China builds for growth23 February 2012
Stuart Anderson recently toured a selection of Chinese cranebuilders on behalf of Cranes Today. He reports on the staggering growth in capacity, and what it will mean for the worldwide industry.
The crane production capacity that I witnessed being brought onstream during my recent tour of eight plants in China is of a magnitude unparalleled in the history of the crane industry. Domestic demand, which now dwarfs that of all of the rest of the world combined, has been the main driver of more than 90% of this growth.
Even though the likes of XCMG, Zoomlion and Sany continue with their strenuous efforts to grow exports to a 30- 35% share, this will take time. Which is why the slow-down in domestic crane and machinery demand—driven by the central government’s recent dramatic reductions in residential, railway and general construction projects—must have China’s manufacturers pretty concerned.
As has been exhibited before, China’s government retains the power to grab a hold of its economy in a way that should be envied in Washington, Tokyo, Frankfurt and London. It can, and has, put the brakes on hard. As large as its domestic market is, in many sectors China is dependent on exports, largely to the US and EU. Trouble in consuming economies ultimately means trouble over for China’s manufacturing sector. Consequently, we’ve seen both XCMG and Sany postponing their planned IPOs on the Hong Kong stock exchange and listened as Zoomlion CEO, Zhan Chunxin reporting that “demand for construction machinery has shrunk drastically and growth will no doubt continue to slow next year”.
The rest of the world’s crane manufacturing industry isn’t exactly short of production capacity. Almost every major crane manufacturer in Germany, the US and Japan invested in significant increases in capacity between 2005 to 2008, and most if not all of these companies are now looking at a lot of empty factory space. It has long been a maxim in the industry that investment in ‘bricks and mortar’ is a harbinger of ‘doom’ and once again it proved right on the money.
Building in China
In sheer volume terms, those expansions pale compared to the factory investments made in China over these past five years. Sany, for example, claims to have invested $300m (CNY2bn). Zoomlion’s new mobile and crawler crane complex covers 660,000m2 while XCMG’s highly impressive new crawler crane plant covers 300,000m2 with 30,000m2 under roof. There is no doubt that XCMG has its eyes on dominating the crawler crane sector to the same degree as in the truck crane market.
During my visit to Sany in Changsha I was shown a scale-model of the planned expansion to the current factory complex (in fact a small town), which covers four square kilometers. A massive new R&D Centre is under construction and the plan is for the new truck crane factory capacity to be quintupled to 10,000 truck cranes per year. That is in addition to China’s existing 2010 capacity to produce north of 35,000 truck cranes with Zoomlion accounting for almost 9,000 of those cranes and XCMG taking an astounding 18,000 truck and all terrain crane units.
All of this is not to forget the surging Anhui Liugong Crane Co., (a subsidiary of the leading wheel loader producer) who, since purchasing Anli Bengbu in 2008 has invested CNY7bn in building the first two phases of a new 320,000m2 truck and crawler crane manufacturing plant. Last year Anhui Liugong achieved crane sales of CNY1bn, selling more than 2,000 truck crane and moving into China’s #3 spot. It too plans to reach a crane manufacturing capacity of 10,000 units and crane sales revenues of CNY10bn. Although in 2011, Sany has regained the #3 position in the truck crane field, Liugong, who recently unveiled a 160t crawler crane, cannot be under-estimated.
Investments have been made at numerous other crane makers including: a move into the 400,000m2 Liaoning Equipment Manufacturing plant by leading crawler crane producer, FUWA Heavy Industry; the construction of a new 56,000m2 plant by the leading truckmounted crane producer Mudanjiang Special Truck Co; and significant expansions by truck crane maker Shenyang North Traffic Heavy Industry.
Zoomlion has just announced an alliance with ElectroMech to manufacture and market its tower cranes in India. CEO Zhan Chunxin says that “Chinese enterprises must accomplish localisation in order to go global, the more localised we are, the more globalised we become”.
Sany’s overseas investments over the recent years are quite without precedent. A plant in Sao Paulo is currently producing hydraulic excavators and truck cranes of 25t, 55t and 75t capacity from CKD kits (completely knocked-down; or full sets of all parts needed to manufacture a crane). Nearby, a new $100m 560,000m2 plant in Jacarei, will open in 2013, building telescopic cranes, excavators, concrete pumps and road rollers.
In Chakan, Pune, Sany is spending $70m on a 48,000m2 plant on 330,000m2 site, established in 2010. It is producing stationary concrete pumps, mixers, truckmounted concrete pumps and batching plant, hydraulic excavators and backhoe loaders. Another Sany plant in Bedburg, Germany, covers 250,000m2, and will see investment of €100m. It just produced its first product, a dry concrete mixer truck.
In Peachtree City, Georgia, a 40,000m2 Sany plant will receive investment of $60m, with a new $25m R&D centre just announced. It will produce RT cranes, crawler cranes, hydraulic excavators and truck-mounted concrete pumps. In Cikarang, Bekasi, Indonesia, Sany has purchased a 10Ha site, and plans to invest $200m in building hydraulic excavators. The plant will open in 2013 With the slow-down in China adding to the woes of the developed economies, some of this investment will have to be pegged back. The postponement of the cash generating IPOs must also be a factor. Zoomlion has already acknowledged that achieving 2011 revenues of CNY50bn ($7.9bn) will now be “challenging”, despite having seen nine-month 2011 revenues rise 39% Y-o-Y to CNY33.2bn ($5.1bn). Similar forecast reductions for the remainder of 2011 and for 2012 seem inevitable for the rest of the Chinese industry. Achieving the CNY100bn targeted revenues at XCMG and Zoomlion in China’s 12th Five-Year Plan (2011-15) will now be even more “challenging”.
A changing market
China now has the world’s largest crane manufacturing industry, the largest crane market, a significant price advantage and a range of products that spans almost all mainstream demand. 2010 was another record year for worldwide sales of Chinese truck cranes, all terrain crane and crawler cranes. Total sales of truck cranes reached almost 35,000 units compared to 27,000 in 2009. This year was strong through three quarters but with a depressed fourth quarter, 2011 may struggle to beat 2010.
The most interesting development in the domestic Chinese truck crane market is the rise in popularity of higher-capacity telescopic truck cranes. Like North America and Japan, very few all terrains of under 100-tonnes capacity are sold in China. Traditionally the Chinese market has been dominated by small 8t–25t truck cranes with 50-tonners being the largest category of any strength. Recent years have seen 65-70-tonners growing in popularity but in the past two-to-three years 100t, 130t and 160t truck cranes have quickly established an important new segment of this market. In both 2010 and 2011 more than 500 of these largersized truck cranes have been sold, with about 35% of these being in the 130-160t classes. This is double the number of ATs of 130–200t sold, with almost all being domestically-produced.
China’s crane makers have all developed larger-capacity six-axle truck cranes in the past few years. XCMG remains the sector leader with its perennial 50%+ market share, but Zoomlion, Sany and the others also participate with attractive products. These larger cranes have also won significant support overseas, with Sany’s 100t STC 1000 proving highly-successful with its new distributor Al Areedh in Saudi Arabia and XCMG winning large contracts for its 100t and 160t truck cranes in Venezuela and elsewhere in Latin America.
The popularity of these larger truck cranes is perfectly logical. Product support and high-tech service know-how are still in pretty short supply in much of the developing world where the culture is still to get things repaired as cheaply as possible. A big truck crane employing largely-automotive drive train components is easier to fix, easier and cheaper to get spare parts and less likely to suffer downtime in a vast country like China.
In 2009 sales of all terrain cranes doubled to pass two hundred units for the first time. Much of that was due to the availability of expanding lines of ATs produced primarily by XCMG and Zoomlion. However since that surge, sales of these large ATs (130-500t) have essentially plateaued in the range of 220- 240 units p.a. This is more bad news for crane importers. Back in 2006 approximately 75% of all terrain cranes sold in China were imported – that share has now shrunk to under 20% and is unlikely to recover.
The story is similar for crawler cranes. Ten years ago, in 2001, China’s crawler crane market was in its infancy, with just 35 new cranes sold. A third of them were imported and FUWA (then named Fushun) took the lion’s share of the remainder. By 2004 demand had quadrupled to over 200 units with imports still accounting for 25%. After a steep decline in 2009, caused by the global economic crisis, crawler crane sales rebounded in 2010 to reach a record 1,750 units sold worldwide. The share won by imports has now declined to approximately 10% and seems certain to continue to fall.
Increasingly in recent years, the two sectors of the Chinese crawler crane market most attractive to importers have been the higher-capacity (250t and larger) class and the specialized heavy-duty foundation category. In the latter, over many years Bauer and Liebherr Nenzing have won good reputations and continue to enjoy strong market presence. All of China’s crane makers now produce medium-duty foundation versions of their 40–70t crawler cranes that can handle vibro-hammers and, it seems, everyone in China makes a crawler mounted earth drill.
Given China’s massive infrastructure development plans, demand for crawler cranes from 50–250t capacity is likely to continue to grow beyond the 2,000 units per annum level. With so many domestic manufacturers entering the crawler crane business and quality continuing to improve, this market will remain the virtually-exclusive domain of the domestic players. Above 400t, importers will continue to have an opportunity but this will shrink as Chinese product quality improves and support capability develops. The last bastion for imports is the top-ofthe- line 500t and greater segment. With its high-profile nature as well as the big investment involved, it plays to the established reputations and experience of the leading European, American and Japanese manufacturers. But, despite some very tragic accidents involving big domestic crawler cranes, the going continues to get tougher for the imports. As Mike Maruo of Kobelco says, “in the Chinese market it’s very tough against the domestic manufacturers. However elsewhere in the Asian region we have had very good success with our 550t SL 6000 with three cranes equipped with Superlift currently on the same roll-up job in Vietnam and multiple cranes so far delivered to Singapore, Indonesia and South Korea. Similarly our 400t SL 4500 has proven very popular, even now in Japan, especially on earthquake protection jobs”.
Internationally most customers remain reluctant to invest in the larger 500t capacity Chinese crawler cranes. Relatively few have been exported compared to the large numbers sold by Kobelco, Liebherr, Manitowoc and Terex- Demag. In the Chinese domestic market there is often significant, sometimes quite open pressure, to purchase domesticallyproduced cranes. And the bigger the crane, the higher the investment, the greater the pressure to invest in domestically-made products.
The one international market where the larger-sized Chinese cranes have won significant market share is India. While Zoomlion breached the market back in 2008 with sales of two of its 600t QUY 600s (to Essar and Tata’s Tara Mandvi), the biggest break-through came this year with Reliance ordering 10 650t XCMG QUY 650s and 14 100t QUY 100s.
There has been the odd sale of these larger-sized Chinese cranes has made in Kazakhstan, Brazil and Indonesia as well, of course, as the high-profile sale of a 630t Sany SCC 6300 to Sarens UK, but these are still the exceptions and not the rule.
While the larger-sized Chinese crawlers have all been individually designed by their respective manufacturers, from a conceptual point-of-view there are clear similarities. These ‘accords’ may come about through the national engineering forums that have long been characteristic of China’s management of its industrial policy. In any event all of the larger Chinese crawler cranes from 400–2,000t capacity prefer the floating style of ‘Superlift’ counterweight to the wagon approach.
For the 3,000–3,600t cranes made by XCMG, Zoomlion and Sany, all employ twin parallel main booms and matching twin derrick masts. In all three cases the auxiliary ‘Superlift’ counterweights are transported on self-propelled crawler undercarriages, Lampson-style. So far only the first of the Zoomlion (3,200-tonne) and Sany (3,600-tonne) cranes are in-the-iron and on their test pads. The first 3,000- tonne XCMG is sold to a domestic customer and due for production next year.
The Zoomlion ZCC 3200NP employs no less than three identical 400kW diesel engines, for the upper, undercarriage propel, and counterweight crawler. The crane has three control modules: a cab on the upper, one on the undercarriage and one on the counterweight crawler. Total all-up weight is 4,500t including 2,900t of Superlift counterweight. The crane has been specially built against the needs of the nuclear power plant project but has not been designed to comply with either CE or ANSI.
The 3,600t Sany SCC 8600 employs quad crawlers for the main body as well as quad crawlers for the counterweight. Like the Manitowoc 21000, this allows the crane to use ‘off-the-shelf’ crawler undercarriages from 250t class cranes and facilitates disassembly for transport without having to split a big single undercarriage into two pieces or remove the track pads. Unlike the Zoomlion, the Sany has a single cab control module on the crane upper and in addition power to propel the counterweight crawler is not provided by an independent engine but from the main crane diesel via an umbilical chord through the stinger.
At the time of my visit, the Zoomlion was in the midst of a programme of 15 test loads over a period of four months and was scheduled to ship early 2012 (unfortunately Zoomlion had a strict embargo on photography!). The crane was configured with 108m main boom plus 48m luffing jib and I was told that the reason for the short test programme was because of it being limited to this configuration for its first project. Somewhat surprisingly it was explained to me that oomlion and Sany had been in competition for this project with the tender being awarded to the first past the post.
Sany’s Southern charm
Sany has made the greatest in-roads in a ‘developed’ market thanks to its fast growing presence in North America. There is no doubt that Sany’s investment in its Peachtree city, Georgia plant and its recruiting of a strong team of well-known and respected US sales and engineering professionals has been absolutely critical to winning the confidence of US customers and distributors.
Sany America’s vice president of sales and marketing, Kyle Nape told me, “We’re delighted with how things are going. We’ve been making our way, slowly, by trying to find people (distributors) that are right for us. So far we’ve signed five with three more pretty close. Those already contracted are Northeast Cranes Sales of Lockport, New York; Imperial Crane Services Inc of Bridgeview, Illinois; Custom Truck & Equipment of Kansas City, Missouri; Binder Machinery of South Plainfield, New Jersey; and Four Seasons Equipment Inc., of Houston, Texas. In total we’ve just passed 50 crawler cranes now in the US, including about half of them sold before our new line was introduced.
“Four Seasons have been incredibly successful in Texas and Louisiana with seventeen of the 110USt (100t) model 8100 sold and ten delivered to date. One of the keys to its acceptance has been the fact that we specially developed an angle chord boom as an alternative to the standard tube chord boom. The design of the angle boom was optimized to the potential of the crane so its capacities are right up there with the tube boom - except at the extremes of radius. So far about 50% of the 8100s sold have been with angle boom to work with the oil well guys who prefer the toughness and strength of the boom.
“Our next most popular model is the 330USt 8300 with Deep South Crane & Rigging of Houston buying two and a third joining Imperial’s existing fleet of four Sanys in Chicago. The 300USt and 200USt crawler segments are pretty slow at present with so many existing cranes sitting around the country waiting for work. We’re excited waiting for the first batch of Sany RTs which will be arriving shortly. The 65USt SRC 865XL has already proven a real hit and so far we’ve sold seventeen of the 40 and 65-tonners through to end users.
“One of the great things about Sany is the speed at which things get done. So far this year we’ve introduced five totally new cranes (the three crawler cranes plus the two RTs) and next year we’ll be adding two more completely-new crawler cranes and a third, larger rough terrain model. No other company can match that.”