Oil, gas, metals markets expecting continued growth in 2018

Things are looking up for the mining industry as demand for oil, gas and some minerals is expected to continue on a positive trend this year after making gains last year.

Overall, 2017 was a positive year for the mining industry worldwide, according to Michelin North America Inc.

"Production did not reach historical maximum, but we believe it grew by approximately 5 percent. In the U.S., production of main commodities (especially coal) also increased compared to 2016," said Karl Litzinger, B2B marketing director, off-highway transportation for Michelin.

He said improved commodity prices helped miners recover in 2017, and he predicted prices should remain healthier than the lows they reached in recent years, but nowhere near the peaks during the boom.

"This should result in a continued positive market in 2018. We do not expect a negative trend in 2018," he said.

An increasing number of mining projects, a growing demand for mining vehicles and an expanding vehicle fleet are expected to drive the global mining tire market as well through 2022, according to TechSci Research in its report, "Global Mining Tire Market by Vehicle Type, by Demand Category, by Region, Competition Forecast & Opportunities, 2012–2022."

The global mining tire market is projected to grow at a rate of nearly 5 percent a year in value terms through 2022 as a result of rising production and sales of mining vehicles on a global level, the report said.

Demand for retreaded mining tires also are expected to increase due to their low cost compared with new tires.

"Reinforcement of mining activities across the globe is the key growth factor of the global mining tire market," said Karan Chechi, research director with TechSci Research. "Moreover, increasing demand for radial tires due to their improved fuel efficiency and reduced wear and tear is expected to further fuel the market in the coming years.

"Besides that, growing technological advancements in the global mining sector are likely to positively influence the global market for mining tires over the next five years," Mr. Chechi said.

Industrial metals will remain on an upward trajectory over 2018, according to BMI Research, however noting that "premature optimism over the demand boost from electric vehicles will wind down in the near-term."

U.S. production

Meanwhile, the U.S. Energy Information Administration (EIA) predicts U.S. coal production will drop by about 2 percent this year after increasing 6 percent in 2017 as demand for U.S. coal exports increased.

Production in the Western U.S. and Appalachia regions is forecast to decrease primarily as a result of the projected declines in coal exports.

Declines in these regions are expected to be offset partially by an increase in interior region production. In 2019, coal production is expected to again decline by 2 percent.

The EIA forecasts U.S. crude oil production will rise about 10 percent in 2018. If achieved, the forecast production would be the highest annual average on record, according to the EIA.

Much of the increase in production is expected to come from the Permian region in Texas and New Mexico.

Growth in crude oil production is expected to result in increased associated natural gas production and natural gas processing, the EIA said.

Dry natural gas production increased 1 percent in 2017, reversing the 2016 production decline.

The EIA expects dry natural gas production to climb 9.3 percent in 2018 and by 3.2 percent in 2019. If achieved, the expected 2018 increase would be the highest on record, the EIA said.

Growth is expected to be concentrated in Appalachia's Marcellus and Utica regions, along with the Permian Basin region, according to the EIA.

Much of the expected increase in natural gas production is the result of increasing pipeline takeaway capacity out of the Appalachia-producing region to end-use markets. The greater pipeline connectivity contributes to higher wellhead natural gas prices for producers and is expected to encourage production growth, the EIA said.

Last year the U.S. was a net exporter of natural gas for the first time on an annual basis since 1957, the EIA said. Net natural gas exports are forecast to increase during the next two years.

Tire trends

"We expect strong demand across our portfolio of products and services," Michelin's Mr. Litzinger said, noting there will be continued strong demand for the giant (63-inch rim diameter) tires.

"These giant tires are used at the largest and most efficient mines, so it is reasonable that these miners will continue to lead in the market," he said.

"Customers remain focused on optimizing production and controlling their costs. Total cost of ownership will continue to be a focus area. Customers obviously want to leverage fully the improved commodity market without over investing.

"We see growing interest in optimizing mining operations to get the most ore for the lowest resource investment," he said.

There will be challenges for tire dealers who sell mining tires.

"Smaller-scale mining will remain cost-challenged despite the improvement in commodity prices. These concerns will be felt across the channel," Mr. Litzinger said.

Increased demand would be a welcome development for Michelin, whose Starr, S.C., OTR tire plant is starting a third year of idled production. Michelin suspended operations at the giant earthmover tire plant at year-end 2015 because of slowing global demand, just two years after opening the $750 million factory.

Michelin said at that time it would maintain the plant and its equipment "on standby" with plans to restart it once market conditions and customer demand improve.