Used cranes: not for the faint of heart

In a game of high stakes, high reward, the used crane market in North America has had its fair share of peaks and valleys. From a dealer standpoint, there has been a severe slowdown in used crane sales. It can be anticipated that smaller crane companies will find themselves gobbled up by larger entities. Even larger dealers and manufacturers must engage together to stay healthy.

At a recent Ritchie Bros.’ public auction in late August, six Grove TMS9000E 110-ton hydraulic truck cranes sold for a combined $2.14 million, two 2002 Liebherr LTM1150 170-ton all-terrains sold for a combined $525,000, and a 2012 Link-Belt 218HSL 110-ton crawler sold for $430,000.

“Pricing on construction equipment was particularly strong and we were happy to see great results on a large number of big ticket, heavy-lift cranes,” said Alan McVicker, regional sales manager with Ritchie Bros.Three leaders in the used crane industry weighed in on where the unstable market might be headed. Members of our roundtable include Clint Wood, chief operating officer of Crane Network; Uri Toudjarov, president of Global Crane & Machinery; and Greg Steege partner at RTL Equipment.

HOW DO YOU CHARACTERIZE THE MARKET FOR USED CRANES IN NORTH AMERICA?

STEEGE: Used rough terrains are pretty soft as are all terrains. With good, late model crawlers there is activity, especially if you are willing to do a rental with purchase option (RPO). The used truck crane market is active with the activity coming pretty much all over the U.S. It is a business that is not for the faint of heart and if you get into too much used [machinery] at the wrong numbers, it can really jeopardize a company.

TOUDJAROV: It is buyers’ market. The supply exceeds the demand.

WOOD: There has been a severe slowdown in the used crane sales market from a dealer standpoint. We have seen the
trend carry over from 2015, but in 2016
it is beginning to take a strong hold of
the industry. Some certain classes of cranes have been harder hit than others based on our datasets. For example the rough terrain market in sub 75-ton class doesn’t seem to get much interest for buying at all, and the inventory of available cranes in this category is growing at an astronomical pace from years past. This is causing liquidation of this particular class of crane at less-than-market value or less-than-book values for crane dealers through auction outlets.

HOW DO YOU CHARACTERIZE PRICING FOR
USED CRANES?

STEEGE: Rough terrains and all terrains are very soft. Crawlers are okay. Used truck cranes, strong.

TOUDJAROV: Prices are at a 10-year record low.

WOOD: In anything smaller than 200 tons it sells way under loan-to-book value and especially less when liquidated through auction houses. We see all terrain cranes from Europe that are in very good to excellent condition selling for much less than what is on the market in North America. It is definitely time in our opinion to focus on crane and equipment rental and try to ride out the storm so to speak.

If you have needs for cranes we would likely recommend considering trade-in capabilities, lease to purchase and other non-conventional methods to protect your investments. New equipment pricing could only go down and is in this market trend. The strong get stronger, and the weak get weaker. This old adage will prevail in this market. Larger companies will recognize the patterns and acquire equipment and companies to add to their ever-growing fleets. New equipment sales could only go down as well including the pricing. The manufacturers are wise [about] the market and will create incentive plans to take new equipment and continue to harm the used crane sales marketplace through these programs.

IN THE PAST, MEXICO, CENTRAL AND SOUTH AMERICA WERE STRONG MARKETS FOR USED CRANES FROM NORTH AMERICA. WHAT IS THE STATUS OF THIS And other international MARKETs?

STEEGE: We do not see a lot of activity from any of these areas at this time.

TOUDJAROV: Central and South America are experiencing a downturn in crane demand. Projects are on hold and existing cranes are covering the local needs. The majority of the good machines from South America are sold to other markets. The flow of used cranes from North to South America is at record lows.

WOOD: There is a minor pick up for larger all terrains and it seems that a lot of U.S. cranes are moving overseas to areas in Europe and Latin America. If we look at a wider picture and consider Asian markets, they seem to be relatively unscathed and possibly smarter than we thought. The largest areas of concentration we see in these market trends are in Vietnam, which has been requesting crane quotes on a massive up line for the entire year so far. India and places in the Middle East, as well as many African regions, are gobbling up available units.

WHAT TYPES/CLASSES OF USED CRANES ARE IN HIGHEST DEMAND? WHY?

STEEGE: Truck cranes and crawlers. With crawlers the work level is pretty high in the upper Midwest with bridges and general construction. Used truck cranes mainly because the housing market is strong, along with the commercial market.

TOUDJAROV: Large, 400-ton and up capacity crawler cranes are in high demand because of price and windmill work.

WOOD: Where there seems to be a lot of interest is in the 300-ton and above crawler market specifically in the South Central portion of the United States, and for that matter around the world. We contribute a lot of that to the renewable energy projects and clean refineries, windmills, etc., that are popping up everywhere. There is also information that a number of industrial projects in the South Central United States are utilizing these larger crawler cranes on long-term rental projects. We see the trend where it concerns all crane sales as relatively flat to a major downturn that has already been recognized worldwide.

This downturn in crane sales has propelled crane and large equipment rentals into a major uptick so we see crane dealers that do not have enough iron for the project work creating a re-rental major increase. The trend will continue all the way down to the small crane business operators. The difficulty is asset values have decreased in most crane classes due to a vast inventory of available units to liquidate and creating a feeding frenzy at the auction houses. I have heard it from several dealers that it is a “blood bath” for crane sales now, and the best time for true buyers.

MOST OEMS ARE ADVERSE TO TRADES BUT IT’S OUR UNDERSTANDING THAT IN SOME CASES, MANUFACTURERS HAVE TAKEN IN TRADES IN ORDER TO SELL NEW MACHINES. HAVE YOU SEEN THIS ACTIVITY, AND HOW DOES IT IMPACT THE USED CRANE MARKET?

STEEGE: Yes we have seen this especially from Liebherr which sells direct. Generally, they have to take them in at real numbers just like we do. If you bury yourself in a bunch of trades eventually there is a price to pay for this, and we try to watch these numbers very carefully.

TOUDJAROV: OEMS are in trouble and will do whatever they need to continue production [including] OEM financing, trades, extended payment terms, no interest and no payment periods.

WOOD: We watch even human capital, and there seems to be some consolidation amongst operators and even in-house administrative sales and management. This proves even further the industry consolidation. The industry as a whole is strong and will probably see smaller returns of revenue than years past for the remainder of 2016, but that is where we suggest that different methods and alternative revenue streams should be considered. We have redesigned and developed our systems in place to accommodate the changing market to provide competitive marketing services for our customers supporting changing trends in crane sales and rentals. We have developed programs and proactive measures to accommodate the liquidation factors affecting the marketplace. We are developing a better, more robust set of global data, and we are sharing that information with our clients. We are developing a better global utilization structure set and also dynamic real time rental and fleet management tools to assist our clients and taking some of the logistical issues away from their day-to-day business. It is time to retool the market for the foreseeable future and create stronger alliance partners.