Demand for high-tech machinery guides market recovery

The Cat 745 Articulated Truck

Demand for mining equipment with current technology and greater efficiencies continues to grow on the second-hand auction market, according to Ernst & Young (EY).

The lift in demand is being driven by digital improvements, automation enhancements and the transformation of the workforce, EY’s 2017 Yellow Goods report revealed.

In this environment, EY continues, predictive analysis is increasingly likely to form the basis of future procurement decisions.

EY Oceania mining and metals transaction leader Paul Murphy said an insatiable demand for low hours, high tech, ultra-class equipment had emerged in the mining industry since market conditions started to show signs of improvement.

“Every mine has gone through the productivity initiatives and cost-cutting exercise of the last several years and fully utilised the current kit that they had,” Murphy told Australian Mining.

“As the market has strengthened a bit, with the benefit of commodity prices over the last few months, the demand is not to replace (the kit) with older equipment, but with high tech, low emission, highly efficient solutions that deliver all-round productivity.

“Companies have actually sat back and focused on productivity and what is going to give them the best solution in this area.”

EY’s report found that Australia’s yellow goods market rebounded over the six months to May, although it was still below the 2013 market peak.

According to the report, there was a 41 per cent recovery in EY’s Australian mining fleet value index in the 15 months ending December 2016, and a 20-25 per cent increase in value for late model, low hours equipment since September 2015.

Overall supply of equipment in mining recovered in 2016, resulting in a reduction in overall clearance rates, which sat at 57 per cent for mining.

Capex delays have contributed to a recovery in used asset values, while the supply of quality used assets has remained constrained at the same time.

Murphy believes the demand for high-end, tech advanced equipment is also being driven by an improved understanding of the capabilities of these new solutions.

“If you go back to two or three years I don’t think there was a great awareness of the value that the latest high-tech equipment provided,” Murphy said.

“It wasn’t only the driverless elements to them but also the maintenance cycles. Now, there is increased awareness of it and we think that is driving the increased demand for higher end equipment.

“Everyone who participated in the report is saying the same thing – that’s the future and that’s where the market is headed.”

EY reported that the unfulfilled demand for newer equipment should be good news for original equipment manufacturers. It added that a partial recovery in commodity prices and demand for iron ore and gas are expected to assist market recovery, along with a growing trend towards automation.

Murphy said the transition towards autonomous equipment appeared significant, with a strong positive impact on utilisation and maintenance costs.

“We expect to see the trend towards automation for large fleets becoming the norm, however the price of adopting automated systems remains prohibitive for smaller operations in the foreseeable future,” he said.

“At the same time, the global push to raise emissions standards could have a negative impact on non-complying equipment, and recent technologies such as AC drive trains could also impact the attractiveness of older, less efficient stock.”

Against this backdrop, management teams face key decisions on whether to overhaul existing machinery, procure new equipment or hire from third parties, Murphy concluded.

This article also appears in the June edition of Australian Mining magazine.

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