P U B L I C I D A D E

ABRIR
FECHAR

P U B L I C I D A D E

ABRIR
FECHAR
Voltar

A difficult year for the industry

Sales of the Yellow Line were reduced in 12.7 percent if compared to 2013. Total reduction was of 6.1 percent, mainly due to a recovering of road truck industry

After another cycle of challenges, the big question is if 2015 will be a better year for the construction industry and consequently for construction equipment industry. Maybe—it is not impossible since the year starts with a lot of uncertainties.

However, the most probable scenario is not of rising. On the contrary, the general expectation of those who manufacture, import, sell or use construction equipment is that the demand in 2015 will be lower than that of 2014, a year when sales of Yellow Line equipment were reduced in 12.7 percent and total sales were reduced in 6.1 percent, according to the Sobratema Study of the Brazilian Construction Equipment Market for 2014-2019, published in November. Specifically for the Yellow Line, the year of 2014 registered the second higher reduction since the start of this Sobratema Study, in 2007.

Among the main private areas that buy construction equipment—contractors and rental companies—there is some uncertainty about the market behavior in 2015. In the first survey carried out by Sobratema, the market was quite divided in the opinion about what would be possible to expect for this year. Considering business volume, almost half of the 35 companies consulted expect a year similar to 2014 and the remaining half is divided in optimistic and pessimistic opinions. There is also some uncertainty about the expected demand of construction equipment for 2015. There is an even distribution among same, lower or higher demand, if compared to 2014.

TREND

Would this mean that the market has a slightly balanced view of 2015? Yes, if considering statistics, but it is important to point out that a market equally shared among companies that expect a better, even or worse year is not the same thing that a market where all companies expect a year in the same level. In terms of arithmetic, the average opinion may be the same in both situations but a divided market means a higher degree of uncertainty. It suggests, therefore, a higher possibility of mistake in any forecast.

Some remarks are important at this point. First, in the business volume expectation, the survey detected a clear trend for each company size. Larger companies—defined as those which have more than 100 machines of Yellow Line in their own fleet—were more pessimistic for 2015 and those with less than 100 machines in their own fleet were more optimistic about next year. In the same way, larger companies showed a significant expectation of lower demand of equipment in 2015, on the contrary of smaller companies that had an opposite point of view.

Obviously if the market seems to be balanced as a whole between optimistic and pessimistic companies—each company receives a unit weight but there is a solid pessimistic vision among the largest companies—we have a probability of lower demand in 2015. This would be one more reason for care about any expectation of growth for this year.

A second remark is that the last survey of Sobratema was carried out in the middle of October, between the first and the second shift of the election for president. People who answered did not know who would be the next president. In the same way, this text was written after the first economic adjustments carried out after the reelection of President Dilma Rousseff—in the Selic rate and in the prices of fuel—but before the information of who would be the Finance Minister or a more concrete confirmation about the possible changes in the country’s economic policies.

(DIS)TRUST

The starting point to foresee the market behavior in 2015 is to understand what really happened during a year with the World Cup, the elections and a significant drop in the sales of most equipment.

To do so, it is important to go back a little more into the past. In the last quarter of 2013, Sobratema closed its Market Study and presented the results of that year in the event “Construction Market Trends”, in São Paulo.

In a roughly way, Brazilian market was completing—in fits and starts—one more year of very interesting sales. New facilities of large international players were being built and the result of the study confirmed this growth: the sales of the Yellow Line increased 13.1 percent. In fact, sales of backhoes, loaders, off-road trucks, compactors, motor graders and aerial platforms increased, as well as  sales of tower cranes, cranes and telehandlers (less than expected). But sales of crawler tractors, hydraulic excavators and skid steer loaders decreased. In general, the increase of equipment sales in 2013 was of 5.5 percent, limited by the reduction in the demand of road trucks by construction companies. This was a very good behavior in a year when Brazilian economy increased only 2.3%.

Although the Brazilian growth in 2013 had not a “Chinese level”, it was much better than the contemptible GDP of one percent occurred in the former year. At that time, expectations were also fed by a level of growth above the foreseen for the economy, apparently overcoming the manifestations of June.

In addition, stadiums for the World Cup were being concluded and the government promised—once more—advances in concessions. The whole situation contributed for optimistic expectations for 2014. In an interview to the newspaper “O Globo”, carried out in September, the Minister of Finance Guido Mantega was speaking about “a significant impulse in investments from 2014 on, that would continue at least for one decade”.

But this optimism was not shared by everybody. In a meeting of Sobratema associates in half November, the market—according to the Focus report of the Central Bank—was already expecting an increase slightly above 2.1 percent for 2014. In other words, the market was already waiting for a slight deceleration.

This was the scenario where Sobratema announced its forecast for the market in 2014: a reduction of 3.3 percent in the Yellow Line, but with increase in the remaining equipment, leading to an increase of 1.8 percent as final result. This was not what the companies wanted to hear but—since the study essentially shows the global vision of the companies—this was not a complete surprise.

From November on, the situation only worsened in the industry. Market expectations about the economy growth in the year decreased almost constantly. Expectation was reduced for two percent in January, stabilized in 1.5 percent up to June and—after the World Cup—almost entered in free fall, getting the mark of 0.24 percent in October. If anyone insists that even in this situation the index was positive, it is important to remember that Brazil has a population increase of 0.9 percent per year. Thus, levels below this figure mean a reduction of per capita GDP.

CONCESSIONS

What caused this severe reduction of confidence along 2014? There were many reasons. One of the main reasons was the inability of the government in starting concessions in the promised way and speed. In January, 2014, the economist and former minister Antônio Delfim Netto said—in an interview to the newspaper “Estado de S. Paulo”—that “Brazil will have a growth in 2014 slightly above that of 2013”. To justify such optimism, he considered—among other subjects—“an understanding of the government about the need to transfer to the private area the works of infrastructure, using the forms of concession or Public-Private Partnership (PPP)”.

But this understanding was not translated into actions, although some advancement occurred in road concessions. After signing a concession contract in 2013 for BR-050 in the states of Goiás and Minas Gerais, five other contracts were signed in 2014, whose foreseen investments had a total of R$ 29.7 billion along several years. But other concessions that were promised remained in the process of “study development”. In railway concessions—which would potentially demand large services of construction and, in consequence, increase in equipment sales—nothing has come out of the paper. At best, they will occur in 2015.

Although being complex, the problem of railway concessions may be summarized in the following question: how to establish a long-term contract that ensures appropriate payback to the investor, in an activity where the most feasible social and economic tariff will not cover actual costs that include capital, interests, operations, etc.