Jim Downey talks with Sarah Jensen from OEM Off-Highway for their OEM Industry Update podcast. We present it here with their permission.
On this week’s episode of OEM Industry Update, we spoke with Jim Downey, Vice President-Global Data Products, Power Systems Research, about the current state of the North American mining equipment market. He says mining equipment production is expected to rebound 13% in 2021 and continue growing over the next 5 years.
Transcript
Welcome to the PSR PowerTALK podcast produced by Power Systems Research.
00:14 Sarah Jensen:
Welcome to OEM industry update. A weekly podcast examining the latest news and technology trends impacting product development teams in the heavy duty on and off-highway equipment industry.
I’m Sarah Jensen, editor of OEM Off-Highway. And in this week’s episode I’ll be speaking with Jim Downey, Vice President, Global Data Products, Power Systems Research, about the current state of the North American mining equipment market. Let’s take a listen now.
So maybe just to start the conversation, if you could maybe discuss what the current state of the North American mining equipment market is?
00:53 Jim Downey:
Yes, absolutely. Uhm, currently we’re, uh, we’re pretty optimistic about the market right now.
We think it was a good sign that the number of shipments were up in the fourth quarter of 2020 compared to the previous year’s quarters. So leading into this year, that was certainly a good sign. So we’re, we’re, we’re thinking we’re sort of forecasting for, for this year, uhm, we’re expecting a rebound from last year, 2020, about 13% for this year, for 2021, in terms of the equipment production, in equipment production, and then we, we expect that to continue to grow over the next five years as well.
01:43 Sarah Jensen:
OK.
Are there any key drivers that are aiding the market growth? And, maybe, and what will help it continue to grow over these next five years as you guys anticipate?
01:56 Jim Downey:
Sure, absolutely. So, looking at looking at the, the growth that we’re seeing, I mean there is, obviously, the, uh, the rebound from the pandemic, as things have gotten better and some of the, uh, you know PPE shortages and the vaccines, the supply chain issues, a lot of the, you know, some of them we still are facing. Some of those obviously, but they’re much better than they were in 2020. As, as we’re right in the middle of things. So that, that’s certainly optimistic and is part of the reason why we’re seeing the mining market to be, to be, you know, better times for 2021 for sure and beyond.
02:41 Sarah Jensen:
Mm-hmm. OK.
And are there any certain segments of the market which are doing better than others? Or maybe why might they be doing better than others or?
02:55 Jim Downey:
Yeah, yeah, absolutely. So when we talk about, uhm, mining equipment, we sort of we break it out into surface mining and underground mining.
So surface mining is going to include, you know, crawlers, excavators, wheel loaders, and the big off-highway trucks — so the mining trucks. And for those we look at 400 horsepower and above so that gives us that that mining surface sector.
The underground mining, excuse me, uhm, that includes the mining loaders, mining locomotives, the mining personnel carriers, ore transporters, and special mining utility vehicles.
So, so with that there’s quite a bit more production within the surface mining, uh, as opposed to the underground mining. So when we kind of look at what we’re seeing, projecting for this year, the surface mining — we’re anticipating an increase for this year. The wheel loader part of that we have, uh, we’re showing an increase of about 7%. Excavators at about 9% in terms of production increase from, from 2020.
You know, the service mining is somewhat more predictable in terms of replacement and consumption cycles. And the mining trucks as well are part of that — looking at, that that to increase 10%.
When we look at the total surface mining, the increase is going to be like 13%, so we get a 13% increase that includes all the products that are discussed.
So we’re not gonna quite get the pre-COVID levels of 2019 but, but getting close, actually fairly close.
So some of the drivers surrounding that, uhm, it’s just the growth in excavation of iron ore, nickel, copper and gold. There’s also, uh, and that’s yeah, that. I guess that would cover the surface mining.
When we look at the underground mining, that dropped by 21% last year. Just reduction of 2020 drop from 2019. And, uh, we’re, we’re just being a rebound of, of close to 8% this year. I mean, again, the volume sizes are quite small compared to surface mines, which are getting close to 5000 units, where the, you know, total, total size of that market where the underground is, that range is not even quite 400 units.
06:05
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06:36 Sarah Jensen:
Are there any specific meeting challenges and or opportunities that might impact the mining equipment market in either 2021 or the next couple of years?
06:49 Jim Downey:
Yeah, well, I think that there’s a couple, couple opportunities. You know there, there is a need for new mining equipment and so that is increasing. So uhm, that’s obviously a good thing.
Also, another opportunity is equipment that would be better electric. So that is, that is starting and then there are prototypes out there — looking at electric mine trucks.
Also the, the underground mining is seemingly a good, good sector where, you know, alternative drives, specifically electric battery, it looks like right now is going to be a good option. And we are, some of those are already, obviously, out there. And so that’ll increase. So that’ll create more opportunity for the, the market to grow as well, you know, with the battery electric options.
And then, you know, I guess, you know, some of the challenges, just, you know, as, as commodity prices fluctuate, I mean, that can certainly hurt, hurt, you know, the mining industry then. Hence the demand for the equipment. So I mean, that’s probably one of the bigger, bigger challenges, right, that, that the mining market would face.
Again though, you know, assuming that things keep continuing the right direction with the pandemic, Uhm, you know, but I think we’re doing a great job in North America; but, you know, obviously in some other parts of the world globally, maybe not. Maybe don’t doing quite as well as, as, as we have with the vaccine. So of course that global effect, depending on how they do, that could certainly affect sort of the global market as well.
08:43 Sarah Jensen:
Mm-hmm. Right. OK.
And so I know you kind of touched on electrification of some of the mining equipment before, but in in addition to that, are there any other big trends you guys are currently seeing in regards to either North American mining equipment or just mining equipment market in general?
09:05 Jim Downey:
Yeah. I mean, uhm, again, with the electrification is obviously, is obviously a pretty pretty big one. I, I think that’s one of the bigger trends that we’re going to see over the next, you know, three to five years.
Prototypes are starting to come out. There’s been more testing. You know, we’ll probably see some widespread use. Probably, you know, I would guess within two years. You know, and then, and I don’t know that they’ll necessarily take away. It might take away with some of the some of the internal combustion units, but I don’t think initially.
Again, if as long as the market continues to grow, I think that initially it won’t affect the internal combustion units; but obviously at a certain point it will. The adoption rates will increase and that’ll come out of the internal combustion. But I, you know, I honestly don’t see that, probably, probably, for five years or so. Just ’cause as this stuff, you know, it takes a lot obviously developed in test, so…
10:09 Sarah Jensen:
Right, right?
10:11 Jim Downey:
But yeah, I mean that’s, that’s probably, you know, some of the bigger trends that we’re seeing. And again, it’s just kind of the global situation where, uhm, you know, we’ll just see.
The GDP is projected to be, eh, about 6% this year, so that’s, that’s encouraging as well. So again, we another reason. We feel pretty good about North America as well.
10:40 Sarah Jensen:
Mm-hmm. Right. OK.
And so, I mean, you kind of touched on this just now, but kind of how you guys maybe perceive the market progressing through 2021 and into 2022?
10:53 Jim Downey:
Yeah, absolutely. So I think, uhm, I can’t remember if I mentioned this or not, but we’ve, uhm, sort of our CAGR (compound annual growth rate) of about 4%, almost 4% that we’re seeing for the kind of our forecast years, which would be out 21, this current year, out to 2026. So really, it, you know, had, had a dip in even prior to the pandemic; but, uhm, we’re anticipating with the need for replacements, electrification possibilities, the rebound, you know, post, well, later in COVID, I should say the Pandemic — so all those things we think are going to lead to some ,you know, positive years going forward in terms of production. Because the demand will be there and the industry, seemingly, is pretty healthy right now. So that’s what we’re, that’s what we’re projecting, at least out for five years now, yes.
12:03 Sarah Jensen:
OK.
12:03 Jim Downey:
So this year, next year, obviously, I think that was your, your question — that those years are going to be pretty strong, I think.
12:11 Sarah Jensen:
Mm-hmm. OK.
12:11 Jim Downey:
Based on those reasons, yes.
12:14 Sarah Jensen:
Mm-hmm. OK. Great.
I think those should cover all the questions I had for now. And if you, I don’t know if you had anything else you wanted to add or think our audience should know about how the mining equipment market is trending there.
12:28 Jim Downey:
Yeah, I mean, I guess the only thing I could add is that you know when we when we look at this, uhm, one of the, one of the things we kind of follow is, is, you know, Caterpillar as a whole. They’re kind of a, Obviously, they’re a leading producer of, of many products; but obviously mining equipment as well. So they’re a pretty good example to, kind of, to use to see kind of what’s happening and, and, you know, they, again, they were down last year, like, like many people, and whether you look at units produced or just, they’re just their revenue loss.
You know, and of course, that was you know that was driven by lower demand, and aftermarket parts, and the impact from changes in dealer inventories, and supply chain issues as well. So, so, obviously that is a pretty good fact. You know, we know that was down and they were leading that as well as part of that. But looking forward, they, they’re projecting growth this year as well. So again, it’s just another. It’s just another, sort of, leading trend that we can, we can look at as a market leader to just kind of see how they did and kind of what they’re anticipating as well.
So yeah, it’s just maybe probably with my last point. But, again, it just, again, it all leads to some positivity. So I think the bottom line is that we just think that the equipment, mining equipment market is going to grow and it looks, foreseeable future looks, looks pretty bright.
14:10 Sarah Jensen:
Thank you for listening to this week’s episode of OEM Industry Update. Thank you again to Jim for providing his insights into the mining equipment market and be sure to tune in each week for another episode to stay up to date on our ever-changing industry.
14:29
Thank you for joining the PSR PowerTALK podcast. This podcast will be available on demand. Search for “PSR PowerTALK” in your podcast app or Google “Power Systems Research” to sign up today. This podcast is used with permission.
