<b>The rise and fall, and rise and fall, of the North American market </b>
Despite the oil leaks, short reach and limited lifting capacities that plagued the early models, and despite the proliferation of proven, reliable mechanical truck and crawler cranes, North American crane buyers took instantly to the new telescopics. Initially most manufacturers entered the business producing small yard cranes and then some ventured into rough terrains and truck cranes. Having approached 1,500 units sold in 1967, demand for hydraulic cranes virtually doubled within just two years.
During these early years, the challenge facing manufacturers was to produce hydraulic cranes of ever greater lifting capacity and with ever longer booms to broaden the range and variety of work that they could perform. By 1970 the world’s first 80 ton telescopic truck cranes were introduced, followed in 1973/4 by 100-tonners and in 1978 by 200-tonners. However, in North America, unlike Japan or Europe, it was not truck cranes that dominated demand, but self-propelled RTs and yard cranes.
As hydraulic crane demand in North America soared past 5,000 units in 1975, some 70% of these cranes were RTs. Most were of extraordinarily limited capacity – 15 ton maximum – and reach was limited to 18m (60ft). They had less performance capability than all but the very smallest lattice cranes, but RTs were a convenient, easy-to-handle, go-anywhere tool. By the late 1960s larger, 35 ton, RTs gained popularity and by 1970 there were 45 ton cranes with 30m (100ft) booms, extending the scope of the concept and helping grow demand. These and the larger sized truck cranes could now meaningfully replace smaller lattice cranes.
New products and especially larger or stronger cranes have always stimulated demand in the crane market. As demand for one size or type has reached capacity, generally there has been a larger or better new model to replace it. Over time demand for the very small RTs and truck cranes dried up, as cost inflation and the ratios of owning, operating and transport costs have favoured ever-larger cranes. Until the early 1980s hydraulic crane demand seemingly knew no bounds. Periods of sluggish construction activity and economic downturns did not have the same severe impact on hydraulic crane demand that it had on more mature types of construction machinery.
That all ended in 1982 when demand collapsed. Industry veterans will remember the devastatingly long recession that followed. At the time many prominent politicians and economists forecast the end of the US heavy manufacturing industry and many US makers of construction machinery and cranes followed the pundits and either closed their factories (voluntarily or otherwise) or moved production to overseas plants to avoid the strength of the US Dollar and crippling interest rates.
As is now clear, US manufacturing did not die, although many businesses were lost. For those that survived it was a long slow grind back to rebuild markets and business infrastructures.
It took until the late 1980s for demand to fully regain momentum, only for this to dip again during the recession of the early 1990s. By that time the structure of the North American crane market had changed considerably. Except for the larger sizes, demand for lattice boom cranes had all but disappeared and annual sales of hydraulic truck cranes had been so weak for so long that most US manufacturers had ceased efforts to develop new models. Japanese and German manufacturers that had entered the market during the 1980s had put down roots. Demand was especially robust for the new all terrain cranes which further challenged the aging US truck crane designs.
The recession of the early 1990s was followed by a long period of sustained growth, peaking in 1999. Though demand that year was ‘only’ around 3,000 units, which is 60% of the number sold in 1975, the average size and cost of today’s cranes is several times larger than those of 25 years ago. Unit numbers may be lower than in the past but the value of the business was not.
The ‘natural’ easing of demand seen in 2000 and most of 2001 after such a long expansion cycle was not viewed with any real trepidation within the industry. Rental utilisation around North America remained, overall, healthy. And though it has become a symptom of the industry to bemoan rental rates compared to those of bygone days, crane rental companies were healthy and wealthy enough to continue their buying programmes at only slightly reduced levels.
From 11 September 2001 capital spending was put on hold. The subsequent impact of major corporate failures such as Enron and Worldcom, have dealt a double whammy to the US economy which remains, by common consent, fundamentally sound. However, such events impact especially on capital-intensive markets such as the crane industry and unit sales in 2001 ended up 33% down on 2000, much worse than the 15% to 20% for which everyone had been braced earlier in the year.
It gets worse. Based on trends in demand during the first half of 2002, Chortsey Barr is anticipating that full-year North American hydraulic crane demand will be a further 33% down on 2001. Particularly hard hit is demand for telescopic truck cranes which up until this year had enjoyed very strong sales for the past five years. Conversely, sales of ATs have been less hard hit. The AT concept is still finding converts and new markets and has, in part, been stimulated by attractive pricing facilitated by the recent weakness of the Euro. The comparative resilience of the higher cost AT means that, despite pricing pressures, the aggregated revenues of the crane manufacturers has not declined as dramatically as unit sales.
One result of the growing US budget deficit and nervousness in the financial markets is the weakening of the value of the US Dollar against the Euro which has been flirting with parity. This could slow the tide of German ATs into the USA as they become more expensive. And with US exports about 12% cheaper than they were just a few months ago, there is likely to be an increase in the proportion of US hydraulic cranes that are exported, which currently stands below 20%.
Finally, we may think that the numbers this year look bad, but despite the unparalleled impacts on the national psyche and business/ consumer confidence, the drop in demand from 2001 to 2002 is less than half that which occurred in 1982 and is significantly less than that of 1991. This is strong testimony to the underlying strength of the market.

<b>Japanese volatility</b>
The Japanese hydraulic crane market was founded on the appeal of the small telescopic truck crane. During the late 1960s demand increased at a rate even faster than that experienced in North America, and from the beginning the Japanese market was virtually 100% focused on the truck crane.
Demand for telescopic truck cranes of between 5t and 15t capacity soared during the 1960s doubling from about 900 units in 1967 to about 1,900 in 1969. Larger sized truck cranes of 25t and above appeared in the late 1960s, expanding the application potential in a market which had a much smaller population of old mechanical lattice boom truck and crawler cranes than was the case in Europe or North America.
The Japanese market passed through several turbulent years in the 1970s but, for the main part, its manufacturers enjoyed robust growth thanks to the quality of their products and burgeoning exports, aided by a weak Yen. After several US manufacturers had failed in their attempts to sell American-style rough terrain cranes in Japan, indigenous crane manufacturers evolved their own hybrid type of RT suited to the home market. This machine offered a degree of highway travel capability and so was able to compete more directly with truck cranes.
Initially demand for these ‘new’ RTs was slow to catch on with annual sales reaching only 165 units by 1980 – after nearly a decade of trying. Demand took off dramatically in the 1980s, reaching almost 1,000 units by 1986 and nearly 4,000 by 1990. However, unlike the pattern in other countries, this new ‘roadable’ Japanese RT ate directly into demand for truck cranes and by 1990 RTs were out-selling truck cranes by a ratio of 4:1.
Export-orientated Japanese manufacturers also recognised the growing appeal of the all terrain which by the 1980s was eroding demand for truck cranes in many countries. They began developing ATs but found themselves hampered by domestic customers favouring the lower-cost RTs, which offered road speeds adequate for much of urban Japan’s crowded highway network. With limited home market demand, the Japanese manufacturers found themselves with ATs as essentially ‘export-only’ products, manufactured in relatively low volumes. These developments in the nature of domestic hydraulic crane demand would have fundamental influence on the long-term competitiveness and strategic planning of the Japanese manufacturers in overseas markets.
With export opportunities declining, domestic demand was strongly stimulated by massive public funding during the late 1980s and early 1990s, creating the ‘bubble economy’. Crane demand soared to an average of more than 5,000 units a year. Underpinning this rise was a new sub-category of crane, the mini RT, in the 7t to 10t range which quickly became the single largest selling crane type in Japan. At the same time a new breed of mini telescopic boom crawler cranes and truck cranes emerged. Though relatively expensive compared to larger machines, these small cranes instantly proved themselves ideally suited to Japan’s crowded cities. The success of the mini concept lay behind the strong revival of demand.
The steady appreciation of the Yen from ¥270 to the Dollar in 1977 to ¥170 in 1986 and ultimately to below ¥100 in 1995 severely challenged the export competitiveness of the Japanese. That the Japanese crane and construction machinery industry was able substantially to maintain its position in the world market says much for its quality and resourcefulness. However, it is not so much cost challenges that inhibit exports of Japanese telescopic cranes today as product design specifications, which in many respects are now out of sync with those of most export markets.
As recession took hold in Japan, and then persisted until recognition of the ‘structural’ issues facing the nation’s economy became the central focus, demand for hydraulic cranes (and virtually all types construction machinery) has steadily declined. Several of Japan’s largest construction companies have filed for bankruptcy recently and more are likely to follow.
Chortsey Barr expects 2002 crane sales in Japan to be the lowest in 25 years. The difference between now and 1977 is that thousands of export sales are no longer available to the Japanese manufacturers with their current product lines.
The recent alliances between certain Japanese crane manufacturers mark a return to the strategies seen in previous downturns i.e. seeking to increase productive efficiencies collectively rather than individually. While there are clear cost benefits to this there is also the potential for long-term compromise of individual competitiveness. Undoubtedly there is widespread frustration amongst Japan’s manufacturing industry with its domestic politics and gigantic bank debt issues. Unfortunately it now appears that the Kuizumi administration’s daunting reform agenda has all but failed to push through meaningful changes and wrest power away from the nation’s traditional conservative establishment. The question as to how much worse things must get in Japan for meaningful structural reform to take place lies at the heart of the future health of many aspects of the Japanese economy, not least the construction and construction machinery industries.

<b>The global picture – and predicting the future</b>
Why does crane demand rise and fall? There are many influences, including the health and confidence of end-user industries and the rise of the rental industry in many countries. There is also a correlation between crane sales and macro indicators such as GDP growth and interest rates on the domestic front and the price of crude oil globally. Technical, regulatory and safety issues can generate obsolescence and thus impact on demand. All of these factors can impact in different ways in different countries. Witness the rise in sales in Australia in the lead up to the 2000 Olympics and the fall off once the infrastructure was in place (see table). Australia has its own market dynamic in other ways too: Franna type articulated all terrains dominate crane purchases.
Despite the inevitable regional variations, overall global trends are evident. A major factor, perhaps the most important, is the life cycle of the product. The working life of mobile cranes has been 20 to 30 years, and while many users will not keep a crane for that long, reconditioning it and selling it on to a second and even third owner, the volume of annual demand for new cranes is heavily influenced by this cycle. In fact, to a large extent the world’s hydraulic crane market is now replacement. This is a greater influence on hydraulic cranes than say hydraulic excavators, which basically self-destruct by beating themselves against the earth. The cycle of mobile hydraulic telescopic cranes is shorter than that of mechanical lattice boom truck and crawler cranes, however, although the technological transition from mechanical crawlers to hydraulic will in due course be shown to have reduced their cycle more in line with telescopics.
The peaks and troughs in demand vary from country to country. New product development within the hydraulic crane industry is a factor that over time creates technical obsolescence in some of the more advanced markets. During buoyant economic conditions, this can encourage first-rank customers to replace their cranes more quickly than they would otherwise. This is most marked in the AT category where developments in boom design and construction technology by German manufacturers have substantially improved AT performance compared to just a few years ago.
The used crane market is a significant business, and more and more customers are inclined to purchase used rather than new cranes. Specialist used crane brokers are active all around the world. Used equipment auctions draw international audiences. Perhaps most significantly, several leading European manufacturers have highly developed crane refurbishment centres. Cranes, unlike motor cars, are not usually dumped after 10 or 15 years but are refurbished, reconditioned and rebuilt.
While the demand cycle for hydraulic telescopic boom cranes clearly varies significantly between countries, the graph of global sales over the past 30 years is a sine wave with both frequency and amplitude declining. One might be tempted to forecast that the height of the peaks, the depths of the troughs, and the distance between them will continue to reduce as the market grows more mature. However, the crane market is more complex than this and if history tells us one thing it is to expect the unexpected.