After being out of the mining shovel business for several years, Caterpillar Inc (NYSE:CAT) announced it's going to enter the segment again, competing directly with market leaders Joy Global Inc (Nasdaq:JOYG) and Bucyrus International (NYSE:BUCY).
There is no doubt this category will be strong for years, as inflationary monetary policies will drive up the cost of raw materials, and emerging markets hungry for them will be pay the price to land them.
That means mining equipment like mining shovels will be hot for some time to come, as the bull commodity market continues on its long journey.
Printing money around the world has resulted in a number of currencies being debased, especially against gold, which also works strong with other commodities as well.
That means raw materials in general will continue to go up in price, generating spending from miner companies on the equipment to make them more efficient.
Confirming this is data from Bernstein Research, which says capital expenditure by mining companies will increase to record highs in 2011, growing to an estimated $113 billion. That would break the prior record of $110 billion.
The positive factor for Caterpillar and others in the industry, is this should continue to be a healthy and vibrant industry even if Western countries continue to falter, as the major growth is in emerging markets, which are going to, for the most part, continue to grow, even if the pace slows down some.
Demand for raw materials isn't near to playing out, and there will be years of robust growth and demand before it starts to level off.
Mining equipment will be among those ancillary industry profiting from that growth.
Goldman Sachs (NYSE:GS) said they see the overall expansion plans of Caterpillar to boost the sales for the company by 15 percent in 2011 and 10 percent in 2012.
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