Not a dirty word anymore

26 June 2017


A global market is beginning to develop for secondhand Chinese cranes, and for international cranes sold secondhand from China, Stuart Anderson reports.

Not too long ago, a second-hand crane was something of a ‘dirty word’ – at least in the so-called developed markets of the world.

Of course, those days are long-past, thanks largely to the high-quality product support now provided by leading manufacturers and the excellent repair and refurbishment capabilities provided by companies such as Liebherr. Therefore, it’s another measure of how far the Chinese crane industry has come, that recently Zoomlion completed a contract to supply over $8m in second-hand cranes from China to Saudi Arabia.

Zoomlion’s contract covered four basic sizes of truck cranes, spanning 25–75t, and illustrates the growing acceptance of Chinese products, at least in emerging markets. For these second-hand Zoomlion cranes were far from ‘as-is where-is’ quality. All of these cranes had been substantially refurbished at Zoomlion’s headquarters plant in Changsha. The manufacturer had disassembled all the telescopic booms of the cranes, replaced defective parts, ultrasonically tested welds in the booms and frames, load and road-tested the cranes and repainted them to the latest standard/colour scheme.

Throughout the program, that dates back over a year since it was conceived, Zoomlion liaised on specifications and operating conditions with local sources, and when the shipments were made, dispatched a service engineer to guarantee a smooth hand-over.

China’s leading truck crane manufacturer, XCMG, also acknowledges the need to increase its attention to the used crane and construction machinery market. Spurred on by chairman Wang Min’s strategy for the new 13th five-year plan that includes a strengthening of focus on aftermarket activities (service, parts, remanufacturing, second hand machinery and operating leases), in February 2016 XCMG held its first ‘International Seminar of Overseas Secondhand Equipment.’ The two-day conference was managed by senior XCMG Import & Export executives Sun Jianzhong and Liu Jansen and attended by 20 overseas businessmen from ten countries. It concluded with the signing of a strategic cooperation agreement between Xugong

Import & Export and Ritchie Bros (Beijing) represented by its general manager Wang Zhijun. On the remanufacturing front, XCMG has already successfully sold 30 crawler rotary drilling machines.

Given the relatively-low cost of new Chinese cranes, the vast majority of customers have chosen to buy ‘new’ rather than used. This despite the fact that all the Chinese manufacturers find themselves and their domestic dealers with vast numbers of repossessed cranes as a result of the oversupply excesses of the market bubble.

To that end, Sany has become more active in developing its international used crane sales business. At present, Sany’s main international used crane markets are India and the UAE, which together received all of the 28 used cranes exported by the manufacturer in 2014-15. Most of the sales to India were relatively young cranes of 3–5 years age, including 25 and 75t truck cranes and a pair of 50t crawler cranes of 2011 and 2012. The largest and most-expensive used Sany sold to India in 2015 was a 2008 250t SCC 2500C crawler crane with an ex-Shanghai value of approximately $580,000. In 2016, Sany’s used crane business started to gain momentum with a total of 57 used cranes sold.

While UAE and India remained prominent, Sany broadened its activities with successes in Indonesia, Laos, Philippines, Vietnam, Oman, Pakistan, South Africa and Tanzania.

In recent years, mediumsized truck cranes have become very popular in India with large numbers of new Chinese cranes being sold. While the number of used cranes imported by India is now well below that of new cranes, there remains a fairly healthy demand for used cranes.

2014 saw five 55t Zoomlion QY 55V532 truck cranes purchased at approximately $230,000 each, while in 2015 the same manufacturer delivered four used 75t QY 75V truck cranes of 2010- 1013 at ex-Shanghai prices in the range of $170-200,000. Also, that year Zoomlion shipped four used 70t QUY 70 crawler cranes of 2007-2008 to India at roughly $140,000 each.

Sany placed several 2010- 2014 truck cranes in Ritchie Bros unreserved auction in Dubai on May 24th and 25th last year. Typical transaction prices included:

  • 2010 Sany QY 50C 50t 8 x 4 truck crane: $117,500
  • 2014 Sany STC 500S 50t 8 x 4 truck crane: $177,500
  • 2011 Sany STC 75 75t 8 x 4 truck crane: $170,000
  • 2011 Sany STC 750 75t 8 x 4 truck crane: $177,500

For 2017, Sany is planning to triple its 2016 performance and sell 150 used cranes internationally. XCMG is also increasing its used crane sales efforts and one illustration of the impact on crane condition and market price for Chinese cranes.

In part, these developments respond to the urgings of the Chinese Construction Machinery Association (CCMA). Back in the heyday of the Chinese construction machinery and crane market in 2011, vice chairman and secretary general of the CCMA Su Zimeng explained that China’s new five-year plan called for the industry to manage China’s used equipment population. He estimated that there were approximately four million second-hand pieces of construction machinery in China – most of which, by virtue of condition, was unsuitable for use in the mainstream market.

At that time auctions were virtually unknown in China and consequently these machines were generally sold privately and locally. China’s second-hand market was almost-completely unregulated and Zimeng urged the Chinese construction machinery industry to formulate an open, standardized market which he hoped would promote the sale of second-hand Chinese equipment in international markets.

Unlike most of the rest of the world, second-hand products still carry something of a stigma for the Chinese. This is despite the fact that for the past 30–40 years, China has imported many thousands of used Japanese truck cranes and many tens of thousands of used excavators.

Needless to say, worldwide, Japanese products have won a strong reputation for their quality and durability and this has become widely recognized by Chinese users.

As the downturn in Chinese market demand took hold in 2012, leaders of China’s largest construction machinery raised their voices urging restrictions on the import of used construction equipment. Sany president Xiang Wenbo warned via his famous blog, “If China continues to import second-hand construction machinery without any restrictions or strong supervision”, they’d end-up a “garbage dump”. Zoomlion founder & chairman Chunxin Zhan added: “Imported second-hand machinery, in the durability and serviceability aspects, are not (as good as) new domestic machines. The most significant thing is service cannot be guaranteed.” While Sunward’s founder, chairman and managing director He Qinghua warned: “In the case of the market being in surplus (i.e. over-supplied) by the release of foreign secondhand construction machinery imports, domestic brands will suffer.”

The development of standards and regulation for the Chinese used equipment market still has a long way to go as the Chinese regulators struggle to establish some form of cost valuation, technical evaluation and corresponding sales tax policies.

Clearly what works in a capitalist open market presents tremendous challenges for a country with the political and economic structure of China. Without the service, inspection and regulatory infrastructures developed in ‘the West’ over more than half a century, the Chinese have discovered that developing a system for the evaluation of the taxable market values, functionality, environmental impact and safety of millions of machines of infinitely-varied types and sizes, brands, ages and conditions spread across a vast country is not easily written into a rulebook.

Japan favoured

Given their brand identities, reputations and global product support networks, it’s not surprising that international customers feel a high-level of confidence in purchasing used Japanese cranes. Between 2013 and 2015, over 200 used Japanese truck cranes were exported from China. By far the most important regional destination for these truck cranes was the Middle East taking two-thirds of them, followed by the markets of South East Asia.

The largest individual country market by far was Iraq accounting for over 30% of exports of Japanese truck cranes from China. In part this is attributable to the dominant position developed over decades by Tadano in the Iraqi market. The enduring popularity of the brand is reflected in the fact that shipments of used Tadanos exceeded those of used Katos by a ratio of 3.6:1. Here, while the evergreen 20t Tadano TL 200E was the single most popular model, the larger four-axle models in the 35–51t classes accounted for a third of Tadano sales. The UAE is the second largest market for used Japanese truck cranes with Kato and Tadano sharing the spoils. Saudi Arabia too is a market where both Kato and Tadano have very deep roots with huge populations of truck cranes still in service. In 2015 over 80 used Japanese truck cranes left China for Middle East markets with over 60% of these being Tadanos.

Turning to South East Asia, the growing importance of the markets of Bangladesh and Cambodia was reflected in the volume of used Japanese truck cranes exported from China. These countries as well as Pakistan and Myanmar, with relativelylow GDP, generally have not had the luxury of affording new equipment but now are becoming important markets for used as well as new Chinese truck cranes.

While truck cranes represent the highest volume of China’s exports of used Japanese cranes, there are also limited numbers of used Kato, Tadano and Kobelco RTs and significant numbers of used Hitachi, Kobelco and Sumitomo lattice crawler cranes. Most of the crawlers are 50–80t cranes with a few being in the 100–200t classes.

When it comes to the largercapacity classes from 400t to 650t capacity Liebherr and Terex-Demag have always sold well in China. Many of these crawler cranes are owned by China’s numerous state owned construction and energy related companies who are very active throughout Asia, Africa and CIS markets such as Belarus and Turkmenistan, and on such projects it is the norm for the Chinese to take their equipment with them.

Typical volumes of exports of used crawler cranes are up to 50 units per year, including those in the hands of Chinese contractors.

Buyer beware!

The watchword for companies considering purchasing secondhand cranes from China is definitely “Buyer Beware.” The Chinese market is swamped with tens of thousands of old cranes that may not have seen regular work for many months or even years.

During China’s boom years, cranes literally worked round the- clock 24/7 with minimal preventative maintenance. The culture is to treat machinery like a tool rather than an asset. The consequence is that most Chinese cranes age very-prematurely with the effect that ‘young’ cranes of even 3–5 years’ age (especially mainstream sizes of up to 50t capacity) for all the world appear to be twice or three-times as old as they actually are.

With a largely under-trained workforce, crane accidents, especially roll-overs, are commonplace. One consequence is that numerous Japanese truck cranes have been repaired with locally-fabricated curved-profile crane cabs similar to those long used by XCMG. As for hydraulic and automotive repairs, the use of genuine replacement parts is the exception rather than the rule, particularly on imported cranes.

Because of the cache and added-value associated with global brands such as Tadano, Kato, Kobelco, Liebherr, Manitowoc and Demag, “misbranding” is not a rarity. For example, it’s quite common to come across a used XCMG truck crane ‘misnamed’ Tadano or similar.

While mistakes happen, it has been proven that in China a number of counterfeiters are actively building top-brand lookalikes.

Then there’s the question of the build-year advertised by used crane traders. Anyone familiar with crane models and their respective production vintage will quickly conclude that the build-years advertised for secondhand cranes in China are often so fallacious as to be quite laughable. Often one encounters cranes advertised as being say a 2012 model that in fact was terminated five or ten years previously.

Even without the disincentive of generally poorly-maintained and often improperly-repaired cranes and equipment, it is also a fact that culturally the Chinese have an aversion to buying used equipment. This heightens the dilemma facing manufacturers and dealers in a market awash with used cranes and equipment.

Over 250,000 new truck, all terrain, rough terrain and crawler cranes were sold domestically in China over the past 15-years.

Many of the older machines are either parked and left to ‘rot’ or have been scrapped.

It might appear that a remanufacturing business should offer significant business opportunities in China. It’s now 16 years since China’s Ministry of Industry & Information Technology (MIIT) approved pilot remanufacturing programs for ten companies including XCMG, Sany Group and Guangxi Liugong. While faced with a lack of unified standards, China’s leading construction machinery manufacturers have been investing heavily in new remanufacturing centers, but mainly for sophisticated and expensive componentry like engines and transmissions.

Sany now has numerous remanufacturing bases in China and while, like Zoomlion, their primary focus is on concrete pumps and their components, both are now engaged in the remanufacture of small truck cranes. XCMG’s Xuzhou Reman Construction Machinery Remanufacturing has particularly focused on remanufacturing its rotary drill rigs. The company works with Xugong Visionbank Leasing Company to re-purchase, re-manufacture and re-sell XCMG equipment.

In 2014 the first large batch of 30 remanufactured heavy duty drill crawler drill rigs was completed for one domestic enterprise and that year the first unit was exported to Madagascar.However, as far as remanufacturing mobile cranes is concerned, the cost of the remanufactured product is a major concern, particularly, for low-cost, mass production machines like small truck cranes.

A truly-comprehensive remanufacturing project on such products involves individually stripping-down the old machine piece-by-piece, inspecting and testing all major components and fabrications, replacing defective parts with new ones, repainting the entire machine and function, load and road-testing the remanufactured crane. It is a major time-consuming, costly and to a degree uncertain exercise.

However, while manufacturers such as Zoomlion and Sany seem to have addressed the most fundamental items, it does not appear that every piece-part has been dissembled and inspected. Generally speaking, the economics would only seem to work well with larger-sized crawler and all terrain cranes.

As the Sany and Zoomlion examples illustrate, China’s used crane business seems to be gradually opening up, at least in terms of international sales.

However, the domestic picture is still not so encouraging. To date used mobile cranes have barely featured in the auction arena.

Ritchie Bros Auctioneers held its first unreserved Chinese auction in Beijing back in 2013 and has since held three or four auctions per year in a number of locations including Changsha and with Jinan proving the most popular site.

However virtually all of the available equipment sold has been excavators, wheel loaders and dozers with literally zero cranes sold.

Changing deeply-ingrained cultures is not for the fainthearted.

A 2010 XCMG QY100K-I auctioned for $212,500 by Ritchie Bros in May 2017
This four-axle 2008 Zoomlion 420 sold for AUD19,000 in Brisbane this year.
Mobile cranes from Sany, XCMG, and Zoomlion on offer at a Ritchie Bros auction in Dubai in December 2016. The Sany SAC2200F in the foreground sold for $560,000.
This 2011 Zoomlion RT550 was sold for $70,000 at a Ritchie Bros auction in Dubai in September 2016.
A 2013 Sany SRC840 sold for $77,500 at a Ritchie Bros auction in Houston, Texas, in November 2016