Recycling Holds The Key To Making Mining Companies More Competitive

Projections from Original Equipment Manufacturers (OEM) and government-funded research point to a huge increase in the need for metals such as copper and nickel over the next decade (according to recent publications from ICMM and McKinsey & Company). However, the supply is not even close to catching up to the demand.

Supply And Demand For Metals

On the one hand, we will probably never completely run out of metals. The challenge becomes how to extract them at the right time, in a responsible manner and at the right price. Metals can be produced from two sources: mining and recycling. Currently, mining accounts for 75% of the total copper supply.

As the supply-demand gap widens, I see recycling becoming a competitive advantage for mining and metals companies from a value and market strategy perspective.

I believe that miners that build recycling into their supply chain have a huge advantage in terms of supplying metals to OEMs such as Tesla and Metso, enabling them to gain market share, higher ESG premium credits and revenue from scrap materials.

The Current State Of Recycling

Glencore and Anglo American are some of the few major mining companies that extract copper or nickel and recycle the material. Glencore, specifically, employs an integrated, end-to-end supply chain from raw material extraction to metal production (as a primary source) and recycled metals (as a secondary source). I believe companies that follow this model can more strongly leverage themselves in OEM partnerships.

Glencore is investing millions in recycling and is a supplier to major EV companies such as Tesla, Ford and GM, making it a key stakeholder in the metals supply chain. 

By focusing on recycling earlier, mining companies can position themselves as the preferred vendor to OEMs, especially with the ever-increasing demand on low carbon footprints by the consumers.

Challenges Of Recycling

The next logical question then is why haven’t mining companies included recycling as part of their operations? Simply put, until recently, there was no business case for it. Some immediate challenges with recycling are:

• Availability of raw materials.
• Availability of capital.
• Technical expertise in implementing recycling plants.
• Chemistry of recycling.

Copper and nickel are 100% recyclable without losing their metallurgical characteristics. However, we cannot simply introduce scrap metal in smelters because of chemistry-related challenges, forcing companies to either change their recipe or invest in new equipment for recycling.

For instance, copper smelters are very sensitive to copper-to-sulfur ratio to maintain temperature levels. High bismuth composition can result in lower-grade metal, which then is sold as grade B material (losing premium value).

The Drive To Increase Domestic Supply

From a supply chain point of view, the majority of refined raw materials required for EV production are currently produced in China. As a case in point, the U.S. consumes 12% to 15% of the total copper produced in the world and sources copper from other parts of the world due to limited domestic smelting capacity.

Recycling presents an opportunity for North American companies to secure scrap and process copper. The 2022 Inflation Reduction Act provides support for mining companies that extract and produce metals in the U.S. rather than exporting them. Similar legislation is slowly being adopted in Canada, the U.K., India, Australia and China—countries with a growing demand for battery-grade metals, making it more attractive for mining companies to scale the rate of recycling.