Rising demand for used construction equipment has created exciting opportunities for buyers and sellers alike. Guy Woodford reports.
IronPlanet, the world’s leading auction marketplace for the buying and selling of used heavy equipment and trucks, says it has seen a significant rise in its European activity during 2015 – a pattern that is set to continue throughout the rest of the year and into 2016.
“The strongest markets in Europe are still Germany, the United Kingdom – which is flying at the moment – and France,” explains Felipe Fernández-Urrutia Massó, vice president of European sales at IronPlanet. “The Netherlands has picked up and has now surpassed Spain and Italy, and Belgium and Poland are showing promising signs too. The reality is that these economies are not yet close to a level experienced before the global economic crisis, but there has been a definite improvement.
“The performance of Europe’s construction industry in these key economic regions means that there is currently a strong demand for a number of machine types,” he continues. “For example, medium- and small-sized construction machines are working particularly well, such as mini excavators, wheeled loaders, telehandlers and backhoe loaders.”
The nature of the construction industry means it is often an excellent means of gauging the state of a country’s economy. As such, IronPlanet says it is in a prime position to monitor how and where to focus its attention, which ultimately benefits its huge volume of buying and selling customers. “We are a used marketplace selling used equipment. We have a 1.3 million-strong user database and that is what drives the participation that drives the prices,” Fernàndez-Urrutia Massó continues. “But if we feel that specific countries have a strong market at any given time – for example Poland, where we have a lot of good buyers at the moment, we invest our resources into these countries accordingly. It means we can help our sellers to find the right buyers from the right locations.”
But while fluctuating market trends dictate how IronPlanet’s core marketplace business operates, the company has spent 2015 implementing innovative strategies to take advantage of new demand opportunities: “Our most important strategic developments in 2015 have been IronPlanet’s merger with Caterpillar Auction Services and our activity as the equipment disposition partner for the United States Defense Logistics Agency (DLA) here in Europe,” explains Felipe Fernández-Urrutia Massó.
“Caterpillar Auction Services (CAS) was an independent company in the United States set up by a number of large Caterpillar dealers,” he adds. “IronPlanet has merged with CAS and we will be using that brand to help our user-base participate in high-scale, onsite Caterpillar auctions via our own online auction facilities. Many international Caterpillar dealers have already decided to participate, and it is now something that we are confident of replicating here in Europe.”
The CAS-IronPlanet merger puts IronPlanet in the unique position of being directly and deeply integrated with the world’s biggest selling construction equipment manufacturer.
In addition to the CAS merger, IronPlanet forged an agreement with the US Department of Defense and its Defense Logistics Agency to act as its equipment disposition partner both in the US and Europe. The partnership means that IronPlanet will offer registered auction participants with the opportunity to purchase used US equipment from an American military base in Germany. “We hosted the inaugural DLA auction in Europe in July and the audience has been huge – over 40,000 attendees, from military equipment enthusiasts to construction companies. It was extremely impressive and obviously the DLA is very happy. That is why we will soon be selling equipment out of more US bases across Europe, including in the UK and additional bases across Germany.”
Fernández-Urrutia Massó is confident that the early promise of this first auction will help IronPlanet to attain similar partnerships in Europe in the near future. “The success at this early stage will be very helpful for us because organisations will begin to appreciate just how big an audience we can attract and how much demand there is for this kind of equipment,” he said. “It means the operation will not just be limited to the US military – other militaries will be motivated to work with us as a disposition partner, but also organisations like the UN and even from the public sector. That is what we are working on in the coming months and we are looking forward to achieving some great results.”
In addition to these latest developments, Fernández-Urrutia Massó is keen to emphasise that a strong focus will continue to be placed on the development of IronPlanet’s relationships with some of the largest contracting and rental companies that operate on the continent, including Vinci and Bouygues. “The services we can offer are fantastic for these types of seller,” he said. “We have different platforms and different routes to the market, be it through our monthly feature auctions or our reserve-auction Daily Marketplace. This combined with the special marketing campaigns we can offer makes IronPlanet an extremely attractive equipment disposition option for these larger companies.
“As a business we have been working extremely hard, but all of these developments and initiatives mean that IronPlanet is an exciting company to be involved with right now. However the real winners here will be our customers,” concludes Fernández-Urrutia Massó.
Nuno Portela, Caterpillar EMEA rental & used operations manager, says that while European demand for used construction equipment is mostly quite flat, there has been growth in African and Middle East markets, with Africa, in particular, seeing “significant” growth in demand.
“We see Africa as giving us one of the biggest growth opportunities we have, as there’s still a lot of construction industry growth there, and our dealers embedded there will help this.”
Taking a closer look at the European market, where Portela says used equipment prices are rising, northern Europe, particularly Scandinavia and the UK, is still, says Portela, seeing good used construction equipment sales. The French market is weaker due to overall construction equipment demand down 20-30% this year. Germany, continues Portela, is seeing slight growth, with the same modest growth seen in Southern Europe, albeit from a very low sales level.
Portela says the Asian used construction equipment market has been hit by a decline in mining, and the drop in value of commodities. He also states that China has a lot of domestic manufacturers which makes it hard to establish good market share.
Meanwhile, the weakness of Japan’s Yen currency has led to good new/used construction equipment exports. Portela says that the CIS states, including Belarus, Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, and Uzbekistan, offer good growth potential.
Caterpillar’s Certified Used Program has, says Portela, grown globally in the last three years of its 10 years in existence. Through the program, customers get a ‘nearly as good as new’ machine for a fraction of the price – with all the servicing and maintenance they need included for up to 10,000 hours of service.
“When our machine achieves Certified Used Program status, it means it has been through 140 point inspections, the service uses only genuine Cat parts, fluids and filters, and it has a good visual appearance,” explains Portela. “The program offers an affordable alternative to new machines.”
Portela says customers are also looking at rental alongside used construction equipment solutions.
There are, Portela believes, big gains to be made from online auction used construction equipment sales, thanks to the merger of Cat Auction Services and IronPlanet in December 2014. He says that while Caterpillar dealers will continue to sell Caterpillar used equipment and the Caterpillar Certified User Program directly to customers, dealers are being encouraged to look at machine and program package sales opportunities through IronPlanet.
“Contrasting the used equipment sector with the overall construction industry, it’s in very good shape,” Portela concludes.
Dromore, County Tyrone, Northern Ireland-headquartered Euro Auctions, which holds joint onsite and online used construction equipment auctions, is growing its global footprint.
As well as its HQ site, which stages four auctions a year, the company stages five onsite auctions a year at its base in Dormagen, near Dusseldorf, Germany; four per year at its site in Zaragoza, Spain; six auctions a year at its Leeds, England facility; and a further four auctions at its site in Atlanta, US.
The Zaragoza site is the newest within the Euro Auctions’ set up, with the company previously locating its Spanish trading in Valencia. “We’ve found a big improvement in the buyers and sellers in Zaragoza as we’re more towards Spain’s border with France. It’s much better logistically with its proximity to major ports and allows us to support the French market with more buyers and sellers coming from this area,” says Valerie Winters, Euro Auctions Dromore office manager.
Winters says the company staged its biggest-ever Leeds auction in August 2015 – with 4,500 pieces of equipment being sold. “We’re increasing the size of our Leeds site. It’s currently over 25acres, and it will go up to 45acres within the next 18 months to two years, with a new two-ring purpose-built auction area. It shows the strength of the UK and European market for used construction equipment.
The UK market continues to be very buoyant and is seen as a benchmark around the world. There are a lot of machines sold new in the UK in ratio to population, compared to other countries, and this then filters down to the used market.”
Winters says that Euro Auctions’ online sales are increasing. “In Europe, around 70% of our sales are onsite, with 30% to online bidders. In the US, 48% of our auctioned equipment is online sales.”
Of the reasons behind the growth in online auctions sales, she says: “We have very good customer service and customers have confidence that allows them to buy online.”
Euro Auctions was due to conduct its first auction in Houston, Texas, US on the 4 December 2015 with a mix of cranes and construction equipment available. “The Texas region has long been seen as one of the most important in the US and we feel it is good to have a presence in this area, as we are trying to grow our brand worldwide. It also allows us access to the Mexico and South American market as Houston port is an important link with the Mexican market,” says Winters.
Ritchie Brothers was in record-breaking form during its recent two-day unreserved used construction equipment public auction in Dubai.
More than US$42 million worth of construction equipment went under the hammer on September 8 and 9 in the United Arab Emirates member state.
Eduard Faig, regional sales manager for Ritchie Brothers, said the event set new Dubai records for the total number of onsite bidders (just over 920), and for the number of online bidders (more than 400).
Over 2,600 equipment items were sold, including more than 100 excavators, 85 dump trucks, and 80 wheeled loaders.
The global construction equipment industry is estimated to reach $145.5 billion in new equipment sales by the end of 2015, according to Statista, the online commerce statistics portal. However, this figure is well below used heavy equipment sales for construction, agriculture and other industries, estimated by Ritchie Brothers to be worth in excess of $360 billion/year.
Despite the popularity of online and onsite used heavy construction equipment auctions, Equippo, another used heavy equipment online marketplace, says auction sales represent only 4-5% of the global used heavy equipment industry.
“While equipment at auction can be very attractive for reasons including price and access, recent trends in the global market have changed the way end users are willing to purchase used equipment,” says Michael Rohmeder, Equippo CEO.
“Equippo links sellers to end users all over the world, especially in developing markets. We’ve seen how users from all corners of the globe are keen on purchasing used equipment directly; we expect this trend to continue and increase over time. However keen, there are very few individual buyers that succeed. With language barriers, risks of online fraud, complicated shipping and so many different equipment configurations and regulations, most end-users are overwhelmed with importing themselves. We provide final price transparency and manage the whole process to take away all these pain points. Ensuring trust and quality is as important to the end-user as navigating international import and duties requirements.”
Rohmeder continues: “A second trend we’ve encountered is the need for advice. We’ve been surprised by how often buyers don’t know the machine they need for the job-at-hand. Unbiased information as to a machine’s features, specs, and suitability to a job/geographic location is imperative for many global buyers; this information is not often available from local sources or auction services.”
As the trend for extra-national used equipment buying continues, Rohmeder says he expects the trend in online buying to also increase. “So far, there has not been a viable online solution to truly facilitate and accelerate international fixed-price transactions. We see huge demand for our unique approach, both from buyers and sellers alike,” he concludes.