German construction equipment manufacturers remain cautiously optimistic at the middle of the year. “After a great bauma trade fair in April we are again in the midst of our daily business – which holds a number of challenges and uncertainties,” says Johann Sailer, Chairman of the VDMA Construction Equipment and Building Material Machinery Industry Association.
After six months of 2016, turnover among member companies in the construction machinery sector practically stands at last year’s level, and the tendency for the rest of the year points slightly upwards. These are figures the manufacturers of building material machines would also like to post. “Apart from individual orders in April the sector is still waiting for a demand push. We cannot talk of an upswing here,” says Sailer. Last year’s overall sectoral turnover of Euro 13.3 b – with Euro 9 b for construction equipment and Euro 4.3 b for the building material machinery sector – is likely to be mirrored by the sector in 2016.
Construction Machinery: Growth only in Europe and India
The heterogeneous nature of the markets is once again the determining theme for manufacturers of construction equipment. North America and the Middle East, two of the most important growth markets of the past few years, are seeing drops in machinery sales this year – not least due to the continuing weakness in the oil and gas sector. This is compounded by the still weak markets of Latin America, Africa and large parts of Asia. Formerly the largest market, China is still not back on its feet and will, after five years of recession, have lost close to an accumulated 80% of its volume. In Asia it is only the Indian construction equipment market that is growing, stimulated by increased investments in road building.
The European market looks positive in 2016. Growth drivers are France – where the construction machinery business is benefitting from a special depreciation scheme – and southern European countries. Northern and Western Europe are again stable. The German market stands at a high level and was able to post further growth in 2016. Only Central and Eastern Europe fell short of expectations this year. Constituting a special case is the construction machinery market in Turkey. Due to recently strong growth, questions are being raised about overheating and the danger of a bubble economy. Together with the political instability the Turkish construction machinery market could still see a “hard landing”.
While a drop is anticipated for global construction machinery sales due to regional developments, German manufacturers are confident of a slight turnover increase of 3% at sectoral level. “This is primarily due to the strong European market,” Sailer comments, but makes clear also that growth will not be evenly spread for all manufacturers: “Depending on where a company’s focuses lie individual results could still be on the negative side.”
Building Material Machinery: No Upswing in Sight
The building material plant and machinery business is always subject to less volatility than the construction machinery sector due to its long-term nature. However, manufacturers are dependent on long-term stable growth markets and these are lacking at present. Only Central Europe, India and North America can be rated as satisfactory. It is primarily the breakdown of the immensely important Russian market that causes major problems for manufacturers. Unfortunately, it does not look as if another market could make up for it shortly.
Overcapacities on the customers’ side present a major challenge for manufacturers. This is particularly, though not at all exclusively, true for the cement sector. When it comes to excess capacities, the sector also automatically thinks of China these days: “We don’t expect suppliers from China to flood the market with their equipment but the trend is clear – when domestic markets are weak companies shift to export markets,” says Sailer explaining the increasing competitive pressure from China.
It is fair to say for all sub-sectors that the political and economic uncertainties in many areas are huge and there is growing instability. “We don’t want to just keep talking about crises and many current issues do not even have a direct impact on the construction sector. But obviously, news of this kind always affect the investment climate among our customers,” says Sailer. It is all the more important to stress that the construction equipment and building material machinery industry is indeed a growth sector – and will also be back on track in the emerging markets sooner or later.