In the market: a tepid construction scene frees up heavy equipment inventories for other buyers

Recycling Today, Nov, 2003 by Curt Harler

Like a punch-drunk boxer, the heavy equipment market is reeling. It has taken a lot of body blows since 1999 and is perceiving 2003 as a "neutral corner" where it can recover its breath and come out fighting in 2004. That is good news for recyclers. It means new equipment dealers are hot to bargain. A recycler with a shopping list is as popular at the equipment dealership as an Olympic champion with a good left hook.

But while the market for general-purpose heavy equipment may be favorable, the buoyant scrap market of 2003 has raised the demand for scrap-specific machines to a much higher level.

MIXED MESSAGES. "If you're looking for a 3- or 4-cubic-yard wheel loader, this is probably a good time to buy," says Chuck Yengst, president of Yengst Associates, Wilton, Conn. (www.yengstassociates.com). Yengst is the U.S. arm of Off-Highway Research, a U.K.-based consulting firm that specializes in research on the kinds of heavy equipment used by recyclers, contractors and renters.

"Equipment prices are not escalating. We're still at the level of demand that can be met easily by what manufacturers are putting out the door," Yengst continues. That is good news for buyers.

Take the wheel loader marker, for example. The market for all sizes has dropped since 17,500 units were sold in 1999, hitting the canvas with 13,250 in 2002. Take away 25 percent of anyone's business, and they will be anxious to make a deal.

Just as other indicators like the stock market are showing new life, the recycling equipment market also seems to be turning a corner. Some manufacturers report strong sales already. "It's been very strong all year, and it's continuing into the fourth quarter," says Tom Skodack, factory distributor for Fuchs U.S.A., Wilmington, N.C. "We expect the market to be strong into next year."

He says the resurgence in business started in 2002. Fuchs U.S.A. sold 60 units last year and 90 already this year. "We could sell more," Skodack believes, "except we cannot get the equipment."

Pete McAvoy at Industrial Metal Recycling (IMR), Oakland, Maine, is one of the reasons Fuchs' sales are up. IMR has purchased five hydraulic scrap handling units in the past couple of years, including three 350s, along with a 630-ton Sierra shear.

"The lower the prices (of scrap), the more you need to be efficient," McAvoy says. That means using the latest equipment. "If new equipment can save you $5 per ton in processing, that's a huge deal."

Ferrous Processing & Trading of Detroit, Mich., also has been buying. "We budgeted for six cranes and four loaders," says Tony Benacquisto, executive vice president of operations. "They were offering better prices than we've seen in quite a while. You can wheel and deal."

Howard Glick, president of Tri-State Iron & Metal, Texarkana, Ark., is another recycler who has been buying. "We bought a new hydraulic scrap handler and a new baler (a Harris Auto-Tie)," Glick says.

While it was not a "steal," he did not feel taken, either. "In any purchase like this there is always some negotiating," Glick says. "We ended up in between." Whether the market is in an up or down cycle was not a consideration. "We buy when we need new equipment," he says.

Indeed, that seems typical of the recyclers across the nation. "Buyers are not replacing whole fleets. They are filling holes or gaps in their equipment," says Terry Erickson, territory manager for Michigan Cat in Wixom, Mich. A large part of the dealership's customer base consists of recyclers, and he notes that recyclers tend to be among the most educated and informed buyers in the business. They'll walk away from a deal unless they perceive it as favorable, he says. Still, recyclers are buying. September was a good month and he says he expects the strong trend of sales to continue through the fourth quarter.

"There is a tremendous amount of pent-up demand," says Erickson. "There has been a lot of use put on machines over the past three years. Recyclers have put off purchasing new equipment because the scrap prices were not that great. But they continued to put hours on those machines."

Things are going so well for LBX Co., Lexington Ky., that it is bringing out a new material handler, the 125,000-pound 600 model, which replaces the 600Q. "We're also increasing our investment at ISRI," says Scott Sutherland, product development manager for LBX, concerning the annual convention of the Institute of Scrap Recycling Industries Inc.

Like most other dealers, he reports a strong year. "We expect that to continue into 2004," Sutherland says. "Even with all the new European players, there is enough business to go around."

"This year has been better," agrees Constantino Lannes, president of Sennebogen N.A., Charlotte, N.C., one of the "European players" Sutherland alluded to. Sennebogen has seen business increase about 5 percent in the past year. "It's still a price fight," he notes. "[But] things are much better this year than before."

MARKET SEGMENTS. Market demand varies by equipment type and size. Researchers like Off-Highway Research draw the line between large and small units at 80 hp.