Collapse of equipment makers adds fresh evidence the mining boom is over
Recent earnings data from main heavy machinery companies such as Caterpillar (NYSE:CAT) Atlas Copco (STO:ATCO-B,A) and Sandvick (STO:SAND) show that the decade-long growth in the mining suppliers and equipment sector has come to and end.
Major equipment and other supplies manufactures have seen a significant decrease in demand, as mining companies including BHP Billiton (ASX, NYSE:BHP), the world’s largest, are holding back investments in new equipment as demand and prices for metals decline.
"While some cost-reduction measures such as temporary layoffs, shutdowns and shortened work weeks have already been implemented, more permanent measures must be taken in the near term," said the company in a news release.
Swedish Atlas Copco, the world’s top maker of air compressors, logged Monday first-quarter net income below analyst estimates mostly due to European sales being sluggish.
Domestic rival Sandvik AB, the world’s No. 1 maker of metal-cutting tools, also posted a bigger-than-expected 33% drop in first-quarter operating profit.
Shortly after Finnish Metso announced its first-quarter underlying earnings before interest, tax and amortisation (EBITA) fell 7% to $172.00 million. While earnings surged at its mining and construction business, which makes crushers and grinding mills, the unit's orders dropped 18%.
According to analysts, major mining companies’ focus on returns, already visible in their most recent announcements, matters well beyond the industry itself as less investment will, over time, reduce supply growth and lead to higher commodity prices.
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