Transforming metals & mining trading and risk management through digitization

EY’s ‘Top 10 business risks facing mining and metals in 2019-20’ report ranks ‘Digital Effectiveness’ at the number two position, stating that digital is the key to achieving productivity and margin improvements. However, while miners are making progress in using digital solutions for single issues or bottlenecks, it is important to apply these solutions across the entire value chain. Only then can they achieve true transformation, more efficient metal and mining trading, and risk management.

Let’s take the case of Boliden, a global metals company with core competencies in exploration, mining, smelting, and metals recycling. Based in the Nordic region of Europe, the company provides efficient logistic solutions for transporting metals and byproducts to customers around the world. Boliden was using multiple systems to manage the commercial needs of its mining and smelting operations, including raw material purchasing, tolling, risk management, hedging, and metal balance valuation. Since there was no integration between these different systems, they provided little flexibility for users. Boliden was also managing complex metal accounting with spreadsheets, adding to the overall operational risk.

When addressing these issues , it was important for the company to invest in an advanced solution to speed up the metal balance calculation process, eliminate time-consuming manual procedures, and provide a consolidated view to executives across the organization. To ensure profitability and navigate future risk, having a digital transformation strategy that includes a CTRM solution was essential.

A modern cloud-based TRM solution makes it possible to connect every step from ore to manufacturing. The entire business, including base metals, refined steel, scraps, concentrates, etc., can be managed via a single platform. This platform provides a transparent view of the business across raw material purchase, concentrates sales, tolling, metal balance valuation, and risk management functionalities.

Such an approach brings several key benefits when it comes to metals and mining trading and risk management:

Through automated systems, modern CTRM software facilitates data aggregation without manual intervention. By eliminating the need to spend hours, days, or even weeks manually collecting, recording, and analyzing data, results in significant time savings. For instance, with its modern TRM solution, Boliden could automate several manual processes, enabling users to make faster, more informed decisions. In addition, Boliden can manage purchases, conversion contracts, metal debts, pledges, and speed pricing.

Unlike legacy CTRM software, modern systems are designed to aggregate and analyze data from multiple data sources across the entire value chain. This includes real-time, historical, structured, and unstructured data from ERP, accounting, spreadsheets, weather forecasts, and more. This can help create more accurate insights, enable better trading decisions, and allow organizations to analyze the impact of dynamic market movements quickly.

Boliden’s finance organization generates both summarized and detailed month-end and year-end closure stock positions and tolling charge reports directly from the CTRM solution. Reconciliation reports help the finance team to catch any discrepancies in month-end and year-end closure bookings.

Modern CTRM systems provide a current, accurate, and complete view of exposure, pricing, and market conditions. Analyzing real-time data enables more effective metals and mining trading and risk management. For example, when risk limits are breached, real-time alerts can immediately address problems.

Features such as on-demand analysis using trusted data with custom dashboards, drill-downs, visualizations, and embedded machine learning algorithms for anomaly detection, can help business users monitor positions and exposures in real-time. Built-in connectors and open APIs enable organizations to easily bring external data from ERP systems and other sources, including market, weather, compliance, and their database.

In the case of Boliden, raw material purchases, concentrates sales, tolling, metal balance valuation, and risk management functionalities are integrated with the company’s systems and business processes giving them a transparent view of the business.

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As per EY, as the mining and metals (M&M) sector gets back into growth mode, digital innovation will continue to be a key tool. However, “the industry must overcome a poor track record of technology implementations. If M&M companies are to survive and thrive in a new energy world, they must embrace digital to optimize productivity from market to mine.”

Therefore, the ability to optimize your mine-to-market value chain and maximize operational efficiency by connecting every step from ore to manufacturing will be critical for success.