Falling raw material prices are hitting German mining equipment manufacturers hard, according to a statement from the VDMA. A steep 33% decline in revenue to €3.5 billion is predicted for the full year 2014. Exports will have fallen by around 34% to €3.2 billion and domestic sales will be reduced by some 20% to about €320 million euros. “The industry has reacted to the slump in sales and scaled down production”, stated Dr Paul Rheinländer, Chairman of the VDMA Mining Association, at the annual press conference in Essen/Germany. “About half the companies are working on short-time now. Some redundancies were unavoidable too”, said Rheinländer.

Talks have already been held with the North Rhine-Westphalian Ministry of Labour and Economy and unions among others to support companies in this difficult situation. “In this context it should be obvious that we can’t agree with Federal Environment Minister Hendricks’ proposal to stop financing coal projects through KfW credits”, emphasised Rheinländer. The Chairman cited over-capacity, market turmoil and wide price falls as reasons for the decrease in revenue. Most raw materials have seen sometimes drastic drops in price since 2011. The coal industry, particularly important for mining equipment manufacturers, has been especially hard hit. A tonne of South African coal still cost almost €92 in January 2011 but the price currently stands at a little over €50 and there is hardly any new investment. In practice, only replacement investments are in demand. But the change in demand had “not really” taken the industry by surprise. It was hoped rather that the decrease would be more moderate.

However, the VDMA feels that the latest figures for orders and other signs from the industry suggest that an end is in sight. Manufacturers are therefore hoping that things will improve from the middle of next year and that turnover in 2015 can be at least maintained. The biggest foreign market this year is the Near and Middle East. With a 17% share of total exports, revenues have almost doubled there. The US is in second place, followed by Russia, Latin America and China. Alongside the general uncertainty on world markets, the German domestic market is characterised by a withdrawal from hard coal production. Ruhrkohle AG, operator of the remaining collieries, is continually reducing investment. In addition, the latest major order went to China rather than Germany. Rheinländer also evaluated investment propensity in the potash and salt sectors as “rather cautious”.

Mining equipment manufacturers are not only suffering from oversupply and price falls. Sanctions against Russia are also hitting them hard. As Rheinländer explained, customers there have turned “enormously” toward the Far East, and China in particular. The Federal Government is transposing measures decided upon at EU level “literally and in every last detail into national legislation.” Procedural errors have led to many more goods being subject to export bans than the sanctions aimed for. Other EU countries interpreted the sanctions “in their own best interests and purposes”, said Rheinländer. “Although the sanctions are severe for the industry, they do appear useful. We have to follow government policy.” In order to reduce their relatively heavy dependency on coal, manufacturers are preparing to enlarge their product portfolios to include machinery and equipment for the extraction and treatment of hard rock. The industry is well aware that the future belongs to renewable energies, said Rheinländer. Mineral ores are required to produce the industrial metals used in manufacturing wind turbines, solar panels and cells or biogas plants, and these are mostly extracted in hard rock mining. Companies are counting on a strong increase in demand in this area in the medium term.

There are now sufficient addresses available to enable universal direct networking of smart objects via the Internet. This means that for the first time ever it is now possible to network resources, information, objects and people to create the “Internet of Things and Services.” In the realm of manufacturing, this technological evolution can be described as the fourth stage of industrialisation, or Industrie 4.0. The Chairman considers Industrie 4.0 of vital importance in the long term, not only to the mining equipment manufacturers but also to German engineering as a whole. “Industrie 4.0 allows increase in productivity together with a minimisation of personnel costs. This opportunity must be used ‘imperatively’. Only then can Germany continue to face global competition as a high-wage country.”