On the way up
11 April 2017
Global sales of construction equipment are expected to increase 8% this year, according to updated forecasts from Off-Highway Research. The number of machines sold in 2017 is expected to reach 704,140 units worldwide, compared with the 650,133 pieces of equipment sold in 2016.
Sales of construction equipment last year were affected by weak economic growth worldwide and low commodities prices. These factors affected demand for most types of machinery, particularly equipment used in mining. However, with commodity prices rising as 2016 went on, sales picked up in a number of key markets.
This year, growth is expected to return to the Chinese market, which bottomed-out in 2016 after five years of steeply falling sales. However, even with the 13% rise in sales forecast for 2017, demand in China will still only be some 30% of 2010 and 2011. Having said that, the rise in crawler excavator sales in the first few months of the year has been striking, and the recovery in equipment sales is being driven by significant infrastructure investments from the Chinese government.
Meanwhile, the robust Indian market is forecast to go from strength to strength. Equipment sales grew a remarkable 40% last year thanks to increased investment and a pick-up in project implementation in the country’s infrastructure market. This is expected to drive consistent and steady growth in Indian construction equipment sales for the next five years, and as the industry matures India could emerge as a significant regional manufacturing hub.
The European construction equipment market enjoyed a fourth consecutive year of growth in 2016, with sales rising 10% to almost 141,000 units. This was the highest level the market has achieved since the global financial crisis of the late 2000s.
Most countries in Europe saw an increase in equipment sales last year, the exceptions being Ireland, the Netherlands and the UK. On the positive side, strong growth in the four other major markets of France, Germany and Italy more than offset these losses. The resurgence in Germany saw it overtake the UK once again as Europe’s largest equipment market, with a near record number of construction machines being sold.
However, other developed markets around the world were poor. Construction machinery demand in North America fell 9% last year, following on from the 2% decline seen in 2015. This was attributed to two key factors – uncertainty in the run-up to the November 2016 presidential election, and the weakness of global commodity prices, which had a knock-on effect for sales of mining equipment and economic activity in general.
The election of Donald Trump as president has been seen as a positive for the construction equipment market. He positions himself as a pro-business president and has also put a strong emphasis on infrastructure spending in his campaign and policy statements. It of course remains to be seen what investment can be delivered and over what timeframe.
Meanwhile, the Japanese construction equipment market took a hard knock in 2016, with sales falling 20% to 59,700 units. This was the result of the unwinding of two positive drivers for the industry. Reconstruction work following the 2011 Tohoku earthquake and tsunami came to an end, the benefits of ‘Abenomics’ including stimulus spending and monetary easing, had run their course, having been introduced in 2012.
The long-term outlook for the global equipment market is for a period of moderate growth, which should see sales rise from the low point of 650,133 units in 2016 to around 810,000 machines being sold in 2020 and 2021 – a 25% increase in total.
In value terms, the market is expected to rise 28% over the same period, with sales increasing from $69.8 billion in 2016 to $89.3 billion in 2020. This reflects an expected resurgence in some higher value types of equipment over the coming years, monotably crawler excavators and rigid dump trucks.