Analysis

Capital gains facts

Jonnie Keys, general manager of Euro Auctions looks at the global picture of the used market and opportunities for those with machines to sell. Used machinery and construction equipment is now seen as a global commodity, traded like any other asset, being bought, sold and often moved on to another buyer as soon as the […]

Used machinery in the Middle East is now wanted globally

Used machinery in the Middle East is now wanted globally

Jonnie Keys, general manager of Euro Auctions looks at the global picture of the used market and opportunities for those with machines to sell.

Used machinery and construction equipment is now seen as a global commodity, traded like any other asset, being bought, sold and often moved on to another buyer as soon as the auctioneers hammer is down.

With activity in the UAE construction sector flattening during 2012 and many contractors experiencing tougher times due to around $719bn of construction projects being put on the backburner or shelved, much machinery and construction equipment is standing idle across the region.

Heavy equipment, once destined for now cancelled infrastructure projects, is destined to move from the Middle East to where there is a more ready market. But where are those markets? Where are sellers in the Middle East going to find buyers? Is Australia still the ‘boom market’ it has been for the last 24 months? Or are there other places in the world with an even greater appetite and keen buyers for certain makes and models?
Europe – East & West

With the sharp decline in construction projects, much needed equipment is moving out of the Euro zone and over half of all plant sold at auction or through dealer networks in the last couple of months has been leaving Europe, much destined for southern hemisphere countries to meet requirements for projects in Australia, South Africa, South America, Central America and India. High in demand is equipment suitable for mining and extraction, with large dump trucks and 20ton+ excavators at the top of the list. Other sought after machinery categories across Europe are: mini excavators, crawler excavators and telehandlers. Make is unimportant, as long as the equipment is good, late and low hours.
Australia / NZ

Australia is still buoyant and has an ongoing demand for a specific range of equipment. The ongoing projects in Australia can be divided in to two broad categories: Mining and Utilities; which includes infrastructure for the mining sector. While there has been a slowdown over the last 12 months, this is still an exceptionally strong market with much demand.

Equipment demands of the mining sector include dump trucks of 40t and above (both rigid and articulated), motor graders, large dozers such as CAT D8 and upwards, as well as all ranges of general crushing and screening equipment. For the utilities sectors, with projects like building the road infrastructure that supports the actual minerals extraction, contactors are demanding large diggers and excavators, wheeled pavers, all sizes of rollers and large 40t + trucks. Preferred makes are predominantly CAT, Komatsu, Bomag for rollers, and Volvo for large dump trucks with the better condition equipment more in demand. New Zealand is fast becoming a demanding force in the requirement for machinery but in the main is content to deal with Australia.

Africa
Africa is generally still a buoyant economy. In West Central Africa, currently Ghana and Nigeria have a good appetite for equipment. International contractors are working in that region and are bringing equipment with them. Popular machines include all makes of excavators and dozers from 20t upwards with ‘rippers’ such as CAT D6t’s being a preferred choice. The trend here is for more utilitarian machines that have dual uses where follow on contracts have different requirements.

Project crews in the region from China are also bringing their own home brands with them, which due to some reliability problems is creating markets for good European and US products. Quarrying equipment is benefiting from increasing demand, with crushers, screeners and conveyors in much demand, plus older wheeled loaders, large generators and compressors as well as older model agricultural tractors being popular.

Buying countries include Nigeria, Libya, Egypt, Syria, Tanzania, Ghana and South Africa. North Africa is still interested in smaller machines and general contracting tools such as backhoes, mini diggers, telehandlers, wheeled loaders, compressors and dump trucks. However, recent infrastructure changes and political upheaval in North Africa, which resulted in a complete plunge in the contracting sector, mean demand in this region is slow and it’s now a waiting game to see if previous appetites for machinery and equipment returns.

China
China has become a tour-de-force in the global market and is now shaping economies around the globe, so sellers should track China’s progress as its world shopping spree continues. For global projects China is buying better equipment, in addition to manufacturing equipment based on popular international designs for its home market. However the Chinese home market still has a great demand for less sophisticated equipment so opportunities exist for most makes and models of earlier kit.

Asia Pacific
A healthy economy is set across the Asia Pacific region with a robust construction sector set to last beyond 2015. Many ambitious infrastructure projects are either underway or planned including significant rebuilding after the flooding in Thailand last year. The current star is Indonesia where new projects are demanding high volumes of equipment and needs are currently being satisfied by Japanese brands.

The region has an appetite for sophisticated products and as a result good quality machinery of the latest generation are much sought after, in particular the latest hydraulics, power drives and electronics, negating interest for older models.

With such a wide range of development infrastructure and regeneration projects underway the call is for an eclectic mix of machinery and equipment across the board. Bigger general construction machines including wheeled loaders, dozers, excavators and haulage equipment are in real demand while the infrastructure projects require small items such as excavators, backhoe loaders, mixing plants, pavers, tower cranes and piling rigs. However with plentiful local labour available ,smaller tools like mini diggers are not in demand.

India / Pakistan
At market, Indian interest is already being seen with smaller construction companies buying good used equipment; predominantly backhoes, telehandlers, compressors and mixers. Pakistan is a ready market for older equipment, with emphasis on items such as wheeled loaders and excavators. Make is not important at this stage and older, non computerised machinery is preferred. 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.

South America
With new infrastructure projects underway in the region, including the construction of 5000 km of highways in Brazil and four major initiatives worth an estimated US$ 30 billion in Columbia (including highways, seaports, airports, railways and river ways) Latin-America is really beginning to boom.
Heavy construction equipment and mining machinery is in real demand, with buyers from South America looking for quality excavators and other specialised plant, particularly from manufacturers like CAT and Hitachi. Some are saying Latin-America is the new Australia.

China is present in South America, predominantly Brazil, looking for natural resources and food commodities. Brazil is the world’s leading producer of cement, a product China needs for its continued economic growth. It is also evident that while certain better known international brands are preferred, the local market may not be able to justify their cost and so Chinese models are more palatable. Other manufacturers like JCB have also committed to the region by setting up a large assembly plant in Brazil. JCB has fared well in Brazil, due to the popularity and versatility of the JCB 3C backhoe, making it a firm favourite on infrastructure works in the Brazilian interior where thousands of miles of secondary roads are being upgraded.

For those wishing to sell machinery and construction equipment to Latin-America countries, the market is shrouded in some mystery as to what is acceptable. There are also market rumours as to how to trade within the sector and import restrictions are open to interpretation and certain criteria exists. However, the current consensus is that makes and models not available in South America can be imported; machinery used in the mining industry can be imported; and finally machinery may be manufactured or assembled in the region, which is why JCB established its large assembly plant in Sao Paulo, Brazil.

Elsewhere, Venezuela, for example, is embarking on a number of ambitious housing projects that will see over 50,000 high rise residences built each year. This is calling for tower and mobile trailer cranes that can operate in confined spaces and this may be the precursor to similar housing projects across the whole South America region.

…so in summary
While construction and infrastructure work in Europe and the Middle East is currently in a lull and other established markets have specific equipment requirements, the real growth areas are the previously under industrialised nations like China, South America and India. Buyers can always be found for good quality equipment but a little more effort is now needed to identify them and if the equipment is presented well good prices can be achieved but the need to ship it internationally is on the increase – which is another growing market in its own right.

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