Recession? What recession?

9 March 2009

Will North speaks to manufacturers working in India, and to one of the country’s biggest end users, and finds out that many in the country’s lifting industry expect a good year, despite recessionary pressures.

The lifting industry in India is at a turning point, as rapid development makes modern construction equipment a better option for many users than cheap manual labour. While local manufacturers have been building truck cranes in India since before the country’s independence, overseas manufacturers are only now beginning to make an entry into the market.

Manitowoc acquired Potain licensee Shirke in 2007, and now manufactures four tower crane models at the Pune plant, ranging from 1.3t to 6t.

Terex is developing a manufacturing campus in the country, near Bangalore. So far, the manufacturing site does not include cranes, but Terex has not discounted the possibility of building cranes at the site. It recently opened a new crane sales office, also in Pune.

Manitowoc vice president for India Raman Joshi says, “Just like in any other developing nation, construction equipment has only recently started to become common in India. In the past, labour was available so readily, contractors used manpower, not equipment. Now, projects are becoming more time bound, and contractors are more keen to use equipment rather than manual labour. This has only happened in the last three or four years.

“We’re the sole tower crane company manufacturing cranes in India. Chinese manufacturers are starting to enter the Indian market. They compete very hard on price, but having a local presence, local sales staff and the Potain brand gives us an advantage.

“Tower cranes are used most on residential and commercial construction, and that is new in India. Mobiles have a longer presence in the market. There are Indian companies that have been making long lasting, traditional, hydraulic cranes for a long time. Last year, we celebrated the 5,000th crane made with Tractors India Limited.

“Mobiles and crawlers are used more in industrial construction, infrastructure, power and chemicals projects. All of these projects are booming, but infrastructure leads. In the west of India, Reliance, one of India’s biggest companies, is building a huge refinery, using a lot of Grove mobiles and Manitowoc crawler cranes.”

T R Badarinarayan has played a key role in developing the country’s crane industry. He ran Manitowoc’s Indian tower crane licensee, Shirke, for many years. When Manitowoc acquired Shirke, he helped develop the Pune tower crane plant as part of Manitowoc’s global business. He moved to Terex in early 2009, where he is setting up the company’s Indian crane sales and services office. He says, “India remains an emerging market for tower cranes considering the geographic location, population density and its status as a developing country. Small capacity cranes find their place in such companies like first time contractors. Based on the need for major projects, the larger capacity cranes are required on the job site. Both tower cranes and mobile cranes are equally useful in the market, depending on the type of lifting solution on site.”

Starting from this base, the country’s crane industry has plenty of room to grow. One of the key drivers for demand is spending on the country’s infrastructure. Chandrakant Sanghvi, chairman and managing director of Sanghvi Movers Limited, says, “A lot of demand is coming from the power sector. We’ve built our capability to build power stations. Over the next five years, India plans to expand its power generating capacity by 100,000MW. The Indian government is funding more than 70% of the new power stations, with the rest being built by private companies like Reliance, Lanco, BGR and Vedanta Group.

“That will need a lot of 150t, 250t, 600t and 750t crawlers. The new capacity is made up of a mix of power station sizes, but the 1,000MW and bigger power stations will all need 600t and 750t crawlers. We currently have six cranes of this size, and have two or three more on order. For the 600t crawlers we buy from Terex Demag, and for the 750t we use Liebherrs.”

Sanghvi Movers has developed a full service business covering all types of project. Sanghvi says, “We hire all our cranes with an operator. We do a lot of engineering and rigging planning, before we suggest the best crane for the job. We do lift planning, heavy engineering, and so on.

Lifting in India isn’t restricted to big infrastructure projects though, or major residential developments. Companies like Manitowoc’s licensee and own-brand manufacturer Tractors India Limited, and independent crane builder Action Construction Equipment (ACE), have developed cranes that address the specific needs of the smaller capacity end of the Indian market. For them, some of the effects of the global downturn are more keenly felt.

ACE director Sorab Agarwal says, “The demand for cranes is coming mainly from the infrastructure sector because the industrial segment has suddenly slowed down as of now. The maximum demand is coming from the new power plant sites as well as Metro Rail projects.

“I am sure that the [economic stimulus] initiative taken by the government and the focus of the Indian government on the infrastructure sector will normalise the demand for cranes in India in the next six to eight months. But the bigger challenge is availability of finance for the end customer, as all the leading finance companies have become very stringent in their norms and procedures for funding equipment.”

ACE’s cranes were developed with the local user in mind. Its biggest seller is a range of pick and carry cranes, but it also makes mobile tower cranes. Agarwal says, “Indian customers look for a cost effective and rugged product. Pick and carry cranes come at a fairly low price and are user friendly. Even the serviceability of these cranes is very easy, hence the Indian customers prefer these low cost, highly efficient pick and move cranes especially in comparison to more expensive telehandlers.

“We manufacture two models of mobile tower cranes. The MTC 2418 has a 24m height and 18m jib and is available either self-propelled with a tractor and alternator to generate its own electricity, or trailer mounted. The first variant is very popular for remote sites as it can generate its own electricity. The MTC 3625 is trailer mounted and has got a height of 36m and jib of 25m. These cranes are very popular in India for up to 10 floors of construction.”

Cost is a big factor for Indian users. Sanghvi says, “We’ve built expertise in-house to refurbish used crawlers. In the 150t capacity range, we buy used M4000 crawlers from Manitowoc, strip them down and refurbish them, before sending them out to work. They are very expensive new, so we can do this for half the price of buying a new crane.”

It’s an issue global businesses like Manitowoc have to take into account. Joshi says, “Indian customers are very price sensitive. The design of the cranes manufactured in India is exactly the same as in other Manitowoc plants. The specifications of the cranes may be different though, to meet the requirements of Indian customers. We use the same design, technology and components whether the crane is made in India or in Europe. Some optional specifications, like an anemometer or remote control, aren’t ordered very commonly, but the components of the crane are the same as anywhere else.”

The Indian taste for simplicity and reliability at a good price has opened doors overseas. ACE’s Agarwal says, “We have been working for the last two years to develop the Middle East market especially UAE, Oman, Qatar, Saudi Arabia and Iran. We also have well established dealerships in Dubai, Qatar, Iran and South Africa. We have been able to make significant progress in South Africa in the last year. The users of these cranes are finding pick and carry cranes as very cost effective and highly productive machines, especially at a fraction of the cost which they have to shelve out to any other type of material handling equipment performing the same job.

“We acquired a company in Romania with the aim to start assembly of our pick and carry cranes in the country. Unfortunately, owing to the change in global scenario, we were not able to start assembly as our entire attention was focused towards our core business in India. We are sure that within 2009 we will start to produce and distribute cranes from our Romanian facility.”

Despite the worldwide recession, the future looks bright for cranes in India. Sanghvi says, “The Indian government is spending a lot on projects like power, infrastructure and water. If there’s ever spending in these sectors, there’s a need for a lot of cranes, so that’s very positive for us. In spite of the global recession, our utilisation rate is 85%. That’s very good in a recessionary period.”

Joshi agrees, “The consensus right now is that, while the rest of the world is in recession, India is in a slowdown. Projects might have slowed down, but they have not stopped. Residential construction was hit, like in the rest of the world, but not the rest of the economy. The economic stimulus that the Indian government announced in the last quarter is aimed at keeping infrastructure projects moving; infrastructure is very important for India, and the projects shouldn’t slow down.

“The biggest crane market in Asia today is China. Looking at trends and growth patterns, India is well on the way to being as big. In terms of demand for equipment and the kind of projects that are going on, it won’t be long before India catches up to China.”