Comment
Jonathan Rowland
–
Editor
Palladian Publications Ltd
15 South Street, Farnham,
Surrey, GU9 7QU, UK
t: +44 (0)1252 718999
f: +44 (0)1252 718992
w:
Managing Editor
James Little
Editorial Assistant
Harleigh Hobbs
Advertisement Director
Rod Hardy
Advertisement Manager
Ryan Freeman
Production
Ben Munro
Subscriptions
Laura White
Office Administrator
Jo Repton
Website Manager
Tom Fullerton
Website Editor
CallumO'Reilly
Digital Editorial Assistant
Angharad Lock
Correspondents
Barry Baxter
Gordon Cope
Publisher
Nigel Hardy
World Coal (ISSN No: 0968-3224, USPS No: 020-997) is published
monthly by Palladian Publications Ltd, GBR, and distributed in the USA
by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals
postage paid New Brunswick, NJ, and additional mailing offices.
POSTMASTER: send address changes to World Coal, 701C Ashland Ave,
Folcroft PA 19032.
Annual subscription (monthly) £110 UK including postage, £125/
E
175
overseas (airmail), US$200 US/Canada (airmail). Two-year discounted
rate (monthly) £176 UK including postage, £200/
E
280 overseas (airmail),
US$320 US/Canada (airmail). Claims for non-receipt of issues must be
made within four months of publication of the issue or they will not be
honoured without charge.
Michael King
Ng Weng Hoong
Comment
Anthony Fensom
P
erhaps the most headline-grabbing number contained in
Joy Global’s most recent quarterly result was US$1.343 billion.
That was the size of the loss the company booked in the three months
to the end of October on the back of a US$1.199 billion writedown of its
underground reporting unit.
Similarly gloomy headlines (and eye-watering numbers) are not hard to
find in the mining industry at the moment. Caterpillar is expecting a 5%
fall in its revenues in 2016 on the back of a 10% fall in its mining-related
revenues. That will mark the first time in its history that the company has
reported four consecutive years of falling sales. Since peaking in 4Q12,
Caterpillar’s Resource Industries business segment has seen sales fall from
US$5.776 billion in 4Q12 to just US$1.796 billion in 3Q15.
Looking at mining CAPEX numbers and it’s not hard to see why
mining equipment manufacturers are taking a hit. Global mining CAPEX
fell by 26% in 2015 and is expected to keep heading down this year (-19%)
and in 2017 (-6%), according to a recent Susquehanna Financial Group
research note. Meanwhile the US coal industry is now in its fifth
consecutive year of belt tightening with the cuts averaging around 30% per
year since 2013.
Is it all gloom then? Well not entirely. Although impressively large,
Joy’s fall into the red was non-cash: its underlying business is stronger
than that headline figure suggests. As Ted Grace, Research Analyst at
Susquehanna Financial Group, told
World Coal
, Joy’s management have
done an “excellent job” of managing through the downturn – cutting costs,
strengthening the balance sheet and restructuring debt, and developing
new products that take the company out of its traditional markets. These
efforts will leave Joy in a relatively strong position when the turnaround
comes. Indeed, the company may return to growth sooner than most on
the back of its new product lines and cost-cutting measures.
The slowdown in the commodity market is not yet over and this year is
looking like another difficult one for anyone involved in digging things
out of the ground. But the mining industry has always been cyclical and it
always swings back around – because ultimately people will always need
mined commodities. And yes, that includes coal.
Nor does the current market mean an end to opportunity. Joy hasn’t
stopped developing new product lines despite its falling revenues; it looks
well set to take advantage of that investment. Murray Energy saw an
opportunity when it bought two Colombian mines, as did Bowie
Resources more recently when it agreed to buy Peabody Energy’s
New Mexico and Colorado mines. In Australia, Stanmore Coal’s plans to
re-open the Isaac Plains mine, bought from Vale and Sumitomo last year,
shows a smaller company smelling profit where a major couldn’t.
Not every risk will pay off; the downturn will surely claim more
victims before it has run its course. But the old maxim still holds true:
fortune favours the bold. While it may be easy to be blinded by the doom
and gloom that dominates reports on the industry, there’s always some
light to be found for those with the vision and gumption to find it.
