Recycling & the Future of Mining
For thousands of years the mining industry has supplied the world with the raw materials the growing population needed for ever increasing consumption. However, mining is not the only supplier of these raw materials. Next to the primary mining industry a secondary mining industry is growing: ‘urban mining’. The existing stock of materials in the urban environment is recycled more and more. 38% of iron input in the steel making process comes from scrap. The average ‘new’ copper cable contains some 30% recycled material. The more we recycle, the less we need to mine. As mining costs increase because ‘easy’ mineral deposits are becoming scarcer and as technological improvements make recycling more competitive, the impact of urban mining on the traditional mining sector grows. How does this change the perspectives of the mining industry in the long term? And which factors will play an important role in shaping this future?
Mining fills the gap between demand and recycled supply
Most people see metal recycling as something additional to mining. Some view recycling more as a competing source of raw materials. However, the right way to look at the combination of mining and recycling is that mining fills the gap between demand and recycled supply. Recycled metal is fundamentally cheaper and more sustainable than mined metal. In an ideal, stable world, all used metal will be recycled at low cost, leaving no need to mine any new metal. In 2006 the International Council on Mining & Metals published a declaration endorsed by its members, including all major mining companies and the associations of producers of all major metals, stating as a fact: “Primary metal production fills the gap between the availability of secondary material and total demand.”
Obviously this gap between demand and availability of secondary material is different for each material. Recycling coal is fundamentally impossible, making us fully dependent on mined coal. The same goes for many industrial minerals. Diamonds, gold, and other investment goods do not have a consumption cycle similar to iron, making the market dynamics of recycling of these resources totally different. The most direct impact of recycling on the mining industry can thus be seen for consumption metals.
Why is recycling better than mining?
Recycled supply of metals is more sustainable than mined supply. Recycling does not require the destruction of natural environments, however good miners manage to restore natural environments after mining. Probably more important in a time of growing concern about and need for action against climate change: recycling requires significantly less energy than mining. Re-melting and casting an existing metal is simply a lot easier than having to extract the metal from an ore. Even though separating joined and mixed materials poses a challenge for recycling, the total energy requirement for recycling a ton of iron is some 20% lower than for mining and processing it. For copper the energy saving is approx. 60% and for aluminium even 90%. Expressed in saved carbon emissions these numbers look even better.
Recycled supply is not only more sustainable, but it is also fundamentally cheaper than mined supply. That is, if the collection and recycling processes are managed well. With the lower energy demand and demand for other input materials processing with recycled inputs is cheaper than processing with mined inputs. If regulated well the collection and separation of waste streams serving as input to recycling is much cheaper than mining the same amount of material too.
Why do we still need mining?
If recycling is fundamentally more sustainable and cheaper than mining, than why do we still need to mine? If market capitalism works well the recycling industry would have totally replaced the mining industry by now, wouldn’t it? Unfortunately the answer to that question is negative. Apart from the fact that the lack of capability of most societies to deal with the negative externalities of waste could be seen as classic market failure which makes that only a small part of the metal available for recycling makes it to the furnace again, the fact that demand is growing forces us to add to the stock of metals in the world by mining. As long as the ‘global demand’ for metals grows, we need mining. In a world without growth and with perfect recycling the resources cycle would be closed: no new metal is needed, and no metal is disposed of: the environmentalist’s dream. But growth means that recycling alone is not enough to satisfy demand. Growth, either caused by population growth or by consumption growth, implies that we need more of the metals than what we used before. This gap is filled by mining.
Another reason we still need mining is that recycling is not perfect. Even if we would manage to collect all the metal that is out there to recycle it, the process to recover the metal is imperfect. Especially for complex materials like alloys and glued products it is simply impossible to perfectly separate and recover all basic ingredients. The term used for the deterioration of metal quality over time is ‘dissipation’. To illustrate this concept: Recycled steel is used mainly to create bars; the purity of recycled steel is typically too low to be able to create good sheet products. In summary, we lose a lot of the above the ground stock by never collecting it for recycling, and we lose some of it because our metallurgical and chemical recycling processes are imperfect.
Putting all these key parameters in a formula, the resulting demand for mined resources is:
The United Nation Environmental Program’s International Resource Panel is working on an extensive study to get a grasp of the key numbers in this equation, analyzing current recycling rates, available stocks of metal, and resource intensity. Most of these parameters are amazingly unknown. We do know how much old scrap is used as input in production processes, but the estimates about how much metal is available in the world, either in use or in landfills, vary wildly. The organization uses a number of key terms to describe the fundamentals of recycling.
Key drivers for mined demand
With need for mining defined as the gap between global demand and recycled supply, how much mining do we need at the end of the century? It is not too hard to describe the key drivers of the answer to that question, but it is much harder to forecast how those drivers will change over the rest of this century. The estimates of global demand for mined resources as presented in this article are derived from a basic model combining estimates of the key drivers described below. Only deterministic analysis using high level estimates by the UN, metal producer associations, and major mining companies has been performed. A valuable addition to this analysis would be a more probabilistic approach, which would demonstrate the wide range of uncertainty of these forecasts. However, the results below most likely fall somewhere in the middle of this range, providing a basis for discussion and helping to set a framework for design of the industry over the very long term.
The first set of determinants of the future of the mining industry is the drivers for global demand: the number of people (population) and the need for metals per person (resource intensity) are the key drivers of demand. The latest forecast of the United Nations for global population growth forecasts a growth to 9.3bln people in 2050 and 10.1bln in 2100. Most of this growth will take place in countries with a low current development level, playing into the second driver of resource intensity. The large iron ore miners don’t get tired of stressing that the fundamental demand growth for their products in the next decades comes from increasing resource intensity in China and India. With other less developed countries following on the ladder of development the global resource intensity is expected to grow by over 1% per year up to 2040, with growth slowing to some 0.3% annually thereafter. Other drivers playing into global demand that are hard to predict are technological innovation and the shift of consumption patterns from one type of metal to another or to different types of materials.The second set of drivers impacts our global recycling performance. The key determinants of success in this area are the ability to collect metals for recycling at the end of their useful life (old scrap collection rate), the ability to collect the scrap created upon manufacturing of goods (new scrap collection rate), and the efficiency of the recycling process. Of these parameters the most important future improvements should be expected in the old scrap collection rate, which is currently below 50% for both copper and aluminium. The old scrap recycling rate and the process efficiency together form the End of Life Recycling Rate (EOL-RR), promoted by the ICMM as the most important metric for measuring recycling success. A recent United Nations study shows that End of Life Recycling Rates vary wildly per metal, but that aluminium, copper, and iron all score above 50%. A proof of the difficulty in estimating these numbers is the inconsistency in the UN’s report with regard to Old Scrap Collection Rate and End of Life Recycling Rate for various metals. Old Scrap Collection Rate for aluminium and copper is presented to be lower than End of Life Recycling Rate; even though it is fundamentally impossible to have a higher End of Life Recycling Rate than Old Scrap Collection Rate (i.e. you can’t recycle more than you collect).
The final factors to be aware of here are the extent and availability of ‘above the ground stocks’, both actively used or passively stored somewhere, and the time the metals are actually in use before begin disposed and being available for recycling (the recycling time lag). If a metal is typically in use for 30 years, the amount of material available for recycling now equals what was produced 30 years ago. Because demand has been growing rapidly, this recycled supply satisfied only a small part of demand.
How much mining do we need in 2080?
As discussed before, any long term forecast of demand and supply is highly speculative, but putting together the data above for iron, copper, and aluminium in a time series model a likely pattern for recycling and the future of mining emerges. Many developments could change this view of long term demand, but if the business of mining and recycling continues without major wildcard events, the most likely scenario for the mining industry is depicted in the graphs below.
Global demand for almost all mined metal will increase rapidly for the next decades, despite all the improvements in scrap collection and recycling rates. The rapid growth of population and resource intensity will put pressure on miners to bring more capacity on line up to approximately 2040. But then the changing landscape becomes evident: population growth and resource intensity growth slow down and start to be outstripped by improved recycling performance. Although global demand for metals continues to increase, demand for mined supply actually starts to decrease slowly, with mining only accounting for 30-40% of total supply in 2080 versus 50-80% in the current situation. The initial rapid increase and the consecutive slowdown and decrease of mined supply lead to a situation in which demand for mined copper and aluminium in 2080 is only slightly higher than current demand. Demand for iron ore will even be back at the current level of demand.
For most people involved in the current mining boom the idea of zero growth over a period of 70 years might be a surprising thought. The future of mining is not only a story of mining lower and lower grade ores in more and more remote places with increasingly instable social and political environments. It is also a story of the mining industry moving from being the major supplier of raw materials to being a less important player on the global stage, plugging the supply shortage of the recycling industry. This fundamental change will force mining executives to rethink the business of mining, rethink the investment selection criteria, redesign organizational structures, rebuild marketing organizations, reassess acquisition strategies in a consolidating industry, and even reconsider vertical integration with recycling companies. Whichever way the industry will turn, it is going to be an interesting ride.