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Mining equipment sales to fall in ’14: Caterpillar

Keywords: Tags  Caterpillar, mining equipment, ore production, off-highway truck, Mike DeWalt, Doug Oberhelman, Bradley Halverson, Corinna Petry

CHICAGO — Sales of heavy-duty, high-capacity trucks and other mining equipment continue to lag as miners squeeze more production out of existing assets and are slow to invest in replacements—and it’s hard to say how long the trend will persist, Caterpillar Inc. executives said during a Jan. 27 earnings conference call.

Last year was "a tough year," vice president of strategic services Mike DeWalt told analysts during the call. Sales declined sharply in Caterpillar’s resource industries division, which is principally mining. "That substantial decline was the result of both lower demand from mining customers and from changes in dealer inventory," he said.

The depressed demand trend has resulted in temporary plant shutdowns, rolling layoffs and the closure, downsizing and consolidation of several manufacturing facilities, DeWalt said. "Despite prospects for an improved economic climate and continued strong production at mines, we are expecting a sales decline in our resource industry segment of about 10 percent in 2014."

Mine production improved in 2013 and likely will be up again this year, DeWalt said. "The bad news is that orders for new equipment remain pretty low. But that cannot go on indefinitely." Based on the size and age of existing fleets, "miners are buying new equipment at a rate that’s well below the average replacement level they’ll need going forward."

The capital spending strategy among miners "is not illogical," Caterpillar chairman and chief executive officer Douglas Oberhelman said during the conference call. "They are pulling ore out of the ground at faster and faster rates. They are just pulling their horns in with (capital expenditures). But they have cautioned us (to) be ready at some point in the future. None of them can predict when that is."

Group president and chief operating officer Bradley Halverson said Caterpillar is bullish on mining in the longer term and "we see that as a great business for us."

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