Coal Age

OCT-NOV 2017

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42 www.coalage.com October/November 2017 suppliers news Mining Equipment Market Continues to Recover The amount of large surface mining equipment shipped worldwide, the latest deliveries to mines during July-September 2017, increased by more than 10%. Those gains come on top of very strong increases in the previous quarter and bring these equipment markets to near- ly double that of the cyclical bottom reached in the second quarter of 2016. As measured by Parker Bay's Surface Mining Equipment Index, the dollar-weighted shipments reached 62.3 (Q1 2007 = 100). While a very substantial rebound from the depths of the last cyclical contraction, the value of deliveries worldwide remains more than 60% below the peak level achieved in the first quarter of 2012. These deliveries continue the trend that started in the third quarter of 2016 and reinforce the other indications of a sustained and growing recovery and expansion of mining and equipment markets worldwide. Not every market segment expanded during the third quarter, but the overall market increased by approxi- mately 11% quarter-to-quarter. When comparing the latest ship- ments to those of a year ago, the gain is 83% (number of units). Mining trucks, by far the largest product sector, increased by nearly 20%, surpassing 600 units deliveries for the first time since the second quarter of 2013. The gains recorded by manufacturers of excavators/loaders were even greater during the third quarter (+43%) after lagging behind truck shipments during earlier stages of this expansion phase. In contrast, however, crawler and wheel dozer shipments lagged these primary production products with shipments contracting by 17% vs. the second quarter and up just 6% year-over-year. This latest result may be anomalous and could represent a more pressing need for miners to focus their still re- strained capex on those products essential to maintaining and growing output. Miners may be turning to used equipment mar- kets to fulfill dozing requirements for the short term. A recovery and acceleration is expected in dozer deliveries in the near future. Within these product groups, the average size of machines deliv- ered continued to decline, a trend that has marked the current recov- ery. The value of machines shipped increased by a somewhat slower pace than unit shipments, this despite the low growth in lower-priced dozers. As further evidence of this shift to smaller machines, average truck payload was just 136 metric tons (mt) vs. 149 mt for the second quarter and 170-mt-plus during the peak years, 2012-2013. While in- creases in "ultra-class" truck shipments have been significant, they have lagged behind increases in delivery of smaller trucks, especially those in the 90- to 110-mt range. This reflects a need to replace these smaller trucks, but is also a reflection of shifts in geographic markets to regions where miners rely on trucks in these smaller size classes. Mines in Russia/CIS, India and Indonesia continue to pace the current expansion. Deliveries to miners in Russia/CIS more than doubled year-over-year and these have now been outpaced by equipment buyers in Australasia with Indonesian miners and contractors far ahead of their counterparts in Australia. Chang- es in other regions varied from +288% in Europe and the Middle East to -14% in North America. But these figures point out that quarter-to-quarter variations may not reflect longer-term trends. For example, the very sharp gains in Europe and the Middle East reflect the small numbers of units required in a region in secu- lar decline. Nevertheless, there does appear to be a continuing and significant dichotomy between faster growth in equipment demand from Russia/CIS, Africa and parts of Australasia, and slower recovery of shipments to the mature regions dominated by the largest world-class mines: North America, Latin America, Australia. At some point in this expansion, it is expected that the largest miners in these regions will switch from restrained to more expansive capex (including several potentially large "greenfield" developments) and attendant equipment buying. But, that is not yet reflected in shipments to date. The distribution of shipments by mineral market continues to reflect a somewhat unexpected strength in buying by coal min- ers in select national markets. Coal mines accounted for nearly half of all unit shipments in the thirs quarter, down moderately from the peak levels achieved in the second half of 2016, but well about historical norms. A substantial majority of these machines were placed in service in Russia, Indonesia and India, while coal operators in the large surface coal producing countries that dom- inated during the expansion phase, Australia, the U.S., Canada and South Africa, remained largely on the "sidelines." In time, these sectors will likely ratchet up capex and equipment purchas- es, but, owing to economic and political constraints, perhaps not to the levels that existed before the last contraction. The three major metals — copper, gold and iron — increased their share of shipments to nearly 40% of third-quarter totals with copper mines in particular surging vs. the second quarter. Increased demand from iron ore mines likewise reflects im- proving market conditions and a growing necessity to replace aging equipment. But the location of the latest buying does not reflect the oft-talked about surge in autonomous-operating haul- ers. Very few were shipped in the third quarter. Moreover, fewer than one-third of deliveries to iron ore mines went to the domi- nant-producing countries, Australia and Brazil, while more than The overall market for mining equipment suppliers increased by 11% quarter-to-quarter.

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