Crane renting firms have witnessed improved utilization of units in the last six months. Renewed equipment off take is after a prolonged period of slump, as compared to the first quarter of the year, when there has been instances of certain firms reporting complete idling of units. The fresh off take is led by upcoming core and industrial infrastructure projects in hydrocarbon and power sector. Couple of restarted projects is also leading to the demand pull.
Contractors involved in Delhi Metro and other metro projects have also resorted to similar practices to hold on margins. They have been focusing on need based approach towards employing cranes for diaphragm wall lowering or concrete pouring from stand alone rental companies. However, the situation has been better for larger capacities mobile and crawler lattice boom cranes, involved in critical jobs of lowering sections of tunnel boring machines. Civil contractors as crane rental companies those have taken up packages with main EPC contractors for diaphragm wall setting, concrete pouring or muck evacuation have also remained insulated from the demand cycles to some extent. Mumbai- based D. Thakkar and Delhi-based, civil contractors, S.B Protech have deployed their new Fuwa, Manitowoc and Kobelco crawler lattice boom cranes on long-term contracts for good number of civil works packages in DMRC projects.
Acquisitions Vs Hiring Rates
There are numerous decisive factors that will play an important role in getting the buying decisions actuated. Planned Greenfield capacity expansions both in core and industrial infrastructure projects, good numbers of which are expected to reach their peak execution by mid of 2015 following from end of 2014 is expected to pull up hiring rates that is also by when bulk of the underutilized/ idle units are expected to be absorbed consequently making the companies opt for purchase. Secondly, it is estimated that close to 60% of small and medium crane rental companies have large scale bank repayment liabilities. The companies will look to deploy units at hiring rates made available by contractors, so as to insulate their equipment from becoming non-performing assets both for short and long-term contracts. This can also delay purchases as under such circumstances as hiring rates are expected to remain depressed, with contractors continuing to have better bargaining powers.
According to industry figures, present hiring rates of new 300 tons class unit is around `15 lakhs as compared to `25 lakhs for a used units of similar class during 2009-10. Further, a bigger paradox is that though there is a big price difference between100-250-300-500 tons class units but there is not much variations in hiring rates, making the renting firms to wait for getting newer units till the rates appreciate. This will be possible with existing units getting fully absorbed.
Going by the present rate of equipment off take, it can be estimated that there could be a time lag of almost two years for complete absorption of existing units, even for the existing companies, those looking for newer acquisitions.
Waiting for Opportune Moment
Fresh acquisitions is also been contemplated by Mumbai-based Barkat Cranes Services. According to Mr. Amar Bedi, Director, Barkat, “We are considering options of acquiring 200-300 tons Chinese units and certain bigger capacities of European mobile and crawler units as we find equipment utilization is picking up almost to 80%.” Barkat is looking for demand to come up from expanding cement and energy units, notably from refinery projects. Mr. Bedi mentions, “We will be looking to employ our cranes increasingly in western, central and southern markets. We will refrain from going to eastern part of the country owing to higher transportation cost involved.” Barkat cranes possess 35 units ranging between 70-750 tons comprising mix of mobile and crawler units.
“We are looking forward for acquiring newer units between 100-300 tons by disposing some of our older units in same capacity from our stable,” says Mr. Ashwin Gandhi, Director, Express Global Logistics. The Gujarat-based crane renting firm has reported increment in its crane utilization rate to 60% from 50% earlier.
Western Indian crane renting heavy weight, Samarth Lifters is also mulling towards fresh equipment buys. However, it will be outmost selective in choosing projects, so as to get decent margins. According to Mr. Prakash Shah, Director, Samarth Lifters, “We are looking to enter into hiring contracts directly with the project developer, instead of entering into pacts with contractors. Further, we will look towards the financial profile of the contractors.” The company has entered into long-term contract with Reliance J3 Jamnagar project expansion, where it has deployed 5 numbers of 250 tons-I series Kobelco units. The company acquired new 250 tons crawler unit during bC 2011. Mr. Shah mentioned, “We have been offering units at discounted rates for meeting our bank liabilities.”