IDA Universal

IDA Universal Aug - Sept 2025 21 is vulnerable to reciprocal tariffs (both imports and exports), rising material prices (especially steel) and availability of farm labor. All major manufacturers are exposed to imports of machines and parts from abroad (AGCO most vul- nerable). Deere has included a $500 million impact of tariffs in its outlook; in early June Deere announce another round of layoffs at three of its major manufactur- ing plants. The farm equipment sector might still trough in mid-year, but its likely that any material improvement has been postponed into 2026. Weather and the reso- lution of the tariff problem are the key variables to watch. Mining Equipment: Sideway Demand at High Levels Economic forecasts for the min- ing equipment sector projected a softening of expenditures from 2024 to 2025 after the mini-boom post-COVID from 2021 to 2024. Hence it was no surprise that the softness in sales at the end of 2024 continued in the first quar- ter of 2025. The modest decline reflected lower sales to end users led by Australia and inventory liquidation. The softness will likely contin- ue with inventories still elevated and global projects slowing a bit reflecting slowing global growth, elevated interest rates, and uncer- tain tariff policies especially in steel, an uncertain green energy policy especially for electric vehi- cles (EVs). Most capital expenditures today are focused on supporting domes- tic supply chain, critical materials for national security, improv- ing efficiency, cost savings and investing in automation. Mining projects and spending in 2025 appear to be moving sideways but remaining at a high level. Mining Equipment Sector: Long-Term Growth on a Roller Coaster Ride The famous philosopher Linus van Pelt from the comic strip Peanuts, who once said, "There is no heavier burden than a great potential," may have been think- ing of the mining sector. Virtually all consulting firms who focus on mining would argue that this is a great time to be a mining com- pany. Demand for global mining equipment is expected to grow at least 5% to 6% to as much as 8% over the next 5 to 10 years or more. The International Energy Agency (IEA) projects copper demand to be up 50%, nickel 2x and lithium 11x. The problem is not whether the demand drivers for mining are real. The industry is highly cycli- cal, projects have long lead times and are capital intensive, the industry can go from shortage to excess, and politics and economic cycles can substantially impact the sector. As Barron's recently pointed out, one major source of cash flow has typically been iron ore, particularly for Industry giants BHP and Rio Tinto. However, a slowing global economy and the internal real estate crash on the largest buyer China has contrib- uted to a major downward 20% price swing for iron ore. Many of the greenfield projects to meet the demand for critical metals are extremely capital in- tensive. There aren't many com- panies like BHP and Rio Tinto besides state owned entities with the ability to meet the $10 billion capital requirement. A good example is the $10 billion investment by Rio Tinto in lithium to meet the projected surging demand from EV bat- teries and electronics, including phones and laptops, etc. However, since its 2022 peak, lithium prices have declined 90% as global capacity surged, and politics impacted the global movement to- ward EVs particularly in the U.S. Mining equipment demand has a very good base globally. Many of the mines in existence have ma- tured requiring new investments for efficiency, cost reduction and automation. New prospects tend to be more remote placing a pre- mium on efficiency and automa- tion. The demands on the mining sector over the next 25 years are potentially enormous, and being on the right side of the supply de- mand equation can be extremely lucrative. Acquisitions and merg- ers are likely in the future and investment to improve profitabil- ity will always be sought by the industry participants. Suppliers of mining equipment should prosper over the next several decades, even if it is a roller coaster ride. https://www.oemoffhighway.com Trends and Tidbits continued on pg 23

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