Gulf Construction Online - Demand rises for building machinery

Germany & The Mideast

German machinery ... sought after in the region.

Demand rises for building machinery

The outlook for the construction equipment sector is positive, given the encouraging trends in order uptake, says the Association for Construction Equipment and Building Material Machinery, a part of the German Engineering Federation VDMA (Verband Deutscher Maschinen-und Anlagenbau).

01 March 2011

THE German construction equipment and building material machinery industry saw a growth of 13 per cent, registering a turnover of €10.6 billion ($14.55 billion) last year. Exports were worth €7.71 billion ($10.62 billion) in 2010 compared to €6.64 billion ($9.15 billion) in the previous year with the country’s sales to the Middle East following the uptrend.

Exports to the Middle East region hit €606.23 million ($834.85 million) in 2010 compared to €588.95 million ($811.09 million) in 2009.

The current increase in exports has all come from non-European markets. In addition to the Middle East, it’s China and India in particular – where the economies are booming – but also the Far East and Brazil that are setting the trends. Russia, the most important market of the industry at Germany’s doorstep, although having an enormous demand, is currently adopting a wait-and-see approach. Demand within the industrialised countries is still cautious and likely to remain so this mid-term, according to experts. Times when Europe, North America and Japan together made two thirds of the international demand of construction machinery are over.

Today, nearly every second construction machinery being produced worldwide is sold to China.

Of the sector’s total turnover, the construction machinery sector accounted for €6.3 billion ($8.64 billion), whereas €4.3 billion ($5.90 billion) were made in the construction equipment, glass and ceramics machinery sectors. Germany is expecting a growth of another 10 per cent in both areas for the current year.

As a whole, 2010 proved to be better than anticipated by companies. Differences were significant, however, when comparing the different segments with each other. Whereas sales in earthmoving machinery grew by 25 per cent and 38 per cent in road building machinery, things did not go too well for the concrete technology and building construction machinery sectors, with the latter having to deal with a 10 per cent decrease in sales. Manufacturers of building material machinery also saw a growth in turnover, albeit by one per cent only.

However, with regard to incoming orders, prospects are very encouraging. During the second half of last year, demand grew significantly in all areas. Manufacturers of construction equipment currently have 56 per cent more incoming orders, whereas those in building material machinery see a 34 per cent increase compared to the same period of 2010.

Capacity utilisation also developed positively. On average, it is at about 80 per cent for the entire industry. The fact that most companies kept their regular staff during the crisis is now of big advantage. The only slowing down factor to these positive trends is the supplying industry.

Some components see lead times of 25 to up to 32 weeks. Some manufacturers in the construction machinery industry already fear not being able to fulfil some of their orders. In addition to some components being in short supply, the high prices of raw materials – particularly steel and natural rubber – have a serious impact on the construction machinery manufacturers.

Shift in markets
Given the shift in markets, companies are now working more internationally and, at the same time, more locally in booming regions. “It’s not enough to offer sales activities only,” says Klaus Beer, managing director of Hazemag, for instance. “You also have to produce where the markets are.”

Dülmen-based Hazemag, a medium-sized manufacturer of building material machinery, has production sites in China, North and South Africa and is currently opening a productions site in Brazil. This company is not alone. Statistics on foreign trade and export quota are one indication of how broadly international the German construction equipment and building material machinery sector has already become.

Companies and clients worldwide will also have to meet several challenges from 2011 onwards, including changing markets and high environmental standards, such as the new exhaust standards, which have to be met especially by mobile machinery to be used in Europe and North America, for instance. The next exhaust level 3b for mobile machinery will come into force as of this spring.

Furthermore, a wide range of new models will enter the European market after companies have carried out long time- and cost-intensive developments.

Manufacturers are, therefore, expecting some of their clients to move investments forward and are now opting for ultra-modern and environment-friendly machines.

With 3,000 members, the VDMA is the biggest industry association within Europe and supports and represents the interests of about 300 companies which manufacture machinery and plants to be used in the construction, building material, natural stone, ceramics and glass industry.

Link for the Germany's export destinations Unit: