Business environment

Industrial producers and terminal operators as customers

80-85 percent Konecranes’ customer segments are related to industrial production the largest sectors being general manufacturing, metals, power generation, petro-chemicals and pulp & paper. Their need for services and new equipment is linked to industrial production volume and capacity utilization, in general.

The remaining 15-20 percent of Konecranes’ customers are container ports and terminals. Their propensity to buy services and new equipment is linked to world trade and container volumes, generally speaking.

Globalization will underpin new equipment demand

The long-term demand outlook for the lifting industry and related services is expected to be positive. Lifting is a basic need, which is the fundamental driver for the need for cranes and related services. This applies both to developed and emerging markets.

Demands for high productivity, safety and eco-efficiency are increasing in the developed industrial countries, bringing with them requirements for better technology, automation and systems. In order to optimize their cost structures, industrial firms are rationalizing and streamlining their production as well as outsourcing their in-house maintenance. This creates demand for advanced value-adding products and services because the remaining production has to meet increased demands for productivity and profitability.

A significant share of the industrial investments takes place in the emerging markets. Global companies are expanding production in the cost competitive regions and local companies are investing to capitalize on the growing business opportunities.

Most of the lifting equipment needs in the emerging markets are served by basic, robust technology supplied by multiple local vendors. However, the same needs for high technology, eco-efficiency and safety are increasingly present also in the emerging countries. As western companies grow, businesses globalize, demands for efficiency and profitability increase, large, globally operating customers want to increasingly deal with suppliers of material handling equipment and service that can meet these challenges.

The rising standard of living has laid a solid foundation for powerful economic growth in the emerging markets where local domestic users of materials handling equipment are playing an increasingly important role. In many cases, they are operating world class industrial assets, which also call for cranes and services of similar performance. On the other hand, there is clear demand for simple and robust equipment in the emerging markets, which is an interesting segment for Konecranes to be present as well.

Globalization of the industrial base is a key driver for the international flow of goods. Historically, world trade has been increasing faster than GDP. On the other hand, containerized trade has even outpaced world trade due to its easiness and cheap unit costs. The container handling equipment provided by Konecranes covers extensively the needs for materials handling at ports and terminals. The needs for productivity and environmental friendliness are equally present in container handling like within the industrial customers.

We estimate that the market for new equipment provided by Konecranes, i.e. hoists, components, industrial and process cranes as well as container handling equipment, amounted to EUR 6 billion in 2009.

Substantial potential in services

Most of our market potential is in services for cranes and machine tools. We estimate that in 2009, the total market for service of industrial and port cranes amounted to more than EUR 9 billion. Furthermore, we estimate that the market for service of machine tools was twice as large, i.e. approximately EUR 20 billion. However, we estimate that only a third of these markets were outsourced to external service providers like Konecranes; two-thirds of the equipment is still maintained in-house. Outsourced maintenance is concentrated in the developed countries but it is gradually gaining ground in the emerging markets too. In this framework, the business potential of our Service Business Area is substantial looking both at the total or the currently open market.

Competition

The market for lifting equipment and related services is dominated by numerous small and local suppliers. Konecranes has identified e.g. the following companies on the international lifting equipment and related services market: