Global infra boom revives S.Korea’s heavy equipment sector

South Korea’s heavy machinery manufacturers are making a strong start this year, reporting the highest first quarter revenue figures since 2018.

According to the financial research firm FnGuide Inc., the country’s two leading heavy machinery and construction equipment makers Doosan Infracore and Hyundai Construction Equipment Co. (Hyundai CE) posted sharp growth in Q1 earnings.

Doosan Infracore’s operating profit in the first quarter was estimated at 231.7 billion won ($206 million), up 28% from the same period last year.

The company’s Yantai plant in China has been operating at 200% of its normal capacity since February, with overtime and weekend operations, as new orders for its excavators have been piling up recently.  

The plant last year manufactured a monthly average of 1,500 units, whereas the company sold 4,591 units last month in China alone, setting a new monthly sales record since March 2010.

The heavy machinery maker also set a new record in the domestic market by selling 650 units in March, the highest number in the company’s history. Its two plants in Korea are also operating at almost 100% of normal capacity.

Likewise, Hyundai CE’s revenue also grew by 454% in the first quarter versus the same period in 2020, reaching 48.6 billion won ($43 million).

Hyundai CE is also operating its Jiangsu plant in China at 200% of its normal capacity since February. It sold 1,255 excavators in the first two months of 2021, more than three times the sales in the first two months of 2020 at 391 units.

The company said the number of new orders from other countries including India, Saudi Arabia, Qatar, Peru and Chile has also doubled compared to last year. 78% of Hyundai CE’s revenue comes from overseas markets.

Heavy equipment industry analysts say that once Hyundai Heavy Industries Group, the majority shareholder of Hyundai CE, completes the acquisition of Doosan Infracore, the two companies will be able to create synergies in various areas including procurement, research and development.

Doosan Infracore and Hyundai CE both project that their total number of orders this year will surpass that of 2018. But they also highlight the importance of having a reliable supply chain of equipment parts.

“We are making sure that we have a sufficient inventory of every machinery part to avoid and handle potential product failures,” said a Hyundai CE representative.  

“The excavator requires thousands of different parts for manufacturing. We are keeping a close contact with our suppliers every day, as every single part must be assembled together to make the final product,” added an official of Doosan Infracore.
 
NEW INFRASTRUCTURE BOOM ACROSS REGIONS  
 
The heavy equipment industry is enjoying an unprecedented year-over-year growth thanks to the global economic recovery driven by resumption of major construction projects around the world.

Another factor driving the industry growth is the large-scale stimulus measures implemented by the American and Chinese governments. The rise in raw material prices also fueled demand for mining equipment.

This year, the Korean manufacturers have been outperforming global competitors in the number of orders. Doosan Infracore’s sales in China in the first two months of this year was higher than that of Caterpillar Inc., the global market leader based in the US.

The company says that market reaction for its 13 models equipped with center high mounted stop lamps (CHMSL) for the first time in industry has been extremely positive.

“The clients recognized the high quality of our products that offer both safety and functionality,” said a company spokesman.

Hyundai CE is also piling up new orders by focusing on sales of machinery that are tailored to the needs of different local environments, such as its amphibious excavators that can perform dredging while afloat on soft terrain such as swamp, wet land and shallow water.

Hyundai CE has also been the market leader in Algeria over the last 10 years, by having a competitive edge in after-sales service.

Smaller companies like Daedong, the country’s top agricultural equipment maker, are also thriving. The company’s US sales of tractors and multi-purpose transport vehicles rose by 80% in the first quarter compared to the same period last year.

The company expects higher earnings this year as North America generates 25% of its annual revenues.

“We will expand our share of the market with our new autonomous tractors,” said a Daedong spokesman.  

Write to Hyung-Kyu Kim at khk@hankyung.com
Daniel Cho edited this article.