According to a recent survey of 100 European mine managers, the majority expect spending on mining equipment and services to be stable throughout 2015.
U.K.-based Timetric, an information services and data analysis provider, asked respondents if they expected their expenditure to increase, stay the same, or decrease. Most respondents are expecting stability within their expenditure. The majority of respondents anticipate spending to be flat: 63% for ‘explosives, blasting materials and chemicals’; 60% for ‘maintenance services’; 58% for ‘equipment parts and components’; and 56% for ‘plant and heavy equipment’.
Most of the stability is from regions producing particularly depressed commodities, such as the Polish coal industry. Other regions such as Western Europe will record stable or declining expenditure, due to their mining industries having matured with few low-cost deposits available.
When the results are split by commodity type, clear differences can be observed. Those commodities which have seen downward trends in pricing over the last two years, have more pessimistic respondents than those where commodity prices are more stable or robust. For instance global thermal coal prices—Europe’s production of coal consists primarily of thermal coal—have declined since the highs of 2011. With a steady downward trend in prices, coal mines are likely to record the least investment in expenditure, as prices are below an investment-inducing level.
In contrast, prices for metals such as copper, lead and gold, while having fallen, have been more stable over the last two years. Results from the survey showed respondents from precious and base metal mines were much more likely to expect an increase in expenditure over 2015 compared with those from coal mines.
In a related development, another Timetrics survey suggests that original equipment manufacturers (OEMs) must support mining companies in Europe and the former Soviet Union with cost reduction or risk losing their market share.
In a survey of 100 key decision makers at operating mines throughout Europe and the former Soviet Union (FSU), respondents highlighted their dissatisfaction towards costs associated with their equipment, with cost reduction being critical for OEMs to retain and develop their customers in the region.
Suppliers were rated according to 16 different factors, relating to costs, product attributes, as well as supplier attributes and capabilities. The lowest satisfaction ratings were given to ‘lowest price’ and ‘lowest total life costs’. Respondents in Scandinavia and the former Soviet Union had given the lowest satisfaction ratings for both these factors. When asked to nominate areas in which their suppliers needed to improve, 56% of respondents in Scandinavia and 44% of respondents in the FSU nominated ‘ability to support cost reduction/minimization’.
The potential for customers to switch due to poor support in cost reduction was demonstrated by a significant share of respondents emphasizing they are likely to switch to a different supplier (31%) in the next five years. This correlated with the regions having nominated lowest satisfaction with equipment costs, particularly Scandinavia, the FSU and Southern Europe. A further 29% were uncertain whether they would switch or remain with current suppliers.
“Decreasing commodity prices in the industry means scrutinizing any spending on areas that could be minimized. Timetric said its research demonstrates the current mindset of those mining companies in Europe and the FSU, and the importance now placed on minimizing costs where possible. A sizeable share of respondents will switch if their equipment manufacturers do not support them sufficiently with cost reduction,” said Nez Guevara, senior mining analyst at Timetric
The two reports—Winning and Retaining Business in the European and Former Soviet Union Mining Equipment Sector, 2015, and Purchasing Trends and Intentions in Mining in Europe and the Former Soviet Union, 2015—are available for purchase from Timetric at www.timetric.com.