'Demand will grow'

Niranjan Mudholkar , February 16th, 2009

The mining equipment industry is relatively well-placed despite the recession. Raj Shrivastav, VP, surface mining segment, Sandvik Mining & Construction, sub region India explains why, in an interaction with Niranjan Mudholkar

India has plenty of natural resources to provide many of the minerals that are critical raw material for the country’s infrastructure as well as other major industries.

It is only natural that mining is integrated with the economic development of the nation. And like all other industries, the mining industry too has been influenced by the dynamic global economic situation.

However, steady economic growth and continuous encouragement to infrastructure development presents a positive outlook for this industry.

Market scenario

“While assessing the market scenario for the mining equipment industry, it is important to look for the three main minerals, namely coal, iron ore and limestone,” says Raj Shrivastav, VP, surface mining segment, Sandvik Mining & Construction, sub region India.

It is indeed important to understand the primary uses of these three minerals. Coal is used for power generation, iron ore for steel and limestone for cement.

Thus all three minerals play a critical role in the country’s infrastructure development. This does not mean that other minerals like uranium, copper, gold, bauxite and zinc are not important.

“These minerals too have a role to play but they obviously cannot reach the levels achieved by the three main minerals,” Shrivastav adds. Incidentally, India produces a total of 89 minerals of which 4 are fuel minerals, 11 metallic, 52 non-metallic and the remaining 22 minor.

Although the international demand for minerals may have gone down, the domestic demand continue to fuel growth. “Our country has huge coal reserves to cater to the power industry. India is a power hungry economy and hence our power plants have not been hit by the recession. There has been, therefore, no substantial negative impact on the coal mining industry as well,” remarks Shrivastav.

According to government statistics, the domestic production for coal is expected to touch 501 million tonnes this fiscal. Incidentally, the demand in the same time frame is expected to be around 553 million tonnes. Some experts feel this demand-supply gap may increase further in the forthcoming fiscal due to rise in consumption from the power sector.

It is true that prices of steel and cement have come down due to recessionary trends. In fact, as Shrivastav says, exports to China have been hit and this has had an impact on the iron ore mining sector.

“The exporters as well as small players have been hit but not the big players. At the ground level there is a slowdown but internally the big steel players have not been affected. On the positive side, the domestic demand is growing,” he says.

True, steel (and cement) will continue to be in demand because of the continued encouragement given to the infrastructure development across the country.

“The negative impact of the recession has been relatively moderate on the steel industry as there is huge demand for infrastructure projects. In fact, the outlook is very positive. It is estimated that the steel industry may be required to fulfil in the next five years what it has been doing in the last 100 years,” Shrivastav says.

“Thus, the Indian mining industry continues to have a strong future prospect because of the steady domestic demand for the three main minerals. In the wider perspective, I do not see why the mining equipment industry shouldn’t pick up.”

On ground challenges

Recession or no recession, there are certain challenges that the mining industry has to deal with on a regular basis. Many of the mines are located at geographically difficult terrains where climatic conditions can be extreme.

It is in these situations that the mining equipment industry plays an important role. For example, two Sandvik underground drilling rigs are being used for the Chutak hydel project in the mountainous region of Kargil in Jammu & Kashmir. The temperature at the project site varies from +40 degree Celsius to -40 degree Celsius.

“The challenge for the mining equipment industry is to provide equipment that works under harsh circumstances for an extended time span,” says Shrivastav.

The criticality of such projects allows little scope for errors. Hence innovation has a different meaning when it comes to mining equipment. “Innovation has to be at the component level,” Shrivastav says.

Incidentally, Sandvik is one of the highest spenders on R&D activities. “We spend roughly 4% of our budget on R&D per year,” Shrivastav informs.

The mining industry prefers machines that are time proven rather than something fancy. “The mining industry is a steady and conservative industry. It wants to go for proven machines and hates experiments,” Shrivastav states.

Equally important becomes the technical support for such heavy duty machines. “It is really crucial to provide support across the value chain,” he says.

Way ahead

As the mining industry continues to play an important role in the nation’s economic development, it will need all the support from the mining equipment industry.

The National Mineral Policy, 2008 (Ministry of Mines, Government of India) too advocates the ‘use of equipment and machinery which improve the efficiency, productivity and economics of mining operations and safety and health of persons working in the mines and surrounding areas shall be encouraged’.

The way ahead for the mining equipment industry is indeed full of interesting challenges and growth.