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Feature | September 2014

CE Pumped up

With the government´s development agenda and emphasis on ´Make in India´, the CE market is gearing up for a turnaround.  

The demand for construction equipment (CE) industry in India is expected to grow to $9.9 billion by 2015, a compounded annual growth rate (CAGR) of 24.1 per cent (from 2011). Revenues are thus estimated to grow at a CAGR of 24.8 per cent on the back of rapid infrastructure development undertaken by the Government of India (GOI). With a robust manufacturing presence in India, the CE industry is increasingly catering to not only India but to Asia and some parts of Africa.

 

According to London-based global consulting management firm Off-Highway Research, the growth momentum of the global ECE industry is shifting to emerging markets like India and China from matured markets (North America and Europe), where finance has become scarce and business confidence is low due to slower growth and the sovereign debt crisis. Ostensibly, the investment potential in India is tremendous considering that there is a strong emphasis on meeting robust infrastructure demands in recent times.

 

Nearly all of the infrastructure sectors like roads and highways, ports, airports, railways, etc., provide excellent opportunities for construction equipment like boom pumps, scaffolding and formwork, crushing and screening, lifting equipment, cranes and hoists, etc.

 

The continuous efforts that are being made at the government and industrial level to foster urban development as well as industrial infrastructure has opened up new avenues for investment in this sector. The continuous growth of high-rise residential and commercial buildings, shopping malls and various other major infrastructure projects has triggered the consequent growth for the CE market in India, and this will continue to grow at a high rate in the years to come.

 

Boom pumps
 The industry for boom pumps is not yet fully matured in India, wherein the end users are still to shift to use boom pumps or other mechanised distributions systems to improve their overall productivity. Initially, the market size of boom pumps in India was around 200 units, but now the market has witnessed a declining trend to around 150 units.

 

According to AV Dikshit, Director, Aquarius Engineers Pvt Ltd, says, ¨The current market is at a bad state due to the economic slowdown, political situation, etc. Most of the infrastructure projects have not been cleared by the government.¨

 

However, Anand Sundaresan, Vice Chairman and Managing Director, Schwing Stetter (India) Pvt Ltd hopes that the boom pumps market will soon mature and there will be more investment coming into the infrastructure projects.

 

Also, much of the Indian construction industry prefers using a traditional trailer pump for their projects, as a boom pump costs a lot higher than a trailer pump, while boom pumps are used in the rest of the world. This indicates a need for industry training and creation of awareness in the market about the benefits of using the more efficient boom pumps.

 

According to industry estimates, an average of about 2,500 units of concrete pumps are sold in the country annually. The growth rate has been significantly higher in the case of stationary concrete pumps with a CAGR of about 25-30 per cent in the recent few years and slightly lesser in the case of truck mounted boom pumps.

 

But currently, most of the infrastructure projects need boom pumps to speed up their completion. Despite the slowdown, many contractors still prefer the more convenient boom pumps because they yield an efficient value on their investments.

 

Thus the demand for the boom pump sector is expected to rise in the coming years, since the government has also envisaged an investment to the tune of $1 trillion during the 12th Five-Year Plan Period (2012-17) for the Indian construction sector, and the Indian boom pumping industry is awaiting the turnaround that will in turn trigger the boom for that industry.

 

The other opportunity, which seems closer at this time, is in the form of infrastructure projects especially in Tier-II and Tier-III cities, due to the impending second phase of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), this much-awaited programme will have an outlay of Rs 1.75 lakh crore, 75 per cent more than the first phase.

 

Crushing and Screening Equipment
 The crushing and screening equipment industry is expected to grow at the rate of 13 per cent per annum during 2012-17, according to industry experts. The demand for crushing and screening equipment has risen, due to the growing demand for aggregates and road-based material. Out of the total portion of the construction equipment industry, the crushing and screening equipment industry holds about 13 per cent of share, which is around Rs 1,350 billion. In the next 5 to 6 years, this industry is expected to grow around 14-15 per cent per annum Y-o-Y. This is only possible if the government speeds up its infrastructure projects, especially road and highway construction.

 

Somnath Bhattacharjee, President, Material Handling Solutions & Equipment and Project Solutions Business, TIL Ltd, says, ¨This year, we plan to launch a bigger range of crushing and screening products, because of our technological superiority, customised aftermarket models, competitive total cost of ownership and wider range on offers.¨

 

As per research conducted by Freedonia, a US-based research group, the demand for construction aggregates in India is expected to rise 2.9 per cent annually, reaching almost 28.7 billion tonnes by the end of 2014. Approximately 40 per cent of the demand for construction aggregates is for crushed stones.

 

Material Handling Equipment
 According to TechNavio´s analysts forecast; the MHE market in India is expected to grow at a CAGR of 15.62 per cent over the period from 2011-2015. One of the key factors contributing to this market growth is the increased industrialisation across the States. The market in India has also been witnessing the incorporation of electronic intelligence.

 

According to AD Kajarekar, VP, Abhay MHE & Consulting, ¨The approximate mix of MHE in the cement industry is 10 per cent, whereas in mining is 50 per cent. The power plant accounts for about 78 per cent.¨

 

The consumption value of the global cranes, lifting and material handling equipment (MHE) market grew at a CAGR of 2.76 per cent during the past few years. After witnessing a year of production and consumption decline due to low demand, the market recovered in 2010, recording production growth of 5.9 per cent and consumption growth of 4.7 per cent.

 

As per the estimates of BK Karnatak, Sr Product and Marketing Manager, Toyota Material Handling India, ¨The total market size at present for MHE is about Rs 7,500 to 8,500 crore and by the year 2020 or within five years, the market size can be estimated to be around Rs 30,000 crore.¨

 

¨The growth of access market has been around 20 per cent year-on-year in the last few years. But with the increased investments in the infrastructure and continuous awareness towards work safety, there is likely to be a substantial growth in this industry in coming years,¨ says Rakesh Kumar, Country Manager, Aerial Work Platform Business, Terex India.

 

Thus, with the investment climate in developed countries improving, and continued demand for construction equipment from emerging nations to support infrastructural and other investments; global cranes, lifting and material handling equipment consumption is expected to record a CAGR of 10.75 per cent in the forecast period of 2015.

 

Port equipment
 India has 148 minor ports of which only 30 handle cargo. Also, 95 per cent of India´s foreign trade by weight/volume and about 70 per cent by value involve transportation by sea. Thus development of new ports and port activities has increased. Therefore, the demand for port equipment has also risen. The average availability of equipment in Indian ports is around 70 per cent as compared to 85 per cent-90 per cent for other Asian ports. Besides, the number of containers handled per ship/hr is 10 at JNPT port which is India´s most modern container terminal, as compared to 30 in Colombo and 69 in Singapore respectively.

 

According to Mohan Lal, Director, Mech Marine, a shipbuilding company based in Mumbai, ¨Indian shipyards possess the know-¡how and technical capabilities to design and construct barges, dredgers,hopper barges, jack-up platforms and pontoons needed for port construction. Afcons, Simplex, Essar Projects, Continental Constructions are a few companies that have avail-¡ed our services in the past. A few foreign contractors engaged in port construction in India as well as the Middle East are bringing in equipment from Dubai.¨

 

Among all the equipment, Crawler cranes play a very important role in the construction of ports. According to Nilesh Bhorkar, National Manager Sales & Marketing, Kobelco Cranes India, ¨Crawler cranes mounted on barges are an essential part of port construction and demand for these of capacity 80 tonne to 400 tonne is increasing, albeit slowly.¨ He further said that it will be a promising segment in the coming years; thus, the company is preparing to launch higher capacity cranes. ¨We currently offer 100 tonne crawler cranes but will add 150 tonne and 250 tonne crawler cranes to our fleet in the coming months. Large contractors engaged with port construction as well as heavy industrial infrastructure development such as steel industries, power plants and refineries will be the main takers for higher capacity cranes,¨ he says.

 

Conclusion
 The C&HE industry is expected to exceed $ 22.7 bn in size by 2020. Even the equipment sales volume is expected to increase from over 60,000 units in 2010 to 330,000 in 2020. This translates into a great growth opportunity for the industry. The key to the achievement of these figures, however, will depend on a few factors. First, the government will need to improve and speed up the implementation of the announced infrastructure projects. As a result of increased volumes, companies will find it easier to develop market-specific technologies. Second, players within the sector will need to increasingly focus on versatile and efficient solutions along with an increased focus on electronics and software. Third, the application of technology will play a key role in development of the sector.

 

Also, the technology being used in the automotive and aviation sector will continue to be used in the C&HE sector too. However, it should be used in a specific way and systems and processes need to be established in order to suit the application and accelerate product development.

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