The land of opportunity16 November 2015
It’s all change in China, with technology evolving, economic growth slowing, and opportunities for domestic and international crane manufacturers alike. Daniel Searle reports from Beijing.
In recent weeks, both the USA and the UK have rolled out suitably red carpets to welcome state visits from China's president Xi Jinping. His visit to the UK represented the first by China's premier since the visit of President Hu Jintao in 2005, and reflected the continued efforts of the Asian giant to expand its international economic relationships and to reverse the slowing growth of its economy.
The country's growth stayed at 7% in the most recent quarter, its weakest performance since 2008, while manufacturing activity fell to its lowest level in more than six years, recent research has shown. September's preliminary Caixin/Markit index, based on a survey of factory purchasing managers, fell to 47.0 from 47.3 in August -- with any score under 50 on the 100-point scale indicating a slowdown of growth.
The current period of slower expansion came after a long stretch of double-digit growth, and the Chinese government is now trying to stimulate the nation's economy with measures such as reduced interest rates - the rates have been cut five times since November 2014 - and increased public spending, with total expenditure for 2015 projected to be more than 15,000bn yuan, up from 14,000bn yuan in 2014 and more than double the total spent in 2010.
The Chinese government has also implemented more long-term plans to help assist growth, including the 'One Belt, One Road' programme introduced in late 2013 by president Xi. This is based on the premise of restoring China's ancient trade routes, both maritime and overland, and was initially named the 'New Silk Road' programme - a reference to the Silk Road network of trade routes that connected the former Chinese capital Xi'an with the world, as far as ancient Rome, in the age of the Han and Tang dynasties.
Key figures are that almost $1 trillion will be spent, with the aim of increasing the value of trade with more than 40 countries to $2.5tr within ten years. As the Financial Times commented, "Creating a modern version of the ancient trade route has emerged as China's signature foreign policy initiative under President Xi Jinping."
The programme was first announced by president Xi during a visit to Kazakhstan, when it was referred to as the New Silk Road and represented an attempt to address overcapacity in China's steel and manufacturing industries. It later became known as One Belt, One Road, with the belt referring to overland trade routes and the 'road' a maritime route between the western Pacific and the Indian Ocean.
Initial signs are that gateways are being opened - in 2014 Chinese investment overseas was almost on a level with foreign direct investment in China, reports The Economist.
Meanwhile, China's Ministry of Industry and Information Technology developed the 'Made in China 2015' initiative, designed to upgrade Chinese industry. It was drafted using input from 150 members of the China Academy of Engineering, inspired by Germany's 'Industry 4.0' plan, adopted in 2013.
A document from the State Council summarising the plan said that the main principles include aiming for manufacturing to be innovation-driven, to emphasise quality over quantity, and to make Chinese industry more efficient.
Taking the initiative
Chinese crane manufacturer XCMG followed the lead of the Made in China programme, bringing eight new products to the recent BICES exhibition in Beijing that had been improved, the company said: "according to customers' demand and to the new advancements of Made in China."
Amongst these was the XCT130, a G-generation truck crane with a five-axle chassis and six-section U-shape boom. Talking about the company's latest developments, XCMG's president Wang Min referenced a global outlook, commenting: "With the guidance of Made in China 2025, XCMG will provide the best equipment solutions to customers from every corner of the world, and become a world-class enterprise that contributes to world construction."
While the Made in China initiative is set to encourage further technological development over the coming decade, Chinese manufacturers have already made great progress in recent years. Ken Lousberg, president of Terex's global cranes business, says: "The techniques being used here are very advanced. I think people who have never been to China really can't imagine the real China. It's quite modern - especially along the sea coast from Beijing down to Guangzhou, which is very impressive.
"And it's happening very fast. My first trip to China was around 1993, and I had never seen so many black bicycles in my life as I had in Beijing -- there were just black bicycles everywhere. Now it's black Audis."
Norbert Dudek, general manager of Terex Cranes China, adds: "We had some visitors recently who hadn't been to China before, and had certain expectations of China based on what the media reports - and they came out with wide eyes. They were unbelievably, positively surprised by the technology that's being used, starting with transportation - the hotels, the service, the infrastructure."
Promise for the crane sector Terex currently operates six facilities in China, employing around 2,000 staff, and has set $1bn as the next target for its business, which it aims to reach within three to five years. The energy sector is a focus, said Dudek at the company's BICES press conference:
"If there's any certainty in any market, it's that the energy demand is always there and it is always increasing year-on-year. This includes nuclear, petrochemical and wind power projects, and large construction projects. We have over 130 cranes in this market and we are very happy to see a substantial requirement this year with our CC 6800, which we have supplied to oil fields and offshore segments, as well as delivering a CC 8800-1 Twin into the petrochemical segment for the first time.
"We have the Jinan facility where we are building 600t crawler cranes, with a new focus and a new investment in the company. We are using our German engineering knowledge to develop the machines in Jinan for 350 up to 600t.
"We also have our JV to complement our range of truck cranes, from 25 to 100t. We are well-positioned to partner and offer the full range of products and solutions to the energy, petrochemical, and large construction industries. We are very excited with the progress we have made in Jinan specifically and looking at the market as it develops, the nuclear power projects and the large construction projects such as the large airport here in Beijing will sustain the growth of the company."
At Manitowoc China, Michael Wang has also seen parts of the energy sector thrive, despite a recent dip in the market: "China construction machinery industry is experiencing product oversupply and huge inventories. The economy is slowing down compared to previous years, however the wind power industry continues to grow. Several units of our Grove GTK1100 were sold to the local projects, thanks to the superior performance of our cranes.
"For the Chinese local market, we are focusing on selling several types of cranes - Manitowoc crawler cranes, Grove mobile cranes including all terrains and off road rough terrain cranes, and Potain tower cranes. In China Jiangsu province, we have a factory manufacturing Potain tower cranes.
"We launched the 250t Grove GMK5250L with VIAB system this year from our WHV factory in Germany. From our Manitowoc factory in US, we launched the MLC3650 and MLC300 models featuring our VPC system, a new technology from Manitowoc for increasing capacity at small footprints. We believe with these new products we can better serve China local customers who have specific requirements."
China's crane makers
At tower crane manufacturer Yongmao, business is strong and the company is looking to start exporting into Europe.
"Most sectors are performing well, with business evenly split between them," says general manager Shi Yong. The companies supplies a range of sectors including high-rise building developments and power plants.
"We export through our Singapore arm, and currently supply South East Asia, and also the Middl East for high-rise buildings. Our next target for exports is Europe.
"We have sold more than 1,000 cranes into overseas markets. In China, 3,000-4,000 of our cranes are in operation.
"Customers like the diversity offered by our company -- we have full coverage from 10m-80m long and capacity from 6t upwards, which customers like as they don't have to go elsewhere. We have also been in the market for a long time so can guarantee that our technology is proven and will work."
Fellow tower crane manufacturer Fangyuan has seen the recent economic slowdown in China affect its sales.
"Overall, the domestic market is decreasing, and our sales record has followed that trend," says Mingchen Wu, engineer at Fangyuan. "Our projects are mostly in hydraulic power plants and in civil engineering."
"In China, we generally supply around 700 cranes annually -- this year target is 500 because of slightly decreasing market demand," says international business development director Shuangyuan Zhao.
In the worldwide market, the company has sold more than 5,000 cranes. "We supply Russia, Ukraine, and especially markets in Africa and the Middle East, as well as South America," says Zhao.
"In 2016, our sources predict that in the domestic market we will sell to infrastructure projects such as large-scale roads and bridge projects, as well as power projects. In our export business, we will continue to mainly supply to the high-rise and residential building sectors. We are currently evaluating new markets, such as Algeria."
XCMG, primarily a manufacturer of truck cranes and all terrains, as well as truck-mounted cranes, crawlers and tower cranes, is anticipating a gradual decline in the market until 2017, followed by recovery.
"XCMG has always been the largest crane provider in China," says Shi Wei at XCMG. "As China's economy is slowing down, sales of crane are being affected. However, the influence on the crane business is not as large as on other construction machineries like excavators, loaders, concrete pumps, and so forth.
Therefore XCMG's crane division is seeing a slight downturn in sales but still remains in the top position in China.
"Truck cranes have always been and still are the most popular type of crane in China. Sales of truck cranes outnumber all other types of cranes. Yet, with the development of wind power, more and more all terrain cranes are needed in China.
In addition, truck-mounted cranes are more and more popular in the logistics business. So these three kinds of cranes are presently popular in China.
"As well as wind power, the most common types of project at the moment include rural residential housing construction, logistics, nuclear power, and chemical factory plant construction.
"2016 will probably still see decline in the construction machinery industry including crane business. But we estimate that the downturn will hit the bottom in 2017 and will see rebound in 2018."
In a market with overcapacity in both crawler cranes and truck cranes, Sunward has created a niche for itself with its range of telescopic crawler cranes. It launched the latest model, the 75t SWTC75, at BICES and also manufactures 5t, 12t, 16t, 25t, 35t and 55t models.
"The design was produced in 2011, and we first exported the cranes to overseas markets at the beginning of 2013," says Canlun Liu, dean of crane research institute at Sunward.
"The cranes are a combination of mobile cranes and crawler cranes. The problem with crawler cranes is that some need a large amount of space on the job site. The SWTC75 overcomes this, and can also move under load, which is a disadvantage of some mobile cranes. Our crane fills the gap in the manufacturing industry - it has not just one single function but is a combination between the two types of crane.
"For this kind of crane, we are the high-level domestic brand. In China in the crane industry there is big competition, so we designed and developed this type of multi-function machine. We have specialised customers who need this kind of machine.
"In our domestic market the cranes are used on projects such as construction sites and oilfields. Abroad, they are used in mining.
The first 75t model was recently exported to Australia - we are focused on exporting it to Australia, South America and South East Asia.
"We have also exported to the British market, and in Singapore the 25t and 55t models are very popular. Singapore is a very small country, like a city, so job sites are very small. These models can be moved easily and are very convenient."