www.shcri.com -- The proportions of the long-term loan of China new RMB loan in April and May in 2009 were 79.9% and 67.6% respectively. The substantial growth of the loan chiefly flows to the medium and long-term investment projects. The equipment purchase of the related projects will be gradually carried out.
In the aspect of the investment in fixed assets, the demands for the construction machinery equipments are distributed in the fields of the real estate, mining and capital construction. The growth speed of the inventory of the construction machinery products maintains a high degree of correlation with that of the investment in fixed assets. The variation of the investment structure in fixed assets has an immense impact on the demands for the different construction machinery products. In the former three quarters of 2008, the substantial growth of the investment in mining had contributed to the demands of the construction machinery products, speeding up the sales of shovel loaders, excavators and bulldozers.
According to the convention of the construction budget, the operating costs of the construction machinery account for 9% to 20% of the flat cost and 5% to 14% of the total construction cost. If these equipments are completely newly purchased, the volume of purchase should be 2 to 3 times of the operating cost according to the payback time of 2 to 3 years. That is to say, the costs of the purchase of the construction machinery account for about 10% to 28% of the total investment. It is predicted by the real estate that except the expense of the land purchase and other expenses, the stimulating rate of the purchase of the construction machinery will be 19% and that of the capital construction will be expected to be 7.2%. In the aspect of mining, 70% of the newly mining investments are investments in fixed assets, half of which are equipment investments, which account for about 35% of the mining investment. Considering the proportions of the new mining investment in the total investment and the proportions of the construction machinery in the equipment investment, it is expected that the construction machinery will account for 9% in the mining investment.
With an increase of 19% of the capital construction investment, 18% of the real estate investment and 23% of the mining investment in 2009, the pulling effect for the construction machinery by the increase of the capital construction investment can primarily offset the reducing demands for the real estate investment and the mining. The domestic demands of China's construction machinery in 2009 are almost the same with those in 2008. At present, there are signs of recovery in the China's domestic real estate. It is predicted that the acceleration of the real estate in the latter half of 2009 will improve the demands for the construction machinery. The growth of the construction machinery market will probably go beyond of the expectation of the market, of which close attention should be paid to the construction machinery products relevant to the real estate.
The main export regions of China's construction machinery products are Asia, Africa and Europe. It is seen that they are rich in petroleum and mineral resources. With the great decline of the raw material price, the requirements of the global mining industry, energy industry, metallurgy industry, etc. for the construction machinery are shrinking. Meanwhile, the export earnings of the raw materials exporting countries decline enormously. The investment budget of the domestic infrastructure will decrease, which results in the recession in demand for the investment of the construction machinery equipment. Meanwhile, most of the construction machinery purchase overseas relies on the bank credit. Due to the financial crisis, the banks tighten the credit loan, which does harm to the sales of the construction machinery. It is predicted that the market of Chinese construction machinery export will keep on going down in the latter half of 2009.
During January to May in 2009, the export sales volume of China's shovel loaders, excavators and bulldozers decreased by 54.7%, 75.4% and 54.4% YOY. In the first quarter, the export sales volume of cranes, diesel forklift trucks, electric forklifts and concrete mixers decreased by 55.32%, 62.7%, 28.1%, 52.1% YOY. Taking the first three quarters of 2008 into account, the export sales of the construction machinery increased dramatically. So did the cardinal number. However, the cardinal number of the export sales volume in the fourth quarter is low. It is predicted that the export sales volume of China's Construction Machinery Industry in 2009 will decrease by over 30% YOY.
In the first five months of 2009, the new RMB loan exceeded 5.8 trillion by Chinese financial institution, increased by 176% YOY, which showed that the bank credit was substantially relaxed. Most of the construction machinery products are sold in the form of the bank credit mortgage while the downstream industries of the construction machinery industry are construction companies and developers who excessively rely on the bank credit. At the same time, the model of mortgage sales in the construction machinery industry has determined a relatively high reliability for the bank credit. Among various kinds of construction machinery products, mortgage rates of the excavator are about 80%; those of pump trucks, auto cranes and rotary drilling rigs are all nearly 50%; those of shovel loaders are lower, about 15%.
At present, to enlarge the domestic demand and guarantee an economic growth, Chinese government loosens the bank credit policy. The reduction of the rates lowers the financing cost of the related enterprises and the individual as well, which brings a supported bullish sales of China's construction machinery industry.
Source: China Research and Intelligence
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Eileen Gu
China Research and Intelligence
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Based on the database, Interviews and research methods from China Research and Intelligence, CRI analyzes the development and opportunities in this industry clearly.
