The end of hire markets?
Summary: As the mining boom slows, major projects and expansion plans are being put on the backburner as companies continue to reassess their expenditure.....
Not only does this mean cutting back on workers and contractors, but with hire and rental companies traditionally providing the equipment companies don’t need to own, many are looking at their future in the industry and if current projects are enough to sustain the industry.
The hire and rental industry in Australia is reportedly worth $4 billion, with rental equipment the most sought after when it comes to the mining sector.
With mining companies after work platforms, cranes, heavy machinery or cars, the hire and rental industry exploded with the boom as mining companies looked to hire and rental companies for assistance in projects as dealerships and OEMs backlog of orders grew.
However, decisions by major companies to shelve projects has sent a shock through many hire and rental companies who were banking on being used.
BHP’s decision to shelve plans for the Olympic Dam expansion is the largest example of how decisions in the mining sector flow through to affect the businesses who service them.
The scrapping of the $20 billion dollar project means that 6,000 construction jobs along with an estimated 15,000 indirect jobs that were expected to be generated from the project didn’t eventuate.
With the much publicised boom slowing, it is clear the hire and rental sector will suffer.
Hire and Rental Industry Association operations manager, James Oxenham, says the mining slowdown will affect some companies more than others.
“A lot of our members are all across Australia, so some will be more affected than others,” he told Australian Mining.
“If they’ve seen it coming than they’ve probably prepared and diversified .”
Oxenham pointed to other sectors hire and rental companies could target and says that the upcoming construction industry and infrastructure projects, particularly off the predicted LNG boom, are likely to be the avenues traditionally mining specific companies would take.
“Some that have good business with the mines –if they can see a slow down - will be looking at what else they can do.
“It’s up to them to figure out what equipment they have and choose what projects they can undertake,” he added.
While it may seem obvious that companies with big machinery go after projects within the government sector as the mining boom slows, if this happens there is the very likely possibility that companies will all be clambering to secure the same government tenders in what could become a competitive nightmare, not to mention an unsustainable business model.
With the highly targeted products that most hire and rental companies offer, many say that moving to other sectors just won’t work for the companies whose equipment and skills are not immediately transferable, putting them at a disadvantage and potentially, out of business.
Most companies in teh sector are working from a backlog and don’t expect the shelving of projects to affect them for the moment but say the slowing pace has definitely become more noticeable.
Mark Webster from hire and rental company RNS OilField Services says that while the industry is ‘still going strong’ he has noticed a slight slowdown.
“We are related to the oil & gas industry and also do some coal seem gas,” he told Australian Mining.
“We are finding we are working through the backlog of projects ,which will still sustain our business for a few years to come.”
However, Webster does concede that there has been some slowdown in Victoria where his company predominatly operates.
“The only slowdown has really been in Victoria for us, and (we) can forecast that we will have to travel further afield to go to work.”