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2016 in review: The Mideast machinery sector

The ten main global and local events that shaped the construction and machinery sector in 2016, some of which will exert their influence in the New Year

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There is considerable unanimity in the Middle East’s construction and machinery sector that 2016 has been a year of challenges. Overall, the sector has failed to match its performance of the past couple of years because of sluggish demand caused by the slowdown in construction activity and lower government spending on infrastructure.

The price of oil – that all-important factor for the GCC’s economy – remains weak and shows no immediate sign of recovery, suggesting that growth will remain at low levels in the year ahead, as it did in 2016. Globally, the scenario is not too different, with only pockets of growth in an otherwise depressed market.

However, in the midst of this the construction machinery industry still continues to progress and new projects continue to be executed. CMME brings you the top events, announcements, projects and news in 2016 that formed the highlight of the sector this year.

1. Year of the backhoe
Some markets can be characterised as backhoe loader (BHL) markets – such as the Middle East. Typically, the multi-applicability of backhoes is sought after in countries where there are significant amounts of infrastructure work taking place. And a backhoe is a solid investment for a contractor, since the machine will be useful whatever the next contract is. Reason enough, then, for backhoe manufacturers from all over the world to make a beeline for the Middle East market.

While almost all global players are present in the sector in the region, what makes this year the year of the backhoe in the Middle East is the flurry of activity in the segment. This includes a new entrant into the segment and new models that some of the existing players have brought in.

In May this year one of the biggest brand names in the world that was conspicuous by its absence from the BHL segment at last made an entrance. The name in question is Bobcat, the compact equipment major, which joined the ranks of backhoe manufacturers with the launch of its first three models in its B-series.

And, as a testimony to the popularity of and demand for the backhoe in the region, it chose Dubai to launch the machines, which are targeted specifically at the Middle East.

But why now and why here? As Gaby Rhayem, Bobcat’s regional director, Middle East and North Africa, explained: “There was always a latent demand for the backhoe loader here in the GCC region. Over the years it has proved to be one of the most resilient and useful machines in the region, as elsewhere. The market is big for this segment and we sensed a window of opportunity.”

In fact, so sure was Bobcat about the prospects of its BHL in the Middle East that it had always planned an exclusive launch in the region before anywhere else. “We did not even display our BHL in Bauma this year, because we absolutely wanted to launch it in the Middle East and show it to our people here first before any other market in the world,” Rhayem told CMME at the launch.

Close on the heels of Bobcat making its debut in the BHL segment was Case Construction extending its top-of-the-line 580t and made-in-India 570t models to the region.

Designed with the needs of developing markets in mind, the 570t had already proven to be a hit in Africa with its value for money proposition and robustness. For the company that originated the BHL concept, it was only apt to extend the model’s coverage to the Middle East, which has similar market requirements.

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2. A memorable lift
It’s not every day – or even every year – that a 1,800t piece of metal needs to be lifted 126m in the air and precision placed on the legs of what will be the world’s largest Ferris wheel when completed. This year will go down in the history of construction and heavy transport in the Middle East region as the year that this herculean task was accomplished.

The piece of metal was the hub and spindle unit of the Ain Dubai Ferris wheel being built by Dubai-based developer Meraas on the Bluewaters Island off Dubai’s coast. The project is not only an engineering marvel but also a showcase of what the construction machinery of our times can achieve.

The hub and spindle element was manufactured in the UAE by specialised steel fabricators Denholm Yam, Meraas said. And helping to move and lift the structure in place was global heavy move specialist Mammoet.

Due to its size and weight, the only option by which the unit could arrive at the job site was by sea. It was placed on self-propelled modular transporters, which carried it to the quayside, where it was carefully slid on to a barge, which undertook a 15-hour journey to Bluewaters Island.

The equipment used for the lift were two of the biggest and most powerful cranes in the world. The first was the Mammoet PTC 200, with a lifting capacity of 3200t on a boom length of 123m and a 55m jib. The second, the Liebherr LR13000, is the largest crawler crane in the world with a 3000t lift capacity on a boom length of 120m and a jib length of 48m.

“The physical lifting process took three hours; however, there were many challenges to overcome before, during and after this process,” Brian Schofield, vice president, Portfolio Lead at Meraas, told CMME. “Arguably the greatest challenge was the fact that it was a tandem lift, meaning that the load was split between the PCT200 and LR13000 cranes.”

Throughout the lift, it was imperative that the centre of gravity was not compromised. This was managed through onboard computer systems and the skill of the crane operating teams. Once the unit was placed on the legs, the cranes held it in place for three weeks of internal and external welding before the full load was transferred onto the legs.

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3. New heights of infrastructure
This year marked the opening of the first 36km of probably the most difficult road project ever executed in the UAE, and indeed among the most difficult in the region – the Jebel Jais road in Ras Al Kahimah.

Jebel Jais, the country’s highest point at around 1781m above sea level in the Hajar Mountains, has generally been off the charts for tourists and drivers in the country. But all that is about to change.

The new road snaking up the mountain to the Jebel Jais peak is suddenly making what was hitherto a forbidding landscape of sheer cliffs, craggy rocks and perilous drops, part of the country’s motoring landscape. Almost 10 years in the making, the road has now advanced more than 1500m above sea level in the 36km of tarmac that has been opened to the public so far, and will reach the peak a couple of hundred metres above by the middle of next year – after about a dozen more hairpin bends and zig-zagging curves are completed.

The reward from the top is a view unlike any other in the UAE, or even in the wider region. And a much cooler climate. This is the only area in the country where the temperature drops to freezing quite regularly in winter and stays near salubrious even at the peak of summer. Rain and clouds often shroud the high reaches, making for probably the most picturesque sight – a natural one at that – in a country full of man-made picturesque sights. And it is also one of the few places in the region to experience snowfall.

There are talks already of building a mountain resort on the small plateau at the top of the mountain where the road will terminate.

But commercial gains aside, from a construction point of view the Jebel Jais road is a marvel of engineering and of the resilience and excellence of modern construction machinery.

The people behind the task are Yaghoub Alipour Vaezi and his team from General Mechanic Company, the project’s contractors, fortified with an army of Volvo CE equipment backed by the Swedish giant’s dealer Famco, one of the biggest machinery companies in the region.

“This is 36km of some of the most challenging and difficult roadworks you can find,” Vaezi told CMME.

With the vagaries of terrain, weather, remoteness of location, ground conditions, et al, conquered, the project remains a testament to the ingenuity of the modern infrastructure contracting business and of the capability of the construction machinery of our times.

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4. Jettisoning the operator
Equipment companies have been working on future technologies for a long time now, with their biggest goal being to eliminate the operator altogether. Not only does this improve efficiency but also eliminates accidents due to human error at jobsites.

This year saw a flurry of activity from manufacturers espousing the cause of driverless machines. Leading this charge into autonomous machines was Swedish giant Volvo CE, which held a dedicated event at its base in Sweden to showcase the autonomous machines the company is working on.

The prototypes included unmanned excavators, wheel loaders and articulated haulers, going about various tasks such as digging, loading and hauling away earth without operators, like clockwork on automated mode – all under the remote supervision of a single human controller.

Most machines were standard Volvo products – L120 wheel loaders and A25F articulated haulers – upgraded with autonomous technology. Once the solution is finalised, this technology could be applied to other products in Volvo’s range, said officials.

An hour’s comparison found that the autonomous wheel loader was easily working to the equivalent of 70% of that of a skilled operator’s productivity. The biggest gain, though, was in safety.

Meanwhile, another brand to try out autonomous machines this year was CNH Industrial. The Italian giant previewed its concept autonomous tractors at the 2016 Farm Progress Show in Iowa, USA, with the entirely cable-less Case IH Magnum concept and a New Holland T8 NHDrive concept tractor.

Using GPS and satellite correction signals for precise guidance, the machines allow completely remote deployment, monitoring and control.

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5. The Makkah crane accident saga
In September last year, when a large crawler crane toppled during high winds in Makkah, falling on worshippers at the Grand Mosque and killing 111 and injuring 394, it was the deadliest crane collapse in modern history.

The protracted enquiry and official processes that have followed since have periodically thrown up interesting news and facts.

In July came the news that Saudi Arabia had brought charges against several suspects, including engineers and two government officials, in the accident.

According to reports in the Saudi press, authorities completed an eight-month investigation into the case and questioned several suspects before charging the accused, who included two officials working for two government bodies in Makkah, as well as two engineers.

Then, in August, came another revelation that gave a new twist to the tale when the Saudi finance ministry claimed it had advised the removal of the giant crane from the mosque 10 months before it came crashing down.

The project manager, however, did not comply, despite assurances, the ministry said.

The ministry, which represents the government in the mosque’s expansion projects, told the probe panel that it stopped reimbursing expenses for the crane 10 months before the accident, because the equipment was no longer considered useful.

Fourteen defendants of various nationalities are accused of negligence, damaging public property and ignoring safety guidelines. The defendants comprise six Saudi nationals, two Pakistanis and one person each from Jordan, Philippines, Canada, Palestine, Egypt and the UAE.

The case continues.

6. Telematics to the fore
While the construction machinery industry remains by and large a traditional industry manufacturers and end users are embracing the opportunities of the digital age like never before to improve their predictive abilities by harnessing the power of big data.

Manufacturers such as Volvo CE, Caterpillar, Komatsu and Hitachi have been offering most of their equipment with 2-D controls as standard for a while now. The next step in operator aids – going 3-D – saw a big increase in uptake this year with almost all the major manufacturers including it as an option.

Meanwhile, several OEMs are collaborating with and even acquiring specialists in the field. Caterpillar has a minority stake in Uptake, a tech start-up in Chicago while arch-rival Komatsu is collaborating with General Electric to develop sensors on dumpers.

Volvo CE announced a partnership with Topcon Positioning Systems, part of Japan’s Topcon Group, to establish a Topcon 3D machine control solution for its excavators.

Volvo is also integrating Trimble’s 3D control solution in its machines after an agreement the two companies signed in Bauma.

Meanwhile Trimble itself launched an updated 3-D Grade Control System, expanding the mix of construction machines supported by the software.

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7. Demag returns
Demag is a legendary name where mobile and all-terrain cranes are concerned. For several decades operators and fleet owners swore by the Terex-owned brand, which has carved a reputation as one of the best performers in the mobile crane category.

This year, the Demag name is back at Terex Cranes for large all terrains and mobile cranes. Despite Terex dropping the name about seven years ago, customers have continued to use it and so it is back by popular demand.

All terrain cranes above 100t capacity and crawler cranes above 400t will now carry the Demag name. A blue and yellow colour scheme replaces the white and grey of Terex but there is more to it than that, Terex explained at the launch ceremony during Bauma 2016 in Munich, Germany.

Ken Lousberg, Terex Cranes president, said: “I am very excited that we are reintroducing the Demag brand. We’re doing it because our customers asked us to bring the Demag brand back. It is as simple as that.”

Lousberg continued: “The Demag brand is a legend and through extensive conversations with our customers, we understand how much the brand still means to them, and what their expectations are that go along with it. It’s a brand they have depended on every day for decades, and it continues to be one of the most recognised brands in the industry.”

Another part of the change is a return to the old nomenclature of AC 130, AC 250 and so on for the all-terrain cranes and CC for the crawlers. The Terex Superlift 3800, for example, will become CC 3800.

Improved service, updated machines and higher quality are also part of the rebranding. Three updated five-axle all-terrains are already part of the Demag crane family since Bauma.

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8. Cat goes solo in mini machines
Caterpillar is known for some of the largest machines in the business, but the American giant also has a major interest in the smaller stuff. And, going by recent announcements from the company, that interest is growing.

Earlier this year, Cat announced that it would end a strategic alliance with German small equipment specialist Wacker Neuson for the production of mini-excavators and go it alone in the segment. The two companies had entered into a six-year alliance under which the German maker produced the mini-excavators for Cat to be sold under the Caterpillar brand name.

Cat said it would phase out the Wacker Neuson-made mini excavators that have carried its brand name under that agreement, and begin producing its own line of the machines. The alliance, which involved machines of 3t or less, is scheduled to end in May 2018.

“Wacker Neuson has been an excellent alliance partner, providing Caterpillar high quality mini excavators in this smaller size class for the past several years,” said Korey Coon, a Caterpillar general manager overseeing mini hydraulic excavators and small track-type tractors.

“The market for these products has grown, and we believe that internally designing, manufacturing and distributing these excavators will provide an even higher value to our customers, dealers and shareholders.”

Caterpillar will shift design and production of hydraulic excavators under 3t to its Building Construction Products Division, although it was unclear whether the company had decided which of the division’s facilities would handle the machines.

The division has its main plants in Clayton and Sanford, in North Carolina, USA, among other locations.

Caterpillar said its focus on growing its global mini excavator business will capitalise on the design and manufacturing expertise developed in producing its larger mini excavators.

Current models manufactured by Wacker Neuson that will be phased out in mid-2018 include the 301.4C, 301.7D, 301.7D CR, 302.2D and 302.4D.

Both Caterpillar and Wacker Neuson said one other model, the 302.7D CR, will phase out at the end of 2019, as will the 300.9D if the companies agree to do so later.

Both companies said spare parts and technical support will remain available for the affected models, and warranties will be honoured. Other products sold and serviced by Wacker Neuson at Cat dealers and rental stores will not be affected.

Caterpillar’s move has been viewed in many quarters as a nod to the current global market forces, which have seen steady falls in sales of larger equipment and the action shifting to the mini equipment segment.

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9. The drive to zero emissions
It may not be such an apparent or important issue in the Middle East, where Tier II and III machines are still the norm, but going green is the next big thing for the global construction machinery sector. The advanced economies, such as the EU, US and Japan, are already into Tier IV levels as mandatory and are phasing in stricter emission norms.

Even among the major OEM suppliers, offering the most environmentally-friendly product is now a race that no one can afford not to run. Customers in the bigger and more mature markets, under pressure from their principles to be more eco-friendly, are now coming to judge equipment companies by how green their products are.

The response from manufacturers so far has mainly centred around hybrid machines. One of the companies leading the charge is Hitachi, with machines such as the ZH210 LC hybrid excavator. Others such as Komatsu and Cat have their own hybrids under test. And yet others, such as Volvo, are researching the next step of cutting out emissions altogether with electric equipment.

At this year’s Exploration Forum in Volvo’s facilities in Sweden, where the company showed off its autonomous prototype range, it also displayed its fully-electric autonomous dumpers, which not only had the complete driver’s cab missing by virtue of being fully autonomous but also sported twin live electric axles powering it. Still a prototype under study, Volvo nevertheless has enough confidence in it as the machine of the future to show it to the world and hint at the direction its product development will progress.

The biggest step towards zero emission, however, has been taken by Wacker Neuson. The German compact and mini equipment heavyweight has already gone into full commercial production of an entire line-up of electric equipment, which it showed off at Bauma earlier this year.

Among the electric equipment Wacker Neuson displayed was the construction industry’s first fully electric wheeled loader, with all-wheel steering, produced under its Kramer division. Deliveries of the 2t 5055e have already started in summer this year in Europe.

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10. Rise of rental and used
Tough times call for tough measures. With the depressed oil prices seemingly a long-term reality, construction activity has slowed considerably this year in the oil revenue-dependent GCC region.

Private investors are shying away from the market with a wait and watch policy, and with slashed government budgets, the big ticket infrastructure projects are either on hold or progressing extremely slowly. In some countries in the region, such as Saudi Arabia, the slowdown has been extremely pronounced, resulting in a telling effect on machinery suppliers. And the slowdown shows no immediate sign of abating.

In this scenario, most fleet owners, contractors and developers have pulled down the hatch on new purchases for the immediate future. Instead, the few projects that are now seeing action are using machinery rented for the purpose of seeing through the immediate work phase.

Among the beneficiaries of this trend are outfits that offer equipment for rent, especially big dealerships that also run rental operations.

“Whenever the construction market faces a slowdown economically, the demand for used equipment starts to increase,” a spokesperson from Mohamed Abdulrahman Al-Bahar LLC, Caterpillar’s distributor in the region, told CMME earlier this year. “During such scenarios, we have noticed that purchase of used machines falls within the budget for those customers who still have projects to run.”

According to Al-Bahar, in addition to offering cost-effectiveness, used machines also come with lower risk. Since the investment is considerably lower, down-time between projects does not impact the bottom line as much.

Where fleet owners still need new or replacement machines, or in the rare cases where they need to update their fleets, second hand machinery is the first choice in tough times. Machinery auctioneers Ritchie Bros. have benefitted from this trend and from the global spread of their operations.

“We have the ability to transcend local challenges in any market by bringing in buyers from outside to create more liquidity and help maintain pricing levels,” Karl Werner, chief operations support and development officer and MD, Middle East, Africa and India, at Ritchie Bros, told CMME.

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