European crane manufacturers refuse to be squeezed by the Asian price crunch. Alex Hughes reports
However the economic maelstrom continues to depress even the hardiest producers.
Trygve Boström, director of Port Service at Konecranes, pulls no punches when he says to Port Strategy that the current economic crisis impacting the ports industry is doing nothing to encourage sales of new cranes.
He says the most telling indication of the state of the industry has been the cancellation or postponement of a couple of tenders that had been scheduled and in which the company had indicated a keen interest in participating in.
The analysis of Paceco España sales manager Enrique Marchessi is that the market for quayside gantry cranes has certainly gone into a period of downturn as a result of the world economic situation. However, although many new projects where Paceco would have been interested in bidding for contracts have been postponed, no existing contracts placed with the company have been cancelled.
"In fact, we have just signed an order to supply three gantry cranes for DP World's container terminal in Tarragona, which are due for delivery in the summer of 2010," he says.
But the Asian/European divide remains and with ZPMC seemingly sweeping everything before it, PS asked European manufacturers how they are able to compete.
Paceco España starts the ball rolling, by making clear that there is not, in Mr Marchessi's view, a 30% difference in price between Asian and European manufacturers; if there were, Paceco España wouldn't be in business, he says.
"In our target market, which apart from the Iberian Peninsula, is the whole of Europe, we are definitely competitive on price, quality and reliability. However, we have a distinct philosophy to ZPMC: they are a global supplier, whereas we see our role as supplying mainly a regional market."
Nor does the Spanish-based manufacturer seek to compete in the bulk crane production market; its maximum annual capacity remains in the region of ten units.
Nevertheless, being owned by Mitsui and forming part of a group encompassing Paceco Corporation, Paceco España does occasionally venture into other markets, most notably those in the Americas.
And while Liebherr Container Cranes' sales and marketing manager Gerry Bunyan accepts that there are differences in the purchase prices of cranes offered by non-Asian producers, he believes that the premium you pay can be recouped within a relatively short period. The key element, he states, is life cycle costs.
"You can offset the purchase price difference in high performance units through the simple fact of having a quality crane in service that is always available for operations. With reliable equipment, a terminal operator starts making money faster."
But while some manufacturers believe the falling price of steel has helped to suppress the cost of European-produced cranes, others believe that the picture has changed little over the past twelve months.
Konecranes' Mr Boström, for one, says there has been little change. In his view, the relative percentage fluctuation in component prices between Europe and elsewhere has been more or less equal. In addition, the trends in raw material prices are the same irrespective of whether they are in China or in Europe, he says.
However, he insists that the type of customer targeted by the company is not wholly fixated on price, but looks at the total cost of ownership.
"A typical Konecranes customer appreciates safety, the life cycle value and evaluates the cost of the crane purchase based on the total cost of ownership," says Mr Boström.
The result is that batch sizes for ship-to-shore cranes tend to be in the two to four unit range. However, the way the company has structured itself does allow it to quickly adapt to demand variations between different crane types. If necessary, the three main ship-to-shore manufacturing plants - located in Finland, Ukraine and China - can produce dozens of these annually, if required.
This compares with Liebherr's typical order of between 1-10 cranes per customer, says Mr Bunyan. "We took a lot of orders last year and have enough work to last well into 2010 and we are continuing to receive enquiries," he adds.
For Liebherr, repeat business is key, with South Africa's Transnet being one of the company's biggest clients of recent times, while terminals throughout the Middle East have returned time and again.
Asked what impact the falling price of steel has had on the cost of Paceco's cranes, Mr Marchessi points out that up to February prices had definitely fallen. Since then, production has been cut and prices have begun to rise once again. So in that respect the market has been self-correcting.
Significantly, unlike other manufacturers in the sector, Konecranes builds a lot of its own components. Indeed, it is the largest crane drive builder in the world, as well as producing other key components in house. The guiding philosophy behind what is built in house and what is bought in from external suppliers is one of ensuring that all systems function well together.
"This is especially true for drives, where there's a noticeable difference between those developed specifically for cranes and those designed for more generic applications. In addition, when we supply something ourselves, there is a great benefit to be had in terms of support and troubleshooting," says Konecranes' Mr Boström.
Even though the company's cranes may have a slightly higher list price, the eventual cost/box left ratio will be better, he argues. Furthermore, safety and environmental aspects have to be taken into account.
Since the majority of Konecranes' key parts and components are built in house, spares and knowledge are readily available. Depending on requests from customers, and the part category the company will provide original OEM part numbers in crane documentation.
"We obviously sell parts and components, even though we may not have necessarily built them ourselves. I would stress that we aim to price these very competitively," says Mr Boström, adding that all business lines have their standalone profit and loss responsibility.
Lead times of 14-16 months from contract signing to the handover are currently the norm for Liebherr, while Paceco España describes its delivery times as competitive, although vary considerably depending on exactly what products the customers want. Standard solutions, says Mr Marchessi, can result in an extremely short delivery time, while tailored solutions understandably take longer.
"The more complex the engineering involved, the longer the delivery time," he says.
In terms of investment in research & development, Paceco España is fortunate that its parent company, Mitsui, has ploughed significant financial resources into crane development, often meaning it has been a major innovator in some areas. In fact, Mr Marchessi claims that the group's R&D has given it the edge when winning several contracts.
"We obtain components such as brakes and gearboxes from reputable third-party suppliers. Our objective is to cooperate closely with these companies and develop new solutions in partnership with them," he says.
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