The demand for heavy equipment

The world demand for heavy-construction equipment is forecast to increase 4 percent per year, with sales reaching almost $87 billion in the year 2001, according to The Freedonia Group's study, World Heavy Construction Equipment. In the United States, however, the demand is expected to remain at a plateau of just under $17 billion through 2001. These expected small gains for the U.S. are the result of the high level of sales in the base year of 1996. All markets -- private construction, public infrastructure spending and mining -- recorded record sales in 1996. As Table 1 illustrates, construction-equipment demand nearly doubled from 1992 to 1996. With slow spending on infrastructure and housing starts, The Freedonia Group believes it is unlikely that the U.S. construction-equipment market can sustain any major growth, if any, until after 2001. Then, the demand is expected to begin climbing again, reaching nearly $20 billion by 2006.

"Much of the demand for building construction and infrastructure will be generated by maintenance and repair activity, particularly for highways and other transportation infrastructure with the possible exception of airports," reports The Freedonia Group. "Since maintenance and repair, particularly work taking place within built-up cities, tend to use smaller and quieter equipment, the construction side of the market is shifting towards smaller pieces of equipment."

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As it stands now, the Southeast region of the country leads demand in most areas. Regional studies show the Southeast has the highest heavy-equipment demand with 34 percent. The Midwest follows with 23 percent. Yet, the West reports the fastest growth.

In studies of product type, however, the demand varies. The Southeast claims almost 40 percentof off-highway truck demand, followed by the Midwest with 22 percent. Paving-equipment reports indicate, once again, that the Southeast leads with 30 percent of demand, followed by the Northeast with 27 percent. It is important to note, however, that as of 1995 these rankings were different, due to the local (state) economy or funding for paving projects

Worldwide, North America and Europe have taken turns over the past 10 years claiming the lead in the heavy-equipment industry. Though the two continents may lead in annual financial numbers, Table 2 shows Japan experienced the highest annual-growth rate from 1987 to 1996, with 12.8 percent. Asia and Oceania held second at 10.6 percent. Furthermore, the prediction for future growth has Asia and Oceania with an additional 7.5 percent annual growth for 1996 through 2001. Central and South America are expected to follow closely behind at 6.7 percent.

Nevertheless, the heavy-construction-equipment market anticipates annual demand growth of 4 percent through 2001, which translates into $86.6 billion.

Source: World Heavy Construction Equipment, The Freedonia Group Inc. (Cleveland).

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