Chinese revolution

Over the past few years, it’s been a bit of a dispiriting experience going to the big trade shows. At Intermat in 2009, it was clear that the Paris show was struggling to compete with the two other big triennial shows, Bauma and ConExpo, and was increasingly becoming a regional show. Saie in 2010 suffered the same fate, with many manufacturers vowing not to support an annual crane presence at the Bologna show. The original Bauma in Germany, while still hugely popular and a key event in the calendar of everyone in the crane industry, was hampered by the cloud of ash spewed over Europe by the Eyjafjallajökull volcano.

Few visitors leaving the bustle and noise of recent shows for the cold misery of the collapsed economy outside would feel much in the way of optimism, however productive the event had been.

In the queue for Bauma China, with hordes of visitors jostling for a way into the show on the first morning, it was clear that there is something different about China and about this show. From the outside of the Shanghai New International Expo Centre the skyline of the open-air showground bristled with cranes: dozens of towers, and huge crawlers and mobiles, many with capacities reaching into thousands of tonnes.

The enthusiasm of the throng of visitors was matched by the exhibitors. The big manufacturers filled their stands with row upon row of cranes, from 8t truck cranes all the way up to 2,000t crawlers. Rival firms mounted huge sound systems projecting their pitchmen’s spiel against each other: one contact of Cranes Today took the time to check the sound levels, and found they were many times beyond the level that would be allowed on the busiest of construction site.

A unique market
Manitowoc showed two truck cranes at Bauma China, along with its first Chinese built crawler, the MLC 100. Shortly before the show, the US-based crane builder announced it was creating a new regional division solely for China, splitting it out of its Asia Pacific business. Gilles Martin remains in charge of the Asia Pacific region, with Grove and Manitowoc veteran John Wheeler now heading the China region. Both report to Manitowoc Cranes president Eric Etchart (himself a long term leader of Manitowoc’s business in the country).

Wheeler explains, “The size of the Chinese market creates a significant opportunity. Eric Etchart felt it appropriate to have one manager directing Chinese operations. The market is substantial, the growth rate is phenomenal, and I don’t see it slowing right now. There’s a very bright future for construction and for lifting.”

Ken Lousberg, newly appointed as president, Terex China operations and business transformation, agrees: “While the rest of the world is going through recession, for China, it’s just been a little dip in exports.”

Terex’s enthusiasm for the country is considerable. Sitting in on Cranes Today’s interview with Lousberg were Terex Cranes president Rick Nichols and vice president for marketing Francois Jourdan. The three tried to find ways to explain the importance of the market.

Nichols says, “The difference is, China is bigger...” Lousberg adds, “People underestimate just how big.” Nichols continues, “...it’s the largest construction market in the world.”

Both turn to Jourdan for some hard figures: “Last year, there were almost 35,000 truck cranes produced in China," the marketing man says. “There are pretty big numbers of all terrain sales (both imports and local), around 350 units a year. And the domestic market for crawlers is growing, it’s around 1,500 a year.”

Nichols concludes, “Then, you have 8%, 9%, 10%, GDP growth, you have to build for that.”

It’s not just foreign businesses that see how China’s growth sets it apart from the rest of the world. Wang Haiping, marketing manager, Fuwa, says, “In China the financial crisis was not so serious. Fuwa sold about 600 units in 2008 and 470 in 2009. We are aiming for 500 units in 2010.”

Haiping’s figures suggest the sales blip was less about China’s economy than the world’s: “In 2008, about 60% of Fuwa sales were exports. In 2009, this dropped to about 30%. In 2010, exports were about half.”

Demand driven
Domestic demand is strong across all sectors, with investment from both the private sector and the Chinese government. LiuGong vice president David Beatenbough came to the company from Case New Holland, where he was VP for R&D in the compact equipment division. The company recently bought a crane builder, Bengbu, which was making truck cranes and beginning to develop a crawler line.

He says, “Direct sales are primarily to contractors on large projects, like high speed rail. There are dozens of high speed rail projects across China, as part of the country’s economic stimulus package. At the moment, LiuGong cranes are working on the 350kph Beijiing-Shanghai line.”

As well as high speed rail, the Chinese government has plans to build metro lines in the capitals of each province. This will also call for the sort of 25t truck cranes many Chinese manufacturers focus on.

Another state-backed source of demand is residential construction. Helen Huang, president of Zoomlion’s tower cranes division, says, “In my personal opinion, the general trend in residential construction is going up. In the next ten, twenty years the trend will continue up, and all developing countries will follow the same trend. In many countries, 80% of the population live in cities; in China, it is only 40%, so the government is pushing to develop cities.”

That huge demand for new inner city homes means that cities like Shanghai are building a mass of skyscrapers, stretching as far as the eye can see. That’s a great boost for companies like Zoomlion. Huang says, “The government of China insists on very strong monitoring of tower cranes. Their focus is on buying new cranes.”

Not everyone’s product is right for this market, but there are plenty of other opportunities, both within China and for Chinese cranes in other markets. Comansa Jie was formed in 2006 as a joint venture between local company JIE Holding Group and Spanish firm Linden Comansa. Linden Comansa commercial director Martin Echevarria explains, “Comansa Jie cranes are at the top level of the market in China: the price is higher than some local rivals, but still acceptable. We have a lot of high profile customers. Two of the biggest nuclear power projects in the country use our cranes. They’re also used on dams, power plants, bridge building and LNG projects.

“Civils continue to be strong, but residential doesn’t. Competition on big projects is smaller: there are very few manufacturers in the world who can do this type of job.”

Echevarria’s colleague at Comansa Jie, foreign trade manager Robin Hu, explains, “Our smallest crane, an 8-tonner, is a bit bigger than the Chinese market generally needs. About 70% of Comansa Jie’s production is exported. The domestic market is good, but difficult. We’re aiming to increase domestic sales.

“We’re exporting to almost every country in South East and South Asia. We have a huge market share in Singapore, but are also selling cranes in India, Vietnam, Hong Kong and Indonesia. For example, Comansa Jie cranes are working on the Keangnam Ha Noi Landmark tower, the tallest tower in Vietnam.

“In Singapore, the market is mainly residential. We delivered 120 Comansa Jie cranes to Singapore over the past two years, and 20 units from Linden Comansa in Spain.”

Like Comansa Jie, Zoomlion is building big tower cranes: in some cases, very big ones. The company’s tower crane division was showing one of the huge sections for a new ‘super large’ tower, the D5200. Helen Huang says, “This new design of super-large tower will be used for infrastructure projects. We’re showing D5200 tower sections, designed for bridge building. It can lift 240t, and work at a maximum height of 220m. The D5200 has a capacity of 5280tm, equivalent to lifting 70 elephants to a height of 70 storeys. It is used for lifting heavy steel components on bridges. It’s part of a new technique for building bridges in China, building big components on the shore and moving them into place. There will be demand for 10,000tm cranes for these jobs in future.”

Comansa Jie has chosen to take an essentially European crane, and make use of the cost advantages offered by Chinese manufacturing to boost its appeal to the top end of the domestic market and regional export markets. Tadano has taken a similar approach. Its BQ Tadano joint venture aims more squarely at the local market, but it is working on meeting rising capacity requirements. Its latest crane, the 100t GT-1000E, pushes at the upper limit of domestic demand.

Tadano manager Kenji Munezawa says, “In China, business is booming, but price competition is very hard. The big demand in China is for cranes under 50t, but the Chinese market is changing very quickly. Our focus on safety and product quality give us an advantage over Chinese manufacturers, but companies like XCMG and Zoomlion are improving every year.”

Seiji Ozawa, sales and marketing manager for BQ Tadano, explains how the company is looking at both local customers and exports: “BQ Tadano cranes are mainly for the local Chinese market. The 50t-100t capacity range is a grey zone between rough terrain and all terrain cranes. Global players like Mammoet and Sarens like these cheap machines with easy maintenance.

“The GT series was originally designed by Tadano in Japan, but is a global design. The GT series uses Japanese and German components to keep quality high. In 2010, we started exporting out of China. BQ Tadano has started exporting the GT-550E, and has received orders from the Middle East and Asia.

“Tadano has delivered more than 3,000 truck cranes. BQ Tadano allows us to introduce a Chinese-built truck crane, but with a ‘Japanese taste’.”

Local companies agree that truck crane capacity requirements are heading up, but say there is considerable resistance from end users. Zoomlion vice general manager, mobile cranes, says, “I’d like to put 30t, 40t, 50t, 60t cranes to replace 25t, 35t, 45t, 55t, etc., but the factory says the 25t is still our No 1 seller. In the Chinese construction market, the main demand for these cranes is government construction and high speed rail. For these jobs, the 25t is big enough. A 30t crane would cost more, but is not needed by the customer. Customers get a better return on investment on a 25t crane.”

The local market is not restricted to small cranes, however. Sany and XCMG both had giant crawler cranes at the show, the 1,600t SCC 16000 and 2,000t XCG 28000, respectively. Sany also showed a new 1,000t all terrain, the SAC 12000.

Zoomlion is developing its own giant crawler. Bo Zheng says that a prototype 3,200t machine has been completed, and it will target nuclear power projects.

Rental transformation
One key change in the Chinese crane industry over recent years has been the development of the rental sector.

Manitowoc’s Wheeler says, “Most of our production used to be purchased by state companies. Now, the big purchasers are private. There are no significant players in rental that are not Chinese. Around 90% of our truck cranes are sold to private businesses. There are a lot of small, private businesses with one or two cranes.”

LiuGong’s Beatenbough agrees: “In the rental sector there’s been a bit of a transformation. Rental firms with small 8t or 12t cranes are beginning to be pushed out of the market by people with 20t or 25t cranes. There will be more coming in at that level.”

Terex’s Nichols says, “In the last five or six years, there’s been a move to privatisation. It’s now a pretty big segment. There are a lot of international project owners, a lot of good sized fleets, but also a lot of small local companies.”

Lousberg adds, “There’s a significant rental channel. It’s not consolidated as it is in the US and EU, but rental is still big. The entrepreneurial spirit in China is incredible. We’ve got customers who started with a couple of Changjiang truck cranes, and have now bought an AC 500. We’re providing some of the big players with fleets of dozens of cranes.”

It’s not just demand that is booming in China, but also the country’s production capacity. With labour costs that remain comparatively low even while skills rise, lower parts and materials costs, local and foreign companies are seeing an opportunity to invest.

Zoomlion invited Cranes Today to visit two of its factories in Changsha, the heartland of China’s construction equipment manufacturing sector, about 1,200km southwest of Shanghai. Combined, the Zoomlion mobile and crawler crane factories Cranes Today visited cover almost one million square metres.

At the 400,000sq m crawler factory, Zoomlion fabricates and assembles cranes all the way from the small end of its range up to its forthcoming 3,200t mega crawler. The plant employs 900 staff, and trains the many welders it uses to hand weld for six months each. Much of the work is done by hand, but the plant is planning to move over to robots for some of the boom sections and slewing components. Outside, a 58,000sq m completion area allows the company to test and finish up to 27 cranes at a time.

Across Changsha, Zoomlion’s 500,000 sq m mobile crane plant builds around 8,000 cranes a year, with an annual sales value of CNY15bn ($2.3bn). The plant is split into two main halls, with a three line painting line in between. In the first hall, the company fabricates turntables, booms and chassis, with two or three lines each for cutting, levelling, bending, milling, and welding. Most of the steel plate components are constructed from SSAB Weldox 960 and 1030. Zoomlion uses three bending machines, with the biggest, a 3,000t machine, imported from Sweden. Zoomlion uses a mix of traditional and laser welding, by hand and using robots. In the second hall, the components are assembled. Outside, a 40,000sq m commissioning yard is split into two areas for cranes above and below 70t capacity. The yard can handle 12 of the big machines and 47 of the smaller machines at once.

Comansa Jie is currently working to expand its plant in Hangzhou, around 200km up the Qiantang River from Shanghai. Echevarria says, “In China, crane manufacturing is more labour intensive: you’re welding by hand, painting by hand. In Spain, you’re more likely to use welding robots and painting robots. It’s basically the same process. We use robotic machining in China.”

Hu adds, “We produced 100 cranes in 2010. In 2011, we’re aiming for 40% more. Our plant is working six days a week. We began a plant expansion in May 2010, which we will finish in 2011. The new plant will be three times bigger. Over the next five years, we want to get four or five times bigger, but we will increase slowly. The training process for welders and quality control takes a lot of time, effort and resources. It’s important to help our Chinese staff understand the demand for quality. The skill of staff in China may not be the same as in Spain, but it is very high. Our engineers in the manufacturing and design departments go to China every year. Linden Comansa supply 99% of the design, but Comansa Jie designers customise it for local demand, with Spanish R&D approval.”

Selling service
Closer to Shanghai, Manitowoc’s Zhangjiagang plant has a dual role as an assembly site for Potain-designed MC series tower cranes, and as the home for the Far Eastern part of its 24-hour Crane Care service. Along with similar centres in Germany and the USA, Manitowoc can make sure that customers anywhere in the world can speak to a highly-trained service specialist, at any time of day. Calls from customers around the world are routed to whichever service centre is open. From the service centre in China, customer service operators can order parts anywhere in the world, ensuring customers receive them as soon as possible.

Service is becoming increasingly important as a selling point for crane manufacturers in China. LiuGong purchased crane builder Bengbu in 2008. David Beatenbough says, "We have parts warehouses across China and around the World. We keep stocks where we are selling, so we can offer overnight delivery of parts. For cranes, as they are so different, we offer service, operator, safety, and sales training as a separate division.

"We've got around sixty outlets now around China. We went through a careful process of checking each dealer's capitalisation level and their ability to offer service and support. We learnt from our other product lines that you need to invest to allow dealers to offer full service."

Zoomlion also sees the importance of building service. Bo Zheng says, "The first step in our domestic after sales service is to train the customer drivers and technicians, using a simulation system and 'fake' machines for practical training. We won't sell cranes to untrained customers. We give two or three months of follow on service; a Zoomlion technician goes to the customer, to ensure reliability. In China, we have more than 20 service centres in our most important markets, equipped with service and sales personnel, close to the customer. We will reach 40 service centres in 2011.

"In 2010, we developed six new dealers in Asia, Africa and Europe. The dealers handle parts and service. We help them build parts warehouses and train their people.

"We never argue on the basis that customers should just buy a Chinese crane and not a European crane. In China, we can provide quicker delivery and faster service. In the Chinese market, customers are not satisfied with the delivery time, price, and service on European cranes. In Europe, we believe we can offer a very good price differential, and offer good parts, service, and a reliable machine.

"What we need to do is not to persuade, but to keep making service, parts, and delivery better and better."

As the Chinese crane industry develops, local and foreign crane builders will increasingly find themselves competing on the playing field Bo Zheng describes.