Ten years ago this year, in 1997, Britain handed over Hong Kong to the Chinese when its 99-year lease of the New Territories expired. Before handover, however, it had rushed to build some of the most impressive infrastructure that civil engineers had ever devised. The new Chep Lap Kok airport was built on reclaimed land on Lantau island, connected to the mainland by a substantial crossing that includes the Tsing Ma suspension bridge. Altogether, there were ten massive projects associated with the airport development, representing many billions of dollars (Hong Kong or US, take your pick).
After handover, other major infrastructure projects followed on, such as the West Rail extension of the Mass Transit Railway and the Kowloon Canton Rail Corporation’s East Rail extension.
Skyscraper development has also continued, ensuring that Hong Kong’s skyline never remains unchanged for long. The 425m-high International Finance Centre (2IFC) was completed in 2003, overtaking the 367m-high Bank of China Tower to take the title of Hong Kong’s tallest structure.
Such projects ensured that any visitor to Hong Kong would see no evidence of the downturn in construction that hit the rest of Southeast Asia in the wake of the currency crisis of the late 1990s. And still today there are major projects going on. The 1,600m-long Stonecutters Bridge is mid-way through construction, and the International Commercial Centre is well on its way to its full 118-storey, 484m height that will make it Hong Kong’s tallest on completion in 2010.
However, the real picture is that despite these projects, there is none of the intensity of activity that was associated with the new airport projects in the 90s. That was at a level which was unsustainable and its legacy was a massive oversupply of equipment. There were far too many cranes and so rates plummeted, never to fully recover. The SARS epidemic alert in 2003 further contributed to economic problems. According to government statistics, the gross value of construction work by main contractors has fallen steadily every year since 1998.
Frank Chan, director of Continental Crane, says there is still an oversupply of cranes in Hong Kong
Frank Chan, director of rental company and dealer Continental Crane, estimates that Hong Kong’s crane population today is just a third of what it was in 1997. Ten years ago there were maybe 700 tower cranes, 600 mobile cranes and 900 crawler cranes (including both foundation and lift machines). Those numbers today are more like 300, 200 and 300, he says. However, there is still an oversupply of machines, he says.
Those that have gone were exported mainly to the Middle East and India. A number of crawler lift cranes went to China, Chan says (to Hong Kongers, China remains a foreign country), but there was no demand from the north for either telescopic mobiles or foundation cranes, because of tariffs to protect the massive indigenous manufacturing base. Whether the cranes are new or used, China imposes a 10% import tax after a 17.5% value added tax, making a cumulative tariff of 29.3%.
Many crane companies have responded to the new circumstances by scaling back, and finding ways other than cranes in which to invest their money. Continental Crane’s rental fleet consists of just four crawler cranes today, but it has had no work for them in Hong Kong since 2002. The rental rates, Chan says, make it not worthwhile. He says he can get only HK$150,000 (less than US$20,000) a month for a 250t crawler crane, which is roughly half what he was getting in 1997. Instead he has found work for them in China, where he can get US$30,000 a month, he says. Chan says he sees little prospect of any improvement in this situation.
Despite the tariffs in China, Continental Crane can still find buyers for used large all terrains there, which it imports from Europe.
Many mobile crane rental companies in Hong Kong have also suffered from the downturn. Large all terrains can be seen sitting idle in their yards. Hong Kong’s largest mobile crane rental company, Kanson, continues to flourish, with a growing fleet and utilisation in the 80%–90% range. The secret, aside from hard work, is revealed by the company’s new full name—Kanson Crane & Heavy Transport. By investing in heavy transport equipment and SPMTs, Kanson is now offering turnkey lifting and transportation packages, which has proved profitable, despite a 40% fall in crane rental rates. Rates began falling in 1999, says Kanson director Nelson Kan, but have been stable for the past two years. Kan is optimistic that rates will start to pick up again soon, with perhaps a 10% increase achievable in 2008.
Kanson has approximately forty cranes and continues to invest in new equipment. A new Tadano Faun ATF 220G-5 arrived at the end of last year via the Bauma China fair in Shanghai, where it was exhibited on the Tadano stand. An ATF 80-4 arrives in March. While Tadano has long been the preferred brand for truck and rough terrain cranes in Hong Kong, Kan believes that these are the first Faun all terrains in the country. Kanson also took delivery of a 250t IHI crawler last month, to respond to a customer request. It has owned a couple of crawlers before, but sold them on again.
Nelson Kan says that demand for telescopic mobile cranes has remained good because civil engineering projects, notably highways and bridges, have continued. It is the building sector that has borne the brunt, he says, impacting mostly on foundation and tower cranes.
There has been remarkably little penetration by Chinese-made mobile cranes in Hong Kong. Contractors and rental companies have international expectations and share the widely-held concerns about the quality and reliability of Chinese-made equipment. Nelson Kan says: “At this moment, I wouldn’t consider [buying a Chinese crane] because I don’t know the quality of the cranes. I am not familiar with them or the quality control. But in the future, who knows?”
He knows of only one Chinese mobile crane in Hong Kong, a 70 tonner. Kan says his father, who previously owned the company, bought two Chinese cranes in the mid 1980s but while they were structurally adequate, the components were of poor quality and kept breaking down, Kan says.
Chinese tower cranes, on the other hand, are becoming a more common sight in Hong Kong, just as they are across all parts of Asia. According to Richard Kwan, director of Proficiency Net, this is primarily because of the long lead times and delivery problems of the non-Chinese manufacturers. “Hong Kong people only buy Chinese when they have to,” he says. He estimates that between 10% and 20% of tower cranes in Hong Kong are now Chinese brands. Most are SCM models in the rental fleet of Moreton.
Proficiency Net has ten tower cranes for rent, as well as a single Liebherr LR 1280 crawler crane, and is the Wolff tower crane distributor for Hong Kong. It also trades used cranes of various brands. Kwan says that the years from 2001 to 2004 were particularly difficult. “Rental rates and utilisation both dropped by 50%,” he says. “No one wanted to buy equipment. Everyone wanted to sell. There were no winners.”
Gambling on success
All that began to change for Kwan in 2005, however, thanks to the casino construction boom in neighbouring Macau, an island just 70km away and well served by regular ferries. “With the help of the Macau projects, I stand up again,” says Kwan.
In neighbouring Macau, a massive casino construction boom is underway as the island bids to become “the Asian Las Vegas”. This is the Venetian Macau, an exact replica of the Venetian in Vegas.
On hire from Proficiency Net, a Liebherr LR 1280 crawler crane is working double time to help complete the new Venetian hotel and casino complex in Macau
The former Portuguese colony has long been a centre for gambling but until 2002 one company held a monopoly on casinos. Since that was lifted, Las Vegas casino owners such as Steve Wynn and Sheldon Adelson have moved in. The Sands Macau opened in 2004. Now nearing completion by main contractor Gammon is Sands’ Venetian Macau, an exact replica of the Venetian in Las Vegas. This stands at the heart of the 80ha Cotai Strip, a $2bn mall-casino development by Adelson on reclaimed land. By 2009 the Cotai Strip will also have hotels operated by the likes of Four Seasons, Hilton, Marriott, Sheraton, Shangri-La and Intercontinental.
When the $1.2bn Wynn Resort and Casino opened in September 2006 it was Macau’s 22nd casino.
Macau already has 12,000 hotel rooms. That number is expected to grow at least fourfold in the next ten years.
In 2005, Macau had gambling revenues of $5.3bn, close to the $7.6bn taken in Las Vegas. Macau will undoubtedly overtake Las Vegas within a very few years.
The speed and intensity of construction in Macau is reminiscent of Hong Kong in the pre-handover 1990s. Kwan says that there is no such urgency on the part of Hong Kong’s new administrators. Projects are identified but then get stymied by discussion and review. An example is the long-discussed project to link Hong Kong, Macau and the city of Zhuhia across the Pearl River Delta on the Chinese mainland by a series of bridges and tunnels. Plans for the US$4bn project are well advanced and construction may finally start later this year or next.
Kwan has a list to hand of other major projects that should start this year or next. These include: redevelopment of the old Kai Tak airport (US$2.6bn); a new government headquarters building at Admiralty (US$700m); refurbishment of the Ocean Park theme park (US$700m); a cruise terminal at Kai Tak (US$400m); and redevelopment of the Hennessy Centre (US$400m). Then there is US$16.5bn of work to be done to develop housing estates at five locations at railway stations and US$4.5bn of railway extension projects.
Despite lingering doubts about how quickly all this work will really come through on the planned timescale, Kwan is generally optimistic about prospects. Rental rates for tower cranes have already increased about 30% since 2004, he says, although that is still not enough.
However, having significantly scaled back the size of their fleets in recent years, Hong Kong’s tower crane owners will now begin buying again, Kwan confidently predicts. “Over the next three years, we will need another maybe 100 cranes in Hong Kong,” Kwan reckons, “or about 30 a year.” He also says that these will generally be larger than the cranes bought previously. “The construction method is changing to precast and a lot of structural steel, so there is a need for bigger cranes.” Kwan sold 12 cranes in 2005, he says, all of which were at least 400tm class.
Thus not only are more tower cranes set to land in Hong Kong, they will also be of a higher dollar value than before.
