The European Union moves its borders eastwards on 1 May when most of the old Comecon countries and some former Soviet states are finally absorbed into full membership. In total, 10 countries are joining now. Five are eastern European countries – Poland, the Czech Republic, Slovakia, Slovenia and Hungary. Three are former Soviet Baltic states – Estonia, Latvia and Lithuania. And two are Mediterranean islands – Malta and Cyprus. Romania, Bulgaria and Turkey are on the list to join in a few years.
The change means a big jump in the EU’s population, up more than 70m to 450m. Theoretically it also means a big jump in the size of the common market at the heart of the EU. For beleaguered crane manufacturers and operating companies, battling with stagnant conditions in Germany, France and Italy, it could be a significant boost.
In the years following their entry to the EU, the Republic of Ireland and (more especially) Spain experienced construction booms and Spain remains Europe’s second biggest crane market today, behind only Germany. No one, however, seems to think that any of the new member states will become the next Spain. A typical comment is: ‘These are interesting markets but they cannot be compared with the west of Europe.’ That comes from the German manufacturer Sennebogen.
It is a question of money. The new members may add nearly a third again to the physical size of the EU but their economies add just 5% to overall GDP. Such economic structure as they had before the 1989 fall of the Berlin Wall has mostly gone in the transition to market economies. Infrastructure, which had developed relatively slowly anyway, is now decayed and production is low.
Economies like Poland’s, by far the biggest new member with a 40m population, have also taken a hit from the recent western slowdown and even the post-1989 activity that had developed is now sluggish. The Czech Republic, Hungary and Slovakia, the other bigger players have done better, but still have problems.
But for these very reasons, there has to be rebuilding. It is in the rules that EU member tates must be able to provide conditions and access to their own territories that will allow other members’ companies to compete. That means not just changes to their laws but also a physical transformation. Transport and basic infrastructure must be upgraded, with new railways and highways to the main centres. Water resources and other environmental factors must be up to standard.
Money is being made available for this. EU members are entitled to development aid and funds. The new member countries have much to do, and so a lot of money will be invested there. In the first three years of membership some €21bn in grants is slated by Brussels for the 10 countries, half on environment and half on transport. Major western engineering consultants have opened up in the east, and are busy preparing plans.
As well as the grants there will be project and infrastructure loans, perhaps as much as €6bn a year. Brussels is also encouraging the development of private funding, articularly for key roads in the European network. And there is private investment ongoing in retail centres, hotels, and residential property as well as some industrial facilities like refineries and factories.
Crane manufacturers too have put in some money. Palfinger is opening new works in Hungary and already has a subsidiary in Slovenia. Terex-Demag has a subsidiary in Hungary, Pylon, which makers carriers.
All the investment from the west should mean lots of construction work – and that means a market for cranes. ‘You don’t sell unless someone has a need for it,’ says Niels Peter Sorensen, director of Krøll, the Danish specialist in large tower cranes.
Some Brussels money has already gone east in advance of membership, to bring the candidate countries to a certain basic standard for entry. Early on, stabilisation grants were also given.
It has all helped Krøll, like many Western firms, to establish itself. ‘We have tried in Hungary,’ says Sorensen ‘and have had most success in Poland where we have been for four years.’ Krøll has sold eight cranes in Poland, via a small rental company. Although they were mid-sized cranes rather than the giant 800tm ones that the firm is best known for, it is a satisfactory start for a small company.
Sorensen says the going can be tough because ‘finance is difficult to obtain. And there are a lot of old cranes in service that were made in Poland and the Soviet Union. There was a Potain factory here years ago.’ Old models are often kept in service until they fall apart.
The same is true throughout the eastern countries and for mobile and crawler cranes as much as tower cranes. ‘The average age of cranes is over 20 years,’ says Dr Csaba Orosz of Budapestbased Horoszcoop, which is the Tadano Faun distributor for Hungary and the Czech Republic as well as Romania.
‘I think there is a good demand for cranes,’ says Orosz ‘but it is a question of credit, which the banks are very reluctant to advance without strong guarantees.’ If dealers offer five-year credit or leasing deals they have a better chance, he says.
‘Remember with an old junk crane there is nothing to write down on the books so it is better for cash flow. Noone on site cares how you lift something as long as you do it and they get a cheap price.’ Hire rates are competitive, he says.
In the old regimes every factory had a big general purpose maintenance division he says and the ‘fix-everythingsomehow’ tradition lingers on, to keep old cranes going. But they eventually break down and there is a demand to renew.
Orosz says that the demand is in the small capacity ranges of 20t to 30t – the sort of sizes that old Soviet-style machines from manufacturers like CKD in the Czech Republic and Bumar in Poland. But demand is increasing for machines in the 40t to 60t range, he adds.
To date the sale of new cranes has been limited and the market largely concentrates on good second hand machines, not least because the stalled construction market in Germany and the Netherlands has provided a plentiful supply. Many of the big names are sold, with Liebherr putting in a strong showing. Terex-Demag does well in the Czech Republic and Grove is stronger further north in Poland, though it has a presence throughout the main countries.
For Liebherr, eastern Europe has been an important territory for some years and it sells a full spectrum of tower cranes, mobiles, crawler cranes and also port and ship cranes. The company is creating two major sales centres for its ranges, in Brno in the Czech Republic and Gyo”r in Hungary and wants service and back-up to be available locally there.
Liebherr says that the Czech Republic, Hungary, Slovenia, Poland and the Baltic states are all taking used tower cranes.
For mobile cranes there is an improving picture, says Liebherr, with a transition towards much younger used machines and even some new machines. This trend is helped perhaps by relatively stringent emission standards in several central European countries.
Most of the cranes are below 100t. A five-axle model is regarded as a big crane. Models over 300t are only occasionally bought, perhaps for a wind farm erection project or a significant international scheme.
The market for smaller mobile cranes remains highly competitive, however. One way to sell into this market is to emphasise robustness and relative simplicity, believes Sennebogen, as does Csaba Orosz in Hungary. Machines without complex electronics and technology can be maintained by existing skills alongside 30 year old models.
Sennebogen has been selling into these markets for 12 years, says marketing manager Alfred Endl, across a full range of telescopic machines, materials handling machines, crawler cranes, harbour cranes. Poland, the Czech Republic and Romania are good markets for port cranes, Endl says.
Liebherr too sells harbour cranes and ship deck cranes with some success, particularly in the Baltic seaboard states where it has sold five harbour mobile cranes in recent years. It has also sold an LHM 400 model to Gda´nsk in Poland. It believes that a good market for harbour cranes may develop along the Danube as the new countries are integrated and trade on the Rhine-Main-Danube waterway increases.
While not much new equipment has been bought in eastern Europe, this may change if the infrastructure funds start to feed through. And that will lead to a greater willingness to take higher technology products.
If you assume they are far behind in technical understanding you would be wrong,’ says Niels Peter Sorensen. If money becomes more available then even the most sophisticated machines might be in demand.
There is evidence that this development has already started in the Czech Republic and Slovakia, suggests Terex-Demag’s east Europe regional manager Rafael Cezan. ‘We have good possibilities in those regions and sold 12 machines and four machines there respectively last year,’ he says.
Customers include crane hire companies, builders and demolition contractors, he says. There are not many big hire companies yet with more than 20 cranes, he says, but those that exist are recognising that with the accession the pressure for faster, more efficient machines will increase, allowing them to cut the size of their fleets.
Terex-Demag’s sales have included an AC 350 in the Czech republic, though most machines are well below the 200t mark. A particularly good customer has been the famous Pilsner beer plant.
Terex-Demag says that good back-up for service and training is a crucial component for the future, and that with this the demand for even the highest specification machines will grow. The firm has a service station in the Czech Republic and brings staff to its Zweibrücken for training.
A growing sophistication is also apparent in the truck loader crane market. Most of the major manufacturers, including Hiab, Palfinger, Effer and Fassi, are pitching for sales across eastern Europe.
‘Originally they were looking for machines that did not have too much in the way of electronics because there was not the experience for servicing,’ says Günter Ebli, who looks after Slovenia Poland and Malta for Palfinger. ‘But I think that is changing.’
In recent years, he says, the recession in Germany has impacted on Poland particularly and turned the market back towards second hand machines. Palfinger has been inWarsaw for about 12 years. Ebli reckons the Polish truck loader market is perhaps 160 units a year, of which Palfinger takes 50. He is hopeful that there will be some growth in the years ahead, particularly in construction.
Italy’s Fassi is also strong in Poland, says marketing manger Silvio Chiapusso, and it also sells in the Czech Republic, Slovakia, Slovenia and Hungary. ‘And we are obviously thinking to grow our penetration,’ he says ‘though with the other countries we are currently only at the level of making contacts. But these are all interesting markets.’
The are interesting too for manufacturers of factory cranes and hoists. KCI Konecranes in Finland has established a presence in the Baltic states, Poland and Romania and sells into most of the other countries.
‘In Hungary we established a joint venture 10 years back, which is now 100% owned by us,’ says chief financial officer Teuvo Rintamäki. We also sell cranes, hoists and other components in Hungary and we have a fairly well established countrywide service organisation. Cranes are also made locally although high value parts are imported from our component centres. This is the typical model we operate in these countries.’
Konecranes is also active in ports, both with new cranes and maintenance work. ‘We see strong development in these countries from EU expansion. Activity level is rising for inbound investments from Western Europe and America and even sometimes Japan,’ says Rintamäki. ‘However these economies altogether are still small and therefore they are not likely to compensate the dull investment climate in western Europe – yet.’
