Mining equipment values bounce back as industry recovers

The value of mining machinery in Australia is on the rise, another sign that sentiment in the industry has improved.

Australia’s yellow goods market has rebounded over the past six months, an Ernst & Young study revealed, although it adds the sector has yet to return to its 2013 market peak.

According to the EY 2017 Yellow Goods report, there has been 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 both the mining and construction sectors recovered in 2016 resulting in a reduction in overall clearance rates which are currently sitting at 57 per cent for mining and 60 per cent for construction.

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

The demand for equipment with current technology and greater efficiencies continues to grow, driven by digital improvements, automation enhancements and the transformation of the workforce. In this environment, predictive analysis is increasingly likely to form the basis of future procurement decisions.

EY Oceania mining & metals transaction leader Paul Murphy said the limited number of new builds in the recent past, particularly in the mining market, extended beyond ultra-class equipment.

“This unfulfilled demand for newer equipment should be good news for original equipment manufacturers, who can hope for stronger order books than they have seen in the last few years,” Murphy said.

“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.

”The benefits of automation appear 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.”

Murphy said 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.

“After a difficult period in the Australian yellow goods market, the uptick in value over the last quarter reflects a cautious optimism that the worst is behind us. Against this backdrop, management teams face key decisions on whether to overhaul existing machinery, procure new equipment or hire from third parties,” Murphy added.

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