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Off-Highway Business Still a
Bit Off
By most accounts the collective U.S.
heavy equipment industry picture
continues on its bumpy path.
According to Brian Langenberg,
our dismal science tea reader
whose column — Global Industrial
Outlook — appears regularly in our
sister publication Power Transmission
Engineering, “The stronger U.S. dollar
is enabling Japanese machinery
competitors to gain share in the
Middle East and Latin America, and
lower soft commodity prices translate
into a continuing North American
decline in demand for farm equipment.
Increased Japanese construction
equipment competition remains
a negative for U.S. manufacturers.
And in the long-suffering, crucial
mining sector, things only get worse.
“Mining,” according to Langenberg, is
“not only awful, (but) may be worsening
in the U.S. — given continued
deterioration in coal fundamentals.
And in other heavy machinery, he
reports “modest incremental demand
from non-residential and residential
construction markets, but more than
offset by soft crane and agricultural
markets.”
And last, John Deere, U.S. agriculture’s
bell weather (65% market share),
finds that its “sales trends are in the
tank across every product area, and
in particular with larger, high-margin
tractors and highly seasonal combines.
Meanwhile, for the industry as a
whole the wait continues for Congress
to pass some semblance of a longoverdue
national infrastructure bill, which would of course provide a muchneeded
boost to the heavy machinery
sector.
Not going to happen. Not during this
Administration, at any rate.
With the 2016 presidential race
already underway (in case you didn’t
notice), much needed action on things
like infrastructure repair will take a
back seat to debate on red state-blue
state issues like gay marriage, gun control,
estate taxes and so on.
Following are additional facts and
figures, as reported by Reportlinker,
Freedonia, Hoovers and Global Industry
Analysts:
- Click image to enlarge
Market outlook. The US domestic
construction equipment market
has seen sales jump almost 60% over
the past year. The rebuilding of rental
fleets and increased exports in the utility,
farming, manufacturing and mining
sectors are driving sales higher.
Equipment prices have risen just over
1% as production has not yet climbed
back up to capacity levels. Prices for
equipment and rentals continue to rise
due to job site demand as the construction
sector rebounds following a slow
period caused by the economic downturn.
Construct ion equipment and
machinery industry market. Global
construction machinery demand is
expected to grow at a yearly rate of 6.5%
through 2015 to reach a value in excess
of $170 billion, according to Freedonia.
EU and North America equipment sales
are forecast to rise after an unprofitable
period between 2008 and 2010. Growth
in other regions such as Asia-Pacific
and Africa-Mideast is expected to slow
through 2015 in tandem with construction
and mining activity.
- Click image to enlarge
The construction equipment and
machinery industry has been hit by
slow economic growth, following the
global financial crisis, which took a particular
toll on global construction activity.
Worldwide demand for construction
equipment and machinery suffered a
huge falling off after the 2008 economic
downturn. Demand fell for three years tion
slowed. In particular, a fall in U.S.
domestic housing construction slowed
heavy equipment sales.
- Click image to enlarge
Key Market Segments:
Market growth in terms of sales of
excavators, loaders and cranes is forecast
to accelerate through 2015. As economic
growth picks up again after the
slow 2008 to 2010 period, demand for
heavy equipment will rebound. Greater
investment in urban development -
including construction across industrial,
commercial and residential sectors
- will buoy demand for draglines and
cranes. Demand for loaders will also
grow as mining output rises. Growing
profits in non-building construction
and mining will boost demand for excavators.
Regional Markets
- Developed nations are expected to
lead demand for equipment, with
North America expected to show
close to 7% yearly growth in the fiveyear
period ending 2015, according
to Freedonia. The U.S. market will
be driven by residential construction
spending gains, as the construction
sector rebounds following the 2007 to
2010 downturn. Demand in Mexico
is also forecast to grow in the same
period.
- There are around 700 companies
operating on the U.S. construction
machinery manufacturing market,
representing combined yearly profit
of around $25 billion, according to
Hoovers. It is a very concentrated
industry, with 85% of overall profit
generated by the top 50 companies.
U.S. industry leaders include Terex,
Hitachi, Caterpillar and Komatsu.
Third-quarter construction activity in
the U.S. in 2011 pointed to a rebound
in the construction industry, boding
well for construction equipment
demand.
- The largest share of new demand for
construction equipment in the fiveyear
period ending 2015 is expected
to come from Asia-Pacific, according
to Freedonia. Construction machinery
sales are expected to increase almost
7% a year through 2015, fuelled by a
higher degree of mining output and
construction spending gains. China
will represent almost 40% of new construction
machinery demand until
2015, and growth will also accelerate
in Indonesia and Malaysia.
About Author
Jack McGuinn, Senior Editor, has a diverse,
20-year history in manufacturing, including
management-level positions in quality assurance
and testing; product development; marketing and
promotion; and industrial journalism. He has been
with Gear Technology since 2005. [10 years in the
gear industry]