Equipment sales reach record highs despite supply chain challenges

By Chris SleightAugust 24, 2021

Global construction equipment sales are expected to hit a record high of 1.13 million units, with a value of almost $110 billion this year, according to updated forecasts from specialist consultant Off-Highway Research.

This is some 2% higher than the previous record of 1.11 million machines, which was achieved in 2018. This is the key finding from Off-Highway Research, following the completion of a mid-year update to its forecasts.

The forecast for North America has been upgraded to a 13% increase. While this increase will not regain the highs of 2019, those levels should be reached and surpassed in the following years.

Can sales translate to shipments?

Alongside record-setting equipment sales is a an unprecedented leap in the price of construction materials, as well as supply chain disruptions, both of which are creating hardships for contractors and slowing down projects, according to an analysis of government data by the Associated General Contractors of America (AGC).

The AGC posted a Construction Inflation Alert to update contractors and their clients about the latest developments. Officials have urged the Biden administration to end a variety of tariffs and quotas on imported construction inputs and to help ease domestic supply chain problems.

“Without tariff relief and other measures, construction employers will have little ability to invest in new equipment and hire new employees,” said Stephen E. Sandherr, CEO of AGC.

Covid’s role in equipment sales

The current timing for a peak in sales was not expected prior to the Covid pandemic. It comes as a result of the stimulus response to the virus by governments around the world, most significantly in China.

A program of special bond issues by provincial governments in 2020 to raise funds for infrastructure spending and other stimulus saw the Chinese market rise 30%. That growth continued through the first quarter of 2021, but the Chinese market has slowed since. A 2% decline in sales is expected for the year as a whole, but volumes in China will remain at a very high level in historic terms.

While China is slowing and performing slightly worse than previously expected, the rebound in many other parts of the world is more robust than was anticipated at the start of this year. The European market is projected to rise 15% in 2021, as opposed to the previous forecast of single-digit growth. This should see volumes rebound to similar levels to the cyclical high which was seen in 2019.

A modest 1% rise in construction equipment sales is now forecast for Japan in 2021, as opposed to the previous expectation of a downturn. This rise will build on the modest increase in sales which was seen in 2020 as the government increased spending on public works. This will take the market to its highest since the early 2010s, when a combination of stimulus measures and the reconstruction following the 2011 earthquake and tsunami drove a sharp rise in equipment demand.

However, the forecast for India has been downgraded from the previously expected 15% increase to an 11% rise in sales this year, compared to the low seen in 2020. This is due to the second wave of Covid infections which swept through the country in the second quarter of 2021.

The outlook for the rest of the world remains unchanged, with the expectation of a 6% rise in sales this year.

“The global rebound in equipment sales over the last six to nine months has been striking,” said Chis Sleight, Off-Highway Research managing director. “While this is excellent news, the industry still faces many challenges in meeting this demand, including supply chain constraints and bottlenecks around shipping and other logistics. I believe that without these, sales this year might have been even higher than the record volumes we are predicting. However, the positive in this is that the current buoyancy should extend well into 2022 as a result.”

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