Atlas Copco Says Mining Demand Quickened in Third Quarter on Metal Prices

Atlas Copco AB, the world’s largest maker of air compressors, is seeing mining-equipment demand accelerate in the third quarter as higher metal prices spur spending on drills, according to executive Bjoern Rosengren.

“The mining industry is strong,” said Rosengren, who oversees Atlas Copco’s Construction and Mining Technique unit, in a telephone interview from Shanghai today.

The current quarter’s orders at the division, which generated 41 percent of total revenue last year, have been “somewhat better” than the prior period, the executive said.

The Swedish manufacturer plans to build more factories in faster-growing markets such as China, where the unit currently has six plants. Rosengren relocated to Shanghai last year to be closer to the booming Asian market. Gold futures are at record highs and with growing demand for copper and iron ore, demand for blast-hole drilling rigs is climbing, the executive said. By contrast, no such investment is foreseen for the west.

Rising raw-material prices are helping reverse the effects of the financial crisis, which led the mining and construction unit to cut 3,000 jobs, half of the total workforce reduction that Atlas Copco instigated to combat plunging orders in Europe and the U.S.

Mining and construction is now Atlas Copco’s fastest growing unit, with orders in the second quarter nearly tripling to 16 billion kronor ($2.3 billion). The unit has hired about 1,000 people this year as demand recovered. There are no signs of a looming double-dip recession in the global economy, Rosengren said.

China Takes Lead

A primary focus in China, which overtook the U.S. as Atlas Copco’s biggest market last year, is to keep small, local rivals at bay by developing locally-produced, less-expensive products matched to customers’ budgets, Rosengren said.

“New competitors are emerging in China that can quickly grow in size,” he said. “You have to meet those rivals the same way they’re acting in this market and make sure they don’t get the chance to grow and become too big and enter other parts of the world.”

The company’s construction business, which makes road- building machinery such as rollers, is also expanding in China, India and much of South America, especially Brazil, he said.

“In southern Europe things are difficult,” Rosengren said. “In the U.S., it’s still pretty tough. Things are beginning to move there but from a low level compared to the good old days.”

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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