Construction Machinery Industry

 

1. The number of used excavators imported from Japan into China will drop sharply, giving domestic excavator brands a good opportunity to expand the market and increase their share. In recent years, China's excavator imports have accounted for about 50% of total construction machinery imports, of which used excavators account for more than 90% of total excavator imports and more than 35% of total domestic sales by volume; the imported volume exceeds the total volume of domestic-brand excavators, and the imported used excavators are mainly Japanese brands. The disaster relief and post-disaster reconstruction work following this major earthquake will sharply increase domestic demand for excavators in Japan. With capacity unable to be expanded in the short term, this will inevitably affect the pace of excavator replacement, thereby affecting the number of used excavators exported to China. Domestic excavators will gain room for import substitution, and the domestic content ratio is expected to rise rapidly from about 20% to more than 30%.

 

2. It may affect some enterprises' procurement of excavator hydraulic components and pump truck chassis, but the impact is currently estimated to be small.

 

1) In terms of excavator hydraulic components, Kawasaki Precision Machinery of Japan is the world's and China's largest supplier. Kawasaki is more than 500 kilometers from the epicenter and was not greatly affected by the earthquake; it is not yet clear whether Kawasaki has any subcontractor factories in the quake zone. Considering that Japan's post-earthquake power rationing policy may affect Kawasaki's capacity, Kawasaki may give priority to supplying hydraulic components for newly added excavator demand in Japan, which may affect the supply of excavator hydraulic components in China. However, the impact will not be large because (1) domestic excavator manufacturers basically signed 2011 procurement demand contracts with Kawasaki in 2010; (2) Bosch Rexroth, as the second-largest hydraulic component supplier, is increasing its capacity relatively quickly; (3) Korea's Dongmyung and Jeil Hydraulics may serve as alternatives to fill Kawasaki's supply gap.

 

2) In terms of pump truck chassis, Isuzu is one of the main imported brands, currently accounting for between one-third and one-half. Isuzu has currently been affected by the earthquake (the extent is not yet known), but the impact on domestic pump trucks is estimated to be small: (1) Mercedes-Benz and Volvo chassis can make up part of the supply; (2) pump trucks can also use self-made chassis. 3. Subsequently, China's construction machinery exports to Japan may be promoted, such as bulldozers and cranes. In summary, the major earthquake has more advantages than disadvantages for the construction machinery industry. Top picks: XCMG, Shantui, and Sany Heavy Industry.

 

Nuclear Power Equipment Industry

 

The nuclear power plant accident in Japan will draw further attention to nuclear power safety and may affect domestic nuclear power construction. We are closely monitoring this and expect a short-term adverse impact on nuclear power equipment companies such as China First Heavy Industries, Erzhong Heavy Equipment, Jiangsu Shentong, and China Nuclear Technology.