Market moves

25 April 2008

More than 150 crane owners responded to this year's IC Crane Confidence Survey, a response that, while not providing conclusive proof of every market dip or rise around the world, does give enough information to be able to draw broad conclusions about how the crane market is poised.

Those conclusions could be summarised so: Middle East good; Europe bad (with exceptions); South Asia good (although the best may be over); North America still good; and the rest of the world “fair to middling”.

The graphs and tables on these pages give you some meat to fill in the details, but the clear message from our survey respondents is that the Middle East is the place to be if you own and rent cranes. More Middle East crane owners than anywhere else will expand their mobile crane and small crawler crane fleets next year, and Middle East owners also feature high in the league tables of forecasts for rental rates and utilisation levels next year.

“It's known that the Saudi Arabian construction industry is booming and the demand is more than the supply, especially on cranage. It's going to continue for the next five to six years, minimum”, said one owner.

Of course, how you rate future business prospects depends, to a great extent, on the current situation. Your market may be booming, but perhaps you can only see a decline in the future. This might loosely characterise the views of crane owners in Australia and South Asia.

“The crane rental market seems to have matured in India after a very high growth period in the last two years”, wrote one respondent, “Crane rental and utilisation rates [in India] for the 100 tonne and below range have decreased due to an increase in crane imports from Europe and Asia. The higher capacity crane market is as yet unpredictable, with high variables in rates and utilisation if you compare with other hirers.” Another wrote of an expected “sharp downfall in the market”.

Two Australian owners similarly warned that a change was coming. “The crane industry in Australia continues to be strong but there are signs of the end of an unprecedented boom not being too far away,” said one. “The Australian crane rental market continues to astound all local players with the strongest national picture in historical terms. Our country has had regional booms greater than the current one, but never before - and dare I say never again - will a national boom take place at this level. The signs are, however, that the slowdown is inevitably arriving in the next 12 months”. Managing decline would seem to be the challenge for Australian owners in the coming years.

European owners, meanwhile, remain fairly downbeat. Not many seem to be planning to expand their crane fleets - under a third will expand their small mobile crane fleets, compared to more than 85% in the Middle East - and they are also among the most pessimistic about rental rates and utilisation levels, with very modest forecast rises for the next 12 months.

It was easy to find negative remarks from European crane owners. One Portuguese owner said; “Crane rental in Portugal is now decreasing after a big increase with the Expo 98 and the Euro 2004 events. If the national plans to start building a TGV [high speed rail line] and a big new international airport, we think the crane rental can increase a little more.”

One UK owner noted a “decline throughout the UK” and forecast business failures in the next six months. Another was scathing of the practices of some of the bigger players; “Whenever competition increases due to a downturn in work the so-called market leaders reduce their prices to maintain the market share needed to meet finance obligations. This after we have all attempted to increase our hire rates over the last two or three years. All the hard work put into this has been undone by the 'majors' reducing prices by reportedly up to 20%.”

He continued; “It would take a big reduction in mobile crane units in the UK to get the industry back on an even keel, but with so many cheap deals available from the manufacturers there is little chance of this happening or from preventing others entering an already congested and less profitable market place.”

One Germany-based tower crane specialist reported “hot spots” in the Rhein-Ruhr area as well as in Bavaria (especially Munich) and Austria (especially Vienna). It was similarly positive about the United Arab Emirates (UAE) and North America, and said that the future would see growth in the Balkan region of south eastern Europe and Turkey.

Turkey certainly seems to be offering good opportunities. “The crane market will expand in Turkey because of some power plant projects in 2006 and 2007”, said an owner.

North America remains a market where there are high levels of activity and signs that rental companies have been successful in increasing rental rates. North American owners were top of the league in terms of forecasts of rises in rental rates over the coming 12 months, and a healthy 61% reported rate increases over the last 12 months, a figure exceeded only by South Asia and the Middle East.

“The US market is strong and in specific areas a shortage of cranes exist”, said one US owner, “Companies capable of moving their fleet to high demand areas will experience growth opportunities.” Another wrote that demand in the Mid-Atlantic region of the US was up “across the board”, and a Canadian respondent had good news as well; “The east part of Canada is very active and we will expand to the west part of the country because it will be very active soon.” Other owners commented on the strength of the tower and crawler crane markets in the US.

There were positive findings from other markets as well. High growth in Mexico was singled out be several companies - “this year has seen a steady rise in the investment by the government here and next year will see a lot more with new plants being built in the petrochemical sector” - and Indonesia was also cited as a promising market by one respondent, who described the market as extremely buoyant; “The expansion in coal, power, oil and gas is very strong.” This owner said the outflow of cranes following the 1997/98 Asian financial crisis resulted in a shortage of cranes in the country. He also made a wider point; “The world demand for resources guarantees strong growth in the crane sector throughout the Asia Pacific region.”

That is a positive remark to end on, although how much cheer that will bring to European crane owners is debatable. •

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