Special report: Positive signs for South America's crane market

South America is bucking the economic trend somewhat and there are positive signs for crane sales.

Each year for many years South America has been touted as being about to explode into a region of strong growth in new crane sales. There are indications that this is beginning to happen.

Glen Tellock, Manitowoc chairman and chief executive officer, praised the South American market in the manufacturer's 2009 second quarter results. "Obviously, crane demand continues to be weak across most of our markets. The exceptions include portions of Asia, Latin America, and Africa." Earlier this year Bob Hund, Manitowoc vice president of worldwide marketing, also said the continent was in a good position. "Crane sales in South America, especially Brazil, Argentina, Colombia, Chile and Peru, will pick up quicker than most other countries."

Brazil is still the continent's major market. Its construction equipment sector is worth BRL 10 billion (US$ 4.7 billion) annually, according to the latest research by Sobratema, the Brazilian Association for Technology in Equipment and Maintenance. The government's Growth Acceleration Program (PAC) and its commitment to construct the Mercosul trade corridors that run through the country, along with preparations for the 2014 FIFA World Cup, were the main drivers behind sales of construction equipment in the country.

Increasing range

One of the continents biggest crane rental companies is Brazil-based Locar Guindastes e Transportes Intermodais. "We have been operating in Uruguay, Chile, Cuba, Ecuador and Angola. But, at this moment, we are operating only in Brazil, says Julio Eduardo Simoes, Locar CEO.

The company's fleet includes a mix of crawlers, truck cranes, all terrains and rough terrain cranes. The most utilised models are in the 100 to 200 tonne capacity range, although Simoes has recently invested in a 1,350 tonne Liebherr LR 11350 crawler crane and will soon invest in a further six crawlers lower down the capacity scale.

The country is already well stocked with machines of 100 tonne capacity and below as there is truck crane manufacturing in the country, although there is no all terrain production. "We intend to invest more in crawler cranes and less in 60 tonne cranes because we would like to participate in big projects with big cranes," Simoes adds. In 2009 the company's revenue is forecast to increase due to a recent maritime services acquisition. "However, if we exclude it, we expect a 30% decrease in sales versus 2008," adds Simoes.

Crane manufacturer Madal Palfinger, based in Brazil, produces 30 and 60 tonne capacity telescopic mobile cranes. It says the market for telescopic cranes is down about 50% compared to last year. The company has also introduced loader cranes into the country through its partner, Palfinger, based in Austria. The largest capacity loader is the PK 100002 Performance, launched in Brazil this year. Seven units have already been sold to customer Zandoná. Palfinger adds that loader crane sales are at about the same level as 2008.

Top sellers

Liebherr sales in South America reflects Locar's experience in providing services in the continent. Top sellers are the four and five axle all terrains like the LTM 1200-5.2 and new LTM 1100-4.2. There is also a growing interest in the manufacturer's 100 tonne capacity LTR 1100 telescopic crawler crane, says Wolfgang Beringer at Liebherr. Brazil has been fruitful for the manufacturer this year compared to other countries, taking 50 units so far this year.

Beyond Brazil, demand for different models varies with the environment. "The requirements for products and material in South America are very diverse and challenging: from the tropical, hot and wet climate of the Amazon to the Andes at 4,000 m above sea level and minus 30°C in the copper mines."

That said, Liebherr is keeping its eye on Chile, which Beringer says is an ambitious market and is developing well when it comes to crane sales, mainly because of its intensive mining industry. "Large mines do not allow old machines for security reasons and therefore they buy new machines directly or force the rental companies to do so."

Chilean president Michelle Bachelet's announcement of a US$ 4 billion economic stimulus package will help the upward trend. It will increase 2009 public spending by almost US$ 1.5 billion. It means, however, the government will post a fiscal deficit of 2.9% in 2009.

Wind power is also bringing in orders for new crawlers even in markets that traditionally have been for used cranes, for example, Argentina, says Beringer. "But the combination of new crane prices, rental income and lack of local finance make it very hard for the rental companies there, especially the smaller ones, to purchase new cranes. Basically this is the same situation for all South American countries."

Kyle Nape, vice president and general manager of Manitowoc in Latin America, says Argentina is struggling, although Brazil, Chile, Ecuador, Peru and Colombia are doing well.

Plans

Nape observes that the market for cranes of 100 tonnes capacity and below has slowed but, for 100 tonnes and above, the market is still relatively good. "There are some big projects in the region and, therefore, there is still a need for big cranes."

In terms of where the market is heading, Nape says customers were conservatively optimistic at June's M&T construction show in Sao Paulo, Brazil.

"While some cranes are idle right now, there's a hope that work will come back. In Brazil, there is a significant amount of infrastructure, and they are planning for the World Cup 2014. In Chile, there is still work on refinery and power plant projects."

Again, it is the around the 200 tonne capacity level that there is most growth. The competition from local manufactures for truck cranes under 100 tonnes, notably around the 60 tonne mark, is fierce and the market is already well stocked with these cranes.

Hence that is why new models like Manitowoc's GSK55 and TMC540, as well as Liebherr's LTF 1060-4.1 may seem suitable cranes for the market, but have not been aimed at it. "We have discussed the GSK55 with some customers, and we see some opportunities for this crane in the market. Right now, the market is not very active, so it may take time for it to become popular. But it could certainly be in the future," explains Nape.

Testing the market

Concerning the new Liebherr LTF 1060-4.1 truck mounted crane, Beringer says Liebherr is also testing its market in South America. "Generally we see a market for this crane in South America, even though it was difficult in the past for our smaller truck-mounted cranes because of import duties and the presence of local manufacturers. But, due to the higher lifting capacity of the 60 tonne LTF 1060-4.1, we see a better chance."

Marchetti is braving the 60 tonne capacity truck crane market with its new MTK 60 model, launched earlier this year. The Italian manufacturer says the model is designed for markets as far afield as Brazil and Australia where the customer will supply the chassis. This, says Marcello Maestri, Marchetti export manager, makes the crane cheaper to transport and more flexible for the customer.

Chinese manufacturers are also viewing South America keenly, along with the other markets. Construction equipment manufacturer LiuGong Machinery Corp. is to open a Latin American headquarters in Belo Horizonte, Brazil. This will have an impact on the crane market too with the company's announcement this year that it would build a crawler crane factory in China, capable of producing 3,000 a year.

After sales service

Fellow Chinese manufacturer XCMG already sells cranes in Brazil but is seeking to develop sales in other South American countries. "At present, we are trying to open a second market in South America and we already have a good start in Panama, Venezuela and Colombia," says Sam Shang in the XCMG America and Oceania department. The manufacturer already exports a range of truck cranes to Brazil from the 20 tonne capacity QY20B through to the 130 tonne capacity QY130K. It will introduce the 200 tonne capacity QAY200 all terrain soon, says Shang.

In a further example of how Chinese manufacturers are becoming increasingly conscious of the need to provide after sales service, XCMG is to set up a service and spare parts centre in Brazil to support its dealer there.

The biggest challenge in such a diverse continent is to improve technical service networks and to continually look for financing solutions with local banks, adds Beringer. "There are many countries with different regulations based on different motives like protecting local manufactures or preventing them from being invaded by old machines. For example, in Argentina you cannot import machines older than 15 years with a telescopic boom below 42 m without paying higher duties."