Going once, going twice

When IronPlanet merged with CAT Auction Services at the end of 2014, they had big, big plans for the future of heavy equipment auctions. Traditionally an online marketplace, IronPlanet is now aiming to host about 10 live, on-site auctions a year with the help of CAT Auction Services. The first one was held at the end of February, netting over $48 million in sales. Only about $1 million of that was cranes, but there’s more on the horizon.

IronPlanet is targeting the segment of the industry that loves the social aspect of a live auction. Interacting with competitors and friends in a competitive environment brings out a level of excitement that online auctions can’t always produce. That’s not to say online auctions aren’t a thrill in their own right. We’ve all been there, furiously bidding on something on EBay, watching the timer run down, praying we win, but if you’ve ever seen a crane, and I’m sure you have, there’s just nothing like standing in its massive shadow.

The crane market at IronPlanet’s auctions is very dynamic, and that’s due to the versatile nature of cranes as equipment, according to David Tobón, director of crane operations for IronPlanet.

“Fortunately cranes have a tendency to be able to switch from one segment of utilization to another,” said Tobón. “If the oil and gas segment is going down and housing is going up, they’ll switch over. It provides for good auction activity.”

You can imagine which cranes do well at auction then. The all terrains do exceptionally well, as do crawlers and boom trucks.

“Crane availability is generally adequate to demand in every segment except all terrain,” said Tobón. “Higher quality all terrain cranes are difficult to find and lower end products are coming into the market in greater volumes.”

This is somewhat of a new trend. The oil and gas industry is flush with cranes that have been in the industry for fewer than 10 years, but due to working double or even triple shifts during the boom they look like they’re 20 years old.

Rough terrain cranes (RTs) are a tough sell right now, too, according to Tobón.

“You can go into just about any U.S. dealer and they’ll have plenty of inventory of new RTs from 2013 sitting in their yards,” he said. “I knock on those doors a lot to get them to auction but they don’t want to part with them.”

It’s all a balancing act, as are most things in finance, and things appear to be stabilizing, but apprehension still persists.

“We’re on track to pre-June 2008 levels,” said Tobón. “The supply and the demand curves are there. The value is there as well, but there’s just a lot of uncertainty about 2015. People don’t take financing into account as much as they should, like in 2008. Financing facilities are not in place because lending institutions are being ultra conservative. That has a tendency to affect the market in the auction and retail sales.”

End users are responsible for about 70 percent of IronPlanet’s crane sales. Their software-driven model gives IronPlanet the ability to manage a spectrum of data for sellers they otherwise might not have. It’s one of the main reasons CAT Auction Services decided to merge with IronPlanet. CAT was losing information to auctioneers who weren’t interested in a true partnership. With IronPlanet, they became a more informed seller, which is attractive to buyers. Just take a look at their first joint auction and the $48 million worth of equipment they sold. Tobón isn’t exactly satisfied, though.

“To be honest with you, it’s small compared to some of the 50-year old companies who have been doing auctions for a long time,” he said.

Versatility sells

On that same day and about 800 miles away in Casper, WY, Ritchie Brothers Auctioneers hosted a very large auction for Energy Transportation that featured 750 pieces of equipment, including 34 cranes. Fourteen rough terrain cranes (ranging from 20 – 150 tons), seven all terrain cranes (225 – 600 tons), seven hydraulic truck cranes (75 – 110 tons), six crawler cranes (230 – 660 tons), and related rigging equipment, as well as heavy-spec trucks, trailers and other equipment were auctioned off.

While Ritchie Bros. has seen a good mix of various types of well-maintained cranes at their auctions, they aren’t noticing large quantities so far this year.

“There’s a lot of activity in the lifting and handling sector right now tied to the increased amount of infrastructure work in the United States,” said Doug Olive, VP of pricing and valuations, Ritchie Bros. “As a result of the amount of work going on, demand is high and pricing on used cranes has been strong, especially for late model, well-maintained cranes. We’ve sold 180 cranes, including 84 rough terrain cranes, 24 carry deck cranes and 21 crawler cranes.”

Ritchie Bros. sold more than 1,400 cranes in 2014, including 578 rough terrain cranes, 168 hydraulic truck cranes, 163 all-terrain cranes, and 144 crawler cranes. Traditionally, they sell more rough terrain cranes than any other type because of their versatility and cross-sector appeal.

According to Olive, there are a number of major factors that affect the price of used cranes, most notably the lead time and cost it takes to purchase new.

“With jobs available now, crane operators need cranes to put to work right away—it can take up to two years to special order certain types of cranes, and many operators can’t afford or don’t want to wait,” he said. “Ritchie Bros. provides crane operators with access to quality used cranes when they need them.”

The most expensive cranes Ritchie Bros. sold in the past six months were two 2011 Grove GMK5165-2 (165-ton) all terrains. They went for $925,000 each in Williston, ND back in November.

“The biggest factor affecting prices for used cranes right now is the amount of work available, particularly with increased infrastructure work in the United States,” said Olive. “Greater demand and tighter supply mean strong prices for sellers.”

Similar to IronPlanet, end-users make up the largest percentage of sellers and buyers at Ritchie Bros. auctions.

As opposed to going to auction, end-users wind up selling their own used cranes quite frequently, as is the case with ALL Erection & Crane Rental. ALL sells direct because of the after-sales service they provide their customers.

“The used crane market is strong right now,” said Michael Liptak, president, ALL Family of Companies. “Our high sales volume of used machines is what enabled us to invest heavily in newer models for our fleet.”

ALL recently purchased 40 new Link-Belt and 17 new Tadano cranes.

“Our success in selling really stems from how well we take care of the equipment in our fleet,” said Liptak.

Oil and gas fallout

Myron Bowling Auctioneers, Inc. has been on a tear turning over crawler cranes as of late. They hosted a five-day auction in Morgan City, LA last Fall for McDermott, Inc., an international engineering, procurement, construction and installation company that showed demand for cranes from end users as well as dealers.

“We sold several American 11250 crawler cranes at the auction for as much as $525,000 plus 15 percent buyer’s premium,” said Greg Hengehold, managing partner, Myron Bowling. “At another auction in New Iberia, LA we sold a half dozen Manitowoc crawler cranes, including a 2250 for $475,000 plus 15 percent. In the Gulf Coast market, lattice boom crawler cranes are in demand among shipyards and fabricators.”

Myron Bowling forecasts a bit of a dip in the used crane market due to low oil prices in the months ahead.

“In addition to the massive layoffs by the larger players in the oil market, we have already seen some smaller operators in the transportation, fabrication, and site preparation fields close their doors,” said Hengehold. “Because of the tightening of the market, more cranes will hit the market, increasing the supply as demand decreases. On the bright side, cranes used in the construction trade are scarce and in demand.”

If you’re not in oil and gas, things look a lot better. Myron Bowling reports that their auctions have generally been strong and they see that most industries are increasing capacity with an appetite for good, late-model used equipment, including cranes.

Myron Bowling typically sells cranes from owner operations that have closed. These are generally fabricators, ship builders, construction companies or erection contractors.