After six years of growth in a row, the German construction equipment and building material machinery industry expects to see an end to the construction boom in 2009. “We see a slump with regard to incoming orders already today which indicates that the construction equipment sector is to face serious setbacks in the nearer future,” said Dr Christof Kemmann, chairman of the Federation’s association representing the construction equipment and building material machinery industry, at its members’ meeting at the beginning of November 2008 in Karlsruhe. “But we are well prepared to take a decline.”
Currently the industry is experiencing growth. During the first nine months of 2008, sales of the entire German construction equipment and building material machinery industry increased again compared to the same period last year. This is particularly due to the development in the building material machinery industry.
In comparison, there were a lot less incoming orders for construction machinery during the same period of time – and this is true for all segments of construction machinery. On average, one third less orders were placed than at the same time last year. This particularly applies to manufacturers of tower cranes, concrete technology and construction devices, but also manufacturer of standard machinery such as excavators and loaders are affected. Construction material machinery, on the contrary, still saw an increase in incoming orders by 7 %.
Thanks to the bulk orders in the cement sector, the industry’s association is able to even slightly exceed its forecast of 8.2 % growth for the entire industry for this year. The association now expects a growth in turnover of 8.6 % to 16.6 bn. 7. Mr Kemmann stressed that, however, these figures should not blind anybody to the fact that the current situation with regard to incoming orders is to be taken seriously.
Export flourishing – Competition from China increasing
Exportation is crucial for the industry. During the first nine months of this year, construction equipment and building material machinery worth nearly 8 bn. 7 was sold abroad. This is about 16 % more than at the same time in the previous year. With a 68 % export quota, Europe is the biggest sales market. “We were able to participate proportionally at this growth, while countries such as the USA, Japan and Great Britain lost market shares to other competitors – the Chinese in particular,” Mr. Kemmann noticed. Chinese companies were able to expand their global export activities significantly during the past five years and, with this, their global market share grew from 2 to 6 % during this period of time also. Chinese companies export particularly to Africa, Latin America and the Middle East and are currently trying to gain a foothold in Russia. According to Mr. Kemmann, though, they have not yet been successful in gaining a considerable market share in Europe as well as in North America.
Decline – albeit on a very high level
The general economic situation shows obvious signs of weakness. The Federation’s association representing the construction equipment and building machinery industry therefore expects a decline in turnover for the entire industry in 2009 of 4.6 % to about 15.8 bn. 7. 10.7 bn. 7 (loss of 7.5 %) of this for construction equipment and 5.1 bn. 7 (increase of 2.2 %) for building material machinery.
This forecast 2009 is based on the following assumptions:
» Companies are currently experiencing a volume of orders which is much above average, even though cancellations of orders for construction machinery have been happening. For the entire industry, lead times have already become more normal.
» The raw material processing as well as the building material machinery sector are less, or currently even not at all, affected by changes than the construction machinery industry.
» Exchange rates are offsetting some disadvantages which German companies are facing. The European industry is currently enjoying a competitive advantage when it comes to prices due to the decreased Euro compared to the revalued US Dollar, the Yen and the Won.
» Construction projects in the infrastructure area will remain stable globally, as these projects are generally all signed and sealed already at this point in time. The association expects that some countries, such as German for instance, will even drive these projects further now, especially to stimulate the economy.
» Global demand for house building, for private and commercial use alike, particularly in the emerging nations, will stay as big as before.
Positive change in two years’ time at the earliest
In total, Mr Kemmann expects a period of restrictive financing which will have negative effects on the industry’s business. How long this phase is likely to last, nobody currently knows, according to him. It will largely depend on if, how and when the instruments chosen and implemented by politics to fight the financial crises will be successful. Recession in important construction markets such as the USA, Spain, Great Britain and France are already causing the industry quite a bit of trouble. According to the association’s relevant experts, a positive change in the economic situation can be expected in the second half of 2010 at the earliest.
Dampening effect: Lack of engineers
Recruiting qualified staff is difficult for the construction equipment and building material machinery industry which mainly consists of middle-sized companies. They also think that the end of the boom, which is now clearly to be seen, will not solve the problem either. According to the survey, innovation and quality awareness are the strenghts of the industry and make for its good market position. The industry needs qualified skilled workers and engineers in order to keep and defend this position in future. Mr Kemmann reports that the association he represents, embedded into some other activities by the German Engineering Federation, started a “Young Staff-Initiative”. The aim of this being to show young people the various carreer opportunities this specific industry has to offer as well as promote the industry as an attractive employer.
Plagiarism threatens competitiveness
Product piracy threatens the competitiveness of the construction equipment and building material machinery industry. According to a survey carried out by the German Engineering Federation in April 2008, the entire industry has suffered a loss in sales of 7 bn. 7 per year due to counterfeiting and piracy. In this context, the German Engineering Federation will go via its offices in Berlin and Brussels more to make the German government and the European Union act against product piracy more determinedly. The China IPR SME Helpdesk, which the German Engineering Federation had asked for for years, is a big achievement and a success. It was implemented in May 2008 and has been a point of contact for all companies affected by plagiarism in the region. With its campaign “Pro Original”, the companies belonging to the machinery industry inform their potential clients to make them appreciate the added value of using original technology and help them to see the risks in using copied products.