Crawler Cranes Market Active Despite Pressure on Pricing

The demand of crawler lattice boom cranes is expected to remain firm in mid and long-term amidst pressure on pricing, S. A. Faridi. & P. P. Basistha report.

The pricing of medium and higher class hydraulic crawler cranes in India is likely to remain under pressure as of now. This is because ongoing demand slowdown in US, Europe, and Middle-east is unlikely to extend delivery schedules in the mid and longterm for the cranes in Indian construction market. Modest demand at home, led by stretched financial closures of coal fired power projects, owing to inadequacy of coal, would restrain prices from firming up. Comfortable availability would continue as increasing number of crawlers get released from contractors on verge of completing ongoing projects in orderbook. There has been a moderate price increase of the equipment at 3-4 percent as compared to 2008 due to rising commodity costs. Delivery periods are of 8-10 months.

However, amidst pressure, pricing is likely to remain stable. Increased volatility is not expected as the big wigs in rental market seem to be weathering the downturn. Rental companies in the recent past continued to buy new build cranes of bigger capacities from original equipment manufacturers. NBM&CW has learnt that companies have been acquiring European, Japanese and Chinese new cranes with capacities varying from 150-300-640 tons. A major crane rental company from Western India into LNG projects, imported three units one each of Chinese manufactured 300-350-500 tons crawler lattice boom cranes six months ago and purchased a brand new 250 ton Japanese made crawler crane seven months back. Another western based rental company brought 600 ton multifunctional crawler crane from a European manufacturer.

Purchases have been made much recently by a rental heavy weight from Northern India with capacities varying 70-300 tons. The company is in advance stage of discussion with European, Japanese and Chinese manufacturers to acquire at least six new units with different capacities varying from 400-500 tons spanning across ten months. There is an information on acquisition plans for 1,600 ton capacity as well by rental companies.

Companies are acquiring new cranes in view of future projects in pipeline both in core and industrial infrastructure. The projects, mainly power, though delayed are expected to head for financial closure with private project developers becoming aggressive on buying coal blocks abroad. Private power project developers are likely to command substantial share in power production as compared to state utilities by the end of 12th plan. Speaking to NBM&CW Mr. Arun Srivastava, Director, Tata Power said, "as a stop gap measure, the power producers will keep looking for coal assets abroad for commissioning the projects." Import will continue to be focused as desired local availability is unlikely to materialize soon. Mr. N. C. Jha, Chairman, Coal India Limited said, "our pit head stocks have come down from 75 million tones to 45 million tones at present. We will continue to emphasize the process of liquidation. However, I would like to tell greenfield power project developers that fast liquidation will only happen on availability of wagon rakes by the railways." CIL primarily provides coal to state utilities. State owned utilities have been slow in acquiring coal blocks abroad to support expansion.

Future potential from greenfield private power projects is an area that is making rental companies to buy new units. The projects will require both high capacity equipment and small and medium capacity machineries for carrying supporting jobs in the project. The ongoing maintenance of industrial projects and scheduled debottlenecking by oil refining companies will continue to create demand. Requirement will be supported from new industrial projects as well. Bharat Petroleum Corporation Limited has recently charted a mega Rs.40,000 crore refinery expansion plan to be carried in five years. Similar plans have also been announced by Hindustan Petroleum Corporation Limited. The refining capacity expansion of the PSU will be running from 2012 to 2016.

Mr. A. K. Somani, Representative Director (LWE), Liebherr India Private Limited affirms, "demand for new heavier units are being created to set new industrial projects and also to carry brownfield expansion. The new trend is that contractors executing core infrastructure projects now require new cranes to be made available by rental companies. This is because contractors are increasingly focusing on cranes that can deliver higher productivity and are safe to operate to cut down on time overruns at job site."

According to manufacturers, market demand is getting robust for 400 tons and above. Rental companies are increasingly making purchases to fill the demand of construction sector for higher capacity cranes.

The demands for heavier capacity crawler cranes are coming from wind mill projects and Thermal Power projects. Companies renting out cranes are strongly marketing their services to wind mill power project developers. The projects require cranes with lifting capacities varying from 400 to 600 tons to lift the nacelles, Tower Sections and blades of the equipment.

Value on Products

Mr. Somani says, "we are aggressive on promoting 600-750 ton crawler units targeting windmill power projects and Thermal power projects. High demand potential is also for 200-250 tons capacity class Tyre Mounted Cranes from upcoming cement plants." The German crane manufacturing major sold 16 crawler crane units in 2010. Among the units sold were 1,350 tons LR 11,350 crawler cranes to Nuclear Power Corporation of India for its Kakrapar and Kota Units.

To take on pricing pressure, Liebherr will not resort to price roll back. Somani says, "we will continue to offer value to our customers through our reliable products, superior after sales support by inducting additional service engineers in our team. He tells, "valued customer service is important to us, as most of our new business in India have continued to come from existing customers." We are strengthening our sale of Used cranes, which we tradein in Europe Market, repair and sale all over the world. This will give more economical opportunity to new companies.

Price roll back will not be resorted by Manitowoc Cranes India for retention of market presence either. According to Mr. Raman Joshi, MD, Manitowoc Cranes India, "Our company has been building crawler cranes since 1925 and has never used pricing as the lone factor in persuading customers to invest in our cranes. Manitowoc Crane Care is a big differentiator for our company and it’s a major reason that customers invest in us. Our latest development with Crane Care is a new telephone Contact Center in India that gives customers 24/7 support for their Manitowoc crane. We are also expanding and increasing our support services in India to support the evergrowing population of Manitowoc cranes in India. Crane Care has added new facilities and new staff and boosted in-country resources. The division’s training activities are proving especially popular too. We also use superior engineering, innovative design and excellent customer service to ensure customers choose Manitowoc."

He added, "to make equipment affordable, we offer contractors and rental companies more value for their cranes. Although the initial investment may be higher with Manitowoc than with alternatives, customers know that lifetime costs with our cranes are lower. We offer greater reliability, more productivity and also stronger residual values when the crane is ready to be sold, so overall, a Manitowoc crawler crane is a smarter investment."

According to Mr Joshi, "pricing pressure will be less for higher capacity cranes as customers at this end of the scale purchase cranes for highly technical or challenging projects. Here there is less focus on price and more focus on capability." He informed, "emerging demand will be from higher capacity cranes as project sizes are getting bigger. To cater the demand, we already have a broad range of Manitowoc crawler cranes in India, from the 750t Manitowoc 18000 down to our 73t Manitowoc 8000. Part of the reason customers like to deal with Manitowoc is that we have a full products range with a lifting solution to suit any requirement."

Mr.Joshi said, "we expect demand for higher capacity cranes to come from both contractors and rental companies, although we are expecting more interest from rental companies in the coming years as that industry sector continues to grow." However, he said "for all categories of cranes, the lower capacity classes generally have a greater number of models but there are also higher volumes and more demand. We expect lots of interest across the capacity range, but of course cranes from 80t to 150t will see most demand."

Mr. Joshi felt, "India is one of the world’s brightest markets for crawler cranes and we believe there will be a mix of cranes, both new and used, sold in 2012 with a range of technical capabilities and manufacturing qualities. Hence, pricing will altogether not be a determining factor for governing demand of crawler cranes in the mid and long-term."

Expansion and retention of market presence is looked by crawler crane manufacturers through offering products that offer value. Mr. Martin Seibert, Director, Terex Cranes India says, "In the price sensitive Indian market, we have been consistently providing value to our customers byproviding cranes that can be deployed invarying jobsites and conditionsoffering calculable running costs and a solid return on investement. Each machine is available in numerous combinations to provide customers with the right solution foralmost anylifting requirement. Reliability and safetyis ensured throughcareful operators and maintenancetraining,superior steel, state-of-the-art electronics and safety equipment as well asuser-friendly troubleshooting all ofwhich provides high machine uptime." The highest capacity crane sold by Terex in India is the CC8800-1 with a 1.600t capacity.

According to Mr. R.B. Pandey, General Manager, Marketing, ABG Cranes India Private Limited, "price wise we are dearer than other equipment offing of similar class as because we manufacture our cranes through premium quality equipment. Boom pipes of our 80 ton crane are imported from Nippon steel Japan, hydraulics from Rexroth and Mannesmann Germany." ABG has sold 30 units of 80 ton class cranes during 2010. The company is likely to launch its ABG 160 ton crawler crane by end of 2011. The prototype of the crane is undergoing testing.

Amidst moderation, demand for new equipment is being created by contractors as they now want to complete jobs sooner. Requirement for new equipment have also been well catalysed by the intervention of Department of Revenue Intelligence (DRI), especially for Tyre Mounted Cranes. DRI has brought strict penalty clauses for importers (both rental companies and construction firms) those who have been procuring older cranes from the global construction market and under invoicing the price value of the products.

The intervention is a bonus point for local manufacturers and new crane importers like Telcon. According to the company sources, bulk of import of used equipment has been taking place in the 25 to 100 ton class. Cheap imports have been denting the share of the equipment manufacturers.

Despite the requirement of new equipment being created, the slump has taken a toll on sales. Telcon reported sales of Crawler Cranes to go down from approx. 270 units during 2010-11 to around 240 units during the FY 2011-12, this excludes any bulk order receipts by corporates.

According to a company spokesman, TATA Friction Cranes come with a dual advantage of undertaking foundation jobs through grab and casing arrangement with its duty cycle features as well as erection and lifting jobs. Improvements have been carried out in TFC 7 by inducting added electronic features comprising digital safe load indicators, Tower Light Assembly, and sophisticated hydraulic controls replacing mechanical controls, heavy duty break rims among others.

Telcon expects to counter competition brought by new foreign products offering in similar class through competitive pricing of its cranes, longer maintenance cycles and strong brand positioning. But notably based on competitive duty cycle features of its TFC’s involving ‘stronger winches’ for creating faster line pull, Telcon expects in continuing its brand presence, which other price competitive product manufacturers are yet to attain perfection. Also, localisation of advanced technology hydraulic crawler cranes from its partner Hitachi Sumitomo is undergoing at one of its factory, company spokesman pointed out.

Telcon is planning to retain its market presence banking on its pan India sales and service network. Besides, ready availability of components and parts in the local market for its cranes is likely to give it an edge over competitors.

With new foundation and piling jobs being created, Telcon expects to market its TFC to upcoming infra projects in Eastern India.

Taking on Pricing

Kobelco has cut costs of its crawler cranes at least by 10-15%. Mr. Anirrudh Moharir, Deputy general manager Cranes Voltas Limited, "with global demand easing, supply side constraints are no more an issue for hydraulic crawler cranes in India. To maintain our market presence, we have resorted to price cuts. Voltas resorted to price cuts for Kobelco cranes it distributes in India owing to sharp appreciation of Japanese yen at the rate of 25-30%. Mr. Moharir says, "we are planning to retain our market presence by improving our customers support taking regular feedback from them."

However, according to Mr. Nilesh Bhorkar, National Sales Manager Kobelco, "long term strategy to bring down price of its crawler lattice boom cranes through increased localization." Kobelco has recently set up its manufacturing facility at Sricity near Chennai. The facility will manufacture 90-250 tons capacity crawler cranes. Mr. Bhorkar feels, pricing pressure is likely to remain on imported crawler lattice boom cranes due to ongoing variations in currency exchange rate. He expects pricing pressure will be on 250 to 300 MT cranes. Pressure is expected to be less on 400 to 600 MT class. Kobelco will focus on promoting 100 to 200 MT class in the Indian construction sector. Mr. Bhorkar informed, "for Imported cranes, we will supply some of the components from our factory in India in order to reduce the overall cost of the cranes as alternate strategy."

Competitive pricing is also much in focus by Sany. Relatively a new entrant in India’s crane market, Sany will focus on localization to bring down price of its products. Mr. Richard Deng, Managing Director, Sany Heavy Industry India pvt Limited says, "localization is much important for us. As of now, cranes manufactured in India will continue to have at least 95% of its parts of imported origin with engine from Deutz US and Isuzu Japan, hydraulics from Rexroth and Kawasaki, electronics from Vikers US. However, bulk item like counterweight, boom structures will be sourced from local vendors. Further, indigenization will be carried in stages. Steel obtained locally will be welded with our own high quality welding to provide durability to the equipment."Sany will initially manufacture crawler lattice boom cranes of 80-100-150-250-350 ton capacity.

It will take up 600-640 tons in later stages. Mr. Deng says, "we intend to increase our market presence by providing value added customer support."

The downturn has brought demand of new equipment with heavier lifting capacities. This augurs well for equipment manufacturers. But beyond doubt retention of market presence will depend on ability of manufacturers to offer increasingly competitive solutions both through product offering and pricing.