Wednesday, May 30, 2012

Euro Auctions offers a World Round Up for Q1 - 2012

In the last 4 years, there were quite a few surprises that sprung up on the economy. Used machinery and construction equipment, like water 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. With Caterpillar Inc releasing impressive recent financials for 2011, the thirst for used machinery and equipment seems unquenchable. At the end of 2011 the expectations for market activity in early 2012 was optimistic, and now with the first quarter (Q1) of 2012 behind us, what is the feeling in the market for the rest of the year and what has the market to offer?

Worldwide: Manufacturers are now producing again. In the downturn, many geared down quickly and with demand now increasing, the winners are those that are able to gear up production efficiently, as the Year End figures from Caterpillar reflect. With the cost of new equipment up by around 20% on 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 rallying in the 12 to 24 month class.

In 2012, the current trend, which is predicted to continue, is that interest in older machines and equipment in the 24 to 48 month class are the next focus on the ‘wish list’ as market stocks deplete. But what has caused this market shift? Again, showing no sign of fear, Caterpillar will launch 64 new machines in 2012 and will spend $4billion on capital investment.

At Auction: Euro Auctions has repeatedly seen over 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 of good second-hand equipment held through 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. High in demand is mining and extraction equipment with large dump trucks at the top of the list and anything with approaching 300 hours on the clock are 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.

Demand: 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, screeners, large dump trucks such as the Volvo a40e, CAT 740, Komatsu hm400 and large excavators in the 50 tonnes 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 also Australia. Due to world demand companies like Caterpillar, JCB, Doosan, Volvo, Terex and many others have reignited production, but certain ranges are like endangered species with CAT 785, 789, 797 hard to find and CAT D10T and D11T almost extinct.

Europe: In Q1 it was still evident that Europe has its problems to solve and economies are faltering: Ireland is still in the doldrums, Italy has slowed right down, with Greece and Spain feeling a lot of pain. The demand for equipment in Europe rallied through 2011, however, in 2012 according to Off-Highway Research the next 12 months will be flat and could see plant sales drop by 2% across Europe and 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, whilst Romania shows 15% and Sweden 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, over 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.

Pacific Rim: Australia continues to be the world’s number one client with no let down in the mining and extraction markets. In the last three months 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 the ongoing infrastructure works are creating demands for specialised equipment with pipe welding equipment and trenching machines in high demand. The Australian ‘cash cow’ is still mining, 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: Asia is fast becoming a powerhouse in the global economy. Following a positive start to 2012, India is set to become the next newly emerging market. In the next five years India will invest (US) $1.2 trillion in infrastructure projects, including transport, irrigation, oil, gas and telecommunications, 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 general construction machinery, mixing plant and tower cranes. Japan is still recovering and companies like Komatsu, Hitachi and Hyundai that 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 is 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 has been visible in the global market place, acquiring equipment not only for its own domestic use but to accelerate the growth of extraction of raw materials in Australia.

South America: The news in 2011 that huge infrastructure projects were under way in South America has resulted in a good start to 2012. Recent announcements include 5000 km of new highways under construction in Brazil and four major initiatives worth an estimated US$ 30 billion in Columbia which include 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 a


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