Too much of a good thing? Earthmoving industry outlook 2018/2019

In recent years, the earthmoving equipment market in Australia has witnessed a surge in demand, largely driven by increased government spending toward infrastructure projects. We spoke to several industry leaders to find out some of the current trends in the infrastructure and earthmoving space, and where the challenges and opportunities lie in the future.

All respondents had a positive outlook for the upcoming 2018/2019 financial year, with demand for new earthmoving machines predicted to only increase.

“The Australian industry for new machines is now at an all-time high. In 2017, there was over 15,000 new machines delivered nationally, which was an increase of over 20 per cent from 2016. In 2018/19, the forecast for new machines is expected to reach over 10 per cent year on year,” Caterpillar Global Construction and Infrastructure Manager, Ranil Tennakoon, said.

General Manager of Construction and Forestry Sales at Hitachi Construction Machinery, Frank Gili, said the company is extremely optimistic about the coming financial year, even if growth in demand slows compared to last year.

“We expect market demand to continue to increase across most major machine classes, however, perhaps not at the rate we experienced in FY18. Continued investment in infrastructure projects, predominantly on the east coast, will continue to fuel this market demand growth. Hitachi Construction Machinery is positive in regards to the opportunities in FY19.”

General Manager of Melbourne Tractors, Matt Thorne, said that as a result of new construction projects across the country, the company was expecting an increase in sales at all of its dealerships.

“The residential boom in Victoria is progressing well with no sight of slowing down, and the Queensland Road and Rail projects will bring about a lot of work for the Queensland construction industry.”

Semco Equipment Sales Corporate Accounts, Director, Graham Murphy, also confirmed that there are currently plenty of large infrastructure projects, more than he had seen for many years.

“Semco is mainly focused on the light to medium class of construction equipment and we are seeing strong demand which we think will be sustained, so long as the housing industry remains buoyant.”

Major projects continue to drive construction boom
Mr Murphy said that he was seeing major investment in road and rail projects in several capital cities, most notably Sydney, Brisbane and Melbourne.

Mr Thorne highlighted the Inland Rail, Ipswich Motorway upgrade, Bruce Highway upgrade, Cross River Rail and M1 upgrade projects in Queensland, and the Melbourne Metro Rail, Melbourne Airport Link, West Gate Tunnel and NorthEast Link projects in Victoria as the biggest projects currently planned or underway in Australia.

Sydney’s second airport, Victoria’s West Gate Tunnel and Melbourne Airport rail link, and Queensland’s Bruce Highway project were top of Mr Tennakoon’s list of the biggest projects currently underway or planned in Australia, with Mr Tennakoon adding that he expected to see an increase in demand for large projects like these.

According to Mr Gili, “There are many large infrastructure projects (road, rail and housing) both current and planned that will continue to drive construction machinery demand.”

Understanding the challenges ahead
Both Mr Tennakoon and Mr Murphy said that the main challenge facing earthmoving equipment suppliers was getting access to capable staff, particularly good operators, diesel fitters and field workers.

“Maybe we are not training enough apprentices, although Semco does it’s share. Quite a few are striking out on their own and becoming contractors, which is a double-edged sword. The level of tech-savvy that diesel fitters need these days and the tooling to keep up with the low emission engines and other electronics suggests they may struggle on their own,” Mr Murphy said.

“Some of the challenges facing the industry are safety and access to good operators. The industry is addressing these challenges by investing in technology to help reduce fatigue, and use of on-board technology to provide unmatched protection for people, equipment and existing assets and infrastructure on work sites. Technology is also allowing operators to move more dirt and be more accurate in a faster time frame, therefore improving overall productivity,” Mr Tennakoon commented.

While earthmoving equipment suppliers are enjoying the spike in sales, managing the supply chain to meet market machinery demand also brings its own challenges.

“Manufacture of machines continues to increase significantly and while most Original Equipment Manufacturers (OEMs) have the capacity to increase volumes, predominantly by adding an extra shift, downstream suppliers are struggling to ‘feed the OEMs’,” Mr Gili said.

“As a consequence we are starting to see lead times increase significantly. To counter this significant increase in demand, OEMs are now increasing their forecast volumes on their downstream suppliers and also seeking alternative supply sources to assist in maintaining market acceptable lead times.”

Mr Thorne said that most manufacturers have ramped up production to meet the new global demand.

“The Australian excavator market is up 37 per cent from last year which is causing factories to run over capacity. And thisincrease in sales isn’t just occurring in Australia but worldwide which means we are competing with other nations for excavator supplies.”

Mr Murphy also shared this sentiment, commenting, “Customers need a strong dealer support base here if they want to work machines hard and shift dirt. We are just two per cent of the world market so it is an issue for OEM distributors and dealers where they are expected to support brands through their working lifetimes with parts and service.”

1 Comment
  1. Camille Devaux 2 months ago

    I like that you mentioned the importance of finding good operators. This will make it super easy to get the best possible results for construction. My cousin looking into getting this service might like knowing this.

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