Economic review & forecasts
Chris Sleight
Editor
International Construction
Contents
 Global economic trends
 Construction industry trends – global and US
 Trends & cycles in the crane industry
 Trends in the heavy transport sector
 Outlook based on economic forecasts
Warning
 Economic forecasts always have uncertainty
 We live in very uncertain times
 If any forecast today turns out to be accurate it is pure luck
 But forecasts have a value
 Show broad trends
 Summarise complex situations
 Form your own opinion!
 What is important for your own situation?
World economic growth 2012
CIS 4.0%
US 2.2%
EU -0.4%
MENA 5.3%
RoA 6.7%
LAm 3.2%
S. AF 5.0%
WORLD 3.3%
JP 2.2%
World economic growth 2013
CIS 4.1%
US 2.1%
EU 0.2%
MENA 3.6%
RoA 7.2%
LAm 3.9%
S. AF 5.7%
WORLD 3.6%
JP 1.2%
World economic growth 2017
CIS 4.1%
US 2.6%
EU 1.7%
MENA 4.5%
RoA 7.7%
LAm 4.0%
S. AF 5.8%
WORLD 4.6%
JP 1.1%
GDP trends
 Strongest growth in emerging markets
 BUT growth moderating in China & India
 Developed countries remain weak
GDP trends & construction
 Growth in construction is in line with GDP growth
 Construction output ~ 10% of GDP
 GDP data indicates size & trend of construction market
 GDP & construction are key drivers for lifting &
transportation industries
Global construction market
Total output 2012
~ US$ 7.5 trillion
EU
24%
ASIA+AUS
34%
CIS
4%
LAM
8%
Growth rate, 2012
~+4%
NAM
24%
ME+AF
6%
Global construction markets: growth trends
10%
5%
0%
2007
2008
2009
2010
2011
2012
-5%
-10%
-15%
Asia
ME & AF
N. America
S. America
W. Europe
World
2013
Global Construction outlook
Global:
~+4% growth this year
Europe:
Return to recession
North America:
Good growth from low base
Japan:
Continued stagnation
Developing Asia:
Strong growth – circa +7%. China & India slowing
Latin America:
Strong growth – circa +6%. Inflation concerns
ME/AF:
Generally strong – depends on commodity prices
US construction output – US$ billion
1200
1000
800
600
400
200
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013*
Crane industry trends
Manufacturers’ revenues & profitability
Stock market performance of crane manufacturers
Fleet sizes
Relation to wider economic trends
Source – World Crane Report
Unique study of the global industry
 10-year study
 Manufacturer trends
 Owner trends
 Insights into fleet composition
 Links to wider economic trends
Manufacturers – 10-year revenue trend
(US$ million)
35,000
Peak = US$ 31.7 billion
30,000
-25% drop in 2009
25,000
+6% - +8% growth since
20,000
15,000
Re-gain peak in 2014-15?
10,000
Chinese = 30% of total
5,000
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Europe
Asia
North America
Quarterly sales ($ million) –
‘traditional’ crane manufacturers
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
2007
$0
2008
2009
2010
2011
Q1-3 2012
Operating margin selected ‘traditional’ crane manufacturers
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
2007
2008
2009
2010
2011
2012 T.D.
Stock market performance – year to date
40%
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
All crane manufacturers
'Traditional' suppliers
Dow
Manufacturers - conflicting indicators
Revenues & profitability recovering
- Revenues up on 2011, but looking flat this year
- Significant improvement in margin
Weak Chinese market deflating share prices
- Chinese truck crane sales down ~ -45% in 1st half
- Stock market weakness from May onwards – China, Euro Zone etc.
Total fleet – Top 50
25000
Total fleet = 21,896 mobiles &
crawlers
20000
Almost unchanged since 2008
15000
Continued growth in Europe
North America more cyclical
10000
5000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
RoW
NAm
EUR
Top 50 – wheeled mobile vs crawler
25000
Ratio of mobiles:crawlers
78:22 in 2012
20000
All cranes 2003  2012
16,470 21,896
(+33%)
15000
Mobile cranes 2003  2012
13,118  17,022
(+30%)
10000
5000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Mobiles
Crawlers
Crawler cranes 2003  2012
3,352  4,874
(+45%)
Top 50 – total load moment
16,000,000
Change 2003 – 2012
14,000,000
Total
4.6 14.9 million tonne-metres
(+225%)
12,000,000
10,000,000
~ 1.53  4.98 million tonnes
lifting capacity
8,000,000
6,000,000
Per crane
279  682 tonne-metres
4,000,000
2,000,000
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
~ 93  227 tonnes lifting
capacity
North American fleet size – mobiles &
crawlers
12,000
10,000
8,000
6,000
4,000
2,000
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
US fleet size & GDP - % change
4%
10%
3%
5%
2%
0%
1%
0%
-5%
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-1%
-10%
-2%
-15%
-3%
-4%
-20%
North American] GDP - SOURCE: IMF (left-hand scale)
Change in Fleet Size (right-hand scale)
North American GDP + 2 yearS (left-hand scale)
Cranes vs economic cycle
Global fleet did not shrink in recession years
- Capacity increased significantly!
US fleet has been more cyclical
- Follows GDP growth with 1-2 year lag
- Start of modest fleet growth in 2012
- GDP does not look strong enough to trigger high fleet growth
Heavy transport
Trends in specialized heavy transport
Road transportation & fuel prices
IC&ST Transport 50 – global capacity (t)
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2009
2010
North America
2011
Europe
Asia Pacific
ROW
2012
Transport 50 – North American capacity (t)
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2009
2010
2011
2012
Historic US retail diesel prices - $/gal
4
3
2
1
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011 2012*
Oil price - $/barrel (WTI)
120
100
80
60
40
20
0
Heavy transport costs
Direct correlation between oil price & diesel price
Outlook for oil price:
– US Energy Information Administration predicts -8% fall in 2013
– Trending lower over medium term due to global economy
Equates to US$ 3.70 per gallon (~ US$ 4.00 in 2012)
Heavy transport trends
+17% increase in heavy transport capacity in 2012
US trailer-focussed market (79% trailers vs 21% modular)
(Europe 14:86, World: 47:53)
Diesel prices softening, but staying high
Outlook for sector
Improvement in early 2012, but outlook has weakened
(Fuel) costs may fall
Reasonable recovery in US construction  crane sales
Globla Uncertainty
Euro-zone, China, US fiscal cliff
Further information
www.khl.com
E-mail:
Direct tel:
chris.sleight@khl.com
+44 (0)1892 786205