1st Quarter 2022
The increase in Q1 shipments decelerated from the very strong gains achieved in the second half of 2021 especially Q4. This is reflected in Parker Bay’s Mobile Mining Equipment Index (Q1 2007 = 100) which increased to 95.3 from Q4’s 93.0. Unit volume declined slightly while the value of these machines increased by a modest 2.4% as compared to the 16% increase recorded by Q4 2021 deliveries. This reflects in part a shift among product lines – shipments of higher priced hydraulic shovels/excavators and trucks increased while deliveries of relatively lower-priced wheel loaders and dozers declined. Within product lines, deliveries of hydraulic machines were on average substantially larger but not the mining trucks they are paired with. Such discrepancies are not likely to reflect long-term pairings as they represent only a very small percentage of the operating population of both. The decline in both dozer and wheel loader shipments have been protracted and substantial. Since the most recent expansion cycle began in Q4 2020, unit shipments of trucks and excavators are up 170% and 73% respectively (albeit from very depressed levels in Q3 2020). But dozer deliveries are still 6% below the start of the expansion; wheel loaders nearly 20%. Sales of both product lines held up better during the last contraction. And part of the explanation may be due to the availability of good quality used machines which in general are more easily resold and transferred than larger machines. But it is not yet clear to Parker Bay if there are other contributing factors to the continued weak shipments of these two product lines.
As is very often the case, quarterly shipments vary widely by geographic region and mineral application. These variations were particularly wide in Q1 2022. Geographically, the more traditional markets with the largest equipment requirements – North America and Australasia – were up 21% and 34% respectively, while Latin America, Africa and Asia all declined by 16% or more. Deliveries to Russia/CIS mines declined by 7% but it’s questionable whether this was the result of the war in Ukraine. It affected only the last six weeks of the quarter and likely had no impact on shipments within Russia/CIS or China. Mineral markets diverged greatly with iron mines taking on 77% more shipments than in Q4 2021 and Canadian oils sands more than tripling from a very low Q4 2021, yet only +5% YoY. Shipments to coal markets worldwide increased by a modest 7%. In sharp contrast, the previously strong copper and gold sectors declined by more than 30% each. Again, we caution reading too much into changes from one quarter to the next.
Although growth in shipments decelerated from Q4, the conditions for continued gains remain in place, at least in the short term. Mineral prices are generally strong and output higher and growing. In some markets there are indications of supply shortages. Although Parker Bay does not have access to manufacturers’ orders and backlogs except as they are made public, there are indications that they continue to grow, and that delivery lead times are longer than a year ago. One manufacturer cited increased utilization of machines in service, and this should indicate that miners will require additions to their fleets if demand for their output continues to grow. And used equipment sales are reportedly strong. All these conditions point toward continued growth.
But there are also problems that will limit these gains. Manufacturers’ costs are increasing, and they are understood to be passing this increase along in higher prices. There are continuing supply chain problems, and these may worsen as the impact of the war in Ukraine expands. It now appears there will be no near-term settlement of the hostilities. Based on public disclosures, indications are that some Ukraine mines have remained in operation while those close to the Black Sea have been forced to suspend operations. Machines at those operations are recorded as ‘parked’ and account for about 20% of the national total. But it’s possible that operations at other mines have been disrupted, resulting in larger numbers of inactive equipment than reported in the Database.
Outside of Ukraine, the Database does not yet reflect significant impacts of the war. Some sectors, both mining and mining equipment, will undoubtedly be affected even after a hoped-for settlement of hostilities. Russia exports of coal will be affected though not to all countries. U.S. manufacturers have suspended activities in Russia and sanctions will limit sales from North American and European equipment suppliers. These will likely be replaced by Russian/CIS equipment suppliers and, perhaps, by imports increased from China. All of these changes and more may be part of greater shifts in trade patterns and economic dislocations. Coupled with monetary authorities’ efforts to contain inflation, the result could well be a global recession which would likely result in mineral and mining market contractions and declining equipment sales later in the year or in 2023. But for now, we expect some continued growth in machine shipments this year.