For ten years, demographic changes and a climate that entices second-home buyers from abroad has kept Spain’s residential construction market booming. With the worldwide credit crunch, and local factors such as tighter enforcement of planning regulations, the country’s housebuilding industry has hit a wall. However, not every sector is doing as badly.
The Spanish plant manufacturers’ association, ANMOPyC, has tracked the downturn. Director Jorge Cuartero says, “We should differentiate several aspects of the market to properly understand the situation in Spain. On one hand, residential construction is our main cause for concern, and has suffered an important deceleration.
“But, the fact is, not all of the construction sector is living through a bad time. Actually, public construction is expected to grow by 5% this year, and civil engineering is expected to soften the decrease in growth caused by the problems in the residential sector.”
Cuartero points out that the hit to residential construction is, in some ways, predictable: “The outstanding growth of the market during recent years, could hardly still go on in the future, and has flooded the market. The second reason for the decline is the complicated economic situation across Western Europe, that has also affected Spain. And finally, the problem of finding financing, not only for the construction companies when carrying out their projects, but for household economies when asking for loans and mortgages.”
An important source of demand for construction companies in the country has been state investment in infrastructure and other building projects. In the run up to the country’s general election, on 9 March, new government investment slowed. With the return to power of Jorge Zapatero’s centre-left government, public investment is expected to pick up again.
Nicolas Grand, Terex marketing director for South Europe, the Middle East, and North Africa, says “New public works stopped being contracted in the run up to the elections; they may pick up now.”
The collapse of confidence among lenders is having an effect across the whole economy. Cuartero says, “The situation in the construction sector is worrisome, but the problem is not only in construction; we see how other important sectors in Spain-such as the automotive sector-are suffering a similar situation.
“In the plant sector, the most affected are machinery rental companies, and manufacturers of any machinery or equipment directly related to residential construction, especially dry mixer trucks, scaffolding, and formworks. All of these sectors have suffered a drop in their sales since the last quarter of 2007.”
The crane sector has been one of the hardest hit. Ian Trenzano, sales manager for loader distributor TransGruas, says, “Business is slow. Construction is down. We’re selling, but the market is low. Interest rates are high, and the banks aren’t lending. Construction in Spain is based on speculation.”
Carmelo Hernández Elía, export sales for Liebherr Industrias Metálicas, says “Spain was good last year, but this year, everything has stopped.”
Cuartero agrees, “Crane manufacturers are the ones suffering the most from the construction slump, as tower cranes are used in 100% of residential construction works. Crane manufacturers have to adapt to the new economic situation of the Spanish sector and try to export part of their production to other markets.”
This is a message many of the country’s manufacturers are picking up on. Terex’s Grand says, “Sales in Spain are down, as are Portugal and Greece. But other export markets, like North Africa, and the Balkans, are going well. Morocco, Tunisia, and Algeria are going very well, they’re investing a lot in infrastructure. Libya is doing well too.”
Tower crane manufacturer Linden-Comansa is also seeing strong export sales. Roberto Insausti, area manager for Linden-Comansa, says“About 90% of our production now is going to export: it was 70% in 2007. We aim for a 50:50 split though.
“We’re working hard in the USA, where we’ve got about 25% of the tower crane market. We’re working hard in Russia, Ukraine and the other CIS states. We’re selling well in France, and in the Gulf.
“We’ve got sister companies in France and Russia, and a factory in China. The Chinese produce one model, using systems from local suppliers. They’re making the best at the quality they need. We can also sell other Linden Comansa cranes, built in Europe, through them, if customers want.”
Liebherr Industrias Metálicas’s Elia is following the same strategy, “For us, it’s not a big problem, we’re mainly an export factory; for local manufacturers, it’s a bit more difficult. We’ve got our name, and our distribution network, so we will get through OK. We’re opening new markets, including Brazil. We’ve got service deals in Venezuela and Argentina. There’s a lot of cranes sold there.”
Cuartero says other manufacturers should look to these companies’ example: “Our advice for the Spanish manufacturers is to bet for export, our associate members have been doing it for many years and their experience shows that companies have to work in several markets in order to diversify risks; this way, changes that come in a certain market will have less of an effect.
“It is hard to say what to do in such a delicate situations like this, as there are many factors to be analysed, including company size, range of products, and economic environment. But if we have to suggest something, this could be to diversify their products and their target markets. If they are focused in residential construction, they should look into extending their product ranges to some other areas such as civil engineering, mining, or even agriculture.”
With a series of global acquisitions and investments in new plants in developing countries over recent years, the crane industry’s biggest players have shown that they are willing to diversify in the way Cuartero suggests.
However, supplying the international lifting industry isn’t just a game for the giants, as one Spanish manufacturer demonstrates. Luna has been building truck mounted cranes for many years, putting telescopic booms on commercial trucks, with much of their commercial appeal coming from the simplicity and ease of repair of their products.
Luis Javier Mur Gil, export manager for Luna, says, “Around 80%-90% of our sales are exports. We sell well in South America and Eastern Europe, but also in France. We mainly make truck mounted cranes, and we’re very flexible about the makes of trucks we can mount cranes on. We do a lot of business with Sogecofa, the number four rental fleet in France.”
Maybe, with a declining residential construction sector across the developed world, the key to success will be the type of simplicity and flexibility that a firm like Luna offers.
