German sales on the up

Orders for construction equipment in Germany rose between January and August, and this recovery is set to continue into the New Year, a conference is Germany has heard.

"Orders are finally coming in again," the German Engineering Federation (VDMA) Construction Equipment sector get-together in Frankfurt, Germany, was told by Sebastian Popp, economic expert at the Construction Equipment & Building Material Machinery Association of the VDMA.

From January to August, orders for construction machinery increased by 60% compared to the previous year, with more interest from abroad than from the domestic market.

It was demand for road construction machinery that was the most positive, Popp told the conference, followed by machinery and plant for building construction and earthmoving equipment.

He added that turnover was not yet keeping up with the incoming orders trend, but overall, compared to the previous year, it had already slightly increased again.

At the beginning of the year, the VDMA predicted a slight increase in turnover of 5%. "If the current trend continues up to the end of the year, we will even be well above this level", Popp said. While he predicted that the recovery would continue in 2011, he said that this was not yet a reason for celebration. With the current level of turnover - at best equivalent to the 2005 level - the industry was far from the experiences of the boom period, he said.

The medium-term prospects for the construction machinery industry are good, he said. According to the Global Insight market research institute, worldwide construction volume will increase by about 4% a year from 2009 to 2014. Asia, with an expected growth rate of almost 8% is the driving force, followed by South America.

German exports of construction machinery picked up in the first seven months of this year with an increase of 16% compared to the same period in 2009. The main country for German construction machinery exports is currently France, ahead of the USA and China.

In terms of world export share, Germany currently occupies second place behind the US.

"Despite the crisis, we have maintained our position. That is good news," Popp said. He also added that the market share for German construction machinery manufacturers in South America could, however, be further increased. The sector is treating Brazil as one of the most promising markets in South America. Many German companies are already actively involved in the country at a local level, and an increasing number of firms are planning to follow suit.

The VDMA had picked up the trend and invited Paulo Oscar Auler Neto, chief procurement manager at Construtora Norberto Odebrecht, to the sector get-together. With turnover of US$ 2.65 billion (€ 1.9 billion) and over 79,000 employees, Odebrecht is Brazil's largest and leading construction company.

Mr Auler Neto encouraged German companies to become actively involved in Brazil, but not without pointing out the associated difficulties, such as a dramatically expanding bureaucracy and non-uniform tax laws.

The Brazilian construction machinery association Sobratema expects that sales of construction machines will increase in 2010 by over 24% compared to 2009. This will benefit German export business. In 2009 it supplied construction machinery worth around € 100 million to Brazil and, as a result, was the second most important supplier country after the US, albeit a very long way behind the leaders.