Caterpillar Inc's plan to bring back a popular mining product it had discontinued a few years back threatens to raise the competitive stakes in an industry already marked by fierce rivalries.

The world's largest maker of construction and mining equipment said it is launching a range of mining shovels, returning to the equipment category currently dominated by Joy Global Inc and Bucyrus International.

Mr Adam Fleck analyst of Morningstar said that "When Caterpillar, being sort of an 800 pound gorilla in the room, gets into any business line, it sort of instills some fright into the competitors.”

Emerging economies have been boosting investments in power infrastructure and other construction, driving demand for copper, iron ore and coal. A rosy outlook for demand and price stability have inspired miners to expand capacity.

Caterpillar's resolve to dig deep into the market coincides with a healthy rebound in customer spending, after the economic downturn significantly curbed miners' budgets.

According to Bernstein Research, Globally, capital spending by mining companies will reach a record high next year, surging 50% from this year's level to USD 113 billion, to edge above the previous record of USD 110 billion set in 2008,

Caterpillar is also expanding its mining truck capacity and hydraulic excavator product line to boost the mining segment, which currently accounts for about 28 percent of total sales.

Goldman Sachs estimates Caterpillar's USD 700 million multi year expansion plans will boost the company's mining equipment sales by more than 15% in 2011 and another 10% in 2012.

Mr Jerry Revich Goldman Sachs analyst said that "Caterpillar has serious plans to grow its mining busines. Its strong distribution, excavation expertise and product development track record suggest some share gain is likely."

Caterpillar's plans for high margin segments such as mining shovels and trucks will be good news for miners, as increased competition means more bargaining power.

(Sourced from Reuters)