Bloomberg News

Hitachi to Build Mining-Equipment Plant in Japan on Asian Demand

November 07, 2011

Nov. 4 (Bloomberg) -- Hitachi Construction Machinery Co., the world’s biggest maker of giant excavators, plans to build its third mining-equipment factory in Japan as demand for thermal-coal rises in Asia.

The plant near an eastern port in Ibaraki prefecture is slated to start production in 2013, Senior Vice President Shinichi Mihara said in an interview. The cost of building the factory is being studied and will be part of Hitachi’s three- year $2.4 billion expansion plan.

Hitachi is seeking to increase mining revenue as competition in its main construction-equipment business intensifies from China, where the government has slowed public works and housing projects to cool the economy. Orders for power coal are rising in nations such as India, where demand exceeds supply by as much as 14 percent during peak hours.

“We have to keep customers waiting until the end of next year,” Mihara said in the Nov. 1 interview. The Tokyo-based company is in talks with customers about new orders to be delivered in 2013, he said.

Larger domestic rival Komatsu Ltd. on Nov. 2 agreed with Rio Tinto Group to supply at least 150 driverless trucks to Australia’s Pilbara iron ore mines by 2015. Caterpillar Inc., the world’s largest construction and mining equipment maker, forecast revenue in 2012 will rise as much as 20 percent. The European debt crisis and the pace of U.S. growth don’t “signal the onset of recession,” Peoria, Illinois-based Caterpillar said Oct. 24.

Heavier Than A380

Hitachi, Japan’s second-largest maker of construction- equipment, holds 40 percent of the global share for mining excavators weighing between 120 metric tons and 800 tons. A 550- ton excavator, twice as heavy as an Airbus SAS A380 superjumbo and as high as a three-story building, is used to scoop rocks or minerals and load to dump trucks.

The new assembly plant is expected to increase Hitachi’s sales from mining equipment to 220 billion yen ($2.8 billion) by March 2014, or 20 percent of revenue, Mihara said. Miners expect demand for coal used in power generation to lead investments in mines in nations including Australia, Indonesia, Africa, Russia and China, he said.

“Development of coal mines will stand out in the coming years,” Mihara said.

Hitachi plans to expand supply of excavators weighing at least 120 tons by 60 percent to 360 units by March 2014 and more than double output to 510 units in the following five years, Mihara said. Sales of dump trucks weighing at least 140 tons will probably triple in three years, he said.

Demand for construction-equipment in China is set to fall 20 percent to 89,000 units in the year ending March 31, 2012, steeper than the 3 percent decline expected in July, the Tokyo- based company said Oct. 25. Mihara forecast a demand recovery in China may come as soon as February next year.

--Editors: Indranil Ghosh, Keith Gosman

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net;

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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