Busy. This is how our 2018 Crane Rental Roundtable characterizes the crane rental market in north America going into the second half of 2018. Utilization is strong, rental rates are stable, and there’s a steady stream of projects in the pipeline. They are selling off old equipment and are amid “refreshing” their fleets with new machines.
The ACT 2018 Roundtable comprises executives from four crane companies. Those answering our questions include Mike Appling, CEO, TNT Crane & Rigging, Houston, TX; Michelle Solaimani, CFO, W.O. Grubb, Richmond, VA; Ron Hill, vice president, Hill Crane, Long Beach, CA; and Alex Harrell, executive account manager, B&G Crane Service, a NCSG Company, Jefferson, LA
I think you will be very interested in their answers to our questions.
How do you describe the crane rental market in the region(s) your company serves?
Appling: Competitive but improving.
Solaimani: The Mid-Atlantic region is good if not better than average. We are fortunate enough to be in a region where there is always a good amount of infrastructure and government work. We tend to be on the end of where funds flow. I would dare say that the Mid-Atlantic area is currently one of the strongest markets in the country.
Hill: Currently the economy in Southern California is good, and when the economy is good, new construction is good. However, it’s important not to only focus on new construction. It’s also important to obtain service work that will help carry companies through times when new construction is slow.
Harrell: With an expanding market full of chemical refineries, it’s hard to deny that the Gulf Coast crane rental market is saturated with competition. With rising crude prices, we have seen a slight up shift of new work and opportunities.
What is the hottest crane class in your market?
Appling: 200 to 265-ton capacity.
Solaimani: Across the board, all classes of cranes are busy, especially since the weather has finally broke. However, we have seen a strong demand for larger all terrains, 350-ton capacity and up. We also have a high demand for larger rough terrains, 90-ton capacity and above.
Hill: The Liebherr LTM 1400-7.1. The demand for the 500-ton crane class over the last two years has increased substantially. Again, with the increase in new construction the need for a crane of this class, with the many different configurations and the versatility of this machine, has made the demand for it very high.
Harrell: The mid-size all terrain class is the hottest crane class in B&G’s fleet. They are versatile and offer a wide range of lifting needs for most of our customers.
What class of cranes are Seeing the least demand?
Appling: Crawlers and rough terrain cranes.
Solaimani: Small rough terrains are in the least demand currently. This also supports what we’ve heard from the manufacturers that the smaller RT market has dwindled. Although the market has never been better for large RTs, anything 90 tons and above is in hot demand.
Hill: 35-ton and 40-ton class rough terrain cranes. Many general contractors are bare renting larger RTs. With so many 40-ton hydraulic truck crane and boom trucks in the market, it has really lowered the demand for the 35-ton and 40-ton rough terrain cranes.
Harrell: We find that the smaller RT fleet is in least demand due to most companies acquiring their own small RT’s.
What is your most prevalent type of business – refinery work, steel erection, heavy civil work, etc.?
Appling: It’s mixed.
Solaimani: Our most prevalent type of work currently is heavy civil work by far, roads and bridges. We also have a good amount of energy related work.
Hill: Currently Hill Crane Service has a large footprint in the electrical infrastructure industry providing crane service to multiple public utilities and its subcontractors in Southern California. However, we are increasing our footprint in the petrochemical/refining industry. Recently we provided crane support for a large oil refinery in Southern California that included 10 cranes operated and bare rented for a 40-day turnaround. We have several more of these jobs planned for later this year. We also support a large portion of the general construction market including steel erection, HVAC, bridge girders, power plant support, etc.
Harrell: B&G Crane Services has a strong stance in the refinery market throughout the Gulf Coast, but we still work in the heavy civil and steel erection as well.
How do you describe crane rental rates?
Appling: Stabilizing, for the most part.
Solaimani: Rates could be higher for every class of crane we have. Acquisition costs have escalated this year so to keep up with not only the rising cost of new equipment, but the increase in labor rates, and our operating cost across the board, we need rental rates to be higher.
Hill: Rental rates are always a challenge. Every few years another competitor will enter the market and reduce rates to gain market share. The challenge is maintaining the relationship with the customer, continuing to provide good support and service that can justify your current rate schedule. We are fortunate to have a very dedicated customer base that sees the value of paying a little more for crane service.
Harrell: With expanding activities for 2018-2019 in the Gulf Coast region, we are seeing a number of rental companies focused on market share expansions, which in turn has brought rates down. This also has to do with the downturn in the oil and gas sector over the last couple years, which had some EP companies pushing off maintenance/turnarounds/capital expansions. This caused a shift in an already saturated market that houses a lot of competing crane companies throughout the Gulf Coast.
Do you see competitors cutting rental rates in order to get the job?
Solaimani: Of course. Some things never change.
Hill: Yes, this happens quite often in today’s market. Many of our competitors believe this is the most efficient way to gain work. However, we believe there is more to it than just rates. Customer service, quality of equipment, quality of operators and above all safety should be the ultimate decision factors in selecting a crane company/service. Anybody can provide rates lower than their competition, but if these factors are overlooked and problems arise on the job, is the cost saving really worth it?
Harrell: B&G has seen a trend of aggressive pricing throughout the Gulf Coast.
What are the biggest challenges in the crane rental market?
Appling: Bad competitors.
Solaimani: The biggest challenges that we see in our crane markets are keeping our rental rates up. Also, manufacturer’s lead time on new equipment keeps pushing out longer, making it hard to keep up with the increase in work that we’ve been experiencing. Also getting paid. For the most part we are working for subcontractors and sometimes a sub of a sub, so when contractors have a mindset of “pay when paid,” we are always the last to get paid. Not all customers are like that, but it’s getting to be more of a common practice.
Hill: Maintaining regulatory compliance and attaining qualified personnel to operate crane and equipment.
Harrell: Maintaining an experienced, personal staff to further safety standards.
What about used cranes? Do you have any problems with the used assets in your fleet? Are you tending to use cranes longer than you have in the past?
Appling: Yes, we would like to sell more, but the used equipment market is challenged from a pricing standpoint.
Solaimani: We have moved a good amount of inventory so far this year, although we aren’t in the business of selling cranes. We sell off our surplus inventory when it makes sense to us.This year we have felt an uptick in the used market so we took advantage of the opportunity to sell off some of our older pieces. Which in turn simply allowed us to take delivery of new cranes to replace the ones that we sold.
Hill: No, we are currently in the process of updating all our old cranes and trucks. Environmental compliance is becoming more stringent in Southern California, and vehicle emissions has become a major topic lately. Having cranes with Tier 3 and Tier 4 engine emission standards are becoming more common. There are several pieces of equipment that are no longer produced, and currently hold some market share. In those cases, proper maintenance and repowering of these machines is done to extend the service lifespan.
Harrell: B&G Crane does not buy used assets. All of the assets that we have were acquired over the 70 years of business have been new. We have taken pride in our fleet of cranes, heavy haul equipment and other assets. All of B&G’s equipment is maintained at a very high level with service records that show every bit of work that has been completed. We are able to track the assets life from conception to retirement, and because of this high level of service, we can maximize the life of all assets acquired.
Do you expect to purchase new cranes in the coming months?
Solaimani: Yes, we have a pretty good list of new inventory coming in for the remainder of the year. We’ve added a branch a year for the past five years, so to keep up with our growing footprint and demand, we have to keep a steady stream of new equipment coming in.
Hill: Yes, we are currently exploring several different types of cranes, in particular a large all terrain crane and several different crawler crane options in the 300-ton to 500-ton class.
Harrell: We are consistently purchasing new cranes as we expand our market share in the current regions we operate, as well as expansions into new markets.
What distinguishes your company in the crane rental marketplace?
Appling: Safety and service.
Solaimani: We believe in our people. Our people are by far the best in this industry. Also, our service and our commitment to our customers is what defines W. O. Grubb as a leader in the marketplace.
Hill: Our service level and commitment to the customer. Hill Crane Service has been in business since 1947, started by my grandparents. As executive management has changed from generation to generation, each generation has always promoted a level of customer service which we believe is unattainable by our competition. This with the highly experienced staff of operators, project managers, office staff and safety record has allowed Hill Crane to excel and grow from year to year.
Harrell: Adaptability, transparency, integrity and pride. B&G was founded over 70 years ago and started with one crane and one operator. The foundation of the business incorporated these key elements to build a strong organization that has had successful growth at a steady pace.
We do not over extend our assets and manpower, which instills confidence in customers. By also creating a safety-oriented work environment, B&G has infused a safe work attitude, which is shared by all employees from the highest levels of management to field personnel.
This contributes to the safety commitment of the company and our long-term employees that understand that safety is the number one priority within our company as well as clients that we serve. B&G Crane Service is dedicated to maintaining its position as an industry leader by providing the highest quality, most dependable, safest and most economical service in crane rental, heavy rigging and specialty hauling.