Caterpillar: Supercycle China isn’t coming back

With revenues of $50 billion a year and operations at the ends of the earth, few companies are in a better position to take the pulse of the global economy and the resource sector in particular than Caterpillar.

The world’s number one heavy equipment manufacturer has been hit hard by the decline in mining and construction – sales are down more than $15 billion from its peak just four years ago and Caterpillar expects another 5% decline in 2016. Just last month the company announced another round of cuts to its workforce.

The extent of the slump and the outlook for a recovery are particularly stark in China. The head of the Peoria, Illinois-based company’s construction equipment  division, Tom Pellette is still optimistic about China long term, but ruled out a return to the heydays in an interview with the Financial Times on Sunday:

Mr Pellette said industry-wide sales of hydraulic excavators between 10-90 tonnes, will reach the “23,000 range” in China this year. That compares with a total of more than 27,000 sold in March alone in 2011 and more than 112,000 for the whole of 2010, which was the peak year for the market. The company does not disclose figures for sales of its own products by country.

“That shows how far off the peak we are,” Mr Pellette told the Financial Times in an interview. “My expectation is within China and globally that the market will pick up to a level above where we are in 2015. But for China specifically, our expectation is that the market will rebound but we are not planning [for it to] get back to 2011/2012 levels.”


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