Mixed emotions

The European rental market is not as buoyant as some other parts of the world, although there are success stories among a market battling with rising costs.

For Martin Ainscough, managing director of UK-based Ainscough Crane Hire, it is time to address the growing problems associated with costs. “We can’t keep swallowing the increasing costs of wages, tyres and fuel,” he says. “We have to turn things around, and we are talking to our customers about passing these expenses on.”

Sales dropped slightly last year, but Ainscough expects to sell up to 70 cranes before the end of the year. “As we sell old cranes we buy new ones,” he says, “and that trend will continue for the foreseeable future.”

Ainscough is preparing for a busy year with increasing health and safety demands forcing more contract lifting and offsite fabrication, thus more onsite lifting and craneage. “We’ve increased our fleet of self-erecting cranes,” says Ainscough. But, although he expects them to be busy, he does not think they are about to replace other cranes.

“They are popular at the moment,” he says, “but they are not as simple to work with as they appear, and I think people will find that out in time.” He concludes: “I think mobile telescopic cranes will prove to be the better option.”

However, self-erectors are gaining more acceptance in Europe, according to Belgium-based rental company Arcomet Group managing director Dirk Theyskens: “They are increasingly popular where fork lifts used to be busy. Meanwhile,” he predicts, “tower cranes will become larger, and luffing jib cranes will gain ground worldwide.”

Theyskens has tipped growing rental markets in the US, China and Russia to bolster demand for all kinds of lifting equipment.

Following the recent announcement of its appointment as distributor for the full range of Potain self-erecting and tower cranes in the UK, Arcomet has revealed expansion plans in the UK, Europe, and the United States. A total of 230 new Potain cranes valued at approximately €30 million have been ordered, including 100 self-erecting cranes (from the Igo13 to the GTMR 386 B), and 130 top-slewing tower cranes (from the MC85 B to MD 365 B) for its rental fleets in Europe, all to be delivered during the course of 2006 and 2007.

Theyskens says business is good in all European markets. “Germany,” he adds, “is picking up strongly both in volume and prices.” The result should be a 22% increase in turnover for the company this year.

Arcomet sold 795 tower cranes - used and new - in 2005, up considerably on the 525 units sold the year before. Theyskens expects growth to continue after the first quarter of this calendar year.

With many areas of the world enjoying construction booms - the Middle East a prime example (see Cranes Today, March) - longer delivery teams from manufacturers are fuelling used crane sales.

As Theyskens puts it: “There is a general acute shortage of used cranes to buy, sending prices into space.” He calls the Middle East a “black hole” for used tower cranes with the region demanding what he describes as “exorbitant volumes.”

Arcomet currently trades used tower cranes 15% over Argus values.

Unusually, Theyskens does not believe costs are a problem. He says: “We seem to be able to hold the lid on costs (excluding fuel prices, which we can charge extra on our customers).”

He says the rental industry will continue to mature, and eventually eclipse the sales market. “Rental will double in size over the next five years,” he says. He expects the rental market to consolidate with major players buying up local and regional companies.

Alexandre-Jacques Vernazza of France's biggest mobile crane hire company, Mediaco, says costs are a huge problem for French rental houses. He identifies tyres and fuel, in particular, as a growing source of concern. “Prices are increasing every year, and tyres are hard to come by,” he says.

Vernazza says that French companies run at a disadvantage because rental rates have remained constant despite an increase in costs. Customers are not forking the bills, and crane hirers are starting to feel the pinch. As Vernazza says: “We don’t add insurance (16%) like foreign competitors do.”

Vernazza believes there is a need for European harmonisation on fiscal items. “New cranes are also becoming more expensive and negotiation with manufacturers is harder,” he says.

Mediaco acquired 68 cranes last year compared to 59 in 2004. Sales also rose last year, with 28 units being sold compared to just 24 during the previous 12 months. Turnover for the crane rental division for the previous calendar year was €163m – a 15% rise from 2004. Mediaco Group turnover was €204m.

“We expect 2006 to be a good year,” continues Vernazza. “We’ve got contracts, and there will be work for the duration of the year.”

Mediaco Group also operates cranes in Morocco and Algeria, where Vernazza says it is the market leader.

Doron Livnat, owner of Netherlands-based Hovago agrees that costs are a problem, and he has also vowed to pass these on to customers this year. “Prices are going up all around us and we need to charge our customers more,” he says. “I think they understand that we need to do that,” he says.

Livnat estimates that costs have risen 20% over the past two years, and factories are still increasing prices. The market is not busy enough to support this kind of increase, he says.

“I’m afraid of further erosion of profitability because I can see this trend continuing,” he predicts. “I’ve told all my colleagues in the industry we need to charge customers more. The early signs this year is that this is starting to happen.

However, he says, business is good, and he expects all terrains, rough terrains, and crawlers to have another busy year in infrastructure and energy. “This won’t change for another couple of years,” he claims, “and I expect things to get even busier.”

Livnat notes a decline in the sales of new cranes. “If you order a crane now you can’t expect to receive it until the end of the year, of maybe even next year,” he says. “We need more new cranes,” he continues, “but manufacturers can produce more because demand is so high and there is a shortage of tyres for the mobile units.”

Soren Jansen, managing director of Danish crane hire company BMS, agrees that business is good. He notes that low interest rates and a strong economy have cultivated excellent market conditions. “Last year was better than 2004 and the trend looks set to continue,” he says. Smaller cranes, up to 160t lifting capacity, are keeping the company busy in the domestic market while there is plenty of work for the larger cranes elsewhere in northern Europe.

“There is work for the large cranes in Denmark, but not enough to feed them alone,” explains Jansen. But this does not matter with residential and office development at an all time high. BMS sold 90 cranes in 2004 and bought just seven. Last year it sold 50 units but purchase a further 15.

Jansen says there is no indication that business will not continue to swell. The Oresund Bridge, which opened in 2000, connecting Copenhagen, Denmark to Malmo, Sweden has gradually increased the market. As he puts it: “We now see Sweden as home turf”, not least because BMS bought ?????

Christophe Briere, finance director of French crane rental and industrial services company Foselev, is more conservative, and he relates to similar problems to those noted by the UK’s Ainscough. Briere is equally concerned about costs. He notes that the prices for steel and tyres are continuing to rise, thus new cranes are becoming more and more expensive.

Foselev’s turnover in the crane rental division rose by 10% to €125 million in the last calendar year. It sold 15 cranes in 2005 – three less than in the previous year.

Foselev is not unique in noting prolonged delivery times from manufacturers. “Their capacities seem to be full,” says Briere. He reckons that crane rental companies need to grow and achieve increasing powers of negotiation with manufacturers. “In France,” he says, “we see a higher level of competition with foreign companies starting to infiltrate the domestic market.”

Foselev is noticing an increasing demand for rough terrain cranes - already hugely popular in neighbouring Italy, but Briere says growth in Asia and eastern European has caused a shortage of new cranes in France.

Tim Sparrow, managing director of UK-based Sparrow Crane Hire notes a parallel between the increasing use of self-erecting cranes and mini-crawler rental businesses. “Legislation will also benefit future growth in tower cranes and other niche markets,” he adds. Overall, business is stable.”

Booming business elsewhere in the world is starting to make waves in the European market where business is, arguably, somewhat static. Sparrow agrees with others that the Middle East, Far East, Japan, US, and elsewhere in Europe are areas to watch over the coming year.

Sparrow believes these trends will continue for up to the next seven years. “The second hand market in all types of cranes is probably at an all time high,” says Sparrow. This, he says, is due to a worldwide shortage fuelled by growth in demand from the emerging economies. Investment in energy producing countries, of which there is no better example than those in the Middle East, is also key in the continuation of this trend.

“They are benefiting from higher oil prices but there are now long delivery times for new equipment,” he concludes.

Making waves in the growing mini-crawler market referred to by Sparrow of is AB Kranlyft, the European distributor for Kato mobile cranes and Maeda mini crawlers. Managing director Christer Dijnér says sales figures in 2005 increased by over 50% compared to the previous year. He believes this increase represents the gradual acceptance of mini-cranes in an innately conservative industry. It could be the same mindset that is causing mixed feeling elsewhere where self-erectors are concerned. The market is clearly undecided there.

“It is always easier to work in a way that somebody is familiar with using old methods and machinery,” says Dijnér. He continues: “When an end user starts renting the mini-cranes they like the product and come back for more.”

The difficulty, he says, in the rental of this type of crane is to get the customer to use it the first time. “But,” he adds, “we can clearly see that mini-cranes are being more frequently used to lift smaller weights.”

The market for mini-cranes is still too young to have any second hand units but it is an area to watch closely. Dijnér says: “There are always customers who want to buy a crane but they are not sure if mini-cranes will work for them and they therefore prefer to buy a used crane elsewhere rather than a new model.”

AB Kranlyft is ready to cash in if the market “come of age” where this niche crane is concerned.

Meanwhile, Belgian rental company Sarens is cashing in on petrochemical development in Oceania, the Middle East, and central Asia, while western Africa is also generating demand for its lifting equipment, albeit in a less stable market.

Sarens expects the power industry to provide more work closer to home with noteworthy increases in business in the Mediterranean.

“Growth in Europe will be slow over a period of approximately three years,” according to Sarens sales manager Dirk Verwimp. “The second hand market,” he continues, “is very lively across the world - including in the US.”

Sarens also notes that longer delivery times are endured where new crane sales are concerned.