Asia’s oversupply

The hangover of the economic crisis that struck Southeast Asia in 1997 is not entirely over and the influence of the currency collapse lingers on. However, the market has turned in the right direction and most countries are back on a growth path. That does not mean that crane sales are suddenly rising, or that rental rates are anywhere close to the levels of 1996 and early 1997, as there is still plenty of under-used old equipment available. The reluctance to invest in new machinery is understandable.

Mick Michael of Link-Belt visited Korea, Taiwan and Singapore in August. He says: “The construction equipment market continues to be slow even though their economies are now back in a growth mode after their currency crisis and severe downturn.” That said, there are definite signs of progress. All governments in the region are trying hard to stimulate their economies by developing public works projects. The impact of these policies has been mixed, and they have had the fastest effect where public money is more readily available, such as Hong Kong, Singapore and Taiwan. As political stability is a precondition for the economic stability that leads to economic recovery, Indonesia and the Philippines are the only ones left behind while other regions are on the way to economic recovery, however slowly.

Against this background, it is the public sector led civil engineering sector which is doing better than the building sector which relies more on private investment and tends to operate in a cycle behind civils activity. Thus there is an oversupply of tower cranes across the region at the moment.

KS Chan, sales manager of Hong Kong trading company Continental Equipment, reports that tower cranes are “lying idle and grazing the metre-high grass in storage yards, depressing both the sales and rental prices of tower cranes, of all types and all categories.” If anyone is on the look out to increase their tower crane inventory, this is the time to do it, he says.

One of the leading tower crane rental companies in Hong Kong is Proficiency Equipment which has more than 60 cranes from Wolff, Kroll, Potain and Liebherr and celebrates its 15th anniversary this year.

Proficiency’s general manager Wilkin Lam says that while business is still tough, it is at least better than last year. With the building market in decline, it is mainly the larger towers of 60m or 70m jib length that are in demand on infrastructure projects. Utilisation is running at a reasonable 75%, he says, but rental rates are less than half what could be achieved in 1996, although they are 10% or 20% better than last year.

Unlike Proficiency, Manta Engineering, which with more than 120 units is Hong Kong’s biggest tower rental company, has actually bought some cranes this year. Manta is a Potain dealer and bought the first two MD 238s, a model introduced at the Intermat show in Paris this year. These cranes, which feature 75 LVF Optima (frequency variation) winches, were sold on to Hannison. Three more units with the LCC120 high speed winch are due for delivery to Manta this month. Manta Singapore has also purchased a new MR220 luffing jib for its rental fleet in Singapore.

Eric Etchart, managing director of Singapore-based Potain Pte, says of prospects across the region: “We are reasonably optimistic although we believe that the over investment of cranes during the bullish years back in 1995-96 and the first half of 1997 can sustain the need for equipment for some time. We are however still very pessimistic about Indonesia and to a lesser extend Thailand and the Philippines.” Other tower crane manufacturers are even more pessimistic (see panel, right).

While the tower crane market still struggles, there is “an inexplicable and sudden surge in rental demand for both mobile and crawler cranes with capacities of 100t or more,” Chan says. “But these are for short term rental business only, not sales, which is driving the rental rates to a temporarily higher level. No one expects this phenomenon to sustain for long.” Liebherr is clearly confident about the market in Hong Kong. “There are now about 240 Liebherr crawler cranes in Hong Kong and with several major construction projects coming up, everybody is busy,” the company says.

Liebherr (HKG) a subsidiary of Liebherr-Werk Nenzing which sells and provides after sales support for Nenzing’s crawlers, ship cranes, harbour mobiles and offshore cranes in east Asia, set up a new 21,000m2 workshop in Hong Kong at the start of the year. It has taken on an additional 40 engineers, fitters and skilled workers, making a total of 60 employees in its after sales department in Hong Kong.

Liebherr (HKG) is also looking into the possibility of taking up dealerships for other construction equipment.

Hitachi of Japan regards Southeast Asia as a main market for its crawler cranes. While it has yet to see any rise in demand for new machines, exports of used crawlers out of Japan has risen, which Hitachi thinks is a sign of recovery in demand for new cranes.

Manitowoc, stronger in lift cranes than foundation equipment, has sold no new cranes into the region this year but director of international sales John Wessel asserts confidently: “Asia is rebounding, and I expect the general level of orders for cranes with capacities of 200t or more to start rising late in 2001 or early 2002. Much of the large lifting equipment in the region is now idle, and those units will have to go to work before we see sustained demand for new equipment from that area.” European manufacturers of mobile cranes are also bullish about prospects. Liebherr Werk-Ehingen has seen some notable sales in the region too this year, selling two 500t-capacity LTM 1500 all-terrains into Taiwan and a third to Nelson Kan’s Lik Ying Crane Hire in Hong Kong. Kan has been planning this purchase for about three years now, but delayed it during the course of the downturn. Liebherr has also delivered an LTM 1800 (800t) to Yuek Chun of South Korea.

Dematic agrees there are “clear signals for recovery in Southeast Asia” and says it has taken “a considerable number of orders, but the customers have asked us not to disclose any details until the cranes have been delivered”. It has, however, already delivered an AC 200 and AC 300 to China and Hong Kong. Orders in hand include a TC 2500, which features the superstructure of the 450t crawler crane CC 2500 on a seven-axle carrier, for a petrochemical company in China.

Dematic has taken advantage of the quiet market of recent years to restructure its business in Asia. Its representative office in Singapore has been turned into a Dematic subsidiary and in Japan the company has taken over the majority of its 50/50 joint venture with C-Itoh and renamed it Dematic Japan Co. Ltd.

Like Hitachi, mobile crane manufacturer Kato also looks to what is happening with used equipment in Japan and takes hope from it. “We now feel strong movement of the market everywhere in the region. In particular, many used machines are now exported to Korea, and both new and used machines to the Philippines,” says Hiroyuki Suzuki, manager of Kato’s product planning group.

Over the past 12 months Kato has exported just over 100 mobile cranes to Asian countries. The sales are mainly truck cranes, says Suzuki, but it has also sold two KA-900s, a 90t-rated all-terrain. Kato is also expecting large orders from China on the back of a huge development project in the west region.

The picture, inevitably, is a mixed one. Few, however, are as upbeat as Denis Brouwer of heavylift contractor Van Seumeren. “We are busy all over Asia, including Indonesia,” says Brouwer. “About the market situation, I think it is picking up. If I look at Malaysia it almost looks as if there never was a crisis.”