2nd Quarter 2020
Q2 deliveries totaled 637 units and with an aggregate value of US$1.23 billion. This represents a decline of just 6% in units and 11% in $ value – less than Parker Bay expected given the severe, virus-driven closures and declines in many other business sectors. It’s worth noting that these equipment markets had already weakened substantially over the previous five calendar quarters such that Q2 total units were down 47% and market value 40% from shipment levels at the end of 2018. With the unique worldwide economic conditions within which miners and equipment manufacturers are operating, it is extremely difficult to determine whether current levels represent a bottom for the contraction cycle that began at the end of 2018. But we do estimate that deliveries are now below long-term replacement requirements. And postponing such replacement of economically and physically obsolete units can only be delayed for a relatively short time if mine production is to be maintained.
The value of shipments (measured in recently depreciated US dollars) declined more than units because of shifts between and within product lines. High-value hydraulic shovels/excavators declined by 42%. And while truck deliveries were down just 5%, units in the ultra-class segment (290-mt+ payload) declined by 26%. Offsetting their reduced shipments was an increase in dozer deliveries (+19%). Analogous to trucks, wheel loader unit volume was up 2% while value declined 5% reflecting growth in the smaller (20-mt payload) units. Oftentimes these differences are reversed in subsequent quarters. When compared to levels reached at the peak of the last expansion cycle in Q4 2018, equipment shipments are down substantially for all product lines with the exception of low-volume electric shovels (+67%).
Geographically and by mineral, the changes in shipments varied widely on a quarter-over-quarter basis with Africa up 47% and all other regions down to varying degrees: 1% for Russia/CIS while North and Latin American mines each declined by more than 30%. Deliveries to coal, copper and other minerals declined Qtr/Qtr while shipments to gold, iron and oil sands all increased. Other than our usual caveat that short-term shipments do not necessarily represent longer-term shifts in market shares, we would suggest that declining global prospects for utility coal demand is translating into greatly reduced equipment requirements which is reflected in both the latest and recent measures.