Milwaukee is on Path to Become the Mining Equipment Capital of the World

Last updated on May 13th, 2019 at 02:36 pm

The common rally cries among economic development advocates in southeastern Wisconsin include calls for the region to attract the young and creative class, to become more hip and to transform itself from a manufacturing-based economy to a high-tech economy. Well, here’s a counterintuitive thought. For 2005, the region fared just fine because of its relatively skewed reliance on good old-fashioned manufacturing, and many of the family-supporting jobs created in its factories.

Consider for a moment the performance of the stock market for 2005:

  • The Dow Jones Industrial Average dipped 0.61 percent to 10,717.50.
  • The Standard & Poor 500 gained 3 percent to 1,248.29.
  • The Nasdaq Composite Index gained 1.37 percent to 2,205.32.

In the end, the Dow fell after two years of narrow gains, the S&P’s percentage gain was just a third of the previous year’s gain, and the Nasdaq eked out a narrow gain, only on the back of Google Inc.’s meteoric rise.

Contrast those weak returns with the heavy metal performance of the BizTimes Stock Index. The index, which was created by Small Business Times and is monitored by North Shore Bank, measures the stock values of publicly held companies based in southeastern Wisconsin.

The BizTimes Stock Index outperformed the broader market for the second consecutive year. The local index began 2005 at 153.33 points, but rallied to close the year at 158.79, up 5.7 percent. Along the way, the local index spiked at 162.26 points.

Reflecting the local economy, the BizTimes Stock Index is heavily laden with the stocks of manufacturing companies, much more so than the Dow, the S&P or the Nasdaq.

Yet, manufacturing is where the gains were in 2005.

Of the 20 local companies whose stocks posted gains in 2005, 18 were manufacturers. In fact, nine of the top 10 were manufacturers.

The top-performing local stock for 2005 was that of Joy Global Inc., a Milwaukee-based manufacturer of mining equipment. Joy Global’s stock jumped an astounding 107 percent to $40.00 per share after opening the year at $19.30.

Milwaukee, which is often still referred to as "Brew City," could change that moniker these days to the Mining Equipment Capital of the World. With Joy Global and South Milwaukee-based Bucyrus International Inc. in its midst, southeastern Wisconsin is home to two of the three largest mining equipment manufacturers in the world.

Bucyrus International’s stock rose 30 percent in 2005 to $52.70 per share, and the company launched a major expansion of its manufacturing operation when it decided to acquire the former Metso Minerals plc plant in Milwaukee, where it is creating 100 new jobs. The company also is expanding its South Milwaukee plant with a $22 million addition that will be completed in the third quarter of this year.

The demand for mining equipment is soaring, as regions such as China, India, Russia and the former Soviet republics become more industrialized. The economic growth of those countries is cramping the world’s supplies of raw materials, creating an even hotter market for the mining equipment needed to harvest those commodities.

The demand resulted in an eye-popping bottom line for Joy Global in 2005. The company’s incoming orders jumped 23 percent to $2.29 billion, and it revenues grew 38 percent to $1.93 billion.

Joy Global’s shipments to Russia increased 245 percent in 2005, and its shipments to China rose 98 percent. The company also has been fueled by strong gains in the demand for equipment in coal mines in the United States.

"This was a terrific finish to a strong growth year," said John Hanson, chairman, president and chief executive officer of Joy Global. "One of our objectives for fiscal 2006 is to keep delivery lead times from growing and perhaps even improve them as we continue to increase realizable capacity … Our strong incremental operating profitability again in the fourth quarter gives us increased confidence that we can perform at these levels in fiscal 2006."

Robert McCarthy, the stock analyst at Robert W. Baird & Co. Inc. who covers both Joy Global and Bucyrus, noted the strong performances of the two mining equipment manufacturers in 2005 and expects continued strong results from them in 2006.

"It’s a combination of factors. Mine commodity prices are at all-time highs, particularly for copper and coal. In Joy Global’s case, the company’s stock was propelled by the company consistently beating Wall Street forecasts," McCarthy told SBT. "The big difference-maker in the current sector is China, and to a lesser degree, India, Russia and some other countries. China has a huge appetite for (raw) materials. Yes, we expect further order growth in 2006."

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