Hitachi Construction Restores China Plant Operations

Hitachi Construction Machinery Co. (6305), the world’s third-biggest maker of building equipment, has restored operations in China after shuttering its plant there for half a month last year as the economy cooled.

The excavator plant, in the eastern province of Anhui, is gradually increasing production since the end of 2012 as demand for small diggers used in housing recovers, President Yuichi Tsujimoto said in an interview from the company’s Tokyo headquarters on Feb. 18. The factory now operates five days a week after its partial shutdown cut production to as low as 25 percent of capacity, he said.

“We expect demand will recover at a moderate pace rather than the V-shaped rebound we saw in the past when demand came back from declines,” Tsujimoto said in the interview. “The company will need to monitor the market for the next two weeks to gauge how strong demand will be in the post Lunar New Year period,” a peak season for construction equipment, he said.

Sales in China may grow more than 10 percent for the year starting in April because of spending on stimulus measures and infrastructure that Tsujimoto says will spur industry demand beginning in China’s summer season.

Hitachi Construction Machinery shut the Hefei plant in August for two weeks a month as construction activity slowed -- the first time the plant has closed for more than a week since it was set up in 1995. Total retail sales of construction equipment in China, the world’s biggest market, slid about 19 percent in 2012 to $32.3 billion, according to data compiled by Bloomberg.  

“Important Market”

“China will remain an important market because there are no other places with such large demand,” Tsujimoto said. “Still, we expect a tough fight with existing rivals and local suppliers,” he said, referring to global suppliers including Komatsu Ltd. (6301), Caterpillar Inc. (CAT), Sany Heavy Industries Co. of China and Doosan Infracore Co. (042670) of South Korea.

Hitachi Construction Machinery fell 3.4 percent to 2,115 yen at the close in Tokyo trading, paring its gain to 18 percent since Jan. 1.

Hitachi’s efforts to strengthen marketing in China, including training workers in after-sales service and sending staff to dealers in regions where positioning is weaker, will pay off next fiscal year when demand picks up, Tsujimoto said.

Production of small-sized diggers weighing 6 metric tons to 12 tons has returned to “usual” levels, while output of larger excavators used in coal mining remains low after declines in the commodity price, according to Tsujimoto.

Komatsu expects industry demand in the Asian nation to grow by 5 percent to 10 percent in the 12 months beginning April 1, Chief Executive Officer Kunio Noji said Feb. 13.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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