Machinery / Industrial Parts & Tools

On November 7, China Construction Machinery Industry Association released the sales express of main products in the construction machinery industry in October 2022. According to the statistics of the Association on 26 excavator manufacturers, 20501 excavators of all kinds were sold in October, up 8.1% year on year.

Driven by the policy of stable growth, the domestic infrastructure operation rate rebounded, and the international trade market demand increased. After entering the third quarter, China's construction machinery sales resumed positive growth. Lv Ying, deputy secretary-general of China Construction Machinery Industry Association, said that in the past four months, the sales data of the construction machinery industry has gradually improved, and the supporting role of the domestic construction machinery industry chain on the world construction machinery industry chain has been further enhanced. Looking forward to the fourth quarter, the construction machinery industry is expected to continue to recover, but whether the inflection point has been formed remains to be seen.

The market is gradually warming up

In the first half of this year, the demand for construction machinery, such as excavators, was under short-term pressure due to the downward trend of infrastructure construction. However, after entering the third quarter, marginal improvement was welcomed.

In October, China Construction Machinery Industry Association made statistics on 26 excavator manufacturers, and sold 20501 excavators of all kinds, up 8.1% year on year, including 11350 domestic excavators, down 9.91% year on year; 9151 sets were exported, up 43.8% year on year. Statistics of 22 loader manufacturers show that 9448 loaders of all types will be sold in October 2022, with a year-on-year growth of 1.85%. The sales volume in the domestic market was 6304, down 5.98% year on year; The export sales volume was 3144, up 22.3% year on year.

"Construction machinery has resumed positive growth, driven by multiple factors, among which the national policy of stabilizing growth has played a great role." Lv Ying said that since this year, the country has introduced several policies to stabilize growth, which has played a key supporting role in promoting the development of the entire industry.

From the supply side, the upstream of the construction machinery industry mainly includes steel, hydraulic parts, engines and other raw materials and core components. The price fluctuation of steel and other raw materials directly affects the production cost of construction machinery. In the first half of the year, the overall steel price showed a trend of "soaring and falling", which helped to improve the efficiency of construction machinery manufacturing enterprises and their enthusiasm for production.

From the demand side, the construction machinery industry is greatly affected by downstream infrastructure, real estate construction, coal mining, etc. In the first half of the year, many projects were delayed due to the frequent occurrence of the COVID-19 and high temperature power rationing in many places.

After the third quarter, China's infrastructure investment accelerated. The "CCTV Finance Excavator Index" jointly created by CCTV Finance, Sany Heavy Industry and Shugen Internet shows that the operating rate of various types of machinery and equipment remained at a high level in the third quarter. The average monthly operating rate of construction machinery in the third quarter was 64.76%, higher than 53.98% of the average monthly operating rate in the first quarter.

"After entering the second half of the year, many enterprises began to rush to ensure the completion of the whole year's construction progress." Yuan Xuezheng, a researcher at the Mechanic Think Tank, said that although the external environment of construction machinery this year is not as good as last year, there are still some positive factors. For example, the expansion of investment in the mechanical and electrical industry, the increase of overseas market demand, and the demand for upgrading brought by environmental protection and technology have all boosted the sales of construction machinery.

Export sales exceed domestic sales

On October 25, Sany Heavy Industry announced that from January to September, the company achieved an international sales revenue of 25.88 billion yuan, a significant year-on-year increase of 43.7%, 10.8 percentage points faster than the first half of the year. Among them, the sales revenue in Asia and Australia reached 11.595 billion yuan, up 52.3%; The sales revenue in Europe reached 7.517 billion yuan, up 26.5%; The sales revenue in the Americas reached 4.846 billion yuan, up 63.5%; The sales revenue in Africa reached 1.92 billion yuan, up 29%.

The person in charge of Sany Heavy Industry said that the global market share of Sany Mining Machinery has rapidly increased, and the market share of international trade has exceeded 8%; In the United States, the United Kingdom, Italy, Brazil, Canada and other overseas mining machinery markets, sales revenue has achieved a rapid growth of more than 60%.

Another leading construction machinery enterprise, XCMG, also adheres to the international strategy. XCMG's products cover a wide range of global export sales, with international revenue accounting for more than 50%.

"The share of the international trade market of domestic construction machinery enterprises has been much higher than that of two years ago." Yuan Xuezheng also said that exports had largely smoothed the domestic cycle when domestic demand was not particularly booming.

Since the third quarter, construction machinery as a whole has been able to return to positive growth, and export growth has indeed played an important role. In the first nine months of this year, the export sales volume of excavators in China was 80,000 units, with a year-on-year growth of 70.5%. In September, the export sales volume of excavators exceeded the domestic sales volume for the first time, accounting for 50.35%.

"The situation that exports exceed domestic sales is unprecedented in many years." Lv Ying said that according to the customs statistics, the export volume of construction machinery in July, August and September this year continued to exceed 4 billion dollars.

In the past, there was a strong brand inertia in the international construction machinery market. International brands have been deeply cultivated in some regional markets for many years, and it is difficult for domestic enterprises to enter the main markets. But this pattern is changing. At present, many foreign construction machinery enterprises are faced with problems such as uncontrollable production costs, incomplete industrial chains, long supply cycles, and difficult shipping. The supply of products is greatly reduced, giving Chinese construction machinery enterprises the opportunity to expand the international market.

Yuan Xuezheng believes that the demand of foreign markets does exist, but the export growth is mainly due to the active layout of domestic leading enterprises in technology research and development, industrial chain and international markets. China's construction machinery enterprises have advantages in electrification and digitalization, strong industrial toughness and high cost performance ratio, effectively seizing the opportunity to enter the international market.

"The supporting role of the domestic industry chain to the international construction machinery industry chain is prominent." Lv Ying said that the export volume increased not only for the whole machine, but also for parts and components.

Take Brazil as an example. In the past, it ranked in the top ten in China's construction machinery export market and entered the top ten in the third quarter. Nearly half of its imported construction machinery products are spare parts. The "whole" and "zero" export has enabled domestic construction machinery enterprises to achieve leapfrog development in non-traditional advantageous markets.

Lv Ying said that if the export volume of domestic construction machinery can achieve sustainable growth, it will contribute to the reconstruction of the international market pattern of the entire construction machinery.

Stable growth expected

On November 4, Liugong's full range of Guosi products appeared at the commencement ceremony of Liugong's Central China Industrial Base Project and Liugong's comprehensive solution conference. It is reported that at present, Liugong has completed the "National Fourth" environmental protection filing of 28 loaders, 31 excavators, more than 10 bulldozers, graders and other engineering machinery and equipment.

Since December 1, the construction machinery industry will officially enter the era of "National IV" emission standards. How will it affect the sales of construction machinery industry in the short term?

"Although the previous two emission standard upgrades did bring big fluctuations, this time is not necessarily the case." Lv Ying said that the whole market's expectations for upgrading environmental protection emissions have changed, and the impact of the new emission standards may not be great.

Referring to the trend of electrification and intelligence of construction machinery, Lv Ying believes that China has great advantages in relevant fields. But in the long run, there are still some technical and service difficulties to overcome. In the future, with the accumulation of enterprise technology, electric construction machinery is expected to achieve accelerated development in the next two to four years.

Looking into the future, as a strong cyclical industry, does this round of performance recovery mean that the cycle has gradually bottomed out?

"The situation of the whole construction machinery industry is improving, but the specific extent of improvement still needs further observation." Yuan Xuezheng believes that at present, the domestic market and the international market are in different industry cycles. The main role of export is to smooth the domestic cycle through the international market. In the future, China's construction machinery will continue to increase its share in the global market. At the same time, with the end of the industry bottoming, the sales volume of the construction machinery industry will rise. The domestic demand still exists, and whether the export will become the main support in the future is still unknown. It is believed that with the gradual going out of China's equipment and the continuous expansion of the international trade market, the pattern of the two major domestic and international markets will be gradually established.

Lv Ying said frankly that the sales volume in the fourth quarter is unlikely to change dramatically. Although the sales volume of some products may recover, the quantity and scale will not be too large. In terms of exports, international trade enterprises should be alert to the negative impact of the recent sharp US dollar interest rate hike on the demand for construction machinery in some countries. They should combine the new changes after the recovery of the domestic market, comprehensively study and judge, and reasonably adjust the production capacity.