“Even in Japan, the topic of shale gas and shale oil has become quite common place in the general press and on TV. There is, however, a strong view that, when it comes to the demand for industrial gas in Japan, while excavation has become quite popular in North America, it really might not mean anything. However, the fact is that from excavation to transport by LNG tanker up to storage in LNG tanks, an expansion of the demand for gas in Japan over a wide range is anticipated for use in related equipment and systems.
Heading toward an increase in construction equipment for North America
A typical example is construction equipment. At the presentation entitled ?The Outline of the Market for Construction and Mining Equipment Overseas? held on December 17 of last year, Komatsu stated that the demand for the 7 major types of construction equipment for North America in 2012 was expected to exceed 60,000 units, a growth of over 20%. At the meeting held on January 30 of this year entitled ?The Regional Market Environment and Outlook?, Hitachi Construction Machinery too anticipated that the US market for hydraulic shovels for 2012 would come to 24,000 units, a growth of around 25%, while mini shovels would total 24,000 units, a major increase of over 40%.
The main reason is the increased activity regarding the development of natural gas of which shale gas is one type. The excavation process for shale gas involves clearing forests and mountains. The land is developed and an access road to it is constructed. Excavation equipment is set up on the land. A huge pond is cut out to be used for treatment of the waste water. The gas well is drilled. After completion of the work and excavation equipment is moved, the peripheral land is renewed. Construction equipment is used for all areas as mentioned above. In North America alone the demand for construction equipment is huge just because shale gas plants are expected to excavate over 10,000 wells.
Recent trends regarding the use of construction equipment in the excavation of shale gas show that the equipment is becoming smaller and the process time is being reduced. They also show that there has been a shift toward renting the equipment. Another trend is that development related to the excavation of shale gas has been rapidly increasing, while the related know-how has been accumulating. Reduced costs are also being required.
The external demand for construction equipment overall in January of this year was down by 31.3%, but a major reason for this was that the demand for hydraulic shovels in China was down by half. At the IR meeting entitled ?Status of the Chinese Market? held by Hitachi Construction Machinery in Shanghai on March 21 a drop of 46% was announced for the period from April, 2012 to February, 2013. The demand for hydraulic shovels in 2012 in China came to 42,000 units, a drop of 40% over the 70,000 units in 2011. This was a drop of over 60% compared to the 111,000 units of the peak year of 2010.
As one aspect of this, the demand in North America came to 24,000 units in 2012, an increase of 26%. It is anticipated that there will be a recovery in the demand for construction equipment in China next year at the earliest. It appears, therefore, that there will be a major shift in the demand for construction equipment over to the market in North America. The entire demand for construction equipment in FY2012 compiled by the Japan Construction Equipment Manufacturers Association showed that apparently there would be a drop of around 25%.
Looked at from the point of view of the demand for gas, the demand as of this time is not on the way up since the total number of construction equipment produced is not growing. However, already the manufacturing lines of Komatsu and Hitachi Construction Machinery for the US market are already in full operation. Just by virtue of the fact that the demand in Japan is quite firm, a great expansion in demand is anticipated as of April.”