Mining boom decline hitting Cat hard

The downturn in the mining sector over the past two years appears to be having a significant impact on the U.S.’s biggest mining equipment supplier – Caterpillar – which has also been hit by a sluggish U.S. economy which will have adversely affected its construction equipment business too.  

The combination has led to plant closures worldwide and major workforce reductions.

According to Equipment World , the most recent announcement of the planned shutdown of its Pulaski, Virginia coal hauler plant next year, with the loss of 240 jobs is just the latest in a string of closures – mostly related to mining equipment.  

In the past year the company has announced cuts to its global workforce amounting to around 10%, or 13,000 jobs, in order to cut costs. 

The company’s Q3 profits were 44% down and the company’s CEO, Doug Oberhelman, noted then that the slump in demand for mining equipment accounts for 75% of the expected 17% decline in total sales from 2012.

Equipment World notes further that earlier this month  Caterpillar had announced a restructuring of its underground mining equipment plant in Australia where 200 workers are employed. And last month the company announced the closing of its mining plant in Kilgore,Texas, laying off 100 workers there. 

In September, the company announced the layoff of 115 workers at its South Milwaukee, Wisconsin plant before announcing that some of the production from the Kilgore plant would be moved there. 

In August, the manufacturer announced the layoffs of 125 workers at its Large Engine Center in Layfayette, Indiana. 

In April and May the company announced two rounds of layoffs totalling 800 workers at its big Decatur, Illinois mining equipment plant as well as the closing of its Toronto tunnel-boring machine facility (an ill judged acquisition) where 330 workers were employed. 

In May, Caterpillar announced the closing of a South Carolina plant that recycled transmissions and other components. That plant employed 280 people. In February, Caterpillar cut 1,400 jobs at its Belgian excavator plant. 

Reuters has also reported that more “smaller consolidations and shutdowns” have come at plants in Beckley, West Virginia, Tazewell, Virginia, and Sudbury, Ontario “that put more than 75 employees out of work.”

Over the past 30 years Caterpillar has moved from being virtually totally construction-focused into a major producer, probably the world's biggest in terms of revenues, of mining equipment – initially for the surface mining sector but later moving into underground equipment and systems and into tunnel boring.  

Much of this massive expansion in mining equipment was through acquisitions – notably companies like Bucyrus International in South Milwaukee, Elphinstone in Australia, DJB in the UK and Lovat in Canada  – and some of these plants appear to have borne the brunt of the Caterpillar closures and layoffs.

Caterpillar had a number of years of riding the mining boom and over this period the mining equipment sector was probably the most profitable in the Caterpillar range.  But with major mining companies currently cutting back capital expenditures on new projects and expansions, it is this sector which appears to be being hardest hit as the equipment giant struggles to cut costs and bring profits back on track.

This article appears courtesy of Mine Web. To read more daily international mining and finance news click here.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.