PESTEL analysis of the mining industry

PESTEL analysis of the mining industry

This article offers a detailed PESTEL analysis of the mining industry, with examples drawn from both developed and developing economies. Mining is the process of extracting resources from the ground. This industry has grown into one of the most important ones in many countries. It offers great rewards for companies; however, it comes with a lot of risks as well.

Political environment affecting the mining industry

The political environment can affect the mining industry significantly. For instance, if the government has a policy that favours investment and growth, this can be favourable for the industry. On the other hand, if the government has a policy that is anti-mining, this can affect the industry negatively by driving away existing and potential investors.

The mining industry is under private ownership virtually in all countries. However, there are huge campaigns well underway in some countries to urge and pressure the government to nationalise it. For instance, people have been campaigning for it in Chile for a long time, though a constitutional assembly has recently rejected plans to nationalise parts of the key mining industry (Guardian, 2022).  There have been growing calls for nationalisation of the mining industry in Australia as well.

China, Australia, USA, Indonesia, Russia, Brazil, Chile, South Africa, Canada, Peru, India, and Kazakhstan are the top mining countries in the world based on mineral production value (Garside, 2022). These countries have different political systems and circumstances which impact on the industry by determining its nature of operations.

Economic environment affecting the mining industry

The economic environment is a key area of assessment in this PESTEL analysis of the mining industry. The mining industry is affected by the level of demand for the commodities it produces. And the demand for commodities is affected by many factors, including economic growth, population growth, and inflation.

The mining industry contributes to the global GDP significantly. In fact, many global industries are dependent upon it. However, competition is becoming fierce as many big companies such as BHP, Rio Tinto, Anglo America, Glencore, and Newmont are in constant battle with each other for global market share. This has decreased the net profit margin of the industry.

Social environment affecting the mining industry

The mining industry is affected by the strength of social norms against pollution and environmental degradation. For instance, if the people of a country value cleanliness, they are more likely to campaign against the pollution of the environment through mining.

The workforce in the mining industry tends to be significantly older than those in other industries in the USA. This is a challenge particularly because older miners are more susceptible to physical injuries. Likewise, the industry needs new generation of miners as the older ones are retiring (CDC, 2022).

However, the problem is that many people do not want to work in the mining industry for several reasons. Mines are usually located in remote areas requiring miners to work away from the family. They are also required to work long shifts and anti-social hours. These often cause them suffer from stress and poor sleeping pattern (CDC, 2022).

Technological environment affecting the mining industry

The technological environment is another key area of discussion in this PESTEL analysis of the mining industry. Technology can improve the efficiency and effectiveness of the mining companies. It can also help reduce the impact of mining activities on the environment (OECD, 2022).

Automation, electrification, renewable energy, and digitalisation are some of the key trends shaping the mining industry today. However, it is worth mentioning that many poor and developing countries lack in technological infrastructure and expertise. Therefore, they need to rely on foreign companies which often does not maximise the benefits for local economies.

Environmental issues affecting the mining industry

Mining is one of the most polluting industries in the world. It is responsible for many environmental issues, including contamination of water resources, land degradation, and air pollution. Therefore, it is extremely important for mining companies to abide by environmental rules and regulations.

The mining industry is greatly affected by the strength of a country’s environmental regulations. Environmental regulations affect the mining industry in two ways. First, they determine which technologies can be used in the mining sector. Second, they determine which activities in the mining sector are allowed.

Legal environment affecting the mining industry

Legal environment is the final part of examination in this PESTEL analysis of the mining industry. There are certain regulations that specifically apply to the mining industry, such as regulations about pollution and protection of the environment. Similarly, mining companies need to abide by general regulations concerning employment and industry practices.

Summary of PESTEL analysis of the mining industry

Thus, it can be said that the mining industry is greatly affected by the political, economic, social, technological, environmental, and legal environments of a country. Mining is an essential part of many industries, including electrical, iron, steel, oil, gas, pharmaceutical, and many more. It is also very important in terms of providing many jobs and contributing to the GDP of a country.

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Last update: 25 July 2022

References:

CDC (2022) Mining program: economic factors, available at: https://www.cdc.gov/niosh/programs/mining/economics.html (accessed 23 July 2022)

Garside, M. (2022) Global leading mining countries based on mineral production value, available at: https://www.statista.com/statistics/1114898/leading-mining-countries-worldwide-based-mineral-production-value/ (accessed 24 July 2022)

Guardian (2022) Chile’s constitutional assembly rejects plans to nationalise parts of mining sector, available at: https://www.theguardian.com/world/2022/may/15/chiles-constitutional-assembly-rejects-plans-to-nationalise-parts-of-mining-sector (accessed 25 July 2022)

OECD (2022) The impact of technology on sustainability in the mining sector, available at: https://www.oecd-ilibrary.org/sites/b9ed6f5e-en/index.html?itemId=/content/component/b9ed6f5e-en (accessed 23 July 2022)

Author: Joe David

Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.