The Producer Price Index (left), which measures prices for new equipment, and Rouse Value Index (right), which tracks used-equipment values, both show upward pricing pressure this year. Related Links: Concerns About U.S. Economy Deflate Industry Confidence Chinese Heavy Equipment Digs In Globally
Rising commodity costs, scaled-back production and scant availability of late-model used equipment has bumped up construction equipment prices this year.
"We saw an exodus of equipment leaving North America over the last five years because it was cheaper to buy here," says John Crum, national sales manager for Wells Fargo Equipment Finance Inc., Dublin, Pa. "The auction market has become well known, enabling people to see prices and easily sell in this recession. It's now perceived as a smart move."
Ritchie Bros. Auctioneers, Vancouver, saw a record $2 billion in proceeds for the first half of 2011, 16% more than a year ago and the largest six-month haul in the company's history. "Competition for late-model equipment remains intense," says Ritchie CEO Peter Blake.
IronPlanet similarly saw robust bidding activity this year with $162 million in gross auction sales for the first quarter, a 25% year-to-year increase. The Pleasanton, Calif.-based firm was helped by 21 global auctions in the first three months of 2011, 61% more than last year.
Caterpillar, meanwhile, announced in August plans for a 40,000-sq-ft work-tools building in Wamego, Kan., for churning out buckets and blades, among other devices, as part of $3 billion in capital expenditures planned for this year. Half of the total will be spent in the U.S.
While the Peoria, Ill.-based equipment maker ramps up long-term production capacity, rental companies are reaping short-term rewards. High prices, market uncertainty and anxiety over looming emission standards have contractors deferring big purchases in favor of equipment rentals as stopgap solutions.
United Rentals Inc. doubled its second-quarter net profit to $27 million, with time utilization reaching a record 69%. The Greenwich, Conn.-based firm is investing $650 million on fleet expenditures in 2011, triggering an estimated 5% rental-rate increase this year.