By Dong Yaguang
With the recovery of national economy, the prosperity degree in construction machinery industry has showed an active change. Viewed from sale, the sales volume in construction machinery industry from January to August continued to improve year on year, and the export presented the evidence of bottom-hitting; viewed from industrial development, all favorable factors, such as the adjustment of industrial structure, the continuing promotion of technical innovation and the rapid growth of domestic investment, will become the important factors of the continuing recovery of construction machinery industry in the fourth quarter.
In accordance with statistics, the aggregated sales volume of the major products in construction machinery industry is listed as follows: 17,826 sets of auto cranes, up 10.7 percent year on year; 60,856 sets of hydraulic excavators, which equals the number of the same period last year; 5,420 sets of bulldozers, decreasing 15.8 percent; 9,317 sets of loaders, decreasing 29.1 percent; 83,372 sets of fork trucks, decreasing 32.6 percent year on year.
In terms of export, the import turnover of construction machinery from January to July is US$2.77 billion, falling 20.9 percent year on year; the export turnover is US$4.37 billion, declining 43.1 percent. The decreasing amplitude of complete machine export is more than that of overall export.
We believe that construction machinery industry will keep going well in the fourth quarter based on the following factors:
Firstly, continuing promotion of structural adjustment. Nowadays, China has started to attach great importance to energy conservation and emission reduction of the engines of construction machinery, the technology development is inclined to environment protection and humanity, and the industrial upgrade in construction machinery industry has accelerated. For such road running construction machinery as auto cranes and pump trucks, National III Emission Standard has been implemented on all of their engines; however, the emission standard on the engines for such non-road running mobile machinery as excavators, loaders, bulldozers and road rollers has not yet been integrated with the international standard. Based on the current technical level, China's emission control technology on road running vehicles can be transplanted on non-road running machinery.
The expansion orientation for new products in construction machinery industry is mainly concentrated on such three aspects as maximization, minimization and new functions. Large equipments are mainly for meeting the demand of large project's construction development; small equipments are mainly applied in such fields as municipal construction and maintenance; with the alteration of construction modes, those products in construction machinery industry with brand new functions have been put into use in a large scale. The continuing launch of new products will meet market demand to a larger extent. Additionally, the design of construction machinery is more human oriented, and more attention is paid to the mainstream products in terms of handleability, security, comfort and beautiful appearance.
Secondly, the investment keeps a rapid growth. The demand character in construction machinery in the first eight months of this year is that the demand at home is stronger than that overseas. It is closely related to domestic highly increasing investment on fixed assets. From January to August of this year, the investment on China's urban fixed assets has increased by 33 percent. We believe that the investment on infrastructure construction will still keep a rapid growth in the fourth quarter. The investment on the special line for passenger trains to be constructed in the second half of 2009 is RMB1 trillion yuan, far higher than that in the fourth quarter of 2008 and the first half of 2009 (about RMB650 billion yuan), which means the investment on railways will keep a rapid growth in the fourth quarter.
Thirdly, it is expected that the export order volume will recover. Over 70 percent of China's construction machinery is exported to developing countries; therefore, the economy and investment circumstance of developing countries will have a great impact on China's export. Currently, the economy of part of developing countries is improving. Some domestic enterprises have reflected that the demand intention of overseas clients has begun increase, accordingly, we have a positive estimation that the export order volume may recover in the last ten-day of November.
Fourthly, the hovering at the low price of steel is helpful to stabilize the profitability. The direct cost on steel takes up 20 to 30 percent of the cost on construction machinery products, and the variation of steel price will also impact the price on such bought-in components as diesel engines. Therefore, the low steel price, especially the low price of medium plates, will help to improve the profitability of those enterprises in construction machinery. At present, the average price of medium plates has decreased over 30 percent than that in 2008. As the phase of overmuch capacity in steel industry has not yet been improved, it is estimated that the steel price on the fourth quarter will not increase greatly, and its impact on the cost of construction machinery will not be great.
In accordance with current industrial development, we figure that the overall demand in the fourth quarter on construction machinery at home and abroad will not glide obviously and likely maintain a level close to that in the third quarter.
The author is an analyst from Sinolink Securities majoring in machinery industry
