Overall demand for mining equipment appears to be significantly increasing, benefiting construction equipment distributors. However, the coal industry is still facing multiple headwinds, reducing that sector’s demand for equipment.
Increases in the number of mines, an acceleration in mining activity and less restrictive government regulations are among the factors boosting the mining equipment sector, research firm Market Research Future reported earlier this year. The thriving economy and rising commodity prices are also providing strong tailwinds to the sector.
Conversely, the coal sector has numerous challenges, including stepped-up use of natural gas, tough regulations and renewable energy initiatives.
Back to the mines
Jonathan Campbell, the vice president of Wheeler Machinery, told CED Magazine in May that his company’s business with mining companies has accelerated a great deal in recent months, driven by rising copper prices.
“Copper is the main driver for Wheeler Machinery, and copper prices are at the point where mining equipment that had been parked is all back to work,” says Campbell, whose company sells bulldozers, mining shovels, wheel loaders, wheel dozers and other equipment to mining companies. “As long as the U.S. and world economy stay strong, leading to continued building in the commercial, residential and infrastructure sectors, Wheeler will do well.”
Campbell, whose company is based in Salt Lake City, Utah and sells equipment to mining companies in Utah, Nevada and Wyoming, says he expects Wheeler’s mining business to stay strong “at least through 2020.”
While Campbell says a federal infrastructure bill would definitely help Wheeler’s mining business, he’s not “super optimistic” that such a bill will be passed based on what he’s heard from several members of Congress.
Strong consumer confidence and higher iron ore prices are helping to increase demand for mining equipment, according to Michael Vazquez, the vice president of MECO Miami.
Due to the rapid expansion of infrastructure in Florida, “rock pit mining is huge here,” Vazquez says. “Every day more and more raw materials are needed for roads in the state,” adds Vazquez, whose company sells various types of equipment, including wheel loaders, excavators, motorized bulldozers, transmissions, and engine parts.
Moreover, over the long term, MECO Miami should be helped by a very strong overall business climate. “The outlook for business over the next three to five years is excellent, and the mining equipment business should benefit from that,” he says. “Our parts business and our rental businesses are doing very well. It’s a great time to be in the heavy equipment business.”
Troubles in Tennesee
State and federal regulations have greatly hurt the mining business of Tennessee-based Stowers’ Machinery Corporation, the company’s president, Wes Stowers, told CED Magazine.
“Mining was 25% of our business, and now it’s just 5%,” Stowers says.
Although there are multiple factors that have contributed to the decline of Stowers’ mining business, the Obama administration’s failure to approve permits for new coal mines was the biggest negative catalyst, according to Stowers. Tennessee state law mandates that all permits for new coal mines be issued by the federal government, and the Obama administration, for the most part, refused to issue such permits.
“Under Obama, two new coal mining permits were approved in eight years. There was no follow-up to applications for the mines. It would take years to get applications for mines approved, versus six to nine months previously, so mining companies pulled out of Tennessee,” Stowers says.
A bill has been signed into law by the governor of Tennessee giving the state authority to approve coal mines within its borders, but the U.S. Congress must still approve funds for the change next year. “We’re still a long way from being able to compete with other states [for coal mines],” Stowers says.
Still not obsolete
Coal will never be as lucrative as it once was because natural gas has become much more widely used as an energy source in the U.S. But although coal is generating a lower percentage of electricity In the U.S. than it once did, current demand for coal-generated electricity in the country is expected to remain level. Additionally, metallurgical coal is still needed to make steel and solar panels.
Coal is a vital electricity source because, unlike any other existing power source, it is possible to stockpile coal so it can be deployed in the event of extremely high demand, Stowers says.