Global Market Growth

Cece recently participated in the annual International Trade Committee Meeting, hosted by the Japanese Construction Equipment Manufacturers’Association (CEMA). The other participants were the North American Association of Equipment Manufacturers (AEM), and the Korean Construction Equipment Manufacturers’Association (KOCEMA). The China Construction Machinery Association (CCMA) was not present but had provided a report on its industry and markets. The meeting provided an opportunity for the five associations to exchange market forecasts and discuss issues affecting the industry, such as steel prices and environmental issues.

Market Outlook

Following a +16% expansion in the EU construction equipment market in 2004, CECE is predicting a more subdued +3% rise this year. For a detailed analysis of the European equipment market, see the May issue of Construction Europe.

According to the AEM, the North American market enjoyed similar growth last year, with the US market rising +16,1% and Canadian sales going up +14,3%. This upswing looks like it will be better sustained in North America than in Europe - the AEM is forecasting a +8,4% rise in sales for the US this year and +6,6% growth in Canada.

The expected growth in North America looks like it will be fairly evenly spread across the various equipment types. In the US, Asphalt equipment will see the strongest growth this year, with a +10,4% rise. This group will be followed by concrete and aggregate machinery (+9,5%), lifting equipment (+8,7%), earthmoving machines (+7,8%), light equipment, and attachments and components (both +6,8%).

While being more subdued, the pattern in Canada still reflects growth across all the machine sectors. The biggest improvement this year is expected to be lifting equipment sales (+9,7%), followed by earthmoving machines (+6,9%), asphalt equipment (+6,5%), light equipment (+5,7%), concrete and aggregate machinery (+5,2%), and attachments and components (+5,0%).

The AEM also makes predictions about demand for the different types of equipment outside its membership base of North America. Concrete and aggregate machinery is expected to see the best growth in these ‘rest of the world’markets this year, with a +10,2% rise in sales. Asphalt equipment is also expected to see a strong improvement with a +9,5% increase, followed by lifting equipment and light equipment (both +5,9%), attachments and components (+5,7%) and earthmoving machinery (+5,6%). The AEM expects overall sales outside North America to increase +7,0% this year.

As has been widely reported, the previously fast-growing Chinese market was strongly affected last year by Governmental measures to slow the over-heating construction sector with a range of planning and credit law reforms. However, according to the CCMA, the market still grew +10% last year. While the association shied away from making a forecast for this year, the data it presented for 2004 showed some interesting trends.

It is clear that the excavator sector, which is dominated by developed world manufacturers’subsidiaries or Chinese joint ventures, was hit hardest by the credit tightening. In March, prior to the reforms, excavator sales hit a record of 6466 units for the month. By July that figure had dropped to 938 units, and recovered only marginally to 1317 units in December.

In Japan meanwhile, construction equipment sales grew +4,7% last year, and CEMA expects a further +1% rise this year. Following improved domestic sales last year, the four key product groups of excavators, mini excavators, cranes and tractor units are all expected to stagnate this year.

What domestic growth there is this year is expected to come from road building machines, foundation equipment and other miscellaneous categories. The demand for tunnelling equipment is expected to drop slightly, while all other categories are expected to remain flat.

Exports of excavators and particularly mini excavators are expected to grow well this year, so total production by Japanese manufacturers is forecast to rise by +6,4%. Total production is expected to hit JPY 1557 billion (€ 11,4 billion), compared to JPY 1463 billion (€ 10,7 last year), with exports accounting for 61,3% of this, compared to 59,3% in the 2004 fiscal year.

Korea is the only region of the five where sales are expected to fall this year. Following +2,5% growth last year, KOCEMA expects a -16% contraction in 2005. However, like in Japan, production from the Korean manufacturers is expected to increase this year, from KRW 3596 billion (€ 2,83 billion) in 2004 to KRW 4030 billion (€ 3,2 billion). The share of exported equipment will grow, from 63,2% in 2004 to 72,3% this year.

Despite the negative outlook in Korea, the world market for construction equipment is forecast to grow this year. Without a forecast for China it is difficult to put an accurate figure on this growth, but the increase will be less pronounced than in 2004.

Members of CECE's national associations can download the complete presentations from the “members only”part of CECE's website, www.cece-eu.org