Opening a gold mine
Mining and quarrying has been a ray of light for the construction machinery industry with the Middle East experiencing its own mini-boom.
Mining and quarrying has been a ray of light for the construction machinery industry with the Middle East experiencing its own mini-boom.
It may be a marriage of convenience but there’s no greater love for construction machinery companies at the moment than the mining sector. Why else would the world’s biggest equipment manufacturer want to sink almost $1 billion into a mining specialist barely six months after completing the purchase of Bucyrus for $8.8 billion?
Of course Caterpillar is not only the biggest company in the sandpit but it is the wealthiest. It also has investors to appease and they have their own particular passion – seeing their shares gather value. When the economy goes awry, tradition dictates that the safe havens are the things people always need like commodity materials that excavators and crushers can churn out. Caterpillar’s material gains with ERA and Bucyrus makes all kinds of sense.
Bucyrus was the gold stamp it needed to enter the mining sector (the underground mining segment in particular) and ERA – a company which designs, manufactures and sells underground coal-mining equipment in China – was the visa stamp it needed to tap a rich seam of business.
Caterpillar will arrive in the mining sector in China with two other familiar rivals already scratching away. Both Komatsu and Hitachi have made ground in the industry there, but they’ll be more worried about Caterpillar’s new venture than the other way around.
Fortunately the global market – with the Middle East an increasingly important market in its own right – looks rather perky at the moment.
Since global demand for construction and mining machinery/equipment began to plummet in 2008 due to the global economic downturn, the construction machinery industry has begun to realise the value in mining. As the decline in demand continued through 2009 and 2010 spending on new construction activity continued to slump, and the stock of mining rose.
Current estimates calculate that the global market for construction and mining machinery and equipment will be 822,000 units by the year 2015. As we have seen in the Middle East, demand for general construction equipment is expected to come from developing countries with growing needs to construct highways, oil refineries, power plants, office buildings, and other infrastructure projects, but mining is the sector that the big companies are working hard on.
According to the Construction And Mining Machinery/Equipment: A Global Strategic Business Report, a new market research report on companiesandmarkets.com, China and other developing markets in Asia-Pacific, Latin America, alongside the Middle East are forecast to drive market growth.
“Nevertheless, the outlook for the construction machinery market is positive, with demand for machinery expected to recover post-2010, as the global economy recovers,” says the report.
Asia-Pacific is forecast to register robust growth in the construction machinery segment, especially in countries such as Indonesia, India, South Korea, and China. Among these nations, China is expected to account for the largest share of the overall demand for new products globally, followed by North America.
The US market for construction equipment is expected to be driven by the enhanced activity in residential construction sectors. Besides, the non-residential construction work such as construction and repair of bridges, highways, and public works, mining will be a major growth driver for the US construction industry.
The implementation of strict emission norms for off-road engines in the EU, the US, and Canada is expected to drive up the prices of construction equipment in these regions, in turn increasing the sector’s revenues in the coming years. The trend related to construction equipment rental is spreading, particularly across mid and smaller size machines.
In terms of unit sales, China represents the largest market for construction and mining machinery worldwide, as stated by the report. China is also projected to emerge as the fastest growing market for construction and mining machinery worldwide. Wheeled loaders represent the largest machinery segment in the Chinese market, accounting for about 63% share in 2010. Crawler excavators, vital in mining operations, represent another major segment. Currently, Europe constitutes the second largest market worldwide, followed by the United States.
Global mining equipment demand is forecast to grow significantly over the years. Presently, China is a major market for mining equipment worldwide, backed by the country´s expanding mining industry.
The US as well as the industrialised countries of Western Europe represent other major mining equipment markets.
Growth in mining equipment demand is expected to be driven by growth in China, as the country is expected to continue generating half of the demand for novel mining equipment. China registered robust growth in the mining equipment sector due to significant investments made by the nation in the local mining sector last year. In addition to China, Australia and India are other major markets in Asia-Pacific region, where demand related to mining equipment is high. Demand for mining equipment in Latin America, Africa and Middle East is forecast to rise significantly as these regions possess large mineable resources.
Like the construction machinery industry, the Middle East has also been buying heavily into the sector. Qatar Holdings, owned by the Qatari Emir Sheikh Hamad Bin Khalifa Al Thani, recently dropped $1 billion on Greek mining company European Goldfield (the deal also saw the group take a 10% share in the country’s biggest construction company Ellaktor). Closer to home Saudi Ma’aden and its JV partner Alcoa raised a $1 billion for the second phase of their mine and refinery at Ras Al Khair. The Kingdom is expected to continue to invest in its bauxite mining and aluminum production and when the country recently signed off its $600 million North/South railway, it made sure that the mineral mining centre of Ras Azzour was stop en-route.
