The world's big mining groups are sharpening their marketing strategies in a post-crisis scramble for even tiny increases in profit, seeking marginal gains much like cycling teams in the Tour de France or Olympic velodrome. Anglo American, BHP Billiton and Rio Tinto are using varying tactics to boost profitability on commodities such as copper, iron ore and coal, as the traditional model of simply producing more is under strain and the recovery from a deep downturn remains tentative.
The one thing in common is a philosophy championed by cycling coach Dave Brailsford: achieve marginal gains in as many areas as possible and the overall performance of the rider - or in this case the business - will improve significantly. BHP and Rio Tinto, the biggest miners, have both appointed executives this year to extract the maximum value from every stage of their business process, from the mine to the consumer. For BHP and Anglo American, the strategies include commodity trading - although on a far smaller scale than their rival Glencore, which began life as a pure trader and says income from this business helped it through the commodity slump.
Overall, the object is to help cushion the mining groups from the kind of extreme price swings that the market has experienced in recent years. "I am very confident that the culture changes we're building on will allow us to move away from this boom and bust mentality," Arnoud Balhuizen, BHP's new head of marketing and supply, told Reuters. The strategic shift, which began with the price crash that knocked billions off the miners' earnings in 2015, has gained momentum this year despite a revival on commodity markets. "Prices have lifted, but the world will remain a very competitive place and everybody will still be looking for that extra dollar," one industry source said, speaking on condition of anonymity. Even after investors piled back into mining stocks this year, making them the biggest gainers on the London's FTSE index, their prices are still barely back to where they were around the start of 2015. Chris LaFemina, a managing director of research at Jefferies investment bank, said the new strategies were necessary but they would not transform the miners' fortunes. "In a bull market, companies would not have been worried about incremental margins through marketing, but now everyone is focused on getting the maximum price and they can get a little bit of extra margin over a lot of tonnes," he said. "Small changes are important at the bottom of the cycle and it still matters, but it's not going to change the investment case."
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