Germany has a long-held reputation for being the economic powerhouse of Europe and it’s certainly in better shape than some of its neighbours but even it is seeing some peaks and troughs in performance within certain industry sectors.

Kito Europe has found the German market to be "volatile and unpredictable" during the last 12 months, according to Scott Miller, managing director. "Some sectors, such as infrastructure, driven by public spending, have been good but private investment in plant expansions seems to be up and down quarter by quarter," said Miller.

"It seems the stimulus plan by the European Central Bank boosted the overall economy but to us it seems to have only had an effect on some sectors."

STABILISATION AND RECOVERY

SWF Krantechnik sales director Robert Menstell went so far as to say the German market "slightly slumped" in the 12 months up to the first quarter of 2015, adding that the situation has "stabilised and recovered" since then.

In STAHL CraneSystems’ experience, the German market has been "quite stable", thanks largely, it said, to its diversified product portfolio.

"Prices for standard lifting equipment are still under high pressure," said Thomas Kraus, support centre director, adding that "most business is clearly coming from the engineering sector."

KULI Hebezeuge noted that competition on the domestic market had been very strong during the last 12 months, particularly for standard cranes and crane components.

"As the German market was doing quite well this sector was placed under more pressure as more overseas companies pushed into this sales area," said Oliver Riese, KULI’s export manager. He added that as KULI also operates in special and tailor-made crane designs, it was able to compensate for this and its sales revenues remained stable.

Overall, the German construction sector is experiencing growth and this is expected to continue. A recent Construction Intelligence Center (CIC) "Key Trends and Opportunities to 2018" report on construction in Germany expects the industry to record a compound annual growth rate (CAGR) of 4.31 per cent over the forecast period of 2014-2018, reaching a value of EUR 321.1bn (USD 452.2bn) by 2018.

This increase follows growth of 4.22 per cent between 2009-2013 (value at 2013 EUR 260bn/USD 344.7bn) – growth that was supported by the government’s focus on investing in the country’s infrastructure, commercial and residential construction projects. In addition to this, strong economic conditions, a favourable labour market and a positive tourism images are likely to fuel investments in the retail and tourism sectors.

LABOUR MARKET

Of the five construction sectors identified by CIC, residential construction tops the list. With a value of EUR 116.8bn (USD 154.8bn) and an industry share of 44.9 per cent in 2013, there is a trend towards urbanization in the country and a pressing need for affordable housing. The sector is expected to be the fastest growing market between 2014-2018, with a projected CAGR of 5.35 per cent by 2018 (value EUR 151.5bn/USD 213.4bn).

The second fastest growing construction sector is commercial building, which had a 13.6% share of total output in 2013. Valued at EUR 48.2bn (USD 64bn) in 2013, the market is expected to grow by 3.34 per cent, to a value of EUR 56.8bn (USD 80.1bn) by 2018, fuelled by growth in the construction of retail, leisure and hospitality facilities.

Infrastructure construction is ranked at number three in terms of growth, with an industry share of 16.7% and a value of EUR 43.3bn (USD 57.4bn) in 2013. CAGR of 3.86 per cent is expected by 2018, pushing the sector’s value to EUR 52.4bn (USD 73.8bn)

Aging infrastructure

According to Germany’s Federal Statistics Office (Destastis), there is a focus on improving the country’s aging infrastructure in order to cope with an increase in the transport of goods. And this, said Menstell, is likely to benefit crane and hoist suppliers.

"Crane technology is always need in tunnelling projects, for example," he said. "The new Fehmarnbelt tunnel [an 18km road and rail underwater tunnel linking the German island of Fehmarn with the Danish island of Lolland] is a project for which a completely new concrete plant will be created and that will require the use of cranes."

KULI has also witnessed demand in the transport infrastructure sector, pointing to gantry crane supplied for the extension of the Düsseldorf underground.

"The work has been finished so the crane has now been removed and rebuilt in Hamburg where they are starting underground works," said Riese. He added that KULI had also supplied cranes for the extension of the Cologne metro and the railway station at Dortmund.

The government’s plan to invest in renewable energy is also expected to drive market growth.

Following the Fukushima disaster in Japan in 2011, Germany committed to phase out all nuclear power plants by 2022 and its intention is that 80 per cent of the country’s energy needs will be met by renewables by 2050. Germany’s Renewable Energy Act of August 2014 was approved by the European Commission and will support the provision of energy through mining gas and renewable resources.

Renewable developments

Twenty billion euros (USD 27bn) per year is to be invested in shoring up renewable energy developments and, as a result, this is expected to be the fastest growing sector of construction, with an expected CAGR of 5.07 per cent, to a value of EUR 16.7bn (USD 23.6bn) in 2018.

Kito Europe says it has witnessed this growth but, so far, only in energy production via wind turbines. "The wind turbine generator [WTG] manufacturers are very busy and their development of higher output towers has been good for ww as the towers get higher and higher," said Miller.

"But," he added, "the German government’s promise to build transmission lines seems to have stalled. We have even heard of some new wind farms in the north of Germany that are operating but can’t connect to the grid to deliver the power they produce!" SWF Kranetechnik reports that it has also benefited from growth in wind farms, saying it has delivered many crane components for the manufacture of turbines.

"In addition, we will soon have another electric chain hoist for the wind turbines themselves," said Menstell.

Construction market

The institutional construction market, encompassing healthcare and educational facilities, is ranked fourth in terms of the overall construction market. It was valued at EUR 27.6bn (USD 36.6bn) in 2013 and accounted for 10.6% of the industry value. The market is expected to grow by 3.01% to a value of EUR 32bn (USD 45.1bn) by 2018.

The smallest construction market in Germany in 2013 was the industrial sector, which registered a value of EUR 24bn (USD 31.9bn) and accounted for 9.2 per cent of the total industry value. This market is expected to grow by 3.31 per cent to a value of EUR 28.3bn (USD 39.9bn) in 2018. While industrial construction may account for the smallest chunk of the overall construction market, it is of major interest to the overhead lifting sector as it includes manufacturing (including automotive), chemicals and pharmaceuticals sectors.

The construction of manufacturing plants is the largest sub-category within the industrial building sector, accounting for 26.7 per cent of the total market value at 2013. According to CIC, growth in this category is expected to be moderate up to 2018 when its value is predicted to be EUR 7.8bn (USD 11bn) – up by 4.05%.

Automotive dominance

The dominant industry within German manufacturing is, of course, the automotive sector. According to the German Association of the Automotive Industry (Verband de Automobilindustrie, VDA), it is the largest industry sector in the country, with a turnover of EUR 384bn, which accounts for around 20 per cent of Germany’s total industry revenue.

Germany is home to 43 automobile assembly and engine production plants, with a capacity of more than a third of total automobile production in Europe. The sector employees 775,000 people, more than 93,000 of who work in research and development.

Even this sector has seen some limiting factors affecting growth – the depressed economy in Europe has dented exports (three-quarters of German-manufactured cars are exported) for example. And current labour market conditions are making domestic production less attractive and manufacturing in countries such as China and India more so, which, of course has a knock-on effect for German suppliers.

However, it is still a sound market for lifting equipment suppliers. Kito Europe has gained significant new business from the sector, for example, particularly from tier one suppliers.

"We see this sector gearing up output with plant expansions," said Miller. "We’ve seen several projects where there has been a requirement for higher lifting speed hoists, with a much higher duty cycle compared to the existing equipment. It seems they are targeting production bottlenecks and are investing to eliminate them."

Capacity expansion

Chemicals and pharmaceutical companies have invested in capacity expansion in recent years – although this has slowed due to factors such as high energy costs and the requirement for lengthy planning periods. The industry depends on the recovery of the global economy, so is affected by external forces – sanctions against Russia have impacted demand.

German companies have tended to invest in foreign fixed assets rather than on home turf. Perhaps as a result, lifting equipment providers have yet to benefit from any significant spending in this field. Notwithstanding that, there are some significant projects under way. For example, a USD 384m biotechnology manufacturing facility is planned in Penzberg. The facility, which could be completed by the end of 2018, will include a manufacturing hall, packing and storage facilities and a research laboratory. Clearly the opportunities are there, particularly for companies that have lifting solutions for almost every scenario. STAHL, for example, sees opportunities within the automotive and chemical/ pharmaceutical manufacturing sectors, as well is within transport infrastructure and renewable energy, although it points out that it "makes no sense" to bid for orders at any price.

SWF’s product portfolio also puts it in a good place to capitalise on growing market sectors.

"We have a versatile product programme with innovative features – socalled ‘crane intelligence’, said Menstell. "Whether it’s chain hoists for lifting heights of 145m for wind turbines or cranes up to 500 tons for the steel and metalworking industries, SWF has something to offer every industry and application."

Buying trends

And opportunities come not just from straightforward growth, but also from changing buying trends and a demand for better quality products.

"There has been a long cycle of buying lower cost equipment in order to save investment costs," said Kito Europe’s Scott Miller. "But we see a shift in this trend and more and more engineering personnel are searching for the ‘lowest cost of ownership’ and are directing their buyers to consider downtime, replacement costs and the cost of spares when making their purchasing decisions.

"With reasonable maintenance and care a high quality electric chain hoist can easily survive 10 years and Kito has really benefited from this shift in trend towards quality."

KULI said the key considerations when pitching for business included making sure "that all your components are absolutely up to date – particularly for the energy sector".

Riese added that being able to meet requests for energy efficiency and low maintenance products had also fuelled KULI’s growth, as had the ability to supply spare parts very quickly." Product and service development hasn’t been driven by any new legislation specific to the industry, said commentators, but there is an increasing focus on safety issues.

"It is clear that more and more end users have become more sophisticated about safety, including required inspections and third party certifications," said Miller. "Since safety legislation is becoming more restrictive, especially in Europe, we have a continuous product evolution process in place," said STAHL’s Thomas Kraus. "This mainly affects the electrics and the condition monitoring systems and helps us to keep our products up to the latest standards."

Financial downturn

Outside of the domestic market, of course, sales have been impacted by the financial downturn in Europe.

"The European market has been weak for a couple of years now," said Riese. "France, Italy, Spain and the UK have traditionally been strong markets for German industry but they are still not at the level they were before the [economic] crisis began." He added that there had been some recovery over the last few months on a "manageable level" and said that, as KULI exports to more than 100 countries it can absorb missing turnover from Europe by virtue of its business levels in regions such as the Middle East, South-east Asia and Africa.

SWF also said the sensible tactic was to look to other markets during a downturn. "We have clearly felt the depreciation of the euro as well as sanctions in Russia but, with our crane manufacturing partners, we try to find new markets to compensate for the declining ones," said Menstell.

"It’s not easy because there are so many competitors in Germany and in the EU," agreed Kito Europe’s Miller. "But because of our small size, combined with our strong global parent, we are able to be flexible and adjust to changing opportunities. And our overall EU geographical diversity gives us stability – we can be down in one market but up in another, all while finding other markets that are new prospects for us."

As a global player STAHL CraneSystems is also well placed to cater for the ups and downs of export markets. "We have nine subsidiaries and more than 150 partners throughout the world, said Kraus. This helps us overcome the financial downturn in Europe and so our business is still in good shape."