In the first 7 months of 2018, sales of all kinds of construction machinery were rising, all year round. But how long can this boom take place? Through the analysis of several research institutions, it is concluded that the sales volume of construction machinery will increase steadily in the next three years due to the good factors such as inventory renewal, new equipment demand and enterprise development.
Research data show that 80% of the future demand for construction machinery industry is due to equipment upgrades and upgrades, which is relatively robust and downside risk is small.
Generally speaking, the life cycle of construction machinery products is 8-10 years, the last round of sales peak concentrated around 2011, 2017-2019 is the construction machinery equipment into the phase of elimination and update iteration peak. According to statistics, at present, the market of construction machinery industry has more than 7 million sets, and about 2.4 million old equipment is facing elimination, which provides market space for new machine sales and further stimulates industry demand.
At the same time, whether national or local environmental protection requirements are becoming increasingly stringent, most of the existing equipment in the market belongs to the second and third national emissions, even if less than the age of aircraft may be forbidden because of environmental considerations. Therefore, two aspects of environmental protection policy and age have further expanded the demand for upgrading of construction machinery.
Policy driven infrastructure investment is expected to rebound
In the first half of 2018, China's fixed assets investment grew by 6%, infrastructure investment increased by 7.3% year-on-year, the growth rate was significantly lower than expected, which also affected the overall development of China's economy to a certain extent. Therefore, in late July, both the State Council meeting and the Political Bureau meeting put forward the development keynote of "guaranteeing infrastructure and promoting investment". More active fiscal policy and PPP project investment warming, coupled with loose monetary policy, all aspects of the protection of the smooth progress of infrastructure projects, but also ease investors'worries about slowing industry growth.
Based on years of development experience, China's construction machinery sales and investment in fixed assets are positively correlated. It is expected that with various infrastructure projects landed in September, the construction machinery industry will bring real sales increase.
Mechanical replacement of construction machinery continues to improve permeability
In recent years, with the aging of China's population, labor shortage, labor costs have increased significantly, the trend of mechanical replacement is obvious. Previously, China's rural market, such as road expansion, farmland construction and water conservancy facilities, basically rely on labor, but now the lack of young rural labor force, and most young people are seldom willing to do this job, labor costs soared, giving birth to the trend of mechanical replacement of labor. In the past, China's Excavator per capita is relatively low, and the penetration of construction machinery in the future is expected to continue to improve. Moreover, not only in the field of construction machinery, the trend of mechanical substitution in various industrial fields is very obvious.
Recovery of mining investment provides new growth power
After the 2008 financial crisis, the global economic growth stall led to the downward demand for mineral resources, and the global mining industry as a whole showed a trend of stagnant growth, declining investment and clear capacity. Since 2017, the global mining industry has been showing a trend of warmer growth.
Taking the data of the first half of 2018 as an example, from January to June, the value-added of industries above the national scale increased by 6.7% year-on-year. Among them, the added value of mining industry grew by 1.6% compared with the same period last year, an increase of 0. 3 percentage point; investment in mining industry increased from 0.2% to a year earlier.
The recovery of mining industry is of great significance to the demand for mining equipment. Before, mining equipment has been monopolized by foreign enterprises such as Carter and Komatsu. In recent years, with the development of domestic construction machinery, the competitiveness of mining equipment produced by Xugong, Sanyi and other construction machinery enterprises has been continuously improved, and the door of mining machinery market has been torn open, which is conducive to the entry of domestic equipment.
Comprehensive strength promotes steady growth of exports
The improvement of the overall level of China's construction machinery industry has not only increased the share of the domestic market, but also achieved remarkable results in opening up overseas markets. In the development of overseas markets, the countries along the belt have become the most important target market for construction machinery enterprises in China. In the past five years, the construction of China's construction machinery and equipment has been frequently seen in the construction of international railways, such as the Sino Lao railway, the Zhongtai railway, the Hungarian railway and the Ya Wan high speed railway. Moreover, the urbanization rate of the emerging markets represented by India is low, the infrastructure construction is poor, and the demand for construction machinery is large, which is more conducive to the export of construction machinery in China. It is reported that Xugong's overseas income is 72% and 31 of its overseas income comes from 70% countries along the route.
Business is more cautious and tighter.
It is hard to forget the warning. Due to the cold winter of the industry as long as five years, even if the industry situation is hot again, China's construction machinery enterprises are still cautious in production, sales and industry forecast.
In the first half of 2018, China's excavator sales increased by 60%, loader sales increased by 33%, truck crane sales increased by 74%. Instead of blindly increasing production capacity, most enterprises in the industry have begun to focus on strengthening cash management, purifying high-quality customers, and the production and sales of long-lasting streams of water can also help reduce profit margin contraction and the risk of accounts receivable.
To sum up, based on the assumption that the domestic economy is running smoothly and continuously transforming and upgrading, China's construction machinery industry will not decline sharply in the next three years at least, and can maintain stable growth.