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Manufacturers Are More Upbeat About Sales But Don’t Expect Full Turnaround Until 2012

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People who are watching the industry barometers of new and used equipment sales expect the market to make slight comebacks this year after a tough 2009. But few are predicting the market to post sizable gains until 2011 or 2012.

Auction Prices
Source: Machinery Trader. Monthly Average, All Categories, Without High/Low.
Auction Prices
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Overall new-equipment categories are expected to grow 5% in the U.S. this year, followed by 15% gains in 2011 and 14% growth in 2012, says the Milwaukee-based Association of Equipment Manufacturers. Previously, machinery sales slumped 43% last year and 8.6% in 2008, the trade group says.

“Even with a modest rebound in the next few years, the construction equipment industry will still be down by double digits,” says Dennis Slater, AEM’s president. Manufacturers do not think volume will “level off” until 2012, with job losses continuing until then.

AEM’s four-year outlook, published on Jan. 21, also describes a tenuous situation for international markets. The Canadian market dropped 34% last year but is expected to grow 7% in 2010, 14% in 2011 and 11% in 2012. Similarly, markets outside North America fell 34% last year, with sales expected to rebound 7% this year, 13% in 2011 and 13% in 2012.

Most producers expected flat sales, and few predicted a reality this harsh. In last year’s outlook, AEM said the U.S. market would be up 0.04% in 2009 after an 8.6% decline in 2008. “There are so many product categories where the markets are down by 60% to 70%, it’s unbelievable,” says Frank Manfredi, an industry analyst in Mundelein, Ill.

Price Pressure

Liquidators of used equipment had another banner year as buyers continued to seek out bargains from distressed sellers. More buyers purchased over the Internet, as well, but prices still remain depressed.

Average auction prices for all equipment categories fell more than 18% last year, to just under $22,000, according to Lincoln, Neb.-based Machinery Trader, which reports auction prices for the past two years. After a period of intense auctions, used prices last year reached a peak in April, at about $24,000, before falling to a July low of about $18,000. By December, prices rebounded to nearly January 2009 levels, at about $22,400, says Machinery Trader.

Construction Machinery Forecast
2009 2010 2011 2012
Aggregate Equipment -56.5 5.0 14.8 20.3
Attachments -34.6 1.7 11.7 11.1
Bituminous Equipment -43.6 10.5 27.9 NA
Components -53.6 5.0 10.8 13.6
Concrete Equipment -42.0 9.0 11.0 NA
Cranes and Lifting Equipment -37.1 -0.9 16.5 15.7
Earthmoving Equipment -49.6 5.5 14.4 13.2
Light/Portable Equipment -34.6 9.3 10.8 13.1
Miscellaneous Equipment -26.0 10.7 18.8 7.6
Source: AEM. Annual percent change, U.S. sales.

While used-equipment sales remain robust, fewer big-ticket items are going up for bid, says Ritchie Bros., Vancouver, the industry’s largest auctioneer. It closed 2009 with $3.5 billion in gross sales, 2% below 2008 levels, while average proceeds per auction fell 2.2%, to $17.3 million. Meanwhile, the average number of lots per auction increased 12%, to 1,450.

“The ongoing reluctance of U.S. equipment owners to sell their larger, more expensive items in this climate continued to impact our gross-auction proceeds in the second half of the year,” says Peter Blake, CEO. “Unfortunately, people are still waiting for more certainty in the market before they decide to sell.”

Even so, online auctions are still clicking right along. Ritchie Bros. took in a record $830 million in online bidding last year, an 18% annual increase in Internet traffic. Likewise, Pleasanton, Calif.-based IronPlanet.com sold a record $458 million last year, an increase of 34%.

“I think we are at or near the bottom,” says Manfredi. “But how long we stay here is another issue.”

 

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