All of the industry developments of last year and predictions for the year ahead
Pickles Mining and Pickles Oil & Gas are two divisions that have observed back-to-back years of fluctuating industry conditions. As a fresh new year kicks into gear, we can review the mining and oil & gas developments of 2022, and what they could mean for 2023 and beyond.
2022 was an indisputably turbulent year, thanks in part to the Russia-Ukraine war spurring high-energy prices, the start of post-pandemic economic recovery, and skyrocketing inflation and interest rates. These worldwide developments led to a considerable decrease in consumer demand, which subsequently drove low levels of business and consumer confidence. This has been observed in lower returns through sales on older equipment and LVs over the last 2 months of 2023.
From a mining perspective, deliveries of new assets were up significantly compared to previous year numbers: 16% in units and 12.3% in value YoY. However, OPEX was stronger than CAPEX, again due to inflation and rising interest rates. Remanufacturers/part resellers had a bumper year, with more owners opting to hold onto their assets as second-hand prices stagnated and new equipment became more expensive.
According to data from Parker Bay, miners took delivery of machines with valuations up a collective 72% compared to Q2, but modestly lower than Q3 2021. Despite this, there was a significant decline in iron ore prices. The only other mineral market higher in Q3 vs Q2 was coal, which was up 22%. There are underlying regional shifts that will change over time as the coal industry moves away from traditional marketplaces in the US, Canada and South Africa, and towards Russia, India and Indonesia.
Copper remains the yardstick of fiscal change, with a lacklustre 2022. Copper is an essential component in the transition towards renewable energy solutions and EV manufacturing, with a very slow growth rate logged. Global consumption for copper was up just 2.9% in 2022, which is a considerable drop on the already low growth of 4% in 2021.
From an asset perspective, one equipment item that excelled in 2022 was the Cat 16 variant graders – with some leaping 40%+ in value throughout 2022 and moved from a market awash with used units to almost none available.
CAT has built and displayed its battery electric (BE) version of its 793, a 2,650-horsepower mining truck that appears coy regarding the vehicle’s performance specifications i.e. distance between charge and charge time. It would be rare, but not impossible, for CAT to build a lemon and there is a future in BE assets on the horizon. It is possible we’ll receive a hybrid fuel cell/BE approach to sustainable assets given the high utilisation of most mining production equipment. Industry insiders are keeping an eye on hydrogen powered units with FMG investing in R&D of the alternative fuel taupe for its haul trucks. A recent partnership with Liebherr would mean a working asset in the not-too-distant future.
What’s in store for 2023?
A sustained level of high inflation, elevated energy costs, rising interest rates, and a greater focus on ESG and the continued labour shortage are key issues to monitor in 2023.
As the global economy begins to cool after COVID-19, inflation will continue to permeate marketplaces until monetary measures start taking effect and supply catches up with demand. A strong US dollar against a weakened AU dollar will only compound the issue, but exporters will be enjoying the ride.
Geopolitical risks to energy supplies are predicted to keep prices high throughout 2023. A chillier than normal European winter will also be intriguing to monitor as the continent endures its first year without gas supply from Russia.
Labour shortages are still causing headaches to the mining industry, both at home and abroad, in countries such as Canada. Focus will be placed on attracting suitable people and ensuring that their training emphases not just acquiring skills, but also retaining them. Plans to offer flexible WFH arrangements and non-core benefits will be offered to encourage more applications.
With the goal of limiting global temperature rises to 1.5°C all but hopeless, a new goal is likely to be set. Industries and governments should now seriously be striving towards reducing their impacts and cutting emissions where possible. An insistence on those dragging their feet on incorporating effective ESG policies should be undertaken, as well as improvements by those with existing ones.
What also needs to occur in 2023 is the transition of supply chains from just-in-time (JIT) to just-in-case (JIC). The JIC strategy involves using increased inventory levels as a buffer to demand surges and disruptions. Currently, JIT is driving up costs given its an expensive approach in an environment marked by high inflation. As consumers, we still expect variety, fast delivery and value for money on purchases, which would entail fronting the additional cost.
It is reasonable to predict that 2023 will be another year of turbulent market and economic conditions. This makes it crucial that asset marketplaces uphold the availability of assets as businesses continue to navigate changes to supply and demand.
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