The mining industry will favour repair over machinery / equipment purchases in the next few years.
With nickel prices dropping to $6.59 AUD/lb from over $9 AUD/lb, & Gold prices have also dropped from $1,624 AUD/ozt to 1,611.29 AUD/oz, there are reports suggesting that the mining boom is over.
While there is definitely a downturn in the industry, it is a long way off until we see the curtains fall on Western Australian’s honey pot.
The mining industry has been experiencing a strong performance over the last five years with annual growth at 3%.
The market is currently experiencing a downturn, but a 2% growth rate is predicted during 2015-2020.
This shift has been significant. This dip in the market is going to put pressure on many mining companies. In order for them to remain economically viable, they will have to reassess their costs.
One way they can do this is looking at their expenditure on equipment. Buying expensive machinery during the next five years might not practical. One trend that is becoming evident is that companies are turning towards repair and maintenance instead of buying new machinery.
Repair and maintenance: a major mining activity
In the heavy machinery repair sector, the primary activity is fixing and maintaining mining equipment, proving it not only is an alternative to buying outright, but that the practice has existed for quite some time.
There has been a demand for machinery maintenance and repair over the past 5 years. Companies have been using this strategy for years to keep costs down and to compensate for the huge waiting time for buying equipment.
Despite the recent downturn, the demand for repair and maintenance is set to increase in the next few years due to a continual decline in the manufacturing division, caused by strong import competition and the closure of businesses. This means that more people will be opting to pursue the repair route.
Key external drivers
Capital expenditure will see more companies chose to extend the life of their existing machinery rather than buy new equipment. This adaptation method allows companies to remain profitable in a market that is experiencing a decline in growth.
A safer option
Mining equipment is extremely expensive and while maintaining and repairing equipment over an extended time period may briefly affect productivity, it is a much safer option than investing major capital in an uncertain time in the industry where operations are closing at a high rate.
If you have decided to maintain and repair rather than buy, please contact Hydramech. They are an experienced and dedicated company that focus on underground mining machinery.