~ Market will continue to grow, though tight margins will compel diversification ~
SYDNEY, June 5, 2015 /PRNewswire/ -- Australia is amongst the world's leading producers of several mined commodities, including coal, iron ore, gold and bauxite. As of 2015 Australia has a total of 420 operating mines for gold, coal, iron ore, copper, nickel and others which include nickel, zinc, tin, opal, bauxite, etc. Mining accounts for about 10% of the Australian economy.
New analysis from Frost & Sullivan, The Australian Mining Equipment Repair and Rental Market finds that over the five years to 2011-12, stimulated by demand growth from China and other developing countries, the mining industry grew robustly and prices for most commodities increased, almost doubling the mining industries income. This triggered a surge in investment in new mining operations, particularly in the iron ore sector. Australia's significant mining sector also stimulated the growth of a large METS (mining equipment, technology and services) industry which in total employs about double the workforce of the mining industry itself.
"Prices for many mined commodities began declining considerably in 2013 and markedly since mid 2014 as a dual result of substantial increases in production coinciding with suddenly softer markets. This led to a significant decline in mining investment which directly impacted the market for equipment rental, as it is exposed to the construction phase of mining operations. Consequently, rental equipment utilisation rates have fallen significantly, and rental prices have been impacted by cost control measures from major miners," said Mark Dougan, Managing Director, Australia & New Zealand, Frost & Sullivan.
The mining equipment rental market is a fragmented and cyclical market, and more exposed to the mining cycle than equipment repair & maintenance. Repair & maintenance expenditure has been relatively stable in recent years. Rental of earthmoving equipment is particularly exposed to fluctuations in construction or expansion work, or providing additional production capacity.
"As repair & maintenance expenditure is subject to mining production volumes and hence equipment utilisation rates, as a result of a very sizeable increase in the equipment base over 2012 and 2013, the equipment repair market has continued to grow, spurred by the need for increased repair requirements," Dougan added. A good portion of the mining equipment repair and maintenance market is spent on earthmoving and extracting equipment and expenditure is forecast to increase by 2019-20, propelled by increased mine production and the growing maintenance requirement of equipment installed during the investment boom.
Although the outlook for commodity prices is currently negative, and the lower prices have resulted in reduced revenues for many mines which have fed through into operating cost reductions, mining production in Australia is forecast to continue growing over the period 2014-15 to 2019-20, with production volumes increasing and commodity prices recovering well in 2016-17. This will prop a tandem growth trend in the mining rental and repair markets, though margins will be tight and rental companies will be forced to augment their market by diversify away from a reliance on mining and targeting efforts toward other non-mining markets such as aggregates and civil construction.
The Australian Mining Equipment Repair and Rental Market with a focus on earthmoving and extraction equipment is part of the Industrial Automation & Process Control (http://www.industrialautomation.frost.com) Growth Partnership Service program. All studies included in subscriptions provide detailed market opportunities and industry trends evaluated following extensive interviews with market participants.
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The Australian Mining Equipment Repair and Rental Market with a focus on earthmoving and extraction equipment
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SOURCE Frost & Sullivan