Date July 2016
By the numbers
- The North American market for mobile cranes is soft
- Values for most mobile cranes have plummeted during the past 12 months
- Major mobile crane categories: All-terrain, crawler, hydraulic truck, lattice truck, rough-terrain
- Significant manufacturers: Kobelco, Liebherr, Tadano, Terex, Furukawa UNIC, Guangxi LiuGong Machinery, Hitachi Sumitomo Heavy Industries Construction Crane Co., Ltd., KATO Works, Komatsu, Manitowoc, Sany Group, XCMG, Zoomlion Heavy Industry Science and Technology, Link-Belt, Altec, SENNEBOGEN, Grove
A buyers’ market: A strengthening U.S. dollar, the prolonged fall in oil prices and an influx of used equipment have contributed to the current depressed state of the used mobile crane market. The situation has become exacerbated over the past year. Values of crawler cranes, smaller capacity (less than 200-ton) all-terrain, hydraulic truck and lattice truck cranes have all fallen 20 to 25 percent during the past 12 months. Lenders with these assets in their portfolio and an appraisal that is more than one year old should seek an update as soon as possible. While some dealers have also reported a softening in the market for rough terrain cranes, our appraisers have observed more stability in this market.
What’s happening is, in part, a consequence of the rising value of the U.S. dollar. A significant amount of used equipment is sold to overseas markets. Buyers purchasing equipment in the U.S. have had to pay more for U.S. dollars, meaning they are willing to pay less for equipment sold in the currency. Strong demand has been seen from Vietnam, India, the Middle East, and Africa. While these buyers want the value of buying used equipment, many steer clear of cranes that are too old. Even though cranes are generally 30-year assets, equipment that is more than 10 years old will have limited marketability internationally because of the repair and maintenance costs. Lenders should be aware of this steeper obsolescence curve.
Low oil prices are contributing to the situation as well. Once bustling oilfields in Texas, Canada and the Dakotas have all but stopped buying equipment altogether. And many oil & gas companies themselves have contributed to the glut by liquidating assets to generate cash. Crawler cranes, which are often customized to the needs of oilfield companies, were hit particularly hard by these dynamics. Values for smaller all-terrain cranes are also significantly down, but demand from civil construction has helped somewhat for these more versatile pieces of equipment.
Mobility makes selling easier: Generally, mobile cranes have wheels and can be driven on the road. This makes remarketing easier because equipment can be readily relocated and, in some cases, grouped with similar assets to attract a larger pool of buyers. However, lenders should be aware that crawler cranes are not road ready and need to be trucked. Costs to tear it down and trailer it will increase recovery expenses.
Equipment specifications are important: The most versatile types of equipment are typically all-terrain and rough terrain cranes. Crawler cranes tend to be put in one place and not moved around much. In addition to its type, a crane’s age, capacity and accessories are all major value drivers. What kind of boom does it have (i.e., jib or luffing)? Does it have auxiliary or standard drums? Which counterweights are included? Does it have auxiliary winches? Lenders should expect appraisers to list these detailed specifications and auxiliary equipment. The specifications included are important and may narrow a crane’s marketability. For example, many crawler cranes coming out of the oil and gas industry lack a boom and other features a civil contractor may want, meaning that the civil contractor will pay less for the crane knowing modifications will be needed to make the equipment productive.