Caterpillar: China demand ‘not expected to recover to peak’

Equipment giant expects industry-wide excavator sales in China to hit about 23,000 units this year, compared to 112,000 in 2010

PHOTO: Caterpillar has been affected by slowing demand in China and continued headwinds in oil and gas, among other factors. Credit: Caterpillar

Construction equipment giant Caterpillar has warned that it does not expect demand for excavators in China to recover to the peaks of 2010-12, it was reported.

Industry-wide sales of hydraulic excavators between 10-90t will reach the “23,000” range in China this year – a stark contrast compared to the 112,000 sold in the whole of 2010, Tom Pellette, group president for construction industry equipment, told the Financial Times.

Pellette’s remarks came as the Chinese economy recorded its slowest growth rate since 2009 in the third quarter.

“My expectation is within China and globally that the market will pick up to a level above where we are in 2015. But for China specifically, our expectation is that the market will rebound but we are not planning [for it to] get back to 2011/2012 levels,” Pellette said.

Last month, the Illinois-based manufacturer of heavy equipment and engines reported that its third-quarter sales and revenues were $11 billion, down from $13.5 billion in Q3 2014. The manufacturer also said it expects sales and revenues for next year to be about 5% below 2015.

Sales in the Energy & Transportation business are expected to be down 5-10% as a result of continuing weakness in oil and gas, coupled with a weaker order backlog than in 2015. In a statement announcing its Q3 results, Caterpillar said it also expects its mining business to suffer.

The preliminary outlook reflects weak economic growth in the US and Europe, with US construction activity impacted by low infrastructure investment and continued headwinds from oil and gas. It also reflects slowing demand in China, recession in Brazil, and continuing weakness in commodity prices, Caterpillar said.

“The environment remains extremely challenging for most of the key industries we serve, with sales and revenues down 19% from the third quarter last year. Improving how we operate is our focus amidst the continued weakness in mining and oil and gas,” said Caterpillar chairman and CEO Doug Oberhelman.

“We’re tackling costs, and our year-to-date decremental profit pull through has been better than our target. We’re also focusing on our global market position, and it continues to improve even in challenging end markets. Our product quality is in great shape, and our safety record is among the best of any industrial company today.”

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