LONDON, Oct 15 (Reuters) - Order books for major mining equipment makers are still buoyant, signalling that a worsening outlook for metal demand and a global financial crisis have yet to slow mining activity around the world.
The world’s suppliers of drills, machinery and huge truck tyres are betting that long term, there will be firm demand for their products.
"Everybody agrees that in the long term, five to ten years, the Chinese, the Indian and the Brazilians will grow and they will need more minerals and more energy," said Luc Minguet, president of the earthmover and industrial tyre product line at Michelin MICP.PA in France.
“We have not seen any slowdown yet -- but what could happen nobody knows,” Minguet said, pointing to last week’s sharp fall in financial markets.
The industry has been working falt out to meet demand from a booming commodity market over the last five years with prices of metals such as copper rising fivefold.
“We are ramping up capacity as fast as we can...we cannot get the equipment to make these big tyres fast enough,” he said.
As tyre manufacturers have been struggling to meet fast growing demand -- tyres for mining vehicles need to be changed at least once a year -- they have delayed supplies of machinery.
"One bottleneck for us has been the tyre industry," said information officer Klas Magnusson at Volvo Construction and Equipment, a subsidiary of Volvo Group VOLVb.ST.
“A couple of years back the situation was really bad for some machines with lead times up to a year -- but now these take maybe 3 months to delivery,” Magnusson said.
EQUIPMENT STILL NEEDED
In Australia, which accounts for around 14 percent of the world’s gold production and is the biggest iron ore producer, lead times were not seen any shorter -- yet.
"This meltdown happened only pretty recently so I don't think it has been factored into the equipment suppliers yet," said Peter Harold, managing director at nickel producer Panoramic Resources PAN.AX.
Harold said the lead time for a large production drill was still around six months and it would take between 6-12 months to get trucks and loaders.
“If this uncertainty persists over the next six months then a few projects, especially new projects, might be put on the back burner ... that will flow through to the equipment guys.”
A London-based analyst said miners were having to dig deeper for copper, gold and iron ore and better equipment was needed.
“In these metals all the easy mined deposits have already been exploited and those that are left have lower grades and are found deeper and deeper under the surface,” he said.
“They sell their equipment to larger companies with their own cash flow and balance sheet,” one analyst said.
Lower commodity prices will put pressure on the mining sector, but the replacement market still looked strong.
“If they buy less new equipment, then they have to put even more money into service and repairs and for companies such as Sandvik and Atlas the replacement division is more or less the same size as the equipment side,” the analyst added.
Sandvik and Atlas Copco were not available for comment.
Reporting by Anna Stablum, editing by Peter Blackburn
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