Metals and Mining – Digital to Sustain Growth

Background: While all industries aim to sustain its business and continuously grow with time, digital
technology will impact the way industry conducts its business today, and in future. The
democratization of technology will enable even small players to complete with large behemoths as
factors like scale of operation and global footprints will no longer remain as the key success factors.
Hence it is imperative for industries to adopt flexible and agile business processes by leveraging
digital in all aspect of their operations, especially the metals and mining companies.

Current Scenario: Favourable external environments and investment initiatives are paving the way
for strong industrial growth in India, which is boosting the demand for metals. Key policies aimed at
improving infrastructure, increasing the penetration of automobiles and renewed focus on power
sector especially renewable energy are driving metal consumption. Smart cities, PM Aawas Yojna,
Highway projects, Electric vehicle impetus, UDAY, Smart Grid missions, National solar mission are
few to name such initiatives.

Also government has imposed safeguard duties on a plethora on imported metal SKUs and acted
strongly against dumping by China. Recent mandates like “Use of Indian steel for government infra
projects” have further improved sentiment on India which the industry has strongly resonated. The
sharp rise of metal prices from their all-time lows in 2015 is a clear sign that metal sector have gained
back the sheen and is now trading almost 40 % higher from their 2015 prices. On global level, the
EBIDTA of steel companies have risen from ~5 % in FY12 to ~10 % in FY 16. Indian steel industry
has outperformed their global piers and have achieved nearly ~ 15 % EBIDTA in FY 16.But does it
signal the end of woos for metal sectors? Probably not. Few reasons why we say that

1. Mineral prices have remained volatile over last 2 years and data suggest the trend is here
to stay

2. Trade policies have supported the revival of Indian metal sector but should not be relied
upon for long term sustainability.

3. At the ground level, all is not well within the metal sectors as there are a lot of
underperforming assets and block closures. A lot of firms are on the verge of being acquired
or to be declared as NPAs by the creditors.

So what should we do? If we closely observe the prevailing challenges for metals and mining sectors,
the same can be summarized as below

Global competition will keep indian companies on the edge

Resource security would continue to push prices for iron ore

Access to capital would be difficult in view of huge NPAs this sector.

Delays in project execution continue to push prices

Operational excellance as Indian companies struggle on asset management

Changing markets and customer preferances

Technology disruption and innovation

Amrendra Kumar
 Metals and Mining – Digital to Sustain Growth

Way Forward: In these turbulent times, digital can be a saviour. The fourth industrial revolution driven
by connected technologies and smart sensors are enabling real time, on demand information and
visibility across operations enabling flexible, adaptive and proactive operations. The process data
across manufacturing chain can be stored over cloud and analysed to generate business insights
enabling fast, decentralized and better decision making, creating better products and customer
experience.

M2M, IIOT, Cloud, Big Data, Mobility and IT/OT are few such technology enablers which can help
companies realise their untapped potential. While companies like Tata Steel, Hindalco and Vedanta
have adopted digital as the next enabler for success, there is still a long way to go. Recently Baosteel
has signed up Siemens to create the world’s first digitally enabled Smart Steel Plant to completely
transform its steel operation. Concepts like Digital twin can help to improve mine planning and take
decisions which can completely transform the process. The concern of low literacy among workers in
mining sector as a roadblock to digital adoption has been dispelled by widespread adoption of smart
phones across the nation. This has one again reemphasized the point that if technology is supportive,
adoption will never be a challenge. So it is incumbent on the corporates to identify, adopt and
leverage digital in all realms of business and remain sustainable in 21st century.

Amrendra Kumar