Re-inventing Korea’s crane market

According to a recent report published in the OECD Economic Outlook, Volume 2016, Issue 1, output growth for Korea in 2016 is projected to be 2.7%, which the report suggests is due to weak external demand and fiscal tightening, with inflation at around 1%. The OECD said given Korea’s reliance on export-led growth, a delayed rebound in world trade is the biggest risk to sustained expansion. This, coupled with a sharper than expected slowdown in China would be problematic for Korea.

There is planned restructuring of some major industries which the OECD predicts could lead to higher unemployment rates but on the upside it suggests that Korea’s strong external position could provide a buffer against these types of reforms. This could lead to a reignite for domestic demand and reverse the decline in export performance.

Ho-Joon (James) Bang worked for Manitowoc for 32 years and is currently the vice chairman of the Korean Crane Association and president of the Asia Crane and Rigging Group. Cranes and Lifting met with him earlier this year and again more recently, when he said that one of the biggest challenges facing the construction and crane sector in Korea has been the global drop in oil prices.

“We have four major industries in Korea: shipbuilding, steel manufacturing, oil refineries and construction. All those industries are facing a very hard time at the moment. We have to compete with China especially in the ship building industry and they are already surpassing us,” Bang said.

“Most Korean crane companies are trying their best but it’s hard times. I never expected to see this with the economy. Who expected oil prices to drop? There are many challenges to face in 2016. The rental market is the biggest issue. The rates are half but the payback is the same. The last two years, it’s gone down and now it’s more than half.

“Iran is a big market for exports and will continue to grow. With the sanctions now lifted and a population of 80 million it’s created new oppor tunities. Oil production is cheaper in Iran than in any other country in the Middle East. In Korea, we expect more than 20% of our exports will continue to go to China and now Iran. The lifting of the sanctions has created a whole new market for Korean expor ts,” Bang said.

“Some companies have fallen on hard times but we expect to see a recovery of the Korean crane market in 2018 as we go to a general election or if crude oil and gas prices recover first,” he said.

Bang believes that the general market conditions for the Korean crane sector is mixed, with the crawler crane sector at a crisis point due to limited demand from the construction sector.

“All-terrain and rough-terrain have had better operating conditions recently and it seems to be on a rising curve but demand is for less than 300-tonne capacities. Over 500-tonne are still less than 40% of operating conditions,” Bang said.

“Tower cranes are showing signs of prosperity and this is expected for another two years due to demand from an expansion of the electronics industry and a new boom in residential construction.”

Currently, Korea has no large infrastructure projects from both government and private investors because as Bang suggests, global demand has slowed down and many investors are not looking for projects until 2017.

CASE STUDY: THE GUMI CRANE GAME

Korea is a densely populated country with the majority of people living in high-rise apartments. Maneuvering cranes is often an issue, as streets are narrow and hilly which means it can be a logistical nightmare to access building sites.

German crane manufacturer, Liebherr recently looked at three crane companies in the Gumi area of Daegu – Korea’s fourth largest city – to see how accessible it really is to get cranes into such confined sites.

Sinhan Cranes recently invested in a second-hand Liebherr MK 80 mobile construction crane in order to diversify its business and become more competitive in the hydracranes sector.

“We have a number of hydracranes, but the competition in this area is intense with much of the construction work in warehousing, storage and light industry. Buildings are on tight sites with large footprints and very little access for lifting equipment,” Wun Bae-chun, owner of Sinhan Cranes said.

Jung Bu Cranes, also situated Gumi, has two Liebherr MK 80 mobile construction cranes and an MK 100. According to company owner Kim a large number of development projects that are undertaken in Gumi are in narrow or congested areas, or are being built on expensive plots of land where little room is left for installing a crane.

The company’s MK100 is currently working on a seven-storey shopping mall in Gumi, located on an exceptionally tight site with a building footprint of only 2696 m2.

“The site is long and narrow, and the only place for the crane is in the slip- road alongside the project. This is only wide enough for one car. We can get the crane into the space even with the outriggers and its 52m jib,” Kim said.

Liebherr found that not all crane companies in Korea were using new equipment. Kim Wan-gu a one-man owner-operator of Hanbit Cranes, a crane-rental company in Gumi, uses a 2001 MK80 that had previously been used on construction sites in the Netherlands.

“Competition is intense and I realised I needed to give myself a more distinctive and competitive business advantage to be able to undertake jobs that I could not have done with the hydracranes,” Kim said.

“Our crane is currently being used to build a shop and office building in a part of Gimhae where the streets are particularly narrow and hilly, and where there is a considerable amount of congestion. The building covers an area of 866 m2 and has a total floor area of 4130 m2. Its completed height will be 19.6 m.”