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The mining industry’s woes are spreading with Caterpillar Inc. becoming the latest casualty of weak metal prices.
The company, often viewed as an economic bellwether, on Wednesday slashed its sales forecast and reported a profit shortfall this quarter because of less demand for its giant tractors and equipment used to move large pieces of earth.
“This is an unfortunate consequence of what is going on at the top of the food chain,” said Blake Langill, mining leader with Ernst & Young LLP.
A combination of lower metal prices and high costs has forced the largest mining companies such as Barrick Gold Corp. to suspend projects and sell expensive mines in order to survive.
Junior miners have also had to delay construction because they have been unable to raise capital in the public markets or find an investor to help finance their projects. Some of the owners have had to turn to family for extra funding to help them stay afloat.
That in turn has rippled out into other parts of the economy, cutting work for builders, geologists, engineers, lawyers and other businesses that provide services to miners.
“There are several projects that have been delayed pretty significantly. Construction companies will be hit by this,” said Jacqueline Palladini, senior economist with the Conference Board of Canada research group. Caterpillar, based in Peoria, Ill., may be able to mitigate the slowdown in mining activity because producers must still operate their existing mines and will eventually require spare parts from the company.
Lawyers and bankers who have helped arranged financing for miners will also be able to find other work.
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