A global increase in demand for commodities has led to tightening access to mining equipment and labour, an Ernst & Young (EY) report revealed.
The Australian mining fleet index has risen by 7.5 per cent in value in 18 months since December 2016, edging close to levels last seen five years ago.
The rising index indicates a strong demand for construction, earth-moving and quarrying equipment, termed as yellow goods.
It points to a healthy Chinese economy and other manufacturing economies that are underpinned by key commodities such as coal and iron ore.
EY Oceania mining & metals leader Scott Grimley said, “While the demand points to a strong economy, it creates headaches in business for those in procurement who are responsible for managing the supply of labour, equipment and spares.”
Lead times for larger equipment items have now extended to 12–24 months, which generates demand for additional labour for maintenance of older equipment. This, however, comes at the expense of productivity.
“Electrification is more common, where a shift from diesel is expected to yield improvements, particularly for underground mining operations,” Grimley said.
Drilling rigs are a common example where technological advances are adopted by most mining players, including autonomous drills to improve safety and productivity.
Market power has now changed hands from miners to hire fleet owners, who are able to negotiate better terms.
EY Oceania mining & metals transaction leader Paul Murphy said, “We expect to finally see consolidation in the mining services sector, similar to the consolidation of oil field services businesses, driven by the need for larger scale enterprises to invest in technology and requiring significant more capital relative to the past.
“With the mining services sector returning profit we anticipate an uptick in transactions as strategic growth becomes a priority.”
Murphy said most deals were being driven by the need of diversification across geography, commodity and service provided, scale or acquiring technology and digital plays improving the performance and efficiency of assets.