A Conference Note From Jarrett Harris

Pricing on Graders, Dozers Shows Continued Strength
Pricing on graders and dozers on the third day of Ritchie Bros. Auctioneers Inc. Orlando auction continued the trend of the first two days, averaging higher yy, driven by strength in late-model, low-hour machines. However, a few sources said even though older equipment is not logging the same increases, it is performing relatively well in auction. “The quality is not great, but even so, these are pretty good prices,” one said. Another said, “Pricing has been really strong.”

Sources speculated a relatively high portion of this year’s auction is at-risk business, given the dearth of quality machines in the market, but none could offer specific examples. “They market this auction as ‘The Big One,’ so they can’t have people coming from around the world and not have good equipment to bid on,” one said. “But there’s so little good equipment, it’s very expensive [to acquire]. They are in a very tough spot.”

Although sources could not quantify the percentage of international bidders at the Ritchie auction, some of the earlier Florida auctions reported a significant uptick. “The number of international bidders was up almost 50 percent,” one said. “The South American market was back pretty strong; that was pleasing.”

Rental Market Forcing Auctioneers to Adapt
Used pricing trends are a positive development for equipment remarketers, but the shifting dynamics in the U.S. construction equipment market are creating a number of longer-term challenges. Most notably, the shift in end-user preference for rentals has altered the flow of used equipment. There is a less direct dealer to user to liquidation service model in place as national, regional and local rental players become a more significant part of the overall construction equipment market. As a result, sources indicated auction companies are attempting to capture new business from the rental channel in order to attract the volumes that used to be easier to come by.

However, some in the rental channel are partnering with nontraditional sales services. One example is the relationship between United Rentals Inc. and Rouse Services. Rouse provides marketplace data to a number of OEMs and rental houses, but sources said the data provider is taking a more active role getting directly involved in selling equipment (see http://ur.rousesales.com/). By contrast, United relied heavily on Ritchie Bros. in 2008-2009 when rental fleets were liquidating equipment.

At the same time, sources indicated many leading contractors are attempting to resell used equipment themselves in an effort to cut out the costs associated with using a third party. “If they can cut out the middle man, they can save a lot,” one said. “But it’s a difficult position to fill. A guy who was maybe a used-equipment manager at a Caterpillar [Inc.] or Komatsu [Ltd.] dealership won’t have nearly the flexibility to swap equipment or generate commissions like he is probably used to.”

Sources said although all equipment remarketers are chasing business from rental fleets, auctioneers are also doubling down on specific niches within the broader used-equipment market. CAT Auction Services continues to gain a reputation as the destination for premium equipment -- so much so that a 2008 CAT 770 brought more than 25% at the Feb. 14 CAT Auction Services event  (listed here, login required) than a nearly identical model at Ritchie’s auction (listed here, login required). IronPlanet Inc. is reportedly focusing more on national accounts with large contractors that move high-volume packages of equipment. And Ritchie Bros. is becoming known even more as a retail channel, where smaller players in the market can buy or sell smaller machinery and equipment packages. 

Note: Long-term participants in the global used-construction equipment market track a number of metrics when making sales, purchasing and broader forecasting decisions. Among those are the age (in hours) and price of a handful of “core” equipment categories produced by Caterpillar: midsize backhoes (model 420), dozers (models D6 and D8), graders (model 140), excavators (models 320 and 330) and articulated trucks (models 735 and 740). OTR Global is orienting coverage of the February auctions around the performance of these categories, in addition to other themes sources discuss.

EVENT DETAILS

WHAT: 2014 Ritchie Bros. Auctioneers Orlando Auction

WHEN: Feb. 17-22, 2014

WHERE: Orlando, Fla.

WHO: Thousands of buyer and sellers of used construction equipment from countries around the world, attending both in person and online