Heightened demand for resources coupled with declining ore grades is initiating a new upcycle for the global mining equipment sector. According to GF Securities, overseas growth exhibits three distinct characteristics: (1) Africa and Southeast Asia are emerging as primary growth hubs; (2) the application focus is shifting from domestic sand and aggregate to overseas metal mining; and (3) the client base is expanding from Chinese-funded enterprises to foreign customers. The unique traits of this equipment cycle are favorable for breakthroughs by Chinese manufacturers, particularly in the highly standardized and expansive front-end equipment segment. The main viewpoints of GF Securities are outlined as follows.
The global mining equipment sector is entering a fresh upcycle, driven by increasing demand for resources and a persistent decline in ore grades. Based on Caterpillar's 2025 Investor Day projections, global mining capital expenditure is expected to accumulate a 50% increase from 2024 to 2030. On the demand side, global energy and infrastructure development are boosting the need for key minerals, with Caterpillar forecasting cumulative demand growth for copper, graphite, and nickel at +22%, +118%, and +52%, respectively, between 2024 and 2035. On the supply side, deteriorating global ore grades, exemplified by an anticipated 9% drop in copper ore grade by 2035, is compelling higher mining volumes and more lean production practices.
Regions like Africa are becoming new growth poles, presenting significant opportunities for Chinese companies. Approximately 75% of excavator demand in Africa stems from mining activities for copper, gold, and lithium. Data from the AEM shows that African excavator sales surged 59% year-on-year in Q3 2025, with countries like Guinea (iron ore/bauxite), Mali (lithium), and Nigeria (iron ore/rare earth minerals) all experiencing growth rates exceeding 100%. Superficially, global trade frictions and rising energy security needs are prompting Chinese mining firms to intensify extraction efforts in Africa and other regions, with Chinese equipment manufacturers following them abroad. On a deeper level, China is effectively trading infrastructure investment for energy imports from Asia, Africa, and Latin America, where the contribution of minerals and energy to GDP multiplied by the proportion exported to China roughly equals China's share of fixed-asset investment in these regions.
Globalization efforts are accelerating, marked by a rising proportion of overseas revenue and a transition from Chinese to foreign clients. Taking Yunji Group as an example, its overseas revenue share skyrocketed from 0.2% in 2021 to 68% in 2024. This international growth is characterized by three features: (1) Africa and Southeast Asia are the main growth drivers; (2) the application scope has widened from domestic sand and aggregate to overseas metal mining; and (3) the customer base has diversified from solely Chinese clients to include foreign customers.
The aftermarket for mining equipment represents a substantial opportunity, with this cycle presenting structured prospects. Reports indicate that companies like Komatsu, Epiroc, and Weir generate over half of their revenue from aftermarket services. GF Securities observes that this cycle's dynamics are conducive to breakthroughs by Chinese firms for two reasons: (1) insufficient infrastructure in remote areas like Africa creates reliance on Chinese companies for operation and maintenance; and (2) according to Caterpillar's 2025 Investor Day, about 60% of its mining equipment is over 10 years old, signaling a replacement cycle where Chinese enterprises have a foundation to compete.
New models are emerging, involving novel technologies and collaborative approaches. This includes (1) new technologies replacing old ones, such as conveyor belts supplanting railways, forged wear-resistant parts superseding cast parts, and electric products displacing fuel-based ones; and (2) moving upstream by taking equity stakes in mining assets. For instance, according to announcements from Naipu Mining Machinery regarding its planned investment in the Alacran project and from South Mining Group's subsidiary cooperation agreement, Naipu will invest in a Colombian copper-gold-silver project in 2025, while South Mining Group will invest in Zimbabwe's Brownhill gold mine project. This strategy diversifies the revenue streams of equipment companies and facilitates the subsequent introduction of their products and aftermarket services.
Regarding investment recommendations, front-end equipment, characterized by high standardization and large market potential, leads to recommendations for XCMG Machinery and Sany International, with Tongli股份 suggested for attention. Back-end equipment, with its strong customization attributes and potential for rapid breakthroughs, leads to recommendations for Yunji Group and Naipu Mining Machinery, with South Mining Group also suggested for monitoring.
Investors should be mindful of risks, including macroeconomic uncertainties, potential global trade frictions, and volatility in mining capital expenditure.
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