Resource Revolution. Capturing the Biggest Business Opportunity in a Century. Matt Rogers McKinsey & Company Global Outlook Norway Arendal August 2015

Transcription

1 Resource Revolution Capturing the Biggest Business Opportunity in a Century Matt Rogers McKinsey & Company Global Outlook Norway Arendal August

2 Resource Revolution the Basics 2.5B people entering the middle class, even as resources get harder to produce companies need to improve resource productivity 3-5% annually to keep up The opportunity: Combining information technology with industrial technology can drive 10x productivity improvements on both supply and demand side This shift in the way we produce and use resources will restructure most traditional industrial markets and will require a new approach to management Today s examples: Buildings, Autos,Oil, Consumer Electronics, Power, Agriculture each industry facing a 10x productivity shift today 1

3 The economic revolution underway is 3000 times larger than the UK Industrial Revolution Country Years to double per capita GDP Year Population at start of growth period Million United Kingdom United States Germany Japan South Korea China 1, India

4 The core challenge: we haven t seen productivity shift we have experienced for labor in energy and other commodities Productivity growth (multiples of 1820 productivity) GDP per hour worked (labor) GDP per ton of oil equivalent (resource)

5 China is building the equivalent of 100 New Yorks in 20 years 100 Chinese building stock growth New York City floor space equivalents added projections 350 million in additional urban population 221 total cities with populations of more than 1 million 170 new mass transit systems

6 We are seeing a transformation across industries, for example, modular building can save 30-80% of energy and materials Modular building techniques employed by the Chinese developer Broad Sustainable Building 5

7 Broad Sustainable Building Video of BSB building erected in 15 days 6

8 What s ahead: much lower cost, easier to assemble buildings with net zero energy at a rental premium (PRIME) Moving from R2 to R30 Efficient Modular More useable space Faster to build Easier to configure Advanced HVAC Solar plus storage LEDs plus wifi makes DSM Productive Better lighting; comfort; security Integrated 7

9 In oil, hydraulic fracturing video game technology meets drilling 8

10 North American LTO production continues to grow, in spite of low oil prices, now surpassing 4 mmbd U.S. LTO production (MMBD) 4.5 Other 4.0 Niobrara 3.5 Wolfcamp SOURCE: HPDI; EIA; McKinsey analysis; NEB Avalon Bone Springs Eagle Ford Bakken +52% p.a

11 Restoring health to the oil and gas industry requires a fundamental rethink of capital projects to drive break-even back down to $60/bbl Design for constructability Modularization Productivity Design to cost Mobile, Data- Driven O&M Increased Recovery Robotics Logistics Quality Advanced materials 3D Printing Autonomous Power by the Hour Sensors/Big Data Analytics Supply Chain 10

12 In automotive, we are seeing the development of software defined machinery, e.g. Tesla 11

13 and sharing is in the money for low mileage customers Annual cost of mobility $/vehicle equivalent , Percentage of US drivers ,950 UberX 12 Ave. US driver (13,476 miles p.a.) 1 13,022 9 LyftLine BAY AREA DriveNow Leasing New Car Purchase New Car Public Transit Mileage driven per annum 12

14 These trends are restructuring the transportation industry from 67 cents/mile today to 10 cents/mile and universal access (ACES) Connected/ Software Extend range Auto route Electrified Autonomous maintenance & charging No up front costs for batteries Use only the size car you need Autonomous Match open trips & 2 minute service Shared 13

15 We see massive structural waste in the food system Productive use Food waste In Europe, ~31% of edible food mass produced is lost or wasted Fertilizer utilization 95% of fertilizers do not provide nutrients to human body Fertiliser used to feed people Malnutrition deaths and diseases Obesity is responsible for ~5% of deaths 69% consumed 11% consumer waste 20% value chain waste Lost or wasted Not taken up by crops (up to 70%) Not absorbed by human body Used by inedible part of crop 3 Releasing GHG emissions and causing eutrophication and drink water pollution 50+% of European population is overweight (30+%) or obese (22%) 2 ~5% of EU population is at risk of undernutrition Land degradation ~20% of arable land in EU is affected by soil degradation 14

16 Big data meets industrial technology to change agriculture (and construction, pipeline safety, environmental monitoring, etc.) 15

17 The Resource Revolution fundamentals are launching the Next Agricultural Revolution Substitution/ Synthetics Broader reach Scalability Bacterial Innovation Reducing risk Driving up field productivity 50% less water and fertilizer; 10-20% better yield Field to Table Supply Chain Eliminate waste Data-Driven Automations 16

18 Across technologies, our materials dependency has become more complex Elements widely used in energy pathways

19 And we are increasingly drawing on rare materials 18

20 Increasing supply risk Sustainable for now Some concern Significant risk/impact Phosphorous Potash Rare earth Chromium Vanadium Coking coal Iron ore Germanium Platinum group metals Indium Cobalt Molybdenum Gallium Global market size $ Billions Potential for shortage Years of reserves (reserves/ annual production) Volatility ( standard deviation of price/mean price) Geographic concentra - tion (number of countries with significant reserves) Dependency (mined only as byproduct of another material) Recyclability (classifica - tion and percent estimate for recycling) Impact of shortage Substitutabiity Contribu - tion to production processes Resource linkages with food/ energy % High Low Low Difficult High High % High Low Low Difficult High High % High High Low Difficult High Low % High Low 60% Possible High High % High Medium Medium Difficult High Medium 151 <50 34% Medium Low Low Challenges High High % Low Low 61% Difficult High High 0.1 N/A 34% High High 30% Challenges Medium Low % Medium Medium Medium Difficult Medium Low 0.3 N/A 24% High High 60%-65% Possible High Low % High Medium 25% Challenges High High % Low Low 30% Possible High Medium 0.1 N/A 10% High High High Challenges Industrial uses Agriculture Energy, fertilisers, primary constituent of gunpowder Energy, glass industry as colouring and polishing agents Energy, autos, textiles, construction, electronics Energy, steels, chemical industry, ceramic manufacture Steel production Steel, construction, industrial applications Energy, technology, plastics Technology manufacturing, medicine, glass, oil and gas Energy, dental Energy, steel, medicine, agriculture Energy, autos, plastics Energy, technology manufacturing, medicine Tungsten % High Low 30%-40% Possible High Medium Energy, high intensity industrial processes Bauxite/ Aluminum % High Low 48% Challenges High Medium Construction, manufacturing, aerospace Nickel % Low Low 43% Difficult High Low Construction, chemicals Copper % Medium Low 32% Challenges High Medium Energy, construction Zinc % Low Low 30% Possible High Low Automotive, building and construction Gold % Low Low High Challenges Low Low Jewelry, electronics, aedical, aerospace Lead % Low Low 77% Challenges High Low Tehnology manufacturing, lubrication and heat transfer, paint Tin % Medium Low 34% Possible High Low Electronics manufacturing, construction, chemicals, glassware Silver % Low Low High Possible Medium Low Energy, household goods, coinage, jewelry, dentistry Lithium % Low Medium Medium Challenges Low High Energy, ceramics, pharmaceuticals, aerospace Medium Medium 1 Data for reserves and geographic risk pertain to Bauxite. Other data pertain to Aluminum; 2 Wherever possible, market size represents finished/refined metal e.g., market size is for Aluminum metal and not Alumina or Bauxite; data; 4 Platinum group metals includes ruthenium, rhodium, palladium, osmium, iridium, and platinum and are grouped together because of their similar physical and chemical properties as well as tendency to occur together in the same mineral 19

21 As a result, the Consumer Electronics Industries are restructuring rapidly (TECH) Better Supply Chains Efficient Risk substituted out Circular Supply Better Products Software upgradeable Integrated Life Cycle management Better market structure Total engineering Recycling start to finish Holistic end game 20

22 Now, Power needs to control a digital Network of Networks at the Grid Edge Efficiency/ Smart appliances Networks Offices Homes 12 3 Demand management networks Wind farm Electric Vehicle Networks Storage Networks Cyber Smart Meter Networks Disturbance in grid Industrial plant Central power plant Distributed Generation Networks Isolated microgrid 21

23 So, even the mature utility industry is undergoing a major 10x productivity restructuring (4D) Digital network Integrating transportation Disruptive 10^6 more information intensive Localized demand mgmt Distributed resources Matching supply and demand resources in real time to keep market balanced Dispatched demand 22

24 Get the full story Available on Amazon.com Restructuring markets globally: Transportation Utilities and Water Oil and Gas Mining Buildings and Construction Food and Agriculture #ResourceRev 23

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