The pandemic presented a number of opportunities for FLSmidth. The demand for minerals increased significantly resulting in increasing commodity prices. Especially copper and gold, which are traditional FLSmidth strongholds, enjoy favourable market conditions.
Another outcome of the pandemic has been the increased global awareness of health, safety and the environment. Some of the world’s largest, most densely populated and most polluted cities have experienced weeks or months with closed factories, car-free streets and, for the first time in years, fresh air and clear blue skies. This has sparked fresh momentum in the battle against climate change.
It has accelerated the green energy transition and industrial decarbonisation, both of which favour FLSmidth as a premium supplier to the mining and cement industries with huge potential to reduce their environmental footprint.
"Over the past year we have seen a step-change in customers’ willingness to adopt our remote support solutions and digitalised optimisation of operations."
The pandemic has also underscored the importance of our agile supply chain, and it has proven the strengths of our regional business structure that was implemented in 2018. Today, we have a higher share of local sales and service staff close to our customers which has served us well through the lockdowns. Another cornerstone in our 2018 reorganisation was an improved focus on digitalisation. Over the past year we have seen a step-change in customers’ willingness to adopt our remote support solutions and digitalised optimisation of operations.
Towards zero emissions in mining and cementIn November 2019, we announced our sustainability programme, MissionZero, to enable our customers in cement and mining to move towards zero emissions by 2030. With around 96% of our overall emissions derived from customers’ use of our sold products (scope 3), MissionZero is where we can have the greatest positive impact on emissions reduction. In 2020, we reached significant milestones for MissionZero.
In support of our ambition to reduce energy usage and increase resource efficiency in the mining industry, FLSmidth is driving a number of research and development partnerships with customers, third parties and academic institutions around the world. One of the most promising joint projects led by FLSmidth recently received a EUR 5.4m grant from the European Institute of Innovation and Technology to help accelerate innovation. On a separate track, we have seen increasing demand for our water recycling solutions from the global mining industry.
"To further our ambition to decarbonise the cement and mining industries and put FLSmidth on the path to carbon neutrality, in early January 2021 we committed to set science-based targets according to the Science Based Targets initiative."
Following FLSmidth’s successful installation of a tailing management system which recirculates over 86% of the process water at Hindustan Zinc Limited’s mine in Rajasthan, India, we were awarded an additional contract to deliver an integrated dry stack tailings solution to recover the process water at one of their other mines in Rajasthan.
The next stage on our Mission
To further our ambition to decarbonise the cement and mining industries and put FLSmidth on the path to carbon neutrality, in early January 2021 we committed to set science-based targets according to the Science Based Targets initiative. We are also aligning our practices and reporting of climate-related financial risk with the TCFD recommendations. As part of this, we conducted a climate risk and opportunities analysis in late 2020 facilitated by an external advisor.
Step change in digitalisation
Digitalisation is an important lever to accelerate the journey towards zero emissions in cement and mining and the pandemic has accelerated customer adoption of digitalised operations and remote support. Earlier in 2020, we received an order for our BulkExpert™ digital solution from a customer in Brazil. The solution will fully automate the stockyard operation of two large iron ore shipping export terminals in the south of the country, improving the throughput, quality and safety of the customer’s operations.
On the innovation front, we launched the world’s most OPEX- and CAPEX-efficient digitally-enabled gyratory crusher, and we took a major step in our artificial intelligence journey with the launch of our latest ProcessExpert system applicable for both mining and cement. Furthermore, we supplemented our in-house innovation through the acquisition of KnowledgeScape, a global leader in digital optimisation solutions for the mineral processing industry. Market developments in 2020 Although demand for more digitalised and sustainable mine sites and cement plants is rising, the pandemic severely impacted our end markets in 2020.
"Miners are generating good cash flows, but despite the healthy industry fundamentals, they have continued to defer large capital investments due to pandemic-induced uncertainty and delays related to prolonged environmental and other regulatory approval processes."
Compared to the global cement business, the mining industry has been more resilient – albeit not immune – to the COVID-19 pandemic. After approximately 10% of the world’s mine sites were shut down in April, nearly all sites have since restarted production and most are running at high production rates. Under normal circumstances this would mean good conditions for our service business but travel restrictions and limited site access have continued to impact on-site technical services, resulting in reduced demand.
On the positive side, commodity prices have rebounded strongly following their sharp decline earlier in the year. Miners are generating good cash flows, but despite the healthy industry fundamentals, they have continued to defer large capital investments due to pandemic-induced uncertainty and delays related to prolonged environmental and other regulatory approval processes.
With continued high COVID-19 infection rates and lockdowns in many parts of the world, market uncertainty remains high. At present, our working assumption is that market conditions in the first half of 2021 will be similar to that of the second half of 2020. From the summer of 2021, we expect a gradual improvement in business sentiment and increasing access to customer sites, returning to a more normalised situation by the end of the year.
We are positive on the outlook for mining. Most commodities have seen a strong rebound in prices, surpassing pre-pandemic levels. Mine sites, overall, are running at high production rates and industry fundamentals are healthy. In the longer term, the switch to green energy and electric-powered transportation will create increasing demand for copper and battery metals for which the mining industry will need to scale up investments in order to meet this.
Every crisis presents challenges as well as opportunities. The current health (and economic) crisis is no different and we will seek to capture those opportunities, whether they entail organic or acquisitive growth.