Demand for heavy mining, earthmoving and construction equipment has staged a rebound in the 15 months leading up to the end of last year, according to accounting giant EY and reported in The West Australian. The paper said the EY 2017 Yellow Goods report noted a 41% recovery in the Australian mining fleet value index in the 15 months to the end of last year and a 20-25% increase in values for late model, low hours equipment since September 2015.
Overall supply of equipment in both the mining and construction sectors recovered in 2016 resulting in a reduction in overall clearance rates which are currently sitting at 57% for mining and 60% for construction. However, EY said capital expenditure delays had contributed to a recovery in used asset values, while the supply of quality used assets had remained constrained. The report noted the demand for equipment with modern technology and greater efficiencies continued to grow.
EY Oceania Mining & Metals Transaction Leader Paul Murphy said the limited number of new builds in the recent past, particularly in the mining market, extended beyond ultra-class equipment. The West Australian quoted him: “This unfulfilled demand for newer equipment should be good news for original equipment manufacturers, who can hope for stronger order books than they have seen in the last few years. A partial recovery in commodity prices and demand for iron ore and gas are expected to assist market recovery, along with a growing trend towards automation. The benefits of automation appear significant, with a strong positive impact on utilisation and maintenance costs. We expect to see the trend towards automation for large fleets becoming the norm, however the price of adopting automated systems remains prohibitive for smaller operations in the foreseeable future.”
He added: “At the same time, the global push to raise emissions standards could have a negative impact on non-complying equipment, and recent technologies such as AC drive trains could also impact the attractiveness of older, less efficient stock. After a difficult period in the Australian yellow goods market, the uptick in value over the last quarter reflects a cautious optimism that the worst is behind us. Against this backdrop, management teams face key decisions on whether to overhaul existing machinery, procure new equipment or hire from third parties.”