Poised to Grow: Emerging opportunities in the mining equipment market

The mining sector is one of the core industries of the economy, as its mineral and metal reserves can be leveraged to en­able infrastructure development. So far, the mi­ning sector’s contribution to the country’s gro­ss domestic product has been limited due to underexploration of its geological potential and the decreasing per unit expenditure on ex­ploration. The share of the mining and quarrying sector in the gross value added (GVA) has declined from 2.7 per cent in 2014-15 to 1.6 per cent in 2020-21. The decline in GVA in the mining sector between 2019-20 and 2020-21 can be attributed to the Covid-19-induced lockdown, which led to the halt/slowdown of production activities across various mines. As per the second advanced estimates for 2021-22, the GVA at basic prices for mining and quarrying (at the current price) contributes 2.4 per cent to the total GVA, indicating a recovery to pre-Covid levels and a growth in the mining equipment market as well.

Equipment such as electric rope shovels, hydraulic excavators, rotary/percussive drill ma­­­­chines, backhoe and wheeled loaders, bulldozers, shovels/hydraulic shovels, excavators, draglines and dumpers are used for various ac­tivities involved in mining.

Market size of mining equipment

According to India Infrastructure Research, the estimated market size of excavators is ex­pected to be around 560 (in number), and dumpers (including haul trucks) to be around 13,966 during 2020-21. The market size of drills and other auxiliary equipment is estimated at 201 and 1,192 and the sales of rigid dump trucks stood at 682 units in 2020-21, while wheeled loaders recorded sales of 2,326.

The average annual utilisation hours of so­me key equipment in large mines (both opencast and underground techniques) are expected to be around 70-80 per cent (in the best scenario). The factors that affect utilisation of the mining equipment include unforeseen conditions, which are dynamic, with many un­kno­w­­ns that have a huge impact on equipment utilisation. Apart from this, the lack of availability of spare parts reduces the utilisation le­vel. Mean­while, drilling, blasting, loading, hauling and du­m­ping makes the mining process more pro­ne to lower utilisation if even one of the components in the chain breaks down. Th­us, the utilisation of equipment in one se­qu­ence depends on the utilisation of equipment in the preceding sequence.

In 2021-22, Coal India Limited (CIL) concluded contracts worth Rs 17.44 billion for installation and commissioning of eleven 20 cubic metre electric rope shovels and nine 10- 12 cubic metre diesel hydraulic shovels. This equipment plays a critical role in CIL’s opencast mines in production and overburden removal. Meanwhile, 400 old and outlived major heavy earthmoving machineries were surveyed off and 42 shovel, 428 dumpers, 63 dozers, 25 dri­lls and 9 surface miners were commissi­on­ed during 2021-22.

Key emerging trends

Some of the emerging trends that impact the mining equipment, which have been observed in recent years, include a shift towards sustainable mining and leasing of equipment as a business model. Mining companies are moving towards net zero emissions and aligning mining practices with their environment, social and corporate governance goals, thereby increasing the adoption of sustainable and energy efficient mining practices and solutions. Mean­while, there has been an apparent trend towar­ds leasing and rental of earthmoving equipme­nt. Traditionally, the leasing segment of the ma­rket has been small, but it is expected to grow due to flexibility in financing and tax ad­van­tages. The “pay-as-you-use” model is picking up in India, as it minimises costly breakdo­wns and eliminates storage costs.

Further, the adoption of new-age technologies in the equipment market and the use of varying sizes of equipment are other trends that have been observed. In order to increase operators’ comfort and reduce fatigue, the ergonomics of the equipment have been impro­ving. Equi­pment manufacturers, apart from making efficient, robust and reliable machines, are also fitting equipment with high-end user-friendly technology solutions, which allow operators to perform their job more efficiently and enhance productivity. Technological advancements to im­p­rove the health and safety environment for mine workers are also gaining traction. In line with this, and to ensure safety and protect equipment loss in opencast mines, a dumper collision avoi­da­nce system (DCAS) has been developed indi­gen­ously and successfully deployed at the KDH opencast mine of Central Coalfields Limited.

Moreover, with the growth in the size and scale of projects, large equipment is increasingly being used. This provides economies of sc­ale and helps contain the cost of operations. However, smaller-sized equipment is also often used because of the cost economics and operational flexibility with the growing preference for the outsourcing model.

Growth drivers

The mining equipment industry in India is highly fragmented, comprising the organised segment (consisting of large private firms that cater to small-, medium- and large-scale projects) and a host of stand-alone private contractors in the unorganised segment, which operate on a small scale.

Key policy developments such as the Min­es and Mineral (Development and Regulation) Act, 2021 are expected to spur growth in the mining sector, thereby driving the demand for mining equipment as well. Meanwhile, emphasis on lean and sustainable mining practices in order to reduce the carbon footprint is expected to enable innovation and technology upgra­des by equipment manufacturers. Further, dee­per and larger-scale mining operations will re­quire high capacity equipment. Apart from this, private commercial mining will en­han­ce competition and productivity by facilitating the use of the latest equipment with auto­mation and improved technological features.

Challenges and issues

Some of the key challenges faced by the mining equipment market are cost competitiveness and equipment financing. With mine operators (especially government clients) opting for lower-priced equipment, standardisation of equipment prices becomes a huge problem. It is challenging for equipment manufacturers to price their pro­ducts in a manner that they achieve profit mar­gins as well as remain cost competitive. Me­anwhile, the procurement of equipment takes up a significant share of the investment outlay of a mining firm. If cash flo­ws are low and the overall growth in the sector is tepid, the procurement of new equipment beco­mes a challenge. Fur­ther, with the increasing equipment inventory, costs of regular maintenance and working capital cycle also increase.

Apart from these, other challenges faced by the mining equipment market include limited information technology and automation, lack of availability of spare parts and assemblies, procedural delays in equipment procurement such as regulatory and administrative procedures of mining companies. Also, the lack of skilled workforce, which ultimately lowers the utilisation level of the equipment owned by a company, poses a major challenge.

Future outlook

Almost all areas of the mining industry were affected by the pandemic on account of production shutdowns, supply chain disruptions, cash fl­ow issues and a reduction in demand. The disruptions in the supply chain and manufacturing acti­vity caused delays in processing or­ders by mining equipment companies. How­ever, the mining industry is now recovering to pre-Covid-19 levels. The future of the mining eq­uipment market in India looks positive, backed by opportunities in underground and su­rface mining. Mean­while, the government has enhanced its focus on commercial mining, which is set to provide a boost to the mining equipment sector. In addition to this, mining reforms have helped the sector by str­eamlining business processes and giving a boo­st to productivity, employment and revenues.

In a bid to cater to the expected rise in demand and help in the infrastructure transformation of India, mining equipment manufacturers have set ambitious goals. Going forward, automation is expected to play a greater role in the mining equipment market. This is expected to be supported by internet of things and other technological advancements, leading to increa­sed operational efficiency. CIL is targeting the use of environment-friendly technologies and equipment, with optimal capacity and improvement of existing technologies. In 2022-23, CIL is planning to procure high capa­city equipment with an investment of more than Rs 22.77 billion for enhanced coal production in the coming years.