CHICAGO The long-term
outlook for the global mining sector is positive despite a
recent downturn in demand, according to heavy equipment
manufacturer Caterpillar Inc.
The economic slowdown in China,
bracketed by Europes ongoing debt crisis and recessionary
conditions, means mine operators have eased off ordering new
machines, but as soon as global growth moves higher there will
be pressure to mine commodities like iron ore, copper and
metallurgical coal, executives at the Peoria, Ill.-based
"The key phrase when we talk
about the world economy in 2013 is a bit better, but still
weak," Mike DeWalt, corporate controller and investor relations
director, said during a conference call.
"In the United States,
were becoming increasingly optimistic. Interest rate
policies and the Feds plan to continue injecting
liquidity are positive for 2013 growth," he said. "We expect
the U.S. economy to grow at least 2.5 percent in 2013. We
expect the U.S. housing industry to help (lift growth)."
In Europe, Caterpillar projects
"another tough year. Much of the region is entrenched in fiscal
austerity (so) we expect the eurozone to struggle to match 2012
and we expect construction activity there will decline," DeWalt
Many emerging nations are easing
fiscal policies and lowering interest rates, which should
contribute to better growth. "Specifically in China, were
expecting improvement in 2013," he said. Caterpillar foresees
8.5-percent gross domestic product growth for China, a more
favorable environment for construction and higher commodity
Chairman and chief executive
officer Douglas R. Oberhelman said Caterpillar needs more
orders over the next two quarters to meet its forecast. "Order
rates cant stay at the level they were during the second
half of 2012; they will need to go up," he said.
The company built a massive
mining equipment backlog from early 2011 through mid-2012.
"Thats when sentiment changed in the world economy. China
was softer, you had an easing of commodity demand, so over the
past six months customers really eased off on ordering," DeWalt
Caterpillar cut output and
worked down finished goods inventories, and some plants will
remain idled until new orders accumulate.
Caterpillar anticipates a
"slightly firmer" price for iron ore this year, pegging it at
$135 per ton, while copper pricing also should improve. "If
that happens, that will help the order rates as the miners
respond to that," Oberhelman said.
Caterpillars forecast for
mining remains very good, executives said. "The issue of
declining ore grades and deeper mines is still there," DeWalt
"I really hope well see
world growth move up to 3 to 4 percent at some point. If that
happens, its going to be mineral-driven," Oberhelman