On April 12th, multiple stocks in the construction machinery sector were active in trading, with construction machinery, Xiagong Group, Jifeng Technology, Zhejiang Dingli and others leading the way in gains. In addition, the Ministry of Housing and Urban Rural Development recently issued the Implementation Plan for Promoting the Renewal of Building and Municipal Infrastructure Equipment (hereinafter referred to as the Implementation Plan). Analysts have indicated that the replacement cycle of domestic construction machinery will start, and the industry is cautiously looking forward to the market recovery effect this will bring.
Equipment update policy introduced, industry demand bottoms out for repair
The Implementation Plan proposes to update and eliminate construction machinery and equipment that have been in use for more than 10 years, high pollution, high energy consumption, severe aging and wear, and outdated technology, including excavation, lifting, loading, concrete mixing, elevators, bulldozers, and other equipment (vehicles).
According to statistics from the China Construction Machinery Industry Association on major mini excavator manufacturing enterprises, in March 2024, sales of 24980 various types of excavators decreased by 2.34% year-on-year, including 15188 domestically, an increase of 9.27% year-on-year; Exported 9792 units, a year-on-year decrease of 16.2%.
According to Lv Juan, an analyst in the China CITIC Construction Machinery Industry, the above policies are expected to become a key factor in initiating the replacement cycle of construction machinery. It is estimated that 2024 will be the year when the domestic market of construction machinery bottoms out and is expected to achieve a slight increase. With the promotion of policies and the arrival of the update cycle, 2025 is expected to usher in a clear upward turning point, and key component enterprises and top complete machine factories are expected to be the first to enter the performance repair window period.
Huaan Securities issued a prediction that from the perspective of the whole year, domestic demand in the construction machinery industry will bottom out and export sales will increase. Considering the monthly distribution of last year's base, it is expected that the growth in the second half of the year will be faster than that in the first half. For the main models of excavators, March is the traditional peak sales season, and based on current judgments, domestic demand is expected to gradually bottom out and rebound.
Be cautious about market trends and layout in the field of second-hand equipment
Compared to the optimistic attitude of securities firms, practitioners are relatively cautious in their statements, but they are also continuously monitoring positive signals of the replacement cycle. A staff member from Sany Heavy Industry told Securities Daily, "The start of the replacement cycle will release a large amount of new demand for construction machinery, which is expected to last for three years. Currently, we are still observing the start signal stage and making relevant preparations. Considering that the notice will be issued soon, various regions will need time to introduce supporting policies. We will also develop corresponding replacement plans, price plans, and service packages based on local supporting policies."
While closely monitoring the starting point of the replacement cycle, some construction machinery companies are also turning their attention to the second-hand construction machinery market. Shanhe Intelligence is one of the early companies to enter the field of second-hand construction machinery, with rich experience in evaluating equipment, refurbishing old machines, and exporting complete sets of second-hand equipment. "After the start of the replacement cycle, the second-hand construction machinery market is expected to usher in a peak supply period, and the demand for equipment evaluation, equipment refurbishment, and equipment dismantling and recycling is expected to increase. Construction machinery enterprises with mature technology, recycling channels, and relevant qualifications are more likely to find real gold in the second-hand construction machinery market. Currently, there is good demand in the infrastructure markets of East Asia, South Asia, and Southeast Asia. If the second-hand equipment replaced in this replacement cycle is refurbished, it is expected to be exported overseas and play a role again."
It is reported that XCMG Machinery, Zoomlion Heavy Industry, Liugong and others have entered the field of second-hand equipment and have certain experience and cases in equipment recycling, equipment evaluation, equipment refurbishment, and second-hand equipment overseas.
Professor Cao Erbao, Vice Dean of the School of Economics and Trade at Hunan University, analyzed the above situation and believes that two important links need to be grasped. He said, "After the replacement cycle of construction machinery starts, top enterprises need to seize two key points. Firstly, they need to seize the opportunity of advanced equipment replacing outdated equipment, and replace old equipment with more advanced, environmentally friendly, energy-saving and efficient new equipment to bring stronger endogenous power to the domestic market. Secondly, they need to seize the opportunity of recycling and reusing outdated used equipment, bring cost-effective and well serviced complete sets of products to the international market, and implement the business philosophy of resource conservation and environmental friendliness."