The reporter interviewed a number of industry insiders and experts and found that the construction machinery industry is facing the situation of AB face to face competition: on the one hand, the decline of sales volume and the increase of operation volume coexist, but the marginal improvement of industry demand is expected to rise as a whole; On the other hand, the progress of infrastructure investment moderately ahead of schedule is also considered by some market participants to have the possibility of a slight delay. There is a lag in boosting the demand for construction machinery products. Some interviewees believe that the machinery industry is still in a downward period.
This reflects the cyclical pain of the construction machinery industry and forces the head enterprises to open the "strategic toolbox" of the ironing cycle and seek increment from electrification, internationalization or diversification. How to break the cycle curse will torture the wisdom of all construction machinery participants.
Decline in sales volume vs increase in operation volume
China Construction Machinery Industry Association has made statistics on the sales data of more than 20 construction machinery enterprises. In terms of sales volume, there was a year-on-year decline in the first two months, especially in domestic sales. From January to February, 40000 excavators were sold, with a year-on-year decrease of 16.3%, of which 25300 were sold in China, with a year-on-year decrease of 37.6%. 16500 loaders were sold in the first two months, a year-on-year decrease of 0.49%; The domestic sales volume was 9786 units, a year-on-year decrease of 18.3%; The export sales volume was 6694 units, with a year-on-year increase of 46.2%.
According to Pei Xiaojun, a doctoral student in the school of mechanical engineering of Tianjin University, from the monthly data since the beginning of the year, the performance of the construction machinery industry is hard to say and eye-catching. The main reason is that the growth rate in the first quarter of last year was too good, resulting in a year-on-year decline in sales this year. From the data of nearly two months, the situation has improved compared with that expected at the end of last year.
Yang Yong, a senior researcher at Yihe Yinfeng, told the securities times that in the first two months of this year, China's domestic sales of construction machinery products represented by excavators were sluggish, but the decline narrowed slightly; Exports continued to grow at a high speed. He believes that the decline in the second quarter will be significantly narrowed.
Although the sales volume of representative products in the domestic market declined, the operation volume showed an upward trend. According to the CCTV financial excavator index report, in February this year, the operation time of cranes, on-board pumps, excavation equipment and Drag Pumps increased by 32.7%, 3.9%, 3.5% and 2.7% respectively, which means that a large number of key projects are concentrated and the construction in progress is accelerated. From the perspective of truck cranes, crawler cranes, mixer trucks and other categories, the investment and construction efforts in Shanghai, Zhejiang, Shanxi, Hubei, Sichuan and other places are continuously increasing. Pei Xiaojun believes that this can be regarded as the feedback of many places on "moderately ahead of infrastructure investment".
Pei Xiaojun believes that the increase in work volume is also related to the start of the "counting from the east to the west" project. "Take Guizhou as an example. With the construction of the inter provincial direct optical cable project from Guiyang to Wuhan, 17 direct networks will be built in the first half of this year. The growth of the operation volume of truck cranes and Drag Pumps shows that the demand for the commencement of new projects in Guizhou is still releasing."
Increasing downward pressure on the industry
According to the statistics of 26 excavator manufacturing enterprises by China Construction Machinery Industry Association, the sales volume of main products in the industry generally showed a sharp decline in January 2022. Among them, 15607 excavators of various types were sold, with a year-on-year decrease of 20.4%; 7598 loaders, a year-on-year decrease of 14.8%; 1146 road rollers, a year-on-year decrease of 5.99%; 1550 truck cranes, a year-on-year decrease of 57.7%
While sales fell sharply, corporate profits also fell. According to the third quarterly report of Sany Heavy Industry, Liugong and Zoomlion in 2021, the net profit attributable to shareholders of Listed Companies in the current period decreased by 35.32%, 59.70% and 46.01% respectively year-on-year. Many respondents said that due to the high industry base in the first quarter of 2021 and the continuous "price war" and other factors, it is expected that the net profit of enterprises in the first quarter of 2022 will not change significantly.
"Since the construction machinery industry reached its peak in the first quarter of 2021, it has entered a downward inflection point, and this process will last for a long time." Wang Min, chairman and party secretary of XCMG machinery, believes that this round of industry downturn is not expected to be as severe as the wave of "sharp decline" around 2012, which will force the industry to transform and upgrade and pursue higher quality development.
It is worth noting that the central economic work conference in 2021 set the tone that stability will take the lead in 2022 to deal with the triple pressure of demand contraction, supply impact and weakening expectation. Among them, "moderately ahead of infrastructure investment" and "promoting affordable housing construction" have become the two key points for steady growth. According to the Research Report of Pacific Securities, in January this year, the enterprise sector increased credit by 3.36 trillion yuan, a year-on-year increase of 810 billion yuan, and the net financing of government bonds was 602.6 billion yuan, a year-on-year increase of 358.9 billion yuan, indicating that the policy overweight is driving the market to pick up.
Xiang Wenbo, chairman of Sany Heavy Industry, believes that the construction machinery industry has experienced five years of rapid growth from 2016 to 2021, and the growth has fallen moderately or even negative growth is expected. "There will be more variables in 2022. But I predict that the overall trend will be 'low before high'."
Some enterprises are cautious about the market prospect. Wang Bin, deputy general manager of Jiangsu Hengli Hydraulic Co., Ltd., believes that from experience, generally from March to May is the peak sales season of construction machinery enterprises, and the sales volume is 3 to 4 times higher than that in the second half of the year. Even if there is a trend of "low before high", it is difficult to hide the overall downward trend. "At present, the domestic market tends to be saturated, which can be seen from the operating rate of excavators and other equipment. However, there are still opportunities for sub circuits such as aerial work platforms in the industry."
Leading enterprises speed up their participation in international competition
During the interview, the reporter found that accelerating the pace of "going global" is becoming the common choice of many leading construction machinery enterprises. According to the data of China Commercial Industry Research Institute, the export volume of construction machinery products in 12 categories increased to varying degrees in 2021. Among them, the overseas sales of lifting working platform and crawler crane have doubled. The export volume of excavators, graders, bulldozers, forklifts, road rollers, truck mounted cranes and truck cranes increased by more than 50%.
The sharp increase in exports reflects that leading enterprises have accelerated their overseas layout. One belt, one road, was found in the press survey. The leading enterprises represented by Xugong machinery, Sany and Zhonglian heavy industry have focused on developing the market along the "one belt" road and participating in the high-end market competition in Europe and the United States.
In 2011, XCMG invested in the Construction Machinery Industrial Park in Brazil. In 2021, XCMG Brazil's operating revenue increased by 219% year-on-year, ranking in the forefront of the local crane, grader, roller, trenchless drilling rig and other market segments. On this basis, XCMG began to actively layout to the high-end market in North America and create a localized "research, production, supply and marketing financing" system. "The markets of European and American developed countries have high requirements for product quality and technical services, and the competition is fierce. It is a 'hard bone' that must be chewed down to build an international brand." Wang Min said. In 2021, XCMG announced that it planned to invest US $99 million to officially establish the US company and its subsidiaries. At present, it is stepping up the site selection and implementation.
XCMG is not the only one speeding up its distribution to developed countries. Not long ago, Sany Italy company opened its business, undertaking product display, direct sales, service, training and other functions. As the Italian headquarters and accessories Center, it supports and radiates agents throughout Italy. Xiang Wenbo said that the largest market of construction machinery in the world is not developing countries, but developed countries. Sany group is committed to expanding the markets in Asia and central and South America to North America and Europe. At present, Sany group has successively invested in construction machinery R & D and manufacturing bases in India, the United States, Germany and Brazil.
Zoomlion also accelerated its efforts to explore the markets of developed countries in Europe and the United States. Zoomlion's European plant has been officially completed in Italy. Meanwhile, Zoomlion's base in Belarus has been completed and put into operation.
Many respondents said that although the counter cyclical policy will play a role, the domestic construction machinery market is close to the "ceiling". After several rounds of reshuffle, the concentration of the construction machinery industry has increased significantly. Accelerating the international layout will be the inevitable trend of the development of leading enterprises and an important direction for the transformation and upgrading of the domestic construction machinery industry. In addition, international leading enterprises such as Caterpillar and Komatsu have advantages in network layout, key core technology research and development and other fields. Especially in the markets of developed countries, consumers' requirements for products and services are generally higher than those for prices. This means that Chinese enterprises must upgrade their management, technology and services.
Prospects for 2022
Based on the above situation, the sales volume, investment and technical investment of construction machinery in 2022 will not be worse than that in 2021. In 2022, with one new infrastructure and one belt, one road construction machinery will be in a small growth stage. The sales volume of excavators may exceed 2021, but it will be more difficult than that in 2020.
Although the construction machinery is facing a downward cycle, there are new changes in the technical development of the construction machinery industry. Electrification, intelligence, energy conservation and environmental protection have gradually become the development trend, which also points out a new path for the development of construction machinery. With the support of new technology, the sales of construction machinery will increase. If the sales volume of construction machinery increases month after month in 2022, the domestic market will gradually pick up by the end of 2022, and the total experience will return to the level of 2020.
In terms of export of construction machinery, the export of construction machinery has increased for 50 consecutive months. In 2022, with the control of the epidemic abroad, the increase of foreign resumption rate and the gradual recovery of the world economy, the export of construction machinery will be affected, but the overall impact will not be very great. In 2022, the export of construction machinery will still increase greatly, but it will decrease year-on-year.
Commodity prices fell and the import of core components accelerated, and the cost pressure of the industry is expected to ease
In addition to the revenue side, at present, we believe that the decline in the price of upstream raw materials and the strengthening of the localization and substitution trend of core parts are also expected to alleviate the pressure on the cost side. Taking the excavator with the largest proportion in construction machinery as an example, according to SGS data, the excavator is mainly composed of core parts (engine, hydraulic system), steel, other parts and manufacturing costs, accounting for 45%, 20%, 27% and 8% respectively.
In terms of steel prices, steel prices have fallen significantly since October last year. With the promotion of stable supply of upstream prices and the decline of iron ore prices, we believe that the subsequent downward trend of steel prices may continue.
In terms of core parts, taking hydraulic parts as an example, the core hydraulic parts mainly include variable hydraulic pump, hydraulic motor, hydraulic cylinder, pilot valve and control valve. And the profitability of core hydraulic parts has exceeded the overall profitability of domestic excavators. According to the data of the branch of construction machinery and mining machinery, 70% of China's high-end hydraulic products depend on imports, of which the import proportion of high-end hydraulic parts of high-end construction machinery is higher, and about 80% of high-end hydraulic parts are controlled by others. With the acceleration of import substitution of domestic hydraulic parts, the industry cost is expected to be further alleviated. In fact, in recent years, the overall import amount of hydraulic parts has gradually decreased, from US $3.42 billion in 2011 to US $1.55 billion in 2016, and the domestic substitution has shown a steady upward trend.
At the same time, the digitization process is accelerated, and the industrial benefits are expected to be improved. In recent years, leading enterprises have continued to increase R & D investment, promote digital transformation and boost the efficiency of the industry. For example, the proportion of R & D expenditure in revenue of Sany Heavy Industry, Zoomlion and XCMG machinery in 2020 reached 6.3%, 5.4% and 5.1% respectively, and the R & D expenditure was as high as 5 billion yuan, 3.35 billion yuan and 2.4 billion yuan respectively. A large amount of R & D investment has made phased progress in the transformation of enterprises to intelligence and digitization.
Increasing uncertainty of small and medium-sized enterprises
The above slightly optimistic views are only limited to the large-scale enterprises of China's construction machinery, even the leading enterprises. They interpret the national policies most accurately and benefit the most from the national investment. Their situation will not be bad in 2022, and a certain degree of growth is certain. The biggest uncertainty comes from a large number of small and medium-sized enterprises.
The market share of small and medium-sized construction machinery enterprises accounting for more than 90% of China is very small. I can't find relevant data on the Internet, but only XCMG, Zoomlion and Trinity have a market share of 33%. In addition, many foreign-funded enterprises, state prefix enterprises. In their own words, the majority of small and medium-sized enterprises are living in the cracks.
In 2022, these small and medium-sized enterprises are the most uncertain. Although the steel price will decline, the technology and quality of these enterprises are almost the same, and their strength cannot be compared with the giants. Since 2020, construction machinery has entered the stock market from the incremental market, in which vicious competition is inevitable. The only trump card in their hands is the price war.
In 2022, how much investment in new infrastructure can go to small enterprises is a problem. In the period of market downturn, the primary task of enterprises is to consume inventory, develop more competitive products and maintain cash flow. Users have limited funds to buy new machines, so the transformation of old equipment should be higher than in previous years, and the accessories market should be booming again.
In 2022, the state will ensure growth and employment. Of course, this is inseparable from the majority of small and medium-sized enterprises. Some national support policies will appear in large numbers, and will increase efforts to support some specialized and new small and medium-sized enterprises. It will also propose tax cuts, burden reduction and many other measures.
Of course, the most important thing is the enterprise itself. It is a difficult process to reduce costs and expenses within the enterprise and improve the competitiveness of products. This winter is particularly cold. I seem to see countless engineering robots moving forward in the wind and snow.
