While the values of second-hand yellow goods in the mining sector continue to decline, there is light at the end of the tunnel for the construction/ general purpose sector, a new report has found.
The 2016 Australian Yellow Goods report from auditor Ernst and Young (EY) found that, predictably, minimal demand and high over-supply have sent yellow good values in the mining sector into a free-fall during the past 12 months.
However, the news is somewhat better for the construction/general purpose sector, which shows signs of recovery.
The research show auction clearance rates in excess of 70% and generally improving valuations for construction and general purpose equipment, compared to auction clearance rates around 60% and generally declining valuations for mining equipment.
In the construction/ general section of the market, the authors found:
- An 8% recovery of the value of low hours/late model equipment in the in the 12 months leading up to September 2015, although there was an overall 7% fall in values since September 2013; and
- Values for higher hours equipment have remained steady in the 12 months leading up to September 2015, although there was a 15% overall drop in values since September 2013.
In contrast, the mining industry exhibited the following:
- A 30% fall in the value of low hours/late model equipment in the 12 months leading
up to September 2015, and a total 37% fall in values since September 2013; and
- A 22% fall in the value of higher hours equipment in the 12 months leading up to September 2015, and a total 41% fall in values since September 2013.
Factors influencing this decline include continuing low prices for iron ore and coal, low-cost iron ore production undercutting high-cost iron ore producers’ profits, a reduced demand for rental and contract fleet services, and an oversupply of second hand equipment in the market.
The authors suggest factors which could be having a positive, or at least neutral, effect on the market include the emergency of US buyers looking to break up equipment for resale as spares, major infrastructure projects getting underway and a reduced supply of new equipment coming into the market which, while bad news for original equipment manufacturers, is likely to have a positive impact on the value of late-model second-hand equipment.
View the full report here.