Caterpillar warns lower Chinese demand will limit sales – by Lindsay Whipp (Financial Times – November 15, 2015)

http://www.ft.com/

Chicago – Caterpillar, the world’s largest mining and construction equipment manufacturer by sales, has warned that it does not expect Chinese demand for excavators to recover to the peaks of 2010-12.

Tom Pellette, group president for construction industry equipment, made the remarks as the Chinese economy recorded its slowest growth rate since 2009 in the third quarter, due to declining construction and factory activity, which many economists do not believe has bottomed out yet.

The forecasts also highlight Beijing’s efforts to rebalance the economy away from its traditional drivers such as manufacturing and investment and towards consumer spending. It also demonstrates the impact of the stimulus programme, which the government unleashed during the global financial crisis, had on demand.

Mr Pellette said industry-wide sales of hydraulic excavators between 10-90 tonnes, will reach the “23,000 range” in China this year. That compares with a total of more than 27,000 sold in March alone in 2011 and more than 112,000 for the whole of 2010, which was the peak year for the market. The company does not disclose figures for sales of its own products by country.

“That shows how far off the peak we are,” Mr Pellette told the Financial Times in an interview. “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.”

Despite the immediate headwinds, Mr Pellette is optimistic about the long-term future for the company’s business in the world’s second-largest economy in part because the urbanisation of the country has some way to go.

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