Signs of a thaw in the frozen north?

For crane manufacturers and hire firms operating on the European stage, supporting construction while accurately identifying the relative peaks and troughs of crane demand across the continent is an arduous but necessary task.

According to a 2009 survey by World Market Intelligence, many working in the crane sector agreed that intense pricing pressure and the uncertainty of the economic situation would most likely shape their activities throughout 2010.

However for European respondents, the results showed that concern over falling demand was higher than the global norm, forcing the containment of operating costs to the forefront of industry professionals’ minds.

As these concerns have been realized across the continent this year, many firms have tailored their fleets more carefully to shore up their finances and cut costs.

Some have achieved this through sales of smaller capacity cranes, as increasingly fierce competition fuelled by scant utilisation opportunities has made this a prudent option.

Ainscough Crane Hire managing director, Neil Partridge comments: “We were running 600 cranes two and a half years ago, and we’re now running 470. We’ve sold an awful lot of small cranes.”

“Small capacity cranes is where the physical demand has fallen most, the cranes up to 50t since the beginning of the recession back in early to mid 2008.”

With tighter restrictions on mortgage lending across Europe and rising levels of unsold stock contributing to declining property values during the first half of 2009, demand for smaller cranes was always expected to be fairly poor throughout 2010.

“Across the range from 50t all the way up to 500t, crane demand is lower,” adds Partridge, “but it is much lower at the very bottom end of the capacity ranges because of house building, small commercial and retail construction drops that have been widely felt more than anything else.”

Varying national approaches throughout Europe on how best to ensure fiscal stability has helped engender hesitance within construction, as the industry waits for to the worst to blow over.

Partridge continues: “In our case we have re-mixed our fleets. We have continued to invest in larger capacity cranes, although obviously we have sold a considerable number of our smaller cranes as well, we have hopefully put ourselves in a position where we are able to react for the upturn, whenever it may come.”

In the UK the strain on lower lifting capacity cranes under 50t is exacerbated by the use of alternative construction equipment

Liebherr UK managing director Richard Everist explains: “Housing isn’t really a great market for cranes [in the UK]. There are cranes used but it’s not of huge potential, a lot of housebuilders use other equipment.

“If you drive around Northern Europe, Germany especially, you will see a different methodology, and you will see a lot of these small self-erecting tower cranes used just on one build, a build of one house. That just doesn’t happen in the UK, they will just rent a telehandler for a day or a very small mobile, or even a large knuckleboom.”

Pocket change
Though European markets may be awash with small cranes, for larger capacity cranes, although the work rate may have slowed, there are still pockets of opportunity.

One such place is Poland, where preparations for the UEFA 2012 European Football Championships have required substantial investment in the country’s hospitality sector.

For instance in the capital, work continues apace on one of Poland’s centrepiece projects for Euro 2010, Warsaw’s national stadium, which is expected to net main contractors Alpine Bau, PBG and Hydrobudowa €292.1m.

Significant investment in the country’s transport infrastructure is still needed, and even just for mega projects worth over €1bn this represents nearly 30% of current national construction spending.

Select Plant Hire are already moving to exploit this, having recently sold a number of tower cranes to a Polish hire firm.

General manager Duncan Salt comments: “They’ve got a buoyant market again in the commercial, residential and infrastructure sectors. They’ve got big building projects for housing and a lot of infrastructure.

“We could probably sell another 20 cranes over there if they could raise the finance but they’re struggling. The banks have got almost zero liquidity so they have to sell shares in their business to gain any capital. It’s frustrating a lot of people.”

Another buoyant Northern European marketplace for cranes is Scandinavia, where larger capacity cranes are in short supply.

With over €6.6trn of spending just on wind farm projects worth over a billion Euros in Finland, Norway and Sweden, domestic crane firms will have a hard time keeping up with demand.

In Norway, a nation accustomed to sourcing the majority of its construction plant from overseas, there are currently less than less than ten Norwegian owned crawler cranes in the country, according to Kranringen Nordas owner Knut Nordas.

He says: “We have seven or eight crawler cranes in Norway, and that is more cranes than the Norwegian crane dealers own altogether.

“From 500t to 600t, I think that is a very good market. The market for bigger cranes is getting better because everything is growing, the things that they are lifting around the world are being made bigger, so we need bigger cranes.”

He continues: “For bigger cranes and crawler cranes it will be the heavy industry, the oil industry and the wind farm market that need them, that is what is creating this good market.”

Kranringen Nordas is working on the oilrig Deepsea Atlantic at the Hanoytangen quayside near the firm’s Bergen offices.

Using a Terex Demag CC2400 crawler crane, alongside a Grove GMK 5130, the firm is helping to carry out classification and maintenance work on the rig.

Along with more work from the oil industry, the firm is hoping that 2011 will see heavy Norwegian investment in onshore wind farms, as has been the case in neighbouring Sweden for the last few years.

Contemplating future prospects, Nordas claims: “Around Norway there will be a lot of big cranes working on wind farms, I can see the wind farm industry becoming very strong in Norway.

“It’s been very good business in Sweden in the last years. There are a lot of big Norwegian companies doing a lot of jobs in Sweden.”

Despite remaining the second biggest exporter of construction equipment in the world, Germany’s construction market was dealt a sizable blow during the downturn.

Over €21bn was earmarked to revive the struggling construction sector from the German government’s fiscal stimulus package for 2009 and 2010.

Owing to the eminent reputation for quality of the countries crane manufacturers, national exports of construction cranes remained fairly strong throughout the downturn.

The majority of industry commentators seem to agree that the quality of the nation’s strongest materials handling export far outclasses many contenders and outweighs buyer hesitation over the current strength of the Euro.

The waiting game
But even with prospects for larger cranes in 2011 looking more promising, few crane hire firms are expected to make new acquisitions next year, whether for tower or mobile cranes.

“I don’t see the tower crane market improving, certainly not for investment purposes for people like us, manufacturers, for years, and I hesitate to put a figure on years but it won’t be next year, and I doubt it’ll be the year after either,” comments Everist.

“With tower cranes during the boom time you had a lot of investment in a lot of cranes, they are still here. So if you go around to any of the yards of major tower crane companies you will see they are absolutely crammed full of tower and all the while they are on the ground. So why would they invest in new ones? It will be a long time before they get back to the point when they would need to invest in new.”

“Of course there will always be the odd project where it needs something that they didn’t have but the general market isn’t going to improve for a while. Even with the pockets of investment, I think the underlying economic situations around northern Europe really aren’t going to improve very much.”

Ainscough’s feel for the mobile crane market seems to correspond with this view.

“I don’t think there’ll be a great deal of investment in new cranes amongst the mobile crane hirers at all in 2011,” says Partridge. “We have continued to invest during the recession in 2009 and 2010, but we’re going to take a pause now, and from what I can gather an awful lot of the small crane companies are not spending either. I just don’t think there’s the appetite because the economic climate is still so difficult.”

“I think our industry has found this recession tougher than we thought it was going to be, and I think that has influenced the industry to plan not to do anything in the next twelve months and to wait it out throughout the whole of 2011.

“That is broadly speaking what we intend to do, and I think it mirrors what an awful lot of other businesses supplying to the construction industry are doing as well. There’s still too much uncertainty and too much economic pressure.”

However for some smaller firms a ‘wait and see’ approach will not be enough to sustain them throughout the period.

Up until now there has been little of the industry consolidation that typifies sectors struggling through a recession. However with any expected upturn expected in over a year’s time many agree that many bigger companies are likely to increase their market share through the failure of competitors or acquisition.

“In Norway some companies are growing bigger and bigger, buying up smaller companies. We have two or three big companies now, and we can also see the same in Denmark and across Europe. I think in the future if you want to survive you will have to be big.”

Salt echoes this sentiment, concluding that although smaller firms may have it harder, well thought through partnerships can help them ride out the storms.

“I think it will take 18 months [before consolidation becomes more widespread], because your crane hire guy is a pretty resilient fellow, pretty resourceful and very proud of what they have.

“I know LTC have joined forces with Neremat in Northern Europe, and that’s not a bad thing to create a joint venture.

“The market was slack everywhere, but it has come back in other places, and if you’re in a flat area and you have a partner in a busy area you could ship your cranes between each other.

“It’s finding the markets, some parts of Europe are good and other markets are emerging. It’s how you put the dealers to work and your guys to work.”