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Tough going: Oil prices have affected the Middle East’s excavators market

PMV Middle East takes a look at the market for the excavators in the Middle East, after a challenging couple of years for the segment, in parallel with the dip in oil prices and tough construction markets

The 20- to 25-tonne and 30- to 40-tonne range account for around 80% of Liugongs excavator market share in the MENA region.
The 20- to 25-tonne and 30- to 40-tonne range account for around 80% of Liugongs excavator market share in the MENA region.

A cornerstone of the earthmoving segment, excavators are fated to rise and fall in their sales volumes with the fate of their main target industries: construction and mining. A year ago, the sentiment of suppliers to the market was muted, and in many ways the situation remains subdued, while competition naturally persists.

“The excavator markets continue to be very subdued when compared to the peak volumes seen in 2015. Customer confidence with regards to the acquisition of excavators remains low in the prevailing market conditions,” states Franco Invernizzi, senior business director for the region at CNH Industrial Construction Equipment.

With respect to the construction segment, Invernizzi explains that delayed payments to contractors for work completed, uncertainty over future contracts and the underutilisation of existing machinery all continue to weight on the market.

He continues: “As oil prices remain low, government budgets are expected to be limited for the foreseeable future, and I do not expect to see a significant upturn in the market — not even well into 2018.”

Equally frank is local dealer GENAVCO, which distributes Liebherr equipment in the UAE. As senior sales manager Saif Khan says: “There has been a drop in business this year as compared to the last two years. We sold about 350 units in the 20-tonne to 50-tonne class of excavators in 2015, and about 380 units in 2016, but through to Q3 this year, that figure has dropped to about 190 units.”

Confirming that 2015 was the tipping point for the excavator market in the region is Benjamin Zhu, deputy GM for overseas sales at GuangXi LiuGong Machinery, who notes: “The value of the excavator market in the MENA region dropped by around 45% in 2016, though it is possible that this year it will maintain the same market value level. We have sold around 1,500 units.”

Zhu countered that although, as a Chinese brand, Liugong has been facing a serious competition from Western, Japanese and Korean brands, it has been seeing its overall market share increase each year, and has successfully sold its larger 45- and 50-tonne excavators to a number of key customers.

One Japanese brand is Hitachi, and Piet Van Bakergem, GM at Hitachi Construction Machinery Middle East (HMEC), notes: “As we all are aware the MENA territory is under a constant shadow of economic and political issues, and the fluctuating the pricing of oil and other commodities. But within the region as a whole, while we have seen a decrease in demand effect the numbers, our market share is growing, thanks to the strong reputation of our machines.”

In a notable network development this year, HMEC appointed Middle East Crane Equipment Trading (MECET), as its dealer for the UAE. Headquartered in Abu Dhabi, MECET will open an additional 10,000m2 facility for sales, service and spare parts in Dubai Investments Park by the end of 2017.

Returning to the wider market, John Boyd, MEA region MD for the likewise Japanese brand Kobelco Construction Machinery, notes: “Most heavy equipment markets in the Middle East have experienced a downturn due to the wider market forces — in particular, the low crude oil prices and the geopolitical instability — but we still see some activity for excavators in general construction, and are noticing more activity in the potential for rental opportunities.”

From Korea, Moonju Kim, marketing manager for Hyundai Construction Equipment, adds: “Business in the Middle East, has been going less well lately, primarily as a result of the protracted low oil prices, but we see it beginning to turn around in specific countries. In Iran, for example, the demand for large-sized excavators is on the rise thanks to the recovery in commodity prices.”

Panning to Sweden, Ilkay Fidan, business director for the Middle East and Africa at Volvo CE, adds: “We have seen the market for crawler excavators drop in the Gulf, but it varies across the region. We have seen a drop in Saudia Arabia, whereas the UAE market is actually up. However, Saudi Arabia represents a large portion of the Gulf market.”

“When the market was hit at the end of 2015, most of the construction equipment dealers had a big stock inventory. This has definitely affected factory deliveries, as sales have continued from stock. Stock levels are now coming to the desired level and this will lead to more factory deliveries in the coming months. Saudi Arabia shows big potential together with UAE and Oman.”

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