Jonnie Keys, general manager of Euro Auctions, reviews the world market for new and used construction equipment and machinery, with an insight into what’s hot, what’s not and who’s buying
Recent events in the global economy have produced surprising results over the last four years. Like water, used machinery and construction equipment has a way of finding its own level, and globally, regardless of manufacturing output, used equipment is highly sought after. This results in new markets and emerging demands dictating where machinery is required in the world. At the end of 2011 the expectations for market activity in early 2012 were optimistic, but what is the feeling in the market for the rest of this year and what does the market have to offer?
Construction equipment and machinery manufacturers are now producing again. Many geared down quickly during the downturn but with demand now increasing, the winners are those who are able to gear up production efficiently, as reflected in Caterpillar’s 2011 year-end figures. With the cost of new equipment up by around 20% compared with prices in June 2009, the used market is still strong. In mid-to-late 2011, regardless of make, model and year, prices strengthened for late-used and nearly new equipment, with the strongest rally in the 12- to 24-month-old class. This year it appears that older machines and equipment in the 24- to 48-month-old class are next on the ‘wish list’ as market stocks deplete (a trend which is predicted to continue). But what has caused this market shift?
Euro Auctions have repeatedly seen more than 30% of all plant sold leaving the UK and Europe for projects in Australia, South Africa, South America, Central America and India. With the UK still looking for large construction or infrastructure projects to commence in the wake of the Olympics, or house building to change up a gear, the future for the used market is overseas. UK prices for good second-hand equipment held through the first quarter of 2012 (Q1) and look set to hold in Q2.
In 2011, 12- to 24-month-old equipment was reaching premium prices, closely followed by good 24- to 48-month-old stock. This trend has continued in 2012 with world buyers now being more specific. In high demand is mining and extraction equipment with large dumptrucks at the top of the list and anything with approaching 300h on the clock being seen as just ‘run in’, so many owners are sitting tight as projects end, seeing values rise as demand increases. Emerging markets are always the first to be seen at auction and India is a regular new participant with an appetite for small-to-medium-sized construction machines, such as backhoes, dumpers, mixers, dozers and excavators.
European demand has been affected by strengthening sterling, leaving the UK more expensive than the rest of Europe. In Q1 of 2012 Australia continued its huge demand for crushers, screens, large dumptrucks and large excavators in the 50-tonne-plus category. With peace in North Africa continuing, wheel loaders, generators, backhoes, dumpers and mixing plants are in demand and are being hotly contested. It was apparent that much equipment was being shipped through Africa bound for destinations such as India, South America and Australia.
In Q1 it was still evident that Europe had its problems to solve and economies were faltering. Ireland is still in the doldrums, Italy has slowed right down, and Greece and Spain are feeling a lot of pain. The demand for equipment in Europe rallied through 2011, however the next 12 months, according to Off-Highway Research, will be flat and could see plant sales drop by 2% across Europe in 2012 and by a further 2% in 2013. At market, Germany is the largest buyer of construction equipment in Western Europe and during the last 24 months increased acquisition by approximately 70% over 2009. Increased construction output in Eastern Europe is being led by Poland with a 34% increase on output over the previous year, while Romania shows 15% growth and Sweden shows 7% growth. These figures are reflected by the activity in the market. Decline is led by Slovenia (–20%), Portugal (–12%) and Spain (–11.5%).
Overall, while Europe has seen a collective 1.4% decline, more than 50% of used equipment is leaving the Eurozone for emerging regions. For those who are buying, the most sought after machinery categories across Europe are mini-excavators, crawler excavators and telehandlers.
Australia continues to be the world’s number one client with no let down in the mining and extraction markets. Demand from ‘down under’ has not wavered and the exchange rate between the Australian dollar and pound sterling is still making transactions from the northern to the southern hemisphere extremely attractive. In addition, large pipeline projects as well as ongoing infrastructure works are creating demands for specialized equipment, with pipe-welding equipment and trenching machines in particularly high demand. Mining is still the Australian ‘cash cow’, with contractors, operators and dealers seeking good-quality, low-hours equipment. Q1 was strong in this region with Volvo, Komatsu, Cat and JCB being the preferred makes. In the last three months, New Zealand emerged as a new contender having new-found demand for general contracting machinery following the lead from Australia and favouring the same brands.
Asia is fast becoming a powerhouse in the global economy. Following a positive start to 2012, India is set to become the next emerging market. In the next five years India will invest US$1.2 trillion in infrastructure projects, including transport, irrigation, oil, gas and telecommunications, all of which will need equipment and machinery. At market, Indian interest is already being seen with smaller construction companies buying good used equipment, predominantly backhoes, telehandlers, compressors and mixers. Make is not important at this stage and older machinery is preferred.
Vietnam is emerging as a new contender in the world buying list, resulting from the nascent economy with major road and infrastructure projects demanding not only all manner of dozers and excavators, but also general construction machinery, mixing plant and tower cranes. Japan is still recovering and companies such Komatsu and Hitachi who are based in the area and were affected by the tsunami, have seen factories either wiped out or shut down with failing supply chains. Caterpillar are actively focusing on China as a new target market and, as a result, the used market is following in the same footsteps. In Q1 this year China was visible in the global market place, acquiring equipment not only for its own domestic use, but also to accelerate the growth of extraction of raw materials in Australia.
The news in 2011 that huge infrastructure projects were under way in South America resulted in a good start to 2012. Recent announcements include 5,000km of new highways under construction in Brazil and four major initiatives worth an estimated US$30 billion in Columbia, including highways, seaports, airports, railways and river ways. With mining in Chile, the global message is that heavy construction equipment and mining machinery is on this particular shopping list. World buyers from South America are looking for quality used excavators with Caterpillar and Hitachi being preferred brands.
At the end of 2011 analysts predicted that activity in the United Arab Emirates (UAE) would flatten during 2012 and contractors would experience a tough 12 months. With the cost of labour, material and plant remaining constant in 2012, and with little new infrastructure projects to tender for until 2013, activity has been slow. The value of cancelled construction project in the Middle East and North Africa rose by 8% in Q1 of 2012. The result is approximately US$719 billion of construction works put on the back-burner or cancelled altogether, with more than 50% of these projects being in the UAE. Heavy equipment destined for infrastructure and cancelled canal projects (eg Cat 777s, 789s and 797s) is now moving out of the Middle East to where it is needed most – Australia. Whereas last year the trend was to ‘hang on’ to machinery until the price changed, that time has now come. With smaller projects still moving forward, there is a need for lighter machines such as graders, dozers, backhoes and wheel loaders. Caterpillar are still number one and demand has shifted to older models (up to six years old) with low hours.
Russia continues to see growth which is converting into demand for plant and machinery. Large civil engineering projects, including the 2012 APEC (Asia-Pacific Economic Co-operation) Summit in Vladivostok and the 2014 Winter Olympics in Sochi, are contributing to the need for construction machinery and equipment. In February the complicated transportation upgrade moved a step closer to finalization with the completion of the main Olympic transportation tunnel. Also, with the 2018 FIFA World Cup being played in Russia, the need for improved infrastructure is paramount, with new cities to build and new stadiums and airports to construct. Russia is actively seeking earthmoving and road-building machinery of all makes, models and sizes. The most sought after machinery in Russia includes backhoe excavators, wheeled excavators and tracked excavators.
North and Central Africa
In early 2011 North Africa saw demand for plant and machinery come to a grinding halt due to the ‘Arab Spring’. With peace and confidence returning to the region, buyers from Sudan, Egypt, Libya, Algeria and Morocco are trading again. The first quarter of 2012 has seen countries in the region purchasing and demand is increasing. The main machinery requirement is for older models of Cat wheel loaders, large generators and compressors, as well as older-model agricultural tractors.
African nations always have an interest at auction. In Q1 countries such as Nigeria, Libya, Egypt, Syria, Tanzania, Ghana and South Africa were buying well. The improvement in these markets revealed a marked interest in larger pieces of equipment. With logging and mining continuing in west Central Africa, currently Ghana and Nigeria have a good appetite for equipment. International contractors are working in that region and bringing equipment with them. As was the case in 2011, many of the project crews from China are bringing less-than-reliable home brands, which is creating a market for more reliable US and European makes of equipment of all types. There is also an increasing need for quarrying equipment, with crushers, screens and conveyors all in high demand.
At auction in the first three months of 2012, American buyers were more apparent after an absence of some 12–18 months. Buyers from the US are looking for large heavy mining equipment for the home opencast coal and iron ore extraction markets. As a result, big dozers and dumptrucks for the contracting market are always on buyers’ shopping lists. Older equipment is going from the US to South America and beyond.
Looking ahead, manufacturers are now producing again and new stock is commanding ever higher prices. As a result, there is increasing demand for quality second-hand equipment with certain models even making a premium. Some new markets are showing real interest and the outlook is generally optimistic. This means that the market, while patchy in places, is going to remain buoyant. It is worth bearing in mind, however, that buyers are also going to be more discerning, so it remains important for sellers to present used plant and machinery in the best possible condition, and to be prepared to see their equipment shipped to the parts of the globe that need it most.
About Euro Auctions
Established in 1998 in Dromore, Northern Ireland, Euro Auctions have additional sales sites in Leeds in the UK, Dormagen in Germany, Valencia in Spain and Brisbane in Australia. As well as their American-style parades of equipment and lots, which have become a trademark of all sale days, other services available to customers include an in-house transport team that can assist with transporting and shipping assets all over the world, as well as a live Internet bidding facility. For further information visit: www.euroauctions.com