Monday, May 23, 2022

Construction Equipment

 

             Construction Equipment – Aggression with Caution

 

The COVID-19 outbreak and the subsequent lockdowns negatively impacted the construction industry globally. The road construction machinery market witnessed significant growth in the recent past, owing to the increased road development programs undertaken by the central and state governments. As we move ahead aggressively yet cautiously, distribution, digitization and electrification are expected to be the key drivers of the construction equipment industry writes, PRERNA SHARMA.

A McKinsey analysis highlights that construction represents 13% of the world’s GDP today. Over the past three decades, the sector has delivered subpar performance characterized by robust growth but flat profits. Going forward, the construction ecosystem is expected to experience dramatic shifts that will redistribute roughly 40 to 45% of the industry’s value across different players, such as contractors and machinery suppliers.

According to Markets & Markets report, the construction equipment market is projected to reach $250.4 Billion by 2026 from $208.3 billion in 2021, at a CAGR of 3.8%. This growth is triggered by various factors which cover various aspects, like increase in infrastructure investments post-COVID-19 pandemic, added by the demand for construction equipment and increasing investments in urban infrastructure resulting in a boost to the construction equipment market during the forecast period.

Despite the impact of COVID-19 pandemic, the Indian Construction, Equipment Industry, backed by strong infrastructure demand in the second half of the fiscal, registered a volume growth of 9% YoY in FY20-21, according to ICEMA report. Here are some of the major drivers for construction equipment industry that have helped in carrying forward the growth bandwagon…

 

Fast Facts
  • Big machines don’t always work well in inner cities, so one product category we see growing fast is compact equipment, especially mini excavators, and compact tracked loaders.
  • According to Mordor Intelligence study estimates, the crane market was valued at $33 billion in 2020, and is expected to reach $48 billion by 2026, registering a CAGR of around 6.26%.
  • The backhoe loader market accounts for ~7% market share in total sales of the construction equipment industry globally.
  • India is the largest market for backhoe loaders, accounting for almost 50% of all construction equipment sales in unit terms.
  • According to Fortune Business Insights, the global excavators market size is expected to reach $63.14 billion by 2026 while exhibiting a CAGR of 4.7% by 2026.

 

Increase in infrastructure investments post the COVID-19 pandemic

Factors impacting construction equipment manufacturers include investments in infrastructure, residential, commercial, and industrial construction, mine and well construction, and institutional spending. With the concerted efforts from the government, there has been a renewed thrust on infrastructure projects across the country and the work has been happening at full swing, thereby strengthening the demand for construction equipment. COVID-19 pandemic impact has been deterred to a greater impact owing to co-ordinated efforts by the policy makers, construction companies and the allied industries. In short, there’s no such gloom and doom in the market, which was expected at the start of the pandemic in the year 2020.

 

Electric and autonomous construction equipment

Electrification is shaping the construction equipment market and offering significant opportunities and design possibilities. Electrification has been increasing in most market segments such as cars, buses, etc., including construction equipment. This has been made possible as advanced technologies are increasingly mature and affordable as they are also increasing regulations on emissions that have changed the future of the construction equipment industry. Several cities around the world have announced bans on the use of diesel within city limits, impacting the operation of construction equipment in these cities. Also, stricter emission regulations are being implemented for heavy machinery and equipment on the global, regional, and local levels in China and European countries. The emission and noise-pollution standards implemented by these regulations can be easily overcome with the use of electric construction equipment. This offers opportunities for construction manufacturers for the introduction of electric variants of existing/new products in the market.

 

Wheeled Loader> 80HP segment is estimated to be the largest market

By equipment type, the wheeled loader >80 HP segment is estimated to dominate the construction equipment market. These equipment are used primarily to load/unload and bulk material movement in construction, quarry, and crushers. They are widely used in large scales infrastructure projects such as roads and highways, railways, dams, ports, and airports. An increase in roadways and residential buildings in China and India is driving the demand for these equipment. Government initiatives in infrastructure development have further anticipated the demand for wheeled loaders.

 

 

The 100-200HP segment is projected to be the largest market

Construction equipment with this power output allows manufacturers to improve machine capability and downsize the engine to one of lower displacement. This reduces maintenance costs and improves fuel economy and better component layout. Construction equipment with a power output range between 100-200 HP is primarily suitable for road, airport construction projects, and commercial projects.

 

 

Earthmoving Equipment segment to hold the largest market share

Excavators (crawler and wheeled), loaders (backhoe, skid-steer), and motor grader are considered as designed for constuction activities. These equipment are designed for construction activities. Asia is projected to account for the largest share of the earthmoving equipment market in terms of value by 2026. The increasing urban population and the demand for better infrastructure facilities are creating significant growth opportunities for the earthmoving construction equipment. A significant market trend observed is the ongoing shift from traditional equipment to automated equipment as consumers are retrofitting and renovating the old technology. In order to increase productivity across the construction industry, the prominent and strong players are effectively trying to tighten up the construction equipment supply chain and achieve higher efficiencies.

 

 

Increasing expanse of rental equipment

The renting or leasing of construction equipment has been on the rise, owing to the equipment cost and the cost of the maintenance process. Apart from the cost, there are also other benefits associated with renting the construction equipment. Rental companies provide the machinery, with the required professional machine operators and drivers included in the rent. The construction industry is getting smarter. Digitalization, connectivity and automation are driving the development forward, leaving a substantial impact on construction projects. Moreover, renting companies geared up in investing in new technologies to cope with the growing demand for advanced construction machinery and replace the older ones with new or upgraded machinery fleet.

 

 

Excavators – On a Steady Growth Path

The growth of the excavator market is majorly driven by huge investments in infrastructure projects and commercial activities such as mining which have led to an increased use of excavators. Stringent regulations relating to emission control have led to the development of environment friendly equipment, which is expected to drive the demand of market in the future. Rising collaboration between rental fleet owners and excavator manufacturers are also expected to drive the growth of the market as they provide excavators at very low cost. The emphasis of excavator manufacturers on development of efficient and technologically advanced products with better control systems is making the use of excavators easier, thereby driving the growth of the market.

The widespread adoption of automated excavators is driving the market growth immensely. These excavators aid in minimizing labor costs and facilitate remote tracking of operations. Additionally, various product innovations, such as the utilization of fuel cell-based electric motors to power excavators, are the other growth-inducing factors. In comparison to a diesel engine, fuel cells are lighter and more efficient, thereby increasing the cabin space for the operator and improving the overall productivity of the machine.

In the next few years, excavators will be widely used in construction work, including both traditional infrastructure projects such as roads and bridges, and new-model infrastructure programs such as 5G signal towers, charging stations for electric vehicles and urban renewal. About 30% of the machines are fitted with telematics on site that could ascertain fuel efficiency, health check of the engine, transmission, how the machine has worked and access all information online. This telematics trend is set to capture the Indian market in a couple of years giving competition to Europe and Japan.

The high demand for oil & gas, infrastructure, commercial spaces, and others associated with the growing population is expected to drive the demand for the product. Prominent companies such as Terex Corporation are heavily investing in R&D that is likely to favor the global excavators market growth. The recent trend of the market shifting from traditional to automated products has increased the productivity of the crawlers. These machines are efficient in terms of operational drawbacks or malfunction as they automatically inform service centers and reduce costs. The crawler machines with their safer and faster removal of debris, along with the ability to function even in muddy conditions have gained prominence worldwide. As per a report by Off-Highway Research, the long-term future trend for the excavator industry remains positive and demand is expected to grow with a CAGR of 16% during 2021-2023 and reach 28,000 units but is expected to come down to 25,000 units in 2024 due to the election year.

 

 

Backhoe Loaders – High on Performance

The backhoe loader is in trend due to its versatility, mobility, low ownership, operating costs, easy financing, excellent resale value, and widespread availability of after-sales support. Specialist machines such as mini and midi excavators and telescopic handlers – although more efficient in some applications – are considerably more expensive to buy and maintain and do not have the mobility offered by backhoe loaders. These factors make backhoe loaders the preferred choice of small contractors and first-time buyers, as highlighted by Off-Highway Research report. According to Technavio, the backhoe loaders market has the potential to grow by $1.59 bn during 2021-2025. Demand for backhoe loaders in India declined only 4% last year, despite the impacts of the Covid pandemic.

According to Persistence Market Research, the past few years have favored the use of backhoe loaders in the residential construction sector, owing to rapid population expansion and a rise in gross household disposable incomes in developed and developing economies. Such developments mandate the adoption of technologically advanced machinery such as backhoe loaders that facilitate construction activities. In addition, various governments worldwide are shifting their focus on infrastructure development, including the construction of highways, ports, roads, and railways, which are offering newer vistas for manufacturers of backhoe loaders.

 

 

Innovative attachments

Various combinations of bucket and backhoe (breakers, dozer, stump grinder, among many others) can be detached from or attached to backhoe loaders, increasing versatility in applications. With these attachments, the vehicle serves multiple applications such as snow removal, lifting light materials, cleaning construction sites, and transferring or removing wastes with greater efficiency. Removable and replaceable features of backhoe loaders increase their application in various fields besides construction.

Powered by Hydraulics: Hydraulic systems work on pressurized hydraulic fluids to power machinery. Backhoe loaders require continuous oil pressure in the engine to enable the consistent working of the equipment. Hydraulic pumps fulfil this requirement by providing adequate power. The incorporation of hydraulics has improvized the operating efficiency of backhoe loaders. Additionally, innovation in the design of the pump has further enhanced the efficiency of backhoe loaders. Further, the productivity of backhoe loaders has improved in various aspects such as faster movement, greater power, and better digging with the incorporation of novel hydraulic pumps and innovative electronic sensors.

Center Pivot Backhoe Loaders gaining traction: According to FactMR research, the market for center pivot backhoe loaders is growing significantly as these type of backhoe loaders are setting new benchmarks for better operator comfort, exceptional performance, versatility, and job site efficiency. The center pivot backhoe loaders are estimated to account for 86% in revenue by 2019 and are expected to grow at a value CAGR of 5.7%over the forecast duration. Trailing close behind are sideshift backhoe loaders foreseen to cross ~US$500 million in the future by contributing over 11% in the overall absolute dollar opportunity created by the end of 2026.

Sideshift backhoe loaders: Sideshift backhoe loaders allow operators to work closer to the edge of a building than traditional center-mounted backhoe loaders. Sideshift backhoe loaders are widely used to carry out operations in confined areas. Their design facilitates high-speed operations & high performance and is more stable than center-mounted backhoe loaders. The sale of sideshift backhoes is expected to touch a value of over US$3,400 mn by the end of 2026, contributing to the overall growth of the global backhoe loader market in the coming years.

The road construction activity remains the most significant driver of construction equipment (CE) demand, with execution reaching record-high levels of 13,327 km in FY2021, up 30% on a YoY basis despite challenges from the Covid-19 pandemic and associated lockdowns. All such promising avenues showcase good times ahead for the backhoe loaders segment in the country.

 

Cranes – Capturing Giant Strides

According to Research & Markets study, over the last three to four years, the Indian crane market has witnessed tremendous growth fuelled by government initiatives. The COVID-19 pandemic has hindered the growth of the crane market as sectors such as energy, manufacturing, construction, and automotive were affected significantly. The construction sector also witnessed a significant decline in the number of projects worldwide as most countries across the world imposed lockdown restrictions, disrupting the overall supply chain. However, post-pandemic, the market is expected to regain its momentum as economic activities resume and manufacturing activities resume across the world. The implementation of automated technologies to reduce human interaction in production facilities and offices is anticipated to support the growth of the crane market over the projected timeframe.

The designs of cranes have evolved to meet the requirements of a variety of industries with modern cranes having the capability to coordinate simple systems to attain complex lifting tasks. A wide range of different types of cranes can be used in construction projects to lift and move materials and other building elements from one location to another. Cranes can be of multiple types and can range from a simple rope pulley to a tower crane fixed to the top of a high-rise building.

 

 

Mobile Cranes

The mobile crane market was valued at $15.72 billion in 2020, and it is expected to reach $22.73 billion by 2026, registering a CAGR of 6.34% during the forecast period. The projected increase in demand for construction equipment, worldwide, is an important driving factor for the mobile cranes market. Various government initiatives and the exponential increase in the need for new and improved structures are increasing the market opportunities for the construction market. The increased need for renewable energy sources, like energy from windmills, is another area of great opportunity for the mobile crane market. The compact space advantage offered by the mobile cranes makes them easier to fit into cramped-up construction areas for operations. Rough terrain cranes with high torque and offroad navigating capabilities are in high demand in both the construction and mining industries due to the operational advantages and efficiency these cranes offer.

 

 

Tower Cranes

Surge in urbanization, exceptional stability offered by tower cranes, and rise in investment on renewable energy development fuel the growth of the global tower crane market. Based on type, the hammer head segment held the major share in 2020. According to an Allied Market Research report, the global tower crane market was pegged at $6.68 billion in 2020 and is estimated to hit $9.90 billion by 2028, registering a CAGR of 4.8% from 2021 to 2028. Tower cranes are utilized for lifting and handling goods and materials. They are powerful equipment and can easily surpass lifting capabilities of any other type of crane. In addition, it offers extremely high lifting capability and offers peak efficiency, stability, and precision. Moreover, tower cranes are widely utilized in the construction industry, owing to the high demand for material handling on elevated levels. However, they also find applications in construction of structures such as dams, bridges, industries, power generation plants, and others. With automation fast making inroads into the equipment manufacturing, cranes segment is here to witness best times ahead.

 

 

Compaction Equipment – No Mean Feat!

According to a recent Research & Markets report, the global market for Compaction Equipment estimated at $4.2 Billion in the year 2020, is projected to reach a revised size of $5.4 billion by 2027, growing at a CAGR of 3.5% over the period 2020-2027. While compaction equipment is mostly used to compress loose soil but owing to a variety of compaction equipment available today, this have found way in all types of construction activities, right from building roads to constructing industrial complexes. This equipment can compress loose soil, rocks, landfill debris, road surfaces and other materials to a particular density level so that the ground does not cave in with use over a period of time.

Compactors machines majorly operate on the basis of hydraulic technology and are very powerful & efficient when it comes to hectic and time-consuming tasks. Continuous and rapid growth in the new infrastructural and construction activities, especially in the developing countries is fuelling the demand for soil compactors. This is because, soil compaction is one of the crucial steps for any construction project. The rise in construction in smart cities, also the increase in transport construction acts as a major driver for the market. Also, the rapid urbanization fuels the demand for compaction equipment market as it gives rise to a large number of demolition sites and new construction sites. A major shift from labor-centric approach toward mechanization is also likely a significant driving factor for the compaction equipment market during the forecast period. The trend of offering compaction equipment on rental basis has been growing. This factor is estimated to create immense growth opportunities for the market in the near future.

 

 

Concrete Paving Market

According to Persistence Research, the concrete paver market contains astounding variety of application and technology adoption for ease of use and time-saving. Considering the satisfaction of project owners and flexibility of changing paving widths and transportation equipment easily and quickly there is a demand for refined control over pavement smoothness. For the need of the increase in adjustment speeds of the paver concrete machines, there has been a widespread use of refining paver controls and features to meet the ultimate goal of paving smoothness. Major infrastructure projects in developing economies have created demand for the advanced controls in the concrete paving machines for smooth functioning and good outcome. The technique of two lift paving uses less expensive or the recycled aggregates in the lower lift and saves the best aggregates for wearing course which then minimizes the effects of skidding, reduction in pavement noise and the pavement life leading to significant growth for the Concrete Paving Equipment Market. Laser grading technology is adopted to substitute string lines. Integration of biodegradable, recyclable and sustainable materials in construction activities in the economies has created growth opportunities for the modern construction techniques. The rising public, rapid urbanization, significant amounts of private investments as well as increasing industrialization investments in infrastructural sectors has made the global pervious concrete paving market a catalyst for new constructions all over the world.

If global trends are anywhere to go by, today, contractors that specialize in grading, excavation, paving, or other work that can often involve remote locations and dispersed teams need a connected and collaborative approach. This approach includes working with up-to-date information flows that enable seamless communication among team members—whether in the back office, the job trailer, or out in the field. Selecting the right compaction equipment might seem like an easy task but taking the time to look at how each feature impacts the overall operation can have big payoffs. From cross-mounted engines to compact footprints, it’s these features that feed a contractor’s productivity, uptime and, most importantly, profits.

 

 

Future beholds

As a sector, construction is considered a major driver of both noise and emissions pollution. While CE machines are one of the lowest sources of pollution in this industry, their high visibility at construction sites, as well as their critical role, has created a lot of interest in finding alternate energy sources for them, especially in urban environments. Today, only a small fraction of CE fleets is fully electrified, but this figure should increase as OEMs and operators invest heavily in electrification. Several tailwinds will aid the adoption of electric equipment, such as the lower total cost of ownership as battery prices drop, the improved performance of newer battery technologies, enhancements in charging infrastructure, and stricter emission-control regulations.

To take advantage of the electrification trends, CE OEMs must quickly invest in R&D and pilots to define their alternate fuel strategy, since they could see profit pools decline by as much as 25% if they do not pursue innovation. At the same time, they should take note of emerging business models that incorporate new technologies, such as site-charging infrastructure, battery swapping, and battery-as-a-service, since these may reshape the CE value proposition. OEMs that take the lead with electrification may gain a first-mover advantage. Demand-forecasting tools are becoming increasingly important as markets get disrupted and rapidly evolve. To thrive amidst these changes, CE OEMs must be able to estimate future demand by using data-driven, analytical models that allow them to make rapid adjustments to production and supply chains. Improved demand-forecasting models drive benefits in multiple areas, including revenue generation, cost control, and capital optimization. Using such models would represent a big change for many CE OEMs, since they have traditionally relied on forecasts that are based on experience and tribal knowledge.

Creating modern infrastructure and replacing older inefficient systems will be driven with a much higher regard to climate change in the future. Increasing urbanization will also drive market growth – by 2050 close to 70% of the world’s population are expected to live in urbanized areas, up from a little over half (55%) today. Going ahead, the industry will be shaped by a combination of infrastructure investment that supports climate change; Digitization; and Regulations on emissions, noise, and transport. Construction equipment manufacturers need to fasten their seatbelts if they want to turn the tides in their favor by deploying automation and developing eco-friendly products.