Rising raw material prices and increasing SOC investment… Hyundai E&C Doosan Infra

Enter 2021.03.19 06:00

Hyundai Construction Equipment won orders for 3 months this year, up 128% compared to the previous year
Doosan Infra is also increasing mainly in emerging countries such as Asia and the Middle East.

As raw material prices such as copper and oil continue to rise in anticipation of a recent recovery in global demand, the domestic construction equipment industry is also expanding. In emerging countries, demand for heavy equipment is also increasing as SOC (social overhead capital) investments such as raw material mining demand increase.

According to the industry on the 19th Hyundai Construction Equipment (267270)Has received orders for a total of 2698 construction equipment in emerging markets such as the Middle East, Southeast Asia, and Latin America over the past three months. This is a 128% increase from the same period last year (1181 units). On the 7th, Qatar and Colombia received orders for 104 units, including 56 excavators and 40 excavators and backhoe loaders, respectively. Starting with the Indonesian coal mine in December of last year, it also signed equipment contracts with the Sudan gold mine in Africa and the iron ore mine in Brazil.



An excavator (HX300SL) that Hyundai Construction Equipment will supply to the Qatar sewage treatment facility construction project in the first half of this year. / Provided by Hyundai Construction Equipment

No. 1 market share in the domestic construction equipment market Doosan Infracore (042670)This year, it has signed a contract to sell a total of 221 construction equipment in Asia, the Middle East, Africa, and Latin America. In Asia, it signed a contract with a Hong Kong construction company for 50 medium and large excavators, and won orders for 38 excavators and wheel loaders and 20 mini excavators from Thailand and Vietnam, respectively. In addition, it has signed an excavator and wheel loader sales contract with ▲Oman (27 units) ▲Morocco (35 units) ▲Egypt (35 units) ▲Colombia (16 units).

One of the backgrounds for successive orders in emerging markets is the expansion of SOC investments in emerging markets. Emerging countries are increasing their SOC investments to recover the economy, and demand for construction machinery to mine raw materials for this is increasing. The Bloomberg Merchandise Index (BCOM), consisting of futures prices for 22 major commodities such as copper and crude oil, recorded 85.95 on the 17th (local time), significantly exceeding the peak (80.88) before the outbreak of Corona 19 (January).

In terms of raw material prices, international copper prices based on the London Metals Exchange (LME) have been trading at more than $900 per ton (ton), the highest since 2012 since the 25th of last month. The price of Brent oil from the UK’s North Sea, one of the world’s top three oils, rose to $71.38 per barrel at the beginning of the market on the London Futures Exchange on the 7th, exceeding the $70 mark for the first time since May 2019. Western Texas Oil (WTI) in the U.S. rose to $60 per barrel and natural gas to $2.88, back before the outbreak of Corona 19.

In China, one of the major emerging economies, SOC projects have already been actively carried out from mid-last year. Doosan Infracore sold 18,686 excavators in China last year, with the largest sales volume in the last 10 years. Last month alone, a total of 1,754 excavators were sold, exceeding three times the sales volume of the same period last year (482 units). In India, where Hyundai Construction Equipment occupies the second largest market share, the economy has been on a rebound since the fourth quarter of last year.



Doosan Infracore’s Chinese subsidiary located in Yantai, China, exceeded the cumulative production of 200,000 excavators in 26 years after its establishment, and held a production ceremony in October last year. /Provided by Doosan Infracore

An official from the construction machinery industry said, “After announcing stimulus measures at Yanghoe (National People’s Congress and National People’s Political Negotiations), the largest political event in China last May, the construction market has survived thanks to the financial support and demand for equipment replacement from the Chinese government “He said, “The increase in mine development due to the recent increase in raw material prices is also raising the demand for excavators.”

Experts are looking forward to synergies from the acquisition of Doosan Infracore by Hyundai Heavy Industries Group, which belongs to Hyundai Construction Equipment. last month Hyundai Heavy Industries Holdings (267250)KDB Investment Consortium Doosan Heavy Industries & Construction (034020)It signed a contract to acquire 34.97% of Doosan Infracore’s shares for 850 billion won.

According to a report published by the Korea Institute for Industrial Service last year, the market share of Hyundai Construction Equipment and Doosan Infracore in the global market ranks 20th (1.5%) and 9th (3.7%), respectively. When the shares of both companies are simply summed up, it is the same as Sweden’s Volvo Construction Equipment (5.2%), which is the fifth largest in the world.

Kwang-Sik Choi, a researcher at Hi Investment & Securities, said, “Hyundai Construction Equipment is expected to create synergies in sales, joint R&D, and integrated purchasing through the acquisition of Doosan Infracore by Hyundai Heavy Industries Holdings.” “We expect more than 3 percentage points (p),” he said.

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