The world’s second largest maker of mining equipment is preparing for a tough year ahead. Komatsu said it believes global miners will continue to refrain from buying large diggers and dump trucks until at least 2017 as falling commodity prices cool investment.
“We won’t likely see a recovery in 2016 and we are uncertain about 2017, given current commodity prices and the sentiment of management at mining companies,” Tetsuji Ohashi told reporters in Tokyo, after Komatsu posted a 19 percent decline in second-quarter net income.
When a rebound does come, demand for machinery used in copper mining is likely to pick up faster than other commodities, Ohashi said. A recovery in thermal coal mining would probably be next, while iron ore would be last. Tokyo-based Komatsu trails only Caterpillar Inc. of the U.S. as a supplier of mining and construction equipment.
Bloomberg reported that the rout in commodity prices is piling on the pressure for Komatsu and its peers as the mining equipment market contracts for a fourth consecutive year. At current prices, miners aren’t ready to spend on new equipment, although customers are repairing their existing fleets albeit gradually, he said.
World copper supply is set to move to a deficit in 2017, Andrew Michelmore, chief executive officer of Hong Kong-listed miner MMG Ltd., said earlier this month. Producers of the metal have cut output after prices fell to a six-year low due to China’s slowdown. However, the recovery in iron ore is much less certain as major low-cost producers in Australia and Brazil ramp up output and new supply comes online.
Komatsu reiterated it expects sales of mining equipment to fall 15 percent in the year to March.