Global Report 2020

UNIQUE CONTENT AND INSIGHTFUL OPINIONS ON THE SHIFTING MOVEMENTS WITHIN THE MARKET BY THE INDUSTRY’S MOST INFORMED AND INFLUENTIAL SOURCES

GLOBAL REPORT

CONSTRUCTION EQUIPMENT 2020

LEASING AND RENTAL TRENDS | SUSTAINABILITY | DOWNSIZING | THE DIGITAL AGE

CHINA: THE FUTURE | GLOBAL MARKETS REVIEW | ASPHALT PLANT TECHNOLOGY

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Editor:

Geoff Hadwick

Contributing Editors:

Mike Woof, David Arminas, Guy Woodford, Enrique Saez

Designers:

Simon Ward, Andy Taylder, Stephen Poulton

Production Manager:

Nick Bond

Office Manager:

Kelly Thompson

Circulation & Database Manager:

Charmaine Douglas

Internet, IT and Data Services Director: James Howard

Managing Director: Andrew Barriball

Chairman: Roger Adshead

Publishing Director: Geoff Hadwick

Editorial contributors: Liam McLoughlin, Kristina Smith, Graham Anderson, Munesu Shoko, Alan Dron

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Global Report Construction Equipment

Print ISSN 2057-3510

Digital ISSN 2057-3529

CONTENTS

05. Global markets review:

Long-term gain, short-term pain Global construction equipment demand will remain healthy in the decade ahead, with many national governments and ambitious private enterprises committing to significant new infrastructure projects. The future looks bright.

22. The world in numbers: Infographics to make you think We live in interesting times. The global economic and political landscape is in a state of flux like never before as populism, pandemics and protectionism disrupt the status quo. We have selected a mix of key facts and figures to help you make sense of it all.

25. Leasing and rental trends: Servitisation, technology and sharing Market upheavals are driving rapid strategic change in the way construction equipment is owned, sold, rented, leased and used. Do you know what servitisation and the shared economy mean? And where is the technology taking us next?

31. Downsizing: The power game: Less is more as engines get stronger Two decades of diesel engine developments have not only helped to reduce emissions, they have also increased power-to-weight ratios. Is your business making sure it can get the same performance levels from smaller machines?

35. View from the top interview: Is e-equipment the new normal?

At the recent BICES exhibition in Beijing, Global Report sat down with two of LiuGong’s most senior directors. On show was the company’s first range of all-electric construction equipment. Is this the future … or is it the new normal?

40. Sustainabilty:

Construction has a crucial role Construction accounts for more globalresource use than any other industry. It will have a crucial role in the circular economy. How can your business help contractors get the licences they will need to run the site of the future?

47. Logistics: Who can you really trust out there?

Global supply chains involve lots of organisations doing lots of transactions every day, all around the world. Everything is based on trust. How do you make sure that every link in the chain is doing what it is supposed to do? Who can you really trust?

52. Special report: Brazil

Brazil flags up order and progress

The Brazilian construction equipment sector is showing signs of recovery after the country’s economic and political crisis of 2014-2017. Now, at last, there are signs of better times ahead. Can order and progress start to reign again?

56. Fleet cost management:

Wealth and efficiency mean control

A wide range of machinery and technology is needed to run one of today’s large, modern construction sites, and it comes at a huge cost. So, why are the best ways to acquire and operate these expensive equipment fleets often overlooked?

61. Special report: Africa:

Closing the infrastructure gap

Africa’s infrastructure investment gap stands at somewhere between US$68 and US$108 billion per year. The need to spend is obvious and the continent’s backers clearly agree. At long last, it looks like things are moving in the right direction.

67. China: The future:

The dragon emerges from Covid-19

As China’s construction equipment manufacturers ramp up production following the global virus pandemic, what shape will they and their markets be in? Are they thinking local or global? How are their strategies changing in these volatile times?

72. The digital age: Building a brave new world

This is the year that the European Union will push ahead with its new DigiPLACE project, an initiative designed to develop a construction industry “fit for the digital age”. But what does that mean on the ground, in the real world?

76. Asphalt plant technology: Powered by globalisation and data

New asphalt plant technologies are spreading around the world, thanks to globalisation and the availability of information. How do the sector’s leading players think that things will change as these transformative global trends take hold?

PERERFORMANCE

As Global Report 2020 was going to press, the Covid-19 pandemic was continuing to disrupt the global economy. Our expert writers have taken the long view wherever possible and tried to identify the key long-term trends that will affect us all. However, there are clearly going to be some unexpected bumps in the road ahead. Here, in our traditional opening feature, we have collected together independent analysis on markets around the world from the best sources in the business. It is, as always, a snapshot based on their thinking at the time. But, in these unusual times, the sources that we have used here, and throughout the rest of the Global Report 2020, have all said the same thing: This is what we think right now. The long-term outlook is good, they all agree. But things in the short-term are looking far more tricky.

LONG-TERM GAINS AFTER SHORT-TERM PAINS

Global construction equipment demand will remain healthy in this new decade, with many national governments and ambitious private enterprises committing significant financial sums to new transport and utilities infrastructure works. There are lots of large-scale residential and commercial building projects in the pipeline too. The future looks bright. Guy Woodford reports.

The global market for construction equipment reached a historical peak in 2018, with 1.1 million units sold, according to Off-Highway Research (OHR), a leading off-highway business market intelligence consultancy. In the same year, the global value of construction equipment sales was $110 billion. Having begun last year, OHR forecasts the decline in worldwide sales, which began last year, will continue until 2021, after which the next phase of growth will occur.

U.S.-headquartered business market research analysts Freedonia tip global demand for construction equipment to expand 4.4% a year between 2018 and 2023. This is a notable recovery from “weak” performance between 2013 and 2018. Freedonia notes that crucial trends driving market gains include advances in worldwide building and nonbuilding construction activity; and the expansion of the global mining, forestry, energy, and

agricultural sectors, which will generate demand for a variety of construction equipment. Further positive trends include a recovery in commodity prices which will improve the financial position of mine operators, who are significant purchasers of construction equipment; and rising construction and mining sector mechanisation rates in numerous developing nations. Furthermore, Freedonia believes that the development of technologically advanced and more versatile construction equipment will spur replacement sales price increases, boosting value demand even if unit demand stays flat.

On a less positive note, Freedonia also states that hampering market gains is the sizeable amount of construction equipment already in use in industrialised countries and the continuing popularity of used machines in developing nations.

Freedonia predicts that the Asia/Pacific

region will account for 53% of all new construction equipment demand, with China alone comprising 27% of all further product sales gains in the 2018-2023 period.

MarketsandMarkets, a leading global B2B (business-to-business) market research company, whose broad industrial expertise portfolio includes building and construction, notes that the concept of self-driving or autonomous construction equipment will continue to gain traction in the next few years. The firm also forecasts a vibrant equipment rental and leasing sector fuelled by infrastructure building project contractors keen to access premium equipment without paying its entire cost. Meanwhile, MarketsandMarkets has also highlighted how a lack of standardisation for engine technology, including emission standards, is hampering the export of machines. High production costs also represent a significant challenge for construction equipment manufacturers.

EUROPE

A PERIOD OF GROWTH ENDED BY CHALLENGING TIMES

With annual revenues of €40 billion generated by its 1,200 companies and their combined 300,000 employees, the European construction equipment industry is a big player globally.

Off-Highway Research (OHR) notes that European equipment demand has generally been improving since the postfinancial crisis low point in 2009, although the sovereign debt crisis of the early 2010s derailed growth in 2012 and 2013.

The acceleration in 2016-2018 was particularly sharp, and 2019 sales totalled some 178,000 machines. While not up to the high of more than 200,000 units seen at the peak in the mid-2000s, OHR states this represents very healthy demand for Europe.

OHR says: “The last three years have seen equipment sales in almost all European countries grow. The underlying reason has been improving economic growth in the region. There has also been strong residential construction activity, particularly in Germany, reform in France in the form of 2015’s ‘Macron Law’, recovery in the Southern economies hit hardest by

the global crisis, a climate of low interest rates and a good number of significant infrastructure initiatives.”

So far, OHR continues, the uncertainty of Brexit has had little effect on the UK market or broader equipment demand in Europe. With more than 38,000 machines sold last year, demand in Britain and Northern Ireland was almost as high as it was in the boom of the mid-2000s. House building has been strong over the last few

years, particularly in London and the South East, and there is now a good pipeline of infrastructure work.

“There is little doubt that when – and if –Brexit happens that there will be disruption for the industry. Tariffs and bureaucratic barriers could disrupt the flow of machines and parts, and in the longer term, the negative impact on the UK economy is likely to feed through to reduced demand for equipment,” says OHR.

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In terms of equipment, OHR highlights that the mini excavator is hugely popular in Europe, partly because of the ever-maturing rental industry, and now accounts for some 40% of equipment sales in unit terms.

Europe’s construction machinery manufacturers association, CECE, reports that 2019 was a positive year for the sector. However, the forecast for 2020 is that market conditions will be challenging.

Speaking during an online CECE press conference in March 2020 to launch the association’s Annual Economic Report and highlight the CECE’s response to the Covid-19 pandemic, Sebastian Popp, secretary of the CECE Statistical Commission, said the European construction equipment industry was now at the “edge of a cyclical downturn”. However, an initially predicted 5% reduction in equipment demand in 2020 has now been made irrelevant by the Covid-19 pandemic. Looking at the market more closely reveals some crucial pointers and Popp said: “More than half of the equipment sold comes from the three main markets, Germany, France and the UK.” He explained that these account for 25%, 14% and 12% of sales of construction machines in Europe respectively.

Popp said that for many equipment sectors, there was a ‘bauma effect’, with sales

NORTH AMERICA

proving strongest in the first two quarters of 2019. However, the earthmoving equipment sector bucked this trend. “Sales grew 6%, and the growth continued through 2019.”

He continued, “The sector bounced back in early 2020. Until February 2020, we had seen a good recovery.”

How the EU will respond economically to the current pandemic remains to be seen. But Popp added: “When we will see stimulus packages, the infrastructure sector will be one to benefit.” And he explained that this would help boost future construction activity.

Meanwhile, Riccardo Viaggi, secretary

HEALTHY DOMESTIC DEMAND BUT CHINESE TRADE WAR GOES ON

As in Europe, North American construction equipment demand is now the highest it has been since the preglobal financial crisis peak of the mid-2000s, states Off-Highway Research (OHR).

Indeed, the North America market is forecast by OHR to continue its growth until 2022, when sales are expected to reach a peak level of 240,000 machines. Following this, a modest decline is anticipated in 2023 to around 225,000 machines.

OHR notes that lighter equipment types have benefitted most from a residential boom, with strong growth in mini excavators, telescopic handlers and smaller classes of crawler excavators. As in Europe, OHR

notes that the backhoe loader is falling out of favour a little in North America, but sales remain around 10,000 units per year.

OHR says that skid-steer loaders still sell in huge numbers to construction and agriculture in North America, but at 34,000 unit sales last year, the market is far from its peak of 73,000 units in 2000. The fundamental change has been the emergence of compact tracked loaders from the early 2000s onwards. Their lower bearing pressure – and therefore better abilities on poor ground conditions – have, says OHR, moved them ahead of skid-steer loaders in many applications and sales last year were more than 50,000 machines. The similarities in

general of CECE, explained that the group has been lobbying for the deadlines for the Stage V emissions requirements to be extended. He said that incomplete and unsold engines meeting the needs of the transition period had been stockpiled due to a shortage of components to complete them and reduced engine demand. Viaggi explained that sticking to the original Stage V deadlines would result in the scrapping of many components, which is not desirable from an environmental perspective. Europe’s road-building sector continues to offer excellent sales opportunities to construction OEMs (original equipment manufacturers). In Q1 2019, GlobalData reported that its Construction Intelligence Center (CIC) was tracking road-related construction projects in Europe with a total value of US$485.8bn. Of this, $198.2bn was, at the time, in the execution stage and US$165.3bn in the planning stage. Russia accounted for the highest value at $66.2bn, followed by the UK with projects valuing $64.8bn. Norway and Romania follow with road construction projects with a cost of $52.2bn and $31.9bn respectively. The highest value project in Europe as of Q1 2019 was the $25bn floating underwater tunnels project in Norway followed by the US$15.3 billion Central Ring Road development in Moscow, Russia.

ABOVE: North American construction equipment demand is now the highest it has been since the pre-global financial crisis peak of the mid-2000s

BELOW: Aerial view of a German autobahn with construction works for a new railway bridge next to it. Drone photo taken at Denkendorf near Stuttgart

© Frank Gärtner

Dreamstime.com

design and capacity of skid-steer and compact track loaders mean this shift is perhaps best thought of as a change in undercarriage preference, rather than a migration to a new type of machine.

GlobalData’s

Trends and Opportunities to 2023 that the U.S. infrastructure construction market is due to record a CAGR (compound annual growth rate) of 6.83% in nominal terms in the 2019-2023 period. Increasing demand for new infrastructure and maintenance works, along with urbanisation growth and the rise in e-commerce, is creating significant investment opportunities, especially for the transport sector, notes Global Data. In July 2019, under the Infrastructure for Rebuilding America (INFRA) discretionary grant programme, the U.S. Department of Transportation (USDOT) granted US$856mn to develop railway and related infrastructure. Out of the total investment, the government agreed to spend $135.5mn towards the rebuilding of two railway corridors in the country.

BELOW: Construction workers assess plans for a building project in St Louis, Missouri

The whole construction project pipeline in the U.S. – as tracked by GlobalData and including all megaprojects with a value above $25mn – stands at $852.2bn. The pipeline, which consists of all projects from preplanning to execution, is relatively skewed towards late-stage projects, with 58.7% of the pipeline value being in projects in the preexecution and execution stages as of October 2019.

GlobalData highlights that the continuing U.S-China trade stand-off continues to have a destabilising effect on the American construction industry.

On 1 August 2019, president Donald Trump announced that he would impose a new 10% tariff on a further US$300bn of imported Chinese goods, ranging from clothes to smartphones, marking a sharp escalation of the ongoing trade war between the two countries. This new round of tariffs is in addition to the current tariffs of 25% on $250bn of Chinese imports. Already, highlights GlobalData, U.S. construction companies are shifting supply chains and delaying capital expenditure as a result of the previous U.S. tariff increases on Chinese products and overseas metals. “This latest

CENTRAL & SOUTH AMERICA

announcement of tariffs on Chinese imports, together with the effects of previous tariffs, will further undermine business confidence, and likely lead to weaker construction growth,” concludes GlobalData.

The previous Trump-government-imposed tariffs on $250bn worth of Chinese goods entering the U.S., resulted in retaliatory tariffs on $110bn-worth of U.S. goods imported to China. The AEM (Association of Equipment Manufacturers), the North American-based international trade group representing off-road equipment makers and suppliers, has long voiced its concern about the U.S. government’s imposition of tariffs on imported Chinese goods.

Remaining with GlobalData, the global business market intelligence consultancy’s Construction in Canada – Key Trends and Opportunities to 2023 notes that in the 2019-2023 period, Canadian construction activity will benefit from the government’s planned investments in infrastructure. Under the Investing in Canada Plan, the government plans to invest a total of CAD 180bn (US$139bn) in crucial infrastructure sectors until 2028 – generating significant commercial opportunities for construction equipment makers, both domestic and international. The Canadian construction industry’s output is likely to be supported by improvements in business confidence over the forecast period, which will drive investment in overall infrastructure, notes GlobalData. Also, the government’s aim to improve local energy resources will support investment in energy-infrastructure projects, which will, in turn, fuel growth in the industry.

POLITICAL UNCERTAINTY REMAINS A MAJOR PROBLEM DESPITE SEVERAL LARGE INFRASTRUCURE GAINS

Deloitte’s Global M&A (Mergers & Acquisitions) Construction Monitor 2018-2019 reports that there were nine mergers and acquisitions valued at US$5mn or more involving construction companies in 2018, the same level as in 2015.

Between 2018 and 2022, GDP (gross domestic product) in Latin America is expected to grow to an annual average

of 2.6%, notes the Deloitte report. Total infrastructure spending was tipped to reach US$142.5bn in 2019 and $175.8bn in 2020, creating new commercial prospects for construction equipment makers.

New governments in Latin America brought perspective for a region struggling economically. Deloitte says that political stability is vital for the future growth of the

Latin American construction markets. Total infrastructure investment in Latin America is estimated at 2.8% of GDP, significantly trailing the 5.2% investment requirement as defined by the United Nations, states the Deloitte report. Estimates of the infrastructure financing gap in the region vary. For this to close, investment levels must increase in the six countries

© Jon Rehg | Dreamstime.com

that account for over 90% of infrastructure investment in the region (Brazil, Peru, Mexico, Argentina, Chile and Colombia).

More positively, a combination of favourable demographic trends and the implementation of legislative reforms throughout Latin America is generating a wide range of infrastructure investment opportunities investors, says Deloitte. Total regional infrastructure spending is projected to reach $142.5bn in 2019 and $175.8bn in 2020.

GlobalData’s Construction in Brazil – Key Trends and Opportunities to 2023 report says that the Brazilian construction industry is expected to remain sluggish in 2019, before recovering to an annual average rate of 2.3% in real terms during the latter part of the 2020-2023 period. GlobalData says the recovery will be driven by the government’s efforts to improve the country’s infrastructure and increasing investment in energy and manufacturing plants.

The total construction project pipeline in Brazil – as tracked by GlobalData and including all megaprojects with a value above US$25mn – stands at BRL2.2tn ($597.8bn). The pipeline, which consists of all projects from pre-planning to execution, is skewed towards early-stage projects, with 57.4% of the pipeline value being in projects in the pre-planning and planning stages as of November 2019.

Global Data’s Construction in Mexico – Key Trends and Opportunities to 2023 report notes that Mexico’s recently launched infrastructure

plan could restore investors’ confidence and add to national construction industry growth. However, the same source believes public spending will remain subdued and private investment restrained if security issues and uncertainties around the policies of president López Obrador continue. A highprofile example of policy uncertainty was López Obrador’s decision to cancel the partbuilt US$13 billion airport for Mexico City five weeks before taking office in the summer of 2018.

Ongoing civil protests in Colombia are expected to have a negative impact on the country’s economy

raise investment in sectors such as transport, energy and communications were affected by the country’s worsening financial conditions, including the transmission line between Río Diamante to Charlone, the Vaca Muerta gas pipeline and the Norpatagónico (North Patagonia) railway line project.

The report also comments that a weak external environment, which could lead to a lower-than-expected decline in the price of oil, could also make it harder for the Mexican government to achieve its fiscal target, and further constrain much-needed spending on public works. According to the Mexican Chamber of Construction Industry, the 2020 budget for 12 government ministries and state-run companies that have traditionally dominated public sector construction is 8.6% lower than that approved in 2019.

GlobalData notes that the Argentinian construction industry was expected to contract by 6% in 2019 and 2.4% in 2020, due to the continued deteriorating macroeconomic conditions and the challenging business environment. Many of the construction projects included in the plan that was launched by president Mauricio Macri’s outgoing administration in 2019 to

GlobalData says the Argentinian construction industry is expected to recover during the 2021-2023 period, supported by new president Alberto Fernández’s efforts to revitalise the economy and subsequent improvements in investor and consumer confidence. Investments in road infrastructure projects include the Safe Highways and Roads Network program and the Corredor C Toll Road development.

Ongoing civil protests in Colombia are expected to have a negative impact on the country’s economy, notes GlobalData.

The global business market research consultancy says this could harm construction spending – and construction equipment demand. In November 2019, protests began in response to the government’s plans to reduce benefits for workers and retirees and in support of the country’s peace agreements. These escalated into a broader outcry over dissatisfaction with president Iván Duque’s policies on economic reforms, corruption, violence and environmental protection.

The skyline of São Paulo in Brazil

STILL DRIVING UP DEMAND AND R&D INVESTMENT

China’s 25 leading excavator makers sold a total of 235,693 excavators in 2019, up 15.9% year-on-year, according to data from the China Construction Machinery Association (CCMA).

CCMA figures show that 209,077 excavators were sold in the domestic market, rising 13.4% year-on-year, while export of the equipment surged 39.4% to 26,616.

Off-Highway Research (OHR) says the Chinese market experienced a severe downturn in 2015, when sales fell to less than 140,000 machines, a fall of 40% compared to the previous year. Even more dramatic is the comparison with the peak level of sales reached in 2011 at 475,000 machines.

However, since 2016 China has been on a steady recovery path which has led to the latest peak in 2018 – when, OHR notes, nearly 340,000 machines were sold, one-third of global sales that year.

Exports of construction equipment from China remain significant, primarily to emerging markets. In 2018, 85,000 machines were exported, which represented 20% of total machine production.

Production of crawler, mini and wheeled excavators totalled 248,600 units in 2018, according to a detailed analysis in the February 2020 Market Report from OHR’s Chinese Service. It was the second year in a row that the country’s excavator production had set a new record, and output was 18% more than was seen at the height of the stimulus spending boom in 2011.

The OHR Chinese Service study looks on a factory-by-factory basis at the manufacturing of the three types of excavator for all significant OEMs (original equipment manufacturers) – both domestic and international – active in China. It compares actual production in 2019 with the design capacity of each factory.

One alarming conclusion is that although there have never been more excavators produced in China, factory utilisation last

year stood at only 51% of theoretical capacity. However, it is a moot point as to whether full capacity is achievable. Demand in the previous two years has seen waiting times lengthen due to component supply shortages – particularly hydraulic components.

The downturn in China from 20112016 followed an extraordinary boom in equipment sales in 2010 and 2011, which OHR’s Chinese Service notes was the result of the national government’s approximate US$600bn stimulus package. The remarkable high this created was followed by a long and painful recession for the industry. New equipment sales were hampered by the perfect storm of lower construction activity and a large population of young machines in the field.

OHR’s Chinese Service says that the remedy for Chinese construction industry woes came in late 2016 in the shape of new infrastructure investment under president Xi Jinping’s Belt and Road Initiative (BRI). The BRI is developing modern-day versions of the land-based ‘Silk Road Economic Belt’ and the ‘Maritime Silk Road’ of the 21st Century. It is seeing massive investment in China’s land and sea transport infrastructure and has also seen Chinese banks fund projects in neighbouring countries. Both measures have been extremely positive for the Chinese construction equipment industry. One of the crucial points about the overseas aspects of BRI is that projects are often carried out by Chinese contractors (or their joint ventures), and there is a tendency for them to source equipment from producers in China.

Although the peak in equipment sales associated with these projects now looks to have passed, only a moderate decline was forecast in the Chinese market in 2019. A more pronounced downturn may come in

CHINA

Spending on projects involving Chinese contractors (US$m, by stage)

ABOVE: An asphalt road heading into central Shanghai

2020, but at this stage OHR says it does not expect the market to fall off a cliff in the same way that it did in 2012.

In the past wheeled loaders have been the workhorse machines of Chinese construction, but in 2017 they were outsold by crawler excavators for the first time. OHR’s Chinese Service says this is partly due to the greater availability and acceptance of crawler excavators, as indigenous companies have developed good machines over the last ten years to compete with products from international original equipment manufacturers (OEMs) manufacturing in China.

Also, smaller classes of wheeled loaders have come under considerable pressure from cheaper alternatives – mostly locally made low-technology farm equipment.

China’s involvement in infrastructure developments in emerging markets across Asia continues to expand, according to GlobalData, a leading global business market intelligence consultancy.

GlobalData estimates the total value of

infrastructure projects (including building materials) in which Chinese contractors are at least partially involved at around $235bn, while in South Asia the project values total $191bn. Chinese influence continues to expand via the BRI. Under the initiative, China is seeking to improve infrastructure in emerging markets across the world, facilitating economic development through the companies that can transport goods more quickly and cheaply between countries along various routes.

Danny Richards, lead economist at GlobalData, said: “Although wariness has been increasing among the governments in emerging markets over the risks of relying heavily on China for funding and construction contracts, the opportunities provided under the BRI can be attractive for governments with limited funding capacity and rising infrastructure needs.”

In Asia, reflecting political challenges and concerns over the build-up of debt, new governments in Pakistan, Malaysia, and the Maldives, in particular, have been challenging contracts that had hitherto been signed with China or have been delaying progress on existing projects.

Nevertheless, GlobalData says China is heavily influencing the development of infrastructure in Asia’s emerging markets. Based on the global business market intelligence consultancy’s analysis, if all infrastructure projects in the pipeline proceed as planned, spending on projects involving Chinese contractors could reach $64bn in 2020, up from $23bn in 2014.

BELOW: A crawler excavator manufactured by Chinese company LiuGong

JAPAN

JAPANESE MARKET DIFFERENTIALS

The Japanese construction equipment market moved to a different rhythm compared to many other markets over the 2010s, according to Off-Highway Research (OHR). It had a peak in 2013 as a result of prime minister Shinzo Abe’s reform and stimulus policies – known as ‘Abenomics’ – along with reconstruction work following the March 2011 Tohoku earthquake and tsunami, OHR notes.

There was something of an improvement in 2017, continues OHR, but it is debatable whether this was due to improving fundamentals in Japan or other factors. A planned increase in consumption tax in 2015 had been pushed back to 2017, and there is some evidence to suggest a lot of equipment buying took place ahead of this to avoid the price increase. In the event, the tax hike was pushed back again to October this year and could be delayed further.

Another factor, notes OHR, was the rise in equipment demand throughout Southeast Asia in 2017 and 2018. These are the traditional disposal routes for used equipment from Japan, and the need for machines in these countries at reasonable prices encouraged Japanese rental companies and contractors to renew their fleets.

Following the resultant blip in new equipment sales in Japan in 2017, OHR

REST OF ASIA

reports that the market fell back 5% in 2018.

Sales in Japan are dominated by indigenous OEMs (original equipment manufacturers) such as Komatsu and Hitachi Construction Machinery. OHR states that the only foreign supplier of any significance is Caterpillar, which owes its presence to a long-standing joint venture with Mitsubishi, established in 1963. Caterpillar began to buy out its partner in 2008, notes OHR, and the presence in Japan is now wholly owned by the US-based company.

OHR adds: “A consequence of the dominance of Japanese suppliers is that demand is centred around the products those companies have historically offered. Mini and crawler excavators sell in high numbers alongside wheeled loaders, and there is also some demand for dozers, graders and dump trucks.

“There have never been significant sales of backhoe loaders, skid-steer loaders or telescopic handlers in Japan. The common types of lifting equipment are stiff-boom loader cranes and rough terrain cranes, which are permitted to drive on public roads.”

To repair the country’s old infrastructure, GlobalData’s Construction in Japan – Key Trends and Opportunities to 2023 report notes that the Japanese government is investing JPY3tn (US$27bn) under the new public

spending programme on infrastructure redevelopment to March 2021. Under this programme, the government is funding 132 repair or refurbishment projects involving the country’s airports, roads, bridges and power plants. The government’s focus on the development of renewable energy infrastructure will also drive construction industry growth. Additionally, the country’s hosting of world sporting events such as the Rugby World Cup in 2019 and the Olympic Games in 2020, has dramatically boosted the construction industry’s output.

GlobalData also highlights that in the first half of 2019, the government announced plans to develop three rail lines to enhance transport and reduce travelling time by connecting Haneda Airport to stations in the capital city Tokyo. The government aims to link the airport to Tokyo, Shinjuku and Shin-Kiba railway stations with an estimated investment of JPY300bn ($2.7bn) by 2029.

The total construction project pipeline in Japan – as tracked by GlobalData and including all megaprojects with a value above $25mn – stands at JPY33.5tn ($300.7bn). The pipeline, which consists of all projects from pre-planning to execution, is skewed towards late-stage projects, with 58.1% of the pipeline value being in projects in the pre-execution and execution stages as of July 2019.

MOSTLY ATTRACTIVE EQUIPMENT MARKETS

While China is the Asia-Pacific region’s, indeed the world’s, biggest construction equipment buyer, many other regional nations have vibrant national construction markets, creating exciting commercial opportunities for global and regional OEMs (original equipment manufacturers).

The Indonesian construction industry registered an annual growth rate of 5.8% in real terms in 2019, according to GlobalData’s Construction in Indonesia – Key Trends and Opportunities to 2024 report. The report notes that Indonesia’s construction industry will continue to grow at a fast pace during the 2020-2024 period, notwithstanding short-

term disruption and potential risks owing to the coronavirus outbreak, particularly across Asia.

GlobalData states that Indonesia’s president, Joko Widodo, is expected to drive forward further large-scale developments, while the country is also attracting financial support from China for major infrastructure

works under the Belt and Road Initiative (BRI). The industry’s output value in real terms will achieve a compound annual growth rate (CAGR) of 5.59% over the forecast period.

The government plans to spend IDR571 trillion ($40bn) on the development of transport infrastructure in Jakarta by 2029. Under these plans, announced in March 2019, the government intends to build a 120km light transit railway corridor in the capital city. Additionally, in May 2019, the government announced plans to invest IDR6 quadrillion ($412bn) in developing the country’s overall infrastructure from 2020 to 2024. It will see the construction of 25 new airports, highways, affordable houses and power plants. Furthermore, the government plans to add 430GW of new power-plant capacity by 2050.

on infrastructure in the first half of the year.

In March 2019, the government launched the Philippine Construction Industry Roadmap 2020-2030. It aims to increase the construction industry’s contribution to the Philippine economy from PHP2.3tn ($44.1bn) in 2018 to PHP130tn ($2.5tn) by 2030. Furthermore, GlobalData states that the roadmap will also increase the job opportunities for construction from four million jobs in 2018 to seven million by 2030.

Ongoing civil protests in Colombia are expected to have a negative impact on the country’s economy

Deloitte’s Global M&A (Mergers & Acquisitions) Construction Monitor 2019 notes that South Korea’s construction market volume was worth US$112.31bn in 2019, 6.8% lower than in 2018. Due to new regulations on the residential market, the overall margin of the domestic construction sector has declined.

research and development (R&D) will support national construction industry growth between 2019 and 2023. In January 2019, the government approved KRW24.1tn ($21.5bn) to develop 23 projects linked to highways, rail, manufacturing plant and hospitals.

Vietnam’s construction industry registered an annual growth of 9.1% in real terms in 2019, following average annual growth of 9.7% during 2015-2018. It was due to positive developments in economic conditions and investments in transport, residential and energy-infrastructure construction projects. Additionally, government efforts to attract foreign investment supported the industry’s growth.

The Philippine construction industry expanded by 9.4% in real terms in 2019, according to GlobalData’s Construction in the Philippines – Key Trends and Opportunities to 2024 report. The report states that the growth was preceded by an average annual growth of 10.9% during the preceding four years. Growth during the GlobalData report’s 2015-2019 forecast period was driven by continuous spending on large-scale transportation and energy projects under the “Build, Build, Build” (BBB) programme.

Although the overall spending on infrastructure remained healthy in 2019, GlobalData notes that a delay in the approval of the 2019 budget and the 45-day ban on public works – due to the prohibition of

The Deloitte report states that the profitability of the South Korean construction sector has declined continuously due to a lack of infrastructure and housing projects. Medium- and small-sized construction companies are struggling to survive and are experiencing difficulties in their cash flow management.

Larger construction companies will be able to overcome this period, says Deloitte, as they are part of conglomerates. In 2018, most big deals exceeding $105bn involved transactions between group companies, such as Hyundai, Hyosung and Lotte.

On a more positive note, GlobalData’s Construction in South Korea – Key Trends and Opportunities to 2023 report states that the South Korean government’s investment

Vietnam’s construction industry output value will continue to expand during the 2020-2024 period, with investments in transport infrastructure, energy and manufacturing, according to GlobalData’s February 2020 published report Construction in Vietnam – Key Trends and Opportunities to 2024. The report highlights how in January 2020, for example, the World Bank signed an agreement with the Vietnamese government to provide a loan worth VND229.1bn (US$10.3mn) to build a new bus rapid transport corridor in Ho Chi Minh city.

In September 2019, the government announced plans to spend VND30 trillion ($1.3bn) to create a new expressway in Mekong by 2023. The focus on the development of local energy resources will drive industry growth. The government plans to install 55.3GW of a new coal-fired power plant in the country during the 2020-2030 period. GlobalData states that the government also plans to add 7.2GW

A street scene in Seoul, South Korea

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AFRICA

MORE POSITIVES THAN NEGATIVES

South Africa remains Africa’s biggest national construction and other offhighway equipment sales market. A surge in demand from the mining segment, particularly coal mining, has been responsible for significant equipment sales in the country in recent years, says Off-Highway Research (OHR). However, the construction industry has been weak and increased investment is badly needed to stimulate machine sales.

According to OHR’s new Special Report on South Africa, the country’s equipment sales totalled nearly 6,000 units in 2018. This was higher than the low point of 4,613 machines in 2016, but demand remains below a natural and healthy industry level. However, even in its depressed state, the South African market for new equipment was worth just over US$1 billion in 2018, OHR reports.

shortage has been the key positive in the equipment industry over the last 2-3 years. Mining has driven significant volumes in the dump truck, excavator and wheeled loader segments, and the industry’s need for large equipment is also a plus for the industry.

“Although the need for electricity and therefore coal is still acute in South Africa, Off-Highway Research believes the equipment-buying cycle associated with this has peaked. Volumes are at historically high levels, and the scope for further growth is therefore limited.”

Deloitte’s Global M&A (Mergers & Acquisitions) Construction Monitor 20182019 report says margins are under pressure in South Africa as construction firms are competing for work. “This limits their ability to price their offerings fairly. Another major problem has been the pricing model used in SA, which puts all risks in the hands of the construction companies. This is unlike the typical construction contracts in Europe and the US, which use a ‘cost-plus’ system,” says the report.

On a more positive note, Deloitte’s

report adds that in sub-Saharan Africa, the construction industry was due to grow by 3.5% in 2019, up from 3% in 2018.

China is the most significant foreign player in infrastructure financing and construction in Africa

China is the most significant foreign player in infrastructure financing and construction in Africa, mainly through its more than US$1 trillion Belt and Road Initiative (BRI). Indeed, according to Deloitte’s Africa Construction Trends (ACT) 2019 report, China funds 92 projects – one in every five projects – across the continent (20.4%, and up from 18.9% in 2018), now making it the secondlargest funding source after African governments. Private domestic firms follow this with 49 projects (10.8%), and international DFIs (development finance institutions) with 46 projects (10.2%).

The Deloitte report states that China continues to dominate as the most prolific (and single country) builder of projects across Africa, constructing 140 projects (31%). This is down from 160 projects last year. Private domestic firms follow with 104 projects (23%) under construction. Other

“Mining has driven significant volumes in the dump truck, excavator and wheeled loader segments”

The skyline of Johannesburg, South Africa

Source: Africa Construction Trends Report 2019, Deloitte

notable single-country builders include South African firms constructing projects outside of South Africa, albeit some way behind with 17 (3.8%) projects, and Italian firms with the same number of projects. Projects built by China fall primarily within the transport sector.

Deloitte’s ACT 2019 report says North Africa – made up of Algeria, Egypt, Libya, Morocco, South Sudan, Sudan, Tunisia, and Western Sahara – has 87 building infrastructure projects valued at $50mn or more that had broken ground as of 1 June 2019 with a combined value of $144.8bn.

North Africa accounts for 19.2% of the 452 $50mn-plus building infrastructure projects on the continent and 29.1% in terms of their US dollar value – making it a desirable regional market for construction equipment manufacturers. The number of projects in North Africa decreased by 25.3% from the previous year, while the value of projects dropped by 2.4%. Within the region, Egypt has the most projects with 49, followed by Algeria with 17 projects, and then Morocco with 16 projects.

Deloitte’s ACT 2019 report states that the East Africa region – comprising Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, Tanzania

and Uganda – had seen a steady rise in the number of infrastructure projects tracked by the report in the past few years. This is said to be due to increased regional investments in infrastructure development.

The total number of $50mn-plus projects in East Africa rose by 30.9% between 2018 and 2019, with the region currently recording 182 projects under construction. The East Africa region accounts for 40.3% of projects across the continent and 29.5% of the value – making it an even more attractive market than North Africa for construction OEMs (original equipment manufacturers).

Turning to West Africa – which includes Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, the Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone, and Togo – Deloitte’s ACT report highlights that the region has 75 projects valued at $50mnplus currently underway, with a total US dollar value of $80.9bn. The region accounts for 16.6% of all projects in Africa and 16.3% of the continent’s total project dollar value.

Last year, the number of projects in West Africa decreased by 28.6% from 2018, while the value decreased by 2.4%. The report notes that some small-scale transport projects were completed in the region, while at the same

time large-scale projects such as Nigeria’s $18bn Centenary City were added.

Nigeria holds the highest number of projects in West Africa with 21 projects (28%), valued at $54.2bn (67.1% in US dollar value terms). Ghana follows Nigeria with 16 projects, valued at close to $14bn. These two countries combined account for 49.3% of all projects in West Africa and 84.4% of the region’s total project value.

Looking at the Central Africa region –comprising Cameroon, Central African Republic (CAR), Chad, the Democratic Republic of the Congo (DRC), Equatorial Guinea, Gabon, Congo-Brazzaville, and São Tomé and Príncipe – Central Africa represents 3.5% of all projects in Africa worth $50mn-plus and 1.3% in terms of US dollar value. The region is home to 16 $50mn-plus value projects – which are worth a combined $6.5bn. The number of projects, as well as the corresponding US dollar value, represent a decrease of 38.5% and 75.8% respectively from the previous year. Deloitte notes this is the result of a delay to various projects until further notice across the region.

Cameroon accounts for the largest share of $50mn-plus value projects in the region with 50% of all works, and the DRC accounting for 59.6% of projects by value. Regional

MIDDLE EAST

ENCOURAGING MIDDLE EASTERN MARKETS

According to Deloitte’s Global M&A (Mergers & Acquisitions) Construction Monitor 2019, the growth of the construction industry in MENA (Middle East, North Africa) was estimated to be the fastest worldwide in 2019, with a rate of 7.5%. This growth, the report states, is expected to continue until 2022, averaging 6.8% yearon-year. The Deloitte study says the Middle East construction sector has become highly competitive and price-conscious, which has resulted in a ‘lowest-bid-wins’ model.

The Deloitte report says Middle East spending levels have fallen but regional governments are continuing to invest in infrastructure projects. It continues: “The construction sector is driven by the fundamental role it has as a driver for economic growth and job creation. Moreover, a growing population, tourism and mega-events such as the Expo 2020 and FIFA World Cup in 2022 lift the need for infrastructure.”

Projects in the pipeline of the countries in the Gulf Cooperation Council (GCC) amount to over US$2.5trn, according to the Deloitte report. The Kingdom of Saudi Arabia is leading the way, taking up almost half (46%) of the volume, followed by the United Arab Emirates with $750bn in the pipeline.

Deloitte’s Global M&A Construction Monitor 2019 adds: “Although oil prices have risen, it appears that more cautious capital infrastructure spending is now the norm. Future market performance will be determined largely by the oil price, regardless of market reforms achieved.

“Private sector capital is expected to play a bigger role in the industry, either through Public-Private Partnerships or fully private projects. The private sector will demand a more mature contracting environment with fairer contracting practices and a more balanced approach to risk allocation.

“Given where the Middle East is in the economic cycle, investors are unlikely to seek acquisitions for the foreseeable future – other

“An increase in crude oil production and government efforts to diversify the economy is likely to drive investment”

than ‘fire sales’. However, some construction companies may merge for strategic purposes or to improve their purchasing power.”

In its Q1 2019 report Project Insight: Road Construction Projects – Middle East and Africa, GlobalData forecasts that road investment will gather pace in the Middle East up to 2025, with car ownership increasing sharply. Therefore, road investment is predicted to rise by 116%, to reach $31 billion per year in the 2015 to 2025 period.

GlobalData notes that the Saudi Arabian government announced plans to attract SAR1.6 trillion ($429bn) of private investment under the National Industrial Development and Logistics Program (NIDLP) during the next decade. Under this, the government aims to develop the industrial and transport infrastructure of the country to diversify the country’s economy and reduce its reliance on the oil sector.

Following two years of contraction, the United Arab Emirates (UAE) construction industry rebounded in 2018, and registered growth of 4.2% in real terms, notes GlobalData’s Construction in the UAE – Key Trends and Opportunities to 2023 report.

Recovery in the country’s construction industry is expected to continue during the GlobalData report’s 2019-2023 forecast period, driven by a declining budget deficit and improving investor confidence, which will support new investments in residential, energy and utilities, infrastructure and commercial construction projects. Furthermore, an increase in crude oil production and government efforts to diversify the economy is likely to drive investment in the UAE construction industry during the forecast period.

GlobalData’s report highlights UAE investment in transport, energy and social

infrastructure development projects under various programmes. The programmes include the Ministry of Education Strategic Plan 2017-2021, the National Strategy for Higher Education 2030 and Education 2020 Strategy, the Energy Strategy 2050, the Sheikh Zayed Housing Program, and the Dubai Tourism Strategy. These, GlobalData believes, will support UAE construction industry expansion during the forecast period. In October 2018, the government approved the new Dubai Tourism Strategy intending to attract 21-23 million visitors by 2022 and 2325 million tourists by 2025.

After a recovery in 2017, GlobalData says the Iranian construction industry suffered a downturn in 2018, where it contracted by 4.2% in real terms. The dip followed annual growth of 4.3% in 2017 and a yearly decline of 12.7% in 2016. This decline can be attributed, according to GlobalData, to an economic slowdown due to the U.S. sanctions and low oil prices. In May 2018, the U.S. announced its withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and imposed a fresh round of sanctions on Iran, which affected both Iranian oil exports and the country’s revenue.

With the sanctions back in place, GlobalData expects the country’s construction industry to contract by 5% in real terms in 2019, before recovering in the latter part of the forecast period (2019–2023). GlobalData says the industry’s output value will grow at an annual average growth rate of 4.4% during the 2020–2023 period, as the government focuses on developing the country’s infrastructure projects and building new manufacturing plants. Growth will also be supported by investments in renewableenergy projects and the implementation of solar- and wind-energy projects, notes GlobalData.

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THE WORLD IN NUMBERS

At the start of 2020 the world economy was expected to show a modest annual increase, although the United Nations had already predicted overall global growth to experience a ten-year low. Emerging economies were set to make significant inroads in economic rankings, challenging long-held Western dominance. Climate change was a growing concern, exacerbated by unprecedented events. Fifteen extreme weather disasters in 2019 were estimated to havecaused at least one billion dollars-

worth of damage each, with seven of the 15 causing over $10bn each. No continent is now considered immune. And then, just as the new year began, along came the COVID-19 pandemic, forcing communities into lockdown and decimating economies. As of April, the International Monetary Fund (IMF) predicts the global economy will contract sharply by at least 3% in 2020 and suggests that the pandemic’s economic damage will rival that of the 1930s Great Depression. If the virus can be contained,

the IMF predicts growth of 5.8% in 2021 but it warns of even more severe outcomes if containment fails. On a more positive note, the world’s CO2 emissions are predicted to fall by 8% in 2020, according to the International Energy Agency. Let’s take a look at some key indicators. We have split the infographics into different sections: Global Outlook Pre-Covid-19 … Global Outlook Post-Covid-19 … Emerging Markets … Resources … Digitalisation … Artificial Intelligence … Infrastructure.

GLOBAL OUTLOOK (PRE-COVID-19)

World economic outlook update: 2020 (growth projections)

Source: International Monetary Fund, January 2020

GLOBAL GROWTH HAS BEEN DECLINING BUT THERE WERE TENTATIVE SIGNS OF STABILISATION

Source: International Monetary Fund, January 2020

THE 173 COUNTRIES OUTSIDE OF THE

GLOBAL OUTLOOK (POST-COVID-19)

World economic outlook April 2020 (growth projections)

Source: International Monetary Fund, April 2020

EMERGING MARKETS

Emerging markets will dominate the world’s top 10 economies in 2050 GDP at PPP (purchasing power parity)

Source: International Monetary Fund for 2016 estimates, PwC analysis for projections to 2050 The World In 2050, PwC, 2017

UK99Germany

France1010UK

E7 economies G7 economies

VIETNAM, THE PHILIPPINES AND NIGERIA COULD MAKE THE GREATEST MOVES UP THE RANKINGS

VIETNAM 32-20 (12 PLACES) PHILIPPINES 28-19 (9 PLACES) NIGERIA 22-14 (8 PLACES)

Share of urban consumption growth

Source: McKinsey Global Institute, April 2019

ASIA COULD DRIVE 50% OF FUTURE CONSUMPTION GROWTH

For construction

RESOURCES

Actual and projected material use by year (billions of tonnes)

Source: OECD, FT calculations, 30 December 2019

GLOBAL USE OF SAND IS SET TO SOAR

DIGITALISATION

Growth, McKinsey Global Institute, April 2019

ACROSS OUR FOCUS COUNTRIES, DIGITAL ID COULD UNLOCK ECONOMIC VALUE EQUIVALENT OF BETWEEN 3-13% OF GDP IN 2030

$15.7 TRILLION THE AMOUNT GLOBAL GDP WILL GROW BY 2030 THANKS TO AI 40% AI CAN INCREASE PRODUCTIVITY BY 14x THE AMOUNT AI STARTUPS GREW OVER THE LAST TWO DECADES 6x THE AMOUNT INVESTMENT IN AI STARTUPS GREW SINCE 2000 77% OF THE DEVICES WE USE FEATURE ONE FORM OF AI OR ANOTHER

of potential value could accrue to individuals on average in emerging economies in our focus group, making it a powerful tool for inclusive growth

The ground rules are shifting, and quickly ... major structural changes in global equipment supply chains are beginning to play out

SERVITISATION, TECHNOLOGY AND THE SHARING ECONOMY

Market upheavals are driving rapid, strategic change in the way construction equipment is owned, sold, rented, leased and used. Do you know what servitisation and the shared economy means? And where is all that new technology taking us next?

Join Graham Anderson to find out more.

For years, construction equipment manufacturers have spoken about moving directly into rental markets. Their concerns and desires have been well documented – equipment is becoming more complex and expensive; and rental companies do not have the necessary skills, or financial strength, to fully exploit its potential.

What is more, they argue, the rental sector is fragmented, and dominated by small, technologically backward companies. As such, the sector is driven by price and is acting as a block to innovation.

But while there have been individual, episodic examples of direct OEM (original equipment manufacturer) involvement in rental markets, the longed-for supply chain restructuring has not taken place.

Critics of the OEMs have long dismissed their arguments as little more than public relations exercises or thinly disguised and short-term attempts to gain market share.

companies – that is to say, their own biggest customers. Tricky.

But today, the ground rules are shifting, and quickly. Despite the caveats, it is increasingly apparent that major structural changes in global equipment supply chains are beginning to play out, whether in Asia, Europe or the USA.

Driven by technology, the growth of the sharing economy and the rise of a global and expanding Chinese equipment sector, the industry is engaged in an accelerating rethink of its relationships, strategies and structures.

And that was before the impact of the Covid-19 virus which – for better or worse –could give the whole reform process a crisis-driven injection of energy.

Cassinelli believes that LiuGong will be able to treble rental revenues within five years

These same critics also point out that the OEMs have a fundamental problem – if they move into rental themselves, they could end up competing with the established rental

In January this year, LiuGong, the fast-growing and ambitious company headquartered in Liuzhou in southern China, revealed its plans to move into the rental business in a big way.

The company is already the world’s 10th-largest construction equipment manufacturer by market share and the world’s largest manufacturer of wheeled loaders.

A few days later, it also announced that

Graziano Cassinelli has joined the company to lead its newly formed Global Rental and Used Equipment unit.

Cassinelli brings to the Chinese company a wealth of knowledge from years of experience in the rental and used-equipment business.

In his most recent position, he spent almost five years with Caterpillar, including time as rental services territory manager for South-east Asia and India where he worked on developing a new Rental Services Network along existing dealer organizations.

Within weeks of those announcements, LiuGong underlined the depth of its commitment to rental with the news that it was in the process of acquiring Herc Holding’s Chinese business Herc Rentals China – previously known as Hertz China.

LIUGONG ACQUIRES HERC RENTALS

Based in Shanghai, Herc Rentals China has two main branches and eight depots, plus a very high-profile brand. Cassinelli believes that LiuGong will be able to treble rental revenues within five years, on the back of a still strong Chinese market buoyed by growing interest in rental.

But while LiuGong is initially focusing on its home market in China, its ambitions do not stop there – or with the Herc acquisition.

Cassinelli explains: “The Herc acquisition

is specifically for the Chinese market. Herc will allow us to accelerate the rental process. Outside China, we will be supporting our dealers moving into rental. We will succeed if we can engage and support our dealers worldwide in the rental business.”

We believe that the future is in sharing and rental

Further acquisitions might be considered at some point in the future, but while there is nothing planned at present, Cassinelli says that developing a rental business in Europe is on the cards.

LiuGong Machinery vice president Kevin Thieneman, underlined LiuGong’s long-term strategic ambition and its plans for the rental market.

“Rental is the largest segment for the construction equipment industry in Europe and North America and is projected to become a leading segment in China. This new endeavour will champion LiuGong’s efforts to become a leader in rental and used equipment.”

Chris Sleight, managing director of independent consultancy Off-Highway Research, said that LiuGong’s move made sound sense from their perspective.

“In China, the market for organized professional rental is relatively new and only really in the big cities. Also, what is rented out is an eclectic mix of equipment – aerial platforms, gensets and so on.

“For LiuGong, they are not really active in the market for the types of equipment that are most commonly rented out in China. So, they are creating a channel that is currently not renting out their equipment, but hopefully will in future.”

He adds: “As for the European market, it is very difficult for LiuGong and the other Chinese manufacturers to get through the door with the current European rental companies, who tend to buy established brands, with brand recognition and known residual values.

“So, from LiuGong’s point of view, what have they got to lose by moving into the rental space themselves? I think other Chinese manufacturers will look at what LiuGong is doing with interest – and if it is successful might well consider a similar move.”

HITACHI PREMIUM RENTAL

Another equipment manufacturer carving out a new strategy in response to rapidly changing markets is Hitachi Construction Machinery (Europe) which launched Hitachi Premium Rental in Europe in 2018.

Many commentators see the Hitachi Premium Rental programme as similar to the types of “servitisation” business models being developed in many other industries – that is to say the application of services to products in order to create additional value or a new offering to customers. Such ongoing services can deepen and extend the relationships manufacturers have with their customers, adding value in such a way that price is no longer the key purchasing factor.

Rene Koops, HCME’s general manager for Business Development and Marketing, says that the development of the Hitachi Premium Rental programme fits perfectly within the company’s worldwide strategy of putting emphasis on the value chain.

“We want to focus more on the downstream revenues that come out of the entire life cycle of the Hitachi products. This can be rental, but also used equipment, parts and service, and maintenance contracts, for example.

Earlier this year, Graziano Cassinelli joined Chinese equipment manufacturer LiuGong to lead its newly formed Global Rental and Used Equipment unit. With a wealth of top-level experience in the rental and used equipment sectors, and the Herc Rentals China deal concluded, Cassinelli explained that LiuGong’s rental ambitions reach well beyond its home market in China.

“The main reason for LiuGong’s move is that rental is growing everywhere, and it is becoming a big portion of the market in China. Four or five years ago rental had less than 10% penetration of the Chinese market, now that is 20% and it will be 25% by 2025 – with further growth after that,” Cassinelli said.

And he added that “in terms of rental-market penetration, Europe and the USA are 15 years ahead of China”, which means there is plenty

“For each region we have stipulated a specific strategy how to roll this out. In Europe, where we work with an independent dealer in each country, we opted for the rentto-rent model.”

In this context, rent-to-rent means that HCME rents the machines to the dealers and the dealers rent them to their customers as part of a package of services. The machines remain assets of HCME.

Koops says: “Actually, the whole idea behind it is the shift towards the sharing economy. We believe that the future is in sharing and rental. Even though the construction industry may be more conservative, we think that the tendency will shift from owning equipment to using (renting) equipment.

“The Hitachi Premium Rental programme, which is in essence a rent-to-rent concept, was established to support our dealer network to make that transition. We wanted to give them the opportunity to build up a rental fleet, or in some cases, like in Italy, to extend their rental fleet by keeping the investments off balance.”

of scope for growth. He said that Herc Rentals China will be concentrating on larger equipment beside AWP (aerial work platforms) business and will especially focus on infrastructure, road and rail projects.

“Our plan is quite simple – Herc will be a hub that will manage rental for LiuGong, support our dealers as needed and support our key accounts especially in the road and rail sectors.

“Rental for us has two main focal points – to occupy the rental space which is strong globally and growing fast in China, and to give customers the chance to experience LiuGong equipment without making a commitment to buy at the outset.”

But while LiuGong is initially focusing on its home market in China, its ambitions do not stop there – or with the Herc acquisition.

“Professional rental is

growing in China because of its reliability, flexibility and financial advantages. In addition, rental gives clients the capacity to carry out bigger projects than they can with their own current fleets. He added: “We are planning to move into Europe and to occupy a space in the market, especially in central and eastern Europe. That is really important for our strategy – but first we will need to take care of the market in China which accounts for 80% of our sales.”

CASSINELLI ON LIUGONG’S MOVE INTO RENTAL

RIGHT: Will contractors invest in machinery after this crisis or spread the economic risk by renting, asks Hitachi?

BELOW: HCME is focusing on compact and mid-size excavators and wheeled loaders because dealers want to sell long-term rental contracts

Hitachi’s plan was to invest 100 million euros within three years. The programme is now in its third year of operation and is on track. At the time of writing there were around 500 active units in the European rental fleet. More important still is the fact that Hitachi Premium Rental seems to have been well received by the market.

Koops adds: “Almost all of our dealers throughout Europe have been making use of the Hitachi Premium Rental programme, simply because there is no reason not to. They can hold on to their cash and/or use it for other investments.”

He described it as “a magnificent way for dealers to do some economic risk-spreading with regards to their rental fleet” – something that is especially pertinent in the current Covid-19 crisis.

And despite current circumstances, Koops remains optimistic about the future.

“Our rental team aims to fulfil a more consulting role towards our dealers, and we are proud to see some dealers expanding their rental operations. The Covid-19 crisis will maybe first slow us down a bit, but we have high expectations of the post-Covid impact with regards to rental. Do you really want to invest in machinery after this crisis? Or would you prefer to spread the economic risk by renting?”

Some commentators have asked whether Hitachi’s move is ultimately less about strategy than driving market share, especially in the competitive mini-excavator market, but Koops says that is emphatically not the case.

“HCME is mainly focusing on the compact and midsize excavators and wheeled loaders. Why? Because our dealers focus more on long-term rental contracts, not the day-byday rental that would require a completely different organisation.

“The contracts are most of the time 3-6 months or longer. It is all about offering this flexible service to their customers. At the same time, because of the high competition in the mini-segment we have chosen to first focus on mid-size and large machinery.

“Once we have developed this together with our dealers, we can make the next steps – that might include the daily service operations that are needed for miniexcavators.”

What is clear is that Hitachi’s strategy is raising eyebrows. Koops claims that “there is no OEM that works on this scale to support their dealer network in this way – to help them become sustainable for the future, when

it is not about the machine anymore, but about service, parts, and offering flexible and reliable solutions to their customers.”

Like Koops, Rob Oliver, chief executive of the UK’s Construction Equipment Association, feels that business models are changing fast, driven by a myriad of factors coming together at the same time.

“We feel that some contractors are more attracted to buying their own equipment and the old model of plant hire is looking a bit outdated.  I think we are moving towards a “power by the hour” model where equipment might be rented for a specific job, rather than by the day or time period.”

Of course, for the UK there are additional pressures. “What is more, within the UK market, there is a feeling that shortages of labour and skills – exacerbated as a result of Brexit – might drive change and innovation through the demand for increased efficiency and automation.

“It will be interesting to see whether the major changes in equipment and how projects are managed will simply put too much strain on the existing supply chains and business models.”

THE EUROPEAN RENTAL ASSOCIATION

In contrast and unsurprisingly, Michel Petitjean, secretary general of the European Rental Association (ERA), does not see the structural changes discussed – and in some cases acted upon – by the OEMs as a threat to the rental market. Nor does he see the rental sector as a brake on innovation. Rather the opposite, in fact.

“I do not believe that the fragmented nature of the rental market is a source of weakness; it is a source of strength. The rental industry comprises many very small local companies and some very large companies – and you might argue that ones at most risk are those in the middle, the medium-sized ones.”

He continues: “I have to say that I do not believe it is the small companies that are a brake on innovation. In my experience, many of the smaller – and newer –companies are often driven by young, clever and tech-savvy people.”

He is also dismissive of any concerted move by the equipment manufacturers into the rental sector, apart from for companyspecific, strategic reasons. He has seen it before.

“The subject of OEMs moving into rental has been discussed for very many years,” Petitjean says. “Of course, OEMs change their strategies the whole time trying to gain a competitive advantage and take account of changing market circumstances – perhaps in an attempt to boost market share.

“But in my experience, most of the dealers, with few exceptions, have never been convinced and in many cases are concerned that they will be seen as

competitors to their biggest customers.”

He welcomes Construction 4.0 and similar industry-wide digitisation initiatives but argues they are only really for major projects and are a small part of the whole market.

“The future of the rental industry as a whole will not be defined by such big projects. The bulk of the industry will still be working in a traditional way.

“So, I feel that technological change will happen more slowly than many people think. The bulk of the industry will remain traditional, with some of the larger companies experimenting with new business models and ways of working.”

Yet despite this apparent scepticism, Petitjean and the ERA are fully engaged in the debates about the future of the industry.

The ERA has its own Future Group considering what the rental branch of the future might look like, and the ERA is working closely with the European

equipment manufacturers and the European Commission.

Riccardo Viaggi, secretary general of the Committee for European Construction Equipment (CECE), is careful not to describe OEMs and rental companies as adversaries, but rather as two groups looking for the best solutions for the industry at large.

“From my point of view the rental industry will not really be an obstacle to change. We work very well with the ERA and the firms I have dealt with are well aware of the issues and the changes that we must all make.

“I am quite optimistic that the rental sector is able to respond to these developments. They are taking steps to address the changes required. We are already seeing substantial consolidation and rationalization – for example Cramo being acquired by Boels Rental and Loxam’s acquisition of Ramirent.”

A recent CECE report (detailed elsewhere in this edition of Global Report)

ABOVE: A simple visual representation of the standard. Each vendor server (VIS) (i.e. Trimble, Topcon, Leica, etc) will continue to talk to the machine(s) on site with its control system. Each of those servers will also communicate to a single-site server (SMS). The standard addresses that server-to-server communication – which are the red bold arrows.

– Digitalising the Construction Sector – foreshadows current developments: “Because of digitalisation, the boundaries between different players are gradually blurring, opening the way for new forms of business management – for instance, rental companies may be interested in gradually moving into logistics, while some OEMs are already providing rental services to their customers.”

Nonetheless, Viaggi does not predict a wholesale OEM move into rental. “I do not see anything more than isolated developments for specific market or strategic reasons. Any moves of OEMs into rental at the moment is episodic and there is no reason to think that will change at present.”

SERVITISATION

Servitisation, however, is a different matter. “Servitisation is much more than the OEMs moving into rental – at root it is about improving the management of fleets and delivering more value to machinery users through better and long-term services around the machine.

“What we are also seeing is a big push towards platformisation – a platform of data that is interoperable because it uses common standards.”

That push is being funded by an EUfunded project called DigiPLACE. In effect, DigiPLACE is a sort of feasibility study, gathering together inputs from all those in the construction industry value chain, from clients to contractors to manufacturers and suppliers.

Viaggi explains: “The idea is to identify what a digital platform might look like – not to create the platform itself but to define it and find common denominators across the different elements in the industry.

“We have completed the initial steps and are now at the stage of describing how the platform should be structured.”

CECE’s 2019 report, Digitalising the Construction Sector, was a stock-taking exercise, helping the organization prepare for the EU’s work in this area when it started.

It also underlined the fact that developing technologies have the potential to dramatically alter relationships and business models in the construction market.

“Many industries have been disrupted by technology, of course – and not always in a good way,” Viaggi says. “We wanted to ensure that our voice was heard and that we, as an industry, were in control of changes that are coming.

“The equipment manufacturing sector in

construction is very advanced – for example in our use of telematics or autonomous equipment – and the sector already has considerable experience in how to manage and use data.

“The idea of the report was to understand where the bottlenecks are – both from the perspective of the manufacturers and the industry at large.”

Another key factor, as mentioned by the UK’s Rob Oliver, is skills, as Viaggi acknowledges. “Clearly, the industry as currently structured is very labour-intensive, but we know that we can’t rely on that level of labour supply in future – there are simply not enough young people coming onto the market.”

He adds: “The technological developments the industry is discussing will have a big effect on dealers – but not because the OEMs will move into their space. The type of digital and automation features on equipment will require new skills, especially for service contracts.”

WHAT HAPPENS NEXT?

Data is the crucial issue. The next steps will be political and will focus on the steps taken by the EU to regulate on B2B (not B2C) data ownership and sharing – that is to say what type of legislation and at what level?

Viaggi continues: “We at CECE do not believe that we need a lot of legislation. A lot of the necessary systems are already in place with contractual set-ups. We need more awareness of the fact that construction sits on a wealth of data.”

Data management is also high up the agenda for companies on the other side of the Atlantic where the Association of Equipment Manufacturers (AEM) is involved in plans by the ISO – the International Organization for Standardization – to develop a standard called “Worksite Topographical Data” (see diagram).

Again, and like DigiPLACE in Europe, while the subject may appear narrow and technical, the wider business implications are significant.

Sara Feuling, AEM’s director of construction explained that the ISO standard will allow machines with brand-specific machine-guidance systems to communicate within a single-site system, regardless of brand.

She said: “ISO standards are not mandatory. ISO standards are developed to provide a guideline for good practice and build credibility internationally… but as the construction industry begins to utilise ➔

WHAT THE EXPERTS ARE SAYING: MEMORABLE QUOTES

“Outside China, we will be supporting our dealers moving into rental. We will succeed if we can engage and support our dealers worldwide in the rental business.”

Graziano Cassinelli, LiuGong

“I think other Chinese manufacturers will look at what LiuGong is doing with interest –and if it is successful might well consider a similar move.”

Chris Sleight, Off-Highway Research

“We want to focus more on the downstream revenues that come out of the entire life cycle of the Hitachi products. This can be rental, but also used equipment, parts and service, and maintenance contracts, for example.”

Rene Koops, HCME

“The whole idea behind it is the shift towards the sharing economy. We believe that the future is in sharing and rental.”

Rene Koops, HCME

“It will be interesting to see whether the major changes in equipment and how projects are managed will simply put too much strain on the existing supply chains and business models.”

Rob Oliver, CEA

“I do not believe that the small companies are a brake on innovation. In my experience, many of the smaller – and newer –companies are often driven by young, clever and tech-savvy people.”

Michel Petitjean, ERA

“Servitisation is much more than the OEMs moving into rental – at root it is about improving the management of fleets and delivering more value to machinery users through better and long-term services around the machine.

Riccardo Viaggi, CECE

“As the construction industry begins to utilize technology to its full potential, contractors will complete work quicker, safer, and more accurately, while also increasing their bottom line.”

Sara Feuling, AEM

technology to its full potential, contractors will complete work quicker, safer, and more accurately, while also increasing their bottom line.”

One thing is crystal clear. Construction is changing fast

And like her industry colleagues in Europe and Asia, she argues that the technology will impact how industry supply chains will go about their business in future: “OEMs and dealers will need to adjust to meet the changing needs of their contractors. OEMs and dealers will need to be well versed in the technology, what the technology can do for them and why it matters, not just what it costs.”

The ISO standard initially covers only earthwork applications, including roadbuilding and site development. It focuses on onsite radio corrections, digital terrain

models, and overall jobsite information.

She said: “The standard is not an extension of the telematics standard but instead will normalise data exchange at the interface between earth-moving machinery with grade-control systems and the site information system.

“The standard normalises server-toserver communications, not machine-tomachine communication. The standard will allow contractors to utilize a single-site management system to coordinate activities with machines equipped with multiplevendor integration systems and machine control.”

The ISO working group responsible for developing the new standard had planned

to meet again in April, but the current Covid-19 pandemic caused it to be postponed.

Feuling added: “They are still hopeful that a working draft of the standard may be available for ISO review in December 2020. The working group is still targeting final publication by December 2021 and AEM has partnered with the working group to help drive the standard to its target release date.”

Whether Covid-19 will ultimately accelerate or stall the plethora of developments currently in train, one thing is crystal clear. Construction is changing fast.

This will not just be reflected in the strategies of individual businesses like Hitachi and LiuGong, but in the very structure of the industry’s supply chains.

And the construction equipment sector is going to be at the centre of – and some might say the instigator of – that revolution.

OUTSOURCING MACHINE OWNERSHIP “A MUST” TO ACHIEVE THE CIRCULAR ECONOMY, SAYS VOLVO CE

Outsourcing machine ownership to original equipment manufacturers (OEMs), dealers or rental fleet owners needs to become more commonplace, according to Nele Van Campfort, Volvo Construction Equipment’s business development manager for services.

Van Campfort says that the shift to a greener and more circular use of construction equipment must involve a move from machine ownership to machine access – the value of using a machine, rather than owning it.

“The hundreds of thousands of machines that are being produced each year consume vast amounts of natural resources to build, and even more resources to keep working,” she adds. “Then, after a few years, we hope the customer replaces their current machine with new ones – and the process begins again.”

She adds that this is not the cycle of the future and for the circular economy to become a reality, an opposite view must be taken by asking not: ‘How can we make more machines?’ but ‘How can we make fewer machines?’

If Volvo CE’s predictions are

correct, in the future machine manufacturers will primarily sell solutions, not machines. Customers will pay for machine hours as operating expenses rather than capital expenditure. For manufacturers, revenues will come from the use of equipment rather than from selling individual machines.

In this future world of pay-peroutput, the OEM could not only provide the service in the form of machines but also provide the operators and general site consultancy.

Van Campfort admits that this is “a daunting change” for manufacturers and their dealers.

With machines staying on their balance sheets, the incentive will not be to make more machines but to keep the existing fleet running for longer and as efficiently as possible, thanks to regular updates.

In this new world, the way machines are designed will also need to be looked at afresh.

According to Van Campfort, 80% of a machine’s lifetimeenvironmental impact is determined at the design stage.

“Because of that we need to

think about removing waste and pollution right from the start,” she says. “We also need to design components to last longer and be easier to repair, refurbish or remanufacture. And at the end of their lifespans, they not only need to be 100% recyclable – we must ensure that they are recycled, upcycled or down-cycled, with the raw materials redeployed in the production of new products or applications.”

This focus on sustainable design will be reflected in machine ‘digital passports’ that show their ecological footprint; not just in the manufacture, but throughout their entire lifespan.

Van Campfort says OEMs do not have a choice in the move to this new business model as government commitments, such as the Paris Agreement, EU Green Deal and China’s latest Five Year Plan, all raise the profile of sustainability to unprecedented levels.

“Even Wall St. is getting it – with investments flowing into renewable energy and out of fossil fuels,” she adds. “The emergence of Smart Cities will become commonplace, and the

environmental bar is rising for the machines that will be allowed to work on such projects. The circular economy is going to happen, and the construction equipment industry will have to embrace it if it is to survive.”

When will the circular economy of construction equipment be achieved? Not overnight, according to Volvo CE. The European Commission is targeting a 40% cut in greenhouse gas emissions, 32% share for renewable energy and a 32.5% improvement in energy efficiency – all by 2030. Van Campfort says that work on this is already happening at an accelerating rate, with the target for full circularity being 2050.

“The circular economy is not an ‘if’ anymore, but a ‘when’,” she concludes. “Yes, creating it will be disruptive. Yes, it will involve dramatic changes. But the benefits of a waste-free, truly holistic economy are huge, and businesses that take a proactive approach will thrive in the new economic climate. When achieved, the circular economy will be good for people, the planet and for profit.”

THE POWER GAME: LESS IS MORE AS ENGINES GET STRONGER

Two decades of diesel engine developments have not only helped to reduce emissions, they have also increased power-to-weight ratios. Is your business making sure it can get the same performance levels from smaller

Over the last 20 years, diesel manufacturers have made significant progress with internal combustion engine technology. This progress has been achieved by the need to meet an increasingly tough series of targets aimed at reducing exhaust emissions.

Each phase of the emissions reduction process, carried out over a period of years, has seen ever more strict limits being introduced.

The result has been that new generation engines are cleaner than ever before, with particulate emissions and NOx (nitrogen oxides) emissions that are a tiny fraction of those diesels from earlier times before the legislation was introduced.

At the same time, however, an additional benefit of the massive programme of research and development into engine technology to reduce emissions has also delivered major gains in performance.

Aware of the complexity and cost of after-treatment systems to meet emissions requirements, engine firms have used their extensive research and development to reduce whole-life costs of engine operation.

Maintenance schedules have been extended, while fuel consumption has been reduced. At the same time, new diesels now deliver higher power outputs than previously.

The advances in engine technology have been in a number of key areas and specifically in-cylinder, turbocharging and aftertreatment developments.

High-pressure fuel injection has been one of the key developments, allowing more efficient combustion.

Rather than one single burst of fuel into the cylinder, injection systems allow for multiple pulses that increase efficiency. And analysis of the swirl pattern of fuel droplets within the cylinder has allowed engineers to further optimise combustion.

Similarly, turbocharging has played another key role in further boosting combustion efficiency.

After-treatment technologies with now

LEFT: A significant investment has been made by engine firms into developing new diesels as well as production facilities

commonly recognised acronyms such as diesel particulate filter (DPF), exhaust gas recirculation (EGR) and selective catalytic reduction high-efficiency selective catalytic reduction (SCR) have helped lower emissions considerably. These systems have become increasingly bulky however.

For construction machine manufacturers, there was concern as to how such aftertreatment packages could be installed, without affecting sight lines and visibility for operators.

One solution though has come through the new generation engines which offer higher power outputs. The improvements in engines have delivered higher power densities, so that smaller diesels now provide similar outputs to the much larger units offered in the past.

This has helped the original equipment manufacturers (OEMs) select smaller power units, leaving more space for the bulky after-treatment units and minimising the negative effects for operator visibility.

The various engine manufacturers have made significant steps in recent times in addressing the needs for reduced emissions, running costs and fuel consumption, while delivering performance gains.

This electronic control system helps to boost output while reducing fuel consumption and emissions

machine output. In addition, the firm’s latest single module after-treatment system is 30% more compact than previous solutions, further reducing the space needed in an engine

For Cummins, an extended warranty programme is its latest offering for customers. This ENCOMPASS Extra package is available for the new generation F3.8, B4.5, B6.7 and L9 Performance Series engines (with capacities of 3.8litres, 4.5litres, 6.7 litres and 9litres), which deliver a higher power density than previous units in their class from the firm.

The new ENCOMPASS Extra programme offers engine coverage options up to five years with unlimited hours (8,000 hours on the F3.8 engine). This can cover parts and labour or parts, labour and travel. Additional coverage is also available for the Cummins after-treatment to provide the same protection level as with the engine.

This shows how the firm has ensured it can reduce running costs for customers, with its confidence in the products delivering extended working life.

Caterpillar says that it has developed a new after-treatment package for its C13B diesels. The extensive research and development process has helped to boost the C13B’s power output by 20% as well as its torque by 19%. As a result, the 13litre units now offer the same output as an earlier 15litre engine from the firm. For OEMs, another benefit is that the

by removing the EGR unit that was fitted previously to minimise emissions on the firm’s earlier engines in this capacity class.

These are by no means the only firms to have introduced improved engines delivering better power density in recent months.

Deutz is busy developing its TCD 5.2, an in-line diesel. Although this unit will not feature exhaust gas recirculation, it will have a high-efficiency selective catalytic reduction system that will allow it to meet Stage V constraints. The high power density of the TCD 5.2 will allow it to provide up to 170kW.

FPT’s new F34 is a 3.4litre diesel able to deliver power outputs of up to 90kW and torque of up to 490Nm. The company has also cut maintenance needs and running costs compared with its previous engine for this capacity class.

Hatz is now fitting an innovative electronic control system for single-cylinder engines, which it has developed in partnership with Bosch. This electronic control system helps to boost output while reducing fuel consumption and emissions. Its development is a step ahead for the compact engine sector, as this type of technology has previously only been available for multi-cylinder power plants.

John Deere Power Systems (JDPS) claims that it has developed the technologies to reduce emissions, improve fuel economy, and boost machine performance and reliability. The firm claims Stage V compliance for key

BELOW: Extensive testing is carried out on engines to ensure they meet emissions and

RIGHT: New engines offer increased power and reduced maintenance needs

models in its engine range. This includes its variable-speed engine families below 56kW and above 130kW, as well as its constantspeed engine families. The Industrial Stage V line-up from John Deere offers ratings from 36kW to more than 500 kW, with displacements of 2.9litres up to the new 13.6litre unit. These are considerably higher outputs than was previously achievable from engines in these capacity classes. Key features of the new engines include increased uptime and low operating costs.

Kubota’s S7059 is a 7.5litre engine providing significantly more power than the company’s previous unit with this capacity.

The S7059 is designed to deliver up to 223kW, a huge increase over the 149kW of the earlier generation 7.5litre unit from Kubota. While its power output has been increased by around one third, the engine’s exterior dimensions have remained broadly the same.

economy than the earlier units. Exchange intervals for major components, such as injectors and high-pressure pumps have been extended. The company says that this has helped achieve 8% lower life-cycle costs than those of the previous generation.

Final development work is still underway on the S7059 engine and it is intended to be ready for the market in 2023. This six cylinder unit will meet the Tier 4 Final/Stage V emissions requirements. One of the key advances is with its new generation directinjection combustion system, which has helped boost output, reduce emissions and also lower its fuel consumption.

The company says it has also designed the unit to be easier (and cheaper) to maintain with servicing from one side, as well as fitting an automatic belt tensioner.

Rolls-Royce is working on a new range of MTU engines. The Series 1000, 1100, 1300 and 1500 engines cover a power range of 115-480kW. The power outputs and torque of these units have been increased, while the fuel consumption has been reduced. These engines will meet the Stage V emissions requirements due to an array of internal engine upgrades, as well as with the addition of an SCR system and an additional diesel particulate filter (DPF).

The company has been particularly forthcoming as to how its latest engine improvements have been achieved.

MTU’s Series 2000 industrial engines meanwhile can achieve Tier 4 Final and Stage V emissions requirements without after-treatment. At the same time, the firm says that engine performance, fuel efficiency and durability have been boosted while the cost of ownership has been reduced.

The Series 2000 engines are 12 and 16 cylinder units with power ratings from 5671,163kW. The firm says that the new Series 2000 engines deliver up to 10% better fuel

To meet the requirements without the need for external after-treatment, MTU has used four engine technologies: cooled high-pressure EGR; regulated two-stage turbocharging; common rail fuel injection; advanced diesel engine controller (ADEC).

According to MTU, its use of technology has helped to overcome the particulate matter, PM-NOx trade off. The company says

that the solution has been to ensure that the maximum combustion temperature is too low for NOx emissions, while also ensuring a proper balance for low particulate emissions. The firm says that the key function of an EGR package is to increase the thermal inertia of the cylinder charge. For a given engine operating point, which corresponds to a given injected fuel mass, there is also heat produced during combustion. This raises the temperature of the cylinder charge. Meanwhile, the recirculated exhaust gas provides an additional thermal inertia, helping to reduce maximum combustion temperatures.

RIGHT: FPT’s new 3.4litre diesel offers an increase in power density

Kubota’s coming S7059 unit will deliver a significant jump in output

MTU has now patented a new donorcylinder EGR system. This is a cooled, highpressure system, featuring donor cylinders. Only four cylinders on the 12-cylinder models supply exhaust gas to the EGR system.

Meanwhile, the 16-cylinder engines feature five donor cylinders. At maximum EGR rate, the donor cylinders provide 100% of their exhaust gas for EGR. The remaining cylinders, however, supply the turbochargers.

MTU claims that the advantage of its system is that only the donor cylinders have to work against high back pressure, pumping exhaust gas into the intake.

high-pressure stages, and an aftercooler between the high-pressure stage and cylinder inlet. The two-stage turbocharging system also helps to provide low-soot combustion.

Volvo Penta is working on Stage V emissions-compliant engines that are said to show lower fuel consumption of around 5%, while delivering outputs from 105-585kW. The firm says it will offer customers an increase in power density from the units , while lowering overall cost of ownership.

generation diesels deliver higher power densities while using less fuel

MTU says that its advanced EGR system also avoids problems such as lower fuel efficiency, visible black smoke, intake systems and intercoolers clogged with soot, and heavy soot-in-oil issues. And another important feature for the new MTU units is the two-stage turbo system. This has a highpressure stage with one turbo connected in series to a low-pressure stage with another two turbos. A bypass valve for the highpressure turbine regulates turbo pressure. Charge air cooling is comprised of two stages: an intercooler between the low- and

The integrated engine and exhaust after-treatment system features passive regeneration that occurs during normal operation. This eliminates the need for stand-still regeneration. Research has also investigated synergies between the base engine and the after-treatment system so that the diesel and software work together to address the need for active regeneration.

The Stage V emissions legislation requires engines to have a diesel particulate filter which captures and stores soot. This soot needs to be burned off periodically to regenerate the DPF and this has previously been done while the machine is at a standstill.

But the firm has focused on minimising the need for active regeneration as much as possible to keep machines operational.

The firm has carried out extensive testing to address the issue of regeneration.

Meanwhile, uptime has also been boosted by improved oil change intervals, which have been doubled from 500-1,000 hours.

Yanmar’s 4TN107 diesel is offering power outputs from 90-155kW and has a two-stage turbocharger. This engine now features the combined diesel oxidation catalyst (DOC) + DPF + SCR emissions after-treatment system.

The package uses Yanmar’s proprietary DPFregeneration technology, already fitted to the TNV series with its sophisticated common rail injection system.

Looking ahead, the diesel engine still has some way to go as a power source for industrial machines.

New generation diesels deliver higher power densities while using less fuel and generating lower emissions levels than would have been thought possible even 10 years ago. And these units also have lower maintenance needs, with engine firms having made great strides ahead in lowering total cost of ownership.

Electric power solutions are certainly going to become more prevalent for the off-highway segment. Engine firms and OEMs are rapidly developing packages to meet coming electrification needs, but these are most suited for the compact equipment sector. The diesel engine still has many years to come as an industrial power solution.

HAMM rollers

IS E-EQUIPMENT THE NEW NORMAL?

“One of the limiting factors today is battery cost, but this is coming down quickly”

At the recent BICES exhibition in Beijing, Global Report sat down with LiuGong’s David Beatenbough, vice president of research and development. On show was the company’s first range of all-electric construction equipment. Is this the future, or is it the new normal? David Arminas reports.

Hybrid fossil fuel and electric heavy construction equipment were going to be the next big development wave about a decade ago, or maybe less. But LiuGong wasn’t convinced. The Chinese giant decided to sit out the rush for hybridisation, and to focus on developing a range of electric-only machines instead.

This may have been a much more “socially wise” move than anyone realised at the time. Having all-electric machinery during stressed times – such as the recent international Covid-19 lockdowns – could mean less human contact than when refuelling fossil-fuelled equipment.

However, pandemics aside, the top drivers for the development of fully electric equipment remain sustainability, environmentally friendly footprints, noise reduction and lower operating costs.

LiuGong unveiled its first purely electric loader, the 856H-EV, as well as two electric excavators, the 906E-EV and 922F-EV, during the most recent BICES show … the Beijing International Construction Machinery, Building Material Machines and Mining Machines Exhibition & Seminar.

These new machines use lithium-ion batteries for energy storage with the power directed to permanent magnet electric

motors which drive the machines (see our info box).

Eventually, there will be complete excavator coverage up to mid-range size, which is the group’s 22tonne crawler range, explained David Beatenbough, vice president of LiuGong’s research and development (R&D) team.

But the mining excavator most likley won’t go battery-electric because of the high power consumptions needed. LiuGong might go down to the 3tonne crawler size, maybe smaller, but “we are watching what’s going on”, he says.

BATTERY COST

“The industry is developing incredibly quickly, being driven by developments in the automotive and bus sectors,” says Beatenbough.

“One of the limiting factors today is battery cost, but this is coming down quickly and has been for a long time. We expect it to continue.”

Beatenbough is convinced that China is the acknowledged world-leader in battery-electric technology development.

The Tesla car manufacturers of this world are doing some admirable things, he says, but the Chinese are focusing on battery development that is affordable for the masses.

“I think that in 2018 there were more than a million electric vehicles sold in China and most of them small economy cars … even two-seaters.”

Indeed, at the 2019 edition of the Shanghai Auto Show, no fewer than 10 electric cars were unveiled, although most were high-end concept models.

In April this year China-based Xpeng Motors rolled out its P7 electric sports car with deliveries to start by mid-year. It hopes the P7, priced much lower than the Chinese-made Tesla model 3, will stimulate consumer demand in an industry hammered by a domestic economic slowdown, reduced government electric-car subsidies and the coronavirus pandemic.

It’s this focus on affordability that makes Chinese R&D, whether in the automotive or construction equipment sectors, most fascinating. But has LiuGong come late to electric development?

“No, I don’t think so,” says Beatenbough. “We’ve been doing the groundwork for several years and we are moving more quickly than a lot of companies.

“We didn’t do a lot with hybridisation, kind of skipping over that phase. When I looked at the first-generation hybrid machines, the cost-benefit ratio just wasn’t there.”

Hybrid equipment development was most prevalent when it looked like there was no end in sight to oil price rises. This made the cost-benefit of hybrid operation better than pure petrol or diesel engine machines.

However, “once oil prices backed off from a high, the equations simply didn’t work,” says Beatenbough.

“I had always thought that a Generation 2 hybrid where you had some hydraulic energy recovery alongside electric performance had some potential. But by the time the industry started looking at second-generation hybrids, the trend in battery-electric was clear: Battery costs and efficiencies had improved so much that it made economic sense for battery-electric machine development.”

THE DETAILS

Temperatures over 30ºC during the four-day BICES event provided the perfect weather for launches. LiuGong took advantage of the sunny weather to showcase the company’s first purely electric loader, the 856H-EV, as well as two electric excavators - the 6tonne 906E-EV and 22tonne 922F-EV.

These first-generation machines have fast-charging technology for their lithiumion battery systems which the company says need only one hour to reach 80% charge. LiuGong notes that a typical electric vehicle will have a peak power output two times that of a conventional diesel-powered machine and says that its machines are 10% more productive than conventional diesel-powered models.

Meanwhile, the boom and chassis components are standard proven structures that offer long working life and durability. The 22tonne class 922F-EV also shares many of the same high-performance features as other new models in LiuGong’s latest F-series class.

So, is the hybrid then on the way out? “I think so, but it’s just a personal opinion. It’s fading pretty quickly,” he says.

Despite developments in fast charging of batteries, the initial cost of batteries is still a barrier to faster development and consumer uptake.

“It’s pretty high, probably around 75% of the overall purchase cost of an excavator. Today most of the hydraulic functions remain hydraulic. At this point there is not a real cost-effective technology to replace hydraulic cylinders, or at least it very expensive.

“Replacement [of hydraulics by electric power] will probably be phase two of the electric construction vehicle development. In phase one, replacing the engine and

LEFT: The 856H-EV electric loader

rotary devices such as the swing motor can be converted to electric fairly easily.”

Beatenbough predicts that linear actuators of some type will replace hydraulics.

Meanwhile, a diesel engine is around 15% of the cost of the purchase price of a conventional piece of construction equipment. But this is somewhat misleading in the long term, he explains.

“You have to look at the total lifetime cost of running the vehicle. This is because charging an electric motor is much less expensive than filling up a diesel engine.”

BATTERY REPURPOSING

An all-electric machine should get eight-12 hours of battery life – the point of full discharge before it needs to be recharged, but that depends on the size of the battery and the workloads of the machine.

A customer would see five years of battery life before it would be replaced and the old unit could be installed in a power-generation system somewhere.

“In the future, as we develop more and more solar-power systems, storing that energy will become a huge problem,” says Beatenbough.

“The discharge cycle on a battery in a machine requires a full discharge and its discharge rate gets faster as it gets older. So at the end of its useful life in a machine, you can put that battery in a storage system which

The 22tonne 922F-EV electric excavator

doesn’t require full discharge, only storage capacity and it works just fine.”

One of the keys to success in this new e-equipment world (especially for heavy construction equipment manufacturers) will be helping customers dispose of their old batteries.

“We, the original equipment manufacturers (OEMs), will have to think through the total life of the battery. A plan for the customer will be needed for them to recover their investment.”

This is going to need a common understanding among OEMs, he says.

“In all likelihood a battery warranty would be based on the number of kilowatt hours that goes through a battery and that can be measured quite easily.

“It may well be that we [LiuGong] will wind up selling the machine to a customer and leasing the battery to them.

“We would take back the used battery and find the power applications for that battery.”

Or, at least, that’s one “potential business model,” he muses.

Is it a hard sell getting customers to look at electric options?

“It’s a lot easier than it used to be. In fact, in China I’ve had some of the most sophisticated total-cost-of-ownership discussions with customers than anywhere in the world.

“This is because top-notch machinery owners and contractors here are very sharp about their costs.”

There isn’t, at least for now, a lot of interest within the emergent countries for electric machines.

“But then there also isn’t a lot of understanding about what technology is available. Within these countries the interest will eventually come from heavily urbanised areas and major population centres.”

He says the real take-off point for electric construction vehicles anywhere is when there is enough data collected over several years to show the total running costs are lower than for an internal combustion engine machine.

LiuGong has no firm schedule for the sale of the EV series though: “We will have some units in customers’ hands for field-test work in 2020 with the actual product launch,” says Beatenbough. Depending on the test results, you could expect these new e-machines to be on full sale “within two years … probably”.

On test will be a 20-25tonne excavator, a 5tonne wheeled loader – the core model for the Chinese market – and a 6tonne excavator which is “the size of electric vehicle that virtually everybody in this industry is working on developing”.

LiuGong’s electric vehicle line-up at BICES wore white livery, simply to make the prototypes stand out. “They look clean. But to be fair, we’ve never put a white machine like that out in the dirt. After eight hours is might look pretty ugly.”

LEFT: The 6tonne 906E-EV electric excavator BELOW: LiuGong R&D centre in Liuzhou

ABOUT LIUGONG

Officially called the Guangxi LiuGong Machinery Company, LiuGong was founded in Liuzhou in the north-central Guangxi Zhuang Autonomous Region in 1958. Since then, it has moved from being a local wheeled loader manufacturer to having one of the world’s most extensive construction equipment product lines. It is a truly global player.

Apart from wheeled loaders, products include bulldozers, skid steers, forklifts, motor graders, excavators, rollers, drilling machines, truck-mounted and crawler cranes, pavers, cold planners, concrete equipment and mining dump trucks.

The company now has 20 manufacturing facilities and five research bases worldwide that employ close to 10,000 people, along with over 300 dealers in more than 100 countries. The North American headquarters is in Katy, Texas, and its European headquarters is in Warsaw, Poland.

LiuGong started its Global Dealer Conference in 2003 and, according to the company, it has become one of the manufacturer’s most important annual events.

In 2012, LiuGong acquired Polish heavy equipment manufacturer HSW (Huta Stalowa Wola) which included the internationally known Dressta brand of bulldozers. This provided a manufacturing and logistics footprint for LiuGong in Europe.

At the time of the purchase, Zeng Guang’an, LiuGong vice chairman and president, said the move was another bold step in the Chinese company’s global growth strategy and its first purchase of manufacturing facilities and distribution outside of its domestic Chinese market.

“This acquisition helps us continue success with our five-year strategy to become a top 10 construction equipment manufacturer,” he said at the time.

COPING WITH COVID

Huang Min, executive vice president of LiuGong, tells Global Report about his company’s reaction to the coronavirus pandemic that started late last year.

AQWhat did the company do during the lockdown period?

“LiuGong promptly established a command team, led by group chairman Zeng Guang’an, to deploy protective measures and coordinate every aspect of the company’s operation. At the same time, each division has a coordinating team to ensure precautions are carried out effectively.

“To ensure employees’ health and to prepare for a smooth production resumption, LiuGong carried out a series of measures such as safety education, preparation of personal protective material including masks, clothing and disinfectant. LiuGong also adjusted production plans to ensure timely delivery and prevent inventory backlogs.

“Meanwhile, the procurement team communicated with suppliers to ensure component delivery could meet our manufacturing needs. Marketing teams paid close attention to any changes in export policies in key countries and regions. At the same time, our overseas manufacturing bases played an important role in easing the manufacturing pressure within China.

“By January 27, LiuGong’s excavator and wheeled loader factories resumed production and by February 10 all of our Chinese subsidiaries were working normally.”

Q Did you cut staff or lay people off?

A“LiuGong has not laid off any workers in any factories, both at home and abroad. And we are ensuring that production at all our overseas manufacturing bases is compliant with the requirements of their local governments.

“In China, some production departments, such as our excavator division, are even expanding staff to meet the growing demands of the Chinese market.”

AQWere your supply chains affected?

“Our procurement group established a special team as soon as the government announced an epidemic to coordinate with both domestic and global suppliers to ensure the supply of our parts and production materials. Thanks to their efforts, our production hasn’t been badly impacted because the team managed to find alternatives and arranged our orders in advance to ensure our needs were met.”

“Up to now, we have not seen any obvious impact on orders”

Q Did you continue to manufacture as planned?

A“Up to now, we have not seen any obvious impact on orders. But with the expansion of epidemic into a pandemic, more and more countries announced precautions and policies. We will keep a close eye on these changes and are maintaining close communications with our global offices, dealers and customers and make any necessary adjustments.”

QHas the crisis, within China and globally, meant that you have had to change strategies and sales tactics or cut back expansion plans in other countries?

A“Our marketing is always adapting to market environments, economic developments and changing government regulations. And so it will be this time.

“The pandemic has, however, brought out much innovation within LiuGong. For example, online live shopping. On February 11, LiuGong launched its first live shopping broadcast through TikTok* which focused on the promotion of our 930E excavator. Later, a live online business platform was launched which will become a complementary tool to our traditional sales methods in the future.”

Q Do you think you will sell fewer machines this year due to the crisis?

A“In March, China’s excavator sales hit a new record, indicating that China’s economy is in recovery. In the first quarter, the total industrial output value has increased by 4.4% year-on-year. Market share of loaders, excavators, bulldozers, rollers and other products all increased significantly, among which the wheeled loaders increased by 5% and excavators entered the top three in the domestic market.

“However, we realise with the spread of the pandemic there will be uncertainties in global economies including investment, infrastructure planning and trade policies along with possible changes to the consumers’ consumption habits. LiuGong will adjust our sales strategies accordingly to minimise the impact.”

“The Chinese government will issue new policies to stimulate economic growth and counter the recession cycles”

QDomestically, do you think that the Chinese governments – central and provincial – need to set up a financial stimulus package?

A“We do not believe that the positive trends with the Chinese economy in medium term and long term will be affected. But it is still necessary to pay attention to the short-term impact. The pandemic has already caused economic recession the world over. As a result, the Chinese government will issue new policies to stimulate economic growth and counter the recession cycles.”

QWill equipment sales be affected in countries within China’s Belt and Road Initiative?

A“There are currently 65 main countries along the OBOR [One Belt, One Road] with a variety of economic situations and different responses to the pandemic. We will keep close communications with our dealers and customers to prevent loss of our – and their – business.”

*TikTok – called Douyin within China – is a Chinese video-sharing, socialnetworking service owned by ByteDance, a Beijing-based company founded in 2012. ByteDance launched Douyin for the Chinese market in September 2016. For iOS and Android in markets outside China, ByteDance launched TikTok in 2017; it became available in the US in August 2018. It is used to create short (3-15 seconds) videos of dance, lip-sync, comedy and original content, as well as short looping videos of 3-60 seconds.

TO ROAD CONSTRUCTION

Contact: Roger Adshead | radshead@ropl.com

LiuGong HQ in Liuzhou, China

Crushing rocks on-site can cut emissions compared with transporting them elsewhere for crushing

CONSTRUCTION IS CRUCIAL TO GLOBAL SUSTAINABILITY

Construction accounts for more global resource use than any other industry, putting it at the centre of efforts to move to a more sustainable and circular economy. Sustainability is a key issue for construction equipment suppliers as more and more of their clients are forced to get licences to run urban construction sites. Liam McLoughlin reports.

The construction industry is a major producer of waste material and therefore an important part of global efforts to improve sustainability and enable the move from a linear economy, a system based on materials being produced, consumed and then thrown away. The world is moving to the circular economy instead, a system based on using things again and again … a world in which as little as possible is thrown away.

In a circular economy, waste that can be recycled is injected back into the economy as secondary raw materials. These materials can be traded and shipped just like primary raw materials but, at present, the European Commission says that recycled waste still accounts for only a small proportion of the materials used in the EU.

Riccardo Viaggi, secretary general of European construction equipment manufacturers association CECE, says that sustainability is now central to industry,

adding that the goal of every big city is zeroemission construction sites.

In terms of the construction industry’s importance to the sustainability issue, the figures tell their own story.

Construction uses more of the world’s resources than any other sector: 38.8 billion tonnes per year according to a report launched at the January 2020 World Economic Forum in Davos. According to authors, the Circle Economy think tank, this puts construction considerably ahead of the food sector, whose demand for agricultural products such as crops and livestock accounts for 21.3 billion tonnes per year.

The total global consumption of materials is now 100.6 billion tonnes a year, according to the Circle Economy report, with minerals accounting for over half (50.8 million tonnes) of the figure. The report found that total resource consumption has increased by over 8% in the last two years, but the recycling of resources has decreased from 9.1% to 8.6%.

The construction sector requires material for the building and maintenance of highways, bridges, houses, offices … and other infrastructure, especially in the developing world.

Increasing demand for construction materials has been a trend for several decades. According to figures from the European Environment Agency (EEA), the global use of construction materials nearly trebled from less than 10 billion tonnes in 1982 to 28.357 billion tonnes by 2009.

The European Commission states that the construction industry accounts for 40% of energy consumption in the EU, 36% of CO2 emissions, 50% of raw materials consumption, 33% of waste generated and 33% of (fresh) water used.

The industry comprises 9-10% of the EU’s collective gross domestic product (GDP), an estimated €100bn a year in external trade outside the EU, three million companies (of which around 90% are small and medium-

sized enterprises – SMEs), and provides 20 million jobs.

Construction is at the crossroads of several EU policies on the single market, environment, competitiveness, energy, climate, and social dialogue.

To achieve its target of becoming the first ‘climate-neutral’ continent by 2050, the European Commission has set out the ambitious European Green Deal. The strategy aims to transform the EU into a resourceefficient and competitive economy where there are no net emissions of greenhouse gases by 2050, and where economic growth is decoupled from resource use.

Its initial roadmap of policies ranges from achieving huge cuts in emissions, to investing in cutting-edge research and innovation, and preserving Europe’s natural environment.

Emmanuelle Maire, head of unit at the EC’s DG Environment, stresses the urgency of accelerating the transition towards a circular economy where materials are used, recycled and used again.

But what does this all mean for the world’s leading construction equipment suppliers?

Speaking at the biannual summit of European construction equipment industry association CECE in October 2019, Maire said: “We need the construction sector to be part of the new Green Deal, and it is one of the main sectors we will be concentrating on.

“We need to think how we can source the raw materials we use, and we need to use secondary raw materials in new products.”

And she wants the equipment and technology suppliers to follow suit and adopt the same principles.

The EC issued its first Circular Economy Action Plan in 2015, and has so far spent €10bn of the EU budget on financing the move towards a circular economy.

“At the moment we focus on the energy efficiency of buildings when they are in use,” Maire says. “We need to look at what happens before and after the construction of a building, to cover its full lifecycle.”

The Action Plan includes pre-demolition assessment guidelines for the construction sector, and a voluntary industry-wide recycling protocol for construction and demolition waste. The voluntary guidance is designed to cover the mainstream construction market including offices, residential, new builds and renovations.

She stressed the need for global cooperation and that construction industry sustainability is not just a European issue. “We need to team up with Japan, Mexico, China and other countries,” she adds. “It is

Source: www.machinedesign.com

East and North Africa

Sub-Saharan Africa

Latin America and the Caribbean

North America

South Asia

Europe and Central Asia

East Asia and Pacific

The cost of energy is one of the main drivers for the electrification of construction machinery.

Source: World Bank Waste Report, September 2018

Construction minerals Ores and industrial minerals Fossil energy carriers Biomass

Global waste generation by region

Global megatrends and cost of energy are drivers for electrification in construction

➔ not a matter just for policy makers, but for companies as well.”

There are issues that need to be addressed in terms of getting the construction sector on board with sustainable use of materials, according to Eugenio Quintieri, secretary general of the European Builders Confederation (EBC). He gives the example of CO2-free cement: “It costs 10% more than normal cement, and the customer will not buy it. We need to think about how to bring down the cost of new technology.”

Thilo Juchem, president of European aggregates industry association UEPG, says that international cooperation is taking place between associations on the sustainability issue. “We are linked to GAIN, the global aggregates network, and share information,” he adds. “It’s about sharing best practices to let others know what we are doing and vice versa.”

Juchem says that UEPG members are producing both primary and secondary raw materials. “For example, in Germany 90% of construction and demolition waste is recycled and this makes up about 12% of new [raw

material] products.”

Legislation such as the European Union’s tougher Stage V emissions standards for nonroad engines is helping to change industry and customer attitudes, according to Alfredo Barrios de la Fuente, technical and sales director at the Spanish division of engine manufacturer Deutz.

“They have to have a certain type of engine,” he says. “It is difficult to persuade the end user to pay more, but they can get more value later on down the line by using new technology.”

According to de la Fuente, the chief environmental issue with engines is the level of gas emissions, and that engine efficiency has to be improved to address this.

“We need to find the best points for fuel savings,” he says. “For example we can control the cooling fan electronically to save fuel.”

He considers that Stage V-compliant diesel engines are the best current solution to these issues, adding that over the last 20 years diesel engines have reduced their particle emissions more than fortyfold. “With Stage V we can say that it is almost a clean engine.”

In the future Deutz envisages three different engine technologies being applied. Firstly, internal combustion engines (ICEs) where change will come in the form of more sustainable fuels such as synthetic fuels and ‘e-fuels’ (made using renewable electricity).

There will also be fully electric engine systems and also hybrid systems. The latter will have a range of different types combining diesel and electric drives, depending on what is required.

Finnish quarrying equipment company Metso operates a number of different sustainability initiatives, one of them being its Climate programme.

Under this programme that came into effect in November 2019, Metso has set itself targets for CO2 emissions that have been approved by Science Based Targets, a United Nations-backed initiative that champions science-based target setting as a way of boosting companies’ competitive advantage in the transition to the low-carbon economy.

“Science Based Targets has approved four of our targets,” says Kaisa Jungman, Metso sustainability business development.

HOW DATA AND DIGITALISATION CAN DRIVE THE CIRCULAR ECONOMY IN CONSTRUCTION

Digitalisation and the structuring of data are central to driving the uptake of a circular economy in the construction sector, but there is still much progress to be made.

That is the view of Paul Surin, global lead built environment at technology giant IBM. Speaking at the biannual summit of European construction equipment industry association CECE in 2019, he highlighted the importance of traceability and data management.

“We can design great things, but we still don’t trace them.”

Surin said that carbon emissions from buildings are 3.8 times higher than they were designed to achieve. He added that a shortcoming in data is one of the major barriers to companies achieving their digital goals, referring to a survey that showed 42% of organisations either have no, or just a limited, digital strategy.

“Data is the oil of the industry,” he said. “Construction process data is not standardised and is not

structured, with data held in silos.

“There is a lack of intelligence across project lifecycle stages, value chain and asset operations.”

“We have low productivity and low investment in innovation in the sector,” said Quintieri. “We need to address this.”

Surin said that a holistic approach is the key to success in digitalisation and achieving the circular economy, and that data must not be held in silos.

97% of buildings in Europe are energy-inefficient, according to the EBC’s Eugenio Quintieri

Ninety-seven per cent of buildings in Europe are energyinefficient, according to Eugenio Quintieri, secretary general at the EBC (European Builders Confederation) which represents construction SMEs in Europe.

“The end of life of a product is important, and most manufacturers don’t think of this,” he said.

Surin added that BIM (building information modelling) is a buzzword in the construction industry: what thing is being produced, how the thing is produced, and who produces what thing and when.

The UK BIM Task Group says that: “BIM is essentially value creating collaboration through the entire lifecycle of an asset, underpinned by the creation,

collation and exchange of shared 3D models and intelligent, structured data.”

It adds that structured data is the essential element to enable communication in the digitally built environment. It defines structured product data as data that has been defined and organised in such a manner that it is searchable and immediately identifiable and machine readable within an electronic file.

Surin argues that structured data is key to decision support via the use of technology and analytics. He adds that ongoing international standardisation and harmonisation work that is being carried out by standards bodies ISO and CEN will help to structure data and create a common industry digital language.

“We need to connect the stakeholders to achieve the digital built environment,” he said.

“Contractors and manufacturers must work closely together. They have a different view and have different data.”

BELOW: Metso plans to set energy efficiency targets in areas such as health & safety, emissions and materials efficiency, and to offset all its aeroplane flight-related emissions

“We have set a target for our production and for inbound and outbound transportation, and we will also push our biggest component suppliers to set CO2 emissions targets. Our plans for targets are quite comprehensive.”

Metso has also set CO2 targets for some of its products. At the moment these are mostly for grinding equipment for the mining industry.

“Those are the ones that use a lot of energy, and by replacing certain conventional technologies with more energy-efficient technologies you can attain a huge amount of CO2 reductions,” says Jungman.

“We have also made some CO2 savings calculations for our Lokotrak mobile crushing plant. By crushing the rocks on-site it cuts emissions compared with transporting them elsewhere for crushing.”

Metso also plans in future for all its research and development programmes to set energy-efficiency targets in areas such as health & safety, emissions and materials efficiency, and to offset all its aeroplane flightrelated emissions. The company offset its 2019 flight emissions by investing into wind power in India, Turkey and China.

With its components suppliers, Metso has programmes in place to audit them on sustainability-related issues such as health & safety, human rights, environmental compliance, and bribery & corruption.

“We also now have sustainability committees with all our business that consider what are the sustainability issues that are forcing our customers to change, and what kind of challenges they have,” Jungman adds.

“In the future there will be new things

where you will need to cut down on energy. We are now looking into what is our vision on, for example, taking back some of the wear parts and recycling different types of materials.”

two kilometres it doesn’t matter,” Heikkilä adds. “The cost is still about 2-3 euros per tonne, based on the discussions we have had with customers.

“This means that even if you have a quite small amount of crushing material like 20,000 tonnes it’s a huge amount of money, in addition to more emissions.

“We focus on reducing the crusher noise rather than engine noise as that is more disturbing – there are more impacts with crushing noise. We have managed to reduce crusher noise by around six decibels in the Lokotrak Urban models.”

Jungman believes there is no conflict between addressing sustainability issues and remaining competitive and profitable.

We have also made some CO2 savings calculations for our Lokotrak mobile crushing plant

In terms of how all these initiatives will change Metso’s way of doing business, Jungman said: “It means a lot of communication. It means a lot of awareness-raising internally and externally, but especially internally as you need to make everybody understand their role and to act in a different way.”

What will be the financial cost to Metso of conducting these initiatives?

“In most of them the payback time is quite reasonable,” Jungman responds. “For example, the sustainable electricity policy we are trying to push in all of our locations, such as the use of solar panels.

“The payback time is much shorter than it used to be and in many countries it’s no longer more expensive to buy ‘green’ electricity.”

The targets that are set vary depending on the type of product area. “Our Lokotrack Urban mobile jaw crusher is focusing on noise and dust reduction,” says Juhamatti Heikkilä, manager, product safety at Metso. “The concept itself enables our customers to save a significant amount in transportation and energy costs.”

He says the main issue and potential cost with urban construction sites is whether you can operate for example, crushing machines, or do you need to transport the material due to the noise impact.

“Even if you only need to transport one to

“It’s already a key issue for a lot of the customers in terms of having a licence to operate – they need to have their permits. There is also more and more pressure from society to do things in a sustainable way and this is likely to keep on growing.”

Heikkilä highlights energy efficiency as an issue that will be important for companies going forward due to the cost of energy and CO2 targets.

“We are now getting a lot of questions [from customers] about the dust issue,” he says. “It may be due to greater awareness or legislation changes. The questions are more detailed about how much the dust level will be reduced.

“Our customers need a lot of support when dealing with these topics. Authorities may be raising the requirements and companies need to provide more evidence before gaining permissions.”

Heikkilä says it is difficult to say which technologies are the most important in terms of achieving sustainability for aggregates and construction equipment companies.

“A key question in the aggregates and construction sectors is to minimise transportation of materials as that’s really the major thing about energy consumption,” he says.

“Costs come into that and this is clearly one example where you can reduce both your emissions and your costs at the same time without any conflict.

“If you are able to demolish a building and to process the material and re-use it within a very short distance, or even on the same site, that would clearly be a benefit from an operational point of view.”

He adds that enabling technologies for greater sustainability include engine emissions, because these are regulated in many city areas.

“If you are able to use direct electricity, that is one possibility for some of our products,” said Heikkilä. “This might be limited because if you are demolishing on a site you probably will not have the electricity available, at least from a public network.”

Crushing noise and dust is a problem for enabling operations where people live nearby, and Heikkilä says Metso has technologies available for some of its urban products to reduce these problems, and plans to make more of these.

“We are also studying electrical solutions,” he added. “We are studying the possibilities to use different kinds of electrical solutions in the drivelines of mobile crushers. We are not sure what will happen on the demand side about this, and if and when this transformation might be happening. But we need to be ready for that change.”

He said that Metso is receiving more and more interest from its customers about electrical power.

“It may take some years but we already have an offering available with products that have the bi-power option of using either diesel or external electricity,” said Heikkilä.

“Energy-emissions legislation is developing all the time and we are now on Stage V. All the manufacturers have the same rules, and that is forcing them to do development.

“A company needs to make sure that the regulations are being followed and that we are ready for any changes well in advance.”

Metso highlights the advantages of electric drives as being lower maintenance costs and maintenance frequency; longer service life; better environmental compatibility; an immediate reduction in energy costs in operation; and higher productivity.

The challenges/downside of electrical drives include a higher level of capital expenditure; local variances in, for example, voltages and safety legislation standards that make things more difficult for equipment manufacturers.

On-site transportability can also be an issue with electric-powered equipment which may need to have a cable plugged in all the time.

The global rechargeable battery market is predicted to grow more than twofold over the next decade.

Source: Christophe Pillot, Avicenne Energy

“The purchase price of the equipment may be higher, but the operation costs will be lower,” said Heikkilä.

Metso says that global megatrends and the cost of energy are drivers for electrification in construction. There is strong demand for machines with electric drives in the Nordics, India and China, as well as in southern Europe. In Iceland demand for mobile compact crushers with electric drives has been driven by the availability of low-cost electricity from heat and water.

Metso introduced the first Lokotrack Urban crusher prototypes in 2016. The company claims that the reductions in transporting materials that a Lokotrack Urban LT106 enables can create savings of up to €80,000 through on-site crushing. This is based on an urban-area building construction site with a 20,000 tonnes crushing contract (200 t/h over 100 hours).

In terms of alternative power systems, Metso offers Lokotrack machines with dieselhydraulic, diesel-direct drive, and a dieselelectric plug-in system.

“We have full electric machines but we don’t have battery-based solutions as yet, maybe that is the future, who knows,” said Heikkilä. “We might see the first such products in five years, but that is just my estimate.”

Currently, about 10% of Lokotrack sales are for models with electric power.

Metso is conducting research into what is the typical energy usage during the operation if processing recycled material compared to hard rock. The energy need is totally different, according to Heikkilä, with hard rock being more stable, but also requiring a bit more energy.

“In recycling you have quite low energy consumption, but there are situations where you might need more if you have some temporary problems such as a blockage where you need a lot of energy for a short period of time,” he said.

“That is something that will affect batteries and component power levels. It could be that electric battery-powered machines could come to certain types of processes first.”

The LD120E mobile jaw crusher and the LD330D mobile crushing and screening plant both have electric drives that can be used with external electricity sources. Heikkilä says these combinations are very popular in Finland as they are compatible with its road system.

Also, he adds, when making investments in machinery today it is necessary to take account of possible future regulations, such

as it might be a requirement in ten years to use only external electricity for crushing operations.

“There is a huge opportunity to improve the recycling of construction and demolition materials,” said Heikkilä.

“Some studies have found that around 50% of materials are being recycled or re-used and the target set by the European Commission is much higher at around 90%. It’s very important to us to develop products that enable the processing of waste material.”

RIGHT: The Life in Quarries project creates habitats for wildlife during the production period of a quarry. Image: Life in Quarries project

BELGIAN PROJECT BOOSTS QUARRY BIODIVERSITY

The Life in Quarries biodiversity project, which started in Belgium in 2015 and has funding from the EU and the quarrying industry, has expanded to over 25 quarries.

The objective of the fiveyear initiative is to encourage biodiversity in active quarries around the Walloon region (which also provides funding for the project). The scheme is based on the implementation of biodiversity management measures during the extractive phase rather than just rehabilitation of the site at the end of works. The aggregates industry can actively contribute

to biodiversity, according to Thilo Juchem, president of European aggregates industry association UEPG. “We are creating habitats during the production period of a quarry,” he said.

He believes that the European Commission’s 1992 Habitats Directive was instrumental in raising quarrying industry awareness about the large amount of habitats and rare species on their sites. The Life in Quarries project states that every year in Belgium over 70 million tonnes of rocks are extracted – essential work which inevitably transforms

the landscape, disturbing the earth and laying the rocks bare.

This creates ‘pioneer environments’ such as small ponds which are dug out at the bottom of the quarry.

Marie Vanschepdael, project manager at Belgian birdlife preservation organisation Natagora, says these environments can host rare plants and species that are almost only found in active quarries.

These include the natterjack toad, whose survival depends on temporary ponds whose shallowness and regular drying

out protect it from the fish which feed on its spawn and tadpoles. Ringed plovers have also settled at quarries in pioneer grasslands created by excavations, and just require a hole in which to lay their eggs.

The scree which is constantly being formed in quarries provides an ideal shelter for reptiles such as the smooth snake, too.

“We don’t touch their habitats during the breeding periods,” Juchem says of these species. “It’s not complicated for us to leave it and then start there again after the breeding period.”

WHO CAN YOU TRUST?

Global supply chains are complex things. They tend to involve lots of organisations doing lots of transactions every day, all around the world. And it is based on trust. The World Economic Forum has been looking into how this increasingly data-rich digital world operates. How do you make sure that every link in the chain is doing what it is supposed to do? Who can you really trust? Geoff Hadwick reports.

According to a major new report from the World Economic Forum (WEF) called: “Inclusive deployment of the blockchain for supply chains: Part 2 - Trustworthy verification of digital identities,” global supply chains are becoming increasingly digital and, as the global construction equipment sector knows only too well, the whole thing is peppered with a wide range of intricate transactions.

“At the core of each of these digital transactions are trust-based interactions with partners,” says WEF. So … “organisations need a comprehensive system for the verification and management of digital business identities that is both dynamic and trustworthy”.

Online business moves fast and your company needs to feel confident that it is working with a stable of reliable on-screen partners … people who will bring high levels of certainty, credibility, conviction and dependability. There is no easy way through: “Current digital identity management systems are costly, inefficient, and may not be sustainable,” says the report in its opening pages, which is why WEF has decided to get the bit between its teeth and try to help. Is there a systematic way of working that could help?

“This [report] lays out foundations for such a system,” it says, “exploring considerations, proposed principles and recommendations for supply-chain organisations and governments in managing the growing complexity of the digital identities involved in global trade.”

The paper also introduces and investigates the possibilities enabled by a digital Global Trade Identity (GTID) for legal entities participating in global supply chains – “a necessary step in digitising global trade”. WEF has given Global Report: Construction Equipment 2020 permission to summarise its findings.

It has become increasingly clear that: “A central requirement of these digital business networks is the ability to make use of partners in a trustworthy way. Organisations need a comprehensive system for the verification and management of digital business identities that is both dynamic and trustworthy.”

Despite recent improvements in digital identity verification systems, they need further development to support the supply chains of the future, says WEF. Big changes are coming. There will be: “New demands on the digital identities of legal entities” and new “possibilities for supply-chain organisations

will likely be ushered in by the Fourth Industrial Revolution”. Look out for paradigm shifts “enabled by the internet of things (IoT), artificial intelligence (AI) and, in particular, distributed ledger technology”.

According to the report: “The pace of development is faster than ever before, and decision-makers need to re-evaluate the systems they have in place to manage digital identities. As digital business interactions flow across borders in international supply chains, there will be many cases in which parties do not know each other before they conduct business together.”

Of course, businesses work best with partners they can trust and people they know. It’s an age-old truism. The trouble is that online trading means making new networks fast, often in parts of the world that are unknown. “Digital identity ensures integrity in connecting the physical and the digital world,” says WEF. “In global digital supplychain transactions, it is essential for a legal entity to prove its own identity and check those of other parties, each of which requires a unique, verifiable and authentic digital identity.”

Easy to say, but hard to do. WEF decided to “investigate the possibilities enabled by a digital Global Trade Identity (GTID) system

➔ for legal entities participating in global supply chains”. The report focuses on the GTID concept because: “The intention is that GTID is used for any business interaction in a global supply chain.” It should: “Enable any supply-chain partner to dynamically validate the trustworthiness of a legal entity with which it is about to engage in a business interaction.”

The report goes further, suggesting that: “A GTID is (now) a prerequisite for the efficient digitisation of global supply chains and supports the digital era’s increased focus on optimising a business’s environment instead of organisation-centric optimisation.” In other words, you need to look out into the world and find new opportunities. Use modern technology and don’t focus on your own internal processes.

“Decentralised identity systems hold a unique opportunity for global supply-chain organisations and governments to create GTID systems that cater for future supplychain interactions,” argues the report. However, WEF is also quick to point out that “decentralised identity systems are not yet ready for general use due to business, regulatory and technology challenges … but both the public and private sector can position themselves for future success.”

In other words, start getting ready now. And take a quick look at last year’s Global Report, where we summarised the ups

and downs of a modern blockchain. Why? Because blockchains are an important type of distributed ledger technology that is already being used across industry. For now, they are the way to go. But beware, the times they are a’ changin’ and new ideas are following thick and fast.

DECENTRALISATION

According to WEF: “New technologies and current advances in IT are providing new paradigms in understanding how organisations can collaborate without relying on a trusted intermediary.” And these changes may well “bring about transformative changes. Decentralised ledger technologies such as the blockchain are transferring the authority, risk and reward – of defining and enforcing system rules and record keeping –from a central entity to a group of entities of which none has controlling power”.

Businesses are working in cells, coming together in a common cause, without ever having physically met or talked to each other … and each needs to be as disciplined and trustworthy as the rest of the chain. There cannot be a weak link. There has to be a successful and a trustworthy group-think going on.

The end result is that transactions and their details are being recorded in multiple places at the same time, without a central database or administrator, and it is the blockchain

that effectively provides “trust” between and amongst these unknown parties. Systems like these now “transact business and exchange information without an intermediary, while ensuring data integrity and providing a full audit trail,” says WEF.

TRUST MATTERS

According to the report: “The technology underpinning GTID is the foundation for enabling the dynamic validation of trust globally, but there are many other nontechnical considerations that contribute to the trustworthiness of an entity, including procedures for issuing and proofing identities, how IT systems are secured, how companies are managed, company ethics/ cultures etc.” These other, “non-technical” factors are just as important, but they are things to be verified over a longer period of time.

“Today, most identity systems exist in isolation,” says WEF. “Different public and private solutions record and maintain identical identity data potentially hundreds of times over, and are not interoperable, creating a significant amount of redundant identity information. This is a waste of resources for the network in question. They are difficult to scale and they are buried in error-prone and paper-heavy processes.” A shared digital identity is the way to go, suggests the report:

Also: “The case for robust and scalable GTID becomes clear when considering the advance of Fourth Industrial Revolution technologies,” argues WEF. As these technologies develop, “future supply-chain transactions and business processes might be handled by autonomous software agents (ASA) and IoT, dynamically interacting with various parties on behalf of legal entities, so placing greater emphasis on the seamless verification of identities”.

This new digital era will “require enterprises to rethink many aspects of their business models. Several enterprises in global supply chains have moved their digitalisation focus outwards towards the business networks of which they are part. A GTID should enable identity verification that can be more efficient, scalable and sustainable and therefore support digital optimization of business networks”.

How to check and verify that someone has a “trustworthy digital identity” is “a topic on the agenda of several international trade organisations and governments, including the Belgian, Danish and Azerbaijani governments as well as local governments such as the Government of British Columbia and Ontario”. There is also the European Union’s eIDAS initiative which is running alongside projects from the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), the United Nations Commission on International Trade Law (UNCITRAL) and the World

STAYING LEGAL

The legal framework around the question of trust in a global supply chain is in its infancy. There are still a host of problems to overcome. It is best to think ahead.

According to WEF: “The use of digital identity systems in global supply chains is an inherently cross-border (activity), which means parties operate in multiple jurisdictions.

At present, national legal regimes take divergent approaches to legislating for /regulating digital identities, (so) several legal issues arise.

“For instance, which law will apply to establish the validity of a contract and to an arbitration

to ensure “public and private collaboration on advancing good, user-centric digital identities”.

WHAT IS A DIGITAL IDENTITY?

“Digital identity is a unique representation of a legal entity engaged in an online transaction,” says WEF. “It enables remote interactions and trust between entities by providing vital information about the entity, ensuring that it exists in the real world.” Also, “the term proof of existence (should be used) to cover any electronic information that can document that an entity is a legal entity under a specific jurisdiction. And digital identity tools can be used for other purposes,

clause contained in an email exchange?

“Decentralised systems can encourage the development of digital identity. However, where existing laws and regulations have been drafted to consider digital identities (e.g. the eIDAS regulations in the European Union), they have tended to be drafted with a traditional view of data and digital identity – i.e. based on centralised, rather than decentralised systems. This means the regulations are not fully consistent with a decentralised system … therefore organisations could miss out on a potentially promising archetype.

“A possible solution lies in

such as authorisation and providing information (e.g. export licences or C-TPAT certification) beyond simply authenticating a legal entity’s identity”.

A globally recognisable proof of existence does not need to exist, says the report.

“However, if any country issues some kind of digital or physical proof of incorporation (incorporation is the legal process used to form a corporate entity or company), that should be used as proof of existence. In many countries the financial institutions are used as the trusted party that confirms the validity of a physical proof of incorporation and issues a digital identity. How much trust an entity can place on such proof is up to each entity.”

Please note, the report adds, “digital

formulating uniform legal rules across jurisdictions on a global scale. Efforts aimed at creating an enabling legal environment for electronic exchanges across borders is work-in-progress. Useful pieces of legislation already exist.

“Some of them may be found in recent free-trade agreements and others in the United Nations Commission on International Trade Law (UNCITRAL) texts.

“At the same time, it is important to update work while considering emerging concepts (e.g. identity management) and emerging technology (such as blockchain).

“Decentralised identity systems also raise questions about

private-key custody and storage. If the security of an organisation’s digital identity is only as secure as the private key tied to that identity, should service providers that sell custody and storage solutions be subject to common regulatory standards to protect their customers and the system as a whole?

“Finally, the liability for systemic failure needs to be clear. Where the identity system is powered by a permission-less decentralised network, there is no single centralised operator of the network. There are also no legal acts or precedents answering the conflicts of law issues inherent in a decentralised system.”

Economic Forum. Everyone is seeking ways

© Henadzi Pechan

➔ identities issued within a country will not themselves constitute a GTID; however, these can be used as the proof of existence to obtain a GTID”.

There are three types of identity system. These “can be categorised into three archetypes: centralised, federated and decentralised. As the names indicate, it is their fundamental structures that set them apart from each other – with implications for adoption and trust levels, and advantages and challenges for digital entities”.

CENTRALISED

In a centralised identity system, the provider, such as a government’s trade department, establishes and manages a service consumer’s identity, as well as its related data, in a centralised system. “Digital identities are currently mostly governed centrally, in isolated architectures,” says WEF. “A legal entity, typically, must prove itself to each service provider to create its digital identity … see Figure 2. Under this system, the service consumer has almost no ability to manage its own identities and related attributes and must abide by the service provider’s terms and conditions in order to establish and maintain its digital identity. It must rely on the service provider’s processes and trust the service provider can handle its identity securely, which puts obligations on the service provider and requires investment.”

The trust factor in this model relies on “the service provider guaranteeing the identity of network participants, thereby acting as the central third party that facilitates trust among otherwise unknown entities”.

How does this work? “In a business network where supply-chain actors are interacting with multiple digital services, these actors need to repeat their registration activities for any digital service they intend to use. For example, if a shipper/exporter uses its third-party logistics provider for documentation management, does ocean freight shipping for one trade lane with ZIM, which is uses Wave’s blockchain-based bill of lading solution, and deploys CargoX’s blockchain-based bill of lading solution for all other trade lanes mean that it should repeat the identity process across all solution providers …” over and over again.

“This is cumbersome,” says WEF, “requiring identity and security experts in place across processes and entities, and duplication of work at each service provider. Handling trust multiple times across all supply-chain solutions results in hidden overhead costs within the supply chain.”

However, it must also be recognised that: “Today, centralised identity systems are mature, with well-defined standards and processes, which is probably why current providers of blockchain solutions mostly depend on centralised identity systems.”

FEDERATED

Think Facebook and Google on this one – global platforms where “identities are trusted by many apps through standardised protocols. Federated identity solutions have emerged to reduce the burden of registering digital identities at each service provider. In a federated system, two or more centralised system owners establish mutual trust, either by distributing components of proofing and trust, or by mutually recognising each other’s trust and proofing standards. As a result,

the identity role is shared among multiple institutions and enables domain-to-domain trust … see Figure 3. However, most of these federated identity services still rely on a central system to establish and maintain trust”.

Supply chain managers also need to recognise that: “For many shippers and logistics operators trying to plan costeffective, time-efficient supply chains, the lack of visibility is a real obstacle (in a federated system). The International Port Community System Association (IPCSA), for instance, has created a Network of Trusted Networks, enabling the Port Community Systems (PCSs) to trust each other, relying on the authentication of a separate PCS to identify a new user. IPCSA’s track-and-trace infrastructure makes it possible to receive

LEGAL ENTITY

Figure 2: Centralised identity system

LEGAL ENTITY

Figure 3: Federated identity system

LEGAL ENTITY

Figure 4: Decentralised identity system

information not only from the PCS in the region but globally from other PPCSs.”

Examples of private federated identification systems in Europe are Mobile ID and Smart ID in Estonia, Belgium and Azerbaijan. Both of these systems have been created by consortiums of leading banks, mobile operators and other market participants. The Republic of Azerbaijan has also established federation between its digital identity and Alibaba and Amazon, thereby enabling anyone with an Azerbaijan eID to immediately access Alibaba’s and Amazon’s services in one easy move.

DECENTRALISED

We have already outlined the decentralised solution earlier in this article, and the issue of having third parties managing a business’s or government’s identity. The key thing to remember here, says WEF, is that decentralised platforms are “still considered a new and emerging identity system, and they still need to mature in many areas as systems in production do not yet exist within global trade.

“In a decentralised identity infrastructure, legal entities have a self-managed digital identity independent of individual service

Covid-19 is just one more crisis in a long list of catastrophes and set-backs. Indeed, life itself is a crisis, as the comedians like to say. But is this one going to be any worse than the wars, the bank collapses and the plagues that preceded it? At this stage, it is impossible to say, but the background mood music isn’t sounding too good for the global supply chain.

Isolationism. Protectionism. The rise of the nation state. Brexit. Piracy in the Indian Ocean. A chauvinistic US President waging a trade war with China. Surging government debt. Mass unemployment. The fall of globalisation and the rise of localism. A looming collapse in Italy’s banking sector. It’s all out there, and it’s happening now. So, what should we expect?

Does globalisation die and slowbalisation take over? Are we

providers, thereby breaking existing identity isolation.”

If you go down this route, make sure you work with entities that have tamper-proof verifiable credentials, issued by trusted entities.

For instance, says WEF, take a look at:

“The Verifiable Organizations Network (VON), established by the Government of British Columbia to create an improved methodology of finding, issuing, storing and sharing trustworthy data about incorporated organizations. If a supplychain solution provider registers all events during a container transport (container filled, estimated/actual time of arrival, container picked up, etc), then with decentralized identities, the solution provider does not have to register all empty depots, trucking companies, warehouses, forwarders, customs agents, etc. globally beforehand.

“Instead, the solution provider can dynamically validate the submitter of an event’s trustworthiness, reducing onboarding time, barriers and cost. If the event is submitted from an IoT container, it is digitally signed by the IoT container, and this signature can be tracked to the legal entity responsible for the container.”

heading for a world-wide trading system based on an unstable web of national controls? Maybe, but this is not the way to make supply chains more resilient and it is certainly not the way to find global solutions to global problems … like Covid-19.

What is clear is that companies will hoard cash in order to survive. Not that long ago, the banks became less profitable and the 2007-08 financial crash forced them to hold more base capital before lending. The business world took a conservative outlook, and this has not changed. There is a lot of bad news out there.

In the first five months of this year, to the end of May 2020, supply-chain disruption was cited nearly 30,000 times in the earnings calls of the world’s 2,000 biggest listed firms says The Economist, up from 23,000 in

the same period last year.

All in all, it is worth remembering that these centralised, federated and decentralised identity trust processes are not necessarily mutually exclusive … you could use a mix of some or all of them.

Some organisations and governments deploy a mix of all three to perform different functions. “Experts assume that most usecases in global supply chains might require a hybrid system that includes an integrated mix of the three” … and they come in many shapes and sizes, says WEF.

As that wise old saying goes, never put all your eggs in one basket. That would be putting too much trust in just one way of doing things … which brings us right back to where we started: It’s a question of trust.

This feature has been produced in association with the World Economic Forum which kindly gave Global Report special permission to access its full report. If you would like to know more about WEF and the work that it does, please go to: www.weforum.org

Today, Covid-19 will probably make companies less inclined to invest, and that will stifle growth. But, in counterpoint, the digital revolution will speed things up.

Supply chains around the world will use more automation and artificial intelligence to access loans, profile customers, control stock and improve delivery.

According to a recent report in The Economist: “Supply chains will be shorter, more resilient and possibly more local - but there are pluses and minuses to that.

“Economic nationalism, when governments try to protect their economies by cutting imports and investments from other nations, is popular right now - but some warn it results in a selfish and damaging ‘beggar thy neighbour’ approach.

“International institutions like the International Monetary Fund,

the World Trade Organization, the World Health Organization and the European Union may be challenged to up their games - or go away.”

The global economy will be volatile. Things will change. The supply chain will adapt. The winners will be those who keep their supplier base diverse and international. They won’t put all of their eggs in one basket. More inventory will be held in larger warehouses to cushion against short-term stocks.

Logistics directors will go on juggling assets and suppliers to ensure that the “time-sensitive placement of resources” remains the main driver of activity and investment. Some of the balls in the air will change shape and colour, of course, but the show will go on and the new routine will become business as usual … until the next crisis comes along.

COVID-19: ANOTHER DAY … ANOTHER CRISIS

BRAZIL FLAGS UP ORDER AND PROGRESS… ORDEM E PROGRESSO

As 2019 came to a close, Brazilian trade body Sobratema presented an unusually upbeat annual survey of the construction equipment industry in Brazil, the largest economy in Latin America: Sales were up by more than a third year-on-year.

Sobratema is the Brazilian Association of Technology for Construction and Mining and it represents both original equipment manufacturers (OEMs) and end users of construction machinery … its annual surveys cover both sides of the market. This year’s reported a remarkable 37% increase in construction machinery and equipment sales during 2019.

This is equivalent to 26,400 units sold, compared to 19,300 units the previous year. At the end of November, it expected a yellowline sales increase of around 31%, meaning a second consecutive year of growth.

Last year, 16,600 units were sold compared to 12,700 in 2018, indicating a boom in the construction equipment market. In fact, there was even a shortage of equipment required for immediate delivery in the last quarter of the year.

Individual sectors saw significant sales increases. Backhoe loader sales increased by around 57% in 2019, with 5,600 units sold. Hydraulic excavator sales grew by 34%, mini excavators by 86% and mini loaders by 48%.

The truck sector was predicted to report an overall sales increase of 41%. In addition, the segment registering the most significant growth rate was the so-called ‘other equipment’ category – cranes, hand compressors, telescopic handlers, aerial platforms and concrete equipment – which showed an overall increase of 77% in 2019.

Concrete products achieved the highest growth rate with an increase of 169%, followed by aerial platforms (75%) and telescopic handlers (65%).

CONCRETE GROWTH

Speaking about the performance of the concrete manufacturing equipment sector, Luis Miguel Torres, regional sales director for Liebherr Concrete Sales, said: “We expect to double sales in 2019 in relation to 2018. For the year 2020 we count that sales grow by at least 35% compared to 2019.

The Brazilian construction equipment sector is showing signs of recovery after the country’s crisis of 2014-2017. Three years of economic and political upheaval saw GDP fall dramatically and the impeachment of president Dilma Rouseff. But now, at last, there are signs of better times ahead. Can order and progress reign again? Enrique Saez reports.

“But we must bear in mind that these numbers are much lower than the figures reached in 2012 and 2013 in the concrete business.”

Torres believes that the figures then were unsustainable and based on unrealistic growth expectations: “I would say we are coming out of the bottom of the curve.

“We expect a slow but steady recovery for the next five years in the concrete machinery business with an annual average growth rate of 10 to 15%.

“In 2021, growth will be 30%, it will drop to 6 or 7% in 2024. So, our forecast is quite optimistic.”

Torres explains that the main difference between the Brazilian concrete market and that of neighbouring countries is the low take-up of technology in Brazil.

“The situation is very different in Chile, Colombia and other countries. An opposite example is represented by Colombian cement giant Argos to whom we sold 65 pieces of equipment this year, and in 2020 we are going to sell 60 more units featuring all the technological innovations we can offer.

RIGHT: Sobratema’s industry surveys reported a 37% increase in construction equipment sales last year

BELOW: Parts, components and spares became a problem during the financial crisis when machines were exported or cannibalised

“Customers want access to that technology because they understand the need for longer life spans from drum wear.”

The different approach in countries like Colombia and Peru stems from the fact that the concrete companies have very strong ties with the cement companies. They have their own plants and distribution systems.

“For this reason, they have a broader vision regarding the entire process of transforming cement into concrete,” says Torres.

“On the other hand, they can have a lot of financial muscle. In Brazil, cement companies are dedicated to selling cement and concrete companies are selling concrete. Market shares and minimising costs are their main concern.”

The Brazilian market is also hampered by extremely long delivery times for trucks which may then affect the sales of concrete mixers.

In the rental sector, the top story is the recent merger of market-leading companies Mills and Solaris

Another key factor affecting the Brazilian market is the introduction of the Balance Law. Instigated by the Ministry of Transportation, the law imposes significant restrictions regarding the maximum weight trucks can carry.

“This has forced concrete manufacturers to introduce lighter trucks,” says Torres.

“Obviously, they want to keep the same cubic capacity. The solution is to make postures more flexible and understand that it is necessary to stop working with eight cubic metres as a standard volume and move to 7 or 7.5 cubic metres.”

SECTOR SNAPSHOT

Bruno Picini, marketing director of Terex South America, confirms the growth in the lifting machinery sector in 2019, following the previous crisis.

“The lifting platform market is responding positively to emerging from the crisis faster than the crane segment and other divisions,” he says.

“Due to the crisis, rental companies in Brazil were more open to distributing their lifting equipment in the industrial sector. This diversification of uses now allows the segment to grow faster than construction itself.”

Terex’s Genie brand currently sells 2000 machines per annum in Brazil, with the scissors segment being the one with the highest market volume. In 2013 it was equivalent to 8000 units.

In the rental sector, the top story is the recent merger of market-leading companies Mills and Solaris. With a combined fleet of 9000 units the newly merged company will be more than double the size of its nearest competitor. Picini expects the date for market consolidation to be 2021.

MIGRATING EQUIPMENT

One of the effects of the financial crisis, Picini explains, was the shipment of large numbers of rental units abroad. Between 2016 and 2017 a significant number of units were shipped to Chile to supply heavy demand there.

Other units went to Asia, mainly from larger companies in the sector. “It also occurred that some companies began to cannibalise their equipment,” says Picini.

“When parts were needed, they were removed from stationary equipment. This relationship of non-operational units and units outside the country influenced the demand for parts in the country.”

In 2019 it was estimated that the equipment fleet (personal lifting units) amounted to 30,000 units in Brazil. In 2018 almost 2000 units arrived but 10% of those units subsequently left the country.

Renting is characteristic of the Brazilian lift market with units being rented with or without the right to buy through the rental company. This is in stark contrast to the markets in Chile, Peru and Argentina where the main base depends on distributors … not rental companies.

DETAILED ANALYSIS

José Luis Goncalves, regional president of JCB, offers an in-depth analysis of the state of the Brazilian construction equipment market: “Without a doubt we had a very strong crisis from 2015 to 2017. The country collapsed and all industries and sectors of the economy suffered a contraction. ➔

The

“Only the agricultural sector grew because the grain production capacity is very strong in Brazil and harvests increase every year.

“The industry in general fell around 50% in 2015, another 50% in 2016. In 2017, when we thought it could not fall any further, it fell another 10%.”

Overall, the market fell from 24,000 machines in 2014 to 7000 machines. In contrast, the JCB plant in Sorocaba, São Paulo state, has a production capacity of 10,000 machines per year – enough to supply the entire country.

“From there, all the industries reacted. Consumption, capital goods, investments, as well as national sales were reactivated. The machinery market grew from 7,000 to around 13,000 machines.”

At the political level, the situation began to change in election year (2018) and conditions in the country started to improve.

Consumption, capital goods, investments, as well as national sales were reactivated

“In addition, there are eight other machinery plants in Brazil,” he adds. From 2018, Goncalves continues, the country’s fortunes changed and the national economy began to recover, initially with gross domestic product (GDP) growth of around 1%.

“That year, the economy and consumption grew despite high unemployment levels,” says Goncalves.

“The arrival of the new president (Jair Bolsonaro) generated a positive economic environment regardless of political ideologies which was maintained in 2019 thanks to reforms and other government measures.”

For Goncalves, the current challenges are

Engine suppliers will need to meet the needs of users seeking increased productivity, better telemetry and units that shut down automatically when not in use

tackling high unemployment and controlling the high-value dollar which would greatly help the export of products manufactured in Brazil and its economy which, in general, is based on raw materials.

“The construction machinery sector grew around 60% in 2018 and in 2019 it is expected to increase 35% and reach 16,700 machines, including institutional sales that reach between 25% and 30% of the total,” he adds.

“Our market analyses indicated that the construction machinery sector will grow in the next 3-4 years. The country will grow in that period since there is a very solid base of reforms aimed at investments and to ease the business environment while fighting corruption.”

Goncalves considers an annual market of 25,000 machine sales in Brazil “is nothing. The sanitation infrastructure alone for 113 million Brazilians would require around 30,000 (pieces of) equipment” to be supplied each year.

Analysing market trends, Goncalves, an expert in this field, believes that the rental sector will grow. “This trend is compatible with the sale of new equipment as it will allow companies to have a greater appetite for developing more projects by not having to mobilise capital since income allows them to develop projects in the short and medium term.”

MARKET ADAPTATION

Mike Brown, JLG vice president for Latin America, agrees with this analysis of the drop in the market (90% between 2014 and 2016) and the subsequent drop in the after-sales prices.

“We had to make great offers to win the very few packages on the market that all the manufacturers were fighting for,” he says.

Brown considers the small- and mediumheight electric scissors sector to be the most

arrival of new president Jair Bolsanaro in 2018 has led to economic growth despite political controversy over some of his policies

successful in recovering. In fact, there is significant demand for lifting scissors worldwide.

“Above 20 metres we have not detected a recovery, which will come in time. We must bear in mind that 90% of the demand is at a height of less than eight metres”, says Brown.

JLG’s sales in Brazil accounted for 25% of total sales in Latin America in 2018. In the boom years they accounted for around 90%.

As a result, Brown adds, the Brazilian market – in which the average age of fleet vehicles is eight years – has focused on the industrial sector since the financial crisis.

“The future trend is to increase productivity through the control offered by telemetry: utilisation levels, shutdown of nonoperational equipment, geographic tracking, geo-fencing, usage billing and others,” he says.

And, just to illustrate his point … 10,000

next three years: an encouraging number in a market that fell from 7,500 machine sold per annum to between 300 and 400 units.

INVESTING IN INFRASTRUCTURE

A major driver of the Brazilian construction market is the Investment Partnership Program (PPI). This brings together federal government concessions and private companies through joint investment in infrastructure projects with the aim of generating jobs and growth.

Since the onset of the programme, created in 2016 during the Dilma Rouseff (president of Brazil from 2011 until her impeachment in 2016) administration, 287 projects have been approved, with 160 bids held, resulting in investments valued at 695 billion reals (US$ 171 billion) and donations worth 137.1 billion reals (US$ 3.7 billion).

The Brazilian market has been hampered by extremely long delivery times for trucks and the Balance Law, which dictates the maximum weight allowed per vehicle

billion reals (US$108 billion) and financial investments worth 90.7 billion reals (US$22,187 million).

The main sectors targeted for investment are ports, airports, energy infrastructure, railways and roads. Currently, 127 projects are in the pipeline in a variety of sectors: railways (11), airports (22), highways (19), ports (23) and energy infrastructure (24).

The administration of president Bolsonaro has made clear it intends to entrust the private sector with the management and development of infrastructure development.

Growth will be maintained if privatisation and public-private partnerships (PPPs) are allowed to flourish and infrastructure investment continues.

Without doubt, this will have a positive impact on the recently approved pension and tax reform. In the meantime, the construction

WEALTH AND EFFICIENCY: KEEP YOUR FLEET COSTS UNDER CONTROL

Managing a construction equipment fleet is a complex and difficult thing to do. A wide range of machinery and technology is needed to run one of today’s large, modern construction sites … and it comes at a huge cost. It is also often one of the most expensive elements of the project. So why are the best ways to acquire and operate these fleets often overlooked? Alan Dron reports.

Keeping the cost of construction equipment fleets under control was one of the themes of the education programme at this year’s CONEXPO-CON/ AGG event in Las Vegas.

Are you being as efficient as possible? It’s a perennial question when companies seek to acquire heavy site equipment.

One of the recurring themes at this year’s CONEXPO-CON/AGG conference stream was that too many acquisitions are still being made with insufficient knowledge of market conditions or the necessary knowledge of what is the best course of action for an individual company.

For example, said Theo Rennenberg, fleet leasing, national accounts, at DLL Group:

“You have to understand the difference between actual usage and available hours. 90% of leases are structured incorrectly for hours. 70% of equipment is under-utilised.

“Don’t confuse actual usage with available usage. On the construction equipment side we see usage vary all over the place.”

However, he accepted, some specialist items were essential, even if the number

of hours they worked were low: “Some equipment just needs to be there and works only 10% of the time.”

Gil Gilbert, director of fleet operations, infrastructure and integrity at pipeline, facilities and energy infrastructure solutions provider Strike concurred that too many acquisitions are made without the necessary knowledge backing them up.

Know your needs, he told his audience. Too many times, companies have people sitting in cubicles, ordering equipment when they don’t really know what they need.

Similarly, he added, companies have to know their financial worth, just as individuals know their personal credit rating.

“If your company credit rating is poor, you’re not going to get a good deal, because you’ll be classed as high-risk.”

And know your vendors and manufacturers. “If you stick with one vendor, you’re never going to maximise your spend. Different companies are good for different types of equipment: Know the differences.”

Several speakers emphasised the need to break down internal company silos and get

departments talking to each other before acquiring equipment. Co-operation is essential between the operations, fleet and accounts departments.

For example, at Pennsylvania-based Schlouch, which handles a range of activities including excavation, design & build and paving, COO Don Swasing, fleet co-ordinator Kevin Reimert and CFO/treasurer Richard King regularly put their heads together.

King has detailed budget conversations with Reimert and it will be Reimert who does the initial analysis if the company is considering buying a new piece of equipment, calculating the ownership and operating cost of the machine.

The three departments – operations, fleet and accounts – have weekly meetings and operate on the ‘three green lights’ principle – everyone brings expertise from different areas and everyone has to agree on a course of action. If one of the three has a concern or an outright ‘No’, those constitute amber or red lights to the project.

Those weekly meetings continue throughout the life of the equipment. “Each

department co-ordinator brings forward ideas on what equipment should be replaced or sold,” said King. “Kevin and I look at all the different costs – maintenance, repair and fuel. We do fuel hedging that reduces our fuel costs to save a bit of money.”

Keeping fleet vehicles well-maintained can have a beneficial effect when disposing of them; Schlouch typically sells used items of kit for 10-15% more than other firms. Ideally, this will offset any extra money the company has put into maintenance over the years.

The company operates a condition-based maintenance philosophy: “We try to identify things before they break,” said Reimert. “We went to that philosophy after a spell in which we had a lot of equipment laying around unserviceable. We’ve made huge efforts to transition to scheduled, as opposed to unscheduled repairs.”

Rennenberg agreed that departmental co-operation is vital for keeping tabs on the ongoing costs of equipment: “You need to know when the maintenance costs start rising and capital costs start rising too. Get your operations and finance people together; agree

acquisition routes were sketched out by Russ Dolezal, corporate sales specialist with Lincoln, Nebraska-based information processors Sandhills Global, which gathers, processes, and distributes information to connect buyers and sellers across several industry sectors, including construction and transportation.

Outright purchasing can bring the advantages of flexibility; tax incentives and depreciation allowances; usage cost will not fluctuate as much as rental payments

advantages of flexibility; tax incentives and depreciation allowances; usage cost will not fluctuate as much as rental payments; and the potential to ‘buy right’ and ‘sell right’ hedges the cost of ownership.

You can buy at an advantageous price at auction, for example, and sell again at an opportune time further down the line.

Straightforward renting may be seen by some as an outmoded acquisition route, but Dolezal noted that the US rental market has grown by 17% over the past five years, showing that there remains an appetite for this in some quarters. The advantages include passing the cost on to the individual job; availability of newer equipment, having that equipment ready to work with the right attachments; and the renter not having to worry about depreciation. Renting makes sense on short-term jobs.

Disadvantages can include restrictions in rental agreements, such as hours usage; higher payments than leasing/finance

Disadvantages include down-payments that can tie up capital. You may finish a job and no longer need the equipment, which then languishes in the company yard, and there are fleet maintenance costs and the transportation costs involved in moving it to the next location; not forgetting the significant problem of depreciation.

Leasing, of course, is a whole new ballgame in its own right, with the main question being whether a company should opt for an operating or capital lease, the delegates in Las Vegas were told.

With operating leases, the owner or lessor owns the asset and leases it to the operator on

Straightforward renting may be seen by some as an outmoded acquisition route, but Dolezal noted that the US rental market has grown by 17% over the past five years, showing that there remains an appetite for this in some quarters

Capital lease / loan ($1.00 buyout)

● Low usage, long lifecycle

● Wants to own equipment at end of lease

● At end of lease, ownership is transferred for $1.00

Types of leases (Source: CONEXPO-CON/AGG 2020 / usage-based financing and fleet management)

Fixed price purchase option (FPPO)

● Medium usage, medium lifecycle

● Wants lower monthly payment and to know the purchase option amount upfront

● 3 lease-end options:

- Return the equipment

- Purchase it for the fixed amount

- Continue to lease

➔ at the end of the lease period by paying fair market value for it. And the lease is not on the company’s balance sheet.

With a capital lease, the operator pays higher monthly payments, but the residual value is not nearly as high. For example, at the end of the lease period the operator has the option of buying the equipment at a nominal price, such as $1 or 10% of the purchase price.

Or there is the traditional financial loan method, by which the asset used by the operator is paid up in instalments, leaving the operator the owner of the asset once it has been fully paid off.

Are there any occasions on which buying equipment outright is the better option? Many contractors don’t want to tie up cash in one machine, said Dolezal, but if they have decent cash reserves, purchase can be an option.

And Gilbert of Strike noted that outright purchase meant that the asset could be used as collateral or equity and depreciation could be claimed against tax.

However, Dolezal said, loans and leases usually offered more benefits. Some of these were intangible, such as a better company image through having a turnover of newer machines, rather then turning up to a new site with old equipment. There was also the benefit of controlling maintenance costs, as a company could ditch a piece of equipment before repairs started to become a significant factor in the budget.

Of course, the ultimate method of reducing the overall cost of a piece of equipment is through its disposal. A significant portion of its acquisition cost can be recouped when it is no longer required.

“Up to around three years ago, the used equipment market was seen as a risky mess, because the true value was unknown,” noted banker Matt Lang of The Bancorp.

“The true value, the actual cost, was unknown from Day One. That had a direct

Fair market value (FMV)

● High usage, short lifecycle

● Wants lower monthly payment and to write off full monthly payment

● Allows purchase at the end of the lease for asset’s fair market value

relation to the used market. However now, with big data analysis, you can really figure out what your used equipment is worth.”

There are four main channels for re-selling, he said: Unreserved auctions, reserved auctions, private sale and dealerships. With unreserved auctions there are no minimum bids or reserve process; items simply sell to the highest bidder. That helps

THINK AND WORK SMARTER

Innovation is essential in keeping equipment costs down, said Brad Boehler, mobile equipment industry veteran and former president of scissorlift specialist Skyjack.

“If you’re not attempting to find a way to be more lean in your job every day, you’re in danger, because I can guarantee someone in your competition is.”

To make the most of breakthrough solutions, companies have to give their in-house pioneers free rein “to investigate user needs and identify opportunities,” he said.

“You’re pretty much setting yourself up to fail if you don’t give the pioneer some time off from their day job. Identify people in your company: Who is good at understanding and implementing things that are a little different?”

Those may not be the most experienced people in the company, he noted: “When I was at Skyjack, we had some

FMV with flexible term (usage-based)

● Any usage, and lifecycle

● Uncertainty about usage over its lifecycle, business fluctuations and/or overtime issues or underutilisation issues

● Provides a flexible lease with low monthly payment, eliminates overtime and overpayments

attract the largest number of potential buyers and the actual auction process creates a sense of urgency and competition among them, which gives you the chance of achieving the best possible price. On the flip side, however, you have no guarantee on the price the equipment will finally sell for.

Reserved auctions place a hidden reserve price on each item, which prevents a piece

people who were just freshfaced kids, who would come and say, ‘Hey, we can now do something with this machine like this. And they’d go off and buy a Raspberry computer and some software and come back a while later with a solution or advance.”

Telematics have increasingly made an appearance on construction machinery in recent years, but companies have to look past the obvious, said Boehler: “Telematics isn’t about telling you where your machine is, it’s about telling you how effective and efficient the machine is.”

However, he cautioned:

“Not everything will be a technological solution; some of it could be changes to processes.” Companies have to be prepared to pivot when necessary: “Things are never going to be as you expect.”

Innovation was also the watchword preached by Gregg Schoppman, consultant with FMI management consultants

and investment bankers specialising in the engineering and construction industries.

“It’s time to innovate. That doesn’t mean buying the snazziest new vehicle, but are people in the industry looking at innovation at all? Industries that utilise new technology are seeing amazing gains, but construction is lagging. We should find it unacceptable that we’re at the bottom of the curve.”

Equally, however, doing the simple things well remained important, he said. While disruptive innovation is a gamechanger that becomes an industry standard, sustaining innovation - those small, incremental changes happening at individual and project level that become organisation’s best practice –are vital. “In baseball terms, do you look at the grand slam when there are plenty of doubles and singles to be had? When was the last time we tried to capture those singles and doubles?”

Purchase vs Rent (Source: CONEXPO-CON/AGG 2020 / equipmentworld,com)

PURCHASERENT

ADVANTAGES

● Flexibility

● Tax incentives and depreciation allowances

● Payment lower than renting

● Usage cost will not fluctuate as rental rates can

● Potential to buy right and sell right hedges ownership costs

DISADVANTAGES

● Down payment can tie up capital

● Low allocation

● Fleet maintenance

● Transportation costs

● Depreciation factors

of expensive equipment potentially being sold for a song. This can mean there is less competition among buyers, but the seller has the ultimate say on the sale. And while there is control over the minimum price, the

ADVANTAGES

● Pass cost onto the job

● Limits transportation and storage costs

● Often renting newer equipment

● Equipment is ready to work with the right attachments

● Makes sense on short-term rentals

● Don’t have to worry about depreciation

DISADVANTAGES

● Rental agreement limitations, such as hours usage

● Payments are higher than finance/lease options

● Rental rates will fluctuate

● Equipment availability

auction process still creates urgency among bidders. On the minus side, the item may not sell if it fails to reach its reserve.

A company putting used equipment up for sale has the option of doing so itself or via a

A LONG WAY TOGETHER

“Avoid brokers. Today, you can do what they do with big data analysis, but they will charge you for it [and] you are losing a substantial amount of the resale value”

dealer. Undertaking the process yourself has the obvious benefit of cutting out the middle man, so that all proceeds come back to you; you can use your own network and online services for the sale process, but this requires an investment in management time, which may distract staff from other aspects of the business.

If selling via a dealer, the likelihood is that your equipment will be showcased in a prime position and you can take advantage of the dealer’s specialist market knowledge. You have an easy sale and, if you’re planning to upgrade to newer equipment, a trade-in obviously lowers the net cost of your new kit. On the downside, this brings the lowest return for the seller, given that the dealer

➔ is making his own profit out of the sale. However, sometimes you simply need to sell something quickly in order to raise cash, in which case a dealer can become the only option.

One additional point, said Lang: “Avoid brokers. Today, you can do what they do with big data analysis, but they will charge you for it [and] you are losing a substantial amount of the resale value.”

Reimert and King of Schlouch added some pointers of their own when equipment neared the end of its life with the company. “When it comes to disposal, I try to have an ongoing understanding of what the market is doing [and whether to opt for] trade or private sales,” noted Reimert.

Being adaptable is essential, added King. Schlouch sold one grader despite it having just completed a major engine and gearbox rebuild, because Reimert could foresee more repairs looming in the future and it was likely not to be cost-effective to keep it on the company inventory.

One factor to keep in mind, said King and

SOME DO’S AND DON’TS

Strike LLC’s Gil Gilbert offered up a series of thoughtprovoking measures to keep equipment costs down.

• Maximise the efficiency of your equipment by investing time in the human touch: Older site operators are often conservative and reluctant to use newer models with newer technology. “If you take a bit of time and show them how good the technology can be, it can make all the difference,” he said. And be sceptical of vendors’ claims that modern

equipment is so good that anyone can use it after 30 minutes’ training: “I see that BS all the time.”

• Don’t buy exotic brands: Make sure your equipment has a strong dealership network behind it: “If you buy an unusual brand and it breaks down, it could take six months to get a spare part from overseas.”

• Rent out surplus kit: “If you find yourself with equipment sitting idle, be prepared

Reimert’s colleague, Schlouch COO Don Swasing, is the need to keep an arm’s length relationship with equipment dealerships. This approach resulted from an incident some 15 years ago when several company personnel were fired because it was discovered that decisions were being made

to go to competitors, or to companies not even in your sector and say ‘I know you’ve got a big project starting and you need 30 pieces of equipment.’ Give them a good deal. They’ll likely do the same for you some day.”

• Vet your suppliers: “You can lose a lot of money very quickly if you use the wrong suppliers. Watch out for people asking for money up front – there are scams even in our industry.”

on the ‘good ol’ boy network’ and some personnel were getting a little too close to some dealers.

On the other hand, it’s necessary to have a cordial relationship with dealers, said Swasing: “Often, I have to pick up the phone and say: ‘Can you help me?’”

The highway system of the city of Johannesburg, South Africa

AFRICA IS CLOSING ITS INFRASTRUCTURE GAP

Africa’s infrastructure investment gap stands at somewhere between US$68 and US$108 billion per year. The need to spend all of this, and more, is obvious and the continent’s backers clearly agree. Things are moving in the right direction.

Lucrative new investment opportunities are being created: Where are they and what’s the timescale? Munesu Shoko reports.

For years, the key players in Africa’s infrastructure sector have been calling for enhanced partnerships between the continent’s public and private sectors. Business and political leaders across the continent are keen to develop its infrastructure as a spur to industrial growth and employment creation.

They know that infrastructure development will be a key driver in helping Africa make progress across the board, as well as THE critical enabler of productivity and sustainable economic growth”.

To quote Rwandan president Paul Kagame’s report on the African Union reforms: “We have everything needed to succeed. To fail Africa again would be unforgivable.”

Kagame notes that infrastructure development will contribute significantly to “human development, poverty reduction and sustainable economic growth.”

Speaking at the 2019 Programme for Infrastructure Development for Africa (PIDA) Week, African Union commissioner for Infrastructure and Energy, Dr Amani Abou-Zeid, agreed, saying that the continent should learn from its past mistakes and focus on the projects it is going to implement over the next 10 years.

“We should learn how we can be more attractive to investment,” she said. “We should re-draft how we present bankable projects to be able to involve stakeholders from the public and private sectors.”

Economic growth in Africa remains high, particularly in sub-Saharan Africa (SSA), which boasts some of the fastest-growing economies in the world.

Investment rates in transport infrastructure have been increasing

Closing the infrastructure quantity and quality gap here could increase GDP growth per capita by 2.6% per year, according to Research and Markets’ recent report, Project Insight – African Transport Networks

Leading data and analytics company, GlobalData, expects ongoing investments, especially in the transport, telecommunications, energy and utility sectors, to support growth in new infrastructure across Africa.

The analyst notes that foreign-investor interest in Africa continues to rise, supporting major construction projects in the infrastructure, commercial and industrial space.

To put this into perspective, Yasmine Ghozzi, economist at GlobalData, notes that in the UK-Africa 2020 Summit (the latest in a series of ‘Africa Plus One’ Summits), total commercial deals amounted to US$8.5 billion.

This, she says, will help deliver quality infrastructure investment in member countries and drive economic growth.

“The UK can play a significant role in bridging Africa’s huge infrastructure gap.

The continent’s US$68 – US$108 billion infrastructure investment gap per year is massive and so infrastructure investment opportunities in African countries are lucrative,” says Ghozzi.

With the continent’s economic growth projected to reach 3.9% in 2022, plus the increased rate of urbanisation and the rise of middle-class housing, there will be a continued expansion in overall construction activity.

Indeed, GlobalData forecasts that construction output growth in the region will rise above 6% in the next five years. ➔

© Mykhailo

➔

However, GlobalData has recently revised its construction output growth forecast for SSA to 3.6%. The company’s latest report, Global Construction Outlook to 2024 (Covid-19 impact), states that the revision reflects the impact on the region’s economic activity and investment growth stemming from the wider global slowdown and the outbreak of Covid-19 in the region.

Despite the revised construction output, Research and Markets is currently tracking 448 large-scale transport projects (road, rail and bridges) across Africa at all stages of development, from announcement to execution, with a total investment value of US$430.3 billion.

The report notes that investment rates in transport infrastructure have been increasing, thanks to major continental initiatives such as PIDA mobilising resources to transform Africa through modern infrastructure.

When completed, these projects will total over 110,000km in length – with 54,110km of roads, 55,345km of railway track and 599km of bridges – of which 75,297km will be newly constructed, 29,197km will be upgraded and 5,561km will have an element of both construction and upgrade, all criss-crossing the African continent.

Across the continent, governments have paved the way for public-private partnerships (PPPs) to fund a large proportion of projects in the pipeline.

In total, 52.4% of the total project pipeline by value is being publicly driven by African governments, with a particular focus on

Source: GlobalData, Construction Intelligence Center

constructing new roads and repairing existing ones.

Meanwhile, 33.3% of the total project pipeline is being funded by various joint financing arrangements between the public and private sector. (See Global Markets Review page 19)

EAST AFRICA

Deloitte’s 2019 Africa Construction Trends Report has picked up a total of 452 projects valued at US$50 million or above that had broken ground by 1 June 2019. In total, these projects are worth US$497 billion.

East Africa

The East African region has the largest number of recorded projects across the continent with 40.3% of tracked projects (182 projects), as well as the largest share of projects in terms of value at 29.5% (US$146 billion).

Kenya and Tanzania have the highest number of projects with 51 (11.3%) each. Deloitte notes that Tanzania has caught up with Kenya in terms of infrastructure projects. Tanzania’s share of these tracked projects by value is 41.2% (US$60.3 billion), making it the largest contributor to East Africa’s total project value.

“The East African region has the largest number of recorded projects across the continent”

Source: Africa Construction Trends Report 2019, Deloitte

Source: Africa Construction Trends Report 2019, Deloitte

Although Kenya has one of the most valuable infrastructure projects in the pipeline, the country accounts for only 24.6% (US$36 billion) of the region’s total project value.

Kenya’s construction industry, however, has a high growth rate potential during the forecasted period under the national longterm development policy, The Kenya Vision 2030. This national policy aims to transform Kenya into a newly industrialising, middleincome country providing a high quality of life to all citizens in a clean and secure environment by 2030.

The Kenya Vision 2030’s overall goal for the construction sector is to increase its contribution to GDP by at least 10% per annum and propel Kenya towards becoming Africa’s industrial hub.

As far as the East Africa region at large is concerned, the transport sector continues to take the investment lead in terms of project value. The sector accounted for 30% (US$44 billion) of the region’s total projects by value, according to Deloitte.

East Africa has, in past years, encountered several transport infrastructure challenges, thus making transport investments a priority to ensure a reliable transport network. As a result, the sector recorded the highest number of projects (69 projects out of 182, followed by the energy sector with 40 projects (22%).

SOUTHERN AFRICA

As detailed by Deloitte’s 2019 Africa Construction Trends Report, the southern Africa region – which comprises Angola, Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe – registered 92 projects in total, with a

“Several southern African countries have endured infrastructure challenges in recent years”

total value of US$118.3 billion. The region accounts for 20.4% of projects across Africa, and 23% of the value.

Several southern African countries have endured infrastructure challenges in recent years, ranging from poor transport infrastructure to inadequate energy supply. In line with the region’s infrastructure plans, southern African countries continue to prioritise the transport and energy sectors.

Testimony to this are flagship projects like the North-South Power Transmission Corridor project, which aims to boost regional integration and increase intraAfrican trade, as well as the North-South power transmission.

South Africa continues to account for the largest share of the projects in southern Africa. The second-biggest economy in Africa has recorded 37 projects (40.2%) out of the

total 92 projects in the region, while Angola and Mozambique both have nine projects each (9.8%).

Elsewhere, Zimbabwe is prioritising several road projects to resuscitate the country’s collapsing road network. Top of the agenda is the dualisation of the Harare-MasvingoBeitbridge highway, a crucial piece of infrastructure in Zimbabwe and southern Africa at large. Civil works on the upgrading of the US$600 million Beitbridge-Harare highway commenced late last year. The project, which is part of the North-South Corridor, has been divided into five segments. The first phase includes the widening of the road to 12.5m to meet the standard Southern Africa Development Committee’s (SADC) road size. The second phase will entail the dualisation of the 600km road from Beitbridge to Harare.

morning traffic on an motorway in South Africa

➔ Zimbabwe is also working on a phased project to rehabilitate the Harare-Chirundu highway before dualising the same road. The authorities are aiming to complete 120km of the 560km this year.

Zimbabwe’s finance minister Mthuli Ncube announced late last year that the country is seeking to upgrade its 98,133km road network. On October 15, 2019, a total of US$465 million was pledged from the country’s treasury for the project.

Meanwhile, the government of Botswana late last year announced it had secured a US$27.1 million grant from the Chinese government for upgrading of roads across the country.

Botswana has identified three roads to benefit from the grant. These include the Motlopi/Makalamabedi road; Radisele/ Pilikwe road; and one in the Barolong area. Feasibility studies and other required processes have already been completed for the 28km long Motlopi/Makalamabedi road.

Another project of note currently underway in Botswana is the US$174 million Kazungula bridge project, scheduled for

completion in June this year. Construction work for the 923m-long bridge is now at 92%. Once complete, the bridge will improve border-management operations, reduce time-based trade and transport costs as well as transit time for freight and passengers between Botswana and Zambia.

In Mozambique, the World Bank has approved an International Development Association grant of US$110 million as additional financing to support the government’s reconstruction efforts in the aftermath of cyclones Idai and Kenneth.

The funding will address Mozambique’s post-disaster recovery needs in the roads subsector by increasing the scope of the original Integrated Feeder Road Development Project approved in 2018, through reconstruction and rehabilitation of rural roads and bridges in the four additional provinces of Sofala, Manica, Tete and Cabo Delgado.

In Namibia, phase two works of the Windhoek-Hosea Kutako International Airport dual carriageway started late last year. The US$65 million project is part of the

country’s Vision 2030. It is also part of the SADC Trunk Road Network, which supports trade and the seamless movement of people and goods. The road project covers 19.5km, and it will take three years and six months to complete.

GAME CHANGER

The March 2018 agreement to establish the African Continental Free Trade Area (AfCFTA) has been dubbed a “game changer” in the continent’s quest to boost intra-African trade and spur economic development.

The agreement, which came into force on May 30 2019, is not only creating the biggest trade agreement since the World Trade Organisation was established in 1994, but is also the most significant step towards economic integration across Africa.

Through this agreement, Africa has cast its vote for more and better trade across the continent. The agreement commits countries to remove tariffs on 90% of goods, progressively liberalise trade in services and address a host of non-tariff barriers.

Intra-regional trade in Africa currently represents an average of 15% of global trade across both imports and exports.

Under AfCFTA, intra-African trade is expected to grow to at least 53% by the mid2020s, thus effectively contributing US$70 billion to the continent’s GDP.

If successfully implemented, the agreement will create a single African market of over a billion consumers with a total GDP of over US$3 trillion. This will make Africa the largest free-trade area in the world.

With the emphasis on regional integration, African governments continue to think of development beyond their national borders. This has placed greater focus on the

GDP in Africa, by region, 2010-2020

Source: African Development Bank

© John Wollwerth Dreamstime.com

Traffic moves through the city centre of Nairobi, Kenya, at sunset

development of regional economic corridors, interlinking highways, railways and ports in the region, hence providing connectivity between international, national and rural networks.

The Project Insight – African Transport Networks report has recently tracked nine major corridors with 26 roads and railways that are being proposed, or are underway, with a combined value of US$93.1 billion, with a variety of backers, including national governments, donors and private lenders.

One of the most talked about is the North-South Corridor. This project entails the design and implementation of a smart corridor system for both road and rail on the multi-modal African Regional Transport Integration Network (ARTIN) corridor in southern Africa.

Such a development will allow easy border crossings for both passengers and goods between South Africa, Botswana, Zimbabwe, Zambia, Malawi and the Democratic Republic of Congo.

The Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Southern African Development Community (SADC) and Southern African Railways Association (SARA) will play key roles in the implementation of this project.

The corridor will ensure easy border crossing for both people and goods and will increase the efficiency and capacity of the transport sector. The more efficient transport system will speed up regional integration and will increase regional trade, while leading to cost savings.

The North-South Corridor project includes the modernisation of ARTIN and includes 560km of highway and 900km of road. It also entails the construction of 180km of railway line and the modernisation of the rail network.

The construction of four one-stop border posts is also in the pipeline. Countries included comprise Botswana, Malawi, Mozambique, South Africa, Zambia and Zimbabwe.

The Northern Corridor is another regional project of note. It is a multimodal trade route linking the landlocked countries of the Great Lakes Region with the Kenyan maritime sea port of Mombasa.

The Northern Corridor Transit and Transport Agreement (NCTTA) is a treaty coupled with 11 protocols signed in 1985 and revised in 2007 for regional cooperation with a view to facilitating interstate and transit trade, between the member states of Burundi,

Democratic Republic of Congo, Kenya, Rwanda, and Uganda. South Sudan acceded to the agreement in 2012.

The project encompasses road, rail, pipeline and inland waterways transport. The main road network runs from Mombasa Sea Port through Kenya and Uganda to Kigali in Rwanda, Bujumbura in Burundi and to Kisangani in the Democratic Republic of Congo.

The road network also links Kenya and Uganda to Juba in South Sudan. The rail network runs from Mombasa Sea Port through Nairobi, Malaba, and Kampala to Kasese in Western Uganda, close to the border with the Democratic Republic of Congo. A branch line radiates from Nakuru to Kisumu on Lake Victoria, from where rail wagon ferries link the system to Port Bell in Kampala.

SUPPLY-CHAIN VIEWPOINT

enjoyed a healthy run, selling over 20,000 units, with South Africa and Algeria being the top two markets by a wide margin.

In fact, the top two equipment markets on the continent constituted half of the market in terms of total sales during the period.

To give an idea, South Africa took delivery of 5,876 units in 2012, before scaling up to 7,134 in 2013, and decreasing to 6,303 the following year. Algeria had a total of 3,846 unit sales in 2012, 4,814 in 2013 and 4,765 in 2014.

The African construction equipment market has traditionally seen around 20,000 units sold per year

Available industry figures show that the market has almost halved in recent years as several African countries have struggled to bring infrastructure projects to market due to economic pressures in some of the top markets like South Africa.

The African construction equipment market has traditionally seen around 20,000 units sold per year, but it has significantly contracted in recent years because most of the planned infrastructure projects haven’t come to market yet.

Equipment suppliers believe that the market will only start thriving once the various planned infrastructure projects become ‘shovel-ready’.

Between 2012 and 2015, the market

For example, sales of construction and mining equipment continued to decline in the third quarter of 2019 in South Africa, according to the Construction and Mining Equipment Suppliers’ Association (CONMESA).

Year-on-year, the overall market decreased by 9.7% with construction and mining decreasing by 11% and 3.6% respectively. This marked a negative growth for the third quarter in a row with sales of new equipment down by 6.42% in Q3 2019 compared with Q3 2018.

The figures show that 1,357 machines were

BELOW: Busy traffic in Lagos, Nigeria

➔ sold during Q3 2019, which is 93 units less than the 1,450 sold during the same period a year before.

CONMESA chairman Calvin Fennell says the prolonged downturn is a result of the depressed state of the local economy. He is of the view that, while South Africa’s initiatives to kick-start much-needed infrastructure projects nationwide are seen as a positive step in the right direction, such initiatives will take some time to have an effect on the equipment market and will need to be backed by more significant projects by both government and the private sector in future.

“We are not expecting any sudden swing in either direction during the next quarter nor the foreseeable future,” he says.

“Instead, our local equipment suppliers are focusing on streamlining their organisations, maintaining market share and providing customers with maintenance and service support to sweat their existing assets until the market turns.

The long-term prospects have always been and remain a glimmer of hope for many countries in Africa

range, including static, tracked and wheeled crushers, scalpers and screens in southern Africa, has always held an optimistic view that largescale infrastructure projects would take place and ultimately benefit the local economy and communities in South Africa and across southern Africa. He says that there has always been speculation that these types of large-scale projects would eventually take place.

as a supplier to these projects, but more importantly to the communities at large who stand to benefit significantly from them.”

“With the current crisis (Covid-19) and the restrictions on the economy,” adds Marais, “our realistic view is that neither the funding for these types of projects will be available, nor the ability of companies to fulfil the obligations of these tenders in the short- to medium-term.

“Until we see real large-scale infrastructure projects being awarded and rising demand for commodities on the global market, we are expecting more of the same and tough times ahead.”

Francois Marais, sales and marketing director at Pilot Crushtec International, the sole distributor of Metso’s aggregates product

“However, the approved projects have been few and far between for some time now in many of the markets in which we operate,” he says.

“We often hear of tenders for road construction, bridges and dams, among others, but see very few of them turning into reality, which is a pity, obviously for ourselves

Individual country GDP in regional GDP, 2010-2020

“The long-term prospects have always been and remain a glimmer of hope for many countries in Africa, as they look to these projects to improve on their infrastructure to benefit their economies and people at large.”

Marais says the company is always prepared and geared for the projected longterm growth. “We have the foundations in place to service the construction sector and ensure that it’s able to meet the demands of future growth,” concludes Marais.

Source: African Development Bank

RIGHT: Pilot Crushtec International is a key supplier to the aggregates industry in southern Africa

Beijing-based Asian Infrastructure Investment Bank is a big lender to emerging countries

THE DRAGON EMERGES FROM COVID-19

As China’s construction equipment manufacturers ramp up production following the global virus pandemic, what shape will they and their markets be in? Are they thinking local or global? David Arminas reports.

China’s global construction equipment manufacturers had been wanting a much larger share of the international market before Covid-19 erupted into a global pandemic earlier this year.

While this goal may not have changed, almost everything else has – for the manufacturers, their national and international dealers, their supply chains and the end users of all construction equipment.

Strategies and tactics based on precoronavirus budget estimates, funding sources and political assurances are now being revised to accommodate a so-called new normal, at least for the foreseeable future.

Before the Covid-19 outbreak, Chinese equipment had become reliable, efficient and high quality. In 2018, total foreign and domestic sales topped US$87 billion, according to the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) and China Construction Machinery Association (CCMA).

Export sales – to more than 200 countries

– accounted for nearly a quarter of total sales, reaching $21.5 billion.

Figures for 2019 looked even better. Sales had risen again said CCMA and CCCME, as they looked back on the year at a major press conference during the ConExpo show in Las Vegas in early March 2020.

However, even as they spoke, the rest of the world was beginning to shut down due to the spread of the Covid-19 virus. Total domestic and foreign sales exceeded nearly $95 billion in 2019, with exports up also, to $24.2 billion.

So what can Chinese manufacturers expect as they, like manufacturers in every sector in every country, come to grips with national and local economies trying to get back onto their feet? What were their expectations before the outbreak and national lockdowns of economies?

At the most recent bauma construction equipment exhibition, in Munich in April 2019, Chinese manufacturers unveiled, in conjunction with the CCCME and CCMA, an umbrella marketing campaign called ‘For a Better World’.

There were strong hints that the manufacturers were looking to secure around half of their sales from exports, up from a quarter.

Senior executives from Chinese companies including LiuGong, XCMG, Sany Group, Sunward, Shantui and Zoomlion were on board.

“As a large construction machinery market, the Chinese market has not only attracted investment by the major global construction machinery manufacturers, but also nurtured a group of first-rate Chinese construction machinery brands, establishing a complete industry chain,” Wang Min, chairman of XCMG, told a conference at bauma.

“Chinese enterprises have acquired excellent development experience from international benchmark enterprises and rigorously integrated into the global market.”

Dawei He, general manager of LiuGong which celebrated its 60th anniversary in 2018, was similarly positive about the future: “We have an ambitious strategic vision for 2025 and the key to achieving these goals is our three totals strategy - total globalisation, total

solutions and total intelligence,” he said.

“We now have over 100,000 LiuGong machines working outside of China. These machines are bringing us valuable data that we can use to provide even greater consultancy capabilities to our customers.”

Sany Group said that one of its most important strategies is globalisation. “Our mission is quality changes the world”, said Yu Hongfu, chairman of Sany Heavy Machinery.

“We must use our high-quality products made in China to change the world’s perception of Chinese manufacturing and explore the road of internationalisation.”

Indeed, the Chinese presence at bauma 2019 was highly evident. Stefan Rimmel, managing director of Messe München, the organisers of bauma, noted during the event that more than 400 Chinese companies had taken exhibition space.

The big themes were digitalisation, fuel efficiency, sustainable operation and electric drive trains, much in the name of noise and engine-emission reduction.

In particular, the manufacturers were keen to push the future of electric equipment (see Liugong interview).

Chinese manufacturers remained on an upbeat note for the rest of 2019, as was seen a month after bauma, at the first Changsha International Construction Equipment Exhibition, a four-day event in Changsha in mid-May.

The venue, in the south-eastern Chinese city, underwent extensive renovation and expansion earlier this year to give it a worldclass layout. The exhibition area covered 213,000m² and allowed for around 6,000 international standard exhibitor booths and

ON THE REBOUND

Chris Sleight, managing director of Off-Highway Research, assesses the equipment manufacturing sector’s health as it moves ahead after the pandemic:-

“All factories were closed as expected for China’s Spring Festival Week of January 23-27 and some were reopened as normal straight after. Those that couldn’t reopen immediately had closures of anywhere from one to five weeks.

“We calculate the total lost production in China to be

ABOVE: Benchmark other global brands to make improvements, noted XCMG chairman Wang Min during the Changsha exhibition

1,150 exhibitors, of which nearly a quarter were from abroad. Continuing to help the globalisation of China’s equipment makers is the country’s Belt and Road Initiative, as announced by Chinese president Xi Jinping in 2013.

This international blueprint to create a global transport network connecting China to international markets and vice versa has been making significant inroads within the developing world.

The Belt and Road initiative has created funding opportunities for infrastructure projects – now reaching hundreds of billions of dollars – through loans to countries along the routes. The money, much of it coming from Chinese lending institutions, is being spent on the construction of not just roads but railroads, ports and power-generation projects along the way.

equivalent to about 6% of the volume of machines built last year – just over 23,000 machines. This is spread across the Chinese original equipment manufacturers (OEMs), joint ventures and whollyowned international OEMs. There were hardly any equipment imports into China – just small numbers of relatively niche machines.

“A ramp-up period followed the closures, but business was pretty much back to normal by mid- to late March. Factories did not, in fact, work very hard

Allen Hsia, director of overseas marketing for Chinese manufacturer Zoomlion, is well aware of the importance of maintaining good relationships with dealers in the Belt and Road countries – relationships that have taken years to build up.

With around 70% of Zoomlion’s exports going to Belt and Road countries, there is a lot of brand image at stake, he explained during the Changsha event.

The importance of Belt and Road to the Chinese equipment and component manufacturers cannot be underestimated, said Zhang Yujing, president of the CCCME.

Between 70-80% of China’s machinery exports are now going to Belt and Road countries, he told the conference section of the Changsha exhibition.

Equipment manufacturer XCMG is a case in point. The company has reported that around 97% of the Belt and Road areas use its products. In 2018, the number of exported products to Central Asia shot up 74% compared with 2017 – “beyond the average for the market”, noted the company.

Sales included everything from bridgeerecting equipment to heavy-duty loaders. Cranes, in particular, are becoming a big-selling item. The same upbeat attitude by Chinese equipment makers was evident during the 15th edition of BICES in September.

The China Beijing International Construction Machinery, Building Material Machines and Mining Machines Exhibition & Seminar was held just outside the Chinese capital, Beijing.

Qi Jun, chairman of China Construction Machinery Association, reviewed the state

to make up lost production. Indeed, manufacturers anticipate something of a buying spree and perhaps even a boost to the manufacturing sector if the Chinese government launches a big financial stimulus package.

“Lockdowns elsewhere in the world did not particularly impair production of machinery within China. Overall, China is a net exporter of components and so the component supply chain for most Chinese OEMs is within China itself. The exception to this is the supply of hydraulic

components which come primarily from Japan. It is still to be seen how Japan’s state of emergency announced in midApril could affect the supply of hydraulic components to Chinese OEMs.

“Global equipment sales will be affected by Covid-19 and this will impact on Chinese-made equipment being exported. We haven’t yet put a figure on what we expect sales to be this year. Clearly there will be a doubledigit decline from 2019, but it is too early to be more precise.”

of the Chinese construction equipment manufacturing market. Last year saw “sustained and healthy development”, he said.

Sales of nine major products increased by 25.5% year-on-year. Sales of excavators exceeded 200,000 units, surpassing the previous sales peak and becoming a record. Export growth, too, was good in 2018, said Qi. Total exports of nine major products increased by just over 34% year-on-year. It is expected that the whole industry will maintain sustained growth in 2019 of about 10% - higher than China’s GDP growth.

Even while China was struggling with the coronavirus outbreak from January to March, Chinese equipment manufacturers were standing firm with regard to their goal of gaining a larger share of the global market.

During the ConExpo exhibition in Las Vegas in March – which Chinese visitors and exhibitors from overseas could not attend because of the US international travel bans – the manufacturers sounded positive.

“The crisis has laid bare the vulnerability of so many countries”

The China Construction Machinery Association, supported by China’s central Ministry of Commerce, noted that nine Chinese companies were ranked in the top 50 global construction equipment manufacturers in 2019.

Dick Cai, chief executive of the US operation of Sunward Equipment, said that localising support in parts and services is critical for success in markets such as the US.

“It’s a very challenging time in our industry,” he said. “We have been in the US for seven years and last year we established our new US headquarters in Dallas, Texas.”

Cai was bullish about the future prospects for Chinese manufacturers in the US. “We are behind you guys in America, but not for much longer,” he said. “We are going to catch up.”

Indeed, as noted here earlier, sales of Chinese construction equipment reached around $95 billion, according to the CCMA and the CCCME. The export value of Chinese construction machinery reached $24.2 billion last year, a growth of 3%.

While the US remains a tough market for Chinese manufacturers, China’s Belt and Road initiative for developing countries has driven Chinese export equipment sales. Infrastructure projects in these countries

include many highways and road tunnels and bridges. Numerous infrastructure projects are underway, with others due to start. This has provided Chinese construction machinery manufacturers with strong demand for their products in many key emerging markets. This has also been coupled with financing for many of the projects coming from China, with Chinese construction firms also being awarded many of the contracts. It is one thing for the Chinese government to financially support its construction manufacturers within the

domestic market but it’s another thing for their foreign customers, be they equipment dealers or national contractors, to have the cash – and contracts – to purchase imported Chinese equipment.

If the economies of the Belt and Road client countries are suffering because of Covid-19 lockdowns, so will Chinese exporters.

This has been noted by the Asian Infrastructure Investment Bank (AIIB), based in Beijing. In April it outlined ambitious, although short-term, lending plans to help countries – many of them signed up to the Belt and Road Initiative – to continue with ongoing and planned major infrastructure projects.

The AIIB said that it is setting up a $5 billion crisis recovery fund for the bank’s 78 member countries, available for the next year and half.

More cash could be forthcoming, said Jin Liquin, chairman of AIIB, in an interview with the UK’s Financial Times newspaper: “If the demand is much bigger, it is possible for us to increase the amount, with the approval of our board,” he said.

“The crisis has laid bare the vulnerability of so many countries. We need to focus on building up the public-health infrastructure.”

Other large regional Asian investment banks, such as the Asian Development Bank (ADB) in the Philippines, have promised help for the developing countries.

The ADB set aside a $6.5 billion package earlier this year and noted in April that it, too, was considering offering more financial support, noted the Financial Times.

“But now, in the last two weeks, we are working very hard to mobilise additional resources. We can provide more support,” Yasuyuki Sawada, the bank’s chief economist told the newspaper.

BELOW: Allen Hsia, director of overseas marketing for Zoomlion, at Changsha - a local dealer network is essential

RIGHT: Shantui, one of many large Chinese manufacturers looking to boost global sales (exhibiting at Changsha)

Meanwhile, the situation in the US for continued – if not boosted – infrastructure spending looks encouraging, not least because interest rates are near 0%.

In an economy that was increasingly shutting down over the coronavirus pandemic, construction remained one of the national employment bright spots, being declared essential by federal and state officials. Even so, there is a major backlog of essential highway repairs – especially to the country’s ageing bridges.

At the time of Global Report going to press, it looked like infrastructure spending was emerging as a rare area of agreement between Trump’s republican government and the Democratic Party-led Congress … and

This is the 5th TBM supplied by CRCHI for projects in India

Chinese manufacturer CRCHI has delivered to the Mumbai Coastal Road Project the largest diameter tunnel boring machine (TBM) ever used in India. The 80m-long slurry TBM has an excavation diameter of 12.2m and weighs around 2,300tonnes.

Constructed at CRCHI’s main facility in Changsha, China, it will bore the 1.92km tunnel at an installed capacity of 7,280kW with a gradeability of 5%.

The 29.2km Mumbai Coastal Road Project will

nothing will happen unless Congress agrees.

In April, US president Donald Trump called for a $2 trillion infrastructure package as part of the government’s emergency response to get the US economy fasttracked back to normal after the effects of the lockdowns implemented because of the coronavirus pandemic. The real issue for the US government and political opposition is not the amount of money, but how, when and – importantly – where to spend it, according to US analysts.

Before the coronavirus outbreak, the American Society of Civil Engineers estimates that more than $4 trillion of infrastructure investment was needed over the next eight years.

connect Marine drive to Kandivli and deal with complex geological conditions that require excavation in deep overburden. The tunnel drive will pass through a compound stratum of basalt, breccia and shale.

To meet the challenges, the TBM has a mixed cutter head with eight spokes and eight panels for boring long distance. To solve problems such as mudcakes forming on the cutterhead and slurrydischarge blocking, the TBM is fitted with a big-diameter

slurry feeding port and several slurry flushing lines to increase the flow rate of slurry. In addition, 508mm diameter disc cutters are fitted to improve the machine’s rock-breaking capacity and prolong its lifespan.

The TBM benefits from other innovative features, such as a dual-chamber indirect slurry control system, a dual-circuit automatic pressure system, high-torque and retractable main drive, as well as a high-power slurry circulation system.

US civil engineering groups have noted that the country has around 47,000 structurally deficient bridges.

Cracking the US market remains a big goal – business-wise and culturally – for China’s leading construction equipment manufacturers and it will likely take many years to plough significant inroads.

Until then, the developing world holds much more promise – and has already done so, as noted in the comprehensive report, China’s Involvement In Global Infrastructure, published by UK-based research group Global Data in November last year – just before the Covid-19 virus started to take hold in China.

This is especially true, thanks to the Belt and Road Initiative, although there has been increasing wariness among these emerging market governments over the risks of relying heavily on China for funding and construction contracting.

Nonetheless, Global Data notes that information from the Emerging Markets Forum shows China has earmarked or already spent around $600 billion in loans for emerging markets since 2013, compared to $490 billion by the group of multilateral development banks comprising the World Bank, the Asian Development Bank, the African Development Bank and the InterAmerican Development Bank.

Global Data’s report notes that Chinese contractors are involved in foreign projects totalling $1.1 trillion, with much of this in Asia – $426 billion. Projects in India, Pakistan and Bangladesh are key markets.

An example is the Chinese manufacturer CRCHI’s recent delivery to the Mumbai Coastal Road Project of the largest diameter tunnel boring machine ever used in India (see box).

The Middle East and North Africa account for around $227 billion, while sub-Saharan Africa has taken about $240 billion.

Europe and Latin America are relatively small markets for Chinese contractors, with the value of projects in each region hovering just over $70 billion.

Chinese contractors also have a significant involvement in road and railway projects in Australia, notes Global Data. But this is mainly through John Holland Group being a 100%-owned subsidiary of China Communication Construction Company.

State-owned China Communications became the first big Chinese group to build Australian roads and bridges after acquiring John Holland from Leighton Holdings for US$553 million in late 2014.

CRCHI DELIVERS TBM FOR INDIA

According to a report by the Sydney Morning Herald at the time, the deal came after Australia signed a free-trade agreement with China that allows Chinese workers to enter Australia to help build projects. Part of the determination of Chinese OEMs to expand globally could be a realisation that the demand for machinery in their own domestic market is slowing down.

There were already signs of this late last year, as noted by Germany’s VDMA (Mechanical Engineering Industry Association - Verband Deutscher Maschinen- und Anlagenbau).

The VDMA’s China Management Meeting is a semi-annual gathering of its member companies in the Chinese construction machinery and building

material plant engineering sector. The general consensus from last year’s meeting was that the Chinese equipment manufacturing market may have peaked.

Disruption from Covid-19 “was fairly short and sharp”

“In recent years, however, it has become equally clear that the Chinese market is still dependent on government measures to support the economy,” according to the VDMA report of its event. “Just as the boom from 2009-12 was primarily due to government stimulus programmes, the upturn in the years 2016-19 is primarily attributable to public infrastructure projects and investment incentives through favourable financing opportunities.”

The VDMA report also says that the introduction of China Stage IV emissions legislation for engines continues to create

LEFT: Quality will pave the way for much more success when exporting to the world, says Yu Hongfu, chairman of Sany Heavy Machinery

major planning uncertainties in the market.

It is clear that the originally planned introduction will be postponed and that the time from the announcement of definitive dates to implementation will be short.

The background of the postponement remains unclear, but a likely explanation is that the already sluggish economic growth should not come under even greater pressure from further burdens, bearing in mind that Stage IV machines will naturally be more expensive.

Covid-19, too, may also have slowed down equipment manufacturing in China, although the sector has bounced back well, at least so far, says Chris Sleight, managing director of Off-Highway Research, based in the UK and with offices in China.

Disruption from Covid-19 “was fairly short and sharp”, he says. “The loss of equipment production was relatively small, certainly less than we will see in Europe. I would expect some decisive government (financial) action to reinvigorate the economy.” (See box.)

Overall, China’s construction equipment sector appears to be coming out of the Covid-19 pandemic with speed and determination, ready, willing and able to boost its global market share.

Look out, too, for expansion from emerging economies along the Belt and Road initiative, where the Chinese government is investing heavily in grants and business support. It will also depend on the western world’s financial boost to its own infrastructure spending after the Covid-19 lockdowns.

ABOVE: National Road 13 in Laos, an improvement and maintenance project supported by the AIIB LEFT: Chinese manufacturers are raising their game for a larger share of the global equipment market

EUROPE WANTS DIGITALISATION TO HELP IT BUILD A BRAVE NEW WORLD

This is the year that the European Union will push ahead with its new DigiPLACE project, an initiative designed to develop a construction industry “fit for the digital age”. European construction equipment lobby group CECE secretary general Riccardo Viaggi chaired DigiPLACE’s recent launch event, headlined: “Towards a European digital platform for construction”. Cooperation through digital platforms will be “crucial” if Europe wants to achieve its sustainability goals, says DigiPLACE. So … what are the project’s key aims, and how could it affect your business?

The new president of the European Commission, Ursula von der Leyen, has a clear and ambitious message for the people behind DigiPLACE. She wants to see the EU build “a Europe fit for the digital age” because “digital platforms are actors of progress for people, societies and economies.”

According to Von der Leyen, Europe needs “to strive for more”. It needs to “grasp the opportunities [offered by] the digital age within safe and ethical boundaries”, and the construction sector will be used as a leading example for “decarborisation policies and the upcoming Circular Economy Action Plan”.

Someone listening very carefully to all this is Ilektra Papadaki, senior policy officer in the construction and built environment division of the European Commission’s “Directorate general for internal market, industry, entrepreneurship and SMEs.” Papadaki was the man who kicked off the DigiPLACE launch.

According to Papadaki, the project has a mission to encourage the “uptake of digitalisation by the industry”, as well as putting in place initiatives to “study and support SMEs (wanting) to digitalise” their businesses. There will be a “digital industrial

European Commission president Ursula von der Leyen wants DigiPLACE to build “a Europe fit for the digital age” because “digital platforms are actors of progress for people, societies and economies.’’

platform for construction” and an “EU BIM task group” will be used to help get things

“Europe needs to join forces under a common strategy … (one) that takes digitilisation of the EU’s economy forward in order to unlock

revolution.” When construction is compared with other large industrial sectors such as manufacturing, agriculture or healthcare, it is already in a good place: “Construction might be considered as one of the most fragmented sectors,” she says. But, “when it comes to the networks built among its stakeholders, policy

bring this new age into place. The EU BIM (Building Information Modelling) task group, for instance, will be a useful collaboration partner. For Papadaki, the group will help: “Deliver greater value for public money; increase openness, fairness, competitiveness and productivity; stimulate growth in the construction and digital economy and boost innovation” across publicly funded

Here are some of the challenges that Papadaki envisages:

GAP 1: Lack of digitalisation targets at EU and national levels

GAP 2: Limited capability of SMEs for digitalisation & in the construction sector

GAP 3: Market failure and lack of cooperation at member-states level that hinders the digital transformation on European level

GAP 4: Lack of investment in research and development for SMEs, especially for the combined use of digital technologies

GAP 5: Lack of investment to support the implementation of digital technologies by the construction industry

GAP 6: Lack of trained employees (blue-collars) on the use of digital technologies

GAP 7: Lack of experts for data handling and analysis

GAP 8: Lack of complementing asset life-cycle information management (ALIM) standards

GAP 9: Lack of software (both open-source and commercial off-the-shelf) that uses the available available ALIM standards

GAP 10: Lack of data security and preparedness for cyber-attacks, especially in the construction sector

construction activity in at least 24 member states. Public spending respresents “a major share of total construction expenditure” across Europe. In Germany it accounts for at least 44% of all activity.

The EU’s BIM policies have already generated 250 public procurers trained on BIM in 10 workshops and created a handbook for the introduction of BIM in public procurement in 21 languages. There is also an “upcoming methodology to show the (economic) benefits of BIM in public construction works, (plus) a member-stateled initiative on common classification,” says Papadaki.

Another support stream will be a digital building logbook. This, says Papadaki, will be: “A digital repository where a building’s details can be compiled and updated when necessary throughout the life of the building, granting an easily accessible and comparable overview of a specific building. Ownership of the information contained in the digital building logbook stands with property owners. However, this information could be made fully or partly accessible to third persons.”

This initiative will address the “need for common language across the lifecycle” of the built environment, she adds. “The gathering of information, the organisation of information (through) digital building

Baseline and monitoring Technical and financial measures Skills and human resources

Facilitating policies and boundary conditions

Introducing digitalisation targets in the procurement directive and establishing requirements for the use of public funding

Introduce a campaign with best practices for the adoption and implementation of digital technologies by SMEs, especially for the micro-enterprises with limited capabilities

Facilitate the set-up of digital innovation hubs (DIHs) and link them in a pan-European network

Project call to stimulate ecosystem building among SMEs and larger firms and the upscaling and implementation of digital technologies

Increasing the involvement of industrial partners via: - the campaign with best practices - the set-up of digital innovation hubs

Provide lifelong digital skills development for blue collars within construction sector

Provide a multidisciplinary education programme involving mathematics, computer science, as well as the specific knowledge of the particular subject (e.g. manufacturing, material properties, building physics, etc.)

Alignment of existing asset life-cycle information management (ALIM) standards relevant for construction

Design and develop software based on an optimal combined set of standards for ALIM

ICT firms and cyber-security experts need to test and experiment with cyber-security issues to come up with solutions for data protection for construction companies

DigiPLACE and Construction 4.0 will allow the industry to accelerate its own digital transformation, to improve working conditions on sites, to attract young people and to make construction projects more predictable.

logbooks will boost the availability of structured information to a broad range of market players, including property owners, tenants and investors.”

All of this will only work if it is used by and understood by all of the small and mediumsized (SME) construction contractors and sub-contractors out there. As Papadaki admits: “Digitalisation is important for SMEs in construction because 98% of the EU construction sector is composed of SMEs and micro-enterprises. In the Industry 4.0 era, various digital technologies have become available, but the rate of adoption in the construction sector is very low.”

Having set the scene for what the European Commission is hoping to get out of the DigiPLACE scheme, Papadaki was succeeded at the conference by Alberto Pavan of Politecnico di Milano who spoke about his view of the project as the lead representative of the DigiPLACE partnership and as an assistant professor who specialises in the sector. Pavan listed DigiPLACE’s goals and ambitions, detailing its timeline and milestones, as well as introducing its 19 partner organisations. “The highest-level objective of the DigiPLACE project is to create a Reference Architecture Framework (RAF) for the digital industrial platform for the construction sector based on a shared consensus along the entire chain,” he said.

➔ If everything goes according to plan, DigiPLACE will:

• Increase productivity and sustainability for the European construction industry;

• Facilitate the diffusion of a common language in the construction sector;

• Pave the way for the growth of smart cities and smart infrastructures;

• Strengthen the role of the EU in the global construction ecosystem;

• Accelerate efficient collaboration between public authorities and industry;

• Validate usability, risk and security assessment … and sustainability;

• Maintain and extend an active ecosystem of relevant stakeholders, including start-ups and SMEs;

• Promote the diffusion of knowledge and facilitate the introduction of digital practices;

• Encourage tangible contributions from European key players to actively engage with the platform building process;

• Generate efficient information sharing across the programme stakeholders for horizontal issues of common interests;

• Facilitate the introduction of a digital transformation of the construction sector.

There is a large group of “beneficiaries” to the project giving strategic and operational direction. These include: Politecnico di Milano (POLIMI); Centre Scientifique Et Technique Du Batiment (CSTB); European Construction, Built Environment And Energy Efficient Buildings Technology Platform (ECTP) ; Indra Soluciones Tecnologias De La Informacion Sl (INDRA); Conseil Des Architectes D’Europe (ACE); buildingSMART International (bSI); Committee For European Construction Equipment (CECE); European Builders Confederation (EBC); European Federation Of Engineering Consultancy Associations (EFCA); Federation De l’Industrie Europeenne De La Construction (FIEC); Univerza V Ljubljani (UL); Federazione Delle Costruzioni (FederC); Centre Scientifique Et Technique De La Construction (CSTC); Construction Products Europe (CPE); Ministère De L’ecologie Du Developpement Durable Des Transports Et Du Logement (MEEM) ; Associazione Nazionale Costruttori Edili (ANCE) ; Bundesministerium Fuer Verkehr Und Digitale Infrastruktur Dig (BMVI); Bam Bouw En Techniek Bv (BAM); and the Italian Ministry Of Infrastructure And Transport (MIT).

Share of EU GDP

Construction and digitalisation

Construction sector employs

Annual labour productivity growth

18

MILLION WORKERS

DIGITALISATION

European BIM market

Full-scale digitalisation in non-residential construction

OPPORTUNITY

3D PRINTING & DRONES

Contribute to:

up to EUR 1tn in savings

3D printed soloutions in construction

● YHNOVA PROJECT IN NANTES, FRANCE

100,000 +13%

● FOOTBRIDGE IN MADRID, SPAIN

● CIRCULARITY

● SAVINGS

● EFFICIENCY

... and the EU 2020 strategy

● 3D PRINTED HOUSES IN EINDHOVEN, THE NETHERLANDS

● 3D PRINTED BUILDING IN COPENHAGEN, DENMARK

Commercial drones market growth is projected to create over

... and grow in size to EUR

● PRODUCTIVITY INCREASE

● PROFITABILITY

● DOUBLE-CURVED PANEL FOR THE LONDON CROSSRAIL PROJECT, UK

direct jobs in the next 20 years

2.6bn

72% >50% 1%

● AND MORE... 1997 2017

of construction companies either are already or are considering using drones within the next year OF COMPANIES USING DRONES PRIMARILY USE DRONES FOR PROGRESS TRACKING AND COMMUNICATION

If everything on site, and every piece of data in the office, gets connected, what kind of digitalisation, what kind of market, what kind of production services and what kind of supply chains will be needed?

And if that wasn’t enough, and just to make sure that there is even more experience and brainpower on tap, this steering group is backed up by an advisory board whose members include: McKinsey & Company; Dassault Systèmes; Ente Italiano di Normazione - UNI informatica; ADN Construction; CoBUILDER International; Acca Software; Unismart Padova Enterprise; International Data Space Association; Estonian Ministry of Economic Affairs and Communications; Ministry of Construction and Physical Planning (Croatia); Czech agency for standardization (CESKA Agentura Pro Standardizaci); BIMarchitecture; European Rental Association; Platform of Trust; Finnish Association of Civil Engineers; European Concrete Platform; Chamber of Construction and Building Materials, Chamber of Commerce and Industry, Slovenia; Neumarkt; Engineering Ingegneria Informatica; IBM - International Business Machines Corporation; Vinci; Trimble; ENCORD; Autodesk; Graphisoft (Nemetschek); Ecole de Téchnologie Supérieur, Québec; and Allplan (Nemetschek).

The project is also backed by CORDIS, the Community Research and Development Information Service (of the European Union). It is very keen to see the DigiPLACE project do well. “The construction sector is a key driver for the economy, but it is one of the poorest performers in terms of productivity and innovation,” says CORDIS. “It has yet to embrace digital innovations that could help improve productivity and profitability. The digitalisation of the construction sector could be a potential game changer for the sector. The EU-

funded DigiPLACE will create a common ecosystem of innovation, standardisation and commerce to increase the construction sector’s productivity and end products’ quality in terms of buildings and infrastructure. It will also investigate what kind of digital transformation will improve productivity and efficiency. The project’s results will impact the development and competitiveness of the construction value chain.”

It is undoubtedly true that “the construction sector is characterised by a high presence of SMEs, low capitalisation, a low rate of higher educated employees, low investment in innovation, and a long supply chain”, CORDIS adds. “Moreover, in the EU market, different languages, taxation, and regulatory frameworks are obstacles to Union synergies. DigiPLACE will exploit EU added value. Several initiatives have been developed at national level to improve the innovation in this sector. At EU level, some projects were devoted to facilitating the exchange of information, practice and knowledge.”

The key questions are: Will digitalisation help the sector to solve these historical issues and future ones? What kind of digitalisation, what kind of market, what kind of production services and what kind of supply chains are needed? What kind of consumers does the industry have for its products and services? How will these worlds be able to work together?

These are all big questions, and the project will need all the support it can get. One supporter puts it like this: “We, the European Builders Confederation (EBC), as the representative of construction SMEs and craftsmen, are going to deeply collaborate

with our fellow European construction representatives to provide political guidance and expertise, as well as dissemination of the developments and findings of the project.

“This project is the first-ever proposal targeting the digital transformation of the construction industry to receive funding from the Directorate-General for Communications Networks, Content & Technology (DG CONNECT) of the European Commission (and) it is also unprecedented because never have such a wide and representative cooperation of construction stakeholders taken part in the same EU-funded project. This means that the sector wants to accelerate its own digital transformation to further improve working conditions on construction sites, attract young people to the sector and make construction projects more predictable.”

Ambitious indeed.

THE LAST WORD

Putting the “management-speak” and the mysterious language of EU officialdom to one side for a moment, here is how DigiPLACE describes itself: “DigiPLACE is an EU-funded project with a budget of €1 million aiming at assessing the feasibility of a European Digital Platform for Construction, which would integrate several digital technologies, applications and services. DigiPLACE will create a common ecosystem of innovation, standardisation and commerce with the aim of collecting the achieved results and increasing the productivity of the sector and the quality of its end products.”

POWERED BY GLOBALISATION AND DATA

New asphalt plant technologies are spreading around the world, thanks to globalisation and the availability of information. Kristina Smith has been talking to some of the sector’s leading players to find out how these transformative global trends are taking hold.

Historically, it’s been a mixture of culture, tradition and market conditions that has governed what sort of asphalt plant technology dominates in a particular country or region.

Most of Europe favours batch plants, along with Australia, South Africa and parts of Asia. North America is dominated by continuous plants, alongside Africa, South America, Malaysia, New Zealand and France.

“Both continuous and batch plants have pros and cons,” says Filippo Baldassari, head of global sales, marketing and after-sales, Fayat Mixing Plants. “Which type of plant is used where largely comes down to historical reasons.”

It’s a similar story when it comes to technology for using recycled asphalt planings, or RAP, in a mix. Different methods are favoured in different regions.

But those patterns set by history are about to change, says Mike Varner, chief engineer at Astec:

“The trend is towards accepting new technology, the realisation of what works, because of the globalisation of information,” he says. “Technology that makes sense is going to be utilised and recognised throughout the world. There will still be small pockets that hang onto old technology, but no one speaks louder than profitability.”

International suppliers are working hard to make sure they have a presence in every market, ready to promote the technologies that come out on top. Batch plant manufacturers are offering continuous plants and vice versa.

Swiss-based Ammann, traditionally a batch plant specialist, announced late last year that it was launching a new, continuous asphalt plant for the North American market, and that it was transferring some of its batch plant technology over to its new range.

“We evaluated the needs of the market and we adapted our technology to it,” says Günter Tesch, global commercial manager plants at Ammann. “That’s why we have designed the ACP 300 ContiHRT which carries all the well-known technologies with respect to the proper use of recycling material from the batch plant site to a continuous mixing plant.”

Meanwhile, Astec, which has focused for years on continuous plants, has updated its range of batch plants: “We want to be a solutions provider for all of our customers,” says Varner. “Not all of our customers have markets that they believe can be serviced by continuous plants. I think differently but, at the same time, we want to offer solutions for them.”

Ammann has launched the ACP 300 ContiHRT, a continuous plant which features recycling technology developed for the manufacturer’s batch plants

Others were already serving both batch and continuous markets, having grown their offer through acquisition over the years. The Marini Fayat Group offers batch plants through its Marini brand and continuous ones through its Marini-Ermont and Marini-Latin America brands. The Wirtgen Group has Benninghoven for batch and Ciber for continuous.

TIGHTER CARBON TARGETS

Until recently, the uptake of technology that helps to fight climate change – such as RAP and warm mix – has been driven largely by economic factors. RAP is more widely used in countries or states without their own aggregate supplies or in large cities where roads are being constantly upgraded. Warm mix took off in the US, where state departments of transport (DoTs) mandated it due to its cost-saving potential.

plants to be more efficient but, at the same time, become more environmentally friendly.”

Now the impetus is re-focusing somewhat.

Different manufacturers favour different means of

The last five years have seen a growing drive from large corporations and their investors towards setting science-based targets for reducing carbon emissions which include embodied energy – the energy used to mine, manufacture and install a material. This is

In developed markets, such as North America, China and Europe, the trend in recycling is to find ways to include higher and higher proportions of RAP. “RAP is becoming a big deal. There’s a lot of push to use more and more,” says Cardenas. “Our EX single drum plants, which can do up to 50 percent RAP is our best-selling plant, accounting for at least half of what we build.”

The way that RAP is added to a plant impacts on how much can be used. The simplest approach is to add the RAP cold,

ECO asphalt mixing plants can be transported easily and cost-effectively thanks to transport-optimized container sizes. Flexible upgrades are possible at any time thanks to standardized interfaces

being produced. Some markets are trialling other recycled materials: tyre rubber, plastics in various formats and glass.

Different manufacturers favour different means of heating the RAP. “For Astec, the most important developments mechanically have been the development of the high RAP capability double-barrel plant,” says Varner. “It has been one of the most successful singular lines because of its capability from zero to 70 percent RAP. It can achieve high levels of recycling without the emissions associated with RAP pre-drying, which can be an issue.”

Tesch explains why Ammann prefers pre-heating: “When you feed cold RAP into a mix with superheated aggregates, you have a lot of thermal stress in the binder cement of the RAP materials. And with pre-heating, you don’t need to superheat your virgin aggregates which saves on fuel and produces less carbon dioxide.”

Benninghoven developed its hot gas generator technology to heat RAP indirectly using the counterflow method, which the company says can accommodate up to 90 percent RAP. “The advantage of this system is that emissions remain well below the normal range and less total energy is required to operate the plant,” says Michael Frank, head of retrofit at Benninghoven.

Benninghoven also offers a burner that can operate with a variety of fuels, the EVO JET multi-fuel burner which can operate with biodiesel as well as heating oil, liquefied and natural gas, and solid fuels such as pulverized coal. “Combustion technology will continue to play an important role from both an economic and environmental perspective. The EVO JET multi-fuel burner already hints at how renewable energy sources can be used in the future,” says Frank.

Once information and the use of analytics become more widely available, asphalt plant operators will be better placed to choose between the different methods offered by ➔

RIGHT: In China, new plants are totally enclosed, limiting dust, noise and other emissions

heating the RAP

different manufacturers. Data related to recycled materials used, energy efficiency, carbon and other emissions can all be interrogated to find the optimum solution.

AIR QUALITY COUNTS

Beyond carbon emissions, modern asphalt plants must fight to reduce every other type of emission too: noise, dust, smoke, smells. Regulatory and community pressure in many countries continues to drive change, says Benninghoven:

“Statutory regulations aimed at reducing emissions continuously pose new challenges, particularly for manufacturers, especially since the requirements vary worldwide,” says Frank. Increasingly stringent laws in Germany pushed Benninghoven to improve both its cold and hot RAP feed systems to reduce emissions, he explains.

ADM’s Cardenas sees the same trends in North America. “The permitting is where I see most of the challenges. Pressure from environmental groups and changes from the government can make it difficult to put a plant up.”

In California, for instance, more elements of the plant are being enclosed, says Cardenas: “We have started enclosing all points where material transfers from one place to the other, for example older batch towers where they dump onto screens, screens where open to air and there would be dust everywhere.

“Drive-throughs for trucks are being enclosed, transfers from, say, a mixing chamber to the drag elevator. There are dust

control measures introduced to aggregate hoppers and conveyors; water cannons and mist sprayers to keep the dust down.”

In some markets, even ‘blue smoke’, which contains no harmful emissions, says Varner, must be eliminated.

In China, some of the newest asphalt plants are totally enclosed

“When they see it, people are concerned. It is very visible but not at all dangerous,” says Varner. “Astec developed a blue smoke filtration system which uses a fibre bed to capture and attenuate blue smoke. It can be used for loadout or at the top of silos. In many areas this is very crucial. Being able to control smoke, there’s the potential to control odour too.”

Ciber, based in Brazil, highlights technologies that reduce both fuel consumption and emissions. “The most important innovations in the asphalt plant industry in the last few years are related to reducing the fuel consumption of the plants’ dryer drum and reducing emissions released into the environment,” says Marcelo Zubaran, product specialist and trainer at Ciber.

Ciber’s smart combustion system, which controls the speed of the dryer drum top to optimise heat exchange between aggregates and the combustion gases, can save up to one litre of fuel per tonne of asphalt mix produced, says Zubaran, and minimizes the generation of CO and NOx gases.

In China, some of the newest asphalt plants are totally enclosed, resembling large

Extremely versatile: TBA plant can be operated as stationary systems but can also easily handle rapid location changes thanks to a plug & work concept. Furthermore, they are equipped with “RECYCLING+” and feature a particularly high RAP feed rate of up to 80%

factories rather than a traditional asphalt plant. China is particularly stringent on its environmental controls: breach them and a supplier will be closed down overnight. Though extreme, total enclosure is a trend which could extend to other parts of the world, particularly in areas where urban sprawl means that residential and industrial areas are now right next door to each other.

SMALL IS BEAUTIFUL

One of the strongest trends highlighted by Marini’s Baldassari is transportability or mobility of plant. “Transportability, especially in these uncertain times, is very important,” says Baldassari. “This may be because the customer needs to move the plant from one place to the other, or we may want to reach customers who are located far away from our factories, which means we have to provide easy and inexpensive solutions.”

Marini has launched several different models of plant that can be containerised to erase transport from the factory and between destinations. The demand for these comes from almost everywhere, says Baldassari, including the Middle East, Africa and South America. In emerging markets, where job sites may be at large distances from each other, mobility is a useful attribute.

“The only market which this trend does not apply to is China,” says Baldassari. ➔

TOP 5 TRENDS

CONTINUOUS AND BATCH: big players want to supply both, to service all markets globally

TIGHTER CO2 TARGETS: higher proportions of RAP, warm mix and biofuels to help clients meet carbon targets

LOWER EMISSIONS: legislation on air quality – and concern from neighbours – ramps up requirements

TRANSPORTABLE: plants get smaller and more mobile to service remote sites and markets

DATA RULES: long-term, data and analytics will shine a light on the most efficient technologies

New! RECYCLING + available for TBA

Future-oriented.

ASPHALT MIXING PLANT TBA

HIGH-TECH PLANT POWER

> Wide range of mixing capacities: 160 - 320 t/h

> Hot bin section capacity 60 / 80 / 130 t

> Loading silo capacity up to 517 t in up to 7 chambers

RECYCLING +

> Cold recycling up to 40 %, Hot recycling up to 80 %

> NEW – recycling drum using counterflow action with a hot-gas generator

> Retrofitting possible at any time

PLUG & WORK

> Fast assembly (installation and dismantling)

> Modular expansion possible

> Transportable or stationary foundations

> Pre-configured interfaces

OPERATOR BENEFIT

> Ergonomics concept

> Health and safety

> Maintenance concept

“There they want big, stationary plants, installed once and that’s it.”

Astec has also noticed an increasing demand for smaller, more mobile plant, in North and South America, as well as in other locations.

“The trend is towards smaller and smaller plants,” says Varner. “We think it’s because suppliers are going out into the corners of their market and able to chase after work with extremely portable plants.” Astec’s mobile plants range from 80 tonnes per hour up to 400 tonnes per hour. “Even the largest, with the appropriate crew, can be moved and set up in just four days,” says Varner.

Benninghoven identified modularity as an important trend for meeting the differing requirements of differing markets: “Modular components can be combined in a variety of ways,” says Frank. “Together with prefabrication, independent of any specific order, this creates a high degree of design flexibility, resulting in short delivery times and a rapid start of assembly.

“Furthermore, the modular concept features prefabricated interfaces that make it possible to upgrade various components.

THE DIGITAL AGE

The future will definitely see a move towards decision-making based on information – rather than local practice. This will be enabled by digitalisation and the ability to communicate with plants, and components of plants, using the internet of things (IoT).

Eventually, plant performance and technology will be linked to digital records

“The thing that is going to be the biggest game changer in the industry is the instantaneous availability of information about the plant, production and status going through IoT,” says Varner. This change was coming, but the coronavirus pandemic

he says. “This will help with the interactions between plant, customer and manufacturer, how to optimise the use of the plant, how to minimise energy, how to achieve a proper set up, how to inspect the plant and suggest maintenance or to drive the repairs remotely.”

The larger manufacturers are already making good progress towards this point.

“In some ways, it’s developed,” says Varner, “but it’s developed where it makes the most sense, where the technology and the need have come together. Plants will soon have the ability to tell you their status, to communicate with the operator and with distant management seamlessly and nearly in real time.”

This is something that Ciber has been working on, says Zubaran: “We have recently upgraded our remote access technology. Now all the production data is available remotely, in real time and online. The customer can check the plant diagnostics, including checking the motors’ behaviour during production and allowing for predictive

Beyond the capability to remotely monitor information and better plan maintenance and upgrades, the provision of information has far wider implications. Eventually, plant performance and technology will be linked to digital records of where each batch of asphalt was laid, alongside performance-monitoring data which tells road owners whether or not the specification delivered what was expected.

Analysis of the information gathered from multiple types of plants around the world will reveal which technologies work best and where the efficiency gains and the highest profitability are to be had.

“The trends are towards plants that have the higher capability and better operating efficiency from waste, fuel consumption and maintenance,” says Varner. “Connectivity and the ability to be connected will allow us to organise the data we collect into useful and meaningful information.” 

RIGHT: The latest iNOVA line from CIBER comprises five asphalt mixing plants with production capacities between 50 and 200 t/h

Marini Master Tower is a batching plant with an innovative end-to-end drum configuration that is also able to use up to 100% RAP in its feed