Caterpillar, Komatsu See U.S. Construction Market Rebounding

Caterpillar Inc. (CAT), Komatsu Ltd. (6301) and Volvo Group AB said North American construction equipment demand is rebounding from the slump that followed the financial crisis.

The market may expand as much as 30 percent in 2011, said Olof Persson, president of Volvo’s construction equipment unit. Industry sales of equipment including excavators and wheel loaders in the U.S. and Canada may rise to about 40,000 units in Tokyo-based Komatsu’s 2011 fiscal year, which runs through March 2012, from about 30,000 units in fiscal 2010, said David Grzelak, chief executive officer of its Komatsu America Corp. unit. Sales peaked at 72,000 units in fiscal 2006, he said.

“The U.S. market is growing from a low level,” Persson said yesterday in an interview at the CONEXPO-CON/AGG construction conference in Las Vegas. “The North American market is turning and the market is coming back.”

The recovery in U.S. industrial production, up 5.5 percent in the year through February, hasn’t been matched in construction. U.S. private non-residential construction spending dropped to $244.4 billion in January, the lowest level in six years, according to U.S. Census Bureau data. U.S. housing starts in February were 479,000, 21 percent lower than a year earlier, bureau data also show.

“We feel the market has bottomed,” Grzelak said in an interview in Las Vegas. “We see continued improvement.”

Komatsu is seeing increases in equipment utilization, parts sales, and distributors replacing aging rental fleets, Grzelak said. Orders and prices for used equipment are rising too, Persson said.

Volvo Expansion

Volvo will invest $100 million in the next two years at its Shippensburg, Pennsylvania, plant and start manufacturing wheel loaders, excavators and haulers, it said last week. The Gothenburg, Sweden-based company plans to expand into the U.S. market for skid-steer equipment, vehicles that can haul earth and dig trenches.

That market is “one of the products we haven’t been a player in,” said Persson, who will become CEO of Volvo Group in September.

Caterpillar, the world’s largest maker of construction equipment, is seeing a “slow, steady increase” in demand in North America, its CEO Doug Oberhelman said yesterday in a presentation at the conference.

‘Favorable Vibe’

There is a “favorable vibe” at the event in Las Vegas, with a higher attendance from the investment community compared with three years ago, when CONEXPO-CON/AGG was last held, Robert McCarthy, an analyst for Robert W. Baird & Co. in Chicago, said in a report.

“The North American market is in a recovery,” Ron DeFeo, chief executive officer of Westport, Connecticut-based heavy- equipment maker Terex Corp. (TEX), said in an interview at the conference. “I want to temper that assessment with the fact that we dropped pretty low. Most of the demand is replacement demand.”

While heavy-machinery rental companies are replacing old equipment in their fleets, “they are not growing their fleets,” DeFeo said. “It’s the beginning of a recovery, not the middle.”

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.