One of the most significant recent developments in the tower crane market in Southeast Asia has been the decline of Econ Machinery. Over the years it sold 2,200 tower cranes around Southeast Asia and in 1997 had 80 tower cranes in its rental fleet in Singapore plus half as many again in neighbouring countries. By 2001 the rental fleet had declined to about 35 units and in November these were all sold to Access System, a company that previously specialised in renting out Alimak hoists.
No sector of the crane industry in Asia has been hit as hard as the tower crane industry in recent years. Roger Poon, who was managing director of Econ Machinery in its glory days until his departure in 1999 says no one is doing particularly well any more. Poon now manages and co-owns Y&P Marketing which has a fleet of 20 cranes for hire and a Terex Comedil distributorship in Singapore.
Publicly funded infrastructure projects in the wealthier countries like Hong Kong, Singapore, Malaysia and Taiwan may help buoy up mobile and crawler cranes, but tower cranes need tall buildings. Projects that use tower cranes, such as office blocks and hotels, are hard to find because they rely on private sector funding, which is not forthcoming in a down economy. Property prices in Hong Kong, for example, are a quarter what they were before November 1997 when they hit HK$10,000 a square foot. This has left a lot of mortgage holders trapped with negative equity. With air travel and tourism down, the prospects for the building sector are grim.
Martin Tse, general manager of Proficiency Equipment, a dealer for Wolff and Krøll, says that only a half of his 63 tower cranes are in the air and rental rates for tower cranes are down 50% overall, he says. He wants to sell the 40 or so Potain, Liebherr and BPR cranes that he has, and get the fleet down to just Wolff and Krøll brands, but such is the oversupply, there are few buyers out there.
Others say that rates are down by even more. KS Chan used to sell Chinese SCM tower cranes for Moreton Engineering and now works for Hong Kong based Continental Equipment. He says that in 1996 a tower crane lifting 2.6t at 50m could get HK$48,000 (US$ 6,000) a month. Today the rate would be around HK$11,000 or HK$12,000 (US$1,500), he says. And since the salary of a technician to service it would be in the region of HK$12,000 to HK$14,000, it is hard to cover costs.
Those who are achieving reasonable utilisation rates are doing so only, they admit, because they are renting their cranes out cheaply. In Hong Kong Sunshine, a mobile crane rental company, has a tower crane rental joint venture with Hontrade Engineering, the former BKT dealer. Utilisation rate is about 70% because the price is low, Sunshine managing director Kenneth Kwon says.
Shriro Machinery has a rental fleet in Hong Kong of 45 Liebherrs. Utilisation is 90%, says joint managing director Albert Yu, but prices have had to come down 40% to 50% to stay in the market. His fleet ranges from 130tm to 400tm units, with 200tm the size most in demand.
In Singapore Soon Douglas says that though it is achieving a utilisation rate of between 70% and 80%, which general manager Ted Chong Ng describes as ‘about optimum’, rental rates are as low as half what they were in 1996/97.
He says: ‘In the boom years it took three years to recover the price of a new crane. Now you would be happy to do it in five, and six or seven is more realistic.’ The business today is all about cashflow, he says.
It is the same story in Malaysia. Five years ago you could get RM20,000 ($5,300) a month for a 100tm crane. Today you might get RM15,000 but rates go as low as RM7,000 ($1,800). Visitors to Kuala Lumpur, the capital, will see a lot of cranes up in the air, but many of them have not actually lifted anything for several years. They are stuck on projects that were frozen in 1997. Malaysian owned tower crane manufacturer Favelle Favco, which is now manufacturing both towers and offshore cranes in Malaysia, had 100% of the Malaysian tower crane market in 2001 – by selling just two units.
With this background all the manufacturers are struggling in the region. Even Potain, represented in Hong Kong and Singapore by the mighty Manta, is finding sales hard to come by. Eric Etchart, previously managing director of Potain’s Asian operations, is now in charge of the newly combined Manitowoc and Potain operations as managing director of Manitowoc Equipment Works Pte Ltd. He says: ‘The business has been slow in Asia Pacific as Manta only invested in two brand new units in their rental fleet in 2001 for its operation in Singapore.’ These cranes were a pair of MR 220 luffers that lift a maximum of 12t and lift 3.25t at 50m maximum radius.
Manta has 45 cranes in its Singapore rental fleet, though not all are Potains. Some Comedils were taken on when acquiring a competitor. In Hong Kong Manta’s fleet of 130 units is all Potain. In fact, Potain reckons that of the 1,100 tower crane population in Hong Kong, about 600 are Potains.
Despite this dominance, Potain is still struggling. Etchart continues: ‘In Hong Kong, Manta has sold two luffing jib MR 160s to Hi Ping, which is slow compared to the sales achieved in 1997 and 1998 when the average was 30 new cranes a year. According to our statistics, only four new cranes were imported into Hong Kong.’
With such traditionally strong markets failing to yield results, Potain has to find comfort from success elsewhere such as Australia, where self-erectors are gaining popularity, and India, where Potain is represented by its licensee Shirke.
‘My real satisfaction is coming from China,’ says Etchart, ‘with our Potain Zhanj Jia Gang company. After many years of losses since the establishment of the Joint venture in 1995, the company broke even in 2001 and we are confident to grow the business in the next three years. We took over 100% of the shares of our joint venture in early 2000 and we restructured all operations. The launching of new products (MC 80 and MC 200) combined with the development of branch offices in Beijing, Xian and Shanghai has helped grow sales beyond Jiangsu province. We anticipate to grow the sale momentum as we are planning to introduce further new models in the future.’
Etchart continues: ‘I anticipate Southeast Asia remaining slow. Demand for tower cranes will be restricted to infrastructure projects as housing will remain sluggish. China will be the market for the next three years.’
The collapse of tower crane sales has forced several manufacturers into the rental business in Asia. Favelle Favco has 15 cranes for hire in its home market of Malaysia and though it has only three or four rental customers, repeat business is securing it an 80% utilisation rate.
In Singapore both Liebherr and Wolff have towers for rent. Liebherr sold just three cranes in Singapore last year, says senior sales manager Chia Chong Moh. It has entered the rental business by default, to serve customers who cannot afford to buy.
Wolff pulled back from Singapore, its only branch office in Asia, in 1997 when the market collapsed, leaving Sophie Fernando to run its 13-unit rental fleet. Wolff entered the rental business only because it had to take back the cranes of a customer that went out of business.
There are cranes being sold and put to work, of course. In Singapore, for example, Soon Douglas is supplying 12 cranes to Japanese contractor Shimizu for the ‘Caribbean’ development at Keppel Bay in Singapore. These cranes have started going up, in phases. Soon Douglas has three other projects with Shimizu, including four cranes on the Marco Polo hotel. By the time all the Caribbean cranes are up, Soon Douglas will have about 20 cranes with Shimizu. But 50 of Soon Douglas’ 70 cranes are less than six years old, and thus it has onerous financing obligations. It signed up as the distributor of Spanish manufacturer Jaso in 1995 and committed itself to taking 50 cranes between 1996 and 1998. The company was further hit by having to buy back about 12 cranes from contractors choosing to exercise buy-back options after the financial crisis came. The upside of this is that if it can ride out this period, its young fleet will make it well placed for the years ahead. The Ministry of Manpower in Singapore forbids the use of any tower crane that is older than 15 years.
There is no such restriction in Hong Kong yet, but Albert Yu regards Shriro’s fleet as quite young, since only 10 of his 45 towers are more than 15 years old. Despite the poor market for tower cranes in Hong Kong, Shriro has been investing in its rental fleet and bought five towers from Liebherr last year. It also took a further five for sales to customers.
This figure compares with nine delivered to customers in 1999, 22 in 1998 and 19 in 1997. Over this period Shriro also took seven for its own fleet.
The Liebherr cranes that Shriro sold in 2001 were four 245 EC-Hs and a 550 EC-H, which at 550tm is now the biggest tower crane in Hong Kong, according to Yu. Gammon took delivery of this crane in December for the Logistics Centre project where reach, rather than height, is what is needed. This building is a big warehouse and the crane needs a 51.5m jib and 50m height under hook. This sort of special application, however, is the exception to the rule that (outside of Singapore, where the 15 year rule applies) new crane sales in the region are severely inhibited by the vast numbers lying horizontal in yards.
