Is this a blip or a trend? U.S. Construction Equipment Exports Still in Decline

AEM1The latest reports from the USA Association of Equipment Manufacturer (AEM) shows that construction equipment exports from the US continue to decline.  Is this a reason for concern or just a temporary blip?  Will it be a devoloping trend sending the industry into another slump?

It would be too easy to say it is a result of the economic problems industry is facing in China, but Asia is not the most effected region.

Exports of U.S.-made construction equipment dropped 17.6 percent for the first three quarters of 2015 compared to January-September 2014, for a total $10.8 billion shipped worldwide.

All world regions experienced declines, led by Africa and South and Central America, according to the AEM.

The AEM equipment manufacturing trade group cited U.S. Department of Commerce data it uses in global market reports for members.

Exports by World Region

January-September 2015 U.S. construction equipment exports by major world regions compared to January-September 2014:

  • Australia/Oceania declined 5 percent to $645 million
  • Asia decreased 10 percent, for a total $1.4 billion
  • Europe dropped 11 percent, for a total $1.4 billion
  • Canada dropped 15 percent, for a total $4.4 billion
  • Central America fell 21 percent, for a total $1.1 billion
  • South America declined 28 percent, for a total $1.4 billion
  • Africa decreased 36 percent to $611 million

AEM Market Analysis Overview

AEM’s Benjamin Duyck, director of market intelligence, provides some insights:

The third quarter of 2015 marked the 11th consecutive quarter that U.S. construction equipment exports experienced year over year declines. According to AEM’s third quarter North American Construction Equipment Industry Conditions Trends Report initial results, 35 percent of survey exporters indicated they experienced a decrease in exports while 50.9 percent of respondents felt the market had remained stable.

Contrary to the second quarter, imports also declined – 5.71 percent year over year. Declining imports is a bigger signal to the U.S. market, especially now that imports are relatively cheaper under the stronger dollar.

In the third quarter AEM industry conditions survey, 42.3 percent of respondents indicated U.S. demand for equipment was lower this quarter vs. last year while 30.7 percent felt the market remained stable. For the next 12 months, overall growth is still expected.

While the global environment is still positive for construction and construction equipment, one of the bigger clouds could be the Chinese market. It is the U.S.’s ninth largest export market for construction equipment and it declined 25 percent year to date.

Another cloud is Brazil, which last week announced its economy was going deeper into a recession after three consecutive quarters of contraction in its GDP. While exports to Canada, our largest trading partner, also decreased, by 15 percent year to date, Statistics Canada recently reported that the economy returned to quarterly growth.

While it is hard to pinpoint the exact cause of the declining exports, some of the possible explanations may be the difficulties in exporting equipment with engines that require Ultra Low Sulfur Diesel, strengthening local manufacturing industries and a strong U.S. dollar making U.S. manufacturers less competitive. It will be interesting to see where the global economy is going in 2016. While exports might continue to slump, we will also be keeping our eyes on domestic demand and imports.

Exports by Top 10 Countries

The top countries buying the most U.S.-made construction machinery during the first three quarters of 2015 (by dollar volume) were:

  1. Canada – $4.4 billion, down 15 percent
  2. Mexico – $906 million, down 23 percent
  3. Australia – $602 million, down 3 percent
  4. Chile – $388 million, down 11 percent
  5. Brazil – $347 million, down 39 percent
  6. Peru – $267 million, down 26 percent
  7. South Africa – $264 million, down 50 percent
  8. Belgium – $230 million, down 34 percent
  9. China – $214 million, down 25 percent
  10. United Arab Emirates – $182 million, up 57 percent