From Mines to Mills, Companies Are Recalibrating Costs

Companies across energy, raw materials and commodities are in the midst of major cost realignments. Some inputs, like solar panels and batteries, are getting cheaper, but many essential costs are rising significantly. Grid and labor expenses are up, and tariffs are also exerting a burden on these sectors. At the same time, investing in AI and compliance adds new upfront costs, despite the promise of long-term savings.

The challenge isn’t simply to cut expenses. It’s also about managing a shifting cost structure and reinvesting smartly to build resilience and growth.

For producers of energy and materials, cost pressure is coming from all sides. According to Bloomberg’s Tariff Impact Matrix, energy and materials are the two sectors most affected by tariffs, with the highest median blended tariff rates.

Key commodities industries, such as agriculture, are facing earnings declines, according to Bloomberg Intelligence. Diversified miners, for example, are likely to post declines—a reversal of expectations from January 2025. Oil and gas demand is falling, pushing prices down and squeezing margins. Extreme weather is exacerbating the situation, affecting raw material supply chains and crop availability, and labor costs across all industries are rising.

“Lower commodity prices reduce earnings,” says Rebecca Fitz, Partner and Director at the BCG Center for Energy Impact. “That makes cost programs and productivity enhancements essential to boost earnings despite the softer price environment.”

With little control over global prices, energy companies’ main lever to protect profitability is to improve efficiency—a transformation that often requires major infrastructure improvements, from grid and transmission line upgrades to improved energy storage solutions.

“We’re seeing what looks like the start of a CapEx supercycle, driven by the need to build electrification infrastructure for decarbonization and AI-driven energy demand,” Fitz says.

But companies’ spending ambitions are exceeding their cash flows, says Fitz—making every efficiency gain crucial to managing costs.

On top of inflation and volatility, government policy is becoming a major cost driver. In August, the US announced expanded steel and aluminum tariffs, impacting crucial wind turbine parts and grid equipment, and new state disclosure rules are raising compliance costs for some energy producers. In Europe, the Carbon Border Adjustment Mechanism will soon impose new fees on carbon-intensive imports such as steel, aluminum and cement.

The most forward-looking firms see policy as a planning tool rather than a setback. By integrating regulatory compliance into project design, companies can avoid expensive redesigns later and be better positioned to seize opportunities created by the global energy transition.

“Those that embed efficiency and compliance early will have the flexibility to capture that growth,” Fitz says.

Procurement has become the centerpiece of many cost transformation programs. With material prices rising and volatility persisting, companies are rethinking how they source and secure supplies. Jamie Webster, COO of BCG’s Center for Energy Impact, advises firms to take a fresh look at their contracting strategies.

“It is beneficial to have different sources for materials,” Webster says. “You’re trying to keep your costs down, but also trying to make sure that your supply chain doesn’t suddenly dry up if a geopolitical issue ends up happening.”

Of the tens of thousands of merchant ships carrying goods across the sea on a given day, over 50% carry oil and related products; if a geopolitical disruption were to impede their transit, the firms that source most heavily from the affected region—with little diversification—would feel the greatest impact on their operations. Looking at alternative materials and contract time periods can help companies find the most cost-effective solutions. 

The process is critical as global trade becomes more complex. Wolfgang Schnellbächer, a Managing Director & Senior Partner at BCG who focuses on procurement and operations, sees a need for what he calls a “new era of optimizing into the supply chain.” In his view, the old model of pressuring suppliers to reduce their costs no longer works, and discussing options with them is key.

“We have to redesign systems together,” he says. “That means deeper collaboration with suppliers, smarter logistics planning and a focus on where time and value are really lost.”

Efficiency remains one of the most reliable paths to savings. At an organizational level, companies must consider their headcount, while improving operational performance through proactive equipment maintenance and process optimization.

In agriculture, precision tools and smart farming reduce waste and improve yields; in mining and metals, producers retrofit smelters and kilns to lower energy intensity and costs. Programs that streamline progress, which focus on revamping a single constraint, allow companies to squeeze more output from existing assets.

Fitz, Schnellbächer and Webster all emphasize the need for companies to become more efficient across the board to stay competitive. Technology is helping to unlock improvements, and companies are increasingly leaning into AI as a tool to enhance capital efficiency and planning.

Discussions of AI on energy sector earnings calls have risen dramatically in 2025. A Bloomberg Media Studios review of Q3 earnings calls found that energy companies are focused on using generative AI to significantly reduce the time required for production planning as well as grid planning, and AI-driven analytics are helping to manage procurement and contracting.

Utility companies are using AI for predictive maintenance to detect faulty equipment faster and forecast component failures. In mining and raw materials, digital twins and automation enable cost efficiency by reducing labor costs, improving safety and cutting downtime. And in commodities, AI-powered yield prediction and logistics planning optimize supply chains.

Webster cautions companies against adopting AI before carefully considering how it can improve their unique workflows; it must be applied intelligently to make a true impact.

“Make sure that you have a clear grasp on what it is you are trying to achieve with AI—what the work process is, what you intend for it to do and what success looks like,” Webster says.

The imperative to reduce costs has become inseparable from the drive to modernize. Cost discipline today funds the investments that will define the next decade, from cleaner production to upgraded infrastructure.

Schnellbächer underscores the critical need for energy companies to reduce costs. “The average cost of living will become more expensive when these companies struggle,” he says.

Together, efficiency, smart procurement and AI become a system for success. When applied wisely, this system is what will fund tomorrow’s cleaner, more resilient economy.