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MARKET REPORT COMPACT PLANT


Signs of stability?


As hirers and suppliers are still waiting for a general mood of confidence to return, it is important for them to work together to tackle the challenges.


In assessing the compact plant market against the difficult economic backdrop, several paradoxes become apparent. Hirers might have ageing fleets, yet lack the confidence to replace them, even assuming they can find a bank willing to lend; manufacturers seek orders, yet can find it difficult to supply machines quickly given the global reduction in production capacity in their, and their suppliers’, factories; and while customers want the lowest prices, many suppliers report that costs are rising owing to currency fluctuations and higher raw material prices.


More certain, however, is the overall state of the market. Most suppliers we spoke to described it as flat, hoping that this means the decline in sales of recent years has stopped. Mini excavator manufacturers agreed with estimates that sales of machines of up to 9 tonne will reach just over 6,000 by the end of this year, mirroring the 6,300 units sold in 2009. This, incidentally, is in line with the forecast made in last year’s Market Report, and suggests that, while sales are a far cry from the record of 16,000 in 2007, perhaps a semblance of stability is emerging.


According to David Munns, Director, Compact Equipment for Volvo Construction Equipment, “The credit crunch obviously led to a sharp decrease in demand and some manufacturers had excess machinery stocks globally, although we ourselves had taken steps in advance to try to avoid this. Conversely, there was a slight upturn in demand at the start of 2010, although this has fallen back in the second half of the year.


Banks reluctant to lend


Suppliers estimate that mini excavator sales will reach just over 6,000 by the end of this year.


“In the current climate, we have been helping hirers achieve appropriate fleet sizes by, for example, buying some machines back when supplying new


ones, and as banks still seem reluctant to lend to businesses that they regard as closely linked with the construction industry, such as hirers, we are promoting solutions we can offer through Volvo


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Financial Services. While manufacturers’ costs might have risen, it is important that customers do not lose out in the longer term by choosing what might seem to be cheaper equipment


Takeuchi anticipates it will supply more minis in the 3-5 tonne class in 2011.


from another supplier.We are committed to supporting our products with spares availability, service backup and training, which reduces the overall cost of ownership and increases residual values.”


Challenges


Robert Brown, MD of Ammann Equipment Ltd, agrees that hirers have faced challenges in achieving appropriate fleet sizes. “Many hirers, especially some national companies, sold off older equipment in the face of capital expenditure reductions and lower utilisation rates. However, at the start of the year, some realised they might have cut too deeply and needed to buy more.


“We will need to see whether this trend continues, as confidence generally remains fragile, but we could see the market increase by up to 10% in 2011. However, with many component manufacturers having scaled down production, machine availability could be affected, as has happened in the car industry. Buyers must plan ahead and order early. Indeed, all links in the supply chain need to work together to understand each other’s situations.”


Robert Brown adds that demand has remained steady for the Cormidi tracked dumpers that Ammann Equipment distributes in the UK, reflecting the on-going need to replace manual labour with more productive techniques, and to meet Health & Safety regulations regarding manual handling.


Keith Hoskins, JCB’s Sales Director for Key Accounts, agrees that hirers’ uncertainty regarding future business levels has made many reluctant to spend. “Many companies are making kit last longer before


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