The State of the Worldwide Mining Equipment & Services Market Overview Market Data, Sources for Information, Identification of Major Networks, Summary of Suggested Strategies Gary Svoboda, CEO Adventus Research + Consulting Inc. Webinar - May 30, 2014 www.conferenceboard.ca 1
Highlights 1. A synopsis/overview of current international mining supply market data, including market size, growth and trends in the major international markets, and identification of the largest opportunities, both by region and product class. 2. International sources and contacts for mining supply market information, including the most relevant databases and directories, grouped by region, and by type of information available. 3. Identification of major international mining and mining supply networks. 4. Summary of suggested strategies regarding international mining supply business development. www.conferenceboard.ca 2
Methodology & Sources Interviews: were conducted with the following individuals: Spencer Ramshaw CAMESE Steve Fraser EMJ (US) John Chadwick International Mining (UK) Douglas Morrison CEMI Brendan Marshall MAC Amoya Phelps NMA (US) Market data: this worldwide mining equipment & services update is compiled from a range of the most recent secondary sources, including: World Mining Equipment Market Freedonia - Nov 2013 US Market for Mining Equipment Research and Markets Mar 12 Global Mining Equipment Transparency Research Jul 13 In-Depth Research on China Mining Equipment Industry Research and Markets Aug 13 World Demand Dampens Growth Forecasts for Mining Equipment Lux Research Sept 13 Mining Equipment Makers Rise to Efficiency Challenge Reuters Jun 13 www.conferenceboard.ca 3
1. Synopsis/Overview World Situation Mining Equipment to 2020 www.conferenceboard.ca 4
$US Billions World Mining Equipment Demand 2005-2020 World Mining Equipment Demand 140 120 100 80 60 40 20 0 2005 2010 2015 2020 Forecast growth from 2010 thru 2015 of 4.8% per year to $92 billion. Growth rate expected to increase from 2015 through 2020 to 7.1% annually to $130 billion. Recovery is expected to be sustained due to rising demand for commodities such as iron ore and copper, and need for coal. www.conferenceboard.ca 5
Mining Equipment Demand By Region 2005-2020 ($US billions) $ US Billions 70 60 50 40 30 20 10 0 Through 2020 China and to a lesser extent, India, will be leading sources of mining equipment demand. 2005 2010 2015 2020 www.conferenceboard.ca 6
Mining Equipment Demand By Region 2005 vs. 2020 Forecast 2005 - $ 34.1 Billion 2020 Forecast - $ 130 billion Eastern Europe 8% Central & South America 9% Africa / Middle East 9% Other Asia Pacific 18% North America 27% China 18% Western Europe 11% Central & South America 7% Eastern Europe 4% Other Asia Pacific 17% North America 11% China 50% Africa / Middle East 6% Western Europe 5% www.conferenceboard.ca 7
World Mining Equipment Demand by Application, 2005 vs. 2020 (Forecast) 2005 $ 34.1 Billion 2020 - $ 130 Billion Coal Mining 26% Metals Mining 37% Coal Mining 28% Metals Mining 44% Minerals Mining 37% Minerals Mining 28% www.conferenceboard.ca 8
Top 11 Mining Equipment Companies Worldwide in 2010 ($B) 120 108.7 100 80 60 40 20 0 42.5 9.9 66.9 36.7 28.2 21.5 11.5 9.7 7.3 10.1 4.2 3.5 3.5 2.1 2 1.9 1.7 1.5 1.2 1.2 1.1 Total Sales Mining Equipment Sales www.conferenceboard.ca 9
Mining Equipment Manufacturers: High Concentration to Intensify The industry is highly concentrated with the world s largest 7 manufacturers accounting for 43% of global mining equipment value. Forecasts say that the industry will become even more concentrated as the growing technical complexity of newgeneration equipment makes it increasingly difficult for small companies to compete with those that have greater financial and technical resources. All Others 57% Caterpillar 16% Komatsu 7% Sandvik 6% Liebherr- Intern l Hitachi 2% 3% Joy Global 3% Atlas Copco 3% Metso 3% www.conferenceboard.ca 10
Mining Equipment Manufacturers Moving Production Capacity Closer to Markets With the largest deposits of mineable resources generally located in developing countries, another key trend is that the major multinationals that dominate world mining equipment are moving production capacity to these areas a trend that is expected to continue. www.conferenceboard.ca 11
USA Mining Equipment to 2020 www.conferenceboard.ca 12
U.S. Market for Mining Equipment by Application 2000-2020 ($Millions) 10000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0 2000 2005 2010 2015 2020 Coal - Anthracite & other Coal - Bituminous Other Minerals Minerals - Phosphate & Potash Minerals - Aggregates Other Metals Metals - Copper Metals - Iron Ore www.conferenceboard.ca 13
U.S. Market for Mining Equipment by Product Class 2000-2020 ($Millions) 10000 9000 8000 7000 6000 5000 4000 3000 2000 Parts & Attachments Mineral Processing Machinery Crushing/Pulverizing/Screening Equipment Drills & Breakers Underground Mining Machinery Surface Mining Machinery 1000 0 2000 2005 2010 2015 2020 www.conferenceboard.ca 14
The U.S. is a Net Exporter of Mining Equipment 14000 12000 10000 8000 6000 4000 2000 U.S. Mining Equipment Forecast to 2020 ($ Millions) In 2000, the U.S. exported $450 million more than it imported. In 2020 that number is expected to grow to $ 2.45 billion. 0-2000 2000 2005 2010 2015 2020-4000 Mining Equipment - Domestic Production Net Imports www.conferenceboard.ca 15
China Mining Equipment to 2020 www.conferenceboard.ca 16
China Mining Equipment Demand to 2020 ($ Billions) 70 60 50 40 30 20 10 0 2005 2010 2015 2020 China will be the primary driver in the world mining equipment market, accounting for one-half of all new equipment demand by 2020. Underlying reason a strategic decision to invest in its domestic industry. For example, coal output doubled from 1998 to 2008. Also a leading producer of iron ore & bauxite. www.conferenceboard.ca 17
China Market Share of World Demand 60% 50% 40% 30% 20% 10% Between 2005 and 2010, China s share of world demand for mining equipment more than doubled, from 17.5% to 42.5%. The forecast through 2020 is that its share will continue to grow to 50%. 0% 2005 2010 2015 2020 www.conferenceboard.ca 18
China Demand Trends Growth in mining equipment through 2015 ~ 7-10% annually Coal is biggest market Growth in mining equipment market will be stimulated by demand for mined products from downstream industries: Coal-dependent electric utilities Steel Construction Agriculture Chemicals 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Growth thru 2015 www.conferenceboard.ca 19
China Latest Trends May 2014 Globe & Mail ROB May 6th HSBC China PMI (Purchasing Manager) Index is a survey of the country s major manufacturers, who are asked a series of questions on new business orders, hiring and current levels of activity. Readings above 50 are positive, and below 50 indicate declining levels of activity. The PMI index released on May 6 th, 2014 was 48.1 providing evidence of slowing Chinese economy. More concerning is that the Chinese housing market is in virtual free fall. A survey of activity in 54 major Chinese markets noted a 47% decline year over year in new home sales the lowest level of activity in 4 years. The Global PMI (May 2014) was better, at 51.9, due to higher PMIs in the developed world, but declining from February s 53.3. The result is that, for the short term at least, the playing field has changed and the Chinese economy may be moving from the Canadian investors best friend to a source of portfolio underperformance. www.conferenceboard.ca 20
Other World Markets Mining Equipment to 2020 www.conferenceboard.ca 21
Other World Markets for Mining Equipment Demand 2000 2020 ($Billions) 16 14 12 10 8 6 4 2 0 2005 2010 2015 2020 Western Europe India Other Asia/Pacific Central & South America Eastern Europe Afria / Mideast Largest and fastest growing of these markets is Asia/Pacific excluding China, which includes India & Australia Second-fastest growing market will be Africa/Mideast, closely followed by Latin America. www.conferenceboard.ca 22
2. International Sources and Contacts for Mining Supply Market Information www.conferenceboard.ca 23
Mining/Mining Supply Key Publications (International - 1) Australian Journal of Mining. AJM), encapsulates the latest developments, trends and news in Australian and Asia Pacific mining both in print and online. www.theajmonline.com.au/ Engineering and Mining Journal. For 147 years, E&MJ has been the voice of the international mining community. Decision makers rely on E&MJ for the latest in industry news, trends and techniques. Each issue is filled with regional news from the U.S. and Canada, Latin America, Africa, Asia and Australia as well as a regular international coal section. www.e-mj.com/ InfoMine. Mining intelligence and technology website and related information services. Information organized by: country, company, supplier, technology, mine sites etc. Serving the worldwide mining industry since 1990. www.infomine.com/ Intierra Resource Intelligence. Business intelligence services for the mineral resources sector, offering insights into company evaluations, M&A, risk management, due diligence, competitor intelligence and project pipeline evaluation. It integrates diverse data sets and combines them to give clients a sustainable competitive advantage. www.intierra.com. www.conferenceboard.ca 24
Mining/Mining Supply Key Publications (International - 2) International Mining. Published in the UK, IM follows the international mining industry from a purchasing manager perspective. www.im-mining.com/ Mining Engineering. Mining Engineering magazine, is the official publication of The Society for Mining, Metallurgy, and Exploration, Inc. (SME) since 1949. http://me.smenet.org/ Mining Journal. MJ is the industry's leading weekly newspaper covering all aspects of the global mining industry. For over 175 years it has been informing key decision makers around the globe and continues to be the leading source of news, insight and expert views on the mining sector. It packs news, in-depth analysis, and viewpoints from senior players in the industry, market trend data, financial information and news of business development opportunities into journal. www.mining-journal.com www.conferenceboard.ca 25
Mining/Mining Supply Key Publications (International - 2) Mining Monthly. Australia s monthly industry magazine is a unique source of mining industry news and information and features many of the industry s highprofile surveys and studies, containing international coverage of mines, companies, technologies and people. www.miningmonthly.com Mining Weekly. MiningWeekly.com provides real time news reportage through originated written, video and audio material on projects, products, policies, personalities and techno-economic progress, covering a wide range of industries from agro-processing to information technology. Readers may choose to visit the free to air aspects, may register for a daily email newsletter and may choose to subscribe to the site s full search function and back copy archive. A mobile version Mining Weekly Online is available at m.miningweekly.com and an Mining Weekly application is available in the itunes store for the users of the iphone. http://www.creamermedia.co.za/page/mining-weekly-online www.conferenceboard.ca 26
Mining/Mining Supply Key Publications (Canada) About Mining, by the Mining Association of Canada. Several publications on the state and scope of the Canadian mining industry are available at the MAC website. www.mining.ca/www/about_mining/publications.php or call 613-233-9391 CAMESE Compendium of Canadian Mining Suppliers: Your Guide to Canadian Mining Technology, by CAMESE. Includes sub-sectors of the mining supply industry, corporate profiles of Canadian mining supplier and company index. Available at www.camese.org. Mining, Quarry and Oil and Gas Extraction: Canadian Industry Statistics, Industry Canada website www.ic.gc.ca NRCan: Natural Resources Canada Minerals and Metals Sector, includes business and market information, statistics, publications and reports. www.nrcanrncan.gc.ca/mms-smm/index-eng.htm Organization: PDAC: Prospectors and Developers Association of Canada, Statistics and information on global exploration www.pdac.ca/international/misc/statistics.html or call 416-362-1969. www.conferenceboard.ca 27
3. Identification of Major International Mining and Mining Supply Networks. www.conferenceboard.ca 28
International Mining & Mining Supply Networks Austmine. Austmine s vision is for Australia to be the world s number one supplier of innovative, efficient and safe mining equipment, technologies and services. It brings together leading companies from around Australia that supply to the global mining industry, and proactively works to raise to profile of the Australian METS sector abroad. www.austmine.com.au/ Global Mining Association of China. The Global Association of China (GMAC) is the representative body for both companies and individuals within the international mining community in China. GMAC s main goals focus on Advocacy, Networking, Representation and Support. globalminingchina.com International Council on Mining and Metals. ICMM was founded in 2001 to improve sustainable development performance in the mining and metals industry. Today, we bring together 22 mining and metals companies as well as 33 national and regional mining associations and global commodity associations to address core sustainable development challenges. www.icmm.com www.conferenceboard.ca 29
International Mining & Mining Supply Networks (2) International Mining and Minerals Association. IMMa is part of IOM3. It has four technical divisions: Applied Earth Science (AES), Mineral Processing & Extractive Metallurgy (MPEM), Mining Technology (MT) and Petroleum & Drilling Engineering (PDE); and it encompasses all the interests that resided in the former Institution of Mining and Metallurgy (IMM), which merged with the Institute of Materials in 2002 to form IOM3. www.iom3.org The Institute of Materials, Minerals and Mining. (IOM3) is a major UK engineering institution whose activities encompass the whole materials cycle, from exploration and extraction, through characterisation, processing, forming, finishing and application, to product recycling and land reuse. It exists to promote and develop all aspects of materials science and engineering, geology, mining and associated technologies, mineral and petroleum engineering and extraction metallurgy, as a leading authority in the worldwide materials and mining community. www.iom3.org www.conferenceboard.ca 30
International Mining & Mining Supply Networks (3) National Mining Association. The NMA is U.S. mining's advocate in Washington, D.C. and beyond. NMA is the only national trade organization that represents the interests of mining before Congress, the administration, federal agencies, the judiciary and the media providing a clear voice for U.S. mining. NMA s mission is to build support for public policies that will help America fully and responsibly utilize its coal and mineral resources. www.nma.org Society for Mining Metallurgy and Exploration. SME is a professional society whose nearly 15,000 membership represents all professionals serving the minerals industry in more than 85 countries. SME members are engineers, geologists, metallurgists, educators, students and researchers. SME advances the worldwide minerals community through information exchange and professional development. SME's staff of 45 are located in Englewood, Colorado. www.smenet.org www.conferenceboard.ca 31
Mining and Mining Supply Networks (Canada) CEMI: The Centre for Excellence in Mining Innovation directs and coordinates stepchange innovation in the areas of exploration, deep mining, integrated mine engineering, environment and sustainability for the metal mining industry. www.miningexcellence.ca CMIC: Canadian Mining Innovation Council. CMIC is a network whose purpose is to improve the competitiveness of a responsible Canadian mining industry by strengthening mining research excellence across Canada. It complements and links with existing initiatives and research centres For more information, go to: www.nrcan.gc.ca/mms-smm/nmw-smc/cmic-ccim-eng.htm CAMIRO: The Canadian Mining Industry Research Organization. CAMIRO is run by the Canadian mining industry to manage collaborative mining research. There are three divisions of CAMIRO; Exploration, Mining, and Metallurgical Processing. The CAMIRO mandate is industry driven. For further information, go to www.camiro.org Mining Association of Canada. Since 1935, MAC has been the national voice of the Canadian mining industry. MAC promotes the industry nationally and internationally, works with governments on policies affecting the sector and educates the public on the value mining brings to the economy and the daily life of Canadians. www.mining.ca PDAC: Prospectors and Developers Association of Canada, Statistics and information on global exploration for further information, go to www.pdac.ca www.conferenceboard.ca 32
4. Summary of Suggested Strategies regarding International Mining Supply Business Development. www.conferenceboard.ca 33
Top 10 Issues Mining Companies will Face in 2014 (Deloitte & Touche Report -2014) 1. Dealing with stubbornly high costs The mounting costs of doing business when mining lower grade deposits, creating situations where mining productivity is hitting new lows. Suggested strategies: Pursue operational excellence Improve efficiencies through technology Use analytics to uncover true cost drivers Rationalize the supply chain Go modular Rightsize capital projects www.conferenceboard.ca 34
Top 10 Issues Mining Companies will Face in 2014 2. Market imbalances wreak commodity price havoc The legacy of unconstrained project development threatens to push certain commodities, such as iron ore, coal and aluminum, into oversupply Suggested Strategies Get strategic about the portfolio Link value to price Integrate www.conferenceboard.ca 35
Top 10 Issues Mining Companies will Face in 2014 3. Exploring the innovation imperative The business of mining is not getting easier, especially as grades decline, ore bodies are depleted and companies have to explore increasingly remote locations. Suggested Strategies Rethink energy management Electrify processes Automate Borrow best practices Build shared infrastructure www.conferenceboard.ca 36
Top 10 Issues Mining Companies will Face in 2014 4. Finding funding In the face of falling commodity prices, debt is up, deals are down and the juniors are fighting for survival. Suggested Strategies Sovereign wealth funds Private equity Non-traditional stock markets Alternative financing Pension funds Consolidation www.conferenceboard.ca 37
Top 10 Issues Mining Companies will Face in 2014 5. Record asset impairments In Sept 2013, industry asset impairments topped $75 billion in just two years. Suggested Strategies Business case review Mine portfolio optimization Project rationalization Predictive cost analytics Phased modular construction Talent management www.conferenceboard.ca 38
Top 10 Issues Mining Companies will Face in 2014 6. Local community demands intensify With the increasing spotlight on mining activities and the rise of social media, corporate reputations and, and market valuations are at increasing risk. Suggested Strategies Developing local supply bases Improving communications Sourcing local labour www.conferenceboard.ca 39
Top 10 Issues Mining Companies will Face in 2014 7. Government relations marked by increasing hostility Resource nationalism has begun to emerge in previously mining-friendly regions (Chile, Dominican Republic, Ecuador and even Canada). Suggested Strategies Form policy development lobbies Coordinate local infrastructure projects Cluster-based development Get citizens on side Look at all levels www.conferenceboard.ca 40
Top 10 Issues Mining Companies will Face in 2014 8. Zero tolerance regulatory environments complicate compliance Heightened awareness in civic and local community groups of environmental issues also tends to drive increased attention to corruption issues. (esp. important in countries without histories of transparency, like Russia, China and Mongolia) Suggested Strategies Internal controls and policies Compliance audits Risk assessments System upgrades www.conferenceboard.ca 41
Top 10 Issues Mining Companies will Face in 2014 9. Changing the safety equation From zero harm to zero fatalities. Black swan events are proving that major incidents (incl. fatalities) are not necessarily reduced by concentrating on lowering the frequency of minor incidents. Suggested Strategies Model high-risk events Re-examine workplace practices Break down data silos www.conferenceboard.ca 42
Top 10 Issues Mining Companies will Face in 2014 10. The talent gap Despite project halts and a slower pace of development, the mining industry talent shortage persists, and even extends into the executive suites. Suggested Strategies Developing a board-focused talent strategy Standardizing systems Embracing new training environments www.conferenceboard.ca 43
Conference Board of Canada The Conference Board of Canada created Centre for the Commercialization of Mining Technologies & Services (CCMTS) was created in 2008 to respond to an identified industry need to focus on these commercialization and market channel issues and to strengthen complementarities by working across barriers and silos to promote industry sector cooperation, especially in commercializing technologies and technology-based services. Gary Svoboda, CEO, Adventus Research + Consulting Inc. Tel: 519-824-7456, www.adventusresearch.com www.conferenceboard.ca 44