The Market For Heavy Equipment

The world-wide economic crisis may have dampened the market for heavy equipments, but signals have been mixed lately. Like the conflicting opinions of experts from all over debating whether the recession is still with us or not, the state of the construction industry seemed to be on the upbeat.

It does seem strange that with an industry as capital-intensive as the construction business, the signals received from all parts of the world seem to negate the perceived economic recession. As before, there is still a significant demand for heavy equipment machinery like bulldozers, loaders, skid steers and excavators.

Construction equipment demands had been on the rise mostly in the West (Europe and the U.S.) from the 60s to the 80s. After reconstruction of their infrastructures right after the war, the race to become economic powers had been participated in by countries mostly from that region.

However, the economic rise of the East in the mid-80s took center stage. This was led by the oil-rich Mid-East countries all the way to South Asia. Spurred by the rise of the middle class coupled with better earning resources, their rise had been phenomenal, except perhaps for a glitch in the mid-90s economic crisis.

For the past decade or so, China’s heated economy had laid out its infrastructure at such a dizzying pace. These days, their inner cities are now at par with the major ones in terms of roads, bridges, shopping malls and other signs of economic success. At the turn of the millennium, India is following suit.

This kind of growth spawned the increase in sales of heavy equipments. More developments in residential and commercial sites had led to the increase in construction activities.

However, in these developing countries, rotation and use of capital is more or less strategically regulated to a degree, unlike in the West. This enabled investors to choose large borrowings. After which, they created their own substantial capital for purchasing heavy equipments. The result is properly funded heavy equipment sales which is less prone to financial risks.

Added to this is the fact that in developing countries, the economic growth rate also determines the external investments. A growing economy attracts foreign investments, making interest rates go down. In effect, buying heavy equipments for construction is economical.

There are also differences in today’s demands for heavy equipments. The U.S. market and that of Western Europe required upgrades rather than developing new ones. They only wanted to upgrade existing infrastructures. They looked at it as more crucial in the long run.

For the developing countries in the East, building more infrastructures – roads, rails, airports, high-rise buildings – are more important. One reason forwarded is that these countries feel their infrastructures are as yet incomplete.

As they are, infrastructure upgrades could be done later. For now, however, all these activities have spawned more construction work all over. Happily, it had created, in turn, a more than modest demand for heavy equipment use.

Because of the demand, more and more producers of heavy equipment have cropped up around the world. The largest producers are still located in the U.S. Japan, Germany, the U.K. and France.

Today, there are now manufacturing units located in China, Russia and in Latin America. More are expected to come up at places where labor and materials are cheap. Indeed, the market for heavy equipment and the construction industry at large are in for a long haul. For some investors, Africa already looks very interesting right now.