Mining Service Companies See Recovery After Gloomy 2008

Mining service companies are beginning to see a recovery in their orderbooks, the first green shoots of confidence in an industry slammed by the global economic downturn.
"In the past two months, business is better compared to October, November and December last year," said a general manager at a Southeast Asian mining equipment company, who was attending the Asia Mining Congress in Singapore this week.
"Compared to the same time last year, sales are still bad, but there are signs of recovery. Orders are coming in and we are getting more enquiries from customers." He asked not to be identified because he was not authorised to speak to media.
Mining service companies supply the equipment – the mills, drills, rigs and specialist know-how, that the mining companies need in order to pull metals and minerals out of the earth.
The companies, which include heavy-equipment giant Caterpillar and Outotec of Finland, were among the first to suffer when the industry last year slashed capital expenditure by around 40%, or $200bn, in order to preserve cash.
Commodity prices have seen a 60% decline since touching record highs in the middle of 2008 but in spite of the falls delegates said the mood was surprisingly positive.
"Sentiment is reasonably bullish. We think there are signs of progress," said Andrew Berlach, managing director of FLSmidth Minerals, part of a Danish-based cement and minerals equipment company.
He added the turning point had yet to show up in a lot of news and data, which reflected the state of the economy in late 2008, before trillions of dollars in stimulus were in place.
"This is a very good time to invest, you can get capital costs down by 30%-35% at least."
Berlach also said lead times for getting equipment were down significantly from recent years, when long queues meant it could take three years to receive a piece of equipment.
Gold miners were also buoyant, benefiting from bullion prices hovering around 10% short of record highs.
"Gold prices are still strong and in Australian dollar terms they are phenomenal. We are benefitting to a degree from the slowdown elsewhere," said a regional exploration manager for a major gold miner, who was also not authorised to talk to media.
"We've been able to hire new people that otherwise might have gone into industrial metals, especially on the engineering side. We're also finding it easier to get equipment."
As well as stirrings of life in new equipment sales, the market for parts for existing equipment may remain healthy as miners try to maintain older equipment.
"We will see improvements and we are quite optimistic about this part of the world," said Peter Nathan Cazenas, business line manager at Swedish engineering firm Sandvik.
The company is seeing strong orders for replacement parts and consumables, he added.
"The aftermarket business is going to be strong... people are patching up equipment so even if we don't have a lot of new machine sales, the after-market will support."