While in the midst of the longest down-cycle in its history, Caterpillar has begun to explore options for its mining business that could include a divestiture of some of its mining products and that would stop taking orders for machinery specific to underground soft rock mining.
Caterpillar will discontinue production of track drills and will stop taking new orders for many of its underground equipment products including room and pillar products, continuous miners, feeder breakers, coal haulage systems, highwall miners, roof bolters, utility and diesel vehicles.
“These moves, which align with Caterpillar’s ongoing restructuring, will allow us to focus resources on those areas of the business that provide the highest, sustainable growth and best long-term returns,” said Denise Johnson, group president with responsibility for Resource Industries.
The global coal industry has been battered by a number of factors including stricter environmental standards and low prices leading to low demand and bankruptcy filings by the sectors largest players. Caterpillar increased its footprint in underground mining and the coal mining sector with its $8 billion acquisition of Bucyrus International in 2011, when coal demand was high.
“Caterpillar remains committed to an extensive mining-product portfolio,” said Denise Johnson, president of the mining-equipment business. “We firmly believe mining is an attractive long-term industry. At the same time, we continue to manage through the longest down-cycle in our history.”
The Wall Street Journal reported that Caterpillar is expected to log its fourth-straight year of lower sales in 2016. The mining-equipment business has been among the company’s weakest units recently amid slumping prices for mined commodities and reduced investments in mine expansions and new equipment. Caterpillar’s mining unit lost $163 million in the second quarter as sales dropped 29 percent during the quarter from a year earlier.
Caterpillar also announced it will revamp its plant in Winston-Salem, NC. The plant has been producing powertrain components for giant trucks used in surface mines. But slumping demand for the trucks has left the Winston-Salem plant, as well as a plant in Decatur, IL, where the trucks are assembled, severely underused in recent years.
The company said it will move the component assembly work to Decatur and repurpose the Winston-Salem plant for warehousing, machining or fabrication operations for its railroad-equipment business, Progress Rail. The Winston-Salem plant was opened in 2011 as part of a push by Caterpillar to expand production capacity, particularly for big mining trucks. But demand for the trucks began dropping shortly after the plant opened.
Caterpillar and its dealers remain committed to existing customers and will support those room and pillar and track drill fleets currently in operation including Whitehaven Coal Limited which placed an order for 50 Cat longwall roof supports to extend its Narrabri North longwall from 300 meters to 400 meters. Already regarded as one of the most productive longwalls in Australia, the current system set a monthly production record of 1.057 million tonnes in April. The mine in New South Wales will start mining its first 400-meter-wide panel in the second half of 2017.