Philippines Construction Equipment Rental Market - Strategic Assessment & Forecast 2024-2029

MARKET OUTLOOK

The Philippines construction equipment rental market size was valued at USD 175.9 in 2023 and is expected to reach USD 236.5 million by 2029, growing at a CAGR of 5.06% during the forecast period. Under the Public Investment Program, 3,770 projects worth PHP17.3 trillion (USD 0.3 trillion) are prioritized, including Infrastructure Flagship Projects approved by NEDA to increase the construction activity across the nation. The Philippine government has increased infrastructure investment through the Build Better More program, emphasizing sustainable projects. The government in the Philippines is investing in the redevelopment of Infrastructure Flagship Projects, including expanding ports, railway lines, roadways, and highways, which is expected to propel the Philippines construction equipment rental market during the forecast period.

Increased Investment in Infrastructure Projects

• The new Infrastructure Flagship Projects (IFP) list comprises 194 projects, ranging from unfinished initiatives from previous administrations to major priority projects submitted to NEDA for inclusion in the Public Investment Program (PIP) 2023-2028 and the Three-Year Rolling Infrastructure Program (TRIP) FY 2024-2026.
• Out of 194 IFPs nationwide, 64.95% are designated for specific regions, with the National Capital Region (NCR) leading with 33 projects. Region III and Region X follow with 14 and 11 projects, respectively.
• The cost breakdown shows NCR requiring the highest funding of USD 26.28 billion (PHP1.32 trillion), followed by Region III with USD 21.8 billion (PHP 1.09 trillion), and Region X with USD 15.45 billion (PHP 772.62 billion).
• The IFP offers a significant opportunity for the rental construction equipment industry due to diverse projects across sectors and regions, signaling high demand. Government investment in transportation, public works, and irrigation emphasizes growth potential. Concentrated projects in regions like the NCR, Region III, and Region X present localized demand, while PPP projects diversify opportunities, suggesting a promising outlook for rental companies.
• The Batangas Clean Energy Green Hydrogen Power Plant project, a collaboration between Gen-X Energy and ACE Enexor, aims to build a 1,100 MW power plant using green hydrogen, which is reducing coal dependence and promoting cleaner energy. It was scheduled to start construction in 2023, and commercial operation is targeted for March 2027.
• Toyota Motor Philippines is allocating USD 67.4 million to expand its Cabuyao plant in Laguna, Philippines. This project entails the establishment of a new forklift production line, scheduled to start operating by 2025.
• The rehabilitation and development of the port of Irene will be finished by 2025, which will be operated in three phases with an investment of Php 3.941 billion (USD 84 million) under the Build-Operate and Transfer (BOT) structure of Public-private partnership (PPP).
• In May 2023, the National Economic and Development Authority (NEDA) introduced the Public Investment Program 2023-28, a six-year initiative to execute essential programs and projects nationwide. NEDA announced that 5,329 priority PAPs, requiring an investment of USD 362.6 billion, are slated for implementation between 2023 and 2028 under the PIP.

KEY HIGHLIGHTS

• In December 2023, the National Irrigation Administration(NIA) allocated PHP776 million (USD 13.9 million) worth of excavators to irrigators' associations, part of a PHP2.59 billion (USD 0.05 billion) initiative to enhance irrigation systems over three years. The program aims to repair and construct facilities damaged by natural disasters, with tranches involving heavy equipment procurement. This effort targets improving national and communal irrigation systems to boost farmer productivity and profitability while driving demand for earthmoving machinery rentals in government-led projects in the Philippines construction equipment rental market.
• The Davao City Bypass Construction Project Package II-1 is a major infrastructure project in the Philippines involving the construction of two 2.3-kilometer tunnels, expected to be the longest in the country. These tunnels will be unidirectional, with one tunnel for northbound and the other for southbound traffic. An 8.4-kilometer main road will connect the tunnels, incorporating various bridges and other structures. The project is anticipated to be completed in 2028.
• The Department of Environment and Natural Resources (DENR) plans to prioritize government-led mineral exploration in 2024, with the Mines and Geosciences Bureau (MGB) taking the lead. This initiative will receive technical support from foreign partners like the Australian government and the US Geological Survey. The DENR also promotes mineral processing for minerals, including nickel, iron, cobalt, and rare earth minerals.
• Manitou's Ecostop feature automatically shuts down the engine and hour meters based on a preset timer. Caterpillar's new D series skid steer loaders integrate the Cat Intelligent Leveling™ system, offering industry-smart features.
• Hitachi Construction Machinery developed ConSite Mine, utilizing IoT and AI-based analysis to remotely monitor mining equipment operations 24/7, addressing site issues promptly. Monark Equipment Corporation, Tadno's Philippines distributor, expanded its distribution offerings to TADANO's Cargo Cranes.
• Monark, a prominent heavy equipment supplier, aimed to enhance its parts and service management and reporting capabilities for operational efficiency. Partnering with TADA, a B2B Digital Twin software company, Monark transformed data utilization, improving team decision-making and collaboration.
• Komatsu and Cummins collaborated to integrate equipment and engine monitoring, optimizing maintenance for mines. Both companies enhance asset health monitoring and maintenance management by sharing data over a common infrastructure and collaborating on analytics.

MARKET TRENDS & DRIVERS

Need of Construction Equipment in Natural Calamities to Push the Rental Demand

In 2023, the Philippines experienced various natural hazards that affected over 13.7 million individuals, marking a challenging year for the nation. Despite a below-average number of tropical cyclones entering the Philippines Area of Responsibility (PAR), the year has witnessed heightened southwest monsoon and shear lines, triggering heavy rains and subsequent floods and landslides in various regions. Following disasters such as hurricanes, earthquakes, or floods, demand for heavy machinery for debris removal, infrastructure repair, and reconstruction efforts is typically a surge in demand for heavy machinery. This heightened demand often leads to temporary shortages of available equipment in affected areas, resulting in increased rental rates. The consequences of these natural disasters extend beyond immediate humanitarian concerns, impacting various sectors, including the Philippines construction equipment rental market.

Flood Mitigation and Adaptation Projects to Increase the Demand for Rental Equipment

In 2023, the Philippines experienced various episodes of flooding, each with distinct levels of severity and consequences. In January 2023, flooding, landslides, and strong winds affected numerous regions, impacting thousands of individuals due to the convergence of low-pressure areas. In anticipation of future challenges, the government has proposed a budget of USD 3.8 billion for flood mitigation projects in 2024. Additionally, the Metropolitan Manila Development Authority (MMDA) has allocated USD 0.02 billion in its 2024 budget for flood management infrastructure.

Infrastructure Flagship Projects Nationwide Are Expected to Propel the Philippines Construction Equipment Rental Market

The new Infrastructure Flagship Projects (IFP) list comprises 194 projects, ranging from unfinished initiatives from previous administrations to major priority projects submitted to NEDA for inclusion in the Public Investment Program (PIP) 2023-2028 and the Three-Year Rolling Infrastructure Program (TRIP) FY 2024-2026. Further, the allocation of IFPs varies across government agencies in terms of quantity and expenditure. The Department of Transportation (DOTr) leads with the highest number of IFPs at 71, followed by the Department of Public Works and Highways (DPWH) with 58 and the National Irrigation Administration (NIA) with 28.

Transition to Hydrogen Fuel to Achieve Net-Zero Target

The Philippine Energy Plan 2020-2040 underscores hydrogen's importance as an alternative fuel for power generation, aiming to diversify fuel sources, reduce greenhouse gas emissions, and increase renewable energy utilization. Discussions internally focus on classifying hydrogen and establishing national policies to govern its usage. In 2022, the Department of Science and Technology inaugurated the country's first hydrogen fuel cell research and testing center. This center is essential for developing hydrogen fuel cell technology, which focuses on creating locally sourced prototype fuel cells. The aim is to enhance the accessibility and sustainability of hydrogen technology within the Philippines.

Progressing Toward Net Zero Prompts the Adoption of Electric Construction Machinery

Leading rental companies like Loxam, Kiloutou, Boels Rental, and Sunbelt Rentals are spearheading the adoption of electric machines, placing orders for thousands of battery-powered units, formerly diesel-fueled. This trend mirrors global markets like the US, the UK, and Japan, indicating a similar shift in the Philippines. While the Philippines government has not set plans for net-zero emissions, some construction firms in the Philippines construction equipment rental market are pursuing this goal independently. Co-organized by the Net Zero Carbon Alliance (NZCA) and Eco-Business, an event drew 200 delegates from various sectors, including construction, manufacturing, energy, etc., aiming to achieve net-zero emissions by 2050.

INDUSTRY RESTRAINTS

Supply Chain Disruptions to Hamper Rental Construction Market

• The Philippines relies heavily on imported construction equipment from China, Japan, and Europe. Geopolitical disturbances in these regions have posed challenges and disrupted the market's growth trajectory in recent years.
• Trade tensions, diplomatic conflicts, and supply chain disruptions from geopolitical instability have led to delays in equipment procurement, increased costs, and uncertainty for businesses operating in the construction sector.
• The consequences of Typhoon Odette in 2021 resulted in 36% of seaports being non-operational, leading to significant logistics hurdles and disruptions in supply chains, particularly for remote islands.

Skilled Labor Shortage in the Philippines Construction Industry

• The construction industry in the Philippines, particularly in Cebu, faces a severe shortage of skilled workers, prompting contractors to explore innovative solutions to address the growing gap. President of the Cebu Contractors Association (CCA) Inc. highlights the pressing issue, noting that the shortage has become a nationwide crisis affecting project bidding, completion timelines, and meeting post-pandemic demands.
• Construction firms embrace technological advancements to mitigate labor shortfall, including integrating artificial intelligence (AI) into their operations. Automation has increased efficiency and productivity, reducing the manpower required for certain tasks while maintaining output quality.
• The role of technology in streamlining operations, such as the reduced manpower needed to operate crane units, will be beneficial. However, despite technological innovations, labor costs remain high in Cebu, leading contractors to source manpower from other regions in the Visayas and Mindanao.

VENDOR LANDSCAPE

• Caterpillar, Komatsu, Volvo CE, Hitachi Construction Machinery, XCMG, and SANY are leaders in the Philippines construction equipment rental market. These companies have strong market share and offer diverse sets of equipment.
• JCB, Kubota, Kobelco, Zoom Lion, and Sumitomo Construction Machinery are emerging in the Philippines construction equipment rental market. While Bobcat, Tadano, Takeuchi, Yanmar, Manitou, CNH Industrial, and Terex are niche market players. These companies offer low product diversification and have a strong presence in the Philippines’s local market.
• Hastings Motor, Mayon Machinery, FEL-SAN Construction Equipment Rental, and Guzent are a few prominent rental providers in the Philippines construction equipment rental market.