The demand for used cranes is increasing, says Guylain Turgeon at Ritchie Bros.
26 April 2011
The demand for quality used cranes is increasing, particularly from emerging markets which are targeting surplus machines in recession-hit countries. Euan Youdale spoke to Guylain Turgeon at Ritchie Bros. Auctioneers
It has been a busy time for Ritchie Bros. over the last few months. For example, in Europe it sold 45 cranes from Spain in 2010, a figure only matched by the Netherlands and closely followed by Italy, with 41 sales, according to Guylain Turgeon, senior vice president, Ritchie Bros. Auctioneers in Europe. The figure for Spain, where the company officially opened its Ocana auction site last year, reflects the country's economic problems and the fact there are about twice as many cranes as required. "There is still a need for a realignment to make sure the prices can come up to a normal level," Turgeon explains.
Speaking generally, Turgeon adds, "I see in all the industries a couple of things that need to happen. There is a need for more confidence before activity starts again and more confidence from the banking industry to lend money to the construction industry, but I don't think we will have another dip."
The world market for second hand construction, transportation and agricultural equipment totals $100 billion a year. "Of all the segments we cover in the construction industry, the cranes have been the most stable in price," Turgeon adds, "I believe the lower end tonnage have come up quite a bit and the higher tonnage as come down, but not as drastically as some other industries."
While a downturn can result in more units being sold in auction as rental companies downsize their fleets, the inevitable upturn does not spell lower revenue for the likes of Ritchie Bros., says Turgeon.
"I think used crane auction requirements will continue to increase. In our business when times are not good you might sell more assets at lower prices and when times are good you sell maybe a bit less but at a higher price. You are always progressing in terms of turnover."
An interesting trend is a renewed demand for low capacity cranes in the 30 to 100 tonne capacity range, while the recent strong interest in higher capacity cranes, up to 400 tonnes, has diminished somewhat.
"There was much stronger demand for higher tonnage cranes and we have been surprised in the last six months how much demand there has been, not even in the mid-range, but for smaller tonnage cranes - there is a tremendous amount of interest for these cranes."
Further afield China has not shown a great deal of interest for western cranes, even in the used sector, says Turgeon. "Some of the largest crane manufacturers are based in China so there might be less appetite for the users to go abroad and buy cranes, although they do from time-to-time. What we have seen is buyers from India and South America participating in our auctions."
Ritchie Bros. has been working to establish itself in China for the last five years. "We have got to the point we are quite comfortable, but there are still a few things we need to cross. They have not got a taste for auctions yet in China but I think the Chinese are traders and it's in their industry and culture."
An increasing proportion of auction bidders over the last 10 years have been buying online, says Turgeon, although the numbers have reached a plateau in the last couple of years. About 25% of revenue is gained through online bidders.
"We are finding it to be a fantastic tool and sold almost US$900 million of assets on internet last year. But it's very clear that customers have the need to feel, touch, smell the iron and often they will come a few days before the auction to inspect the asset they want to buy, and they will be bidding remotely from their office so they don't waste time."
"Online we are seeing more bidders from further afield as it becomes a smaller world and at every auction we are always surprised by the new bidders that we are getting and where they are coming from."
Ritchie Bros. continues to expand and, while there will be no new sites this year, the second phase of European expansion will be rolled out over the next five years. "We went through the first phase with France, Spain, Italy and Germany. Within the next five years we will double the number of sites within those countries."
Future permanent Ritchie Bros. auction sites are also on the cards for Poland and Turkey, although the company is active there already.
Talking of the future, Turgeon speculates on what will happen when the world recovers from the economic crisis. "It will be very interesting to see if there will be an appetite for mass renewal of fleets around the world and what impact this will have on the demand for second hand equipment. The other thing is will manufacturers be able to cope with that?"
Whatever happens, auction sites will benefit, adds Turgeon. "People don't put their machines in auction only because of financial difficulties; that is a thing of the past." Now, he says, there is a trend to move and resell assets at the best possible value on a worldwide basis.
There is just one note of caution. "If the manufacturers are unable to supply the goods it takes more time to renew the fleet, therefore, there are fewer used machines in the market. There may be a push up of prices in the market, then manufacturers catch up and there's a surplus of machines. So there's always a fear for that."