Fixing equipment shortages

WITH wait times for pieces of large earthmoving equipment blowing out, major equipment makers are taking steps to head it off, although there are concerns equipment prices will rise.
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Equipment makers moving to head off equipment shortages.

The wait times are starting to stretch to a year as the equipment makers scramble to get their component suppliers and their own production lines back to full strength.

This seems to be a key issue facing the large equipment manufacturers - supplier capacity.

During the downturn the equipment makers reduced their manufacturing, which had a flow-on effect to the suppliers.

Caterpillar surface mining & technology vice-president Jean Savage said the company was taking steps to sort out its component supply.

She said one example was the company working with its castings supplier to put in head room for this year.

"We're working together to see that come back to make sure we're ready to help serve our customers," Savage said.

At the Caterpillar Technical Centre just out of Peoria, Illinois, a large part of the materials testing resources there are being put to use on checking the wares of new suppliers.

Further down the road in Decatur, Illinois, the large truck manufacturing facility has been streamlined.

There workers have iPads beside them so they can check their jobs as they are going.

However, the availability of the large castings appears to be a bottleneck.

The frame of the Caterpillar 797 is largely cast. That is what has given the truck its rigidity and longevity in oil sands applications. However, it is also a problem if getting castings is an issue.

The similar sized Caterpillar 798 does not rely so heavily on castings.

Komatsu declined to comment for this article but it is understood to be also suffering component supplier issues.

Unlike Caterpillar, Komatsu is understood to do its own castings in house.

BGC Contracting CEO Greg Heylen said about 12 months ago large mining equipment had been available at about three months' notice.

"We're seeing some of the stuff out to nine to 12 months," he said.

"You have to factor that sort of availability into your work."
That has led BGC Contracting to buy some of the pieces of equipment it thinks it will need to service its clients ahead of time.

It is also the thinking that led Caterpillar dealership Westrac to place a $100 million order.

Westrac Western Australia CEO Jarvas Croome told Australia's Mining Monthly in June that he had put in the big order to help reduce wait times for customers.

Heylen said the equipment shortage made things tougher for contractors because they did not have the visibility on projects two years out like some mine owners did.

"We normally get visibility on projects once the board approves them," he said.

That means about 12 months' notice. However, the contractor then has to secure the tender to win the contract, which can take months before knowing it will need to add to its fleet.
While the contractors can take a speculative view on their equipment needs, that can have business impacts too. There is the cash outlay to get the equipment and then the holding costs while it is not being used.

Heylen said equipment was starting to get more expensive as a result of the shortage.

However, he fears that will get worse.

"At this stage we're seeing modest price increases," Heylen said.

"I think there will be more price increases as demand is confirmed six to 12 months from now."