Showing Resilience27 July 2021
What is the post-pandemic state of the UK construction and tower crane market? Julian Champkin reports.
Now that the first and major disruption stage of the pandemic is past, most projects that were paused have resumed, those that were waiting to begin are gearing themselves up to break ground, and those that were merely at the twinkle in the eye stage are seeking quotes, pricings and contracts. “There is certainly work coming down the pipeline,” says Tony Thacker, sales business manager of Radius Group.
So there is reason for optimism. It should however, be cautious, and tempered. Two factors are major limitations, says Thacker. They are a treat both to projects proceeding at all and to profitability if they do go ahead. Both are longer-term consequences of the pandemic, with added ingredients to make them worse. The first barrier to construction is shortage of materials.
“Some materials are just not available, or else have long wait times for supply,” he says. The cause is the worldwide disruption, not to say near paralysis, of the container shipping industry.
When the pandemic first hit, much international trade suddenly stopped; owners of container vessels, faced with zero demand, simply parked their ships. Then as locked-down populations worldwide decided to spend their money to ease the pressure of isolation, demand almost equally suddenly shot up. But the ships were in the wrong place to load those goods, the loading and the destination ports were overwhelmed with demand, and even empty containers to pack the goods into were scarce, piled up in ports on the wrong side of the world.
To add to the disruption, the container ship Ever Given got itself wedged across the Suez Canal, which carries 20% of all the world’s trade. Traffic through the canal was halted for a week, caused an estimated 60 days shipping delay, and held up more than $60bn-worth of goods.
A second disruption, less publicised but actually more significant, was a Covid outbreak which closed the Chinese port of Yantian in Shenzhen, again for a week. Yantian is the third-busiest container terminal in the world. It handles 13 million TEUs (standard container-equivalents) a year. The knock-on effect hit neighbouring ports also. The net result of all this is that container ports worldwide are still congested, vessels are anchored offshore waiting for unloading slots. The global supply chain is stressed to near breaking-point and goods, for construction as for everything else, are in short supply or simply not available.
Thus in April, the UK’s Construction Leadership Council put cement on their list of items facing shortages. In July, they added plastics for roof membranes. British Steel stopped taking orders on structural steel sections around the same time; aggregates are not currently in short supply but trucks to transport them are.
The second factor affecting construction follows from the first: it is price. All construction materials have become significantly more expensive, and suppliers and construction companies, have publicly warned customers of this. Travis Perkins emailed customers in June to tell them that bagged cement prices would increase by 15%, chipboard by 10%; and paint by 5% forthwith. Construction company Mace in its quarterly report (March 2021) reported construction material prices 8% higher than in March 2020. And timber is a special, and far worse, case all of its own.
There has been a nationwide shortage of timber since the first lockdown in March 2020. MDF, veneers and solid wood are reported by roofers and cladding contractors to be particularly affected. “There is unlikely to be any improvement in timber supplies this year with little or no timber currently coming into the UK that is not already pre-sold and global demand outstripping supply,” the CLC said in April. In the UK, some wood-based products are now over 50% more expensive than a year ago.
But the demand for construction, and so for construction machinery, is there if you can find the supplies to satisfy it. One of the UK’s largest tower crane companies is Bennetts Cranes. “The overall value of construction output is currently slightly above pre-pandemic levels” says Edward Seager, their managing director, “and sales and rental levels are very similar to the pre-pandemic levels we were seeing in 2019. Rental prices fell slightly in the period to March 2020 and there was little in the way of rental activity during the first few months of lockdown. After that, in the final quarter of 2020 and the first quarter of 2021 prices dropped sharply but they have started to rise again during the second quarter of 2021.”
The government’s post pandemic policy has included facilitating the transition of commercial buildings to residential, to use office space in cities that might no longer be needed if working from home remains significant. “That might have an impact on the market for tower cranes, but it is rather too early to say whether that will be the case” he says.
“The most popular types of cranes at present are 60mt, 100mt and 160mt luffers. There is a slight trend towards larger capacity luffers and saddle jibs reflecting growth in the use of pre-cast and pods.”
Another change that some governments and builders worldwide, have been trying to push is Prefabricated Prefinished Volumetric Construction (PPVC). Will this actually come to the UK market? “Prefabrication is definitely a growing market,” says Seager, “but the UK is traditionally a conservative market and tends to be slow to adapt to new developments. So whilst this is definitely a trend, it is probably a slow one. In the event that an increasing proportion of homes are built in factories and transported ready-built to their final site the requirement will be for significantly larger lifts carried out by mobile cranes and tower cranes, not by low-capacity cranes such as self-erectors. With or without prefabrication we do not think that self-erectors are likely to take a large market share.”
And he highlights yet another shortage for the industry: manpower. That too, he thinks will limit the role of self-erectors. “If there are labour shortages, which currently seems to be increasingly the case, we would expect clients to want to accelerate the construction speed. The government is talking about time-limiting planning consents and increasing the volume of house building. Both of these objectives would be helped by greater mechanisation and cranes with faster lift cycles.
“A tower crane with operator and banksman is much more productive than one man attaching a load to a hook, lifting it up, walking to where the load is to be unloaded, moving the load, lowering it into position and then unloading it. In other words, a self-erector or a tower crane operated by remote control is a low-cost, low productivity option. A tower crane is a higher cost, higher productivity solution. We think the trend in building is towards the latter not the former.
“So given that demand for speed, for the coming years we expect to see an increase in the number of high-capacity cranes for pre-cast and pods, and also a trend towards higher freestanding cranes. That last is because using collars and ties to attach tower cranes to buildings interferes with many modern cladding and precast systems so is inefficient and slows production.”
Kevin Lowe is general manager of Total Tower cranes. “Until recently we worked only on in-house projects” he says; but bravely, in the middle of the pandemic, the company entered a new sector: “In August last year, we branched out and entered the crane hire market. For the rental business we bought in more cranes – we use Saez. We have saddles and hydraulic luffers, they are both in demand. Our maximum capacity at the moment is 18t, but for heavier lifts we can bring in equipment from Europe.”
And for them it seems to be working. “Things were quiet during the pandemic, but we expect a lot, and there is a lot in the pipeline coming through now; we are doing pricing and inspection; we have got quite a few clients wanting quite a lot of quotes. If those come off things will be good.
“Rental prices are reasonably level. There is always competition but they did not drop drastically during the pandemic; we have been able to maintain our pricing.
“We operate nationwide but concentrate on Milton Keynes, Birmingham, Liverpool, and the Midlands. We have an excellent client, Winvic Construction; at the moment we are doing a hotel in Milton Keynes for them—it has just topped out at 50m—and a residential project in Edgbaston. We are expecting the rental market to thrive; that is why we entered it.”
Other newcomers are finding it harder. Another recent entrant, who did not want to be named, spelled out the maths. If you buy a tower crane asset for, say ?300,000 you will want to repay that cost over say five years. Five years is 60 months so you will need to earn ?5,000 a month from your crane just to relay the capital, let alone interest and a hopedfor profit. “Rental rates are not beginning to cover that,” he says. “Certainly the smaller-capacity end of the market, the 10-14t range, is saturated. For larger cranes there is more demand, but it is the larger companies, the ones with a great number of cranes in their fleet who are best placed to take advantage of that. Just now there is little point in buying a smaller capacity tower.”
Established companies are more upbeat. “The building pattern for tower cranes has barely changed over the past few years,” says Andy Brown, managing director of Falcon Tower Crane Services. “Residential tower blocks are still the norm but tower cranes are increasingly popular on smaller residential blocks as space continues to get tighter.” He too is seeing the current resurgence in opportunities: “The demand has been fairly consistent since 2017, with the exception of three months at the beginning of the 2020 lockdown. The level of enquiries has also been consistent throughout this period. But we are starting to see enquiries and contracts increasing exponentially towards the middle and end of 2021.
“Rental prices too have remained fairly consistent since 2017. If enquiries and contracts continue to increase at the rate we are currently seeing, demand will soon outstrip supply and we will see the inevitable increase in prices.”
The UK currently boasts the biggest infrastructure project in Europe, in the form of HS2. “HS2 will certainly contribute to the number of cranes erected in the UK” he says, “but our market is undoubtedly residential and commercial as opposed to infrastructure and power stations. Residential and commercial works tends to focus on up to 400mt cranes, which we specialise in; we have a good foot hold in that market. For Falcon, over 60% of our contracts fall between the 100mt and 200mt cranes. This hasn’t really changed over the past few years. The transition of commercial buildings to residential may have an impact on the market, but more for mini or spider cranes than on tower cranes.”
In terms of PPVC, he says: “We are starting to see this type of production in the UK, but the uptake is slow compared to other countries. If this method of construction becomes more popular, there will be a big shift in the way tower crane suppliers operate. Larger tower cranes will become more popular to deal with the extra component weights but hire periods will reduce as this method of construction is considered a lot faster.
“For rental companies this will mean larger capital outlay for shorter contracts, which increases the risk of keeping the machines busy. There will also be a strain on labour as tower cranes will be erected and dismantled more frequently due to the shorter hire periods. There are a lot of benefits of PPVC, which will see this method of production increase in the UK, and it is a case of being mindful of the change and getting ready for it.”
The UK is slow on prefabrication, and slow on self-erectors also: “The uptake of self-erecting tower cranes is still much lower than our European counterparts,” says Brown. “UK users much prefer the telehandler option for that class of lift due to their price rather than the safer more reliable hook. This has changed over the past few years – as evidence we have increased the self-erectors in our fleet. We still have a long way to go to convince clients to pay the extra money for the extra versatility of a crane. Smaller properties will undoubtedly increase the demand for self-erectors but not be the level you may expect.”
Even so, he has more faith than does Seager of Bennetts in self-erectors. “Our self-erecting division has grown to over 75 machines, and we have seen a greater shift to the larger selferecting cranes such as the Potain Igo T 85 A or the Potain Igo T 130. These cranes come with a 45m and 50m jib length respectively, but what makes them so popular is the height under hook. As residential buildings are now getting larger, there is a bigger demand for taller self-erecting cranes. The Igo T 130 for example, can stand up to 37.3m with the jib in a horizontal position and up to 61m in the luffed position.”
And his expectations for the next few years? “To be very busy. Although over the past few years we have increased the number of cranes in our fleet to 430, we have not increased the number of cranes erected on site. This is deliberate, it lets us reduce our utilisation to become more responsive to our customers and allow extra time in between contracts for service and maintenance. Of course, this comes at a cost, but the benefit in the quality of our cranes and service we offer to our customers unquestionably outweighs the cost. This is evident in the downtime percentage of our cranes, which is under 0.5% across our entire fleet. We buy 60 to 70 new tower cranes each year—we did that even during 2020—and we sell just as many to keep the fleet modern; this also contributes to the low downtime of our cranes. We will continue with this course over the next few years and keep our fleet age under five years. Demand in the UK for tower cranes will grow in the coming years, and it is our intention to grow with it.”