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IBG - SA Instrumentation & Control Buyers' Guide

January 2010 News

The growth trend in the mining and metals industry that spurred demand for automation, instrumentation, and operational software came to a halt in the last quarter of 2008.

Through the first few months of 2008, demand for metals worldwide continued to grow. Emerging market demand was growing fastest as manufacturers in Asia and Eastern Europe increased production of industrial and consumer goods. Now the situation is quite different. World demand for steel in the first quarter of 2009 has dropped by nearly 25%, causing major steel producers to see profits plummet. The reduced demand for iron and steel has led to a dramatic drop in both the demand and price for iron ore.

“Through 2007, suffice it to say that no one saw the downturn coming, in terms of investment spending in mining and metals. With the global economic downturn as a backdrop, it is understandable that mining and metals companies have cut back the aggressive growth plans of pre-2008. However, spending will still be needed in 2009 with stronger spending to begin in 2010 and beyond,” according to Analyst Dick Hill, the principal author of ARC’s ‘Automation Expenditures in Mining and Metals Worldwide Outlook’ (www.arcweb.com/res/metals).

Total shipments of automation solutions to mining and metals industry<br>
©2009 ARC Advisory Group

Total shipments of automation solutions to mining and metals industry
©2009 ARC Advisory Group

Big investments on hold, but growth will return

The leading global mining and metals companies understand that, though it may seem counterintuitive in light of the current economic downturn, it is important not to under-invest even now. Certainly, capital outlays are required to maintain production levels at existing mining sites as well as metals processing facilities. The larger investments seen prior to the current downturn have been postponed, but will have to be made to keep up with global demand for minerals and metals.

Over the long term, demand will rise again, particularly in developing regions, and mining and metals prices will rise along with it. Indeed, over the short term, engineering and materials costs may go down as some more complex projects are put on hold, and steep drop in demand for finished goods helps to push down the prices for steel and other commodities. The end result is a more favourable environment for investment than many might expect.

Asia and Latin America to lead growth

Regionally, the highest growth rates will occur in Asia and Latin America. Asia’s share of sales will exceed 35%, and while Latin America will experience healthy growth over the forecast period, the region will still remain a relatively small portion of the overall market. Despite the strong growth in developing regions, Europe, Middle East, and Africa will have the largest share of the market. North America’s demand for automation, instrumentation, and software solutions will drop below 22% of the world’s sales as its growth is expected to be the lowest of all four world regions.

For more information contact Kim Coffman, ARC Advisory Group, +1 508 634 8551, [email protected], www.arcweb.com

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