In terms of cost, environmental protection policies, downstream demand, etc., the price increase of construction machinery products is a major trend.
The construction machinery manufacturers, including Sany Heavy Industry and Komatsu, adjusted their prices for some products at the end of 2017, indicating that the construction machinery industry may have experienced a wave of price increases this year.
In December 2017, Komatsu (China) Investment Co., Ltd. (hereinafter referred to as Komatsu China) informed the agents that since January 1, 2018, the price of all Komatsu models has been raised. In the September-October period, there was also a collective price increase for loaders. Guangxi Liugong Machinery Co., Ltd. (000528.SZ, hereinafter referred to as Liugong Machinery), Shantui Construction Machinery Co., Ltd., and Xuzhou Construction Machinery Group Co., Ltd. ( Xugong Machinery, hereinafter referred to as 000425.SZ), Fujian Jingong Machinery Co., Ltd. and other companies have collectively raised the loader price from 10,000 to 20,000 yuan.
Caterpillar Global Vice President and Chairman of Caterpillar (China) Investment Co., Ltd. Chen Qihua told the interface news reporter that its original product prices have basically remained the same, but the next-generation excavator has upgraded its products and technology and its price is lower than the original price. The corresponding model is slightly higher.
Sany Heavy Industry dealers revealed to the interface news reporter that in January the company's excavator prices rose by 3%. Liugong Machinery stated that it has not received the price increase information from the competent business department.
According to Tianfeng Securities, the major domestic excavator manufacturers Sany Heavy Industry, Liugong Machinery, Xugong Machinery and Shandong Lingong Construction Machinery Co., Ltd. will follow Komatsu's price increase by about 10%. The price increase of large-scale and medium-sized excavators will be greater than that of small excavators.
"Involving the costs, environmental protection policies, downstream demand and other reasons, construction machinery products prices are the general trend," said Yin Xiaoji, deputy secretary-general of China Construction Machinery Industry Association, said to the interface news reporter.
The high price of steel is one of the fundamental reasons for this construction machinery price increase. Since the “cooked cabbage price†of steel prices in 2015, steel prices started to rise in 2016, and since 2017, the increase in environmental production and low inventory have been ferocious.
From November to December 2017, the price of steel rose by 1,000 yuan. On December 1, the steel price index of the Shinkansen Shinkansen exceeded the 5,000-point mark again after six years. As of December 5, the steel price index reached 5230 points, reaching the highest point of the year. In addition, many spare parts manufacturers, foundries, etc. that do not meet the standard are shut down under the pressure of environmental protection policies, and many steel mills have also begun to save energy and reduce emissions, resulting in an increase in the prices of parts and raw materials.
At the same time, the demand in the downstream market remains strong. "The main reason for this drive manufacturer's decision to increase prices is the increase in market demand," Wang Yefeng, vice president of strategic cooperation with Tiejia.com, told the interface news reporter that after the five-year downturn in the Chinese construction machinery market, it entered. During the recovery period, especially in the second half of 2017, due to the supply capacity of the upstream component manufacturers, some OEMs have experienced shortages that have not been seen for many years.
According to the data released by the China Construction Machinery Industry Association Excavation Machinery Branch on the 6th, the 25 host manufacturing enterprises included in the statistics collected a total of 140,000 sets of excavation machinery products in 2017, an increase of 99.5% year-on-year, becoming the largest in 2011 and 2010. The third highest point in history after the year.
Tianfeng Securities predicts that demand for the construction machinery industry will continue to be strong in 2018, with an increase of 200% in January and a growth rate of 30% in the first quarter.
Since the second half of 2016, the major models of construction machinery have been in a state of tight supply and demand, especially the production capacity of parts and components is severely in short supply, but the manufacturers have not increased their production or raised their prices. Soochow Securities believes that this is mainly due to the fact that the industry has taken too long to adjust, and that the host manufacturers have insufficient confidence in the sustainability of the recovery. Therefore, the scale effect is used to absorb the pressure on the cost side.
Yin Xiaoyu pointed out that the current price change of mechanical engineering products is not a price increase rather than a normal return to a reasonable price. The “winter season†in the previous five years severely plunged the construction machinery industry, and enterprises had played a price war for survival. As a result, the price of the product did not match the value, resulting in chaos and disorder in the industry, and many low-end products emerged. “After five years of scouring, we are updating and upgrading according to the national environmental protection policy while eliminating low-end products. This price increase is actually a return based on the unreasonable price war and low-end products in the previous period. ".
“The probability of price increases in the domestic construction machinery industry is not large, but it is more likely to adjust prices when upgrading products and adjusting product mix.†The journalist said.
Soochow Securities pointed out that this round is a structural price increase, and whether the excavator industry’s overall price increase remains to be seen. From the perspective of price increase logic, the more concentrated concrete machines and cranes in the industry have more power and ability to raise prices.
Wang Yefeng said that due to the lack of stability in the competitive landscape of construction machinery in the Chinese market, in particular, individual local companies still have a huge expectation of increasing market share. Some foreign-funded enterprises also want to further expand their position in the Chinese market.
“This Komatsu China price increase will not cause other manufacturers to follow suit, nor will there be a general price increase in the industry,†he said. This is mainly due to rising raw materials and labor costs that have not yet affected the survival of excavator manufacturers. The critical point for development is that, for loaders and road machinery manufacturers with relatively low gross profit margin, it is more likely to increase prices.
As of press time, Xugong Machinery and Zoomlion (000157.SZ) did not respond to the inquiry on the interface news about the price increase.
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