Special Report: 2021 Forecast
By Chris Sleight and Hannah Sundermeyer05 January 2021
Chris Sleight answers pertinent questions about a post-Covid economic picture for the construction industry in 2021.
2020 is in the books, and it’s time to think about 2021 and a sustained recovery. The Covid-19 pandemic has been a disaster on so many levels, to say the least of the lives lost to this horrible virus. While there are still some dark days ahead, there is reason for optimism and hope.
American Cranes & Transport reached out to Chris Sleight, managing director of Off Highway Research, to discuss the economic picture for the construction industry globally and in North America. His answers to our questions are insightful and important as we navigate a post-Covid environment that should happen sometime in 2021.
How has Covid-19 impacted the global construction equipment market? The North American market?
Prior to the Covid-19 outbreak, Off-Highway Research expected the global construction equipment market to have a soft landing after the record highs of 2018 and 2019. Instead of the previously expected 5 percent downturn in global construction equipment sales, we now expect the market to be down 11 percent.
That is not a bad result given the shock which Covid-19 has had on the global economy. Indeed, in volume terms, 2020 would be one of the five best years on record for global equipment sales. However, it is important to dig beneath the headline figure.
The important factor in 2020 has been China. As the country emerged from its lockdown in April, the government launched various stimulus measures. Now, instead of the previously forecast 9 percent downturn in construction equipment sales in 2020, the Chinese market will be up at least 15 percent. It will be comfortably the largest construction equipment market in the world in 2020, accounting for well over a third of global demand. A market that large with such a big upswing of course skews the global picture.
Pretty much every other country in the world will see a fall in construction equipment sales in 2020. The global average for these (world excluding China) will be a 20 percent downturn. A downturn of 10 percent or less would count as getting off lightly. The hardest hit countries will see a fall of 25 percent or more.
North America is likely to be one of the harder hit markets, with a downturn of around 20 to 25 percent in 2020.
What is your forecast for the market, globally and North America, in 2021?
The stimulus-driven boom in China will start to recede in 2021, but most other countries of the world will see their recoveries gather pace, having started to come back from the bottom of the curve in the second half of 2020. Sales in the world excluding China should rebound by 10 percent or so, compared to 2020 levels.
North America is expected to follow that curve, with about a 10 percent increase in sales. Obviously, that could be better if there a large, infrastructure-centric stimulus plan is put in place.
Equally, the market could be disappointing if any plan is delayed or watered-down by partisan bickering in Washington.
With a vaccine now approved and a plan for its implementation, there is hope for a sustained recovery in 2021. When do you envision the market for new equipment will ramp back up?
Even before the news of the vaccine, Off-Highway Research was confident of a bounce-back in 2021. Markets around the world clearly returned to growth in the second half of 2020, and we always expected that to continue.
Construction is fortunate that it can continue reasonably uninterrupted with appropriate Covid precautions in place. Certainly it has seen an impact form the Covid pandemic, but it seems to have been one of the most mildly affected industries and one of the first to get back to some sort of normal working.
Clearly the roll-out of a vaccine around the world could accelerate the economic recovery and therefore accelerate the bounce back for our industry.
How is the crane industry doing as compared to other sectors of the construction equipment industry?
Like other sectors of the construction equipment industry, the crane segment was at its lowest ebb in the second quarter of 2020 and there was a noticeable bounce-back in the third quarter. Looking at manufacturers’ financial results, the downturn for the crane industry was certainly steeper than that of other equipment makers, but the third quarter rebound was sharper too.
Whereas many of the international manufacturers in the earthmoving equipment business benefitted from the boom in China in 2020, when it comes to crane sales in China, it is only really the country’s indigenous manufacturers which serve the market. That includes both the traditional mass market truck cranes, but also now high capacity all terrain and crawler cranes, which 10 or 20 years ago were the sole preserve of the international OEMs.
When production ramps back up, what are some of the issues the OEMs could possibly face?
We have seen it to some extent already this year, but with the industry heading into a weaker and more uncertain economic environment compared to the late 2010s, industry job losses and factory closures are possible in 2021.
While the general outlook is for economic improvement, and the development of a vaccine certainly fuels that, realistically it will be tentative recovery at first. Clearly some of the hardest hit industries such as travel, hospitality, hotels and tourism still have a long way to go to get back to reasonable health and that will play into the general uncertainty.
In addition, we should consider the effects of the new normal. By the time we’re emerging form the winter, many of the world’s white collar workers will have been working from home for a year or more. Their employers will have seen that commerce can be successfully conducted in this way, and many will be questioning the wisdom of the enormous expense of bricks and mortar offices, often in expensive city center locations. They will also be questioning if all the travel expenses of the past remain necessary if the same results can be achieved with a video call.
Those factors could depress the construction of a variety of non-residential structures, including offices, hotels and airports. That could clearly have bearing on crane sales, and tower cranes in particular.
Chris Sleight is recognized as one of the world’s leading authorities on global construction equipment markets.
He holds an honors degree in civil engineering, and since joining KHL Group in 1997 has edited International Construction and Construction Europe. Following the acquisition of Off-Highway Research by KHL in 2015, he transferred to the market intelligence, forecasting and management consultancy business. He assumed the role of Managing Director of the business unit at the start of 2018.
About Off-Highway Research
Off-Highway Research is a management consultancy specializing in the research and analysis of international construction, and agricultural equipment markets, and is the largest of its kind in the world. The consultancy was formed in 1981 as part of The Economist Intelligence Unit (EIU) and is now part of KHL Group. Off-Highway Research offers a unique level of international research expertise to the construction, earthmoving, mining, industrial and agricultural equipment industries, with offices in the China, Germany, India, Japan the UK and USA.