UK markets closed
  • FTSE 100

    -49.17 (-0.60%)
  • FTSE 250

    -166.48 (-0.78%)
  • AIM

    -3.54 (-0.45%)

    -0.0008 (-0.07%)

    -0.0026 (-0.20%)
  • Bitcoin GBP

    +2,126.12 (+4.32%)
  • CMC Crypto 200

    +36.26 (+2.72%)
  • S&P 500

    -25.02 (-0.45%)
  • DOW

    -316.43 (-0.78%)

    -1.48 (-1.79%)

    -50.30 (-2.05%)
  • NIKKEI 225

    -62.56 (-0.16%)

    -360.73 (-2.03%)
  • DAX

    -182.83 (-1.00%)
  • CAC 40

    -52.03 (-0.69%)

Construction machine makers brace for weaker China sales as economy slows

By Brenda Goh

SHANGHAI (Reuters) - China's construction equipment industry is bracing for a decline in sales in 2019 after two years of rapid growth, as work slows on new projects and firms replace fewer old diggers and cranes, executives at an industry event in Shanghai said this week.

China is likely to see sales of excavators, loaders and dump trucks — proxies for the country's infrastructure and building sectors — fall 7-8 percent next year, down from 30 percent growth in 2018, data from consultancy Off-Highway Research show.

The expected downturn in demand underscores a major challenge facing Beijing even as it looks to fast-track infrastructure projects to support economic growth, which has cooled to its slowest pace since the global financial crisis and is facing mounting pressure from U.S. tariffs.


Many economists believe business conditions in China will get worse before they get better, noting recent government stimulus measures will take some time to be felt.

"There are a number of uncertainties (in 2019), be it in relation to the global economy or world trade," Lu Chuan, president of XCMG Construction Machinery Co Ltd <000425.SZ>, said on the sidelines of the biennial Bauma China fair.

Industry executives said there were signs that growth had peaked and that customers were turning more cautious, a concern for firms from Caterpillar Inc <CAT.N> to local rival Zoomlion <000157.SZ> and Japan's Komatsu Ltd <6301.T> in the world's largest market for construction equipment by unit sales.

Melker Jernberg, president of Volvo Group's <VOLVb.ST> construction equipment unit, said the Swedish firm anticipated 2019 sales would be in line with this year or a "little bit lower".

"Those are still good levels," he said. "But there is insecurity. It's a lot of wondering about what is happening now, how many projects will they start in infrastructure?"

GRAPHIC: Bulldozed in China:


The industry's recent sharp growth came on the back of a five-year-long downturn that began with a collapse in commodity prices in 2011. Unit sales rose 81 percent in 2017 and are set to grow almost a third this year, Off-Highway Research said.

However, China's multi-year clampdown on debt and pollution has seen fixed-asset investment growth -- a key gauge of future activity -- fall to record lows this year, a trend that policymakers are now scrambling to reverse.

While more road, rail and airport projects are getting the greenlight to proceed, analysts note their backers will still need to secure funding before construction can begin.

Companies like Sany Heavy Industry <600031.SS>, XCMG and Volvo CE have started investing in technologies such as artificial intelligence and electrification to try and get an edge over their competitors.

U.S.-based Caterpillar, the world's largest equipment maker, was also among those showcasing its newest technologies at its display at Bauma China, which marked its first return to the Shanghai show since it last exhibited in 2012.

"We expect a continued strong market in China moving forward, with all the focus on infrastructure," Tom Pellete, Caterpillar's group president of construction industries told reporters at the event, though admitted the market could slow.

"(Growth) can't double every year forever."

(Reporting by Brenda Goh; Editing by Adam Jourdan and Kim Coghill)