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2012 Business Risk in Metal Industry

I think metal industry is gaining interest this year. At my company, we have at least two project related to metal industry in the last three months. We have proposed one project related to energy conservation in metal industry as well.

I want to show you one example. Based on Market Study published by Brook Hunt (2011), there are at least four new ferronickel project in Indonesia under completion stage.

  • Antam’s ferronickel project at East Halmahera with total cost USD 1.6 billion
  • Nickel-in-matte (15% Ni) of PT Billy International and Jilin HOROC at Konawe region, South-East Sulawesi. Based on this source, the total cost would be USD 6 billion, which consider giant project
  • Ferronickel of PT Inco at Bohodopi, Morowali district, Central Sulawesi with total cost USD 500 million
  • Nickel mine and nickel smelter of Eramet at Weda Bay, Halmahera, with total project cost USD 6 billion

Despite of increased interest in metal industry, mining and metal companies are exposed to higher business risk that other business sectors. However, the process of accepting and actively managing risk can add significant value to a business. 

The Ernst and Young has created Business risks facing mining and metals at 2011-2012. Before we continue on business risk at 2011-2012, we’d better understand top ten global business risk at 2010.

Top 10 Global business risks rated at 2010
Top 10 Global business risks rated at 2010, , The Ernst and Young

Compared to business risks at 2010, it is confirmed much change in business risks rated at 2011. Figure below depicts The Ernst & Young business risks radar at 2011-2012.

Business risks in metal and mining industry 2011-2012
Business risks in metal and mining industry 2011-2012, The Ernst & Young

Resource nationalism is the biggest risk in 2011 and 2012. Government of Indonesia has issued Law number 4 of 2009 concerning mineral and mining industry. The law has provided direction for the mining and mineral industry. In article 102, it is stated that the owners of operation mining permit and special mining permit are obliged to increase the mineral and/or coal added value in mining, processing, and purifying, and also the utilization of minerals and coal. THE PROBLEM is there is no technology currently exists for profitably upgrading coal on such a large scale.

Again, maintaining social licence to operation is also a big concern (as I already wrote here). Maintaining social license to operate become more significant in 2011-2012 than in 2010. One current example just happened in Indonesia : land dispute. Obtaining a social license can sometimes be difficult when land disputes arise between mining and metal companies and local communities. To respond to this risk, mineral and mining companies should encouraging and engaging in community or employee debate over sustainability priorities.

Source:

The business risk report mining and metals 2011-2012, The Ernst&Young.

 

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