United States Mining Report 2009

The year 2008 was a testing one for the mining industry in the US. After an initial boom in production, businesses were faced with a critical Q4 as the effects of the economic downturn began to take effect. The mining story throughout the year has been a mixture of expansion in exploration and investments and a contrast of production cuts, redundancies and other cost-saving measures. In the second half of the year, the cost of metals began to fall as a result of contracting demand from the automotive and construction industries and stifled credit opportunities. As many dipped below the cost of operations, some companies faced major restructuring to achieve profitability and minimise loss.

The US is the world’s largest economy, and mining is a significant US industry. According to the US Geological Survey (USGS), in 2008 the value of mining sector output was US$71bn, up from 2007’s total of US$70bn. Net exports of scrap and mineral raw materials were valued at US$14bn. The value of metal mine production was up by 9% on the previous year to an estimated value of US$27.6bn in 2008. By individual commodities, the most important metal contributors were copper (34%), gold (24%), iron ore and molybdenum (13% each), zinc (5%) and lead (4%). Those showing the biggest jump in value of mine production were magnesium metal (200%), gold (24%), platinum (23%), iron ore (22%) and copper (11%).

As the steel industry faced a critical reduction in demand, steelmakers in the US were hoping for a recovery programme early in 2009 from Barack Obama which would help boost the sector after the economic crisis saw demand and metals prices plummet. A glimmer of optimism is the hope that President Obama will hurry through the approval of a programme of national construction projects worth US$2bn. Production levels and metals prices have halved in the six months to January, according to the American Iron and Steel Institute.

Steel company chairman Daniel Dimicco of Nucor is encouraging Washington to promote a ‘Buy America’ campaign to drive the market demand for US produced steel goods. In February 2009, however, such a provision, which was put forward for inclusion in the economic stimulus package, was being questioned for fear that it would upset international relations. Although it is too early to get definitive data on the area, some analysts are concerned that retaliation from foreign trading partners could do further harm to the security of US firms and employment. Meanwhile, as H109 starts, domestic steelmakers have yet to see the stimulus spending translate into greater sales.

As well as the economy, environmental concerns were at the forefront of issues which could affect the mining industry. In May 2009, the National Mining Association (NMA) objected to a climate change proposal embodied in ‘The American Clean Energy and Security Act’, claiming that its approach to tackling effects of climate change was not balanced by consideration of the economic effects. The NMA argued that by mandating drastic cuts in emissions in the short term before sustainable and cost-effective clean-up methods, such as carbon capture and storage, (CSS) can be developed will only place an economic strain on businesses, resulting in job losses, higher costs and the outsourcing of jobs and projects to countries where emission regulations are less stringent.

The NMA feels that much more work has to be done in terms of development, incentives and providing a clearer framework for developing cleaner coal technologies so that environmentalist and mining companies can arrive at the same goal of fewer greenhouse emissions together, without further pressure on the already strained mining industry. It is likely that debate will continue for some considerable time between environmental lobbyists and organisations within the mining sector, both of which have vehement support. Ultimately, it is unlikely that, in the midst of an economic downturn, short-term drastic measures will be taken which may further upset the fragile economy.