According to market analysts, the Asia-Pacific region has become the largest cranes, lifting and handling equipment market in the world. Together the countries making up the region account for a considerable 48.2% of the global consumption value.
Between 2006 and 2010 the Asia- Pacific market recorded one of the highest growths at a CAGR of 12.26%, driven mainly by rising demand for construction equipment in countries such as China and Indonesia.
An extensive report by World Market Intelligence, publishers of Hoist Magazine, called Global Cranes, Lifting and Handling Equipment: Market Opportunities and Business Environment, Analyses and Forecasts to 2015, reveals that Asia-Pacific was one of the fastest growing regions in the World and witnessed the largest share in the consumption of global cranes, lifting and handling equipment between the review periods of 2006 and 2010.
The report noted: "The regional cranes, lifting and handling equipment market growth was largely driven by China, Indonesia, India and Philippines, at CAGRs of 24.53%, 22.17%, 11.28% and 10.15%, respectively.
"This was supported by infrastructural plans in China, Indonesia and India, to support their rapidly growing populations, urbanization and manufacturing and service industries, which created demand for cranes, lifting and handling equipment in the region. While with a market share of 70.6% in 2010, China was the largest consumer of cranes, lifting and handling equipment, with 0.6% Philippines contributed the least market share. Malaysia, Philippines, Indonesia and China are expected to drive the regional growth over the forecast period."
Of all the countries in the region, China and Indonesia have been identified as the twin dragons powering growth in Southeast Asia and across the Asia Pacific region as a whole.
Between the review period both countries recorded growth at CAGRs of 24.53% and 22.17%, respectively. And, despite the global economic crisis and consequent reduction in construction activity from 2008-09, the number of domestic and foreign engineering and equipment manufacturing firms operating in China, in particular, has reached 2,000, and has made the Chinese equipment market the largest in the world.
In 2010, the Chinese cranes, lifting and handling equipment market accounted for 70.6% of the consumption value in Asia- Pacific, and 33.1% of the global consumption value.
The report predicts that forecast growth in the mining industry, stimulated by growing demand for mined products from the steel, construction, agriculture, chemical and coal dependent electric utilities industries, is expected to drive growth in the Chinese market.
By contrast, prior to 2010, Japan was the second largest cranes, lifting and handling equipment market in Asia- Pacific. However, due to the global economic slowdown, the Japanese share in the Asia-Pacific cranes, lifting and handling equipment market declined from 28.8% in 2006 to 10.2% in 2010.
With regards to Indonesia, another WMI report called Construction Equipment in Indonesia: A Market Appraisal, notes that Indonesia is increasingly being considered alongside the BRICs (Brazil, Russia, India, China) as an emerging market with the potential to be a major global economic heavyweight in the coming decades.
The report said: "The country’s well-balanced economy has been recording solid rates of growth in recent years, averaging over 6%, and it came through the global financial crisis relatively unscathed. Foreign investment is also growing rapidly, and policymakers are keenly focused on boosting economic growth. Indonesia also now has a firmly entrenched democracy, which is increasing the prospects for continued political stability in the coming decades."
The report notes that Indonesia’s construction sector has been performing well in recent years driven by strong economic activity and high levels of investment. Indeed, fixed investment has soared over the past decade, with its share of total GDP rising from 19.5% in 2003 to a historic high of 33.2% in 2012.
"The construction sector has been a clear beneficiary of this investment activity. It has grown by 7.4% on an average basis in real terms over the past 10 years, well above the GDP growth rate of 5.9%. It maintained this rate of growth in 2012, expanding by 7.5%. In line with this trend, the construction sector’s share of total GDP increased from 6.2% in 2003 to 10.4% in 2012."
The report concludes: "Despite some challenges, the outlook for construction is favorable. In nominal output value terms, the sector will grow by 15% a year in the next five years, supported by urbanisation, rising incomes and the government’s effort to improve the infrastructure base as part of its ambitious multiyear plan — the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development (MP3EI). In order to attract investment for the master plan, which envisages spending of up to IDR 4,000trn (around $400 billion) during the 2011-2025 timeframe, the government is taking steps to strengthen public-private partnership (PPP) regulations."
In 2010, conveyors accounted for the largest share of consumption value in the cranes, lifting and handling equipment market in Asia-Pacific, with a share of 33.3% and a value of $14.1bn. Forklift trucks and mobile and truck mount cranes recorded the second and third largest consumption values, at $8.5bn and $5.1bn, respectively. Ariel Crane and Telescopic Crane recorded the fastest growing consumption among the Asia-Pacific cranes, lifting and handling equipment market, with a CAGR of 33.88% during the review period.
Looking ahead, the report predicts that conveyors will be the largest category of cranes, lifting and handling equipment in Asia-Pacific, accounting for a share of 27.5% and a value of $20.5bn in 2015. The forklift trucks and mobile and truck mount cranes categories are expected to record the second and third largest consumption values, at $16.3bn and $9.5bn respectively. Over the forecast period, the overhead cranes category is expected to register the fastest cranes, lifting and handling equipment consumption growth in Asia- Pacific, at a CAGR of 18.93%.
Focus on India: An industry in the doldrums but with hope on the horizon
Once the great hope of the southeast Asian crane industry, the Indian economy has stuttered and stumbled from crises to crises. Mired by what many consider as ineffective government and a series of ill-advised policy decisions, the nation’s crane industry has born the brunt of an economy in freefall.
Tushar Mehendale, the dynamic Managing Director of ElectroMech, one of India’s most successful hoist and crane companies, is unequivocal in his appraisal of the situation. A seasoned industry thought leader, Mehendale estimates that the industry may have shrunk by as much as 30 per cent in recent years.
"The reasons for this shrinkage are multiple," he said. "Apart from a small contribution from the global uncertainties in reducing the demand, the main culprit was the lackadaisical attitude of the Indian government towards economic reforms and development thrust."
In the eyes of many industry insiders, the woes of the Indian crane industry are largely the fault of the government.
Mehendale said: "The government, unfortunately, is the main culprit causing the economic downturn in the overall industry. Many of the infrastructure projects launched earlier with a big bang are still lying trapped in dusty files for want of necessary clearances from the government related to environmental and land acquisition issues.
"Furthermore, the Indian government in its infinite wisdom came up with some tax laws applicable with retrospective effect in order to increase its tax revenues and reduce the deficit thus inducing fear in the minds of the foreign investors keen on investing in India. Clearances for foreign investments in various sectors also saw a lot of debate and watering down of the requirements."
Mehendale added that, to add salt to the wounds, no new significant infrastructure projects were declared in India last year.
As a result, he said, the overall capacity utilization in the basic industries remained at very low levels.
"With interest rates in the economy also being at high levels for a significant part in the previous year, the consumer demand in real estate and automobiles also fell down drastically. As a combined result of all the above factors, there are a lot of uncertainties in the minds of buyers and investors and thus both brown field and green field projects have been affected."
Mehendale stressed that the only way the industry can recover is if the execution backlog of various infrastructure projects is cleared and newer projects for removing the infrastructure bottlenecks in India are implemented.
However, there is hope on the horizon. Looking ahead to 2014 and beyond, Mehendale is characteristically upbeat: "Although the industry has been through a rough patch for almost past 1.5 years, we have started seeing some signs of revival. In the recent months, the Indian government has been making the right noises and new policies are being announced to smoothen project execution and to attract foreign investments.
"Furthermore, over the past months, some sectors are showing good capacity utilization and many have started contemplating expansions.
"We feel that the slack in the economy is slowly being taken out and over the period of 2014, we are confident of seeing the industry grow healthily and at least regain its previous levels achieved in 2011. There is thus a feeling of seeing a light at the end of a very dark tunnel."
60 seconds With…Tushar Mehendale, Managing Director of Electromech
Q: What technology in the crane industry are we likely to see more of in the years to come?
A: Inverter drives are going to become the de-facto standard for all crane motions. Radio remote control systems will replace the traditional pendant push-button control systems as the technology becomes cheaper and safer. Irrespective of the end use of the crane, India has traditionally been a typical "open winch" crane market for capacities in excess of 10t with individual motors, couplings, brakes and gearboxes similar to the configuration seen in steel plant duty cranes. There is a slow but definite shift in customer preferences and product offerings that have either serial hoists or at least drive systems consisting of integrated geared brake motor units. Clients have also started realizing the value of having cranes with lesser wheel loads and compact geometries and many customers have started evaluating these specifications before making a decision, a distinct shift from the old maxim "the heavier the better".
Q: What are the challenges facing the crane industry in Asia (or India in particular) and how can they be overcome?
A: The crane market in India is highly fragmented with 50% of the market value being captured by top 10 players and the remaining being shared between 250+ crane manufacturers! Due to this fragmentation, it is difficult for the manufacturers to achieve economies of scale and offer a highly standardized range of serial hoists and cranes. We believe that in account of the recent slowdown the industry is going to experience a shakeout with a lot of weaker players being weeded out from the market. The market then can be possibly consolidated by the few industry leaders and ultimately an economic scale of operations will evolve that will offer the market with world class products. Another peculiarity in the Indian market is the sheer lack of regulation in terms of the end product that is being offered to the market. This leads to a lot of professional malpractices and a crane with a certain specification can be available in the market from a range of suppliers with prices ranging from 0.5x to 1.5x ! As a result of this the first time crane buyer finds it difficult to arrive at an informed decision when he considers only the price as the criteria.
Q: What has been your most significant achievement (as a business) in recent years?
A: ElectroMech is recognized in the Indian industry as the largest manufacturer in India in terms of volumes. We manufactured almost 700 cranes in the last financial year and as a result of this scale of operations, it is extremely likely that you walk into a manufacturing setup of any industrial group in India and you will most likely see an ElectroMech crane helping them in their production. In the recent past we have secured many prestigious orders from important projects in India. One notable example being our supply of critical area cranes for the Kakrapar Atomic Power Project being executed by the Nuclear Power Corporation of India. Our single failure proof cranes will be doing critical duties like handling spent fuel rods in the power plant. We have strong partnerships with many reputed international manufacturers and technology providers. We are the exclusive partners of Abus Crane Systems in India for the past 8 years and have supplied hundreds of Abus cranes to the Indian market. We are also the partner for Stahl Crane Systems for their EX range of products in India and are in the process of executing marquee projects in the oil & gas and chemical industry in India. Our subsidiary Cranedge which caters exclusively to the after sales requirements of industrial cranes is also going great guns and is providing support to more than 3000 cranes across the country. Recently, ElectroMech has also entered into an equity Joint Venture partnership with Zoomlion of China to manufacture and sell Tower Cranes in India. ElectroMech employs over 500 people across India as well as Middle East and is proud to have achieved a leadership position in the Indian market.
Q: What new plans do you have as a business?
A: We are a growth hungry company. We have grown at a CAGR of more than 40% over the past 12 years and are continuously on the lookout for new opportunities. We are currently considering growth by both organic as well as inorganic means and after discounting the recent downturn in the Indian industrial cranes market, we are confident of the long term potential of the Indian market and we have geared ourselves up to meet the challenges and opportunities offered over the coming years.
