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Confidence and caution in the mining supply and service industry

December 1, 2008
by Dick DeStefano
In: Commentary, Dick DeStefano with 0 Comments

There is a belief in sports that players play their best after the darkest hours and rise to the occasion with some of their better efforts.

These past months have been difficult for the mining sector, but Sudbury Area Mining Supply and Service Association (SAMSSA) members have maintained a high degree of confidence that their value and expertise will prevail against the current background of economic turmoil.

Many SAMSSA members have been in business for more than 40 years and understand the cyclical nature of their markets. They have survived at least three major slowdowns and continue to operate.

Tom Palangio, vice president of SAMSSA and president of Wipware, observed that this is the time to reach out to markets with cost saving technologies that increase efficiencies. SAMSSA members are working vigorously in global markets applying these strategies.

According to all surveys, mining commodities have been inflated and selling beyond their value. There has been a huge pull on commodities from China as the country expanded its infrastructure beyond expectations, driving prices far beyond their historical range.

Reality was slow to set in and demand increased until September 2008 when the American banking system failure triggered a global tsunami that rippled throughout the world. An unprecedented level of fear permeated the system.

The cascade of events that occurred in October and November 2008 forced mining conglomerates to reassess the value of selling their commodities below costs, which would have eventually bankrupted them. Smaller companies talked about protecting their investments in their marginal operations with a protocol called “care and maintenance,” believing that the upswing would occur and they would continue to operate their mines based on profits, not losses.

When will commodity prices return to reasonable levels? Best estimates indicate the fall of 2009, but no one can definitively predict the time and price.

The mining supply and service industry is a remarkably adaptive sector.

Mining supply companies are in the business of providing the necessary expertise and technology that will reduce overall costs and create efficiencies so the cost per ton can be reduced and profit margins increased.

We all know that gold, silver, nickel, copper, aluminum, bauxite, iron ore and potash, to name a few, are essential and will always be in demand. The present crisis will soon pass, but commodity prices will probably never reach former peaks.

Mike Castron, past president of SAMSSA, and president of Cast Resource, said “We will do what we have always done in a slowdown and that is reduce our costs at home and double our sales efforts around the globe to increase and sustain sales. It has worked before and it will work again. Vendors who have diversified their sales around the globe and have strengthened their networking will increase their odds during these times of decreased metal prices.”

Jeff Fuller, president of SAMSSA and president of Fuller Industrial, said that SAMSSA members are better organized than ever before.

“By adding both product and geographical diversification, we have been able to simultaneously grow our international presence and reduce our dependence on the local market.

“We are better informed about market conditions and support systems like those offered by the Export Development Corporation and FedNor,” Jeff added. “The quality of our solutions has also grown significantly. We are already playing on the global field and look forward to the opportunities.”

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About Dick DeStefano

Dick DeStefano is Executive Director of SAMSSA [email protected]

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