Economic review & forecasts Chris Sleight Editor International Construction

Economic review & forecasts

Chris SleightEditorInternational Construction

Contents

Global economic trends

Construction industry trends – global and US

Trends & cycles in the crane industry

Trends in the heavy transport sector

Outlook based on economic forecasts

Warning

Economic forecasts always have uncertainty We live in very uncertain times

If any forecast today turns out to be accurate it is pure luck

But forecasts have a valueShow broad trendsSummarise complex situations

Form your own opinion! What is important for your own situation?

World economic growth 2012

EU -0.4%US 2.2%

LAm 3.2%

S. AF 5.0%

CIS 4.0%

RoA 6.7%

WORLD 3.3%

MENA 5.3%

JP 2.2%

World economic growth 2013

EU 0.2%US 2.1%

LAm 3.9%

S. AF 5.7%

CIS 4.1%

RoA 7.2%

WORLD 3.6%

MENA 3.6%

JP 1.2%

World economic growth 2017

EU 1.7%US 2.6%

LAm 4.0%

S. AF 5.8%

CIS 4.1%

RoA 7.7%

WORLD 4.6%

MENA 4.5%

JP 1.1%

GDP trends

Strongest growth in emerging markets

BUT growth moderating in China & India

Developed countries remain weak

GDP trends & construction

Growth in construction is in line with GDP growth

Construction output ~ 10% of GDP

GDP data indicates size & trend of construction market

GDP & construction are key drivers for lifting & transportation industries

Global construction market

Global construction markets: growth trends

Global Construction outlook

Global: ~+4% growth this year

Europe: Return to recession

North America: Good growth from low base

Japan: Continued stagnation

Developing Asia: Strong growth – circa +7%. China & India slowing

Latin America: Strong growth – circa +6%. Inflation concerns

ME/AF: Generally strong – depends on commodity prices

US construction output – US$ billion

Crane industry trends

Manufacturers’ revenues & profitability

Stock market performance of crane manufacturers

Fleet sizes

Relation to wider economic trends

Source – World Crane Report

Unique study of the global industry

10-year study

Manufacturer trends

Owner trends

Insights into fleet composition

Links to wider economic trends

Manufacturers – 10-year revenue trend (US$ million)

Peak = US$ 31.7 billion

-25% drop in 2009

+6% - +8% growth since

Re-gain peak in 2014-15?

Chinese = 30% of total

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

2007 2008 2009 2010 2011 Q1-3 2012

Operating margin - selected ‘traditional’ crane manufacturers

Stock market performance – year to date

Manufacturers - conflicting indicators

Revenues & profitability recovering- Revenues up on 2011, but looking flat this year- Significant improvement in margin

Weak Chinese market deflating share prices- Chinese truck crane sales down ~ -45% in 1st half- Stock market weakness from May onwards – China, Euro Zone etc.

Total fleet – Top 50Total fleet = 21,896 mobiles & crawlers

Almost unchanged since 2008

Continued growth in Europe

North America more cyclical

Top 50 – wheeled mobile vs crawlerRatio of mobiles:crawlers 78:22 in 2012

All cranes 2003 201216,470 21,896(+33%)

Mobile cranes 2003 201213,118 17,022(+30%)

Crawler cranes 2003 20123,352 4,874(+45%)

Top 50 – total load momentChange 2003 – 2012

Total4.6 14.9 million tonne-metres (+225%)

~ 1.53 4.98 million tonnes lifting capacity

Per crane279 682 tonne-metres

~ 93 227 tonnes lifting capacity

North American fleet size – mobiles & crawlers

US fleet size & GDP - % change

Cranes vs economic cycle

Global fleet did not shrink in recession years- Capacity increased significantly!

US fleet has been more cyclical- Follows GDP growth with 1-2 year lag- Start of modest fleet growth in 2012- GDP does not look strong enough to trigger high fleet growth

Heavy transport

Trends in specialized heavy transport

Road transportation & fuel prices

IC&ST Transport 50 – global capacity (t)

Transport 50 – North American capacity (t)

Historic US retail diesel prices - $/gal

Oil price - $/barrel (WTI)

Heavy transport costs

Direct correlation between oil price & diesel price

Outlook for oil price:– US Energy Information Administration predicts -8% fall in 2013– Trending lower over medium term due to global economy

Equates to US$ 3.70 per gallon (~ US$ 4.00 in 2012)

Heavy transport trends

+17% increase in heavy transport capacity in 2012

US trailer-focussed market (79% trailers vs 21% modular)(Europe 14:86, World: 47:53)

Diesel prices softening, but staying high

Outlook for sector

Improvement in early 2012, but outlook has weakened

(Fuel) costs may fall

Reasonable recovery in US construction crane sales

Globla UncertaintyEuro-zone, China, US fiscal cliff

Further information

www.khl.com

E-mail: chris.sleight@khl.comDirect tel: +44 (0)1892 786205