Chinese Construction Machinery Industry Sees Bright Prospects in the Second Half of 2009

www.shcri.com -In the Q2 of 2009, China's real estate market started to recover. From January to June, 2009, the national real estate sales area and sales amount saw a YOY growth of 31.7% and 53.0% respectively. Investment and development in real estate has been rising slightly since May and June. From January to June, 2009, the national real estate development and investment completed 14,505 billion RMB, increasing by 9.9% YOY, and the growth rate exceeded the last year by 3.1%. From January to June, 2009, China's real estate development enterprises developed 2.397 billion? of the construction area, with an increase of 12.7 % YOY, and an increase rate of 1% over January to May; the newly started housing area is 479 million ?, with a decline of 10.4 % YOY, and the declining rate was 5.8 % lower over that from January to May.

The proportion of the real estate investment in fixed asset investment in China is about 24%. It is estimated that there will be a noticeable recovery of China's investment in real estate development in the second half of 2009, thus it will further increase the demand for construction machinery products. But the extent of the pulling function that real estate investment will make on the sub-sector construction machinery industry is different. Concrete machinery and dredge industries will be the two biggest beneficiaries of the real estate investment recovery.

In the first half of 2009, the export of China engineering machinery was badly affected by the appreciation of the RMB and the global financial crisis, and witnessed significant decline in export growth, during January-May, 2009, it declined 40% YOY; that of imports declined by 21% during January-May, 2009. The trade surplus reached 1.2 billion USD.

In the first half of 2009, excavator sales in China fell by 6% YOY, because of the global economic crisis and the slowdown in domestic demand as well as the impact of the real estate industry. Excavator sales in Q4 of 2008 and in Q1 of 2009 declined rapidly. However by the drive of 4 trillion RMB in infrastructure investment, sales began to pick up in Q2 of 2009. In June, 2009, excavator sales had already increased by 18%. And domestic brands such as Sanyi Heavy Industry and Guangxi Liugong Machinery Co., Ltd. rapidly increased their market shares. It is estimated that foreign excavator companies are heavily affected by the global financial crisis, and their overall competitiveness in china had been weaken.

Excavator export sales remain very sluggish, however; in the first half of 2009, export sales fell by 73% YOY. Taking the factors that the main export markets for small excavators is Europe, United States and other developed countries, export markets are affected by the appreciation of RMB as well as the overseas market demand into consideration, the depression in exports will not be greatly improved in the short run.

According to the experience in the international market, based on the complexity of the engineering and the considerations of construction efficiency, the usage of excavator products will become more and more widely.  It is expected that the excavator sales volume in China will steadily increase in the second half of 2009,  as the cumulative effect of the policy and the recovery of the real estate industry,

In the first half of 2009, China's loader sales fell by 33%. In June, 2009, the loader sales declined by 13% while the decline rate was already turning down. Influenced by the global financial crisis, export sales of loaders in China continued its rapid decline in the first half of 2009, going down by 56% YOY, while export growth rate in 2008 was at 77%. The momentum of the rapid export growth of loaders is estimated to be inhibited in the short term, but the proportion of the export market currently only accounts for about 5% of the entire sales. So in the long term, the potential of the export market is still very large. As a result of the driving of 4 trillion investments in infrastructure, it is estimated that loader sales will continue to rise in Q3 and Q4, 2009.  

China bulldozer sales fell by 17% YOY in the first half of 2009; however, in June, 2009, the bulldozer sales fell by 9% YOY. The decline has been gradually stabilized. Influenced by the global economic crisis, the export sales of Chinese bulldozers fell by 52% YOY during the first half of 2009. Chinese bulldozers companies already have a certain degree of competitiveness in overseas markets; the current proportion that exports accounts for the entire sales is around 20%. However suffered from the global financial crisis, the short-term bulldozers export demand will shrink. It is expected that Chinese bulldozers sales will continue to pick-up in the second half of 2009 owing to the driving of the domestic investment in infrastructure in China.

In May and June, 2009, China forklift truck sales volumes fell by 25% and 17% YOY respectively, with a decrease of 19% during the first half of 2009. With the rebound of macro-economic, it is expected that in the second half of 2009 China's forklift sales will be picked up.

In May and June, 2009, the Chinese concrete machinery sales volumes increased by 20% and 46% YOY respectively. With the start-up of a large number of China's high-speed railway construction projects, the market demand for concrete machinery in China rebounded sharply. As a result of the pulling of investment in infrastructure, as well as the driving of the real estate industry, it is expected the concrete machinery sales will be in a rapid recovery in the second half of 2009. In the long run, along with China's urbanization process and the continuous advance of the promotion of ready-mixed concrete, the application of concrete machinery will continue to be promoted. It is expected that the construction machinery industry will be one of the highlights in China’s machinery industry in the long run.

More information can be found:

http://www.shcri.com/reportdetail.asp?id=274

http://www.shcri.com/reportdetail.asp?id=216

Source: China Research and Intelligence

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