2nd Quarter 2021
Q2 continued to reflect general mining market improvement but with some unusual divergences that may simply reflect quarterly rebalancing of manufacturing and delivery activities among the several major suppliers. They may also be indicative of mines’ priorities among equipment types as they continue to restock following the contraction that ended in Q3 2020. Our index of equipment shipments (based on estimated value of shipments and indexed to 2007 = 100) was 71 for Q2, up just 4% above Q1 but a more robust 27% YoY. This latter gauge will likely record even more positive growth for Q3 shipments as the comparison will then be with the Q3 2020 bottom. The index remains nearly one-fourth below the previous cyclical peak (Q4 2018) representing a gauge of how far manufacturers have to return to that previous level of production. In summary, the current growth phase of the equipment business cycle appears to be on-track but not as growth-oriented as we expected at this early stage of recovery/expansion following the Q3 2020 cyclical bottom.
As indicated by our index, there was a 23% increase in unit volume but just 4% in estimated value of shipments. The explanation derives chiefly from the product mix and, to a limited extent, shift in size classes within each product line. The numbers of lower-value dozers and wheel loaders were up 63% and 50% Q/Q but each around 25% Y/Y. Unit trucks shipments were up 13% Q/Q but just 3% in value. We expect this to balance in the second half with more of the large (220 mt+) trucks being delivered based on large orders placed during the past 12 months. And despite the modest gains in Q2, truck shipments were the highest in two years. Deliveries of the very high-value excavators and shovels declined by 29% Q/Q and nearly 40% in the value of these shipments. We expect this product category to bounce back in the second half of 2021 to better match the levels of truck shipments.
Gains in shipments to mines in Australasia, Africa, North America, and Russia/CIS were offset by a sharp decline in deliveries to Latin America, Asia and Europe/Middle East with the greatest impact stemming from Latin America. As we have noted in the past, quarterly shipments by region can be highly variable and, in particular, we don’t expect the low level of demand from Latin American mines to continue.
Parker Bay continues to expect strong growth during the second half of 2021 based on:
- general mining activity including strong mineral prices and increasing production,
- new mine commissionings and recommissioning of mines previously placed on ‘care-and-maintenance’,
- reports of major new machine orders,
- used equipment market conditions including limited availability and pricing (typically a predecessor to growth in new equipment sales).
As always, there is uncertainty and impediments to growth, e.g., government and non-government objections and limitation to new mine development. But there does appear to be continuing mitigation of the adverse effects of the pandemic. So our assessment is that the positive factors will outweigh the negative for the balance of 2021 and into next year.