Construction equipment market booms with economic recovery
The construction equipment market is growing fast as countries rev up plant and facility investment.
Doosan Infracore, Korea’s largest construction equipment maker, was able to increase the utilization rate of its factory in Yantai, China by 200 percent this year. The Yantai plant is even open on weekends in order to cover orders. The utilization rate of its domestic factories are also on the verge of reaching record highs.
“Now we have to worry about sourcing parts,” said a spokesperson for Doosan Infracore. “Our procurement team is extremely busy.”
The construction equipment industry performed poorly last year due to the coronavirus pandemic, which forced companies to postpone investment plans. But the industry is recently thriving due to the influx of contracts from foreign countries.
Doosan Infracore sold 4,591 excavators in China last month, an all-time monthly sales record since it first entered the Chinese market in 1994.
On April 25, the company signed a contract with a Qatari-based construction company to supply 102 excavators, the largest contract the company has won from a single customer in Qatar.
Hyundai Construction Equipment signed a deal to supply a total of 104 pieces of construction equipment to Qatar and Colombia including 56 excavators and 40 backhoe loaders.
Strong sales translated into strong first quarter results.
Hyundai Construction Equipment's net profit for the first quarter rose 4,850 percent on year to 59.4 billion won ($53.6 million). The company's operating profit and revenue both hit an all-time highs, the former 79.7 billion won and the latter 964 billion won, up 664.9 percent and 51.6 percent on year, respectively.
Doosan Infracore posted 187.2 billion won of net profit in the first quarter, up 151 percent from the same period last year. Revenue increased 23.8 percent to 2.49 trillion won, a quarterly record.
Doosan Bobcat, 51.05 percent owned by Doosan Infracore, reported 171.3 billion won of net profit in the first quarter, up 97.3 percent on year.
“Covid-19 pushed up demand for do-it-yourself gardening, increasing our sales in the United States,” said a spokesperson for Doosan Bobcat. The equipment manufacturer sells light construction machinery, such as mowers, widely used for gardening and landscaping.
Investment for facility expansion and price increases of raw materials are helping.
“Last year’s facility investment plans of Middle Eastern countries were pushed back due to Covid-19, flooding us with construction equipment orders for this year,” said a spokesperson for Doosan Infracore.
By region, Asia is the biggest market for construction equipment with China being the most prominent. According to the China Construction Machinery Association (CCMA), some 292,000 excavators were sold in China’s domestic market by Korea construction equipment companies last year, the best performance since 2008.
Higher price of raw materials, such as steel, copper and rubber, is also helping as construction equipment is essential to produce and ship such commodities.
“At the end of 2019, it was anticipated that 2020 would see a modest downturn in global construction equipment sales, but the forecast for 2021 and beyond is now generally better than was expected prior to the Covid-19 outbreak,” said Off-Highway Research, a market research firm specializing in construction equipment data.
Experts say that the machinery market must take advantage of the opportunity.
“Construction equipment is a must for big ticket investments in the semiconductor and battery sectors, but Korea’s top companies still fall behind in terms of brand recognition and market share when competing in advanced markets of North America and Europe,” said Jeong Man-tae, a senior research fellow at Korea Institute for Industrial Economics & Trade (KIET). “We need to establish new market strategies by integrating IT technology.”
BY KANG KI-HEON [email@example.com]