The global financial crisis since the second half of 2008 has brought a significant impact on the domestic construction machinery industry. Subsequently, the Chinese government introduced a number of stimulus policies. On May 25 this year, the State Council adjusted the capital ratio of fixed assets investment projects. Overall, the construction machinery industry picked up significantly in the first half of this year, and the market sales decreased year-on-year. The ring growth has been substantial.
As the second half of the year, and especially the third quarter, is the traditional off-season of construction machinery, it is expected that the demand for construction machinery will continue to recover due to the acceleration of real estate investment and the continuation of infrastructure investment in the second half of this year. If real estate and infrastructure investment are lower than expected, the recovery of construction machinery will slow down.
In addition, there are two more unfavorable factors in the recovery of the machinery industry. First of all, the international market demand continues to slump. Affected by the financial crisis, foreign demand has plummeted, and the country’s continued high growth in export of construction machinery has abruptly ended. For the forklifts and bulldozers whose exports account for a larger proportion of sales, they are more affected. At present, the export of construction machinery accounts for only a little over 10% of the industry's total revenue, and there is great room for future growth. The continued sluggish international market will also affect the overall recovery of domestic construction machinery.
Second, steel prices are high. The iron ore negotiations gradually came to an end, and it is highly probable that the domestic steel mills will finally accept the price cuts that Japan and South Korea have already reached. Baosteel recently adjusted the ex-factory price of major products in July to 350-500 yuan/ton, which affected the spot market price by 200 yuan/ton. If the increase in steel prices in the second half of the year is large, it will bring greater cost pressures to the machinery companies that just got rid of high-priced inventory.
As the second half of the year, and especially the third quarter, is the traditional off-season of construction machinery, it is expected that the demand for construction machinery will continue to recover due to the acceleration of real estate investment and the continuation of infrastructure investment in the second half of this year. If real estate and infrastructure investment are lower than expected, the recovery of construction machinery will slow down.
In addition, there are two more unfavorable factors in the recovery of the machinery industry. First of all, the international market demand continues to slump. Affected by the financial crisis, foreign demand has plummeted, and the country’s continued high growth in export of construction machinery has abruptly ended. For the forklifts and bulldozers whose exports account for a larger proportion of sales, they are more affected. At present, the export of construction machinery accounts for only a little over 10% of the industry's total revenue, and there is great room for future growth. The continued sluggish international market will also affect the overall recovery of domestic construction machinery.
Second, steel prices are high. The iron ore negotiations gradually came to an end, and it is highly probable that the domestic steel mills will finally accept the price cuts that Japan and South Korea have already reached. Baosteel recently adjusted the ex-factory price of major products in July to 350-500 yuan/ton, which affected the spot market price by 200 yuan/ton. If the increase in steel prices in the second half of the year is large, it will bring greater cost pressures to the machinery companies that just got rid of high-priced inventory.
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