The world’s largest international shipping association BIMCO and four of the world’s largest mining companies Anglo American, BHP, Rio Tinto and Vale have published a position paper, that proposes solutions and aims to accelerate the adoption of digital technologies across the metals and mining supply chain.
Metals and Mining Digitalization Forum
The four miners have formed a working group, the Metals and Mining Digitalization Forum (MMDF) and, with the support of BIMCO, aim to engage all parties involved in the digitalisation of trade, from solution providers to legislators, in an initiative to break down the barriers to a digital future.
According to a report by the International Chamber of Commerce (ICC), an estimated 4bn trade documents are in circulation. If stacked on each other, the documents would be 520,000 mđ high and constitute about half a million trees, testifying to the fact that paperless trade reduces the carbon footprint of trade.
Depending on the commodity, the trade route, and the counterparties involved, a single trade transaction in the metals and mining sector can require anything from 10 to 40 documents, each of which must be processed manually to go from the supplier to the ultimate buyer at the destination, often through multiple intermediaries. According to a recent case study by digital trade platform MineHub, fulfilling one monthly order from a copper producer to an end-buyer involved teams across four continents, eight different logistics providers, 34 days on the water, four ocean shipments, 200 truck shipments and 216 documents.
“Manual paper-based processes are a source of cost, delay, error, inefficiency and risk. One research report shows that these inefficiencies contribute to a staggering $507bn of working capital trapped in S&P 1500 supply chains alone,” said Grant Hunter, director of standards, innovation and research at BIMCO.
Since the first-ever fully integrated paperless trade was carried out for iron ore in 2019 by Rio Tinto and Cargill in collaboration with Chinsay, Voltron, ICE Digital Trade (formerly essDOCS), R3 Corda, HSBC, and BNP Paribas, reducing contract issuance time by almost 98%, digital trade in this commodity is nearing critical mass, with a growing number of iron ore transactions now carried out digitally.
The position paper outlined that although good progress is being made towards trade digitalisation, numerous obstacles to adoption persist. Some of these are common to all industries, but others are more keenly felt in the metals and mining sector.
Often, legal uncertainty, interoperability of various platforms and the lack of comprehensive standards are cited by industry stakeholders as barriers and challenges that need to be resolved.
“As a working group, the MMDF aims to bring forth the next wave of digitalisation at speed, drawing on insights and synergies from all stakeholders to advocate for a conducive environment and greater adoption of digital tools,” the mining majors said in a joint statement.
Trade digitalisation
Over the past decade, each of the founding members of the MMDF has invested in digital transformation within mining processes, operations and supply chains. At the forefront of trade digitalisation, the founding members have carried out landmark digital-first transactions.
An area of initial focus is the electronic bill of lading (eBL) which is gaining traction in the iron ore trade. Based on information provided by MMDF members, and consolidated by BIMCO, MMDF members together account for around 1bn tonnes of iron ore shipped on average per year. Between 2021 and 2022, these leading miners contributed to an increase in the amount of iron ore carried on eBLs by 80%, equivalent to 100 m tonnes of cargo. eBLs now account for more than 20% of their annual trade volumes for iron ore.
In March 2023, BIMCO launched its “25 by 25 pledge” where shippers commit to target moving 25% of their annual seaborne trade volume for at least one commodity on eBLs by 2025. Anglo-American, BHP, Rio Tinto and Vale have all supported the pledge together with shipowners and operators Oldendorff Carriers, Star Bulk and COSCO Shipping Bulk.
In the metals and mining sector, according to a World Economic Forum analysis, digital transformation is estimated to generate more than $320bn of value by the middle of this decade, including $77bn through the integration of technologies that enable better data exchange amongst participants.
“There is currently no one holistic solution for end-to-end trade digitalization, and given the complexity of global trade, it is unlikely that there ever will be. Nor are we advocating for one platform to win them all. As companies work to enhance their processes and operations, the future state of digital trade will consist of numerous platforms and solutions that connect seamlessly to one another. Nonetheless, this seamlessness remains a long way off,” the paper said.
For MMDF, the solution lies in standardisation. “Developing reference data and messaging standards through API standardisation will be an important enabler for better connectivity between different platforms. However, if these standards are to be useful, they must take into account all relevant stakeholders.”
“We need standards that work for everyone because otherwise they won’t be adopted,” noted Manish Naik, head of digital marketing at Anglo American.
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Source: BIMCO
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