Do deepening deficits spell the end for growth in some sectors, and herald the coming of a new age of austerity in the Gulf that only the fittest will survive?
In January’s edition of PMV Middle East, I made some observations about the global equipment industry in the absence of any tangible evidence of how 2016 might turn out.
However, a lot has happened in the month since, and the industry is now much more candidly discussing the challenges it expects to face and their strategies to head them off.
Crucially, the oil price has continued its downard plummet, aided and abetted by the nuanced lifting of sanctions against Iran.
China’s economy and stock market is faring little better, with GDP growth predictions falling to 6.9% — a figure that would delight many countries, but which is anathema to the growth-fuelled Asian tiger economy.
This ongoing depression of the world’s second largest economy and disproportionately large player in the global extractive industry is continuing to have a disastrous knock-on impact on the sales and consequently share price of Far East Asian giants like Doosan and US giants like Caterpillar alike.
In the Middle East, the impact of the oil price is as obvious as it is unpredictable — there is no one who can offer a credible projection of how long the depression in the oil price and thus the squeezing of Gulf country budgets will last.
What we do know is which sectors will at least benefit in the short-term. These are most fleet operators, for whom fuel costs are a major concern. Even with the modest deregulation of fuel prices at the pumps in the UAE, Saudi Arabia, Bahrain and Oman, at the wholesale, commercial level the net effect is still a saving.
As a secondary effect, cheaper diesel is a boon to the temporary power industry. OEMs, dealers, distributors and rental service providers in this segment already enjoyed an uptick in 2015, and expect even greater things of 2016.
Providers of multi-application machinery, like mobile cranes and aerial work platforms, are also better set to weather the storm, as they can switch sector — in the case of the latter moving seamlessly from oil and gas to events.
Nevertheless, it would be dishonest to suggest that the coming year will be without its victims, and PMV Middle East has even spoken with some industry representatives who have raised the dread spectre of international companies being forced to retreat from the market in an aftershock of the events of 2008.
Either way, 2016 looks to be turbulent year. This is the reminder to fasten your seatbelt.
Riders on the storm: Eyeing the market turbulence
Do deepening deficits spell the end for growth in some sectors, and herald the coming of a new age of austerity in the Gulf that only the fittest will survive?
In January’s edition of PMV Middle East, I made some observations about the global equipment industry in the absence of any tangible evidence of how 2016 might turn out.
However, a lot has happened in the month since, and the industry is now much more candidly discussing the challenges it expects to face and their strategies to head them off.
Crucially, the oil price has continued its downard plummet, aided and abetted by the nuanced lifting of sanctions against Iran.
China’s economy and stock market is faring little better, with GDP growth predictions falling to 6.9% — a figure that would delight many countries, but which is anathema to the growth-fuelled Asian tiger economy.
This ongoing depression of the world’s second largest economy and disproportionately large player in the global extractive industry is continuing to have a disastrous knock-on impact on the sales and consequently share price of Far East Asian giants like Doosan and US giants like Caterpillar alike.
In the Middle East, the impact of the oil price is as obvious as it is unpredictable — there is no one who can offer a credible projection of how long the depression in the oil price and thus the squeezing of Gulf country budgets will last.
What we do know is which sectors will at least benefit in the short-term. These are most fleet operators, for whom fuel costs are a major concern. Even with the modest deregulation of fuel prices at the pumps in the UAE, Saudi Arabia, Bahrain and Oman, at the wholesale, commercial level the net effect is still a saving.
As a secondary effect, cheaper diesel is a boon to the temporary power industry. OEMs, dealers, distributors and rental service providers in this segment already enjoyed an uptick in 2015, and expect even greater things of 2016.
Providers of multi-application machinery, like mobile cranes and aerial work platforms, are also better set to weather the storm, as they can switch sector — in the case of the latter moving seamlessly from oil and gas to events.
Nevertheless, it would be dishonest to suggest that the coming year will be without its victims, and PMV Middle East has even spoken with some industry representatives who have raised the dread spectre of international companies being forced to retreat from the market in an aftershock of the events of 2008.
Either way, 2016 looks to be turbulent year. This is the reminder to fasten your seatbelt.