Soochow: The rise in metal prices is driving capital expenditure upwards, and the market space for mining machinery is vast.

Soochow released a research report stating that the global mining machinery market is worth $135 billion, with high gross margin aftermarket accounting for nearly half. The surge in metal prices and decrease in grade resonance are driving capital expenditures of mining companies. Chinese manufacturers, leveraging cost-effectiveness and electrification advantages, are following Chinese-funded mining companies to accelerate global penetration and seize growth opportunities in the high-end market. Soochow's main points are as follows: The mining machinery market has huge potential, with the aftermarket accounting for 50% of high gross margin. By 2024, the global mining machinery market is estimated to be around $135 billion, comparable to the traditional engineering machinery market. Surface/underground/crushing/drilling/processing account for approximately 40%/25%/15%/10%/5% respectively, with core categories including excavators, mining trucks, loaders, bulldozers, drilling machines, grinding machines, etc. Due to the long lifespan of mining equipment of 10-15 years, maintenance demand during this period is strong, with the aftermarket accounting for about 50%. Cat and Komatsu's mining machinery aftermarket revenue accounts for as high as 60%-70%. According to Caterpillar's financial report, the company's equipment/aftermarket gross profit margins are approximately 28%/48% in 2025H1, with aftermarket profits accounting for a higher proportion. Rising metal prices drive capital expenditures, while decreasing grade increases capital expenditure intensity. The transmission mechanism of the mining capital expenditure cycle is metal prices mining enterprise profits mining investment capacity prices, with capital expenditures lagging behind prices by about 1-2 years and capacity release lagging behind capital expenditures by about 3-5 years. Gold, silver, and copper prices all hit historical highs in 2026, and mining capital expenditures are expected to significantly increase in the next 1-2 years. On the other hand, due to resource depletion, environmental constraints, etc., mining grades continue to decline. For example, the average gold grade in the 1980s was about 5g/ton, which had decreased to 0.9g/ton by 2024, leading to an increasing intensity of capital expenditure in mining. The resonance effect of rising metal prices and declining mining grades drives mining capital expenditures. Following Chinese-funded mining enterprises overseas, Chinese manufacturers are gradually increasing their participation in the global mining industry. Due to the lack of large-scale mining resources domestically, domestic mining technology, especially for large-tonnage products, has progressed slowly, with global mining market still dominated by foreign companies such as Caterpillar, Komatsu, Sandvik, etc., with Caterpillar and Komatsu jointly holding over 50% market share in mining and transportation links. In recent years, with Chinese-funded mining companies participating in large-scale mining overseas, domestic enterprises have made significant progress in tonnage. Domestic brands have advanced in technology layout in electrification and unmanned areas compared to foreign brands. With cost-effectiveness and new technology advantages, Chinese brands have a significant advantage in the mid-to-low-end market and are accelerating catch-up in the high-end market, paving the way for the second growth curve for Chinese brands. Investment suggestions: It is recommended to pay attention to Sany Heavy Industry, XCMG Construction Machinery, SANY INT'L, Naipu Mining Machinery, TONLY, Inner Mongolia North Hauler Joint Stock. Risk warning: Industry cycle fluctuations, mining projects falling short of expectations, policy changes falling short of expectations, geopolitical risks intensifying.