The Asia Miner

JAN-FEB 2017

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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VDMA 48 VDMA MINING SUPPLEMENT • 2017 Last year was a difficult year for the mining business and the com- panies that serve it. Coal production and consumption, which rep- resents the largest investment by commodity, declined significantly in both China and the U.S. While the situation for metal/nonmetal mining was not nearly as stark, many of the mining companies took a conservative approach to capital spending, opting for efficiency improvements and brownfield expansions rather than greenfield con- struction and purchasing new equipment. Following a decline in turnover of approximately 21%, down to EUR 2.8 billion in 2016, German equipment suppliers foresee sta- bilization in 2017 and they are preparing for improved business in 2018. Speaking at its annual meeting at the Zollverein coal mine in Es- sen, Germany, during November, Chairman of the Mining Equipment Association of the German Engineering Federation (VDMA Mining) Dr. Michael Schulte Strathaus said he believes that rising raw ma- terial prices and the mining industry's willingness to invest again will bring an end to the days of two-figure declines in turnover. "In the third quarter of this year, mining equipment manufacturers registered a 12% increase in incoming orders in comparison to the same peri- od the previous year," Schulte Strathaus said. "The respective index rose over the same period from 61 to 80 points. However, the period from the receipt of an order to its settlement can run up to 15 months. The renewed increase in turnover can therefore be anticipated in ear- ly 2018." Statistics indicate that the industry has reached the bottom of the cycle. Mining companies are realizing profits again and soon they will invest in more machinery and equipment. Managing Through the Trough Regarding the significant drop in revenues, comparing the first nine months of 2016 against 2015, revenues in Germany fell 36% to around 200 million euros and 21% for exports to just under 2.6 billion euros. "Growth rates of more than 10%, as we had in 2012, will hardly be possible in the foreseeable future," Schulte Strathaus said. "We will more likely be talking about 2%-4%, but we expect the mining market to stabilize this year and begin to grow again." Despite this not exactly simple situation, the companies have succeeded in maintaining a steady workforce of 12,000 employees. "Our member companies have, by dint of strenuous efforts, kept their permanent staff," Schulte Strathaus said. VDMA Mining's domestic business continues to decline. Schulte Strathaus ascribes the domestic decline to missing contracts in the hard coal industry. The last German hard coal mine will close in 2018. Brown coal, potash and salt and stone are still mined. "Germany operates a small-scale, incalculable energy policy that is not always understandable in terms of energy economics," Schulte Strathaus said. "Although no substitute is available, the energy supply guaranteed by brown coal is undermined. Incomprehensible decisions on energy policy are made based on national environmental require- ments that go well beyond European or international agreements. What the politicians lack is a reasonable plan and it is affecting manu- facturing in Germany with higher electrical costs." Healthy Prospects Worldwide The largest export market for German mining equipment manufactur- ers is the European Union, which represents 20% of the mining-relat- ed exports. In the past, this fact has shifted into the background due to the large single markets in China, Russia and the U.S., Schulte VDMA Mining Looks Past the Recession

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