A leading expert in the global construction equipment market has admitted that it is extremely difficult to predict what is likely to happen in the sector in the next few years.
Paul Howard, consultant at specialist management consultancy Off-Highway Research, told delegates at the annual Construction Equipment Association conference earlier this month that he had “never seen such a confused picture” in the market, adding: “It makes forecasting a challenge for anything beyond the short term.”
However, he did predict that, globally, he did not expect sales to reach their 2011 peak again until 2017. Howard explained that in 2007, global sales of construction equipment stood at around $100bn (£63bn). This figure almost halved in 2009, as a result of the economic crisis, but then peaked again in 2011 at $109bn (£69bn), fuelled by massive growth in China.
In the last two years sales have again slumped dramatically, with Off-Highway Research predicting that the total value of the market in 2013 will be around $93bn (£59bn), with the fall again being attributed to the state of the Chinese market.
“In 2012 there was a crash in China as a result of over-stimulus, and the rest of the economy didn’t keep pace with the equipment market,” explained Howard.
China dramatically ramped up its production capability for construction equipment over the last 10 years to meet the demands of its huge infrastructure investment programme. In 2000, fewer than 30,000 machines were manufactured in China. This number had grown to over 470,000 by 2012.
But now that construction has slowed down in China, the country is manufacturing far more machines than are needed for the domestic market alone - and in some cases more than are required for the entire global market.
“Current production capacity for wheeled loaders in China exceeds global demand by 180,000 units,” said Howard.
The situation is similar in excavators, with China having the capacity to produce around 460,000 machines a year, when only 130,000 are needed in the domestic market, and around 290,000 in the rest of the world.
Although Chinese manufacturers have so far not made big in-roads into the export market, Howard predicts that this over-capacity will start to affect global manufacturers based in the more established markets of Europe, Japan, Korea and the US.
“The challenges they are facing [in China] will have an impact on the rest of us, because they have the need for somewhere to sell this surplus capacity,” he said.