Interview Synopsis

Caterpillar – Steel Prices & Construction Demand

  • Public Equity
  • Industrials
  • North America

While the COVID-19 pandemic lockdowns and resulting supply-chain disruptions affected Caterpillar Inc in the past 18 months, a former senior engineer from the company pointed to “the trade war, the things which are going with China” as aspects that will have a longer-term impact on the construction and earth-moving industries.

Looking a bit closer at what’s going on in China, the specialist highlighted government electricity consumption targets. “Let’s say if, for any industry, the demand increases, they will consume more electricity, and if the electricity consumption is higher than the limit, they are simply cutting off their electricity, which is impacting production.” As a result, this is forcing Chinese companies to choose energy-efficient equipment.

The discussion moved on to the company’s core competencies: “Cat is well-positioned in the market, and most of the time they are one step ahead of the competition.” Four main reasons were given for this. “They have a well-thought-out strategy, good vision, a customer-focused approach, and they have their own internal functional groups, which are vertically aligned.”

Another strength is the company’s documentation of previous designs: “They have failed in the market… but they keep on documenting all that history and lessons learnt through that, and now they have a very strong design document with them.” 

In terms of its positioning in different categories, electrification and automation were both commented on. Caterpillar is “already in the lead in automation”, with Komatsu another major player. In terms of electrification, the specialist called it “the next thing” – “electrification is going to be a reality very soon due to climate change and other things, and Caterpillar is also very well-positioned in this game as well.”

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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