For the Purpose of Enhancing and Developing Its Innovative Capability Pre-Study Financed By
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MONIKA KURKKIO ACCOUNTING AND CONTROL • THOMAS EJDEMO ECONOMICS UNIT JOHAN FRISHAMMAR ENTREPRENEURSHIP AND INNOVATION • PATRIK SÖDERHOLM ECONOMICS UNIT MAPPING THE NORDIC MINING AND METAL INDUSTRY For the purpose of enhancing and developing its innovative capability Pre-study financed by: We acknowledge the financial support of Nordic Innovation for this pre-study. Comments and input from Jonas Ivarsson and Rie Aleksandra Rörstrand have been greatly appreciated. Contents Executive summary ............................................................4 5. Central players in the nordic mining and metal industry ...............................................................28 1. Introduction ...................................................................5 5.1 The value chain for producing raw materials ................28 2. About the study .............................................................7 6. Innovation challenges in the nordic 3. Innovation in the mining and metal industry ...............9 mining and metal industry ...........................................30 3.1 Defining innovation and innovation 6.1 Specific innovation challenges for key challenges in the mining and metal industry ...................9 actors within the nordic mining and metal industry .......30 3.2 Innovation at the firm and system levels .......................10 6.1.1 The mining companies .......................................30 6.1.2 The metal producers ..........................................30 3.3 Innovative capabilities at the firm level .........................10 6.1.3 The equipment suppliers ....................................31 4. Mapping the nordic mining and metal industry: 6.2 Cross-border innovation challenges within the a descriptive overview ................................................12 nordic mining and metal industry ...............................31 4.1 Existing mines in the nordic countries ..........................13 6.2.1 A demand for sustainable mining ........................31 4.1.1 Denmark (including faroe islands) .......................15 6.2.2 Difficulties related to exploration of new 4.1.2 Finland .............................................................15 mineral deposits ................................................32 4.1.3 Greenland .........................................................18 6.2.3 A conservative attitude towards innovation 4.1.4 Iceland ..............................................................18 in the mining industry ........................................32 4.1.5 Norway .............................................................19 6.2.4 Global competition and procurement methods emphasising pure cost concerns ........................33 4.1.6 Sweden ............................................................22 6.2.5 Absence of pilot and demonstration plants .........33 4.2 Exploration and outlook in the nordic countries .............24 7. Concluding discussion .................................................35 4.3 Ownership and control of nordic mining .......................26 References ........................................................................36 MAPPING THE NORDIC MINING AND METAL INDUSTRY | 3 EXECUTIVE SUMMARY Executive summary The Nordic countries have large mineral and metal assets stored in the bedrock and taken together they are the largest metal producer in the EU. The aim of this pre-study is to map the current situation in the Nordic mining and metal industry, together with its composition and conditions for innovation. Further, the pre-study aims to identify key challenges for innovation and suggestions for addressing them. First, a descriptive overview of the Nordic mining several groups of producing firms in the Nordic and metal industry is provided. It shows that there mining and metal industry. The major innovation are a number of disparities among the firms in the challenges specific to the mining companies are in- Nordic mining and metal industry, but there are also creased production costs, a traditional and conservative many similarities. Finland and Sweden both have mind-set and a short-term focus on exploration. Major well-developed mining and metal industries. The geo- innovation challenges for the metal producers are logical conditions are comparable and, consequently, primarily old production plants and technology, low profit production and outlook are in the main relatively margins and lack of employees with the right type of skills. similar for firms producing minerals and metals. The equipment suppliers’ foremost challenges are Norway’s mineral and metal production mostly the difficulties of conducting experiments and tests and consists of industrial minerals, the potential of which gaining access to the right type of knowledge. The analysis is promising. Greenland has great potential in its new shows that demand for sustainable mining, difficulties mineral deposits. However, there are several challenges related to the exploration of new mineral deposits, a conserv- (e.g. difficulties in accessing the new mineral deposits, ative attitude towards innovation in the mining industry, and problems related to infrastructure and a shortage global competition and procurement methods that emphasise of skilled workers) which need to be overcome pure cost concerns and the absence of pilot and demonstra- before the mineral deposits can be explored. tion plants are at this time the foremost cross-border Key challenges for innovation have been identified challenges for innovation within the Nordic mining and categorised into (a) specific challenges for key and metal industry. actors and (b) cross-border challenges involving 4 | MAPPING THE NORDIC MINING AND METAL INDUSTRY 1. INTRODUCTION 1. Introduction Fast-paced global development has led to great searching for new deposits and operating the existing demand for raw materials such as minerals and mines more efficiently (by means of process develop- metals. The economic growth rates in Asia, not least ment for example) is particularly important. in China and India, have been extraordinarily high Historically, the role of innovation has been since the beginning of the 2000s. This has entailed extremely important to the competitiveness of the new infrastructure and building projects, and thus an mining industry, both globally as well as in the Nordic increased use of minerals and metals. For instance, the countries. For instance, labour productivity has in- entire growth segment for steel demand in the mid- creased significantly since the 1960s, and new mod- 2000s could be attributed to the high growth rates in ern exploration technology now makes it possible to China and India (Humphreys, 2007). Since the global identify new types of deposits. The continuous geo- production of minerals has not been able to keep logical processes leading to the phenomena of “black pace with this soaring demand, the mining industry smokers” and other examples of ore deposits being has witnessed significantly higher price levels. Even formed on the bottom of the sea open up new sources now, in 2014, prices for minerals and metals are fairly of metal production. It appears that in the race be- high, and it is argued that there are few signs of a ma- tween the cost-increasing effects of increased scarcity jor downturn in the demand for minerals (European and the cost-reducing effects of new technology, the Commission, 2011; Senk et al, 2012). former have been more significant. In Sweden, the The high prices make exploration activities more current competitive strength of the state-owned iron attractive and increase the profitability of new mining ore producer LKAB has been strongly connected to projects. The Nordic countries have large mineral and previous innovations in mining operations (e.g. drill- metal assets stored in the bedrock, and taken together ing explosives and machinery) as well as to product these countries are the largest metal producers in development (e.g. pellets) (Hellmer, 1998). the European Union (European Parliament, 2011). Innovation in the mining and metal industry Finland, Sweden and Norway have all been ranked as involves the capability to manage several (and top ten candidates for the most attractive mining area, sometimes contradicting) aspects at the same time and Greenland has been ranked number fourteen out in order to strengthen competitiveness and contri- of 96 countries (Wilson et al, 2013). This study, con- bute to green and sustainable growth (Cowell et al, ducted by the Fraser Institute, was based on several 1999; Gstraunthaler and Proskuryakova, 2012). As policy factors (e.g. environmental regulations, legal exemplified above, it may involve activities such as systems, taxation regime, socioeconomic agreements exploration, product development, process develop- and infrastructure, etc.), which all affect investment ment and application development that are typically decisions in the mining industry. In brief, the Nordic referred to as the “hard” aspects of innovation (Bartos, countries offer attractive mining investment con- 2007; MIFU, 2010). It can also involve companies ditions, due to both favourable (and largely under- working with the “soft” aspects of innovation, such developed) geological potential as well as political and as organisational culture, climate and the knowledge regulatory stability. base (Goffin and Mitchell, 2005; Klippel et al, 2008; There are, however, several challenges related to OECD, 2005). Successful innovation is also influ- the extraction