Economic review & forecasts Chris Sleight Editor International Construction

Contents  Global economic trends  Construction industry trends – global and US  Trends & cycles in the crane industry  Trends in the heavy transport sector  Outlook based on economic forecasts

Warning  Economic forecasts always have uncertainty  We live in very uncertain times  If any forecast today turns out to be accurate it is pure luck  But forecasts have a value  Show broad trends  Summarise complex situations  Form your own opinion!  What is important for your own situation?

World economic growth 2012 EU -0.4% US 2.2% LAm 3.2% S. AF 5.0% CIS 4.0% RoA 6.7% WORLD 3.3% MENA 5.3% JP 2.2%

World economic growth 2013 EU 0.2% US 2.1% LAm 3.9% S. AF 5.7% CIS 4.1% RoA 7.2% WORLD 3.6% MENA 3.6% JP 1.2%

World economic growth 2017 EU 1.7% US 2.6% LAm 4.0% S. AF 5.8% CIS 4.1% RoA 7.7% WORLD 4.6% MENA 4.5% JP 1.1%

GDP trends  Strongest growth in emerging markets  BUT growth moderating in China & India  Developed countries remain weak

GDP trends & construction  Growth in construction is in line with GDP growth  Construction output ~ 10% of GDP  GDP data indicates size & trend of construction market  GDP & construction are key drivers for lifting & transportation industries

Global construction market

Global construction markets: growth trends

Global Construction outlook Global:~+4% growth this year Europe:Return to recession North America:Good growth from low base Japan:Continued stagnation Developing Asia:Strong growth – circa +7%. China & India slowing Latin America:Strong growth – circa +6%. Inflation concerns ME/AF:Generally strong – depends on commodity prices

US construction output – US$ billion

Crane industry trends Manufacturers’ revenues & profitability Stock market performance of crane manufacturers Fleet sizes Relation to wider economic trends

Source – World Crane Report Unique study of the global industry  10-year study  Manufacturer trends  Owner trends  Insights into fleet composition  Links to wider economic trends

Manufacturers – 10-year revenue trend (US$ million) Peak = US$ 31.7 billion -25% drop in % - +8% growth since Re-gain peak in ? Chinese = 30% of total

Quarterly sales ($ million) – ‘traditional’ crane manufacturers Q

Operating margin - selected ‘traditional’ crane manufacturers

Stock market performance – year to date

Manufacturers - conflicting indicators Revenues & profitability recovering - Revenues up on 2011, but looking flat this year - Significant improvement in margin Weak Chinese market deflating share prices - Chinese truck crane sales down ~ -45% in 1 st half - Stock market weakness from May onwards – China, Euro Zone etc.

Total fleet – Top 50 Total fleet = 21,896 mobiles & crawlers Almost unchanged since 2008 Continued growth in Europe North America more cyclical

Top 50 – wheeled mobile vs crawler Ratio of mobiles:crawlers 78:22 in 2012 All cranes 2003  ,470  21,896 (+33%) Mobile cranes 2003  ,118  17,022 (+30%) Crawler cranes 2003  ,352  4,874 (+45%)

Top 50 – total load moment Change 2003 – 2012 Total 4.6  14.9 million tonne-metres (+225%) ~ 1.53  4.98 million tonnes lifting capacity Per crane 279  682 tonne-metres ~ 93  227 tonnes lifting capacity

North American fleet size – mobiles & crawlers

US fleet size & GDP - % change

Cranes vs economic cycle Global fleet did not shrink in recession years - Capacity increased significantly! US fleet has been more cyclical - Follows GDP growth with 1-2 year lag - Start of modest fleet growth in GDP does not look strong enough to trigger high fleet growth

Heavy transport Trends in specialized heavy transport Road transportation & fuel prices

IC&ST Transport 50 – global capacity (t)

Transport 50 – North American capacity (t)

Historic US retail diesel prices - $/gal

Oil price - $/barrel (WTI)

Heavy transport costs Direct correlation between oil price & diesel price Outlook for oil price: –US Energy Information Administration predicts -8% fall in 2013 –Trending lower over medium term due to global economy Equates to US$ 3.70 per gallon (~ US$ 4.00 in 2012)

Heavy transport trends +17% increase in heavy transport capacity in 2012 US trailer-focussed market (79% trailers vs 21% modular) (Europe 14:86, World: 47:53) Diesel prices softening, but staying high

Outlook for sector Improvement in early 2012, but outlook has weakened (Fuel) costs may fall Reasonable recovery in US construction  crane sales Globla Uncertainty Euro-zone, China, US fiscal cliff

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