There was lots to mull over in the latest Committee for European Construction Equipment (CECE) Annual Economic Report. The headlines were that the construction industry market peaked in 2017 and that the mining industry was still recovering, but maybe slowing, in 2018.
For the construction industry the CECE reported that a growth period from 2008 to 2018 reached a high level of growth of 4.1% in 2017. This fell to 2.8% growth in 2018 and is forecast to drop to 2% growth in 2019. It put this in terms of the sector having a cyclical nature, normally of around eight years. This means it believes a downturn is overdue. Slowing gross domestic product (GDP) growth and tighter financial and monetary conditions are expected to drag on the residential sector. The non-residential side is growing by more than 1.5% in Europe but it has started to following the residential sector. It also noted the ‘very poor’ performance of the infrastructure sector due to government under-investment.
Graph 1: GDP vs Construction Output, year-on-year change (%). Source: Euroconstruct & CECE.
The construction equipment sector saw sales rise by 11% in 2018, bringing it to only 10% below the high recorded in 2007. The CECE reported that the rate of growth for concrete equipment was becoming ‘less dynamic’ after four years of growth. Sales in Europe grew by 17% in 2018 but there was a wide difference between northern and southern countries. France and Germany had 9% and 14% growth respectively but Italy and Spain had 23% and 60% growth respectively. Looking at product groups, truck mixer sales and batching plant sales were particularly strong, with growth rates over 10%. Overall, most countries experienced growth, with the exception of Turkey.
Graph 2: Growth rates in construction equipment sales by product groups in Europe, year-on-year change (%). Source: CECE.
Looking globally, the CECE said that Europe ‘slightly underperformed’ in 2018 as worldwide equipment sales grew by a fifth. It attributed this to the return of emerging markets, led by China and India. Sales in Latin America recovered with a rise of 15% but Brazil, notably, was not part of this trend. North America and Oceania had growth rates of around 20% but the Middle East and Africa saw declining sales. The CECE forecasts global equipment sales growth of 5 – 10% in 2019 subject to there being no trade wars.
Tying into this, the German Mechanical Engineering Industry Association (VDMA) said today that Sebastian Popp, its Deputy Managing Director, described cement plant equipment manufacturers as a ‘drag’ on the rest of the building materials plant sector. His words were from an event that took place earlier in March 2019. Overall incoming order and turnover fell in 2018. He blamed this on a cement market characterised by overcapacity. However, if cement plant engineering was removed from the calculations then the incoming orders of German building material plant manufacturers would have risen by 17% year-on-year and turnover by 16%.
None of this is encouraging for the European cement equipment manufacturers. However, as we said in February 2019 (GCW 390), the market is changing and so too are the suppliers. A period of transition is to be expected. Recent good news from Denmark’s FLSmidth include an order for a new plant in Paraguay and sales figures for its vertical roller mills in 2018. Russia’s Eurocement ordered three mills from Germany’s Gebr. Pfeiffer just last week.
