The mineral and metals processing industry machinery manufacturing companies supply a range of equipment and machinery such as heat exchangers, furnace, grinding mills to the mineral and metals processing companies. The former also provide installation and maintenance services over the life cycle of equipment and machinery to the mineral and metals processing industries. Thus, the performance of the companies in mineral and metals processing industry machinery is dependent on the performance of minerals and metals.
In 2008, the metal prices crashed due to the global financial meltdown as depicted in the movement of the LME Index below. The industry started recovering from 2009 and did so until mid-2011 backed by recovering global demand particularly from China (largest base metal consumer globally). However, as the demand slowed down, specifically from China, this led to an oversupply situation, which in turn resulted in a decline in prices.
The capital expenditure by metal and mineral processing industries (which acts as a major demand driver for metal and mineral processing machinery manufacturers) followed a similar trend as the commodity prices increased from 2009-11 and declined thenceforth. The capital expenditure of the metal and mineral processing companies picked up with a lagging effect since the LME Index recovered between 2009-11. However, the capital expenditure declined thereafter as the LME Index started declining after 2011 (Televisory examined capital expenditure data of Aluminium Corp. of China Ltd., United Co. RUSAL PLC, Alcoa Corp., Jiaozuo Wanfang Aluminium Manufacturing Co. Ltd., Tongling Nonferrous Metals Group Co. Ltd., BOLIDEN AB, Shaanxi Coal Industry Co. Ltd., MMC Norilsk Nickel PJSC, Vale Indonesia Tbk PT and Nickel Asia Corp. for a period of 2008-16). The capital expenditure by metal and mineral processing companies has a direct bearing on demand for mineral and metal processing industry machinery. Televisory analysed the data of Outotec OYJ, FLSmidth and Co. A/S, Metso OYJ, Seco/Warwick SA, Chugai Ro Co. Ltd. and NFK Holdings Co. Ltd. and tried to study their performance.
The revenue and new order inflow of the companies declined in 2008 due to the global economic crisis as stated above. However, as the metal prices began rising as indicated by the recovery in LME index, the revenue and new order profile for the metal and mineral processing machinery manufacturers also recovered during the post-2008 period.
The metal and mineral industry entered slump in late 2011 because of declining commodity prices and the machinery manufacturers were also hit. They registered a decline in new order inflows and thereby, revenues as shown above.
On the profitability front, the machinery manufacturing companies registered moderation in average operating profitability which could be explained by the suppression of margins by clients and rising overheads (as the revenues declined). The leverage of the machinery manufacturing companies also improved between 2009-12 supported by higher cash flows and declined thereafter.
Therefore, as the commodity prices exhibited a marginal improvement from 2017, after years of continuous slowdown, the metal and mineral processing machinery manufacturers are expected to register improvement in new order inflow, this is likely to translate into a recovery in form of revenues and profitability for the manufacturers.
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