My local newspaper, the Milwaukee Journal Sentinel, published an article this week about the global economic impacts on the Milwaukee based mining company, Joy Global. The short-term outlook for the company appears to be rather measly due to globally weak mined comodity prices, slowing Chinese industrial economic activity, and lower U.S. natural gas prices. Equally important, the slower pace of the U.S. economic growth and its fiscal cliff, European debt, and slow growth in China are also adversely impacting the growth prospects of the company. As a result, mining companies will likely decline capital spending from 5% to %10 by cutting capacity and closing some factories in order to prepare for the looming challenge of a difficult business market. A company like Joy Global has a lot at stake when it comes to the global mining, as nearly 100% of its invested capital and and operating profits are in mining, whereas a company like Caterpillar Inc. has less at stake with only half of its capital invested in mining. However, this problem is only cyclical, and Joy Global has a rather positive outlook on the long-term prospects. As the article notes, even though the Chinese economy has slowed recently, China is still is one the world's largest users of coal, and produces nearly half of the world's steel. Back in September, The Wall Street Journal posted an article about the news of the Chinese government passing a $156 billion infrastructure bill as a means for boosting their industrial economic activity. With a huge increase in steel production comes an increased demand for iron ore, which is mined by the heavy machinery manufactued by Joy Global. The Journal Sentinel article also mentions that more developing nations are demanding mined commodities. With that in mind, Joy Global has globally expanded their-service centers and increased manufacturing in emerging markets. The effects of these promising global changes have made their effect locally. P&H Mining Equipment, a Milwaukee based subsidiary of Joy Global employs more than 800 people and is looking to hire even more employees for skilled-labor positions as they increase production of their mining shovels and drilling rigs. If, however, the global economy prospects do not play out as predicted, Joy Global is well-prepared to cut costs by outsourcing these manufacturing jobs to countries with lower labor costs such as China, South Africa, and Poland.
You can read the Milwaukee Journal Sentinel article here:
http://www.jsonline.com/business/economic-slowdown-felt-at-caterpillar-joy-global-787pun0-180936761.html
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