The period 2006-2008 saw the entry of Chinese cranes into many export markets, as unprecedented levels of global demand created openings for these ‘new’ suppliers. In part, this opening was due to the fact that the order books of the traditional leading crane makers had exceeded their supply capabilities, resulting in delivery times extending out as far as two years.

The disparity between market demand and the ability of the traditional suppliers to supply cranes in a timely manner created a heyday for brokers and dealers. So over-heated was demand that customers all over the world were desperate for machinery and many were willing to pay prices way over the odds to get their hands on equipment. Often before a new crane left the factory, it was re-sold, not once but twice or even three times with its price escalating at every turn. Almost every manufacturer hastened to expand manufacturing capacity with major investments in factory expansions and additions. But these expansions came relatively slowly and once manufacturers were able to ramp-up production, the boom was about to be snuffed out by the financial crisis of Q3 2008.

Production overkill?
Very quickly buyer frustrations at the long delivery delays became a distant memory, with many retrospectively happy that they didn’t actually get all the equipment they had being scurrying to accumulate. Meanwhile traditional manufacturers were left with new capacity, dramatically under-utilized and mostly yet un-paid for.

These changes in both demand and supply sides of the market, taken together with continued evolution in the demand for different types and sizes of crane, continue to present real opportunities for both crane manufacturers and, at least in most markets, crane rental companies.

The economic crisis that struck in Q3 2008 severely impacted demand in 2009 and 2010 in almost all of the world’s developed economies.

While global demand was temporarily affected, buyer confidence recovered quite quickly in most emerging nations, particularly in Asia. Similarly, demand in fiscally well-managed and resource-supplier nations like Australia and Canada rebounded after only a brief pause. By 2011 demand was recovering quite robustly in North America and showing positive signs in most of Northern Europe. Japan’s long road back to full economic health was rocked by the Great East China Tsunami and Fukushima but even those clouds had a silver lining in terms of crane and machinery demanded for the long-term recovery efforts.

Changes in Southern Europe
The malaise continued in the Eurozone and specifically in Southern Europe. The long drawn-out drip-drip approach by EU governments and institutions in addressing the debt crisis and settling the very future of the Eurozone remains the most significant global economic issue restraining a rebound in global confidence and investment. Many cry-out for major infrastructure investment programs that would re-invigorate Europe’s construction industries and provide a major boost to employment but thus far its more talk-talk and ever-climbing unemployment.

Starting 25 years ago, the money that the EU pumped into Spain propelled it from being a backwater of the global crane market to top five status. The market consistently took over 300 all terrains crane a year. Spain also became a huge market for tower cranes and a major market for crawler cranes. As the crisis has perpetuated, Spain has witnessed the kind of massive exodus of used cranes that was last witnessed in South Korea in the wake of the Asian Financial crisis a quarter-century ago.

While Iberian demand is a relatively recent phenomenon, Italy has long been a very important market for virtually all types of mobile, construction and maritime or port cranes. Italy has long held the crown as Europe’s largest rough terrain crane market, as well as being the largest rough terrain manufacturer in Europe and, after Japan and the US, the world’s third largest producing in this segment.

While Spain has never had a significant mobile crane manufacturing industry, the converse is true for Italy. Consequently the devastating decline in domestic crane demand most severely impacts the fortunes of Italian crane manufacturers. Most, if not all, are in dire straits and several are close to going into receivership.

To put the importance of the Southern European markets for mobile telescopic boom cranes into perspective, in 2007 Spain was the world’s third largest market for all terrain cranes and Italy was also a top-ten player. The combination of all terrain demand in Spain, Italy, Portugal and Greece accounted for almost 15% of global demand.

By 2011, all terrain crane sales in the four highlighted Southern European markets had declined to 12% of 2007 levels with 400 fewer cranes purchased.

While global all terrain demand in 2011 was still 30% below 2007 levels, close on half of the losses were attributable to the sum of these four Southern European markets. Similarly, over the same five years, demand for rough terrain cranes in these four countries has declined by two-thirds.

It could be a generation before strong demand returns to the Iberian peninsula. Italy, on the other hand, for a wide variety of reasons, has the potential to return to the top table of crane demand quite quickly.

Considering the traditionally Europe-centric nature of all terrain crane demand the loss of 400 units from just these four markets, located on manufacturer’s doorsteps, represents quite a challenge.

That’s especially the case for Italian manufacturers such as Marchetti and Locatelli. Even for the likes of global players like Terex and Grove, the challenge of substituting Italian market demand is no easy issue.

We asked leading manufacturers how their businesses have responded to the change in shape of the global market.

Euro-changes impact China
Commenting on the state of the Chinese market at Bauma China, Andreas Boehm, managing director of Liebherr International AG, said that while the slowdown in China is affecting all manufacturers, Liebherr has improved its China market share. Boehm said China remains one of his group’s top ten markets and has been active since its first agency opened in 1978. Liebherr expects a slight market recovery in China starting second half 2013. He added Russia is now the group’s second largest market.

Christoph Kleiner, managing director of Liebherr-Werk Ehingen, talked specifically about the changes in the world crane market over recent years, indicating Liebherr expects 2012 all terrain crane demand to increase 10% over 2011’s volume; he expects sales of large crawlers above 300t capacity to remain stable at 2011 levels. He confirmed many of the infrastructure and energy projects which had been postponed in the wake of the financial crisis were now being realized.

Talking of the changes in the structure of the global mobile crane market, Kleiner said, "In Europe, high market saturation in the mobile crane sector and the economic troubles of the countries of southern Europe in particular had a dampening effect. No increases in sales are anticipated in this region in the foreseeable future.

"Most recently there has been a rather fundamental shift in the significance of the individual markets and sales regions. While eight years ago more than 60% of total turnover was being achieved in Western Europe, with Germany the most important, this share has now dropped to less than 40%. At the same time business overseas has been constantly on the rise. This applied in particular to the BRIC states and newly developing countries.

Changes to the regionality of Liebherr-Werk Ehingen’s mobile crane sales are evident from the pie chart presented by Kleiner at Bauma China (see chart above). During a visit by the author to Ehingen, marketing manager Wolfgang Beringer confirmed, that Liebherr’s share of the domestic German market is now over 50%. He said, "In 2011, India for the first time was within (Liebherr-Werk Ehingen’s) top ten markets. Some important European markets fell out of the top ten: UK, Italy, Spain and Austria. In 2007 Australia was our #14, in 2009 #10, and 2011 it was our #6 market. Four-to-five years ago we had a market share of about 30% in Australia, now we have a market share of approximately 50%."

Kleiner added, "In the long term we again see high demand for mobile cranes by the sectors of infrastructure, refineries, chemicals and energy, with wind power playing a particularly important part. Large crawler cranes will also be needed in large numbers for the construction of power plants."

Talking specifically of the China crane market, Kleiner said that Liebherr’s 500t LTM 1500-8.1 remains its best seller, with 43 units sold to China since the first to Shanghai Tengfa in May 2003.

Chinese exports take off
It was during the 2005-08 period of extended delivery terms from the traditional suppliers that the Chinese manufacturer saw an opportunity, offering availability measured in a few weeks. Chinese crane exports rocketed in 2007 and especially 2008. Almost all of these were destined for emerging markets, especially India, where the low prices appealed to customers who heretofore had only been able to afford quite-old secondhand cranes.

While exports represented less than 10% of total Chinese production and sales to emerging markets represented over 90% of these exports, nevertheless brokers and traders in Europe, America and Australia also saw a profit opportunity and tried to introduce Chinese cranes to their home markets. Some even drew the parallel of the earlier emergence of Japanese cranes and equipment, saying "China is the new Japan." Such parallels were naïve in the extreme. For, while during the 1970s, Japanese manufacturers were guilty of ‘dumping’ and there was also strong criticism of currency manipulation, anyone who has worked with Japanese companies also recognizes their culture of product support and respect for business agreements and international standards.

Chinese service growth needed
The revolution of the Chinese economy and dynamic growth of Chinese industries is a staggering and unparalleled achievement. But it is also the case that while building industries and products that emulate those that already exist in the rest of the world can be achieved with dynamic focused effort, not everything can be developed and built in a heartbeat. As crane users know only too well, the demands and expectations of a consumer product are one thing, but cannot compare with those of a machine that must work for 20-to-30 years in construction site conditions and needs 24/7 back-up.

What the Chinese manufacturer’s crane sales experience has illustrated is the clear difference in the expectations of customers in emerging markets versus those in mature, developed, markets. Customers in India, Russia, CIS, Africa and many parts of Asia and Latin America continue to buy Chinese cranes, often in growing quantities. With few exceptions, customers in Europe and Australia have all-but given up on them. The difference is not only quality but product support. For fifty years, crane users in emerging nations have had no alternative but to buy very old secondhand cranes, make them last well beyond their safe working lives and fix them in local back-yard shops with will-fit parts. Alternatively they have had to buy low quality cranes with out-dated designs made in Russia, India, etc. To these buyers, the far-more advanced designs and superior quality of Chinese cranes looks like, and indeed is, a good deal.

Conversely, buyers of Chinese cranes in developed countries may be disillusioned. As has often been said, the price paid for anything is quickly forgotten as soon as problems arise. Young Chinese salesmen have learnt the sales, quality and service buzz-words of the West very effectively. But a highly efficient capability to support a machine with 24-hour parts availability over a its working life is vastly more challenging than any new product development.

Products move forward
At Bauma China 2012 the impressive strides made in new product development by leading Chinese manufacturers were evident for all to see. The pace and scale of product development is breathtaking. While it is clear that Chinese engineers are well capable of emulating the designs of leading European, Japanese and American equipment, they may sometimes overlook elements critical to performance and safety. Of course state-owned enterprises, like governments, often expend money and resources less judiciously than private companies. But as some executives of the leading Chinese manufacturers concede, many of the larger-scale new product developments are not purely market driven. The market for the largest Chinese mobile cranes is still undefined.

Crane and equipment manufacturers worldwide have always trumpeted their achievements in being the first in any field or category and attempts to be the first or biggest have resulted in some real duds.

For the main part, significant investment in the development of ground-breaking products is deeply discussed with engineering and marketing to establish that the initiative holds real market potential and will ultimately yield commensurate profitability and value. It is unclear if all of the latest Chinese innovations are about actually selling cranes.

Bauma China saw numerous Chinese firsts and some world firsts. The Chinese "firsts" included the Sany SSC 1020 (similar to the Grove GTM concept) and the XCMG XCL 800 lattice truck crane (similar to the Liebherr LG 1750). World firsts included the XCMG RT 200E 200-tonne rough terrain (overlooked by many foreign visitors because it looked more like an 80-tonner), the Zoomlion ZAC BO1 2000t all terrain and a Zoomlion truck-mounted telescopic tower crane that looked like the amalgam of a 1960s tower structure and a 21st century carrier. But, in the more mainstream product categories, most serious crane people at the show recognized the serious strides forward in design and quality that have been made since the last Bauma China. That can only be good for the industry and market.

China’s manufacturers remain strongly-motivated to earn foreign exchange from export sales and to deny importers business in their home market. In the latter endeavor they are increasingly successful with the market share of imported large crawler and all terrains on a steady downward trend. Similarly the investments in Chinese crane manufacturing joint ventures by Tadano, Terex and Manitowoc all continue to lose Chinese market share.

In 2007 XCMG, Zoomlion and Sany controlled just short of a 75% share of Chinese truck crane production. In 2011, these three had increased their share to almost 90%. Not only are the Terex, Manitowoc and Tadano truck crane ventures being squeezed out, but also the other dozen or so smaller domestic truck crane makers.

XCMG remains the dominant player with a consistent share of over 50%, while over the past five years Zoomlion has increased its share to over 25% and Sany has come from nowhere to claim 10% of the market. Still, despite all of the high-profile new product introductions by the Chinese, sales of all terrain cranes in the country remain relatively low at less than 200 units.

As we have discussed in previous articles, the Chinese market has taken more readily to larger-sized truck cranes of 100t capacity and larger. This is set to expand further with the latest Bauma China 2012 introductions of 220t capacity six-axle truck cranes by both XCMG and Zoomlion.