Buyer numbers grow as auction prices fall

Going going gone....Mark Bacon and Alina Stepanek put the industry under the hammer (click to enlarge)

Going going gone....Mark Bacon and Alina Stepanek put the industry under the hammerAuction companies from the USA and Europe are reporting strong interest from buyers, as residual values continue their downward spiral.

Contractors unwilling, or unable, to finance new machinery are, instead, turning to the auctioneers to find good, nearly-new plant at considerably lower prices.

Auctioneer Ritchie Brothers would normally expect to have around 900 buyers registered for a major European auction, but the company has had up to 1,400 bidders at its most recent sales, and more than 4,000 registered bidders in total in the first quarter of 2009.

Cedric Merot, from Ritchie's French operation, says that the auctions themselves are growing too, with as many as 4,000 machines going through a single sale.

Online auctioneer Iron Planet is also seeing increasing activity, as buyers register to pick up a bargain. "The prices that we are achieving are at a fair market value, but they are down from last year," said Iron Planet's director of marketing Regina Market. "But the buyers are certainly there."

Total volume of equipment is pushing overall financial results up. In the first quarter of this year Ritchie sold €85.2 million of machinery, up from €60 million in the same period last year. However, the individual cost of those machines has fallen dramatically over the last 12 months. Mr Merot says that overall prices have dropped by around 40% since last summer,.
"In our last auction they were higher than in December," he said. "But we think that we are not at the bottom with prices yet. The critical point will be September to November this year, as the banks are taking a lot of equipment back that was sold in 2007-8."

Africa and the Middle East continue to be popular destinations for much of the equipment being sold, though there are European contractors keen to pick up low-cost machines.
In the first three months of the year just under €2 million of Ritchie's sales went to buyers in the UAE, with €440,000 to buyers in Saudi Arabia. Morocco accounted for €2.9 million, while Tunisian buyers took just under €4 million. French and Italian buyers also spent well though, at €11.3 million and €8 million respectively, reflecting the high new equipment prices that are still present in European countries.

The mix of machinery is changing too, with up to 10% of the equipment being virtually unused, as manufacturers and dealers keen to clear stock dispose of cancelled orders.
There is a growing quantity of very young machinery being sold by leasing and finance companies as well, as customers are unable to meet their payments. An upcoming sale on the Mr Machinery website shows, for instance, a 2009 Bomag BW211 roller with no hours on the clock. The starting price is just €40,000.

In addition, auctioneers are handling major fleet disposal sales for rental firms. "In Spain recently we sold more than 4,000 machines for Hertz," said Mr Merot.
Iron Planet held a US-wide auction for a multi-outlet rental customer earlier this year, allowing the firm to clear out much of its excess equipment, and a Ritchie Brothers auction, underway in Holland at the time of writing, included more than 540 access platforms, almost certainly from rental fleets, further depressing prices across the industry.

Newcomer to the plant auction scene, Mr Machinery is seeing a tremendous increase in user registrations and traffic, with customers – both buyers and sellers – showing an ever-increasing interest in online auctions. "There have been peaks of 9,000 users from 140 countries during auction days," says firm's Ireland manager Brian Shinnick. "I think by the end of this year we are going to have a huge amount of plant on the market," he added.
An abundance of machinery, with plenty of potential buyers, might sound like the ideal situation. In truth it reflects the dire state of the new machinery market worldwide, and the fact that many dealers, contractors and rental companies are struggling to meet their financial commitments.

The good news for companies that need to sell machinery is that there are buyers out there. The flip side is that the price achieved may not be quite what they had hoped for.

Article Published: 25/04/2009