Use social distancing sign on side of road in rural enviroment
Thu, 30/07/2020

Recover value chains, upskill & automate: Interview with the OECD on how the mining sector can prepare for future crises

  • Thu, 30/07/2020

Last month MIREU co-hosted a meeting with the OECD on the impacts and opportunities of COVID-19 on mining regions and cities. As part of the event the OECD conducted a survey of regional stakeholders on the same subject. We caught up with the team from OECD Mining Regions and Cities, Andres Sanabria, Lisanne Raderschall and Fernando Riaz Fernandez, to gather their impressions following the webinar and survey results. Read the interview below.

What seems to be the biggest impact of the COVID-19 crisis on mining regions and cities?

The COVID-19 crisis has impacted differently mining regions and cities across the world. The degree of the impact has depended on the type of mineral produced,  principal market, interconnection with Global Value Chains and the local economy’s structure. Mining regions are exposed on two fronts by the economic crisis caused by the coronavirus pandemic. On the offer/production side, the lockdown measures have hindered normal working conditions and supply of inputs throughout the mining value chain as well as promoted investments in security and distancing measures, which together can affect production levels. On the demand side, the global drop on the economic activity have reduced the international demand for minerals and metals. Regions focused on based metals have experienced short term shocks due to the drop of international commodity prices, while other regions specialised on precious metals have less impacted by the fall of prices. The pandemic also accelerated pre-existing declining condition in coal regions, with a significant impact in power generation sector.

What is the most unexpected impact or opportunity that the pandemic has brought to mining regions?

Many mining regions have proven to be resilient to this crisis and kept mining operations. The traditional work in shifts and high-security standards helped many mines to quickly adapt their operations and keep existing labour force during the pandemic. Mining regions have been key to face the pandemic by providing the inputs for medical devices. The COVID-19 crisis has stressed the relevance of digitalisation for economic resiliency, which brings a remarkable opportunity for mining regions to implement policies that seize the benefits of technological change.  Automation can lead to increased productivity in the mining sector, reduce the carbon footprint in the mining value chain and overcome demographic challenges in mining regions including depopulation and ageing. Yet, without policy intervention, automation and digitalisation can bring challenges for mining regions including job displacement and increasing social concerns regarding the local benefit from mining operations. To address these challenges and seize the opportunities, mining regions need to implement policies to ensure quality broadband and its uptake within the community, upskill its work force and adapt education institutions’ curriculum to future industry needs.

Based on the survey you conducted and the discussion during the webinar, what support measures should be put in place to help mining regions recover?

The time of the impact and the policy responses have varied across mining regions. In regions where partial or total mining activity has been maintained short-term measures to face the effects of the pandemic include hygiene and health measures and changes in work structure. Where activity has stopped, the first objective has been to recover pre-crisis activity, bringing workers back and generating trade again. Measures to recover value chains and diversify providers have been concerns for many regions. A policy framework to coordinate mining development with a broad vision of regional development is crucial to overcome this crisis in the short and medium-term and prepare communities for future shocks.

What measures should be put in place to prevent such disasters impacting value chains in the future?

Mining regions are usually highly specialised, being particularly vulnerable to external shocks. This is why strengthening the value chain is at the heart of many mining strategies to overcome this COVID-19 crisis and to be more resilient for the future. It includes greater variety of providers, upscaling capacity of local firms/workers and increasing cooperation with neighbouring regions to adapt to shortage of inputs in the value chain. In the medium and long terms a key strategy is increasing local economic diversification either around the mining value chain or in other sectors where the region have competitive advantages. This will help to reduce volatility and offering alternatives during times of crisis to local communities. Finally, looking-forward policies that integrate the effects of megatrends - climate change, digitalisation and ageing population - are relevant to prepare the local economies for future impacts. Likewise, contributing to the transition of low carbon economy from the mining sector is needed to avoid a future climate-related crisis.

Did your survey find that the pandemic impacted European mining regions differently to those elsewhere in the world? If yes, how?

The findings are not conclusive as the pandemic has evolved with a different timing across the world and regions in some countries (federal) have higher manoeuvre to adapt to the impacts.  European mining regions has been relatively less impacted than other regions as their mining operations tended to continue during lockdown periods. This is partly because mining activities have not come to a standstill, the value chain is relatively stronger and communities have relatively high broadband and digitalisation levels. However, European coal regions have experienced have been hardly hit accelerating the decay in the activity and the need for their communities’ and economies to transition to new growth opportunities. Europe is also in a context of relatively developed labour rights and social welfare, which allowed rapid action to address the most direct impacts of the pandemic on jobs, SMEs and income.

To view all the slides from the workshop, including regional examples, click here.