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Global Construction Summary — An uneven pace of global economic recovery has in part contributed to a shift in size (and relevance) of regional construction equipment markets. Combined with high growth aspirations of Chinese equipment manufacturers, and the potential resultant impact on longer-term global market shares, we have included in this report several regional analyses summarizing key trends to aid investors in monitoring – and forecasting – global trends in construction and infrastructure-related markets.
China Construction Activity Slows in May — Following recent warnings from several Japanese players, official data for May reveals a 13% year-over-year decline in excavator (~20% of equipment market) shipments – the first monthly decline since mid 2009. Year-to-date, shipments are up 36%. The total market share of local players rose to nearly 45% in the month, and has reached a 39% share through the first five months (up from 33% in 2010). We expect China construction machinery sales growth to trend lower through 2011, but still forecast solid full-year growth (23%), albeit lower compared to 40% growth in 2010.
The slower projected growth is mainly due to easing of the fiscal stimulus and lower property investment. Still, purchasing demand related to the 12th 5-yr Plan projects, especially for water conservation and social welfare housing, should support overall growth in 2011. Positive NA Color — Several recent data points suggest equipment markets continue to improve. Komatsu noted US demand up 50%-plus in April/May, and orders at Deere/Hitachi JV are up by 140% yr/yr in Apr/May.
Strength from broader heavy machinery segment was highlighted by two major US-based steel producers in recent meetings with CIRA’s Metals analyst. That said, with private construction market activity soft, and headwinds facing public sector given delays over Highway Bill reauthorization and fading Stimulus funds (highway contract awards down 9% thru April), catalysts to drive a sustained, follow-through recovery are less clear.
Japan — Led by the start of reconstruction work in the Tohoku region, domestic demand picked up strongly in April (up 23%), and appears to have accelerated in May. Japanese makers have lost share in the excavator market over the past few
months in China though hopes are high that there will be a rebound in 2H demand. Europe — Construction markets in Europe are expected to remain broadly flat this year with some modest growth in 2012. That said, there are notable geographic differences: Northern Europe is seeing buoyant growth driven by Germany and Scandinavia; whereas Southern Europe continues to see (5-10%) contractions in output this year. Residential markets have broadly stabilized and are showing some growth. Commercial construction is unlikely to see any meaningful recovery until 2013. Demand for construction equipment has improved, but from low levels.
Korea — April construction equipment production and sales continued positive year over year growth at 23% and 26%. However, both production and shipments appeared to have peaked out in March and have started to fall on a month over month basis. While domestic shipments were flattish in April, export demand has remained solid (up by 49% year/year), led largely by continued strong demand from emerging markets (which represented 43% of total exports).
China Construction Activity Slows in May — Following recent warnings from several Japanese players, official data for May reveals a 13% year-over-year decline in excavator (~20% of equipment market) shipments – the first monthly decline since mid 2009. Year-to-date, shipments are up 36%. The total market share of local players rose to nearly 45% in the month, and has reached a 39% share through the first five months (up from 33% in 2010). We expect China construction machinery sales growth to trend lower through 2011, but still forecast solid full-year growth (23%), albeit lower compared to 40% growth in 2010.
The slower projected growth is mainly due to easing of the fiscal stimulus and lower property investment. Still, purchasing demand related to the 12th 5-yr Plan projects, especially for water conservation and social welfare housing, should support overall growth in 2011. Positive NA Color — Several recent data points suggest equipment markets continue to improve. Komatsu noted US demand up 50%-plus in April/May, and orders at Deere/Hitachi JV are up by 140% yr/yr in Apr/May.
Strength from broader heavy machinery segment was highlighted by two major US-based steel producers in recent meetings with CIRA’s Metals analyst. That said, with private construction market activity soft, and headwinds facing public sector given delays over Highway Bill reauthorization and fading Stimulus funds (highway contract awards down 9% thru April), catalysts to drive a sustained, follow-through recovery are less clear.
Japan — Led by the start of reconstruction work in the Tohoku region, domestic demand picked up strongly in April (up 23%), and appears to have accelerated in May. Japanese makers have lost share in the excavator market over the past few
months in China though hopes are high that there will be a rebound in 2H demand. Europe — Construction markets in Europe are expected to remain broadly flat this year with some modest growth in 2012. That said, there are notable geographic differences: Northern Europe is seeing buoyant growth driven by Germany and Scandinavia; whereas Southern Europe continues to see (5-10%) contractions in output this year. Residential markets have broadly stabilized and are showing some growth. Commercial construction is unlikely to see any meaningful recovery until 2013. Demand for construction equipment has improved, but from low levels.
Korea — April construction equipment production and sales continued positive year over year growth at 23% and 26%. However, both production and shipments appeared to have peaked out in March and have started to fall on a month over month basis. While domestic shipments were flattish in April, export demand has remained solid (up by 49% year/year), led largely by continued strong demand from emerging markets (which represented 43% of total exports).
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