KPMG's mining leader Trevor Hart on responding to Covid-19
As most sectors in the country, Australia’s mining sector is facing the shocks of the Covid-19 crisis. Trevor Hart of KPMG highlights some of the key steps the sector can take to mitigate the impact of the pandemic.
Hart is the Global and Australian Head of Mining at the Big Four accounting and advisory firm, and is engaged in the mammoth task of helping mining leaders navigate a time of demand and supply shocks across the globe. Australia’s mining sector is among the most vibrant in the world, and the market is home to the largest mining companies across the globe.
As a global mining leader, the country has emerged relatively resilient with respect to the ongoing crisis so far. Hart points to a recent spike in the price of iron ore as well as significant forecasts for export earnings to show how the mining sector has attained a degree of stability, while the overall economy teeters.
“Although many commodity prices remain volatile, those of Australia’s major mining exports are robust; that is coupled with a weaker Australian dollar and lower fuel prices. In addition, we are seeing continued profitability, underpinning about 250,000 thousand jobs directly and many more indirectly, through critical supply,” said Hart.
Among the reasons for optimism in Australian mining is the gradual opening up of China’s trade landscape, as the latter is believed to be past the worst of the crisis. “With a view to stimulating investment and consumption, China accounts for 38 percent of Australia’s exports, much of it mining, and our firm thinks this should see commodity demand stabilise in the next quarter,” said Hart.
So the outlook is promising, but Hart recommends that the mining sector remains vigilant and active in its efforts to mitigate the damage from Covid-19. He suggests strategies similar to those being followed by businesses across the Australian economy, consistent with principles of crisis response.
To start, mining companies must ensure that their workforce remains safe and well. While most companies in Australia have implemented ‘work from home’ policies to ensure safety, this is scarcely possible for the mining sector, which makes stringent safety measures all the more essential.
Next is to ensure that everyone is on board with the crisis response, which entails clear and effective communication from company leadership to the entire staff and expansive set of stakeholders. Communications strategies established in this time could even benefit companies as they emerge from this crisis.
The next three considerations involve managing global disruption. Firstly, mining companies must identify vulnerable points in their global supply chain, particularly those that go through severely effected markets in Europe and Asia. Secondly, they must prepare for a global dip in demand and prices as the world moves into what most expect to be period of recession.
Lastly, companies must take a long-term view on their global supply chain disruption and try to build as much capacity as possible in the local market.
