Diversification urged to cope with mining cycles
After six years of studying the Canadian mining supply sector, Gary Svoboda is more convinced than ever of the need for mining suppliers to diversify their customer base.
“The mining supply sector is so cyclical that you’re either too busy to deal with longer-term thinking, or the person you’re trying to sell to has been laid off. There’s hardly any in-between,” said Svoboda, who has served as network manager for the Conference Board of Canada’s Centre for the Commercialization of Mining Technologies and Services (CCMTS) since 2007.
In a down part of the cycle such as we’re now experiencing, diversification is critical, said Svoboda.
“If you’re overly reliant on one or two customers and those orders don’t come in, what’s your plan B?” he asked. “In good times, we don’t have time to think about that because if we don’t deal with an order coming in, we lose the order.
“Mining suppliers are on a yo-yo where they’re either falling behind because the orders are coming in so quickly or the customer stops ordering and they’re suddenly left high and dry. There are a lot of companies in that situation now.”
The Centre for the Commercialization of Mining Technologies and Services is a membership-based network established in 2007 to provide key market intelligence and insights to increase the competitiveness and capabilities of Canadian mining suppliers.
Members include Sandvik, Accurassay Labs, Mining Technologies International, Vale Thomson operations, the Canadian Association of Mining Equipment and Services for Export (CAMESE), the Northern Centre for Advanced Technology (NORCAT), the Ministry of Northern Development and Mines and the Saskatchewan Research Council.
The Sudbury Area Mining Supply and Service Association (SAMSSA), GlecoreXstrata and several other Sudburybased mining suppliers have opted out of the network, and an October 30th webinar on key business and technology trends was cancelled due to poor response.
CCMTS surveys of both mining companies and suppliers reflect the current state of the industry.
In May, the CCMTS surveyed 30 mining suppliers across Canada with 28 per cent of them identified the business slowdown as their most important short-term challenge.
The second most important short-term challenge was sales and marketing at 18 per cent.
The two top longer-term business challenges were the business slowdown and human resource issues. Top technology issues, said Svoboda, included underground technology, lack of technical capabilities, developing competitive advantage, finding skilled personnel and material handling and automation. One-third of the suppliers surveyed in May expected sales for 2013 to increase slightly, down from 50 per cent who responded similarly about prospects for 2012.
Asked to identify the single most important improvement mining companies could make to facilitate business, one-third of suppliers highlighted improved communication to facilitate purchasing.
The finding reflects a trend toward more centralized and more complicated procurement practices as mining companies become more global, said Svoboda. “A small company will have more difficulty finding the door to make the sale. You have to be registered. You have to be in the system.”
In a late 2012 survey of 30 mining companies across Canada, 28 per cent of respondents said the single most important improvement that mining suppliers could make would be to reduce prices.
Tied for second were shorter lead times and improved service and support.
When the industry was booming the year before, half of the respondents identified shorter lead times. Improved service and support was second and honesty was third.
Reducing prices was fourth, Asked to identify the single most important new technological improvement they could think of, 38 per cent of the procurement managers surveyed said they didn’t know. Other responses included improvements in separation and processing, better geophysical data, better supplier information and parts databases and automation and remote control technology.
Going forward, the CCMTS is planning to research strategies that other mining jurisdictions are using to stimulate the growth of their mining supply sectors, said Svoboda.
Australia, for example, isn’t ideally located to manufacture and ship heavy equipment around the world, so they’re focusing on key segments of the industry where they can be more cost competitive, software being one example.
“Looking at the Australian experience could give us some insights into how to move forward in Canada,” said Svoboda. “Maybe we ought to be more proactive about putting our finite resources behind the winners.”
