Middle East's second-hand machinery market to pick up in the future
The second-hand construction equipment market is one of the best indicators when it comes to the state of the industry.
Whether or not, and for how much, machinery is selling at auction can provide intriguing insights into what is happening at the coal face. Just because construction professionals are choosing not to buy new, doesn’t mean that they are choosing not to buy.
For example, when the effects of the global economic downturn took hold in the Middle East, sales of new construction machinery all but halted across the region.
OEMs accrued backlogs of surplus stock for which distributors struggled to find buyers. Surprisingly, however, the trade of second-hand equipment continued largely unhindered. While a dearth of fresh investment prevented customers from buying new, the market still needed machinery.
Of course, this is not to say that the second-hand machinery market is recession proof; only that when the Middle East’s construction industry seemed down and out, there was still a beating pulse to be found in the region’s auction houses.
World Wide Auctioneers (WWA) has been operating in the UAE since 2001, and has held over 100 equipment auctions across the country. The Jebel Ali-based firm boasts an extensive database of established buyers and hosts auctions with no minimum bids, seller bids, or reserved items.
WWA uses this – the American model – to ensure that buyers and sellers trade equipment at a fair market value. If you agree with the old adage that something is only worth what somebody is willing to pay for it, then the results of a WWA auction provide an unbiased snapshot of the Middle East’s second-hand equipment market at any given time.
Keith Lupton, WWA’s VP for regional sales, visited the PMV office to give his expert perspective of how the Middle East’s second-hand machinery market behaved during 2013, and to offer his predictions for the coming year.
“Things started well in 2013,” he began. “Unfortunately, the market never really lived up to these early signs of promise. In early summer, WWA and its rivals experienced a significant lull, and it wasn’t confined to the Middle East. Auctioneers across the globe reported similar trends. The market just went very soft.
“It was a malaise,” continued Lupton. “This is the best word that I can think of to describe it. What’s more, it wasn’t limited to particular countries; it affected nations across the Gulf.
"Typically, auction attendees come with a shopping list. During the summer, however, it seemed that most people were in search of a bargain. The second-hand machinery market proved to be pretty resilient during the recession, but 2013 saw a worldwide softening of prices. Customers just weren’t willing to pay top dollar for anything.”
Heavy machinery, according to Lupton, has been particularly affected by this trend. In 2009, for example, articulated dump trucks were selling extremely well, but their popularity has since declined.
While it is difficult to pinpoint the exact cause of this malaise, Lupton believes that ongoing political instability in the Middle East served to perpetuate trepidation “At WWA’s January 2013 auction, prices were particularly buoyant,” he told PMV.
“This is why we were surprised when prices started to dip as the year progressed. Personally, I would argue that this trend resulted from the political landscape of the Middle East. At the beginning of the year, I think that people expected this situation to be resolved pretty quickly. However, by June, it was quite evident that things weren’t going to progress in the way that pundits had predicted. The general lack of confidence that we witnessed probably stemmed from here.”
Despite the backdrop of this lacklustre market, WWA achieved solid sales during 2013. The company continues to attract considerable interest from the buying public, which is in no small part thanks to the no-reserve auctions that it holds.
“The American model works well for us,” explained Lupton. “No reserves and no buybacks. Of course, it is impossible for auction houses to guarantee that nobody has ever bought back. As one of my colleagues once said, we’re not detectives.
However, we do our very best to protect buyers against client interference. When we see a blatant act, we simply take the culprit’s book. We have banned people in the past for failing to respect the spirit of an auction, and I think that buyers appreciate this.
“It has to be said that sellers sometimes get a little nervous about WWA’s no-reserve system,” he continued.
“However, they soon realise that it’s all about achieving a fair market price. For a long time, there has been an assumption amongst certain members of the construction community that an auctioneer can just wave his magic wand and achieve huge money for some clapped-out machine. Of course, in the real world, this simply isn’t the case. Now and again, there are anomalies, but you’d be amazed at how consistent the market tends to be.”
It seems, then, that despite the odd spike and the occasional slump, the Middle East’s second-hand machinery market is pretty stable. Even so, it is far from static. Change is inevitable, and Lupton predicts that machinery from the Far East will have the effect of stirring up the region’s auction sector during the coming years.
“There is a lot of badge engineering in our market, but Chinese manufacturers appear to be weakening this trend,” he explained.
“Big brand names hold considerable sway when it comes to machinery auctions, and with good reason. Up until a couple of years ago, second-hand Chinese machinery tended not to achieve good prices. Today, however, with much-improved build quality and greater availability of spare parts, prices are gradually increasing, and I predict that this trend is likely to continue.”
Although, ultimately, the 2013 auction sector failed to live up to early market expectations, Lupton remains optimistic about the future. If political stability returns to the Middle East, he is confident that 2014 will have plenty to offer for buyers and sellers alike.
“On balance, I think that 2014 is going to be a seller’s market,” Lupton concluded.
“Even so, we anticipate the imminent arrival of numerous late model machines, so buyers have reason to look forward as well. Essentially, I think that the coming year will be advantageous for both sides. Whilst 2013 was far from a disaster, it wasn’t the best year. I am confident that we will see a more buoyant market during the coming 12 months.”