HOW SHORTAGES AND INFLATION IMPACT THE MINING INDUSTRY

By: Evan Lucyk

The pandemic fueled global pressure on supply chain and labour continues to grow, and the mining industry is feeling the pressure. As an industry that is sensitive to rapid increases in inflation, which directly impacts competitiveness on a global market, we wanted to explore how shortages and inflation are impacting the mining industry.

Regarding the Canadian mining sector, in particular, a recent article reported that Canada’s growth (entering and moving forward into 2022) will be hindered by global supply chain disruptions. The article pointed to a report published by RSM Canada, which predicted that in 2022, Canadian companies will encounter higher international shipping costs and sparse inventories—and that this won’t change for some time.

The report also showed that the average price to ship a container from Asia Pacific jumped 63% from March to July, while the same cost from Europe saw a 79% increase. It makes sense, then, that companies in Canada are seeking domestic suppliers in hopes of procuring more competitive pricing.

According to Joe Brusuelas, chief economist with RSM US LLP, “The global supply chain is already in a very fragile place and further disruption is going to delay the return of full production within the Canadian economy until the middle of 2022.”

LABOUR SHORTAGES IN THE MINING INDUSTRY

The report also predicts labour shortages and a declining labour force to come in 2022, both of which will pose a severe problem to Canada’s efforts of recovery post-pandemic.

After all, Canada’s labour force was already on shaky footing—having been steadily declining since reaching its height back in 2000—and it hasn’t had adequate time to recover from the initial onset of the pandemic’s first effects.

Stats show that job vacancies rose exponentially last year (from 550,000 in the first quarter of 2021 to 730,000 in the second quarter), with the reason for labour shortages attributed directly to the pandemic and dissatisfaction over fair wages (or lack thereof). The mining industry has specifically seen a shortage in trades and engineering jobs sweeping North America.

The intense wage pressures are causing companies to navigate higher costs and pay employees fair wages versus making an actual profit.

EQUIPMENT SHORTAGES AND DELAYS

In the mining industry, equipment shortages have also been experienced (often disguised as delays). Some of these are described generically as a delay when its delivery time is actually uncertain. So, while demand is staying strong in the current climate, mining companies are still struggling with these—and more—supply chain challenges. The disruption is simply not good for business.

One significant shortage is in the number of truckers available to transport supplies. This shortage of drivers has placed immense pressure on Canada’s economic recovery. It will continue to do so until the positions can be filled and we can get drivers behind the wheel and trucks filled.

RAPID INFLATION IN THE MINING INDUSTRY MORE PROMINENT

The mining industry is also facing rapid inflation. This is a result of many factors, including the labour shortage and supply chain disruptions directly connected to the mining industry and global inflation causing a spike in the cost of living for the local workforce. Canada’s inflation is the highest it’s been in years, and it’s only predicted to keep rising.

WHAT CAN THE MINING INDUSTRY DO TO REMAIN COMPETITIVE?

There are several things that Canadian companies can do to prepare for imminent inflation and to remain competitive. For one, they can stand firm to their convictions regarding labour and supply chain pressures.

In some cases, the pressure to produce as much ore as possible takes an increased workforce, and due to labour shortages, the tendency is to offer increased wages or benefits to attract workers from other industries of their competitors. The same goes for supply chain shortfalls, where increased costs may be paid to shortened delivery times.

The harsh reality remains: The longer it takes to address these serious issues, the longer it will take for Canada’s mining industry—and the world—to reach economic recovery. We have plenty of work to do, many jobs to fill, and much more. The good news is that Bit Service is here, ready to help every step of the way.