Generally, when any industry flourishes, its suppliers should flourish as well. And vice versa.
One of the main suppliers to the mining industry is Caterpillar (NYSE: CAT). When you look at pictures showing works at any mine, there is a high probability that you will spot Caterpillar's heavy equipment.
That is why I closely track Caterpillars results, especially those delivered by the company's Resource Segment.
The chart below shows revenue and operating profits (losses) reported by this segment, starting from 2010:
As the charts show, since 2012 Caterpillar has been delivering worse and worse results: revenue has been going down and operating profits have been following it. Finally, in 2015 the segment printed an operating loss of $88 million. To remind my readers, in 2012 the last bear market in precious and base metals started.
Simply put, a slump in the mining industry has a negative impact on Caterpillar's Resource Segment results. What is more, there are no short - term indications that this slump is going to an end. To prove it, below I have put revenue and operating profits (losses) reported in the last 8 quarters:
Both revenue and operating results have been going down since the beginning of 2014. Note, that the operating profit (loss) reported in the fourth quarters is distorted - at year end Caterpillar, as any company, recognizes various accounting charges.
However, the overall tendency is clear - there are no signs of recovery in the global mining sector.
Last but not least. Asia / Pacific area seems to be relatively invulnerable to the ongoing slump:
In 4Q 2015 revenue in Asia / Pacific was only 7.2% lower than in 4Q 2014.