Auctioning off the goods

Auctions are becoming an increasingly popular way to buy and sell equipment. Hugo Berger finds out more.

Keith Lupton says a recent challenge has been the number of tower cranes coming under the auctioneer's gavel.
Keith Lupton says a recent challenge has been the number of tower cranes coming under the auctioneer's gavel.

Auctions are becoming an increasingly popular way to buy and sell equipment. Hugo Berger finds out more.

Shortages of equipment and supplies are a way of life for the construction industry in the GCC.

As the region's construction boom hots up, plant machinery is not exempt from the trend.

There is a major shortage of quality equipment in the Middle East. By quality I mean that which is less than three years old.

Most manufacturers, with a backlog of orders stretching back months, find their machines are snapped up as soon as they roll off the production line.

A lack of raw material, mostly steel and rubber, combined with high energy prices, means machinery producers are unable to keep up with supply.

And with China and India experiencing their own construction booms, the scarcity of machines is on the rise.

The situation is so acute that developers and contractors are often forced to buy aged, poorly-maintained or poor-quality machines.

A way to jump the lengthy queues while assuring quality is not compromised is to buy equipment from auction houses.

In Dubai, there are two major players - Ritchie Brothers Auctioneers and World Wide Auctioneers.

Both insist that procuring equipment through an auction house was the way to ensure that quality merchandise was obtained in a short time period.

Steve Barritt, general manager, Gulf States and Southern Africa, Ritchie Brothers Auctioneers, says there's no foreseeable end to the shortages.

"To buy from a main dealer, in some cases, the wait would be over a year to get a new piece of equipment.

"With us, it's there on the day. You buy it, you take it away and you work it.

He says the scarcity of machinery meant prices were inevitably on the rise.

"There is a major shortage of quality equipment in the Middle East. By quality I mean that which is less than three years old.

"All the manufacturers are struggling to supply and we can help out.

"We are constantly getting better and better prices for our machines. At the last sale in Dubai, there was a big jump in prices.

"The more quality equipment we get, the contractor can take it straight to site and start using it."

Mark Grennell, marketing manager, Ritchie Brothers Auctioneers believes selling equipment at an auction had distinct advantages.

He says: "There are three ways of selling equipment.

"You can do it yourself, you can do it through a dealer or you can do it through an auction house.

"People who try and sell it themselves are not experts in the business and they waste time and money on trying to find buyers and advertising.

"With dealers, obviously it's more a blind supply and demand. The dealer will give you a price for it, but it could not be its true worth.

"With an auction house, if you have equipment lying around which you are not using, you can bring it along, sell it quickly and get the market value for it."

To try and gauge demand in local markets, Ritchie Brothers closely observes projects from start to finish on a global basis.


This means that if a major project is finishing on another continent, the firm can acquire the equipment for upcoming schemes in the Middle East.

The company's last auction in Dubai in March was attended by more than 600 people, from 49 different countries, and generated US $26 million (AED95 million) in profits.

The company's turnover of $3.2 billion, from its 110 auction houses across the globe, marks it out as the biggest auctioneer of its kind in the world.

But local auction houses are also getting a slice of the action.

Keith Lupton, sales director of Dubai-based World Wide Auctioneers (WWA) says the company's smaller size meant it was able to offer a more personal service.

But as his company grew, he too was being accused of losing the intimacy.

He says: "It's a very buoyant market. We are growing but we try to look after the big pussy cats as well as the chap with one machine.

"As we get bigger, we occasionally get accused of being a little mechanical and not caring.

"It's just rather difficult, but it stands to reason that a customer with five bulldozers might get more of my attention than the chap with one generator, though he is very welcome of course" he adds.

"You can't survive out here by being mister nice guy. People will try delaying payment and we've got harsher and have started to fine them heavy penalties to give them a bit of stick.

"We don't want the extra money, we just want them to pay and take the machine then we can start the whole process again.

Lupton says the biggest change in recent years has been the number of tower cranes coming under the auctioneer's gavel.

With apocryphal tales of a huge percentage of the world's cranes being in Dubai, there is an ever-growing market for the machinery.

Lupton says: "The last tower crane we had came from a site in Abu Dhabi.

"It was 30 years old and it sold for $62,000.

"I asked the owner if he still had the parts book and manual and he said ‘for that kind of money, I shall search the warehouse.' It came from a large company and they were just amazed.

"The two big sellers of tower cranes are pretty occupied at the moment and are not putting them in auction.

He says that with a huge amount of earthwork projects starting in Dubai, bulldozers were also becoming more prized items.

"Here in Dubai with the canal projects and all the construction, machines are in demand. "Even low ground pressure vehicles that were normally very specialised for dredging are now popular.

"In the past, LGP bulldozers would sell in Abu Dhabi, but now with the man-made islands and dredging projects the machines are now popular throughout Dubai."

As the construction boom spreads from Dubai to the surrounding region, a slow down in the market looks unlikely for the foreseeable future.

Auction houses such as WWA and Ritchie Brothers will obviously continue to be rushed off their feet in meeting the almost insatiable demands of contractors and developers.

This meant that the days when auction houses were seen as a place to pick up machinery at rock bottom prices may be at an end.

"Most people come thinking they will get a good bargain. But nowadays you will have to pay a fair market value for it; it's as simple as that," adds Grennell.

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