Missed Our Mining & Construction Equipment Black Book? Here Are 5 Key Charts
Below, we show five of the key charts from our mining and construction equipment black book. You can access the full deck and replay here:
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Since mining is a mature industry, capital spending does not need to add much capacity on average. When capital spending shoots well above trend in a rising commodity price environment, a subsequent flattening (not decline) of commodity prices can lead to dramatic declines in resource-related capital investment.
Currently, mining and other resource-related capital spending is well above depreciation and amortization, a rough measure of long-run steady-state capital spending.
We highlight a number of reasons for the commodity bull market, but investor belief in the commodity bull market is likely a key factor. Depending on the opinions of strangers may be a risky strategy.
CAT placed emphasis on dealer inventory reductions for recent operating challenges. The data from CAT dealer Finning and other dealers (as well as CAT itself) suggests that the draw-down may take longer than many expect. At Finning, it has yet to start.
For those who think of CAT as a construction equipment company (CAT's Construction Industries segment is a much smaller portion of CAT's operating income than either Resource Industries or Power Systems), the US private sector, where construction is actually rebounding from cyclical lows, is only a small portion of the global construction equipment end-market.
