sdlg factory restart
Executives and plant managers inspect the SDLG heavy equipment manufacturing plant before it restarts.
Photo provided by SDLG Ltd.

Conditions in place for heavy equipment purchase rebound

Pattern in China could be replicated in U.S. as construction, manufacturing ramp back up.

April 21, 2020

Users, distributors, importers and manufacturers of heavy equipment have endured a very difficult March and April in the United States. The nation’s level of construction and manufacturing activity plummeted more quickly and severely even in comparison to the Great Depression or the 2008-2009 financial crisis.

If there is good news for builders, manufacturers and the equipment companies that serve them, it is that political leaders around the world have begun to look beyond containing the COVID-19 virus to how to restart their economies.

The People’s Republic of China, where COVID-19 began having an economic impact in January, has been attempting to open up a wider array of workplaces and jump-start construction and manufacturing in late March and early April. The nation, as it has long tended to do, has included infrastructure spending in its economic policy mix.

China’s policy framework has had a clear impact on heavy equipment markets.

In mid-April, the China Construction Machinery Association (CCMA) reported the nation’s total excavator sales in March 2020 hit a record high of more than 49,400 units. The CCMA says that figure represents not just a huge increase from the first two months of this year, but also an 11.6 percent year-on-year increase from March 2019.

United Kingdom-based KHL Media reported that South Korea-based Doosan Infracore acknowledged it recently had received several orders for medium-sized excavators from China. The equipment company said the machines were destined to take part in Chinese highway, bridge and passenger rail projects.

As of mid-April in the United States, equipment dealers are reporting being very much in the trough downcycle of COVID-19’s impacts. The Washington-based Equipment Leasing & Finance Foundation says its April Monthly Confidence Index (MCI-EFI) figure came in at 22.3—a 51.5 percent decrease from the 46.0 index figure of March.

The foundation, which says it represents a $900 billion industry, attributes the lack of equipment leasing activity to “the substantial uncertainty stemming from both COVID-19 and the impact of social distancing measures on the U.S. economy.”

The gloomy April and the prospect of a gradual economic restart is likely to keep second quarter optimism in check, according to the group. “The U.S. economy is in recession and will undergo a historically deep contraction in the second quarter. However, a timely and well-coordinated policy response of sufficient scale could limit the recession’s long-term effects,” states the foundation.

As China’s March orders indicate, the rebound could be just as swift as the shutdown. “During these uncertain times, I remain optimistic about the future of the equipment leasing and finance industry,” says Michael DiCecco of Columbus, Ohio-based Huntington Asset Finance. He is among the survey respondents who contributes to the MCI-EFI index figure.

“While production is likely to soften in the short term, in many ways we have a great opportunity to affirm our value to our existing clients and demonstrate our value to new ones,” adds DiCecco. “It’s an important time to stay close to our clients.”

Industry trade groups are nearly unanimous in lobbying for infrastructure spending and manufacturing support as key pillars in any economic recovery strategy.

The Milwaukee-based Association of Equipment Manufacturers (AEM) is calling on the federal government to develop and implement a comprehensive national strategy for manufacturing to strengthen the economy and create new jobs and opportunities.

AEM also has issued a document outlining three steps their equipment-making member companies can take to continue production during the COVID-19 outbreak, including identifying their “high-risk” employees.

Whether or not the U.S. begins a “V-shaped” economic recovery in time to salvage second-quarter figures, there is little doubt that more construction, demolition and manufacturing activity is in the offing by summer.

For equipment makers who want to be ready to supply machinery, the AEM recommendations are one place to start. A company already on that restart path is Linyi, China-based SDLG Ltd. The maker of wheel loaders and other heavy equipment, with a North American office in Pennsylvania, has provided a description of some of the reopening techniques deployed at its plant in Shandong Province, China.

The list of anti-virus spreading techniques includes two-meter (roughly six feet) distancing, wearing masks, taking temperatures, disinfecting equipment between shifts and even asking workers to bring their own utensils and food to work.

While those are not workplace practices that existed in the U.S. before March, as America’s heavy equipment industry gets ready for a rebound, they will likely be considered.