VDMA: Construction equipment and building material machinery on right track

Even at the middle of the year, the German manufacturers of construction equipment and building material machinery are still expecting to generate a growth of 5 per cent throughout 2014. In 2013, sales for the entire industry equaled 11.7 billion Euros.

“This forecast is, however, based on several different backgrounds“, Sebastian Popp, VDMA’s expert on economics explains the situation. While the business in construction equipment has livened up throughout the year and is growing in most areas of the world, the growth in turnover with regard to building material machinery can only be explained by orders that have already been placed last year and are now being implemented.

Different situation with incoming orders

With construction equipment, the amount of incoming orders has seen an increase of 9 per cent. Demand in earth moving and road construction machinery thereby is much stronger than with building construction machines.

With regard to building material machinery, the amount of incoming orders is currently about 30 per cent lower than last year’s. Popp knows, “This can be seen mainly as a statistical effect”. In the cement field, figures went up immensely in 2013 due to some big orders. These stimuli are currently missing. With figures for machinery and plants in the cement field taken off, the industry has seen a plus of 20 per cent in incoming orders. However, with customers being extremely heterogeneous, it is not possible to derive a trend from this.

German market in friendly mood

In the first five months of this year, manufacturers in Germany sold nearly 14 per cent more in construction equipment than at the same time last year. However, this growth is likely to slow down and should be around 5 per cent by the end of the year. Due to the mild winter, all work has been finished on all construction sites. As a consequence: there is no more work waiting for some individual construction companies – despite the order situation remaining the same.

Russian market weakening

For the first time in a number of years, the European market is likely to grow again – which should also help to weaken the extreme discrepancy between the North and the South. Of all high volume markets, the UK is currently seeing the most significant growth.

German manufacturers are noticing a strong decline in Russia. This can only in parts be explained by the current political situation. Besides a cyclical downturn in the construction equipment and building material machinery industry in Russia, the collapse of the rouble is weakening the market in particular. In relation to this, German manufacturers are currently observing a trend towards a “low cost”-segment. Companies from China, and increasingly also Korea, in particular profit from this trend. However, despite these developments, especially Russia remains an important foreign market for manufacturers of construction material.

World market extremely heterogeneous

Again this year, China does not qualify as a market of growth. Since 2011, turnover in construction machinery has gone down by more than 40 per cent (accumulated). “This year, it will probably go down even further”, Popp forecasts. Main reasons are the enormous excess capacities and young machine fleets in the market, as well as difficulties with financing projects and machinery. The Indian market is remaining weak at the moment. With a new government now having been established, all hopes of the industry focus on 2015 and 2016. South East Asian markets are presenting themselves as mainly stable. In the Middle East, the construction equipment and building material market is still growing immensely. It is Saudi Arabia that is currently particularly convincing. The Northern American market is very likely to recover further – due to residential building – also this year. The countries of Latin America do not on the whole fulfill the expectations set in them. Especially in Brazil the major sport events do not improve sustainably the developments in any construction-related sectors.

VDMA
Fachverband Bau- und Baustoffmaschinen
www.vdma.org