A truckload of change2 August 2012
For fifty years or more, Europe’s truck-loader manufacturers have dominated world markets with their broad ranges of articulated boom loaders. Now given the serious debt issues facing many of Europe’s largest knuckleboom markets, Stuart Anderson asks, what will be the manufacturers’ survival and growth strategies?
Many western loader crane manufacturers are looking to emerging markets to make up for decimated sales in Europe. But in many of these countries, the market has been shaped by Japanese manufacturers.
That means that western manufacturers will have to produce more stiffboom rather than articulated boom loader cranes. In significant parts of Asia -- most notably China -- Japanese telescopic truck-loader cranes have a strong presence dating back 30-40-years. For the Japanese manufacturers, Tadano and Furukawa-Unic, the biggest challenge is not the Europeans but the fast-emerging Chinese makers.
For the Europeans it's doubly tough. Not only must they challenge the established presence and quality image of the Japanese and price threat of the Chinese, they must either attempt to change markets from telescopic to articulated products or, more likely, build a presence in a product category in which they have little-to-no market presence.
While the technology advances made in recent years by Europe's knuckleboom loader manufacturers are impressive and attractive, fundamentally changing market cultures is always very difficult. Many would say that boat has sailed.
America and Asia remain in love with telescopic booms while Europe favours knucklebooms. Much of the rest of the world is somewhere in the middle, often with a mix where knuckles are favored for grab and clamshell work and telescopics for pure hook lifting.
The construction industry is highly conservative. Fundamental changes in tools and methods almost always happen at glacial pace. It's an industry where change comes through evolution rather than revolution.
Sometimes though, market changes do adjust demand. Environmental pressures and soaring metal prices have provided an expanding demand for logging and recycling cranes, benefitting the makers of knuckle boom loaders equipped with grabs and grapples. The massive construction demands of China and other emerging nations have benefitted telescopic boom loaders.
Hi-tech cranes in lo-tech markets
On a recent visit to China I was able to tour XCMG's new truck-mounted crane factory and was highly impressed not only by the quality of the facility and its lines of advanced machine tools, but also by the openness of its managers.
China is now the second largest market in the world for truck-mounted loader cranes and while it is growing, most others are way off their historic peaks and in many cases shrinking. XCMG claims to have climbed to market leadership amongst China's dozen or so well-known manufacturers. Some 90% of XCMG's production is telescopic boom loaders with only 10% being knuckles. The most popular cranes can lift 8-10t, but the manufacturer is currently developing its largest crane to date, probably rated at 25t capacity.
Japanese-inspired technology leads. That applies not only to the market for regular telescopic boom truck cranes largely founded on Tadano and Kato concepts, but also to loader cranes. As in Japan where knuckleboom loaders are mostly employed with clamshell on recycling and logging applications, in China, telescopic boom loader cranes universally equipped with wire-rope winches and radio remote controls are the staple for pure truck loader lifting work.
It's a market that, compared to the dramatic explosion in demand for regular truck cranes, has been relatively slow to take off. Government regulations have served, probably inadvertently, to restrict demand since the authorization to mount special equipment such as cranes on trucks is strictly-controlled and requires specific licensed approval.
XCMG has trained various truck dealers on the installation of its cranes. Still, in a country where cranes and trucks are 'hammered' around the clock, generally with little preventative maintenance and where operator training and discipline are still limited, crane accidents are all-to-frequent. As in Europe, Japan and America, truck loader cranes are generally an accessory to the vehicle and therefore operated by a truck driver. And therein lies a major issue.
At least in some respects, a telescopic crane is a simpler concept than a knuckleboom. This differentiation is being broadened as leading knuckleboom loader makers design ever more sophisticated technology, particularly in the area of completely flexible stabilizer set-ups and automatically-corresponding load chart calculation. This has benefits in advanced markets with a deeply-embedded understanding of the technology and well-trained operators.
In emerging markets with minimal experience of articulated loaders and poorly trained operators, it's a different story. Huge potential markets like India and China particularly illustrate this point. Even the most basic safety considerations like properly-deploying stabilizers, understanding load charts and avoiding collisions, need to be more fully understood and regulated. Anyone who has observed crane operation on the job sites of China and India will appreciate the challenge.
The road travel environment is no less scary. Given these sorts of extraordinarilychaotic and un-policed job site and road environments, just how can it be expected that the more-specialized and complex rules of crane set-up and operational safety will be learned by a truck driver?
Hiab has been present in most of the world's markets longer than any other surviving maker of truck-mounted loaders. Even in challenging markets, such as Japan and South Korea with their own domestic manufacturers and product-demand cultures, Hiab has developed its footprint for more than 40 years. Hiab Hana based in Chongwon, some 130km from Seoul, manufactured its first Hiab crane in 1984 and is now one of the cornerstones of Hiab's global manufacturing strategy.
Hiab has been developing a line of 'stiff boom' cranes manufactured in South Korea by its Hiab-Hana subsidiary.
Most of these models are in the 16-32tm load-moment range with maximum lifting capacities ranging from 6.5-10t at 1.7-2m radius and with boom reach in the 19-21m range.
Cargotec's senior project manager, Marcel Kappe, says that the need for ST cranes is rising rapidly in the emerging markets.
Amongst Hiab's latest additions are the 16.7tm capacity ST 170 Series with a choice of two and three section telescopic booms of 9.9m or 12.8m length. Unlike earlier Hiab-Hana models, the ST 170 series is rated at a much shorter radius of less than 1.0m, optimizing nominal capacity to 6.3t. Hiab also recently added its smaller ST 080 series of small telescopics rated 3.2t capacity and with a maximum reach of 7.8m or 10.1m.
The leader amongst Korea's truckmounted crane makers remains Soosan Heavy Industries with its lines of telescopic cranes, articulated loaders and pedestal/sea cranes. Its latest model is its largest crane, the SCS 2016 rated a 20t at 2m.
It's equipped with a six-section hexagonal boom extending to 30.2m radius, putting it firmly in the class of the smaller US boom trucks. Local road travel regulations mean these behindthe- cab cranes are typically mounted with the long boom stowed over the rear of long-bed 10x4 Daewoo or Hyundai trucks, so as to avoid any projection beyond the truck dimensions. They are well specified with 360° rotation, two sets of 'H' type out-and-down outriggers, two hoist drums and a rooster sheave for single line operation. Main export markets are Russia, Ukraine and Vietnam.
Rayong, in Thailand, has been the home of Furukawa-Unic's main South-East Asian plant since 1997. The facility was built with capital support from the large Japanese industrial company Hanwa Co. Ltd. It manufactures and assembles Unic telescopic boom loaders. In 2009 Unic expanded its Thai operations with the opening of a sales and service operation in Bangkok.
The success of this venture hasn't gone unnoticed by Unic's arch rival, Tadano. who in May, signed a contract with Hemaraj Land & Development Plc to purchase 2.9ha of land. The signing ceremony was attended by Tadano president and CEO Koichi Tadano and newly-appointed president of Tadano (Thailand) Co. Ltd., Yasumasa Kuramae, as well as representatives of Hemaraj.
The new plant is scheduled to open in Q2 2013 and will manufacture Tadano truck-loader cranes. Like Furukawa- Unic, Tadano chose the Eastern Seaboard Industrial Estate as the location of its new plant. Locally known as "The Detroit of the East" this large industrial estate is the centre for Thailand's export-oriented industries such as General Motors, Toyota, Ford and Parker Hannifin, and served by Thailand's largest port, Laem Chabang.
A conflict of interest?
Over the past decade Hiab has become the articulated crane market leader in Australia, based to a significant extent upon the efforts over a decade or more of Bob Davis and his team. Not only did Davis's BG Crane, based in Wingfield, Adelaide, pioneer sales of Unic cranes in Australia, they also developed Hiab's market presence so successfully that in 2002 the manufacturer acquired a 30%
stake in BG.
By 2007 BG had taken Hiab to a market leading position with annual sales of €20m and Davis sold out to Hiab. In 2010 the business became Cargotec Australia.
From the beginning Davis had sought to serve all of his market needs. Remaining as managing director of Hiab Australia, he persuaded the firm to retain the distribution rights to both Furukawa-Unic and Italy's Maxilift. Given Hiab's expanding presence in the telescopic (or stiff boom) market, the question must be how long before a conflict with the Maxilift Cobra and Furukawa-Unic lines of telescopics becomes an issue.
Hiab's ST 080 series is pretty much head-on with Cobra's 5500H and 6600H hydraulic and increasingly Hiab's telescopic capability covers a significant portion of the range offered by Furukawa-Unic, as well, of course, as Tadano.
Building in South Africa
South Africa is another expanding market for knuckle booms, especially in the larger size ranges. Amongst the pioneers of this development is Lift & Shift Equipment, founded in August, 2010 by John Henry Bowman and his sister Karen.
Bowman set up this business upon his return to Johannesburg from Australia, after selling his stake in BG Crane to Hiab. Under Bowman's leadership, Lift & Shift has expanded its product offerings to include Hyva Cranes, Hyva Lift Kennis traveling base cranes and high-capacity Erkin World Power cranes as well as aerial work platforms. It has established a sales and service network across South Africa and Namibia.
Bowman's biggest breakthrough came late last year with the sale of what he believes to be the largest articulated boom crane in Africa -- a 160tm capacity World Power 160.000-8 with a maximum capacity of 40t and reach of 32m. Mounted on an 8x4 Volvo, the crane joined the 200-unit Johannesburg fleet of Jumbo Machine Moving. "We saw a gap in the market to provide our clients with a cost-effective and more efficient alternative to traditional mobile cranes," explains Jumbo founder Wayne Fraser. "Our new 160tm knuckle boom crane truck is a fast traveler and does not need permits and a low-bed to establish it on site. We simply drive it there to do the work and drive away."
The Erkin is equipped with a 23t winch (on two parts), eight-section articulated boom and ride-on swing seat. "This is the first of its kind in Africa and we are extremely excited at the potential of this new market. Our first crane truck is up and running with three more on the water."
Palfinger in India
Palfinger entered the Asian stiffboom market with product manufacturing by its Indian subsidiary established in Chennai in 2008. Their first model was the 3.73t at 2m PS 8000, available in two, three and four-section boom versions with up to 11.1m reach. At Bangalore's Excon show last November a second series of 'stiff boom' cranes was added -- the 6.3t PS 13000. The show crane was displayed on a Tata 1616 12t truck but the four-section boom crane is normally offered on a 16t GVW 6x4 truck.
Palfinger India's managing director, Subhamoy Ghosh says that his 4,000 sq m plant currently has a production capacity of 200 crane per year, working on a single shift. He claims to have already achieved a 70% share of the emerging local market: "In the four years 2007-2010 demand for truck loaders remained around 150 units but increased to 300 units in 2011."
Ghosh has forecast that within five years the market will touch 1,500 cranes. "The number of truck loader cranes in the market will increase exponentially as its visibility increases further and application areas are explored by Indian customers. India is seen as a prospective contender for setting up a dedicated manufacturing facility for knuckleboom cranes in the future," he says.
Already Ghosh has brought many large Indian enterprises into his customer base including L&T, Afcons, ITD, Cementation, Reliance Industries Ltd., C&C Construction and Tata Metaliks. Palfinger India has put a lot of work into broadening its sales and service network with appointments of Orion Equipment in Gujurat in the west, Charisma Construction Equipment in Chandigarh, and Dynamic Equipments in Raipur, Chhattisgarh, in central India.
The Japanese truck-mounted manufacturers haven't overlooked India, even though demand to date has been limited. Furukawa-Unic's local distributor, the large industrial group Chowgule, & Co Pvt. Ltd based in Mumbai, has enjoyed some success by mounting smaller-sized 4- 8tm Unic UR-V230T and UR V340 Series cranes on heavily-modified locally-made farm tractors, to create a basic rough terrain tractor crane. Now Tadano has announced plans to establish its own Indian sales and service subsidiary during 2012.
For New Zealand tough times are no new thing. Most obviously the nation been dealing with the massive devastation of the continuing series of earthquakes in the Christchurch region.
More generally the economy has been particularly challenging. Truck and trailer registrations continued their downward trend from 2009 to a decade-low in late 2010, before recovering somewhat in 2011. That didn't stop Gough, Gough & Hamer from acquiring the Palfinger distributors in Australia and Papua New Guinea, to add to its New Zealand franchise established back in 2007.
Despite an economy in deep recession and the devastation of last year's earthquakes, broadening its representation of Palfinger has been an excellent move for the privately-owned Caterpillar franchisee. Last year, according to Gough Transport Group general manager, Glenn Stapleton, division turnover increased 20% and Palfinger Australia "delivered excellent results". Upon gaining control of the Australian dealership, Gough Group CEO Karl Smith said "Palfinger is the global technology leader with over 150 models and a world market share of more than 30%. The acquisition of Palfinger Australia is a natural and strategic move by the Gough Group to expand one of our key global dealerships" He added that this made Gough one of Palfinger's top ten distributors worldwide. While Palfinger New Zealand had "a tough year," it managed to increase market share despite a very tight credit market and the severe strains on the insurance industry. Auckland-based Palfinger New Zealand has an extensive network of 25 service agents with ten locations in North Island and nine in South Island.
Gough's Palfinger NZ national manager Duncan Phillips is particularly impressed with the new PK 5000 2EH cranes recently delivered to Junction Road Transport of Palmeston North and Tauranga's Bay Hiab Transport (In Australasia the name 'Hiab' has become synonymous with loader cranes in much the same way that JCB is regarded in the UK).
Established in 1991 and headquartered in Brisbane, Palfinger Australia is the local market leader with nationwide coverage via branches in Newcastle, Sydney, Melbourne, Adelaide and Perth. BHP Billiton is a major customer with its Mount Arthur coalmine operations in New South Wales Hunter Valley adding to its fleet. BHP has its own stringent occupational health and safety regulations that need to be met, over and above the demands of WorkSafe and CraneSafe. A highlight at the Brisbane Truck Show was the high capacity Palfinger 74002 RD3X. The crane was purchased by City Crane Truck, operating in Adelaide and in the far north of South Australia. It is City Crane Truck's 16th Palfinger.
The loader has a capacity of 14,800kg at 4.4m and at extended reach of 13.6m still lifts 4,540kg. One of its primary applications is transporting portable buildings for mines. Even with his focus on Palfingers, Simone's fleet also includes a large Hiab 800E7 complete with fly jib and winch. Like many in Australia, he recognizes the merits of telescopic boom loaders with their remote controls and hoist winches. His fleet includes both Furukawa-Unics and Tadanos.
Australia is one of the relatively few markets where both telescopic and knuckleboom loader cranes enjoy popularity. Tadano's truck-mounted telescopics have been established in Australia for almost 50-years -- the first unit being imported in 1965.
For years Tadano truck loaders were represented by the old British 600 Group, but when they exited the market in 1999, former sales manager Tony Hensen and his wife set up 600 Cranes Australasia. Today, Hensen's Melbourne-based company has more than 40 employees with branches in Sydney and Brisbane as well as dealers across the country. As well as Tadano truck loaders, 600 sells Fassi knuckleboom loaders in Australia, New Zealand and the Pacific Islands and Hensen claims to have captured a market share of approximately 50% with the Tadano line.
At home in Japan
For Furukawa-Unic, the growth in truck registrations has had a positive impact with sales increasing 12.1% to ¥12.49bn ($152m), including mini crawlers and recovery vehicles.
However the improvements were not enough to completely turn around Unic's prior year loss of ¥684m: this year the company registered a deficit of ¥187m. Unic claims to have maintained a 50% domestic market share but it would appear that this is due, in part at least, to loss-making prices.
Last year was the best since 2007 for sales of truck loader cranes in Japan. Behind the improved performance was the recovery effort for the Great East Japan earthquake and recovering exports in part thanks to a stabilising Yen.
Estimated total industry sales of truck loaders increased 42.8% year-on-year thanks in large part to increased domestic truck registrations that strengthened from 51,420 to 59,310 units during the fiscal years ended 31 March.
The increased registrations were heavily influenced by recent changes in Japan's vehicle emission regulations. Tadano's sales of cargo cranes increased an impressive 39.8% to ¥11.37bn ($142.4m) for a market share of 46.3%, down from 47.2%.
Tadano's domestic sales of truck loader cranes were up 42.2% to ¥10.16m ($127.3m) while overseas sales increased 22% to ¥1.2bn ($15.1m).
As the struggle for emerging market sales intensifies, there are added complications. With good distribution increasingly hard and as valuable as ever, old relationships where manufacturers shared distributors will come under pressure as knuckleboom manufacturers add telescopics.
For example, Furukawa-Unic has long represented Palfinger in Japan -- marketed as Unic-PAL. These two manufacturers also share distributors in several markets of growing importance, including Russia and Azerbaijan while Hiab New Zealand also carries the Unic line and in Ukraine Unic, Hiab and Hyva share the same distributor. With manufacturers moving into each other's markets like this, it could all get very messy.