Caterpillar Inc. Banks on China's Mining Industry
Caterpillar Inc. recently offered ERA Mining Machinery Ltd, a Hong Kong-based maker of mine safety machinery, $886 million in an effort to expand business in the world's biggest coal-producing country. Steve Wunning, who oversees the company's mining equipment business sees it as an opportunity to expand sales to other countries, one of the company's top priorities.
It would “help our Chinese mining customers to become more efficient and safer at the job site,” Wunning told Businessweek. The deal is “all about growth, serving our customers in China, but also allows us to serve customers outside of China.”
While the country consumes about 40 percent of the world's coal and accounts for around 70 percent of underground coal mining, China's mining efforts are some of the most dangerous in the world. Fatalities for the year are already in the thousands, or close to one-third of the record high of nearly 7,000 in 2002.
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Just last week, another illegal mine caused the death of 34 in Sizhuang, while seven were trapped underground after a coal shaft flooded Sunday in China's Gansu province. The State Labour Protection Agency in Beijing is ordering a tightening of safety standards on all mines in the country due to mounting incidents and media attention.
“The latest accident rings the alarm, warning us that accident prevention is a complex, difficult and urgent task,” Vice Premier Zhang Dejiang told an industry workshop in the eastern city of Hefei.
As Caterpillar seeks to expand into the mining industry, it will be competing with U.S. mining equipment maker Joy Global Inc. But shares in ERA Mining Machinery are already up by 21 percent as of Friday after Caterpillar's enormous offering.
The deal is still waiting approval from China's Ministry of Commerce, but the mining equipment market in China is finally looking up.