Secondhand demand

12 June 2013


Fleet owners have always sold used cranes to a range of buyers to make room for new models. These day’s auction houses make use of modern technologies to bring buyers and sellers together from across the world. Zak Garner-Purkis looks at the latest trends in the secondhand market.

Before a crane becomes scrap metal or is recycled into something shiny and new it has several working lives with different owners. How many fleets it is a part of varies on the machine itself: sometimes versatility or capacity will give it a long life, other times an ability to perform specialist applications or low maintenance costs extend a crane's existence.

Every time a vehicle changes hands the owner must enter the uncertain domain of secondhand sales. There are plenty of buyers and sellers, but putting together a deal that suits both is another matter altogether. There are now a variety of companies who facilitate the buying and selling of cranes, whether that's digitally via the Internet or face-to-face at large auctions. Two of the major players in this market are Ritchie Brothers and Iron Planet; Cranes Today spoke to them, as well as crawler crane sale specialists PVE, to find out what's going on in the world of secondhand crane sales.

The mid-range sweetspot
"For most rental owners, crane sales are a necessary evil, necessary because they need to free up space in their fleet for new models, evil because they don't want to do it." says Iron Planet's director of crane operations for the Americas region, David Tobón, "we provide a platform that assists them in getting a fair valuation, instead of them trading or becoming a re-marketer of old equipment. They use Iron Planet to get a fair deal."

The recession in the west has had a major affect on many parts of the lifting industry and the secondhand market has not been immune. It has become important more than ever for there to be an application for a crane to work on, or if is a versatile enough several different projects it can be used for. Within each different equipment category there are fluctuating rates of sales, which means for auction houses it's all about supply and demand.

Capacity often plays a significant part in determining whether a crane will sell for a reasonable price, as David Tobón explains: "For capacities less than 60t cranes, the market is flooded in every region by models from a large range of manufacturers. But, 75t, 100t, and 120t cranes hold value more than higher capacity models, because there is abundant demand and a lack of supply"

Ritchie Brothers', senior vice president of sales in Europe, Jeroen Rijk, also believes that capacity is a factor in secondhand market: "There is a good demand for high tonnage cranes, but the market for 30t, 40t, 50t is more volatile. With smaller cranes a lot of the demand comes from the export market. A year or two ago we saw a drop in prices, especially in the lower product range. But, since the end of last year, prices have picked up. We're seeing quite good prices for 80t and 90t vehicles."

"Years back a 100t crane was big, now we see 200t to 500t cranes being sold on a regular basis. We just sold a 700t Demag, which is the biggest unit sold in the history of the company. The bigger the range gets, the more diverse the customers become."

It isn't just capacity that defines whether a unit has resale value, it's also a question of whether there is a demand for that particular type of crane. In the crawler crane sector PVE have noticed a different trend, director Joost Bömer explains:

"Between 2010 and 2011 we saw a lot of crawlers going up for sale, but because no-one dropped their prices few sold. The cranes stayed at the boom level, because at the end of 2007 to 2008 and 2009 people bought at high prices and none were willing to take a loss."

"Volume has decreased but prices have remained high. Unless the there is a reason forcing them to sell, they won't. Previously, people had a project and would go to the bank and ask for money to buy a crane. The banks would lend them the funds back then, these days they don't tend to. It's difficult to find the money to buy and no-one wants to take a risk."

"Manufacturers keep increasing what they charge for new vehicles. Because the demand for rental is so high, instead of selling old machines many companies are renting them out instead. As a result, we ourselves have increased out rental fleet substantially in the last three-to-four years."

Avoiding lemons online
Some industries have been frightened by the Internet's ability to supply vast amounts of free information on an infinite number of subjects, but not the secondhand cranes market. Here it has proved a valuable tool in connecting buyers and sellers across a diverse range of geographies. The Internet is often criticised for giving opportunies to individuals with ulterior motives to exploit the anonymity it offers. However, in secondhand crane sales it offers the precise opposite, the opportunity to trace each party involved and display a large amount of information for the unit on sale.

This expands upon the services already offered by the auction house, as Jeroen Rijk says: "In terms of online growth what we've seen is a development of what we like to call 'the best of both worlds': The majority of people online have been to an auction before or bought with us previously, so the relationship is already there. They trust our ability to deliver."

"Around 37% of our overall sales across all segments (including the non-crane segments) are online, this varies region to region, but last year we sold $1.3bn worth of equipment over the Internet. The overall pattern is that this is more prevalent in developed markets such as Europe, the US and Canada. Although, we see online bidders from all over the world."

Transparency and detail are the two key aspects in regards to selling online. Greater connectivity is only useful if these areas are addressed. If they are, then the potential for both buyer and seller to get a better deal improves, Ritchie Brothers Jeroen Rijk continues: "A crane is a very specialised item, it's about connecting the seller and the buyer, the world is a very big place and we're seeing a lot of demand from a variety of different locations."

"Our online service features detailed equipment information (DEI), in-depth information on the items that are being sold. It includes over 100 pictures of the unit so the customer can see exactly what condition the vehicle is in. This level of detail means that the buyers can decide whether to jump on a plane and inspect the item themselves. It's a service that we're offering in Europe and one that we've had in the US for a while now."

Iron Planet also prides itself on the level of information its online service provides the customer with as David Tobón explains: "Online services allow the buyer to view inspection information on a range of different vehicles from their home, from around the world. Typically in the past you would have to travel from place to place viewing the machines, and you can still do this, but with the inspection report you get an unbiased comparison of the different assets. This makes it easier for people to both buy and sell."

The Internet is also changing the way in which new customers are found, Joost Bömer of PVE says: "Roughly 50% of first contact between ourselves and buyers comes through email, 25% is through used equipment websites and 25% is from traditional methods of direct contact."

"At the end of the day though this business has a lot to do with relationships on a face to face basis. But finding new customers is easier online, which is very important in terms of sales as you need to find one customer or they have to find you."

"The Internet has made the world much smaller for us, and as a seller of cranes we have seen the benefit. Now everything is so transparent, you can use the web to find out who the owner of a crane actually is. In terms of exposure the Internet is great, as it gives us access to a wide range of different customers."

Location, location, location
Secondhand cranes have always moved across borders, and examining the trade flows gives a good insight into trends across global and regional crane markets. The auction houses are in a prime position to identify who's buying where and who's selling. As David Tobón of Iron Planet explains: "All markets are different, there are buying markets and there are selling markets."

One region that has seen a lot of changes in terms of secondhand cranes is Europe. Many rental firms across continent invested heavily during the boom years and now have large unsustainable fleets, Tobón continues: "Europe is predominantly a supply market: there is a greater population of under utilised and completely unused equipment."

Southern Europe is one area that has seen a large number of sales recently, and Ritchie Brothers have noticed that Spain in particular has a strong export market, Jeroen Rijk says: "Spain is in the depths of the recession. It has sold many cranes because of its global reach, as companies with large fleets look to rid themselves of their surplus vehicles. Recently we've sold 150- 200 cranes in Spain and about 90% of these were to export. We have an upcoming auction in Ocana, south of Madrid which we expect to be busy."

In Europe, austerity policies and a lack of construction work have resulted in a surplus of cranes for other markets absorb. But across the Atlantic, David Tobón of Iron Planet says, there are clear differences: "North America and Latin America are definitely buying markets. Demand in Latin America is driven by oil and gas work, as well as infrastructure projects funded by the World Bank and the IMF, building roads, ports and power plants. Global companies follow the money into these projects working alongside local firms, but a lot of the equipment that is shipped in is project specific rather than being driven by local demand."

"In the US, we have seen certain growth fields such as gas, fracking, as well as a set of infrastructure projects such as bridges and roads. Natural disasters have also affected the market."

There are differences between countries within a region, Tobón says: "Restrictions, and regulations do make certain markets stand out: Australia and Brazil both exist on their own in many ways."

Asia, with a number of countries that are major producers of cranes, also has a distinct secondhand market. "The Asian market on its own has unique opportunities", says David Tobón, "A lot of manufacturers have set up plants and joint ventures out there. China is a supplier, Japan is a supplier. There's a regional buying market, as well as a secondary and third layer made up of smaller surrounding nations that absorb the used equipment. The Japanese have been very successful in getting their used equipment into the Middle East. This is a region that in many ways is self-sustaining."

Getting access to this market is a different process, as PVE's Joost Bömer explains: "Asia continues to have customers looking to buy cranes, although not as many as in the boom years. You have to focus on the cost and what customers are buying. In Asia we target customers through local agents, who can help
give us access to the market."

Shipping fee
Once you've bought your crane, you still need to get it where you need it. Ritchie's Jeroen Rijk says, "It's not that hard to buy a crane, but transporting it can be difficult. Transporting a major unit at a reasonable price and quickly enough can be a challenge. This is why our relationship with companies that provide these services is so important, we have good links with shipping companies for example. This means we can assure the customer that the item they buy at auction will get to them, whether they are based in Chile, Mexico, India or anywhere else in the world. We provide the services to make sure that an item is ready."

Secondhand sales are a necessary part of crane ownership, whether in boom time or in a recession. Tracking trends in secondhand prices is a good way of understanding the shape of the global industry. If the Internet continues to have the impact that it has done so far, then this will become another area that facilitates the sale of equipment from one region to another. Auctioneers remain in a good position to assess the market, as they are neither a buyer nor a seller. Their independence is a key part of the secondhand market. As David Tobón says, "We have two customers: the guy who buys and the guy who sells. Do we help to sell? We like to think not, what we do is help the transaction. The customers don't mind paying a fee to us because we are helping both of them."

A Ritchie Bros auction in Florida.
All terrain crane sales, by units
A Ritchie Bros auctioneer at work