China housing boom drives bulldozer demand - for now

Lonking Holdings

28/04/2017 13:22

* Caterpillar, Komatsu, Sany post strong China Q1 
    * Industry sales to rise 21 pct vs 1 pct rise in 
2016-forecast 
    * Fast growth in H1 on gov support, slower in H2 - execs 
 
    By Adam Jourdan 
    SHANGHAI, April 28 (Reuters) - Chinese demand for trucks, 
cranes and diggers is gaining momentum after bottoming out last 
year, driven by a Beijing-backed infrastructure push, a housing 
boom and increased investment linked to China's modern-day "Silk 
Road". 
    Chinese and global machinery makers, including Caterpillar 
Inc  CAT.N , Japan's Komatsu Ltd  6301.T  and Sany Heavy 
Industry  600031.SS , posted strong profits this week for the 
first quarter of the year, citing growing strength in the 
Chinese market after years of decline. 
    The performance was boosted by China's faster-than-expected 
economic growth of 6.9 percent in the first quarter, the fastest 
pace in six quarters. Economists say Chinese policymakers have 
leaned on property investment and infrastructure spending, 
including their plan to build a modern "Silk Road" trading 
route, to help support the economy.  urn:newsml:reuters.com:*:nL3N1HP1N3 
    "The strong demand in China resulted in a reduction in 
Asia-Pacific dealer inventory, as demand outpaced our sales to 
dealers," Caterpillar Chief Financial Officer Bradley Halverson 
told analysts this week. 
    "If policy remains supportive we expect strong market 
conditions in China to continue at least through mid-year," he 
added. The U.S.-listed firm posted stronger-than-expected first 
quarter sales on Tuesday.  urn:newsml:reuters.com:*:nL4N1HX4BL 
    Sales of construction equipment, including dump trucks, 
excavators and mobile cranes, are set to shoot ahead by 21 
percent this year after a slight 1 percent increase last year 
and 42 percent slump in 2015, forecasts by industry consultant 
Off-Highway Research, show. 
    Industry revenues peaked in 2011 at $35 billion and then 
fell as activity slowed down. 
    Investors have been looking hard for signs of a broader 
economic revival. A team at BlackRock Inc  BLK.N  started 
picking up increased signs of building activity on the ground in 
China in the second half of last year by using satellite 
imagery.  urn:newsml:reuters.com:*:nL4N1HW3OZ 
     
    FAST START, SLOW FINISH 
    Revenues at Zoomlion  000157.SZ   1157.HK  jumped 74.5 
percent in the first quarter, its fastest quarterly growth since 
the start of 2011. Net profit hit 18.6 million yuan, swinging 
from a 660 million yuan loss a year earlier. 
    Sany Heavy Industry Co Ltd  600031.SS  said on Thursday net 
profit for the first quarter rose 727 percent to 745.7 million 
yuan. Sales increased almost 80 percent. 
    Executives and analysts, however, cautioned that the upturn 
would likely lose pace in the second half of the year as 
measures to rein in a hot property market take greater effect 
and there is also no clear policy certainty longer term. 
    "In China there is the Communist Party Congress in the 
autumn, so after that there is some uncertainty about policy," 
said Mikio Fujitsuka, executive vice president and chief 
financial officer of Komatsu Ltd  6301.T . 
    Komatsu has forecast a drop in operating profit this year, 
but said it had seen signs of improvement in China.  urn:newsml:reuters.com:*:nL4N1HX2LT 
    "We think the first half of the year should be fine but are 
more cautious about the second half of the year." 
    Shi Yang, a consultant at Off-Highway Research, said the 
year would be divided by a fast start and a slower second half, 
and that there were even signs of a bubble. 
    "Since the third quarter of last year til now, the recovery 
has been pretty strong - but it has its limits," he said. 
    "The big peaks we saw before are certainly behind us and 
there are some signs of overheating. In fact, already the market 
has started to slow." 
 
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GRAPHIC: China's construction machinery    http://tmsnrt.rs/1WK7NzB 
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 (Reporting by Adam Jourdan; Additional reporting by Maki 
Shiraki in TOKYO, Brenda Goh in SHANGHAI and SHANGHAI newsroom; 
Editing by Neil Fullick) 
 ((adam.jourdan@thomsonreuters.com; +86 21 6104 1778; Reuters 
Messaging: adam.jourdan.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA HEAVYMACHINERY/