Falling raw material prices are hitting German mining equipment manufacturers hard. A 33% decline in revenue to 3.5 billion euros is predicted for the current year. Exports will fall by around 34% to 3.2 billion euros and domestic sales will be reduced by 20% to about 320 million euros.
“The industry has reacted to the slump in sales and scaled down production,” says VDMA Mining Association chairman Dr Paul Rheinländer. “About half the companies are working on short-time now. Some redundancies were unavoidable too.”
Talks have already been held with the North Rhine-Westphalian Ministry of Labour and Economy and unions among others to support companies in this difficult situation. “In this context it should be obvious that we can’t agree with Federal Environment Minister Hendricks’ proposal to stop financing coal projects through KfW credits,” Paul Rheinländer says.
He cited over-capacity, market turmoil and wide price falls as reasons for the decrease in revenue. Most raw materials have seen sometimes drastic drops in price since 2011. The coal industry, particularly important for mining equipment manufacturers, has been especially hard hit. A ton of South African coal still costs almost 92 euros in January 2011, according to Paul Rheinländer. The price currently stands at a little over 50 euros. There is hardly any new investment. In practice, only replacement investments are in demand. But the change in demand had “not really” taken the industry by surprise. It was hoped rather that the decrease would be more moderate.
The latest figures for orders and other signs from the industry however suggest that “an end is in sight”, he says. Manufacturers are therefore hoping that things will improve from the middle of next year and that turnover in 2015 can be at least maintained.
The biggest foreign market this year is the Near and Middle East. With a 17% share of total exports, revenues have almost doubled there. The USA is in second place, followed by Russia, Latin America and China.
Alongside the general uncertainty on world markets, the German domestic market is characterized by a withdrawal from hard coal production. Ruhrkohle AG, operator of the remaining collieries, is continually reducing investment. In addition, the latest major order went to China rather than Germany.
Mining equipment manufacturers are not only suffering from oversupply and price falls. Sanctions against Russia are also hitting them hard. As Paul Rheinländer explains, customers there have turned “enormously” toward the Far East, China in particular. The Federal Government is transposing measures decided upon at EU level “literally and in every last detail into national legislation”. Procedural errors have led to many more goods being subject to export bans than the sanctions aimed for. Other EU countries interpreted the sanctions “in their own best interests and purposes”, he says. “Although the sanctions are severe for the industry, they do appear useful. We have to follow government policy.”
In order to reduce their relatively heavy dependency on coal, German manufacturers are preparing to enlarge their product portfolios to include machinery and equipment for the extraction and treatment of hard rock. The industry is well aware that the future belongs to renewable energies, says Paul Rheinländer. Mineral ores are required to produce the industrial metals used in manufacturing wind turbines, solar panels and cells or biogas plants, and these are mostly extracted in hard rock mining. Companies are counting on a strong increase in demand in this area in the medium term.