By Sarfaraz A. Khan and Gohar Yousuf
The weakness in commodity prices, particularly coal and iron ore, which caused the slowdown of the mining industry, has hit the growth of mining equipment firms. The mining equipment is a $1 trillion market that employs hundreds of thousands of people around the world. But due to the slowdown, the mining companies have laid off thousands of workers and temporarily closed their facilities. The leading mining and construction equipment maker Caterpillar (CAT) alone has cut more than 13,000 jobs. Overall, the sector’s annual capital expenditure for 2013 is expected to fall by 24% to $76 billion.
Meanwhile, increasing competition from Chinese manufacturers, who mainly compete on price, has made things worse. Nearly 50% of the global demand for construction equipment comes from China, where Caterpillar is engaged in a battle for market share against the local rivals. Earlier in October, Caterpillar released its quarterly results that disappointed investors.