Mining Industry

views updated May 18 2018

Mining Industry

GLOBAL FEATURES

BIBLIOGRAPHY

Mining is a site-specific economic activity creating wealth from the extraction of nonrenewable resources from land and sea. The boundaries of the mining industry are imprecise. It conventionally excludes oil, gas, and water, but coal and uranium are normally included. Bulk construction materials and stone are extracted in the same fashion as other minerals, and the volume of their output exceeds that of most other minerals, but they are usually excluded from definitions of the industry. The downstream boundaries are somewhat indeterminate, depending on processes, corporate structure and end uses. Mines usually produce ores that require further processing rather than finished products and the ores may contain one or several economic products. The usable materials are often a small proportion of the ore mined. There are various methods of mining, each suited to the specific circumstances of each mineral deposit, and each with different cost structures. Most minerals are either extracted from open workings in which the overburden is first stripped away to expose the economic ore, or from underground workings that access the ore through shafts or tunnels. Substantial volumes of waste are mined as well as ores, particularly in open pit mines producing base and precious metals.

GLOBAL FEATURES

Ore deposits are not evenly distributed around the globe, with different minerals concentrated in specific geological environments. Typically, deposits located near major centers of industry and population have been depleted and mines are increasingly concentrated in more remote regions. Transport costs are a major determinant of competitiveness, and reductions in shipping costs since the mid-twentieth century have internationalized the markets for many products, like coal and iron ore, that formerly served regional or local markets. The European Union, Japan, and the United States have become increasingly dependent on imports, either of mineral raw materials, or of semi-processed products, to supply their requirements. The fast developing countries of the Asian Pacific Rim are also heavily reliant on imports of minerals. Economic growth in the latter region, combined with rapidly rising demand from China, is putting renewed pressure on mineral supplies. China has by far the worlds largest minerals industry, accounting for about 12 percent of global minerals turnover, excluding coal, and nearly 18 percent, including coal. Many, but by no means all, of its mines are antiquated, undercapitalized, small-scale operations with poor environmental and health and safety records.

Most minerals and their first-stage products are traded internationally at prices determined in global markets. Shifts in exchange rates and domestic economic policies thus influence an individual mines ability to compete. The amount of usable product contained in ore, its ease of processing, and accessibility are the main endogenous determinants of competitiveness. Energy is a large element of costs, so that rising oil prices have an adverse impact. Economies of scale are important, and the typical scale of operations has risen considerably over the past fifteen years. Many small mines have closed down, and larger mines have expanded, so that the number of mining operations has contracted. Technical change and rising productivity have also driven down costs.

Labor costs are relatively unimportant in many mines, although U.S. companies are often burdened by large legacy costs. Organized mining accounts for much less than 1 percent of the worlds workforcefewer than 15 million people, with a further 11.5 to 13 million people working in small-scale mines. According to the International Labor Office, the total number of people relying on mining, both large and small, for a living, taking dependents into account, is about 300 million, of which up to one-third depend on small-scale mining. The numbers have fallen markedly since the 1980s with the closure of many small mines and improving productivity, especially in China. There is a growing global shortage of skilled and professional labor, because of a rundown in mining education and a lack of new entrants.

LABOR CONDITIONS AND STATE OF THE INDUSTRY

Mines are only located where there are viable ore deposits, and these are often in physically remote areas, far from major population centers. The modern tendency is for workers to commute to mine sites for extended shift periods of up to a month, from well-established communities with good infrastructure and social amenities. Before the development of low-cost air travel such commuting was seldom possible and dedicated mining camps were often established to house the workers, not always with their families. Such communities were natural breeding grounds for the social ills of alcohol abuse and prostitution. They also insulated workers from outside influences and fostered their solidarity. That was enhanced by the arduous and dangerous nature of mining, particularly when underground. Even minor grievances, real or imagined, could be blown up out of proportion. The conditions were ideal for periodic labor unrest and trade union militancy. Moreover, miners in rural areas could live cheaply, especially in the summer months when there were alternative agricultural, hunting, or fishing opportunities. That remains true in some regions, such as parts of Canada.

In practice union membership and militancy have not been significantly greater in most of the mining industry than in other sectors of economic activity. According to the Bureau of Labor Statistics, in the United States, for example, the 8 percent of workers in the mining industry that belong to a union compare with 7.8 percent for the private sector as a whole, 13 percent in manufacturing, and 36.5 percent in government. When strikes did occur, however, they were often longer and more acrimonious than elsewhere. The cyclical nature of most mineral markets contributed in that regard, as it still does. Workers naturally seek to increase their earnings when markets are buoyant, as in 2005 and 2006, and are more prepared to strike than when markets are depressed. At such periods employers aim to reduce their labor costs. Today that will be achieved mainly through agreed redundancies. Historically, however, wages were cut, with or without prior consultation with employees. Some of the most bitter and most prolonged strikes resulted from such actions, for example in the U.S. and U.K. coal industries during the late 1920s and 1930s. In North America a tradition of labor contracts covering three- to five-year periods even today may prompt strikes at their renewal, in the copper and nickel industries for example. In neither sector has there been any to compare in recent years with those of the 1960s. Elsewhere, as in parts of Latin America, strikes may be used as a political weapon to achieve broad social and community goals that are more properly within the purview of governments than of the companies affected.

Mechanization and modern capital-intensive mining methods, often in open-pit mines, have greatly reduced the mining industrys historic need to attract a large pool of unskilled or semi-skilled workers. That has in turn altered the nature of the relationship between mining companies and their employees in many sectors of the industry. In South Africa the progressive abolition of apartheid from 1990 greatly enhanced this global process. Previously racial discrimination was legally enforced in the mines. Migrant workers, both from neighboring countries and from within South Africa, were subject to repressive labor laws. They were unable to live with their families but were housed in single mens hostels with their attendant social problems. Wages for unskilled workers were held very close to the poverty line. Over the past decade changing economic conditions have led to the closure of many mines and a substantial reduction in the numbers employed. The living standards and opportunities of the remaining workers have greatly improved. Legislation on black empowerment is also fast changing patterns of ownership.

Mining is a relatively small contributor to global output as well as employment. The worlds minerals production was worth some $375 billion ex mine in 2004, excluding bulk construction materials, but including coal. This equalled around 0.7 percent of global gross domestic product (GDP). U.S. minerals output was $40 billion or 0.3 percent of U.S. GDP, with coal making up half the total. Mining is a much more important source of income in a few countries and of exports in many more. It provides over 8 percent of Chiles GDP, 5.7 percent of Australias, and 1.7 percent of Canadas. In some small countries it is the major economic activity. In Namibia, for example it makes up 15 percent of GDP, and in Botswana 35 percent. Shares of total output understate the mining industrys true importance, as it provides the essential raw materials for most forms of economic activity. Mineral-based products include metals, ceramics, construction goods, and many chemicals and plastics. The total output of the mineral industries is growing, although many of its prices have been on a declining trend. Demand moves cyclically with economic activity. Prices, and to a lesser extent output, are consequently volatile. Individual mines are depleting even as total output grows. Different products have experienced different growth rates.

The industrys corporate structure has evolved with global political and economic change. There is a wide range of different types of organization involved in the industry. Multinational mining companies are less important than is suggested by the attention they receive. The concentration of ownership varies markedly from product to product. Foreign-owned mining companies were effectively unable to operate in most developing and centrally planned economies during much of the period since World War II. During the 1990s most countries liberalized their mining codes, privatized state-owned mineral projects, and became receptive to foreign investment. Some countries, particularly in Latin America, attracted a wave of foreign investment in export-based mineral projects. Political risk nonetheless remains high in many mineral-rich areas, limiting foreign involvement to high unit value products like gold and gemstones. In many countries there remains strong opposition to foreign exploitation of natural resources and this tends to emerge most strongly at the local level. Mining companies can then become a focus for popular discontent with national governments.

Mining necessarily has an impact on the local environment, and some mineral products, like asbestos and lead, create hazards to human health. Although the standards of modern large-scale mining are infinitely higher than those of earlier times, the scars and environmental blight of historic mining and a few well-publicized lapses and accidents influence public perceptions. Whereas mining was once universally treated as having a preeminent claim on land use, that is no longer the case. Tracts of land have been debarred to mining in many countries, and increasingly onerous environmental requirements have been imposed. Larger international companies tend to follow best practice, but the costs of meeting higher standards have risen. Where capital-intensive large-scale projects are developed in rural areas they can upset the social fabric, especially of indigenous peoples. Mines are no different in that regard from other modern industries, except that their location is dictated by the availability of ore. Preserving good community relations is a major challenge for all mining companies.

Coal output of roughly 5 billion tonnes accounts for $105 billion of global turnover, with production for domestic sale in China, India, the United States and Russia accounting for the greater part. U.S. output was almost 1 billion tonnes, with a value approaching $20 billion. Some mines serve both domestic and export markets, but world trade is dominated by Australia, Indonesia, South Africa, Canada, and Colombia. Production for export from large-scale, mainly open-cast, modern mines makes up less than 15 percent of total coal output. Thermal coal for power stations comprises about 60 percent of world trade. The main export markets for coal are in Europe and Pacific Asia whose domestic output has become increasingly uncompetitive, and is often only sustained through subsidies and protection.

The value of global turnover of metal mining varies with prices. The bulk ferrous metals, led by iron ore, made up one eighth of 2004s sales. Domestic production in China and the United States contrasts with large-scale export-oriented output in countries like Australia and Brazil. The major nonferrous ores, of which copper is the most important, account for 15 percent of turnover. As the metal content of many ores is often low, metal mines are responsible for a much greater share of the worlds ore and waste extracted than of turnover. Mines shipping concentrates for processing in industrial centers coexist with mines serving domestic smelters and refineries that produce metal for export or domestic use. Large international companies operate alongside state-owned companies like Chiles Codelco, and smaller domestic firms. Other metallic products, including uranium, make up 10 percent of turnover. Often they are produced as by-products of the major metals, being extracted at the smelting stage. Precious metals (gold, silver, and platinum group products) contribute one-ninth of turnover, and gem diamonds a further one-tenth. Platinum output is highly concentrated in Russia and South Africa but output of gold and silver is widely distributed. Large-scale modern mines, controlled by international companies, coexist with small-scale operations and artisanal workings. The bulk of diamonds is extracted by major companies in Australia, Botswana, Canada, Russia and South Africa, but small-scale workings persist in many developing countries. The health and safety and environmental conditions of the small-scale workings for gold and gems are often very poor. The remaining one-eighth of turnover comes from fertilizer and industrial minerals. Many are mined for domestic markets by local companies, or by companies from downstream sectors like chemicals or building products. In some instances, where only a few deposits are known globally, production tends to be dominated by large international companies.

SEE ALSO Bauxite Industry; Copper Industry; Diamond Industry; Gold Industry; Industry; Natural Resources, Nonrenewable; Petroleum Industry; Silver Industry; Steel Industry

BIBLIOGRAPHY

Breaking New Ground, Mining, Minerals, and Sustainable Development. 2002. The Report of the MMSD Project. London and Sterling, VA: Earthscan Publications.

International Labour Office, Geneva. 2002.http://www.ilo.org/public/english/dialogue/sector/sectors/mining/emp/htm.

Mineral Commodity Summaries 2005, United States Geological Survey.http://minerals.usgs.gov/minerals.

Mining Journals State of the Industry Report. January 2004. London: Raw Materials Group and Mining Journal.

Taylor, L. E., J. A. Hillier, and A. J. Benham. 2005. World Mineral Production 19992003, British Geological Survey. Nottingham, U.K.: Keyworth.

World Economic Outlook Database, September 2005, International Monetary Fund. http://www.imf.org.

Phillip Crowson

Mining Industry

views updated May 14 2018

MINING INDUSTRY

MINING INDUSTRY. SeeCoal Mining andindividual metals.