Korean climate

The economic environment in Korea has improved significantly since the economic crisis which began in November 1997. The first quarter of 2000 saw year-on-year growth in gross domestic product (GDP) of nearly 13%, compared with a fall of 6.7% in 1998, although there remain the regional imbalances that Korea has always experienced.

There has been growing activity at the ports. Increasing imports and exports have led to the local stevedoring companies making more investments than ever. Equipment trading company Kilwoo Corporation sold three Gottwald mobile harbour cranes in 1999 and three more in the first half of 2000.

There is also reason to hope that the crane industry may ultimately benefit from the success of this year’s summit conference between South and North Korea – which remain technically at war since the 1950-53 conflict ended only in an armed truce. Closer relations between the two countries is expected to lead to investment in North Korea which should generate demand for construction equipment. For example, the North Korean city of Kaesong has been designated a special economic zone where Hyundai will build a 6.6m square metre industrial complex. Another project will reconnect the inter-Korean Kyongui railway line and build a four lane highway alongside it.

However, according to IK Jang, managing director of equipment trading company Kilwoo, construction is still in recession because there has been no investment in new capital projects and demand for construction equipment remains low. Such is the lack of demand for new cranes, in fact, that Korea’s three main crane manufacturers – Samsung, Daewoo and Hyundai – have not built any mobile cranes for two years and there is no visible sign of this changing.

Samsung, taken over by Volvo of Sweden in 1998, used to produce hydraulic truck cranes under licence from Tadano of Japan. The licence expired this year and Volvo Construction Equipment Korea, as the company is now called, says it has no plans to make any more cranes. Tadano says that it has received no communication from Volvo on the subject.

Samsung’s SC50H-2 (50t) and SC25H-2 (25t) had major components supplied by Tadano and were similar to Tadano’s TG 500 and TG 200 models. Under the agreement, new cranes could only be sold in Korea and only used models could be exported. Daesoo Lee of Link-Machinery estimates that between 30 and 50 of these cranes were sold into the Middle East, Taiwan and elsewhere in Asia in 1998 and 1999.

Grove sold Daewoo Heavy Industries (DHI) a licence in 1991 to produce its 20t and 35t models. The 20 tonner was effectively a National Crane boom mounted on a Daewoo carrier. The 35t model was based on the TMS 635. DHI deputy general manager Yong Soo Park says that between 1992 and 1997 Daewoo made about 300 machines and imported a further 150 to 200 Groves to distribute to Korean customers. This licence lapsed in 1997 and Grove is now represented in Korea by the Caterpillar and Ingersoll Rand dealer Hae In.

Last year Daewoo designed its own 50t capacity telescopic mobile crane and had intended to begin production this year. Park says that these plans have now been dropped because of the market and he could not say when Daewoo might begin crane production again.

Daewoo is, however, set to begin mass production of telescopic handlers, initially for the domestic market before then launching them into Europe and North America. The DH 4020 model lifts 4t up to 20m.

There are one or two small companies producing a few cranes under 20t capacity, Park says, so Korea’s mobile crane manufacturing industry is not entirely dead yet.

With demand for new cranes down, it is the growing ranks of used equipment trading companies that are making the best of a bad market. In the mid 1990s the wheeled mobile and crawler crane population of Korea rose at about 10% a year, on average, but then fell 10% and 3% in 1998 and 1999 according to Ministry of Construction & Transportation statistics. The statistics show that the mobile crane population in Korea (including crawlers) was 7,875 in 1997 and 6,953 in 1999. This means that more than 900 used mobile cranes were exported out of Korea in the wake of the economic crisis, sold at rock bottom prices all over the world. But with gradual recovery, cranes have started to be brought back into the country. It soon became apparent that the downturn had created panic – too many cranes were sold out of the country and some had to be bought back. This meant even more business for the dealers, although rates were difficult and profits remain hard to achieve. About 100 used truck cranes were imported into Korea in 1998 and about 220 in 1999. Most of them were 25t to 50t capacity models from Japan.

Daesoo Lee of Link-Machinery says that this year is, while not good, at least better than 1999. “At the beginning of 2000, it seemed that things were quite active with selling prices raised at 5% to10% based on mainly local sales,” Lee says.

Exports of used machines are down this year, in general, because of the weakening dollar exchange rate, says Lee. “But in our case,” he adds, “we have exported more than 50 units of used cranes since May 1999 up to now.” Of these, about 40% have gone to Europe and 60% to the USA, he says.

As well as truck cranes, Korea had also imported a number of used 25t to 50t rough terrain cranes since last year, mostly from Japan. “More than 250 units were imported,” according to Lee, “and the average year of model is 1993 through to 1998.” About eight or 10 used crawler cranes have also been brought in from Japan in the past year, all of which were 150t capacity or above. Smaller models are too expensive, he says.