High Demand for Construction Equipment Continues Despite Challenges: CEG – Construction Equipment Guide

The growing demand for heavy machinery is fueled by increased infrastructure construction activities as a result of both government and private investment.

The growing demand for heavy machinery is fueled by increased infrastructure construction activities as a result of both government and private investment.

Emerging from a market coma worsened by the pandemic, the new and used equipment sectors are in the midst of a high-demand cycle. If the heavy machinery market can navigate its way through supply-chain and labor issues, it should experience smooth sailing via 2023 plus beyond.

At its second-quarter earnings conference in early August, Alta Equipment Group outlined the corporate optimism expressed simply by other building companies across the United States.

“Demand with regard to both brand new and utilized equipment continues to be at high levels and sales backlogs remain at record levels, ” said Ryan Greenawalt, chairman plus CEO. “Our organic physical rental fleet utilization and rates on rental equipment continue to improve plus tightness associated with supply continues to buy inventory values across all asset classes. ”

He attributed the particular rosy picture to “industry tailwinds” from the passing of the Bipartisan Infrastructure Bill, saying it is driving further demand regarding construction equipment.

“In our material handling segment, labor tightness and inflation are driving the adoption of more advanced plus automated solutions while also driving the particular market in order to record amounts, ” stated Greenawalt.

Multiple Factors in Play

The U. S. construction gear market specifically is experiencing a high compound annual growth rate (CAGR) because of improved building activities for infrastructure development.

That is the conclusion of a study conducted by India-based market research firm BlueWeave Consulting.

“The U. H. construction market is estimated to grow from a CAGR of 6 percent during the forecast period of 2022-2028, ” researchers reported. “The developing demand intended for construction products in this region will be fueled by increased structure activities to get infrastructural development as a result associated with government and private investment. ”

Because of this particular considerable expense, the facilities segment of the design equipment market holds the biggest market share, said BlueWeave.

In fact, “explosive” is how one industry legal expert terms the global growth in demand for heavy machinery.

This individual attributes the explosion to economic plus geopolitical developments.

Chief among industries seeing a significant uptick in machinery demand is the mining sector, mentioned attorney James. R. Waite.

The uptick is driven by demand for lithium, graphene, cobalt, nickel and other components for batteries, electric vehicles and clean technologies, he said.

“Further bolstering the particular mining industry is increased demand pertaining to precious metals and traditional commodities, especially in Latin America, Asia and Africa, ” Waite said in an article in Engineering News Record. “In construction, need for tools and parts continues in order to skyrocket as countries around the world begin a new push to update roads, bridges plus other system. ”

But , he said, upgrades are especially pressing in the United States, where highways, bridges, rail and other infrastructure projects are finally starting to receive significant authorities funding.

“That will directly benefit the weighty equipment business, but it also will see logistical issues mount and supply shortages become more acute, ” stated Waite.

He or she predicts the war within Ukraine and sanctions against Russia will certainly drive up energy costs in the particular United States and elsewhere.

What the Future Holds

Waite also predicts regional consolidation specifically in the southeastern United Says, where the state of Georgia is gaining a reputation as global hub meant for innovation inside construction devices.

“Six associated with the world’s top 10 equipment manufacturers have identified the state as the new Silicon Valley of apparatus manufacturing, inch said the heavy machines industry attorney. “Georgia’s business-friendly climate and a host of strong structural advantages have provided a strong boost in order to manufacturing and the heavy equipment industry in particular. ”

Georgia provides significant tax breaks for producers and job creators, augmented by the generous condition R& D tax credit.

The state furthermore offers a skilled labor force, low rates of unionization, a top-tier university plus technical college system, a superb manufacturing infrastructure along with a world-class transportation system, this individual said.

Despite global problems including inflation, rising interest rates and the particular war in Ukraine, the heavy gear sector is usually among industries continuing to make headway.

Waite said the industry has successfully leveraged worldwide economic, infrastructure and geopolitical conditions to considerable advantage.

“As a result, ” he or she believes, “the industry is poised to continue thriving for the foreseeable future, driven simply by demand within multiple, only partly overlapping, industries, including mining, construction, energy and agriculture. Declares that seek to attract more large industry ought to follow Georgia’s business-friendly example. ”

Market’s Cautious Optimism

Early this year, the particular Association associated with Equipment Manufacturers (AEM) weighed in on the construction products market’s expansion, saying that a number of challenges could present obstacles.

Short-term factors such as the lingering outbreak, ongoing supply-chain issues plus persistent work shortages were chief amongst AEM’s list of difficulties.

Secondary to those issues that will have emerged to dampen enthusiasm had been deglobalization and inflation.

“The last recession we experienced ended the particular longest period of economic expansion in the usa, and that recession lasted from February 2020 in order to April 2020, ” mentioned Benjamin Duyck, AEM director of marketplace intelligence.

“Two months, inside traditional financial terms, can’t even be accurately described as the recession, inches he said. “However, this particular economic disruption has impacted us almost all greatly, plus we are still dealing with the aftereffects today — labor shortages, supply chain problems and higher interest rates. ”

The responses to AEM quarterly member surveys for the past two years have been positive in regard to exactly how quickly they expect to recover to pre-COVID-19 levels.

“But the data designed for this last quarter is definitely moving again in the other direction, largely due to the particular headwinds we’re facing along with inflation, workforce issues plus supply string disruptions, inch said Duyck.

Though inflation is a little lower, it has risen gradually, with a 9. 7 percent increase in the last quarter of 2021.

Talent acquisition also is a troublesome factor just for both ag and building equipment manufacturers.

AEM’s most recent quarterly member survey found that will hiring remains a major issue.

Within fact, 84 percent of all respondents have experienced issues in this area, while 90 percent of most ag members surveyed are usually affected.

Members are strategic in addressing hiring problems, incorporating internships, educational partnerships, higher wages, bonuses, marketing and recruitment efforts, flexible hours and outsourcing.

But the association believes workforce will remain a prevalent issue for the purpose of equipment producers for the particular foreseeable future.

Supply-chain problems plaguing ag and construction tools manufacturers also remain the major issue.

“COVID-19, followed by growing numbers of employees leaving the labor force, have led to both shutdowns and scarcity of products, ” he added.

In response, the supply chain offers adjusted production downward to meet expected decrease demand.

Plus, there’s the fact that shipping companies cut schedules, expecting a drop popular for shipments.

And though demand in some aspects of the economy dropped, the decrease was not evenly spread over just about all industries plus all workers, AEM noted.

“While people still continued to spend money upon homes and consumer purchases, rates of interest remained low, plus the U. S. skilled an growth in monetary supply, inches said the particular association. “Furthermore, workers and businesses were supported by the government. All of this, combined with the shortage of products and higher requirement results in inflation, adversely impacting provide chains.

An eventual scarcity of items coupled with higher demand resulted in pumpiing making the way up the supply chain.

At the same time, factories could not expand easily due to bottlenecks in the chain caused by both low production as well as the global nature of manufacturing, according to AEM.

Now, overdemand makes it difficult for suppliers to understand the true demand for their products.

“We may see this in our own industries, not only from your OEMs plus from the particular component manufacturers, but also from the end users of the OEMS, ” said Duyck. “That, within short, is why we have got supply-chain issues. Workforce, source chain and all of it ties together plus the results of policies and actions decades in the particular works set off by COVID-19. inch

Supply Chain Is the Choker

In AEM’s most-recent quarterly study, more than 95 percent associated with responding ag and structure equipment producers said they are going through supply-chain problems.

However, final winter it appeared either demand was beginning in order to normalize, or supply string signaling was improving, due to the fact 44 % of respondents noted the issues are beginning to turn around, according to the particular association.

“For the vast majority of these people, issues are both domestic plus global, inches said Duyck. “The issues are furthermore widespread, but consensus opinion among members is that the issues lie particularly with prices, shipping and quantities of raw materials plus, subsequently, inputs and parts. ”

Further, the issues do not necessarily lie at the endpoint or even receiving shipping, but rather in the supplier source — and especially international shipping, this individual added.

Supply-chain issues have caused many AEM users to fall behind, despite ongoing growth.

This situation can eventually lead to changes in inventory management, the particular survey found.

Duyck documented that the third one fourth of 2021 saw stock levels increase between 15 and 20 percent in both the particular ag and construction segments.

However, the ag side saw an additional 15 percent jump within the fourth quarter of last year.

“Whether modifications in supply management may actually take place has yet to be seen, yet it’s quite possible that higher inventory levels will become more prevalent for some time, ” said Duyck.

The bottom line, in accordance to AEM, is that will despite most the issues, growth is still expected in the ag plus construction devices sectors, even at a slower price than in recent months.

“Ultimately, the imbalance between offer and demand and COVID-19 restrictions eliminated all the stock and the grease that allows the particular global supply clock to operate, ” said Duyck. “Another metaphor that maybe hits closer to our industries is this: We’re running a machine that’s low on oil, and almost out of this. The machine will continue to run, and maybe actually run for a while — until it doesn’t. inch CEG