3rd Quarter 2019
Just 835 machines were delivered during Q3 — a 24% decline vs. Q2. The value of these shipments was 17% lower than Q2 reflecting disproportionately greater reductions in the delivery of lower-priced product lines and smaller units within those product lines. While this marks the third quarterly decline this year, it is far greater than those recorded in Q1 and Q2 which appeared to be more of a pause in the latest expansion cycle. It appears to mark the end of the recovery/expansion that began in Q2 2016 but the severity of the decline is disproportionate to conditions in other mining activity.
The declines are widespread but mask substantial variations by product line, size, geography and mineral with some sectors increasing while others dropped even more sharply than the overall contraction. Shipments of mining trucks (by far the largest product line in terms of both units and value) were down by 25%; excavators/loaders by 22% with hydraulic shovels/loaders leading the decline. Crawler and wheel dozer shipments were down by 14%. In sharp contrast, electric/rope shovel deliveries tripled but the volume for these extremely large excavators is very small.
Geographically, the changes during Q3 reflect a reversal of the strength in several regions while ones that lagged behind during the expansion to date increased during Q3. Shipments to mines in Russia/CIS decline by over 40%; those in Australasia by 27% (with a much larger drop in deliveries to Indonesia). In contrast, North American shipments increased by 14%; Latin American deliveries by 24%. This ‘rotation’ among sectors was anticipated, but not the severity of the declines.
Similarly a ‘rotation’ in mineral sectors seems to be developing if Q3 shifts continue. Shipments to coal miners in India, Indonesia and Russia — which led the expansion over the past 2+ years – declined sharply in Q3 with global shipments to coal mines off by 37%, accompanied by reductions in deliveries to oil sands (-10%) and gold (-8%). However, copper mine deliveries were up 58% and iron +13%.
As we’ve often noted, quarter to quarter shipments, especially when broken down by product, size-class, geography and mineral, do not always represent longer-term trends. But it is hard to categorize the substantial decline in Q3 shipments as a glitch. It is possible that subsequent revisions to manufacturers’ shipments will raise currently reported levels but these typically amount to single-digit revisions. And it is possible that short-term order placements or manufacturers’ inventory adjustments had a disproportionate impact on reported shipments that will be reversed in Q4. It is also possible that the contraction will continue for the balance of 2019 and into 2020. But Parker Bay does NOT anticipate any contraction to be of the intensity or duration of the one experienced during 2013-2016.