The economic news has been a mixed bag in recent years for American mining equipment manufacturers and their supply chain. Sales have slipped because of a combination of factors, including a weak global economy, constrained credit, lower commodity prices and competition from abroad. The sharpest downturn occurred in 2009, when many industry players reported losses.
However, the industry is expected to rebound during the next five years as energy and mineral exploration and production heighten to meet growing worldwide demand, according to the analyst group IBISWorld.
The group projects that industry revenue will increase at an annual rate of 2.7 percent and total $30.8 billion by 2018. Mining and mineral processing industries and contractors will account for about 10.2 percent of the increase. More than half of the revenue will be attributed to exports. The weak U.S. dollar, coupled with rising demand in Mexico and Canada, will keep these exports strong as well as rising demand for minerals in expanding South American and Asian economies. Base mineral prices are projected to rise and spark the reopening of idled mines all over the world, particularly those for nickel and aluminum.
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Demand for coal, iron ore, and bauxite will rise with global economic fortunes: coal will be critical to developing nations with sharply rising demands for electricity, and demand for iron ore for steel production will grow in these same nations as they build up their infrastructure and their auto manufacturing industries.
Competition from other nations, particularly China, is on the rise, however. The usual factors — higher operational efficiencies due to the availability of low-cost labor plus a lack of regulation — have given China an advantage in the manufacture of mining equipment. The IBISWorld report notes, however, that U.S. has traditionally had a trade surplus with China in mining equipment. This is due not only to a soft dollar, but other factors including the strong brand recognition of such U.S. companies as Caterpillar and Joy Global.
IBISWorld analyst James Crompton told IMT that end user markets typically value product quality more than price, due to the potential pitfalls of underinvesting in equipment, which could include accidents, machinery repair costs and replacement, and production inefficiencies.
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This article was originally published on ThomasNet News Industry Market Trends and is reprinted in its entirety with permission from Thomas Industrial Network. For more stories like this please visit Industry Market Trends.