Crane Rental Companies Look for Avenues to Hold Back Falling Rates

Crane Rental

Numerous strategies are being scouted by cranes rental companies, essentially through products and lifting solutions offering to keep abeyance depressed hiring rates. P.P. Basistha takes a look.

Indian cranes renting companies are operating under the influence of 'stagflation' at present. Stagflation is a paradoxical situation when demand is subdued whereas operating costs for maintaining business continue to climb. For Indian cranes renting companies, stagflation in the present scenario can be viewed with excess supply of units in the construction market in the face of repressed utilization of units leading to falling hiring rates while wages and salaries for operating and maintaining equipment, fuel costs, bank interest rates for getting new or used equipment remain high. Rising operating costs have been compounded by extended release of payments from contractors that have been affecting the reserves position of the companies.

The market situation can be termed 'challenging' to its fullest extent. Cranes rental companies with deep pockets, negligible repayment liabilities, well managed fleet, sound business models with strong front and backward market integration can only dare to operate and have strong bargaining power at their disposal to get decent hiring rates.

According to Mr. Arun Mahajan, Director, Apollo Cranes, New Delhi based cranes rental major, "It makes business sense that the operating assets do not have repayment liabilities to banks and financial institutions in the present situation characterized by depressed hiring rates. Repayment liabilities would be eating away the profits as moderate rents earned would be insufficient to payback the monthly installments. We are in a comfortable position as large part of our fleet is outside the ambit of repayment liabilities, thus allowing us to remain in business and earn honest margins on our assets."

Apollo Cranes
One of the reasons, Apollo could manage to get appropriate margins for its assets employed as because the company has been prompt in sensing emerging business opportunities in various parts of the country and offer solutions at right pricing accordingly backed by the assets. Mr. Mahajan informs, "We have timely and successfully deployed our cranes to prestigious Bhatinda and Panipat oil refinery projects, thermal power projects being constructed by Larsen & Toubro and even for infrastructure projects being constructed as far in Nepal."

Appropriate market network and ability to sense business opportunities across regions are vital keys for getting margins in a depressed market. Mumbai based Oasis Infrastructure, ensured it won the bid in face of stiff competition for supplying one Liebherr LTM 1500, 500 ton mobile crane and one Liebherr LTM 1160, 160 tons truck mounted crane for lowering and retrieving sections of tunnel boring machines and erection of gantries for muck evacuation as a result of tunnel boring to Delhi Metro Railways third phase projects. It has been learnt that the two cranes from the company followed by arrival of some more heavier capacity mobile cranes will be working at DMRC third phase project given its advantage to lift and lower heavier loads with longer booms at longer radius. According to DMRC officials, majority of mobile cranes of 100 tons 250-500 tons, and above have been supplied by Mumbai based cranes rental companies as availability of said capacities has been sparse from Delhi and National Capital Region cranes renting companies.

The market network has allowed Delhi based civil engineering contractor, SB Protech to depute its brand new Kobelco, CKL 1000-I, 100 ton crawler crane; and other one Manitowoc's New MLC 100, 100 ton crawler lattice boom cranes owned by its subsidiary SB Movers in 3rd phase of DMRC project. SB Protech is undertaking civil contracting work for good number of packages of DMRC. The company also undertook civil contracting job for rapid metro project in Gurgaon through its cranes that allowed it to earn some extra margins. According to Mr. Shyamal Singh, General Manager, SB Movers, given SB Protech's market linkages, the cranes renting subsidiary plans to acquire couple new crawler lattice boom cranes.

Gandhi could manage to supply mobile cranes with lifting capacities of 100-120-160-250-500 tons to L&T for expansion of Bangalore International Airport recently. The Mumbai based crane company encashed the business opportunity and earned some good margins given dearth of heavy capacity mobile cranes in the Southern Indian market. The heavier capacity mobile cranes were advantageously used with their longer telescopic booms to lift and place loads between 1.6 tons, 15-27 and 30-40 tons at higher working radius.

Crawler Lattice Boom Crane

However, once again the ability to address market requirements across regions and getting profitable business out of the same, will depend on the financial liability of the cranes renting company. This is as because, given the present situation when hiring rates are subdued and the hirers have bigger bargaining power at their disposal, cranes renting companies will have to arrange logistics support for sending the cranes to the sites. Not to mention, it incurs recurring maintenance and operating costs. All which will efficiently be possible with minimum financial repayment liabilities. Most importantly, negligible financial burden will allow cranes companies to invest in new or well maintained equipment and earn margins from them.

Mobile Crane
Being excluded from debt has allowed another New Delhi based cranes renting major, Arjun Enterprises which has acquired one used 150 tons mobile cranes recently from Australia. According to Mr. Hardeep Singh, Director, Arjun Enterprises, "given our extensive market network for second hand units and negligible financial liabilities, we could manage to procure, well maintained higher capacity mobile cranes by selling one of our 80 tons Grove, 45 tons Coles and, 50 tons Kato truck mounted cranes." The newer cranes obtained by the company will be deployed for infrastructure projects taking place in the state of Rajasthan, Uttaranchal and Punjab. Mr. Singh expects to get better rental rates for the heavier capacity cranes.

Well placed market network by cranes renting companies have witnessed off take of new units in recent past. Crane rental entity Bhoir Offshore, has taken delivery of its second new Liebherr crawler crane recently. Mumbai based Dinesh Cranes has also taken delivery of Manitowoc mobile cranes. Movements of second hand equipment from rental companies have also been noticed, with lesser financial liabilities, looking to graduate higher capacity cranes. Though the off take of units are not outstanding in their entity, however, they bring optimism for cranes manufacturers as encouraging business prospects. Not to mention for the cranes hiring firms in their bid to hold back plummeting hiring rates.

Value on Well Maintained Units

With safety gaining importance at job sites and compressed work schedules, there is growing demand of new and well maintained cranes. Offering a well maintained crane can allow the renting agency to bargain for some decent profit margins from the project contractor. Possession of well maintained cranes altogether can insulate the renting firm from competition as there is a dearth of good cranes in the market in view of growing financial liabilities of crane companies led by the depressed demand.

The boom of 2007 prompted many firms to enter into cranes rental business. However, dearth of requisite technical expertise to maintain the cranes and non availability to arrange for sustained financial support for maintaining the cranes, as compared to the well established players with sound capital reserves have marginalized relatively new entrants from offering well maintained products. On the contrary, more established players have been able to price their cranes accordingly and earn modest profits in the bearish markets.

According to Mr. Hardeep Singh, "Though the profit margins have went down as compared to 2007 and 2008. However, through our well maintained cranes, we have been able to get a good bargain even on the lower rates." Mr. Singh informs, "For a 150-tonner mobile unit hiring rates have currently plummeted to Rs.6-7 lakhs per month in Delhi -NCR as compared to Rs.11 lakhs during 2003. For 80-100-120 tonner, rates are hovering between Rs.5.50 and 4.50 lakhs per month, that too for well maintained cranes which commanded anything between Rs.7.50 and 8 lakhs during 2003 and immediate subsequent years."

Given the growing demand of well maintained cranes, the established cranes renting agencies are now looking to invest more on better product offerings that are safe and are able to provide higher uptime at projects. According to Mr. R.R.Agarwal, Director, Globe Ecologistics, "We have technically skilled maintenance team for undertaking periodic maintenance of our cranes. Further, we have trained operators for working turnkey jobs. Our skilled trained operators and service engineers are fully capable of undertaking critical lifting jobs safely." Globe Ecologistics, equipment profile comprised 21-100 tons hydraulic truck mounted mobile cranes.

Well maintained cranes are claimed to be offered by Mumbai based Express Cranes. Mr. Ashwin Gandhi, Director Express Cranes says, "Based on the present job site safety requirements and high level of performance requirements, we offer cranes extremely well maintained. Spreaders, hooks, hoists, booms, counterweight and other critical components are certified. We have our own technicians to undertake repair and testing of booms."

Mr. Gandhi mentions, "Based on our fifteen years experience in lifting business, we offer valued services to customers by providing erection schemes based on the lifting requirements of the projects. Further, our operators are skilled for general and critical erections. Safety at jobsites is ensured through our regular safety training session for our ground staff." Equipment profile of Express Cranes comprises 8 –450 tons, mobile truck mounted, rough and all terrain telescopic cranes."

Margings on Heavy Lifting & Specialization

An emerging avenue for crane renting companies to earn decent profits would be to focus on heavier lifting jobs. This is as because with increased proliferation of rental companies competition is quite stiff for mobile and crawler units below 100-150 tons. Owing to the stiff competition in the segment, many firms are focusing on heavier capacity jobs.

Gujarat based, cranes rental major, Sethia Erectors acquired a Liebherr 600 tons crawler unit. Besides, it also acquired one 300 tons, 350, 500 tons crawler units from a Chinese crane manufacturer in recent past. According to Mr. Mitesh Sethia, Director, Sethia Erectors, "The intention behind acquiring the higher capacity cranes is to remain focused on heavier lifting jobs, which is also likely to keep us insulated from competition prevailing in the lower segment." The company has a fleet strength of 100 units comprising 20-1000 tons mobile and crawler units involving a mix of European and Chinese brands. Sethia Erectors has supplied its cranes to wind mill and thermal power projects.

Coupled with offering heavier capacity cranes, suitable profits can expected to be derived by crane rental companies on specialization in lifting and supporting services. According to a senior official from heavy lift major, All Cargo "To provide better value to contractors based on arising lifting complexities in industrial projects, we have entered into an alliance with Mammoet, a global leader known worldwide as the specialist in heavy lifting and transport. Mammoet's lifting expertise encompasses petrochemicals, civil projects, power plant facilities, offshore businesses and marine projects."

Allcargo Heavy Lifting
Under the alliance, All Cargo recently provided heavy lifting support services for construction of mega upcoming Rs.30,000 crore Paradip Oil Refinery for Indian Oil Corporation Limited. All Cargo's heavy lifting and transportation solutions to EPC contractors includes, turnkey lifting & transport operations, factory-to-foundation heavy lifting and multi-modal transportation projects, maintenance lifting services to plant shops. Its other services are salvage and wreck removal of ships and offshore installations, trade in new and used equipment.

Some of the important projects executed by All cargo includes, contract for the NTPC Barh 3 x 660 MW project by M/s Power Machine for the transportation of three generator stators and their accessories from Haldia and Kolkata Port to NTPC Barh in Bihar. Logistics solutions for aluminum smelter plant project to be commissioned at Jharsuguda in Orissa by Val India. Transportation of boiler drum dim: 27 x 2.9 x 3.33mtr weighing 218 tons for BGR Energy – Jhalawar Power Project – Rajasthan.

Specialization and ability to offer valued services counts. This is as because lifting jobs both for core and industrial infrastructure projects are gradually becoming complex in the country. Moreover, compressed job schedules and engineering procurement and commissioning is making its pertinent that companies offering heavy lift services, offer supporting services viz forwarding and logistics services for the loads to be erected.

The quantum of specialization can be assessed taking into account liquefied natural gas terminals. High amount of precision is required by the crane operator and altogether by the crane while accurately placing the dome of the gas storage tanks through luffing jib arrangements. For mega and modern refineries as that of 15 million tones new Paradip refinery with number of trains to process variety of heavier variants of crude oil, specialization is essential for erection of the trains without damaging them. Further, for infrastructure projects taking place at crammed city locations, raising, lowering and slewing of booms in crawler cranes or release or retraction of booms in mobile telescopic cranes in longer working radius is required to carried out with utter caution, all which can be ensured through better specialization of the crane renting company which will eventually give it more bargaining power to obtain worthier profit margins.
NBM&CW November 2013
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