Global Market Outlook on Drilling Consumables

The global mining drill market is estimated to be $1.19 billion with a CAGR of 2–3 percent up to 2021, due to increase in mining-related drilling activity. Asia-Pacific region leads the demand for mining bit, due to the increase in technology-driven drilling.

Mining Drill Bit Market 2016–2021: $Billion

  • The elevated demand in exploration activities, coupled with technology driven drilling solutions, is expected to impact the demand positively
  • In H1 2017, Asia-Pacific region accounted for 55–60 percent of the drill bit demand market
  • The global drill bit is consolidated with major OEMs, such as Atlas Copco, Sandvik. These two suppliers account for 45 percent of the market share for drill bit

Mining Drill Bit Market by Metals: 2016 by Value

  • Drill bit is mainly used in blast hole drilling for gold, copper, iron ore, and other base metals
  • About 45 percent of the demand for mining drill bit comes from the gold mining industry, 23 percent come from the copper mining industry, and 9 percent from the iron ore mining industry. This is mainly because of high exploration spend for copper and gold
  • The demand in exploration activities, coupled with technology driven drilling solutions, are expected to impact the demand positively in the upcoming quarters
  • Gold and copper are key end users of drill consumables.This is mainly due to high spend in exploration activities of gold and copper

LCCS Analysis

  • Sourcing from countries, such as China, could help in accruing cost savings. However, installing drill consumables of tier 2 companies into tier 1 drill equipment could make warranty of the drill equipment null and void
  • Thus, sourcing from tier 2 suppliers, such as those in China, should be done on a case-to-case basis

Growth Drivers and Constraints

Drivers

Increase in Budget

  • Constrained budgets followed by in 2016 and reduction in mining operational cost are expected to give mining companies with better cash flow for 2017
  • The momentum gained has helped mining companies to increase the spend by about 9 percent for 2017

Increase Commodity Demand

  • Commodity demand is a result of the global economic situation. The average commodity prices of many commodities are expected to increase in H2 2017 compared to H1 2017. The prices are expected to remain steady in the upcoming month

Contraints

Currency Fluctuation

  • Fluctuations in currency exchange rates are adversely affecting the margins and financial performances of drilling consumable manufacturers
  • Particularly, the South African Rand, Australian Dollar, Chilean Peso, Chinese Renminbi, Canadian Dollar, etc.
  • This is expected to increase the price for drilling consumables by 5–6 percent in 2017

Regulatory Compliance

  • Compliance and regulations costs around 7 percent of the mining operational cost
  • The high cost of compliance with environmental regulations may discourage mining companies from expanding their drilling operations

Market Indicators: Commodity Prices

  • Commodity prices and commodity demand are key indicators of demand for mining drilling equipment and consumables.
  • The prices are expected to remain range bound in H1 2018 compared to H2 2017 for all commodities, except coal and copper, which are expected to decline by 10–11 percent and 4–5 percent during the same period.
  • Demand for commodities increased tremendously, as the economy recovered from the 2009 economic recession. 2010 and 2011 saw a boom in mining activity, due to high demand for raw materials
  • Late 2012 and 2013 witnessed a slowdown in mining, resulting in the reduced demand for grinding media
  • Again, 2015 witnessed a reduced demand, however, the prices surged, owing to improving economic scenario in China