Crane rental roundtable
Looking back on the last few years, economic predictions could often be filed under "sluggish," "cautiously optimistic," "next year will be better than this year," or "things are slowly starting to pick up." Instead of attempting to predict what 2012 will have in store for crane rental companies, ACT instead asked a handful of companies to tell us how 2011 finished, what rental rates are looking like and what's "hot" and "not" in the current market.
Our panel includes: Michael Liptak, president, ALL Erection & Crane Rental; Ben Graham, vice president of crane division, Kirby-Smith Machinery, Inc.; David Cowley, executive vice president, Turner Bros., LLC and Wes Austin, Vice President of Sales and Marketing, Imperial Crane Services Inc.
Looking back at 2011, did the crane rental market do better or worse than you anticipated? Explain.
Liptak: The rental market has been improving throughout 2011, really, starting in the second half of 2010. Our utilization is very strong, but in part that is because we have locations across the nation and can distribute the fleet based on geographic demand. I didn't really anticipate either a better or a worse market for this year, but knowing that there are always business cycles, I've been equating the bad economy to a very long winter - spring seems to now be around the corner, but it has taken its time.
We are weathering the ups and downs of the market by investing in our people, and by tapping their considerable talents.
Graham: The bare rental business from a time utilization standpoint did better than anticipated due to turnarounds at several refineries in our region along with energy related new construction projects.
Cowley: In 2011 we saw higher crane utilization but margins were still under pressure. Our industrial business was steady throughout the year. However we saw an increase in activity in the oilfield and commercial markets.
Austin: 2011 has been amuch better year for the crane in than 2010. The energy sector continued to drive a lot of business for us as well as a bump in industrial plant work. Daily work for general construction also saw some life come back into it in part because there truly was more work than in 2010, but also because there were fewer cranes in the market due to significant downsizing in the industry.
What classes of cranes and capacities have the best utilization in today's market?
Liptak: We are seeing a growing demand across all market sectors and areas of the country for all terrain cranes, particularly in the 250-350-ton range but also up to 600 tons. A large portion of the demand for AT cranes is in the natural gas industry.
Rough terrain cranes are also spurring growth; in particular, 80 tons and up are seeing more construction work. There will always be some construction. For example, updating or replacing our infrastructure (roads, bridges, etc) will continue to be important in the coming years. Telescopic crawlers are big right now in wind farm construction, mining, and other growth markets where mobility across a tough terrain is key.
Graham: Kirby-Smith Machinery has one of the largest 30-40 ton rough terrain crane fleets in the region and this size range of cranes continues to be the "workhorse" of the fleet and remain highly utilized along with carry decks. Swing cab boom trucks are doing nicely in the energy sector.
Cowley: We're seeing the 100 - 750 ton all terrain cranes having the best utilization. Crawler crane utilization remains sluggish.
Austin: Large all terrains, large crawlers and rough terrain cranes of every size have been our greatest draw in 2011.
What can you say about rental rates? Have crane rental rates bottomed out? Which class of cranes can you achieve the best rate?
Liptak: We told ACT in June that rental rates are steadily recovering. The energy sector - including wind power, mining, petrochem, and municipal infrastructure repair projects - is helping. The most-in-demand equipment garners the best rates - the classic supply and demand. As I mentioned, AT and RT cranes have probably the highest utilization rates right now. To be honest, our crawler fleet is also near pre-recession utilization. ALL has an advantage here; we are committed to continually expanding and upgrading our fleet to serve our customers better, so even when demand for a particular class of crane is high, we have a deep fleet and can draw from the resources we hold in yards across the country. Our equipment migrates from job to job through careful planning until it reaches a region our forecasters have recognized as a "hot spot" in demand.
Graham: Rental rates continue to be all over the board, about the time we think that they have bottomed out we come across a deal below $100/ton. We certainly are not feeling that rental rates have stabilized; rates continue to fluctuate on a daily basis depending on local market conditions and competition.
Cowley: We feel rental rates have bottomed out and will improve as we move forward in 2012. The class of cranes we feel we can achieve the best rates are the 100 to 750-ton all terrains.
Austin: The crane market place has seen a lot of changes since 2009 to safety, equipment prices, insurance, health care and labor. Many of these costs have come about with no increase to street price because the market was so tough. This of course contributed to the downsizing of many companies. 2011 has changed the market basics and we literally have seen customers who have had to wait for crane availability because they had no other options. The equipment rental side of our business has also seen significant shifts for time spent in the pre-lift phase of a project. Where 10 years ago a low cost crane rental could be taken over the phone sight unseen, now we are requested to perform site visits, proposals, aerial satellite photos, lift plans, licensing, certifications and qualification evidence for every piece of equipment and man involved to set a 600-pound air conditioning unit just over the edge of a strip mall rooftop. While we champion a new level of much needed responsibility and accountability for our industry, the costs associated with additional requirements in manpower and OSHA obligations have been catching up to pricing. 2011 has brought multiple incremental price increases, and my guess is that as the market continues to strengthen with new government regulations coming into effect (such as tier 4 engines), the prices will continue to rise and likely the market will continue a slow to moderate growth pace in general construction while still continuing strong in industrial, and potentially hyperactive in energy specifically. This will mean a strong draw for rough terrains, and large all terrains and crawlers into 2012.
What is the biggest challenge in the crane rental market?
Liptak: Rental rate competition is an issue, in part because some companies are struggling just to put their machines back to work. These practices have really - and artificially - lowered rates in some parts of the country. But the increased demand is helping the recovery of rental rates and, thankfully, we are seeing many customers willing to invest more to ensure safety and job site efficiency. Buying decisions are based on more than price, and that includes convenience, service, scope of fleet, and quality. Customers are realizing that rental houses like ALL score amazingly well in just about every one of these categories, making our prices a fair return on any investment made with us. The past six months have been very strong, and I see the investments we've made in service, safety, and training are netting their just returns.
Another challenge goes directly to economics 101. Contractors need to be able to get the funding to start projects and to do so, banks must continue to open up and allow a greater flow of capital.
Graham: Lack of sustainable projects of any magnitude outside of the energy sector. Our crane division is focused on stocking the more current state-of-the-art crane models for our rental fleet. We are also placing a high priority on retaining and training the best service technicians in the industry. For example just in the last 18 months we have invested more than $1 million in training our service technicians in both our cranes and heavy equipment divisions.
Cowley: The biggest challenge for the crane rental market is putting processes and programs in place to comply with the strict CSA regulations implemented by the FMCSA.
Print article
Email to a friend
© 2012 KHL Group or its affiliated companies.
Comments (0)
There are no comments on this article