South Korea suffers from falling excavator sales in China

For ten years, South Korea's Hyundai Heavy and Doosan have dominated the Chinese excavator market - a key product in the construction equipment market - with a total market share of 40 percent. They did this by dramatically undercutting the prices of Japanese and American competitors such as Komatsu and Caterpillar, and have enjoyed growing profits from the intensive development of Chinese real estate.

This placed them among those who have made the largest profits for their country from China's economic boom. South Korea sent 25 percent of its exports to China last year. But the Chinese dream has abruptly evaporated for South Korea's excavator and other construction equipment makers. Hyundai sold 3,743 excavators to China last year, up from 18,467 sold in 2010. But even then, half of the excavators from the peak of 2011 were sold in China. And the South Koreans have suffered more than the rest. Meanwhile, a reputation for quality has allowed Japanese rivals Komatsu, Hitachi, and Kobe Steel to maintain an advantageous position this year.

True, Doosan reduced its dependence on China with the $ 4.9 billion acquisition of American manufacturer Bobcat, which generated 69 percent of Doosan's construction equipment sales in North America and Oceania in the first quarter of this year, versus 11 percent in China. At the same time, Hyundai Heavy's efforts to diversify its construction equipment markets have been complicated by world events: revenues in Russia took revenge on the recent collapse of the ruble, while previously high sales in Libya were "completely blocked" after the ouster of Muammer Gaddafi. In addition, sales for the China division continued to fall, with turnover falling 21 percent in the first quarter of this year.

Construction equipment, which rolls off the assembly line at the Hyundai Heavy Industries plant in South Korea in the port city of Ulsan, is sent to the Middle East, Latin America, Africa and other markets around the world. But no amount of geographic expansion can compensate for what is happening in the Chinese construction market.