Slow progress
18 December 2014This time last year, I talked about how 2013 had been one of limited change. In many ways, and particularly on the business side of the sector, this year has been too. Progress on rental rates and sales does not seem to have picked up at the rate the industry would've liked. In this issue, we open with a round-up of the last quarter's financial results, across a range of listed crane manufacturers and dealers. The news is not particularly good.
Both Terex and Manitowoc reported declines in crane sales: down 7.4% at Terex and 6.7% at Manitowoc. The American giants both noted problems in their home markets. Ron DeFeo at Terex said that rough terrain sales are down by 25% in North America this year. Glen Tellock also pointed to poor rough terrain sales in the region.
DeFeo suggested that Terex would see a sequential rise in sales in the fourth quarter. However, I think we should view such hopes with caution. Rough terrains are often cited as a sign of things to come, as they are first on site on many projects. If they are down now, then surely other sectors will be struggling in six months' time?
In Japan, both Kobelco and Tadano had better news than their US rivals. Kobelco said that crane sales were up 40.8%, while Tadano saw sales up 13.1%. Both companies cited strong domestic crane sales. This matches what they, and others, told me when I visited Japan earlier this year. Again, I think it is too early to be excited about this market. Much of the explanation Japanese crane manufacturers have offered for their growing sales are down to specific, intermediate-term drivers: upgrades to school earthquake proofing, recovery from the Great East Japan Earthquake, or preparation of venues and infrastructure ahead of the 2020 Tokyo Olympics.
While all of these projects are vital, they are all ultimately funded by central government. As I write this comment, Japan has entered its second quarter of GDP contraction, putting the country into a technical recession. The country's prime minister, Shinzo Abe, architect of the Abenomics stimulus programme, has called a snap election. While he is expected to win, these political and economic challenges may impact the pace of government spending.
This month too, we have looked at the situation in the UK. London has recently developed a reputation for ambitious skyscraper projects and major infrastructure construction. That has certainly spurred some growth in crane utilisation rates. However, while there may be more work out there, rental revenues have not grown significantly. Last month, I wrote about the industrial action that faced one of the country's biggest tower hirers. That has been resolved, but crane owners still face challenges to their profitability. And, as a Londoner, I am unconvinced about much of this commercial and residential construction: we all remember the end result of the booms in Dubai and Tokyo. I see no reason why high-end construction in London has any more long-term value than in these cities.
Overall then, I don't see cause for much optimism in 2015. We may not see the sector get worse, but progress will remain slow.
