2018 | Nathan Flesher, Mukani Moyo, Stefan Rehbach, and Eben van Niekerk
Over the past year, several indicators of different aspects of the global mining sector’s performance have confirmed that it is now turning around after the dark days of 2014, 2015, and early 2016. The Bloomberg World Mining Index shows that the sector’s return on capital has rebounded strongly from the bottom of the trough it reached in 2016. The S&P GSCI Industrial Metals Index of commodity prices has risen by nearly 60 percent from its low, in January 2016. The MSCI Metals and Mining Index of company share prices has rebounded even more dramatically—up more than two-and-a-half times from its low point, in January 2016.
What is happening on the productivity front? Our research shows that the sector’s performance is rising in this area too—albeit modestly so far. The MineLens Productivity Index (MPI), McKinsey’s proprietary indicator of the global mining sector’s productivity (see sidebar, “About the MineLens Productivity Index”), shows an increase of 2.8 percent a year in productivity performance for 2014 to 2016 (the most recent period researched). While productivity performance remains far below the levels reached before the demand supercycle struck, MPI data show that the sector is making some headway: its 2014 to 2016 MPI score is starting to move up from the period of stagnant productivity in the five-year period from 2009 to 2014 (Exhibit 1). Observations from our work in the field, as well as news of productivity gains from major mining companies, suggest that the trend is continuing.
For full article please download PDF