Overseas Construction a Factor in Scarcity of Cranes at Home

Editor's Note: In researching our September State-of-the-Industry article, Crane Hot Line Magazine interviewed several folks in the crane industry about the current status of equipment backlogs. Here's what people in the trenches had to say.

If a spike in nonresidential, petrochemical and transportation construction has contractors on the prowl for cranes this year, overseas exports of heavy machinery • including cranes • is making the hunt even more of a challenge. And it doesn't matter how old the model. If end users can find new or used at a good price, they're scooping machines up with few questions asked.

“In fact, there are not enough cranes to go around,” says Randy Harris, Conventional Crane Manager for ALL Erection and Crane Rental Corp., Cleveland, Ohio, “and crane companies have to turn down jobs because they can't get enough cranes.” Harris says the lead times for obtaining cranes can be well over a year • still today.

Because of the combination of heavy domestic equipment backlogs and an upswing in nonresidential construction over the past year, end users are buying up used equipment often at a higher price than they would normally pay for new. The used equipment market is strong, not just because of lengthy lead times for new equipment, but because of the strong economy, says Chuck Yengst of Yengst Associates Inc., Wilton, Conn.

Joel Dandrea, Executive Vice President of the Specialized Carriers and Rigging Association (SC&RA), says for the time being, even if prices are up, the construction equipment picture is a bright one. Equipment utilization is up and capacity is tight right now. “SC&RA's crane and rigging members are doing well and manufacturers are in a very strong posture. Based on the backlog into the first half of 2007, it looks to be very favorable.”

While prices for used equipment are up and finding good used machinery is difficult, Yengst looks for used equipment to continue strong for the remainder of 2006, but to slow down in 2007. In fact, he sees both new and used equipment sales dropping in 2007.

“The economy is slowing and inflation and higher interest rates are going to affect the business to some degree,” says Yengst. “Whatever lead times might be there today for products will evaporate in 2007.” But, as those backlogs begin to shrink and equipment deliveries pick up, the demand for cranes from countries that have seen a construction surge of their own grows.

“Manufacturers are not only supplying the U.S., but also Europe, Russia and China, who are demanding more and more cranes for the steel mills and other large manufacturing plants they are constructing,” says Harris. “Many cranes are manufactured in the U.S., but some types of cranes, such as tower cranes, are only manufactured overseas.”

According to a Wall Street Journal article published this summer, in the first five months of 2006, Japan, China and Brazil increased their purchases of U.S. machinery by 22 percent, 16 percent and 31 percent respectively from a year earlier. A U.S. Commerce Department report states that that trend partly reflects a hike in business investment in those countries.

Glen Tellock, president of Manitowoc Crane Group, was interviewed for the article, and reported his company's exports to Europe and Asia were up about 20 percent and 30 percent, respectively, in the first half of this year. Crawler, all-terrain and tower cranes are selling particularly well in China as that country prepares to host the 2008 Olympics, he noted, saying “They don't have until 2011, they have to get this done by 2008.”

Further, rental houses are even depleting their rental fleets to meet the need, and getting caught in the middle of the crossfire as they buy up available equipment to restock their stores. “A large part of the demand for cranes is due to rental fleets replenishing their inventory,” says Doyle Bryant, Director of Product Marketing and New Product Development for Grove in Shady Grove, Pa.

The challenge, say industry insiders, is to balance equipment purchases with the opportunity for work. New construction has been running strong for a couple of years now, and many end users are trying to weigh those growth spurts against the country's economic future.

Crane companies have added equipment over the past few years and have to be careful not to add too much, says Dandrea. He chalks the situation up to the economic cycle, and says it's a fact of life in the construction industry. “Everyone knows it. It repeats itself, and folks right now are trying to hit that balance of how aggressively they go in adding equipment and capacity, how far out they can plan, and what type of backlog is sitting there.”