Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
In a recently conducted survey of 100 key decision makers at operating mines throughout Europe and the former Soviet Union (FSU), respondents highlighted their dissatisfaction towards costs associated with their equipment, with cost reduction being critical for OEMs to retain and develop their customers in the region.
Suppliers were rated according to 16 different factors, relating to costs, product attributes, as well as supplier attributes and capabilities. The lowest satisfaction ratings were given to ‘lowest price’ and ‘lowest total life costs’. Respondents in Scandinavia and the former Soviet Union had given the lowest satisfaction ratings for both these factors. When asked to nominate areas in which their suppliers needed to improve, 56% of respondents in Scandinavia and 44% of respondents in the FSU nominated ‘ability to support cost reduction/minimisation’.
The potential for customers to switch due to poor support in cost reduction was demonstrated by a significant share of respondents emphasising they are likely to switch to a different supplier (31%) in the next 5 years. This correlated with the regions having nominated lowest satisfaction with equipment costs, particularly Scandinavia, the FSU and Southern Europe. A further, 29% of respondents indicated they were uncertain whether they would either switch or remain with their current supplier, with only 40% of respondents unlikely to switch.
“Decreasing commodity prices in the industry means scrutinising any spending on areas that could be minimised. Timetric’s research demonstrates the current mindset of those mining companies in Europe and the FSU, and the importance now placed on minimising costs where possible. A sizeable share of respondents will switch if their equipment manufacturers do not support them sufficiently with cost reduction,” says Nez Guevara, Senior Mining Analyst at Timetric’s MIC.
