If the mood of metals executives is any indication of the state of the metals and mining industries, things may continue to be gloomy for some time. Yet while confidence in the global economy is low, our survey suggests that most metals and mining organizations believe they can survive – maybe even grow – in the medium term.

Fewer than half of those metals executives responding to our survey voice any level of confidence in the prospects for the global economy over the next 2 years. Yet most metals executives seem to believe their company can outperform the market, with almost two-thirds of metals executives saying they are confident they can achieve growth in the same period.

"You can’t just batten down the hatches and wait for the storm to pass; it will take significant consolidation in order to reduce current levels of structural overcapacity and disruption – from environmental regulation to new innovations – is continuously changing the business environment," notes Eric Damotte, Head of Metals for KPMG International. "The next growth cycle will look very different to the last."

Not surprisingly, most metals organizations expect to spend the next 2 years focusing on finding deeper cost reductions, suggesting further pricing pressure for mining organizations and continued rationalization of metals assets. And our data suggests that appetite for cost cutting is increasing. Whereas 67 percent of our respondents say that cost and performance management was a high priority in the past, 77 percent now say it will be a high priority in the future.

At the same time, mining organizations are also carefully balancing their capital and investments in order to prepare for the next round of growth. "The worst thing mining companies can do right now is to pour more capital into increasing production," notes Richard Sharman, KPMG International’s Global Head of Commodities Trading. "To survive this downturn, miners will need to improve the way they allocate capital to prioritize cash flow and earnings."

While this focus on improving value and cash flow will likely help metals and mining organizations navigate this difficult environment, it will not result in any significant increase in demand for mining companies over the near term. Much will depend on the growth of the global economy.

How are leading metals organizations responding?

• Working with national governments and regulators to advocate for greater consolidation across the sector and the reduction of structural capacity in key markets
• Focusing on products where they enjoy clear market or cost advantages in order to reduce the impact of commodity competition from lower-cost producers
• Reinvigorating their efforts to identify and leverage efficiencies across the entire product portfolio.

How are leading mining organizations responding?

• Maintaining a strong focus on capital and capital deployment to prioritize cash flow returns over increased production volumes
• Becoming more decisive about managing their balance sheets to focus on free cash flow generation
• Improving the discipline around the management and use of their resources and ore bodies to focus on higher-growth or higher-margin commodities.

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