Volume 9 Edition 2 2012 - The ASIA Miner

India
India next Asian hub for mining and construction equipment
By Faseem T and Md Abdul Samad, research analysts, Beroe Inc
THE Indian mining and construction equipment
industry has a bright future in the next
five years owing to the government encouraging
foreign investment in the equipment manufacturing
sector. A number of major mining
and construction equipment manufacturers
have announced big investments in India.
There is a large demand for coal from the
cement industry and power sector in India
while increasing consumption of steel has
also improved the prospects of iron ore mining.
The construction industry in India is also
expected to grow to a size of about US$6.5
billion by 2014, according to estimates from
the Confederation of Indian Industries (CII).
These factors are expected to drive the
equipment market in India.
In the case of excavators, the market was
expected to grow by 30% in 2011 alone. In
order to meet its burgeoning equipment demand,
India is highly dependent on China,
with 60% of heavy equipment sourced from
China. Construction and mining equipment
imports from China amounted to about
US$300 million in 2010-11.
The price sensitivity of Indian consumers is
one of the reasons Chinese equipment is preferred.
Chinese manufacturers like Guangxi LiuGong
Machinery have a good presence in
India. The company started selling its products
in India in 2002 and with the growth in demand
for its products, its subsidiary LiuGong
India Private Limited started a manufacturing
unit for heavy earthmoving and construction
equipment at Pithampur, Madhya Pradesh.
Among the Indian companies, BEML Ltd, a
public sector company, is well poised to garner
a good share in the market. BEML exports mining
equipment to more than 24 countries in
Asia, Europe and Africa. It also has a wide
range of equipment for both surface and underground
mining. With the experience it has in
the industry, the company has even ventured
into contract mining in foreign countries. BEML-
Midwest Ltd, a joint venture of BEML with Indonesian
partners Midwest Granite Ltd and PT
Sumber Mitra Jaya, is looking forward to bidding
for mining contracts in India and abroad.
Major players like Caterpillar, Volvo, Hitachi,
etc are expected to reduce Chinese dominance
by investing in new and existing production
facilities in India. Major companies are
trying to ramp up their capacities in various
mining and construction equipment areas.
In September 2011 Volvo came up with
two excavator models, the EC210B Prime
and EC290BLC Prime (21 ton and 30 ton excavators),
from its plant at Bangalore. The
company plans to increase production by
three times during the course of the next year
to meet increased demand.
Telcon, a joint venture of Tata Motors from
India and Japan’s Hitachi, is the current
leader of excavators in India. They have a
good customer base especially for their
crawler excavators and can capitalize on existing
customer relations.
Hyundai Construction Equipment India Private
Ltd is another global player planning to
improve sales in India. In November 2011
they launched their 34 tonne R-340 LC-7 excavator
in India. The company is currently importing
its high-end excavators, which fall into
a range of operating weights from 30 tonne
to 80 tonne, from South Korea.
Caterpillar is keen to expand its presence
in India through its tie up with Tractors India
Limited (TIL) and Gmmco. The company sells
its trucks, backhoe loaders and excavators
through Indian outlets of TIL and Gmmco.
Caterpillar, being the world leader in mining
and construction equipment, is expected to
take advantage of its expertise in the field. As
part of its 2015 corporate strategy, Caterpillar
is looking forward to increase the manufacturing
capacity of a wide range of products in
emerging economies like India.
The company invested US$62 million in its
off-highway truck manufacturing facility in
Chennai in November 2011. This is in addition
to an investment of US$108 million
Caterpillar made in the Chennai facility in
2010. The company also plans to start a
new facility to manufacture its Perkins
branded 4000 series engine, which will involve
an investment of US$150 million.
Worldwide, the company plans to invest
US$800 million over the next five years to increase
its capacity for large excavators and
haul trucks used in mining applications.
Another major player to look up to is the
JCB. The UK-based excavator manufacturer
has captured a major share in the backhoe
loader market in India. The advantage with
JCB is its large network of retail outlets. The
business model of having retail outlets is different
from the model followed by other players
in India. Most of the players focused on
having tie-ups with institutional clients while
the JCB focused on retail outlet-based sales.
Even though JCB group has mining equipment
in its portfolio, it has kept away from the
mining sector in India. However, as the Indian
mining sector opens up, JCB is expected to
introduce its mining equipment and expects
to leverage the benefits of its closeness to
customers through retail outlets as well as its
good service network.
With the growth in mining and construction
equipment, a number of other related industries
are also expected to come up. In December
2011 Wipro Infrastructure
Engineering of India announced a joint venture
with Kawasaki of Japan to set up a manufacturing
unit in Bangalore for hydraulic
pumps used in excavators. The plant is expected
to become operational by July 2012
and will manufacture pumps used in excavators
within a range of 7 tonnes to 10 tonnes.
Mining and construction equipment distribution
in India is not as well organized as in
other countries. Currently, different players
have different distribution models. Komatsu
is distributing equipment through its partner
L&T’s distribution network while Hitachi sells
equipment through a number of distributors.
In certain Indian states there are multiple players
distributing Hitachi equipment. Kobelco
and Volvo are also following a similar distribution
model to Hitachi. Caterpillar equipment
is distributed by TIL in north and north-eastern
India and Gmmco in the peninsular region.
In the coming years, major players are
expected to improve their distribution as well
as service network.
The expected robust growth in India’s mining
and construction sectors will open new
avenues for equipment manufacturers. The
Indian construction equipment market is expected
to grow to an annual average of
about 70,000 units during the five year period
from 2011 to 2015.
Big players are expected to take advantage
of the supportive policies of the government
on a large scale. The huge investment and
renewed market strategies of major players
are expected to change the dynamics of the
Indian mining and construction equipment industry
in the next few years.
58 | ASIA Miner | March/April 2012