Construction markets are sinking, forcing some contractors that built today’s foreclosed housing tracts to make payroll by selling their iron. But heavy global demand is a bright spot in the U.S. equipment glut.
Sukut Construction Inc.
Earthmovers go to work inside Nevada gold mine.
One builder in Southern California is cashing in on its fleet of “green” machines by renting them out. “We’ve got a lot of equipment, and a lot of it is parked right now,” says Michael Bobeczko, who leads Santa Ana, Calif.-based Sukut Construction Inc.’s marketing department. The contractor, which runs 120 scrapers and other giant earthmovers appraised for hundreds of thousands of dollars per unit, started offering equipment rentals last month in response to the tightening California economy. It also is attracting buyers from overseas, such as in the Middle East, where it originally procured some of its vintage machinery used in the homebuilding boom.
Sukut now has 100-ton rock trucks on rent to gold-mining operators in Nevada. “Commodities are at all-time highs,” explains Bobeczko. “A lot of mining facilities that were financially nonproductive have turned.” Sukut executives also note that while they invested in clean engines to meet emissions mandates at home, they are finding them ideal for rentals and sales because the upgraded machines run more efficiently.
Used iron is hot. Vancouver-based auctioneer Ritchie Bros. Inc. broke records with second-quarter gross proceeds of $1.16 billion, up 23% over the same period last year. During the first of half of 2008, it held 92 auctions in 12 countries for 18,786 lots and 139,864 bidders. And manufacturers are still selling new machines even though “North America remains depressed and we’ve seen softening in Western Europe and Japan,” says Peoria, Ill.-based Caterpillar Inc. Chairman Jim Owens. Cat “continues to grow in emerging markets and in global industries like energy and mining.”
Wall Street remains upbeat on equipment stocks, though markets abroad may not be forever immune to the American sales slide. “Emerging markets remain a bright spot although their growth also appears to be slowing down gradually,” says New York City-based Merrill Lynch analyst Andrew Obin.