Shorter Value Chains Keep Business Competitive: L&H Industrial

Q: How has L&H Industrial’s supply chain been impacted by a trade environment dominated by tariffs, particularly on critical materials like steel?

A: L&H Industrial operates facilities in the United States, Mexico, and Canada, experiencing a fluctuating market. Products are manufactured in Mexico for export to the United States, and vice versa. Within Mexico, there has been a significant focus on local procurement, meaning Mexican clients increasingly purchase from Mexican suppliers. However, this local market also faces growing competition from products imported from Asia, which impacts both the Mexican and US markets.

The rising costs of steel, for instance, often make it more attractive to import products from Asia. This means that in Mexico, domestic companies now compete not only with regional players but also, increasingly, with Asian industries, particularly from China, which offer highly competitive, low-cost goods. These Asian suppliers often do not experience the same cost fluctuations.

Therefore, the focus shifts to finding ways to enhance competitiveness, becoming more intelligent and aggressive in market strategies. This sentiment is particularly strong among local Mexican industries. Historically, competition was primarily with companies from the United States or South America. Now, the dominant challenge comes from industries originating in the East, specifically China.

The impact of these dynamics is mixed, resembling a seesaw. It is not always clear where the effects will manifest most strongly. For example, our products manufactured in Mexico and exported to the United States may benefit if fewer products are entering from China. However, products we move from the United States to Mexico can be negatively affected. Consequently, if L&H Industrial were a purely local Mexican company, the situation might appear beneficial. In reality, however, increases in one area are often offset by decreases in another, resulting in a somewhat balanced, yet volatile, environment.

Q: From your perspective, where are we in the business cycle for the heavy industries you serve in Mexico, especially in mining?

A: The market has been somewhat stagnant and stable for about 15 years, and it has not dipped significantly, which is positive. However, it has also not experienced a boom.

Currently, there is a slight downward trend. Mining companies are spending, but cautiously, not as much as one might hope. The impact of COVID-19 created a temporary bubble, and new policies are also influencing this conservative approach. So, while the market has not crashed, it has not seen the expected growth either. This pushes suppliers to actively seek new opportunities.

Our business has historically diversified beyond mining. Currently, mining constitutes about 80% of our operations. The goal is not to expand into other sectors but to ensure continued growth.

Q: Which other sectors hold interesting opportunities for L&H Industrial? 

A: The power generation sector has experienced the most significant growth over the past five years, particularly since the COVID-19 pandemic. This growth is primarily driven by global decarbonization efforts linked to climate change, requiring the update of energy generation equipment. While renewable energies have been explored, it has become evident that they do not fully meet all future requirements for complete decarbonization.

Consequently, L&H Industrial is engaging with major electricity generation companies, such as GE, to serve as a key manufacturer and supplier for their equipment and substantial ongoing investments. 

Our most significant engagement has been in wind turbines, which are large pieces of equipment. There is also substantial renovation occurring with gas turbines. Our focus is primarily on large equipment that requires extensive manufacturing capabilities, not just small machining. Essentially, we concentrate on producing large-scale pieces.

Q: How are your life-extension and refurbishment services behaving in the current mining landscape?

A: Investment in new equipment appears to be a client-by-client decision, largely dependent on individual budgets. For example, Grupo México has shown significant new equipment purchases over the past five years. It is unclear if they will reduce new acquisitions and dedicate more resources to equipment reconstruction. Reconstruction remains a consistent demand because, in practice, even when a new machine is purchased to replace an older one, the older equipment often continues in use and requires rebuilding. The operational demand has not decreased.

The sustained demand for equipment, despite constrained maintenance budgets, is perplexing to us as maintenance service providers. We observe more equipment in operation but less budget allocated for its upkeep, which seems an unusual approach to managing these assets. This might be due to lower mineral grades or product output in some mines, making current mining operations less profitable than their recovery. Therefore, the situation varies significantly from client to client.

Q: Could you describe the technological approach behind the Ops IQ platform?

A: While L&H Industrial traditionally focused on component manufacturing, current client demands require a shift. Clients now want operational products that can be monitored to track progress, assess wear, and provide alerts in case of failure. This type of monitoring is already common for many industries.

The key difference lies in applying this to equipment in hard-to-access areas within a mine's pit, where not all equipment currently has such systems. Based on client requests, particularly after successful implementations on smaller, more accessible equipment in buildings, L&H Industrial is now applying this capability to remote mining equipment.

We began implementing it, focusing on a custom-made approach. Unlike general platforms offered by OEMs, L&H Industrial builds platforms tailored to individual client needs. This means clients specify what they want monitored, which systems and sensors to use, and where to place them. This custom-fit approach has been under development for two to three years. Several clients are already requesting and having these systems installed on their equipment.

The primary advantage of this new service is the custom-fit platform that integrates client-specific feedback. It goes beyond a generic, remote monitoring solution, offering a truly bespoke system designed for the client's specific operational requirements.

Q: What are the main factors that influence a prospective client not to choose to implement it? How has the company worked to address these concerns?

A: In the past, there was some resistance to adopting predictive maintenance equipment, especially from mechanical staff who feared their jobs would be replaced. They believed monitoring systems would eliminate the need for physical inspections. However, we have consistently communicated to clients that these systems are not a replacement; physical inspections remain necessary to verify the monitored data.

These systems enhance, rather than replace, human work. They help prioritize maintenance tasks by flagging issues like low oil levels or unusual vibrations, allowing teams to be more efficiently dispatched. This improved scheduling prevents unexpected breakdowns, which is particularly crucial for remote equipment in mines that are difficult to access. Previously, maintenance teams might follow a rigid schedule such as: equipment one, then two, then three; only to find equipment three needs immediate attention, disrupting their entire plan.

While monitoring systems were already common for equipment in accessible plant areas, the demand for them in hard-to-access mining equipment is new and growing. This year, we have seen significant interest, with many clients requesting installations. This marks a clear shift in Mexico, where confidence in this technology is increasing as clients realize it is a tool for optimization, not human replacement. For instance, the systems can detect a hydraulic line on the verge of bursting, which could cause a serious accident. By observing this remotely, the equipment can be safely shut down for inspection, allowing for a safer and more controlled review. Clients are increasingly recognizing this significant safety advantage.

Q: What are L&H’s perspectives on the future of the mining sector within the next five years? How does the company plan to participate in this future you are seeing?

A: Mexico's investment climate still presents some uncertainty. There has been a noticeable decrease in foreign investment for new project development. The situation appears stable at the moment, but is marked by significant caution.

Navigating this environment involves continuous adaptation and evolution. Tariff-related issues, in particular, have introduced substantial shifts, especially this year. What might have been a viable strategy last year now requires frequent emergency meetings to reassess, following constant changes in the US tariff policy. There is simply no other option but to remain adaptable and evolve with the changing landscape. 

Q: What are the company’s plans for 2025?

A: In 2025, we are actively seeking to expand our local raw material sourcing, particularly for steel, aiming to reduce reliance on foreign suppliers. If local supply is insufficient, we are open to forming partnerships with companies willing to invest in domestic production. There is significant demand for certain products that currently face near-monopolies from Eastern suppliers. Bringing this production to our side of the world, specifically Mexico, is a key strategic goal. This, we believe, is currently our most challenging objective.

Our search for suppliers focuses on various forms of steel, including plates and castings. We require foundries with significant capacity, as many local options are smaller and cannot handle the scale or volume of our products. Additionally, highly specialized materials are often not easily accessible locally, with most coming from abroad. Securing these steels is the critical factor for our future sourcing strategy.

L&H Industrial, founded in 1964 and headquartered in Gillette, Wyoming, is a leader in technology innovations, custom manufacturing, and comprehensive services for heavy industrial machinery used in mining, oil and gas, and other sectors.