Tower Cranes: Recent Demand Mobility Unlikely To Stifle Pricing Pressure

Tower crane manufacturers work out strategies to insulate from pricing pressure as competition intensifies, despite improved product off-take P.P.Basistha takes a look.

Tower crane manufacturers and distributors are sharing an uplifted business mood followed by prolonged lull phase. Manufacturers are reporting growing product off-take during recent months. Orders are being placed from the existing customers who have put their earlier purchase decisions on hold. There are reports on new business queries from the first time buyers as well. The manufacturers and the distributors expect the demand would continue but not sure for how long.

Enquiries by NBM&CW, with the manufacturers revealed that bulk of the product demand are from commercial and residential real estate projects. The demands are mainly from the projects which have been revived once again following debt restructuring by the project developers and certain renewed presence by private equity funds in real estate. The projects were stalled due to dearth of funds or costly funds on account of prevailing higher borrowing rates from banking and financial institutions. Nonetheless, though demand is expected to escalate in 2013 resulting in growth of market volumes but there is unlikely to be significant disparity in demand supply gap at least in the mid-term. This is likely to retain stiff competition at the present levels making it ever challenging for manufacturers and distributors to expand market share.

"According to our projections, demand for Potain's 5-10 tons class is likely to grow by around 25% in 2013 as compared to 2012 from commercial and residential estate sectors. However, the base is likely to remain at its modest levels. This is not much likely provides sufficient leg room to expand presence," says Mr. Ashwani Mattoo, Head Tower Crane Sales, Potain. The Manitowoc company which makes saddle jib/ hammer head cranes in between the category of 5-16 tons for the Indian market will look to protect and expand its turf in the lighter class.

"Our launch of 2.5 tons MC 148 during bC 2013 in Mumbai is intended for smaller segment of contractors. We are quite hopeful that the crane will be successful in capturing market from the well entrenched local players selling their own manufactured and distributed products," says Mr. Mattoo. He adds, "MC 148 does not have much pricing difference from the other products in the similar segment, yet carries the Potain brand and product quality supported by our well known 'Crane Care' service."

To expand and strengthen its presence in the growing Southern market, Potain has appointed CMAC as its distributor for its tower cranes in Andhra Pradesh. Under the distribution tie-up, CMAC sells and services Potain range of tower cranes from MC-48I upto MD 425 & the special purpose cranes as well. Mr. Rambabu Cheruvu, Director CMAC says, "Though the demand is volatile in the Andhra market, some recent movement has been witnessed in the market with construction projects being undertaken by Tata, L&T and NCC. We are in the process of ramping up our technical support team through enhanced training on variable frequency drives and programme logic control on the Potain cranes for enhanced product support."

The present expansion is being looked into by Action Construction Equipment Limited in the 5 tons category class. "Last year we had launched ACE TC 5034, 5 tons Inner Climbing tower crane which has allowed us to gain market share in the segment with 4-5 units being ordered every month,"says, Mr. Anil Mudgil, Country Head Tower Cranes-ACE. ACE TC 5034 comes with 1.2×1.2×3 meters Mast. It can lift 5 tons @ 15 metres working radius and 1.3 tons at tip load with 50 metres jib length. This year we are looking forward to introduce 60 mtrs and 70 mtrs Jib length Tower Cranes manufactured indigenously for Real Estate Market needs.

ACE has a major market presence in fixed top kit 5-6 tons capacity range. It also manufactures 1.6 tons and 2.5 tons mobile tower cranes. Mr. Mudgil says, "We have adopted the strategy to increase our range, strengthen our after sales service to expand market and retain our market leadership position." ACE also offers higher capacity Tower Cranes ranging from 10-100 tons which are predominantly being used for Prefab Construction, Power Plants, Refinery, Hydroelectric Projects and Cement Plants etc.

Mr. Mudgil mentions, "We are emphasizing on developing longer longer Jib Length and higher capacity models in India to provide world class solutions to Indian customers. We work very closely with our customers and organize training for their operators to ensure full utilization of our machine capabilities. ACE believes in offering customers with complete solutions and our engineers interact with customers right from initial stage to help they choose the right product to cover the site properly. We believe in providing the right product, with good service support, at a reasonable cost to ensure repeat business from various customers.

Eroding Price Disparity

Growing presence by crane companies in the 5-10 tons class through product offering by carrying out improvement in the range is likely to erode pricing disparity between the premium and non premium brands. This is on contrary few years ago when the pricing gap was wide. With demand to a noticeable extent yet out pass supply, which is unlikely to be the case, according to the industry estimates in the short and mid-term, the pricing disparity is likely to erode further, much to the advantage of the buyers. Although crane companies can continue to remain relieved to know that the cranes produced are at least being taken-off and not being maintained as inventories at their backyard adding up to recurring expenses.

It has been learnt by NBM&CW that the buyers of the 5-10 tons class equipment both in premium and non-premium brands are presently being sold without significant price difference in the market. It is expected that the trend will continue further, with buyers having stronger bargaining power at their disposal to buy products at economical rates with supply continuing to exceed than demand.

To have better margin on sales while making them grow, Anupam Industries Limited is strengthening its presence in potential demand pockets. " Future demand for tower cranes from high-rise real estate construction is expected to continue from Delhi and NCR, Maharashtra, Bengaluru and even from newer markets like Kolkata. We are in the process of adding three more service personnel in Mumbai from existing 2. While 8-10 personnel will be appointed in Bengaluru strengthening our presence in the pockets," says Mr. S.K. Malve, Director Technical, Anupam Alfa Industries Limited.

Mr. Malve expects to sell 80 units in 2013 as compared to 37 units in 2012.Anupam sells 5-6 tons hammer head tower cranes from Alfa of Italy co branded as Anupam-Alfa. 5-6 Maximum lifting capacity of 5 tons @ 15 metres working radius at 1.25 tons at 54 metres jib length and 6 tons @ 16 metres working radius and minimum of 1.4 ton at 60 metres jib length.

Localization is also on the radar for Universal Construction Machinery. The concrete equipment manufacturing conglomerate has recently entered into a tie-up with Useter for distributing and servicing its tower cranes in India. "Initially, we will be marketing the German designed crane manufactured in Shenyang, China with Universal - Useter brand in India. In the next year part of the tower crane will be manufactured here using robotics and key component will being imported. Down next two years, the cranes will be fully manufactured at our Shivare plant near Pune," says Mr. Bhosale, Vice President, Material Handling Division, Universal Construction Machinery.

Useter cranes sold by Universal are of 5 tons capacity and 1 ton at tip load with a jib length of 55 meters. The cranes are available with inside and outside climbing variants. "The flat top tower cranes have box section double angle masts, made of heavy duty robust steel for faster erection and dismantling without distortion," mentions Mr. Bhosale. Universal has sold few units to real estate construction project in Pune. The company is likely to sell couple of more units. Further, increasing its portfolio in tower cranes in Indian market, Universal will look to promote 5-30 tons electric luffing tower cranes from Useter in near future.

Universal also makes available vertical man and material handling solutions from 200 kg capacity to 3000 kg capacity and from 3 meter height to 300 meter height which includes rack and pinion elevators, mast climbing platforms, see saw lift, multi go, mini lift, suspended platforms. According to Mr. Bhosale, "the material handling products are designed considering the site requirement and made affordable with utilization for maximum efficiency."

Taking note of larger proliferation of product offerings in lighter segment, Zoomlion- Electromech joint venture tie up claims to promote cranes, designed for the Indian market. "During bC India 2013 we launched new 'Made for India' TC 5013 – 5 and TC 5013 – 5G tower crane models, having a SWL of 5t and a tip load of 1.3t at 50m. The inner climbing model has a mast section which has been designed keeping in mind typical Indian lift shafts. This model can be accommodated in a lift shaft measuring 1.9m X 2.1 m or a floor cut out of 1.38 m x 1.5 m. These models have been developed after consultation with several developers & contractors and take into account Zoomlion's experience in the Indian market. Amongst the host of features that make these cranes easy to use on sites is a quick change device which requires just a pin to be removed for rapid switching between wire rope falls. Safety is also addressed through various features such as a self-climbing mechanism with anti-drop device which ensures safety during jacking while erecting the crane and wire rope & axle breakage protection on the trolley for safe operations," explains Mr. Tushar Mehendale, MD, Electromech Material Handling Systems (India) pvt Ltd .

The joint venture tie up makes available, hammer head cranes from 4t to 240t, flat top cranes from 4t to 50 t and luffing jib tower cranes from 12t to 63 t for the Indian construction market. Zoomlion has tower cranes with lifting capacities ranging from 4 tonnes to 240 tonnes.

Larger portion of sales of tower cranes for the joint venture entity is expected to be driven by demand from real estate sector. According to Mr. Mehendale, "real estate sector will probably be driving 85-90% demand for tower cranes in the years to come with growth continuing at 15-20% per year. An emerging trend within the real estate construction sector to opt for pre cast concrete or pre engineered steel segments for building construction. This will drive the demand for tower cranes from this segment to higher capacities, namely 6 – 12 tons."

To shield its sales from pricing competition, amidst the growing demand from the real estate sector, Electromech will focus on localisation. "During the first phase will start manufacturing the 5 and 6 ton models, which make up over 80% of the total demand. We will expand the range of models being manufactured in India gradually," says Mr. Mehendale. He adds, "we are positioned to address the requirements of power, steel and cement industries. Currently, these sectors account for only 25 – 30 cranes per year. Under our jv entity, we would be able to make available range of products for industrial construction." Larger percentage of sales of Zoomlion tower cranes are from institutional buyers.

However, at present volatility in dollar rates is a source of concern for Electromech. Endorsing the worries, Mr. Mehandale mentions "exchange rate fluctuation is certainly a concern for importers. However, the Zoomlion ElectroMech joint venture has been set up to ensure that Indian customers have access to the best products available globally in India at competitive pricing. Our aim over the long run is to reduce dependency on imported components for high volume items which will keep pricing stable and competitive."

Cranedge the fully owned subsidiary of Electromech for crane maintenance is service partner for Zoomlion's complete range of tower cranes promoted by the joint venture entity. The service package comprises supply of genuine spares, trouble shooting, repairs or breakdown services, annual maintenance contracts, one time health checks, electrical upgrades, operator training courses and other technical support and consultancy on the selection, operation & maintenance of tower cranes. subsidiary Cranedge has recently conducted a 2 week service course, meeting 16 customers across Pune, Mumbai, Hyderabad, Cochin, Chennai and Delhi.

Margings on Heavier Capacity Offerings

Better profit margins are also being looked into by DSC Trading through sale of higher capacity tower cranes for industrial and core infrastructure construction. DCS is the sole distributor for Yongmao in India and the company is expert in specialized work. They manufacture 5tn to 200 tn capacity tower crane and service to many specalised sectors like nuclear project, power transmission, cement plants, bridges, cooling tower, dams, high rise building etc. Yongmao is working in more then 80 countries, says Mr. Rajeev Kumar, CEO-Tower Cranes, DCS TS Pvt ltd. DCS markets 3tn-200 tons cranes incude different models like flat top, top kit, derrick and luffing cranes for the Indian market.

According to Mr. Kumar, "we look towards providing value in sales through technical support for the high end Yongmao cranes. Yongmao has well trained technical support team with requisite expertise in erection of any specialized construction jobs. The team has adequate capability to execute the projects through necessary coordination with the EPC contractors, unlike very few crane companies in India. The tower cranes are advanced and experienced in very diversified projects across globe and comply with all international standards like FEM, CE etc. The cranes structure are robust being made of A3 steel and come with self-dismantling jib."

According to Mr. Kumar, "The market of high end cranes is showing a gradual increase, due to newer trends in construction involving prefabricated techniques in commercial and residential real estate projects in India." However, the Hyderabad based company does not ignore the mass lighter segment. DCS distributes 5-32 tons KRHI Chinese tower cranes for real estate construction. He mentions, "the cranes are of easy design with simple electrical panel, making them suitable for Indian operating conditions. Recent redesigning has been carried out in the masts to make the products economical to own."

However, all that does not make the task easier for the company to promote the products as the market continues to remain highly competitive.

DCS is also distributor of premium European, FM Gru 5-42 tons tower cranes for the Indian market. The cranes are available for commercial and industrial projects.

Escorts Construction equipment (ECE) a division of Escorts Ltd aims to sell 15 units of Linden Comansa tower cranes in 2013, almost the same numbers it sold in 2012. ECEL is the exclusive distributor of Linden Comansa flat top and Luffing tower cranes in India.

"We have recently supplied one unit of 18 ton capacity flat top tower crane for construction of natural draft cooling tower project of around 180 metres height. Three units have been supplied for construction of precast building," says Mr. Sheetal Malik, GM, Sales and Marketing, Escorts Limited. ECE has earlier supplied flat top tower cranes to BGR Energy Systems Limited for construction of cooling towers at Kalisindh plant in Rajasthan and Marwa in Chhattisgarh. Kalisindh plant has two cooling towers with 142 metres of diameters on base and height of 200 metres.

He says, "being one of the best players in the premium high capacity segment, we are isolated from the volatility of mass market. The advanced product positioning of our Comansa cranes is well likely to expand and retain its market presence, when EPC contractors are looking to economize cost of construction, amidst compressed work schedules."

"The unique selling proposition of our cranes is completely based on its range competitive features. Notable among which is removable jacking cage provision. With single jacking cage, heights of other Comansa cranes working at the same sites can be increased or decreased, thereby leading to cost savings," says Mr. Malik. Comansa range of tower cranes marketed in India are sourced from Comansa Jie facility in China and flagship facility in Spain depending upon the requirements of the customers.

Despite advanced product positioning, appreciation of dollar and euro against INR is well likely to put some temporary brakes to promote such cranes. But as such higher capacity range of tower cranes are mainly required for industrial projects like thermal / nuclear power projects there will be huge surge in the demand once such projects are back into the track . Also as more and more building contractors are adopting pre cast technology there will be increase in a demand for high end higher capacity Tower cranes as in such projects tower cranes are utilized like any other production machine and contractors prefer to opt for a reliable product. Although there is a temporary slowdown in the market but we are strengthening our existing position through better product support by hiring more technical hands," mentions Mr. Malik. According to industry estimates, the size of the niche high capacity premium tower crane market is between 40-50 units per annum and this will grow at a CAGR of around 20% once Indian economy in back in the track in the near future.

Higher capacity market is also in focus for XCMG Cranes. According to Mr. Hrikesh Kulkarni, XCMG India, "We are focusing on higher capacities as there are too many players in India now for lower capacities, precisely in 5 and 6 tons capacity. Our focus is towards institutional and corporate customers." He mentions, "we are well positioned with our various types of tower crane designs in various capacities. Customer can have a wide choice and we can supply the tower crane as per his design choice. We can study the site conditions and can help customer in choosing a proper type of design of tower crane suiting to his site." XCMG's tower cranes comes with angle type, box type, tubular type & split type, pin type and welded type mast sections. Working radius are ranging upto 70 meters. The cranes are available free standing type, internal climbing type, chassis mounted versions, moving type and luffing type tower cranes. XCMG's tower cranes are available between 5-100tons."

Mr.Kulkarni says, "to make our tower cranes affordable, we are looking at fabricating the product locally as dollar fluctuation has become unpredictable and no strategy will work to keep fixed price. We propose to expand and retain our market by increasing our reach through dealer network and localizing the part of production process."

Improved product procurement of tower cranes could be an indication of market revival, though it is difficult to predict how long the demand will sustain. Demand sustainability can be well worked out by project developing agencies. However, not to be ignored the competition is there to stay and even getting stiffer, far cry from the days of nascent mechanization putting further pressure on pricing. It will be the onus of the crane companies to take on the challenge and set sail.

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