Sany helps Chinese market recovery

After five years in recession, the Chinese market for construction machinery is strongly rising once again. While one should always treat statistics with caution, there are enough to suggest that China is once again the world’s hottest market for construction equipment.

Sany Bices 2017

Sany at Bices 2017

 

According to the China Construction Machinery Association sales of excavators in China in the first eight months of 2017 rose by 111% compared to the same period in 2016, reaching 85,766 units. This puts it back towards the sort of numbers it was making in 2010 and 2011 when the market was last booming.

Chinese manufacturers such as Sany also exported 5,641 excavators during the first eight months, an 18% rise year-on-year.

The China Machinery Industry Federation says that the numbers it gathered from 25 producers show that they together sold 14,530 excavators in February 2017, a near four-fold increase over February 2016.

Sany, China’s biggest construction machinery manufacturer, sold 3,600 units in February 2017, three times the number a year earlier. Sales of concrete machinery and crawler cranes also tripled year-on-year. Sany says that it has never seen such growth in a single year before.

Estimates produced by Hitachi Construction Machinery of Japan back this up. HCM says that demand for excavators in China has been more than double what it was in 2016 for almost every month of this year. The monthly year-on-year growth rate peaked at 286% in February 2017, HCM says, and even at its slowest, in March, the growth rate was still a huge 70%. In every other month since then the growth rate has been more than 100%.

The recovery in construction machinery sales in China began in September 2016.

Wang Jinxing, deputy secretary of the China Machinery Industry Federation, was recently quoted in the China Daily newspaper saying that the rising sales are the result of improving economic conditions, together with the government’s drive to promote the public-private partnership, introducing private money into infrastructure projects.

A particular growth area is in machinery that accompanies more modern working practices. The Chinese market for powered access equipment, for example, more than doubled in size between 2014 and 2016 and is expected to double again by 2020, according to a study by Off-Highway Research.

Even while sales of more established types of machinery were in recession, sales of boom lifts and scissor lifts have continued to grow over the past five years or more, although from a very low base. The concept was only introduced into China in the 1990s. Gradually the safety and efficiency offered by these machines for working at height have come to be valued in many parts of the Chinese construction industry. Rental companies have emerged to stimulate demand.

Off-Highway Research predicts that, with continuing growth in demand and an emerging market for replacing old platforms, unit sales will reach 40,000 units in 2021 and the working population of platforms will pass 100,000 units.

I make two predictions about this Chinese revival. Firstly, we will start to see renewed efforts by Chinese manufacturers in export markets, beyond the so-called “Belt and Road” countries. Several made substantial inroads into global markets 10 years ago but early progress faltered. Business logic dictates that they should have sorted out their nascent export sales when the domestic market was weak but it seems that the confidence was knocked out of the Chinese manufacturers and they went into retrenchment mode. With renewed confidence, they’ll be back.

My second prediction is that they won’t be as cheap as they were before, in every sense of the word ‘cheap’.

What always happens when demand is strong is that manufacturers are able to nudge their prices up and it seems this is what the Chinese manufactures are doing at home. China Daily reports that some of the leading companies have already raised prices for their by as much as 10% in the past few weeks, telling their customers that this is because their manufacturing costs are rising. This month (October 2017) Liugong is increasing the price of its five-tonne loaders by 20,000 yuan (€2,500) for example. Shantui Construction Machinery and XCMG reportedly have similar plans.

With steel prices in China doubling this year, from 2,000 yuan (€250) per tonne to 4,000 yuan per tonne (€500), how long will it be before Chinese machinery manufacturers start to lose the price advantage that they have traditionally enjoyed?

Steve Rhine

About Steve Rhine

Community Manager at MachineryZone USA - All latest construction news on MachineryZone Mag!