Good and bad

06 May 2008

The problem with this year's generally positive IC rental rates survey is that you can pick the data to give you the conclusion you want. Those in a positive frame of mind can look to the statistic that 74 % of Indian respondents to the survey are planning to expand their fleets in 2005; others can equally point to the fact that India is also the place where most owners-almost a quarter-expect to reduce their fleets.

The seemingly contradictory nature of much of the data is also reflected in the comments made by individual companies. “The market is at an all-time high right across the country. The resources markets-oil and gas, iron ore and coal-“are driving demand at a level that is unprecedented”, said one happy Australian. One of his colleagues had a different view; “Since import deregulation far too many second hand cranes have come in to the marketplace, driving rental and resale values down. Generally though, the market is quite buoyant, although rental rates are far too low across the board.”

That said, it is clear from the survey that, apart from certain areas (the Netherlands, for one), crane rental companies are generally happy. Only 9 % of all the respondents-more than 130 companies completed the survey-expect their fleets to fall in size in 2005, with a whopping 66 % planning to grow their fleets. The same is true for rental rates, with far more companies expecting an improvement (55 %) than those anticipating falls (just 14 %).

A notable feature of the survey is the high level of activity in the Indian market, as previously mentioned, with 67 % expecting rental rate increases and a remarkable 42 % planning to make “major increases#8221; to their crane fleets. The other side of the coin is that in a growing market there seems to be winners and losers, with almost 10 % of respondents from India expecting to make major cuts to their fleets, and a further 16 % making minor reductions-the highest figures of any country.

The two-sided nature of the Indian market is further highlighted by the comments on the changes in rental rates over the past 12 months: a quarter said rates had seen major rises, another quarter reported major falls. Perhaps one explanation of this can be found in the following comment from an Indian crane renter; “The crane market on the Bombay side of the country is highly competitive, with many crane rental companies with average numbers of 50 cranes per owner. In the Eastern parts of the country, i.e. West Bengal, there are emerging projects such as sponge iron plants, etc, so cranes are required for initial construction of such projects.”

The general recovery of the US general equipment rental market is also reflected in the figures from North American crane companies. Some 65 % saw rises in rental rates in 2004, and 69 % expect more of the same in 2005. Similarly, North America is the only region of the world where no respondents said they would reduce the size of their fleets. After a period of investment last year-69 % said they added cranes to their fleets-some 78 % will also expand again in 2005.

Utilisation figures are also revealing: the average utilisation rates across the world last year were 70 % for a 50 tonne mobile; 60 % for a 100 tonne crane; and 56 % for a 150 tonne crane. There is the expected decline as the size of the crane rises, but the global averages mask some extremely wide variations: for example, average utilisation of a 50 tonne crane in North America is 25 % less than in the Middle East, while Europe seems to be stuck somewhere in the middle.

Rental rate variations are also extreme, reflecting as they do the wide differences in the value of the cranes used and the costs of running a rental fleet. The lowest rates are in Asia Pacific, where a 100 tonne mobile crane, rented for a 40 hours a week with an operator, will cost an average of US$ 2700. The highest rates (although not necessarily the best) are found in the US and Canada where the same crane will cost $8900, which is very close to the figure for Australia and New Zealand. The European figure is also on the high side at $7100, and there is perhaps a surprising difference between Europe and the Middle East, with the latter charging a much lower average figure of $4600.

So this year's survey paints a complicated picture of today's mobile crane rental scene: mixed results in the developed European and Asia Pacific markets; buoyancy in Australia, the Middle East and India. As we said, you can pick the figures you want, but we would prefer to accentuate the positive: 66 % expanding their fleets and just 9 % downsizing-in our book that is plenty evidence of market confidence.

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