Short supply

20 March 2008

Last in the yard: demand for used cranes is unprecedented

Last in the yard: demand for used cranes is unprecedented

Ask anyone involved in the used crane sector their assessment of the market over the last 12 months and the answer is likely to be the same - we don't have anything to sell.

“The whole world is looking for cranes,” says Bill Green of UK-based PLC Sales. “The state of the used cranes market is incredibly buoyant, and we are getting a huge number of enquiries from all over the world for used equipment. This applies to mobile cranes, tower cranes and crawler cranes - it is right across the board.”

In such a busy market for new cranes, major manufacturers are finding it a challenge to keep up with demand. Order backlogs are running into billions of dollars and delivery times for some specialized models are two years away or more and, as a result, end users are scouring the world for used stock.

“It has had an impact,” says Green. “There is a huge lack of good used cranes - and not-so-good used equipment too. We have enquiries coming in all the time, from Europe, Africa, the Middle East, China, the Far East, South America. Everyone is waiting for new equipment. The world economy is going like a train at the moment, and there are no solid signs of it slowing down.”

“It is very slow and very bad,” says Maarten Verschoor, of Netherlands-based Used Cranes and Materials, of the current market conditions. “It is the same story for everyone; there are no used cranes available. I have many damaged cranes that I am having to fix up to sell, but even then I don't have very much for sale. I currently have about 20 cranes, when usually I would have between 40 and 60.”

Marcel Riemslag, sales manager at Netherlands-based Hovago, says his company has experienced similarly strong demand for used cranes from all over the world.

“The Middle East, for example, has totally surprised me. Dubai, of course, is expanding, but we also have people in Kuwait wanting 100 cranes. It is everywhere. It is not like the past, where when one market was down another was good.”

Martin Ainscough, managing director of Ainscough Crane Hire, the UK's largest crane rental company, agrees that there is a desperate shortage of used equipment, particularly in the UK and Europe. “There is nothing like the volume around that there has been in the past, certainly of quality. This is the product of the current worldwide market. China and India, in particular, are snapping up new and used equipment, at this particular stage, which has led to this situation. People are just hanging on to what they already have and equipment which they would normally have sold on.”

As a result of falling stock levels, all used cranes are attracting premium prices. “There is no doubt that this situation is forcing up prices,” agrees Bill Green. “A year or two ago, if I was asked what a certain piece of equipment was worth I could have predicted it. Now I wouldn't have a clue. A 2000-built crane could realise between 90 to 95% of its original purchase price seven years on. Providing it is in good condition and properly maintained, there is no limit to what someone will pay.”

Old for new

“We can sell three or four year old cranes at new prices,” says Marcel Riemslag. “People will take anything. They have had to lower their standards when it comes to buying used cranes. Buyers who would not touch anything older than six or seven years are now looking back as far as 1989. There is a market for any ages at the moment. We are selling to people sight unseen, after just one phone call, which has not happened before. Our used trading section has more or less come to a standstill.”

Martin Ainscough agrees. “Used equipment is commanding very very good prices, and people are prepared to pay a premium. At the moment, it is fair to say that people can sell almost anything for a premium price. Anyone selling used equipment can get almost as much or even as much as they paid for it. We haven't seen a situation like this for many years.”

Ainscough warns, however, “We are going to have to be careful not to get carried away. A lot of people are in danger of seeing this situation as a money making exercise. It is like buying and selling houses - what matters is making trading profit. But I cannot foresee this bubble bursting for a long time.”

Ainscough points to the projects involving cranes “that cannot get shut down by interest rate fluctuations. These are major, civil engineering, infrastructure projects that are going to happen, no matter what. And I cannot see how, for at least the next five years, that this is going to change. Demand in the UK market is buoyant and all the signs are that it will get even busier. We have the [2012 London] Olympics, as well as the spin offs from that, as well as regeneration projects. We are looking forward to a very very busy few years in the UK. Offsite building is becoming more popular, and there is a big move towards modular building, which will have a huge impact for the crane business. Nuclear power expansion, wind turbines - it is all good crane work.

“Manufacturers are wise enough to realise that this will not last forever, and so are limiting the number of cranes they are producing and not getting caught in over-expansion, which keeps the market tight, and means that used cranes will continue to be in short supply.”

Riemslag agrees with Ainscough that manufacturers are resisting the temptation to expand production, but says with two year lead times for new cranes, or more for specialised or bigger equipment, buyers may be tempted to order more new equipment than they need to avoid shortages in the future.

“Delivery times are crazy,” he says. “Who can predict what they will need in two years?”

New approach

The shortage of used equipment has made some manufacturers change their approach to the used crane market. Last year Liebherr invested heavily in its repair and refurbishment facility at its UK headquarters in Bedfordshire and Manitowoc Crane Group has launched its EnCore programme, described by the company as “giving dealers and customers the most effective replacement parts options. For the customer that could mean a brand new part or a remanufactured component with a warranty.” It also includes a repair or return option for when replacement parts are not available.

The company is also looking to run a crawler refurbishment programme from its new facility in the Jebel Ali Free Zone in Dubai. This, says the company, is part of a longer term strategy to establish a Manitowoc crawler crane “centre of excellence” for its EnCore programme.

“The EnCore programme enables customers to extend the lifecycles of their older machines,” says Mike Bage, Manitowoc Crane Care manager in the Middle East. “Our objective is to remember all customers and treat every request with similar importance. There are some customers or markets that just don't have the financial strength to invest in new machines, so used or refurbished cranes will always be a requirement.”

As for the future, Martin Ainscough is looking forward to “a very very busy few years,” while Bill Green says, “I am still buying and selling, and getting enquiries to find cranes. I will broker cranes for someone else. I have to be happy with this. We have all got to adjust our sights. Is the situation a worry? Yes and no. It's Catch 22. No-one makes used cranes. But what it is doing is making people aware that the used crane market is a serious one and we have a place in the crane market. We are a close and small business and people trust our judgement. And, after all, manufacturers are in the same situation. New or used - they have nothing.”

Marcel Riemslag also forecasts casualties before the situation changes. “There will be side effects,” he says. Smaller companies without the stock or which are solely trading in new cranes and do not have enough capital may not survive.

“I do not think anyone has experienced anything quite like this situation before, even people who have been in the business for 25 years or more. I do not have a clue what is going to happen in the future.”

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