China's market for construction equipment still faces a glut of
unsold inventory, analysts said in a conference call organized by
J.P. Morgan Securities Wednesday.
"There is still about a year's worth of supply of excavators"
available for sale in China, Ann Duignan, an analyst at J.P.
Morgan, said in an interview after the event. Even if sales of
excavators start to recover this year, she said, production should
be down 30% to 40% from 2012 as dealers work through
inventories.
The weakness of the Chinese market, following soaring production
in 2010 and 2011 when sales there were hot, has been weighing on
the results of numerous equipment makers, including Caterpillar
Inc. (CAT) of the U.S. and Komatsu Ltd. (KMTUY, 6301.TO) of Japan.
It also has hurt makers of equipment parts, such as Cummins Inc.
(CMI), a U.S.-based producer of engines.
David Phillips, managing director of Off-Highway Research, a
London-based consulting firm, forecast during the conference that
global sales of construction equipment this year will total $97.7
billion, about the same as in 2012. China sales will rise 6.6% to
$25.9 billion this year but remain far below the 2011 peak of $37.1
billion, he predicted.
A scramble by foreign and local companies into the Chinese
market has resulted in towering overcapacity. Mr. Phillips
estimated that China last year had capacity to build 460,000
crawler excavators, more than four times 2012 sales. Loose
financing practices have resulted in a high rate of repossessions,
which put more equipment back onto the market.
Off-Highway said Sany Heavy Industry Co. (60031.SH) of China had
the largest share of the Chinese market for excavators last year,
with 11%, followed by Komatsu at 8%. Hitachi Construction Machinery
Co. (6305.TO) of Japan and Caterpillar were tied for third at
7%.
Write to James R. Hagerty at Bob.Hagerty@wsj.com
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