At Trade Show, Makers of Mining Equipment Push Cost-Savings – by James R. Hagerty (Wall Street Journal – September 24, 2012)

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LAS VEGAS—Companies that sell equipment and services to mining companies have geared up for a boom—just in time to see miners cut capital spending due to weak commodity prices.

The MINExpo International trade show, which began here Monday and is sponsored by the National Mining Association, is billed as the largest collection of mining equipment ever gathered. The number of exhibitors total 1,890, up 45% from the previous show four years ago, and cover 860,000 square feet of exhibitions, up nearly 40% from the last show.

But in a sign of hard times hitting the industry, Caterpillar Inc. Monday lowered its forecast for profit growth over the next few years, citing weaker demand for construction and mining equipment.

Around the world, mining companies are cutting costs and delaying some projects. Still, executives at the Las Vegas trade show insisted the slowdown will be short-lived. “We still believe we are in the very early innings” of the economic development of China, India and other fast-growing markets, Mike Sutherlin, chief executive officer of Milwaukee-based equipment maker Joy Global Inc., JOY -1.08% said during a panel discussion. George Boyce, CEO of Peabody Energy Inc., a St. Louis-based coal producer, said the outlook for coal remains “very, very strong,” especially in China and India, despite “near-term head winds.”

Those head winds may cause some headaches for equipment makers in the near term. London-based Anglo American AAL.LN +0.61% PLC said in late July it was reducing this year’s capital spending to about $5.5 billion from earlier projections of $7 billion. BHP Billiton Ltd., BHP.AU -0.48% an Anglo-Australian mining giant, last week shelved studies for two coking-coal mines in eastern Australia. BHP said in August it doesn’t expect to approve any new projects until at least mid-2013. Vale SA VALE5.BR 0.00% of Brazil has postponed its $3 billion Kronau potash project in Canada’s Saskatchewan province.

In the face of such cutbacks, exhibitors are emphasizing efficiencies. Schneider Electric SA SU.FR +0.33% of France is featuring software designed to help miners reduce energy costs. Demand for mining-related supplies and services is growing, though at a slower rate, said Greg Magdanz, a Schneider executive based in Raleigh, N.C., who focuses on mining customers. Miners “are trying to be a lot more cost-competitive,” he said. The global mining industry “might be taking a little bit of a breather now, but the demand is still there.” Schneider increased its exhibit space to about 400 square feet from about 50 square feet four years ago.

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