Slow downs starting to hit mining suppliers

October 22, 2012

As mining companies continue to adjust to changing market conditions the demand for equipment is also slowing down.
Report by the Financial Times, executives from some of the world’s top mining companies such as BHP Billition, said the slow down in the global mining boom is driving down costs of equipment and services.

“We have seen contractor rates in particular starting to go down, rolling back some of the unsustainable cost increases of recent years,” Tom Albanese, chief executive of Rio Tinto told the Financial Times.

Richard Adkerson, head of US-based copper miner Freeport-McMoRan, added that cost inflation had “come down a little bit.”

The largest contractors for the mining industry include Bechtel and Fluor of the US, Leighton of Australia, Weir Minerals of the UK and Hatch of Canada.

At a weeklong conference, LME Week, mining executives reported greater availability of equipment as projects were cancelled or deferred.

Thomas Keller, head of Codelco of Chile, the world’s largest copper producer, said waiting times had “improved significantly” and that “we would expect suppliers to start reducing prices.”

Mike Henry, group executive at BHP Billiton, added that the waiting period for the delivery of trucks, had fallen from “multiple years to a few months.”

This is not good news from the likes of equipment manufactures such as Joy Global and Caterpillar.

Doug Oberhelman, chief executive of Caterpillar, said in September that the business was “soft right now,” calling the recent years a “bubble.” Caterpillar cut its earnings outlook to 2015 to $12-$18 a share, down from $15-$20 a share previously the week before MINExpo.

Joy Global also recently reported that its orders were 25 percent lower in the three months to the end of July than in the same period of last year.
Mining executives said exploration service companies were particularly suffering as junior companies cut back on their spending due to lack of financing. Diego Hernández, chief executive of Antofagasta, said: “In exploration, there was a lack of drilling equipment. Now you can secure long-term contracts at reasonable prices.”

Komatsu and Hitachi of Japan, Stockholm-listed Atlas Copco and Sandvik, and Sydney-listed Boart Longyear are also among the top manufacturers in the sector. Others impacted are likely to be groups such as FLSmidth and ABB, which produce specialized mining equipment.



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