When future teachers and leaders look back on this pandemic, it would not be unreasonable to suggest that they may refer to this decade as the roaring twenties. Combine record Merger & Acquisition valuations, booming property appraisals with all-time high commodity prices, and you have the recipe for prosperity.
Used machinery or ‘yellow iron’ is no different. Current valuations are setting a precedent not seen since 2008 when Australia was importing more used mining and civil equipment over a 7-year-period than any other nation on Earth. Original Equipment Manufacturers (OEMs) were struggling to meet demand, which further pushed prices up. Back then, dealers and end-users would rely on a close-knit network of like-minded international business people to source and organise their yellow iron imports around the globe.
Today offers some similarities. However, due to the advancement of technology, opportunities to import used equipment have actually become a lot harder than it was a decade ago. Tying up capital in overseas equipment comes with a serious element of risk if not inspected in person. This can be further complicated by untrustworthy website listings and questionable brokers. If it’s too good to be true, it probably is.
2022 will be an interesting year for everyone. With inflation, trade wars, and the potential collapse of a Chinese property developer knocking on our door, the system will go through the ultimate stress test. Could this huge asset bubble be ready to burst? Or is this evidence Modern Monetary Theory is now the norm? One thing is for certain, OEMs have a long pipeline of orders and very little stock to accommodate the increasing demand being seen globally. Add in rising shipping prices, it will likely be another 2-3 years of strong plant and equipment valuations before things begin to soften.
If you have a broad portfolio of yellow assets, now might be the time to take stock and get those valuations in. With interest rates at all-time lows and banks eager to lend, you may be sitting on a plethora of options to expand your business. This asset class may be overlooked by many, but for those who know its potential, it can unlock vast opportunities for growth in a buoyant market.
For now, we all wait with bated breath for the end of 2021, and hopefully the end of restrictions and lockdowns. For many in the used equipment space, a return to international travel would be a welcomed relief, so resist the urge to spend those frequent flyer points! They may be redeemed for an upgrade in a matter of months. For the time being, touching base with existing networks via WhatsApp and video calls to find a bargain will have to suffice.
Jack Bookham, Associate Director Advisory
With over 10 years of experience in the Mining and Civil Logistics industry, Jack helps clients with new and used heavy machinery, providing knowledge of asset valuation, asset re-marketing, procurement and import/export requirements. Jack joined Hilco APAC to work across international and domestic markets to provide solutions for companies seeking to trade assets globally.
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