Heavy Load Breaking: The Crossroads Of Construction Machinery Giants

Since April last year, affected by the global epidemic situation, raw materials have entered a rising cycle, and the construction machinery industry is under pressure.

At the same time, China's medium and long-term "carbon peak" and "carbon neutral" policies promote the structural adjustment of the supply side, and supply and demand show a tight situation.

The construction machinery industry stands at the crossroads of reform and innovation once again with the wind outlet of green intelligence.

On June 8, the 21st century economic report reported that the construction machinery leaders represented by Sany Heavy Industry, Zoomlion, Shanhe intelligent and XCMG machinery were seizing the great opportunities of domestic and international market sales and production; At the same time, the rise of raw materials and the new requirements of green production force enterprises to develop intelligent production equipment and processes. In terms of green production, domestic construction machinery industry has broken the situation in many fields. According to BCG forecast, China's pure electric construction machinery market will reach the breaking point in 2025-2026, and the penetration rate of pure electric construction machinery may reach 30% by 2035.

Li Zhe, an analyst of Anxin securities, pointed out that the current rise in raw materials has boosted the new round of construction machinery prices. In the international arena, the global economy has moved from recession to recovery after the outbreak of the new crown epidemic. At home, on the one hand, China's economy will gradually complete the resumption of work and production in the second quarter of 2020, and the demand will recover; On the other hand, the "carbon neutral" policy was introduced to promote supply side adjustment.

Cracking raw materials up

The upstream of construction machinery industry mainly includes the material industry which provides raw materials and components, the manufacturing industry of motor and parts, such as steel for construction machinery, internal combustion engine, hydraulic system, bearing, tire, etc. Raw materials account for more than 90% of the total cost of construction machinery enterprises. According to wind data, Sany Heavy Industry, Zoomlion and XCMG accounted for 90.78%, 95.28% and 84.94% of raw material costs respectively.

In recent years, the price of iron ore raw materials in the international market has soared, leading to the continuous rise of steel prices. According to the data of my iron and steel network, the average price of rebar (taking hrb40020mm: national average price as a sample) rose from less than 3600 yuan / ton in early April 2020 to nearly 6350 yuan / ton in early May this year, with an increase of nearly 80% in 13 months.

Under the soaring raw materials, the construction machinery leaders are obviously under pressure. At present, the price of steel products (such as construction cranes, mixing plants, etc.) with a large proportion of steel products has been adjusted accordingly, and part of the cost pressure has been transmitted. On the other hand, the company and suppliers negotiate to jointly bear and digest part of the cost and jointly cope with market fluctuations.

Data show that Zoomlion has increased the price of station machinery and construction crane series products by 1000 yuan / ton since June 1; XCMG also issued a price adjustment letter in mid May, and the prices of its tower crane and construction hoist series products were raised in June.

In addition to raising prices, construction machinery leading enterprises are also taking a variety of ways to respond.

"When making the budget at the beginning of the year, the company predicted the price fluctuation of steel, and now the cost rise is within the budget range." Zoomlion told reporters of the 21st century economic report that.

"In terms of cooperation with suppliers, the company cooperates with key suppliers to jointly face the market, improve process and management, improve material utilization, and sign short-term contracts to check the price of large materials every month, bundle with bulk raw materials, formulate pricing mechanism, and change payment methods, Reduce the financial pressure of suppliers; In terms of purchasing methods, analyze and update the trend of raw materials at any time, control the scope of inventory or stock preparation, and "purchase nearby"; In terms of channel expansion, the company is looking for new supply channels and substitutes to find alternative materials on the basis of ensuring the physical quality of products. "

Li Zhe pointed out that the raw material push up will compress the gross profit space of middle reaches construction machinery enterprises, and weakening the cost pressure under the background of strong demand is an important option.

In the cycle of raw material price rise, the competitive advantage of leading enterprises will be more obvious. According to Li Zhe's analysis, leading enterprises have strong scale advantages, many means to control material cost and strong bargaining power in the industrial chain. Therefore, the pressure brought by the rise of raw material prices is a good opportunity for leading enterprises to reflect their competitiveness.

The growth trend of leading enterprises also showed signs in last year's annual report.

In 2020, Sany's mining machinery products will account for 28% of the domestic market, with an operating revenue of 100.54 billion yuan, a year-on-year increase of 31.25%, and the parent's net profit of 15.431 billion yuan, with a year-on-year increase of 36.25%; Shanhe intelligent's two core products mining machinery and piling machinery also achieved rapid growth in the period.

In addition, the revenue scale of XCMG machinery's main sectors will reach a new record in 2020, with 11 categories of main engine products firmly ranking first in the domestic industry, and the year-on-year growth rate of 9 categories of main engine products is higher than that of industry rivals.

The road of international growth

It is worth noting that the overseas layout of domestic leading enterprises started more than ten years ago, but the global epidemic situation has not slowed down. Behind the collective high growth of leading enterprises last year is the concentrated performance of increasing overseas market share year by year after Chinese construction machinery enterprises have gradually stepped onto the stage of international first echelon.

In 2008, Zoomlion acquired CIFA, an Italian construction machinery manufacturer, which is the second largest manufacturer of concrete pump and pump truck in Europe and America. In 2012, Putzmeister, acquired by Sany Heavy Industry, is the inventor of the world's first concrete pump and the first brand of global concrete machinery. In 2012, XCMG acquired Shi Weiying, the world's famous concrete complete equipment leader. With the completion of the acquisition of three international concrete machinery giants by three domestic enterprises, the global concrete machinery industry is basically controlled by China. Sany Heavy industry occupies more than 60% of the global concrete machinery market share, ranking first in the world.

According to the 2020 yellow table of global construction machinery released by KHL group of UK, there are nine Chinese enterprises in the top 50 of the world in 2020, followed by Xugong Group, Sany Heavy Industry, Zoomlion, Liugong, Longgong, Shantui, Shanhe intelligent, Lovol and Xiagong. Sany Heavy industry ranks fifth with 5.4% market share. Caterpillar, which continues to be the number one in the world, has a turnover of US $32.882 billion, with a market share of 16.2%.

In terms of product sales, Sany Heavy industry achieved overseas revenue of 14.104 billion yuan in 2020, with sales exceeding 10000 units, with a year-on-year increase of more than 30%, and its market share in some Southeast Asian countries has risen to No.1. According to off highway data, the company will sell 98705 excavators in 2020, accounting for 15% of the global excavator market share, ranking first in global sales.

Globally, excavation machinery is the most valuable category of construction machinery. According to the statistics of wind and off highway, the global excavator sales value in 2019 accounted for 58% of the construction machinery industry. In the past decades, China's Excavator export increased from 3527 in 2009 to 34741 in 2020, with an annual compound growth rate of 23.12%.

Zheng Liansheng, an analyst at Bohai Securities, believes that the excavator markets in Europe, the United States and Japan are becoming more mature, and the sales growth has slowed down since 2016, and the demand is basically stable. If you want to seek overseas growth of this product, emerging developing countries represented by India have the characteristics of low urbanization rate and large industry demand potential, or they can seize the opportunity to realize rapid growth.

In terms of cranes, in 2020, the scale of XCMG's mobile cranes ranked first in the world, and the sales volume of 1000 ton wheeled cranes was in the lead; In the same year, the overseas revenue of Shanhe intelligent reached 3.832 billion yuan, with a year-on-year growth of 7.38%, of which the export sales of construction cranes increased by more than 35%; Zoomlion engineering crane export sales increased by more than 35% year-on-year, of which zcc9800 crawler cranes were exported to Europe, setting the largest tonnage record for Chinese crane manufacturers exporting to high-end markets in Europe and the United States, and sold dozens of crawler cranes in Vietnam.

In terms of other products, XCMG's large mining machinery has become a bright spot in export, and signed an export project with a value of 500 million yuan, and won the bid of 260 million yuan of construction mining machinery project. The share of Shanhe intelligent in Vietnam's pile machine market has also reached a new high.

In addition, in terms of localization strategic layout, Shanhe intelligent has more than a dozen overseas subsidiaries, including two mature subsidiaries in Europe and the United States, with a localization staff ratio of 90%, which reduces the impact of the epidemic on overseas trade. Zoomlion, which has carried out overseas mergers and acquisitions for many times, is also promoting the localization strategy. At present, the company has learned about the local market and customer needs through overseas localization staff, and has unified the information into the company's big data platform, realizing "end-to-end" between enterprises and customers in overseas business.

Green intelligence becomes the next outlet

Since the national "two sessions" in 2021, "carbon peak" and "carbon neutral" have been highly concerned by the whole society, and high-quality development has become the only way for all industries.

In fact, the green production of construction machinery industry has taken the lead. In 2020, the Ministry of industry and information technology of the people's Republic of China issued the action plan for promoting the electrification of vehicles in the public domain to promote the electrification of construction machinery and accelerate the transformation of the construction machinery industry to new energy. Xiang Wenbo, President of Sany Heavy Industry, believes that "carbon neutral" and "carbon peak" are a new track, allowing enterprises to compete with their international counterparts on the same starting line“ For the global industrial chain and future development, we must start with new energy, which will reconstruct the global industrial system. Sany will actively promote electrification and increase R & D investment in intelligence and environmental protection. "

"But overall, the current penetration rate of electric construction machinery products is less than 1%." According to BCG research, the electrification of construction machinery market is still in its infancy, only some domestic and foreign first tier enterprises have layout, mainly from excavator products into electrification, and only take the lead in launching sporadic pilot projects of electric products.

In terms of the achievements made by the enterprise at present, Zoomlion's world's first pure electric truck crane ztc250n-ev will be offline in 2020, creating a historical precedent for pure electric crane. Swe240fed, the first pure electric intelligent excavator independently developed by Shanhe intelligent, is being comprehensively measured in high altitude and low temperature environment on the Qinghai Tibet Plateau. In addition, the company has successfully developed a coupled hydraulic hybrid power system and completed 1000 hours of mine industrial assessment.

Cost is still the core of green intelligent production. If we want to accelerate the process of change in the wave of carbon emissions and new energy, we need to consider the core factor of conversion cost. In terms of cost saving, batteries may become a breakthrough.

Excavators, loaders and other construction machinery products have always been known as "oil tiger", and construction machinery requires high battery capacity and energy density, and poor construction environment also leads to high battery cost. According to BCG research, "the prospect of construction machinery electrification is still optimistic. Under the background of technology upgrading, the battery cost is expected to decrease by 5% - 10% every year in the future, which means that with the decrease of battery cost, after about 7 years, the TCO balance cycle of electric construction machinery will be shortened to less than 1 year."

On the transformation of the production line, Xiang Wenbo thinks: "most of the production lines do not need to be rebuilt. For example, the company did not produce diesel engines in the past, but turned the former diesel engines into motors, and the working structural parts of excavators will not change."

However, Xiang Wenbo also pointed out: "the possibility of higher production costs in the future is not ruled out. But the price rise needs the whole society to pay the cost, needs the government and the market to jointly promote. "

From the perspective of the whole industry chain, BCG research predicts that the process of the electrification of construction machinery will certainly give birth to many new players and new models in the value chain.

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