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Economic review & forecasts

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.

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Economic review & forecasts

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  1. Economic review & forecasts • Chris Sleight • Editor • International Construction

  2. 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

  3. 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?

  4. World economic growth 2012 CIS 4.0% EU -0.4% US 2.2% JP 2.2% RoA 6.7% MENA 5.3% LAm 3.2% S. AF 5.0% WORLD 3.3%

  5. World economic growth 2013 CIS 4.1% EU 0.2% US 2.1% JP 1.2% RoA 7.2% MENA 3.6% LAm 3.9% S. AF 5.7% WORLD 3.6%

  6. World economic growth 2017 CIS 4.1% EU 1.7% US 2.6% JP 1.1% RoA 7.7% MENA 4.5% LAm 4.0% S. AF 5.8% WORLD 4.6%

  7. GDP trends • Strongest growth in emerging markets • BUT growth moderating in China & India • Developed countries remain weak

  8. 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

  9. Global construction market

  10. Global construction markets: growth trends

  11. 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

  12. US construction output – US$ billion

  13. Crane industry trends • Manufacturers’ revenues & profitability • Stock market performance of crane manufacturers • Fleet sizes • Relation to wider economic trends

  14. 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

  15. Manufacturers – 10-year revenue trend (US$ million) Peak = US$ 31.7 billion -25% drop in 2009 +6% - +8% growth since Re-gain peak in 2014-15? Chinese = 30% of total

  16. Quarterly sales ($ million) –‘traditional’ crane manufacturers 2007 2008 2009 2010 2011 Q1-3 2012

  17. Operating margin - selected ‘traditional’ crane manufacturers

  18. Stock market performance – year to date

  19. 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.

  20. Total fleet – Top 50 Total fleet = 21,896 mobiles & crawlers Almost unchanged since 2008 Continued growth in Europe North America more cyclical

  21. Top 50 – wheeled mobile vs crawler Ratio of mobiles:crawlers 78:22 in 2012 All cranes 2003  2012 16,470 21,896 (+33%) Mobile cranes 2003  2012 13,118  17,022 (+30%) Crawler cranes 2003  2012 3,352  4,874 (+45%)

  22. Top 50 – total load moment Change 2003 – 2012 Total 4.6 14.9 million tonne-metres (+225%) ~ 1.53  4.98 million tonnes lifting capacity Per crane 279  682 tonne-metres ~ 93  227 tonnes lifting capacity

  23. North American fleet size – mobiles & crawlers

  24. US fleet size & GDP - % change

  25. 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

  26. Heavy transport • Trends in specialized heavy transport • Road transportation & fuel prices

  27. IC&ST Transport 50 – global capacity (t)

  28. Transport 50 – North American capacity (t)

  29. Historic US retail diesel prices - $/gal

  30. Oil price - $/barrel (WTI)

  31. 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)

  32. 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

  33. 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

  34. Further information • www.khl.com E-mail: chris.sleight@khl.com Direct tel: +44 (0)1892 786205

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