SaMoTer Outlook - Construction industry report
(March 2017)

Significant acceleration of sales in the last quarter of 2016

After a poor start, 2016 closed with strong growth in demand for earth-moving machinery on a global scale (+38.3% October-December compared to 2015) for total sales by the end of the year of 670,000 units. Thanks to this performance in the last quarter, 2016 posted an increase of nearly 44,000 units (+6.9%) compared to the final and very disappointing result in 2015, radically reversing the trend in the first 9 months.

The year opened with falling sales (-2.5% in the first quarter compared to the same period in 2015); in response to relatively more favourable developments in demand on emerging markets, especially China, sales in subsequent months were substantially stable compared to the previous year (-0.2% in the period April-September), thereby helping to hold the overall downturn between January and September to -1%. At the end of the first 9 months, however, critical aspects were still evident on important markets, above all North America.

 

WORLD EARTH MOVING MACHINERY MARKET IN 2016

NUMBER OF MACHINES	2015	2016	VAR. % 2015-2016	WEIGHT % MARKETS 2016	VAR. % LAST QUARTER 2016
World	628,138	671,764	6.9	100.0	38.3
Western Europe	125,452	140,756	12.2	21.0	16.0
Central-Eastern Europe	25,609	26,569	3.7	4.0	-8.3
North America	172,981	198,719	14.9	29.6	119.0
Japan	71,229	56,310	-20.9	8.4	-13.1
China	77,393	94,424	22.0	14.1	85.5
India	31,485	42,250	34.2	6.3	42.2
Latin America	29,775	18,290	-38.6	2.7	-65.8
Rest of the world	94,214	94,446	0.2	14.1	27.0

 

The United States and China were the stars of the end of year “rush”

The main input in reversing this trend on the world construction equipment market in the last quarter of 2016 primarily came from North America and, secondly, from China.

The North American market (90% United States), posted record sales in the last quarter of last year (almost 55,000 machines), more than doubling the result for the same period in 2015. This was then reflected in two-figure growth on average for the year (+14.9%), completely overturning the negative result of the first 9 months (-3%). The dynamics on the North American market, despite the statistical effect arising from comparison with the poor performance in the last quarter of 2015, is explained by the evolution of US building sector activity that closed 2016 on an upturn, largely sustained by the residential field and local area public investments.

China, on the other hand, set in motion a positive trend confirmed in the early months of 2016 (with a trend of +8% for the period January-September). After a two-year period 2014-15 where demand for earth moving machinery in China almost halved, 2016 posted an important upswing (+22% on average for the year) on a market covering 14% of global demand. The result is even more significant when consid-ering that the increase in sales embraced more or less all product lines, with the sole exceptions of backhoe loaders and telescopic handlers (in any case relatively minor products on this market). Even in China, the trend observed as regards demand for earth moving machinery is supported by the acceleration of residential buildings and new sites, not the least with the aim of keeping ahead of the negative impact of new measures to cool the property market launched by the Chinese government.

 

Diversified trends on other emerging markets

Leaving success in China aside, emerging markets also highlighted an excellent performance on the Indian market (+34% on average for 2016) that with more than 42 machines sold to post the second-best result in the country's history, after the peak figure in 2011 (46.7 units). At the end of the 2016 continued improvement for the rest of the world, which aggregate markets ended the year with a sales level substantially similar to that of 2015. On the other hand, Latin America experienced significant difficulties, largely in the wake of the economic difficulties seen in Brazil and Venezuela.

 

CENTRAL AND EASTERN EUROPE
2016 was positive but there has been a slow-down in recent months

Sales of construction machinery in Central-Eastern Europe as a whole increased by 3.7% in 2016. This positive result at last interrupted a period of considerable difficulties, although there are still some problems. Sales slowed down in the last quarter on most markets. Despite the slowdown at the end of the year, Turkey posted a new high, with over 11,000 machines sold. Mention must also be made of the progressive improvement of Russia during the year, closing at +35% over 2015.

 

EARTH MOVING EQUIPMENT MARKET IN CENTRAL-EASTERN EUROPE IN 2016

NUMBER OF MACHINES	2015	2016	VAR. % 2015-2016	WEIGHT % MARKETS 2016	VAR. % LAST QUARTER 2016
Central-Eastern Europe	25,609	26,569	3.7	100.0	-8.3
Turkey	9,442	11,116	17.7	41.8	-57.8
Russia	5,173	6,989	35.1	26.3	64.7
Czech Republic	2,155	2,025	-6.0	7.6	1.7
Romania	1,452	892	-38.6	3.4	-42.6
Hungary	966	891	-7.8	3.4	-19.6
Poland	4,316	2,696	-37.5	10.1	-26.0
Others	2,105	1,960	-6.9	7.4	-22.9

 

WESTERN EUROPE
2016 saw growth, with the exception of the United Kingdom

The Western European earth moving machinery market closed 2016 with sales up by 12%. This performance is in line with the dynamics seen throughout the year and was seen mainly in France, Germany and, to a lesser extent, Italy. The United Kingdom turned in a poor performance (-5.3% average for 2016), although the downturn bottomed out during the year, thanks to an excellent performance in the last quarter (+30.4% compared to the same period in 2015).

 

EARTH MOVING EQUIPMENT MARKET IN WESTERN EUROPE IN 2016

NUMBER OF MACHINES	2015	2016	VAR. % 2015-2016	WEIGHT % MARKETS 2016	VAR. % LAST QUARTER 2016
Western Europe	125,452	140,756	12.2	100.0	16.0
Germany	30,111	34,427	14.3	24.5	16.2
France	19,300	25,677	33.0	18.2	8.7
Italy	8,425	10,517	24.8	7.5	29.1
United Kingdom	30,896	29,246	-5.3	28.8	30.4
Belgium	6,934	7,428	7.1	5.3	-15.6
The Netherlands	6,006	6,449	7.4	4.6	20.1
Others	23,780	27,012	13.6	19.2	11.9

 

FOCUS ON ITALY
The market saw good growth against an uncertain scenario for recovery in the construction sector

Demand for earth moving machinery on the Italian market posted strong and constant growth throughout 2016. The result was sales of more than 10,000 machines (albeit still equal to just 1/3 of the peak figure posted in 2007); this success consolidated the positive trend that began in 2014. There are still some shadows as regards the future when looking at the building industry scenario.

The resumption of construction, despite halting the long period of stasis underway since 2007, has in fact proved to be weak and uncertain. Investments in the sector posted a slight decline on the market in the second and third quarters of 2016 alike, prompting estimates of an average increase for the year of just under 1%.

Market and economic signals suggest consolidation of the recovery over the two-year period 2017-18, albeit at a moderate rate. Confidence among companies in the sector is still positive and signals are beginning to emerge as regards a reversal in trends as regards permits to build homes. The positive trend on the property market is also continuing, supported by financial conditions that are still favourable for families. The recovery may well benefit from greater impetus as regards non-residential buildings and especially civil engineering, assuming the progressive implementation of public investment recovery measures (reform of the Stability Pact affecting local authorities, EU flexibility, school building work, post-earthquake reconstruction, seismic prevention and hydrogeological instability plans). In the residential sector, in the light of the extension of tax bonuses to the end of 2017, investments in renovation are expected to remain positive, while the end of recession as regards new housing is still postponed given the need to sell existing unsold homes.

The scenario is in any case affected by downward risks largely associated with greater caution in investment decisions by families and, as regards public works, further delays in the implementation of planned infrastructure projects as well as the continuation of adverse effects related to the implementation of the new code for public tender contracts.