Mining suppliers short-term forecast mainly overcast: report

Mining services providers’ earnings will continue to fall this year as major miners’ focus on returns, resulting in job cuts, scaling back expansions and shelving of major projects, an investment firm specialized in commodities futures and stocks told Bloomberg.

According to Scott Hobart from HFZ Capital Management Ltd., the use of provisional housing operated by third-party services supplier is “crumbling” as big miners cut dependence on outside contractors.

Equipment makers have already started to suffer from the global mining spending slash, as recent earnings data from main heavy machinery companies such as Caterpillar (NYSE:CAT) Atlas Copco (STO:ATCO-B,A) and Sandvick (STO:SAND) show.

In April Caterpillar — the world’s biggest maker of mining equipment— cut its 2013 profit forecast and laid off about 700 workers as a result of the weakness in the mining sector.

A few days later Swedish Atlas Copco, the world’s top maker of air compressors, logged first-quarter net income below analyst estimates mostly due to European sales being sluggish.

Miners around the world are under intense pressure to cut costs as they contend with volatile commodity prices, rising wages, labour unrest and lower-grade ores.

This has caused the sector to be quite pessimistic about the status of the industry in the coming months, a recent study by Canadian executive search firm The Mining Recruitment Group Ltd. So much so that a bare 9% of mining executives polled by the company said they are actually bullish on the year ahead.

Image by Claffra/Shutterstock.com

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