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Digital Technology Improving Efficiency in Construction Machinery

Digital transformations and technology is becoming more and more part of our daily lives; both from a personal aspect (how it’s defining and impacting our relationships and how we communicate with each other) and in our professional careers and the industries we are working in. The construction industry and the crane market are not immune to these advancements.

The birth of the modern construction equipment that we use today have not been around for very long and the key developments can be traced back to 1965 where the modern hydraulic systems were first put into use in the market which had a direct impact on heavy construction equipment.

According to a report by ForConstructionPros.com, “During the 1970s and 1980s, major innovations in machine configuration and powertrain were introduced,” says Chuck Sahm, automation & enterprise solutions theme manager, Caterpillar. “The track-type tractor elevated sprocket design and differential steering were two examples. The sprockets were elevated to protect them and other drivetrain components from ground-imposed loads and the modular design significantly reduced the time required to remove and install major components. The differential steering system allowed power turns while keeping both tracks working and enabling the machine to turn on a dime.”

Yet again, technology is impacting the heavy machinery industry once more, but this time from different angles. In this article we are looking into the impact of technological advancements and digital trends in machinery software to improve efficiency.

According to Construction Plant News, “The European construction equipment industry is an example of technology leadership. Increasingly, our machines are ‘digitised’ and there is no escape from that.” That was the main message from CECE President Bernd Holz, addressing the CECE Congress in Prague, Czech Republic, an event which saw close to two hundred leaders from the construction equipment industry in Europe come together, as well as technical experts, sales managers, trade press and international trade association representatives.

The Committee or European Construction Equipment (CECE) represents the interests of national construction equipment manufacturer associations in 13 European countries, including Germany, the UK, France, Italy, Russia and Turkey. The sector counts around 1200 companies that employ about 300,000 people directly and indirectly.

In recent years, one of the key focuses of CECE has been on how technology is transforming the construction industry.

Construction is all about building things as efficiently and safely as possible. Technology can help. Equipping a project with smart devices can transmit dynamic data on project’s progress, surrounding and performance that can be used by project directors to help with real time decision making and strategic planning. Since the technological advancements in construction machinery is so vast, we will look into some specific examples:

Better communication between Man and Machine.

Taking the example of Manitowoc,its latest CraneSTAR Diag is a remote diagnostic tool that primarily results in time saving for troubleshooting for top-slewing cranes equipped with V3 or CCS devices. According to Manitowoc website it “offers a user-friendly interface, full graphic display, ergonomic controls, a jog dial for easier navigation and data input, and parts commonality across Grove, Manitowoc and Potain product lines enhancing operator familiarization and serviceability”.

CraneSTAR gives you up-to-date crane fleet information, no matter where you or your cranes are located. You can monitor locations and working conditions; plan maintenance and lifting schedules; and maximize your company’s efficiency, productivity and profitability.

To simply understand how this system works, we will look into an issue to a specific scenario:

The customer on the construction site, the crane care support (the dispatcher) and the workshop (the after sales technician) are at 3 different locations. If there is an issue with the tower crane on the construction site (for example, automatic greasing is at a low level), the job site manager on the construction site notifies the crane care dispatcher in the crane care support office and in order to monitor and investigate this issue, the dispatcher can remotely connect to the crane in real time. This connection allows the dispatcher to make a pre-diagnosis and is able to find a solution without setting foot on the construction site. Depending on the issue, if the part needs to be replaced, the dispatcher can connect with a specialist in the workshop to have the parts sent to the construction site. This solution will result in:

  • Significantly increasing the availability of cranes to be used at the construction site,
  • Improving the job site productivity,
  • Optimizes communication between stakeholders,
  • More importantly, it saves time.

Real-time data collection and supervision.

Drones have made headlines in the news recently from the regulations in using them to how accessible they are for both recreational and professional purposes. Dronethusiat website has pointed out some great uses for construction drones, which we have listed here for you:

  • Planning: a drone can give you a bird’s eye view on the construction site and allow you to see the details more visibly
  • Use of drones in surveying
  • Analyzing the date from the site: Models such as high-resolution 3D types use browser-based technology, so users can simply share by sending a link, and the client can then log in, view the data, and export it to any local entities if they need.
  • Showcasing the construction work progress
  • Monitoring job sites
  • Inspecting Structures
  • Better safety records: you can easily have access to dangerous locations and hard to reach areas
  • Keeping the project on-track, on-budget: If parts of the project are not progressing as planned, or safety policies are not being followed, or resource allocation is not being optimized then these factors could directly affect the time and the cost of a project. With the use of a drone these can simply be reviewed in real time.

Improved planning and minimizing human error.

Autodesk, a leading software company defines BIM (Building Information Modeling) as an intelligent 3D model-based process that gives architecture, engineering, and construction (AEC) professionals the insight and tools to more efficiently planned, designed, constructed, and managed for buildings and infrastructure.

Scan2cad website has summarized the benefits of BIM as:

  • A more optimized collaboration between the project’s stakeholders
  • Better visualization of the project design
  • Cost effectiveness
  • Definition of each step of the project
  • Improved productivity
  • Supports energy efficiency
  • Better co-ordination

Enforcing safety and protecting resources.

RFID sensors for construction equipment allow a site manager to know precisely where a machine is in use. They also deliver a warning to other laborers on site if they are in danger of walking into the path of moving machinery, for instance.  Similarly, anti-collision for tower cranes allow them to communicate wirelessly with each to avoid any clash. Site managers can study through such sensors when a machine is being used and when it is idle hence, what is the optimal location and work radius for each machine, allowing for better planning and resource distribution. Instead of wasting capitals with idle machinery, equipment could be use more efficiently and human error is reduced.

Will technology replace human capital?

To stretch the conversation further, let us imagine to what extent technology can impact the construction machinery industry. For Tower Cranes, a heated question at the ITC conference in London organized by KHL in 2017 was: Can Tower Cranes ever run without operators?

A simple answer to this question would be yes! Just like many other automation, robotic and artificial intelligence advancements that most people didn’t believe at the time, it could be accepted that one day even tower cranes will run without operators.

In the past decade, AI seems to be integrating to all industries from their marketing, customer services to internal operations. Tesla cars which have made a strong presence for themselves globally are a perfect example of how an AI system can operate a mobile machine that has been controlled and managed by a person/operator since it was first invented. Dubai is considering driver-less cars and tests for driver-less pods are under way.  So, it is not very difficult to believe that one day cranes will also run without an operator. Therefore, the question now is, how is AI impacting the construction industry?

In general terms, Artificial intelligence is a term for describing when a machine mimics human cognitive functions, like problem-solving, learning and pattern recognition or at times operating machinery. AI is basically making machines do what humans can do. Therefore, when an AI system is fed more data, it can make decisions on its next steps based on this data.

The world’s first fully functional 3D printed building inaugurated in Dubai in 2016 was done using AI. Dubai Municipality claims that by 2030 “25% of the city’s new buildings will be printed in an attempt to reduce construction costs and shorten delivery time frames”, as part of the government’s 3D Printing Strategy. Data generated and captured in construction projects is growing. This includes data generated from images captured from mobile devices, drone videos, security sensors, building information modelling (BIM), AUTOCAD drawings, etc. The challenge that we’re facing now is how to make the best use of all this data in a way that is optimized. We are in the era of big data and software companies that are looking to cater to the construction company are on a rise. The “drawback” to AI is that, with the emergence of AI, many traditional jobs in the construction industry can be replaced. So an industry that has always depended heavily on manpower could now be replacing man with machine.

Automation solutions and automated machines are not all that AI has to offer and they are part of the bigger AI movement in the construction sector. Back in the days of the first hydraulic machine, people had the same trepidation. However, with change came new opportunities. Specialists believe that the same thing is happening with the debut of artificial intelligence. The use of AI will be slow and steady but by the time automation and machines are applied into construction, new jobs will have been generated to supplement and complement them.

According to Aproplan website, “For CEO Steve Muck of Brayman Construction Corporation, he believes that the American labor shortage in the construction sector can be saved with a robotics-based solution. According to him, the past ten years has been difficult when it comes to finding workers. With their robotics solution of rebar-tying, it has saved lots of time while reducing injuries workers get while manually tying rebars.”

Potain Takes Center Stage At Intermat Paris 2018

Potain is taking center stage at the tradeshow, which is being held at the Paris-Nord Villepinte Exhibition Center between April 23 and 28, 2018. The prominence of Potain is fitting, as this year marks the company’s 90th anniversary. This has presented a perfect opportunity to look back at Potain’s history while looking forward to its new generation of tower cranes.

“Potain is a name that is synonymous with the tower crane industry and is a vital part of the success of Manitowoc,” said Aaron Ravenscroft, executive vice president of Manitowoc. “This year, under the anniversary theme ‘Achieving Your Vision,’ attendees will see how we are celebrating the long success of the company and the vision of its founder, Faustin Potain, who started the business in 1928.

“Faustin introduced the values of customer proximity, innovation and performance. Those values led to the brand’s success over the decades and are still very much alive today. Being in France, where the brand was born, makes Intermat the perfect place to celebrate this milestone, together with our customers and partners who are part of the success of Potain,” Ravenscroft continued.

Potain will be celebrating its 90th year with a “birthday” event at its booth on Wednesday, April 25, at 3:00 p.m. Visitors can expect a look back at Potain’s history, cake, music and a festive atmosphere to commemorate the occasion.

Customer-inspired cranes
To affirm Potain’s commitment to its customers, Manitowoc is displaying two models from the Hup self-erecting crane range — a Hup 32-27 and a Hup 40-30 — and an MDT 389 CCS topless top-slewing tower crane. All three cranes were developed with significant customer input and participation. The cranes reflect the technologies and features that the lifting market needs most and they were developed with much more velocity to market than previous generations of cranes.

The Hup self-erecting crane range contains some of Potain’s most remarkable models of recent years. Having been out for just over a year, the cranes’ versatility and ease-of-use have already made them an international hit. The cranes have a maximum capacity of 4 t and a rear-slewing radius of only 2.25 m for the Hup 32-27, enabling them to be positioned closer to buildings — a major benefit when working in tight urban areas or job sites with restricted working quarters.

Despite being taller than the Igo 36, one of its predecessor models, the Hup cranes occupy the same footprint, making them ideal for space-restricted job sites. Three raised positions of the luffing jib, at 10°, 20° or 30° for the Hup 32-27, in addition to horizontal, provide unprecedented options for a self-erecting crane. With two height options for their telescopic masts and an exclusive new radio remote control with Potain’s Smart Set Up software, operators can maximize their efficiency to levels previously unseen.

The MDT 389 is the largest topless crane from the Potain lineup to feature the company’s Crane Control System (CCS), which is also available on all MDT and MD Potain top-slewing tower cranes and Grove mobile cranes. This user-friendly operating system offers owners the highest levels of comfort, flexibility and ergonomic control, and it reduces installation time compared to previous models. There are two versions of the Potain MDT 389, one with a 12 t maximum capacity and the other with a 16 t maximum capacity. Both have up to 75 m of jib available, and the 12 t version can lift 3.4 t at its jib end, while the 16 t version can handle 3.3 t.

The MDT CCS Topless concept enables complex, multi-crane installations, and the assembly, erection, transport and maintenance phases are shorter than previous generations of tower cranes. All of these features lead to a better return on investment for crane owners, and CCS has been proven to increase efficiency on the job site.

“With the recent updates in Potain design and production, we are confident that these cranes will improve efficiencies and expand lifting capabilities to a level not yet seen in Europe, all at a lower total cost of ownership for our customers,” Ravenscroft said. “We can’t wait to see such cranes benefit the development of the Grand Paris project, a 30 billion EURO infrastructure project that aims to transform Paris into a 21st Century city, confirming its rank among international megacities.”

New Potain components
Manitowoc is showcasing key new innovations at Intermat, the first of which is the 75 HPL winch. The 75 HPL is suitable for all top slewing cranes. It comes in four versions, from 10 to 16 t capacity, making it adaptable to most work sites. Its increased hoisting speeds enable quick load handling and shorter hoisting cycles, resulting in increased productivity for customers. Temperature monitoring of the motor and reduction gear helps to increase service life, and for CCS cranes this can be displayed on the display inside the cab. What’s more, the new winch architecture makes components easy to access, giving quick access for servicing and checking reduction gear oil levels. Other features include a lower level of vibration and reduced noise levels, an optimized power network that automatically adapts to the electrical network, and smooth and precise operation thanks to new service break controls.

The second new product feature previewed at Intermat is the Potain Cab-IN, the company’s inside mast operator lift. Developed for Potain top slewing cranes in partnership with GEDA, an industrial elevator and construction lift manufacturer, the Potain Cab-IN allows for fast and easy travel to and from the cab, fits inside all K-mast systems and is compatible with all Potain bases/chassis. It also boosts cost efficiency, as it does not incur additional transportation costs or require extra storage space on the yard. The Potain Cab-IN will be released in late 2018 and meets French regulations that are set to be implemented in January 2019, as well as in the Netherlands and Scandinavian countries, where regulations require lifts on cranes from certain heights.

Furthermore, Manitowoc is highlighting its remote crane diagnostic system, CraneSTAR Diag, at Intermat. CraneSTAR Diag is part of a new generation of remote maintenance support from Manitowoc. The powerful telematic device is available on all Potain CCS and MCT cranes, and offered as an option on Hup cranes. Remote access to the crane’s operating and maintenance information reduces maintenance time allocation and potential downtime on site.

“Continuous improvement is deeply embedded in our culture, based on the principles of The Manitowoc Way,” concluded Ravenscroft. “We are now moving into a new phase of our growth, where customer engagement, new product development and aftermarket support will help us build on our leadership position. We have already been busy bringing new products and innovations to the market with the velocity that customers expect, and we plan to continue to do so for many more years to come.”

Sources:

https://www.forconstructionpros.com/equipment/article/12094996/50-years-of-construction-equipment-history-celebrating-five-decades-of-progress

https://www.cece.eu/about

http://cpnonline.co.uk/news/construction-machinery-sector-embraces-digital-transformation/

https://www.manitowoccranes.com/en/MDT-CCS-Crane-Range

https://www.dronethusiast.com/7-ways-you-could-use-a-drone-in-construction-projects/

https://www.autodesk.com/solutions/bim

https://www.scan2cad.com/cad/benefits-of-bim/

https://www.aproplan.com/blog/efficiency/artificial-intelligence-future-construction

http://www.arabianbusiness.com/construction/390319-3d-printed-villas-coming-to-dubai

Potain takes center stage at Intermat Paris 2018

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Second-hand & Used Tower Cranes: What you need to consider (Part II)

In Part I of this report, various issues were discussed in details; such as the factors to consider when employing a used crane and the importance of the after sales services of a crane manufacturer.

In this second part, we will further explore this question and also look into the EnCORE program in greater details. At the end, study and analyze the diffuse demand for UK cranes as a case study of how the demand of cranes changes in a country given difference economic landscapes.

In Part I, we discussed that besides the cost factor of repairing or maintaining a tower crane, another important point is the availability of Spare Parts. Some parts may not be found as they are no longer being manufactured. With regards to this, when purchasing a new crane, it is always important to remember that a reputable manufacturer will offer OEM (Original Equipment Manufacturer) services; meaning that you can always go back to the manufacturer (or their partners/dealers) and ask for spare parts and services if necessary. When we discuss repair and refurbishment, the technical aspect of refurbishment seems to be more important for crane owners than the retouching and repainting on an “older” tower crane.

Further look into: EnCORE program: Potain’s second hand market

USA-headquartered crane manufacturer Manitowoc has a dedicated rebuild, repair, remanufacture and exchange programme for all models of Manitowoc, Grove and Potain cranes. It’s called the EnCore programme and it has been running since 2011.

EnCore programme offers various levels of refurbishment and restorations and, depending on the condition of the crane, crane owners can choose either an entry, standard or premium level of refurbishment. In Part I of the article, the information can be found in details about the different services.

Important factors to consider before refurbishment

The level of refurbishment is dependent on the age of the crane and how many hours it has worked in its lifetime, and also a key factor is the climate in which the crane has been operating in, as this could directly affect the level of service needed. It is always recommended that a third-party expert analyzes the level of refurbishment needed.

Another important factor about refurbishment is financing. Different companies might offer financing options that could have a smaller impact on the cash flows of the projects and make it more accessible for crane owners of different sizes. Manitowoc also offers finance options for EnCore purchases. It claims this supports lease agreements and, unlike traditional lending, Manitowoc says its financial products don’t affect bank lines of credit, leaving customers’ capital resources intact for times when they need ready access to cash. This is extremely important and valuable given the fact that many companies (more notably smaller firms) don’t take in to account the cost or the cash flow for crane refurbishment and maintenance services, therefore such option could be a very valuable factor in choosing the companies that carry out the crane support services.

EnCORE: different levels of crane refurbishment

Manitowoc has three EnCore facilities in Europe and one in North America. Specifically, these are in: Lagenfeld, Germany; Buckingham, UK; Breda, the Netherlands; and Bauxite, Arkansas, USA. In addition, there are several independent, certified EnCore partners that Manitowoc works with to perform the work. According to Manitowoc, customers typically visit an EnCore facility to see a refurbished crane, enabling them to inspect and operate the machine before they purchase.

According to an article published on International cranes and specialized transport publication, Manitowoc reports that its EnCore program is particularly strong in emerging or less economically strong markets. In Europe, for example, Manitowoc says it has a strong EnCore presence in Poland, Czech Republic, Hungary and Slovakia – as these countries tend to buy more used cranes with warranties. Manitowoc says it sees little used business in China or India as these are more mature markets, while the Middle East is mixed because it has strong connections with China and India.

In order to avoid competition between new and used cranes, EnCore utilizes similar sales and distribution channels.

“The benefits of EnCore are clear,” enthuses Manitowoc’s Central Europe sales director, Erdo Arslan. “Customers have access to a refurbished crane that comes with a warranty for less of a capital investment than a new crane. Also, some customers may prefer an older model crane or have a crane that they would like to keep in their fleet, in which case EnCore is also an ideal option for them”.

EnCore programme also has a dedicated website, www.Manitowoc-used.biz.com , for mostly Manitowoc-owned used cranes.

Opposing views – when NOT to repair cranes

According to an article published on International cranes and specialized transport publication, “market conditions certainly weigh on a decision to restore or refurbish a crane. The owner has to feel there is enough business to justify spending the time and money involved,” says Tyler Smith, vice president of business development at Certified Boom Repair. “Aging cranes can often be refurbished for half the cost of buying a new one and can be put in excellent operating condition. However, when the repair cost exceeds 60 to 70 percent of the value of the crane then crane owners might be better off buying new.”

Wheco, a worldwide provider of heavy-equipment repair and restoration services is another American company that has been repairing and restoring cranes and lifting equipment for over 35 years. According to David Wood, president at Wheco, “the decision on whether to repair or refurbish a damaged or old crane comes down to its value and what the owner is looking for in a return on investment. Some older cranes are just not worth the investment to bring them up to a safe and reliable long-term condition.”

Potential crane buyers – watch out! It’s not all about the cost.

When deciding to repair or refurbish a tower crane, crane owners should consider that cost saving should not be the only decisive factor. Just like any other purchase in the construction sector, cheaper doesn’t necessarily mean a better deal specially when it comes to tower cranes; as extra costs arise months and at times years after making the total investment much bigger than the paid amount.

Therefore, it is recommended to have a long-term strategy when deciding between repairing or replacing as a tunnel vision can have a bias effect. Low cost repairs might save money in the short term but tower crane owners should always consider how that would affect safety. “Make sure you pick a company that has experience because there are many factors to consider and be aware of when refurbishing a crane,” advises Smith from Certified Boom Repair. David Wood from Wheco adds that tower crane owners should “look for a good partner” to work together in deciding or even in  refurbishment. We need to know the complete history of the machine and what the expectations and budget are of the owner. “There cannot be any secrets, or the outcome is destined to fail”, add Wood.

The role of the third-party expert that analyzes the tower crane history’s and usage is yet again important in having all the necessary information before making any decision or investment.

Conclusion 

As the construction industry in the Middle East is growing rapidly and the demand for used cranes is increasing, maintenance and refurbishment of tower cranes have becoming major topics of discussion in the industry. The fact is tower cranes need after-sales services constantly to prolong their livelihood. The more reputable brands can guarantee a network of support and spare parts and “stronger” tower cranes. However, even the best manufacturers will tell you that tower cranes, like any machine, have a break-even point where the cost of maintaining them exceed their value. The challenge is to recognize this break-even point and to delay it as long as possible, or at least until getting a return on your tower crane investment.

Euro Auctions reports rise in bidder, buyer and vendor numbers in second Dubai sale

Almost $2million worth of equipment snapped up by UAE-based bidders, justifying physical presence in region, says auction house

Euro Auctions has reported a 40% rise in the number of bidders in its second sale in Dubai held last month at its new permanent site in the city.

The global auctioneers of industrial plant, construction equipment and agricultural machinery, said the rise in the number of bidders, as well as in the numbers of successful buyers and new vendors consigning equipment to the sale, is a vindication of its decision to enter the regional market earlier this year.

This was Euro Auctions’ second sale in Dubai after it held its inaugural auction in the region in September last year.

According to Euro Auctions, over 400 lots went under the hammer in the auction, attracting strong interest from across the Middle East as well as from India, Western Europe and Russia. Almost $2m of the sales were snapped up by UAE-based bidders, with significant purchases also going to Oman and Saudi Arabia. Europe accounted for a further $700,000 of the total hammer value, with key consignments going to bidders in Germany, The Netherlands and the UK. Floor sales on the day accounted for the vast majority of business, with just over 20% being transacted online, said the auctioneers, adding that the numbers prove how much a physical presence in the region is vital to meeting local demand.

Euro Actions has leased a 91,000sqm site in Dubai’s Jebel Ali Free Zone. The site includes a purpose-built auction complex covering over 3,000sqm with a 360-seat, fully air-conditioned enclosed auction arena as well as ancillary buildings, workshops and infrastructure.

“We are absolutely delighted about how this sale has gone, firmly placing our Dubai operation in the region and on the calendar,” said Jonnie Keys, Euro Auctions’ commercial manager. “News on our recent arrival in the region and our ambition to be a professional and key player in the used construction equipment sector is certainly getting out and stimulating much discussion. An ever-expanding portfolio of vendors are entrusting us to achieve strong hammer prices for them when disposing of equipment, but it’s also about the full service that we offer and building a solid relationship with all involved. We’re also now signing up a number of the key equipment holders across the region as they look to use our facilities moving forward and this is only positive for bidders as the quality, quantity and variety of used merchandise coming to auction will only improve.”

Notable lots that went under the hammer at the Dubai sale included an unused 2016 Volvo EC210BLC excavator which went for $75,000. Telehandlers and loaders were also in good supply with a 2008 JCB 540-170 selling for $43,000, while a low-hours 2015 CAT 966 went for $147,500, said Euro Auctions.   

“Having a permanent presence in the region is both opening the door to many new buyers and sellers and enabling us to better link together our global operations so we can offer a complete service and sell equipment in the markets where they are most desired and where they will achieve the best prices possible. Having a strong sales and support team here on the ground in Dubai, backed up by our international operations, has been a key factor in our success and was a key part of our growth plans for 2017, along with founding our successful new operation in Hong Kong,” said Keys.

Euro Auctions’ next Dubai auction will take place on March 5. Other upcoming sales include a three-day sale in Leeds, UK, from January 31, a one-day sale in Brisbane, Australia, February 8, and a five-day sale in Florida, USA, from February 13 under the company’s US subsidiary, Yoder & Frey.

Intermat preview: Spring in Paris

The Intermat construction equipment show comes around every three years. Held in France, it will be the main show, in Europe, for the industry in 2018 from 23 to 28 April at the Paris-Nord Exhibition Centre, France.  Paris, France, will be the center of the European construction industry in April with the latest edition of Intermat – the Continent’s biggest trade exhibition for construction this year.

The Paris-Nord Exhibition Centre will be home for a week for 1,500 exhibitors from 40 countries. From 23 to 28 April, it will host the 2018 Intermat show, with the World of Concrete Europe show running alongside it for the second time.

Intermat is organised by: events organiser Comexposium; CISMA (the French association of equipment manufacturers for construction, infrastructure, steel and handling equipment industries); and SEIMAT (the French association of international civil engineering, mining, construction and hoisting equipment industries). 

A new feature for 2018 is the structuring of the show into four specialist area hubs. There will also be theme ‘villages’ concentrating on technological innovations. A series of talks and round tables on topical subjects in the industry will be on the agenda of each theme zone.

The four hubs are labelled: Lifting, Handling & Transportation; Earth moving & Demolition; Roads, Minerals & Foundations; and Buildings & Concrete. The organizers said that this change was prompted by demand.

The Lifting, Handling & Transportation hub will see a concentration of those subjects, featuring machines, accessories, components, services and new technologies.

The Building Smart Village will see the BIM (building information modelling) Cabin, and it will look at digital design and robotic manufacturing, as well as digital tools on the work site.

The final theme village is The Start-up Eurovia Village. Eurovia, part of French contracting giant Vinci, is a partner in the Start-up Village, which will have 13 selected start-up firms displaying their innovative solutions. These will include rental platforms, site supervision applications, equipment management and robotic solutions. 

The Thursday of the exhibition has been designated Intermat Rental Day. The organizers said that construction equipment rental is no stranger to the digital trend sweeping across the distribution sector in general. A key element will be a look at the major factors that will drive change in the rental business over the next 10 years, and how each country is preparing for it.

We invite you all to Potain’s 90 years anniversary on Wednesday 25th of April.

Source: 

http://meconstructionnews.com/26967/euro-auctions-reports-rise-in-bidder-buyer-and-vendor-numbers-in-second-dubai-sale  

https://www.khl.com/international-cranes-and-specialized-transport/intermat-preview-spring-in-paris/132079.article

International Cranes and Specialized Transport Volume 26, Number 4, January 2018

         

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Second-hand & used cranes: What you need to consider (Part I)

The Middle East remains one of the world’s most active construction and infrastructure markets. Governments continue to invest heavily in transport, utilities and ports, and are making efforts to diversify their economies beyond their reliance on hydrocarbons. There will be enormous demand for lifting and specialized transport services.

As the construction market grows in the Middle East and there is an ever-growing need to cranes, it begs the question to look into the crane market deeper. In global markets and in the Middle East, second hand cranes have always been used and there seems to be a steady demand for them.

There is such a growing demand that many trading websites have emerged to bring together supplier and demand for second hand machinery. For example, KHL launched a dedicated business unit under the name KHL Crane Market (http://www.khlcranemarket.com/) to create a market place for buyers and sellers of used cranes.

Basically, this market place is solely for supplier, brokers and crane dealers to place their products there by driving the right demand to this platform. This begs the questions of how big is the market for used tower cranes? It is actually extremely challenging to extract such data, but we can see the increasing demand to second hand cranes.

Other third-party traders include: MachineryZone, CraneNetwork, CraneTrader, Cranes4Cranes, Alibaba and a more local trader: Al Mawkaa.

But what are some of the key factors you should consider when you’re deciding to restore or replace a crane? Of course, the cost if a major factor; depending on the scale of work expected from a crane and the amount of money that needs to be spent on the maintenance or repairing a crane could sometimes even be higher than purchasing an entire new crane. However, the key point here is the timeframe that is expected from a certain crane to operate at a reasonable capacity.

Once you’ve reviewed the financials and maybe you’ve decided to maintain the crane, another important point is the availability of the spare parts and how quickly you need them. Some parts may not be found and not be manufactured.

Therefore, when purchasing a new crane, it is always important to remember that the manufacturer will offer OEM (Original Equipment Manufacturer) services; meaning that you can always go back to them (or their partners) and ask for spare parts and services if necessary. When we discuss repair and refurbishment, the technical aspect of refurbishment seems to be a more important factor for crane owners rather than the reconditioned and painted cranes. According to Liebherr, their most common repair and refurbishment jobs are on main components such as cylinders, slewing bearing, engines, transmissions.

EnCore programme: Potain’s second hand market

According to a report by International Cranes and Specialized Transport, USA-headquartered crane manufacturer Manitowoc has a dedicated rebuild, repair, remanufacture and exchange program for all models of Manitowoc, Grove and Potain cranes. It’s called the EnCORE program and it has been running since 2011. EnCORE refurbishment services are located in the Charlieu, France Potain Towwer Crane manufacturing facility. Each refurbished crane is rebuilt with genuine Potain tower crane parts. These are then painted using the same advanced paint technologies applied to new production. All refurbished cranes and parts are covered through Potain’s warranty programs and supported by the global Potain network, with all technical documents in the language of choice to support the refurbishment.

Through the EnCore programme Manitowoc offers various levels of refurbishment and, depending on the condition of the crane, crane owners can choose either an entry, standard or premium level of refurbishment. Standard across all levels is: a full inspection and calibration of all controls; the repair or replacement of slewing ring bolts; the repair replacement of hoisting steel wire ropes; finish painting and mechanisms and safety device overhaul; and a final functional test report with six- month warranty.

At the premium level the entire crane structure’s surface is shot-blasted, cleaned and repainted. The control system is overhauled, all mechanical and electrical components are repaired or replaced, and a full set of safety and function tests are completed. The crane then gets an EnCore accredited plate indicating the date of refurbishment. The premium level comes with a twelve-month warranty.

Here in the Middle East, NFT, a Tower crane specialist to use new 300,000sqm facility to increase stock, refit used equipment and improve customer service. The yard is now home to NFT’s growing stock of 1,800 tower cranes of which 200 are brand new models. It also contains 500 hoists and 35,000 pieces of spare parts.  NFT has dedicated 2 facilities for reconditioning used tower cranes. The first one will be handling all the welding and painting while the second one will be focusing on mechanical and electrical work. The 2 facilities are joined together like an assembly line whereby each part of the used tower crane is checked and improved step by step until finishing with painting. The yard has enough space for testing as well. Considering the increase in demand for used tower cranes as the market becomes more price sensitive, NFT has invested heavily in this in-house solution of tower crane reconditioning in line with being the one- stop supplier for all lifting needs.

Second life: Used machinery market gets a lift

‘Whenever the construction market faces a slowdown economically, the demand for used equipment starts to increase,’ says one expert. With an atmosphere of cautious optimism pervading the region on the back of low oil prices, equipment manufacturers and dealers will tell you that machinery sales are not what they used to be a year ago. However, this does not mean that machinery is not being bought or sold. What has been built has to be maintained and, despite the caution, some projects have forged ahead, especially those that involve public spending on infrastructure. Enter the second hand or used machinery market. “Whenever the construction market faces a slowdown economically, the demand for used equipment starts to increase,” says a spokesperson from Mohamed Abdulrahman Al-Bahar LLC, a Sharjah-based distributor of Caterpillar products in the region.“During such scenarios, we have noticed that purchase of used machines falls within the budget for those customers who still have projects to run.” According to Al-Bahar, in addition to offering cost-effectiveness, used machines also come with lower risk. Since the investment is considerably lower, having the equipment lying around idle in between projects does not impact the bottom line as much.

At auctioneers Ritchie Bros., the biggest seller of used equipment in the world, Karl Werner, chief operations support and development officer and managing director, Middle East, Africa and India, is quite clear about the challenges in the market and how to meet them.

“We have the ability to transcend local challenges in any market by bringing in buyers from outside to create more liquidity and help maintain pricing levels. Dubai is one of 44 auction sites we have around the world and when we have an auction event, like the one we had in May, we get bidders from every corner of the globe, letting equipment as an asset flow around the world and effectively offsetting the downturn in one place with buyers from another,” Werner says. Of the 3,477 total registered bidders for Ritchie Bros.’ Dubai auctions in 2015, 54% were from outside the UAE, representing 84 countries around the world, he reveals. And they bought 42.9% of the equipment on sale. In total, the auctioneer sold $138.7 million worth of equipment from Dubai last year to a total of 1,429 buyers, which establishes the importance of Dubai as a used equipment hub. Helping Ritchie Bros. to broaden its reach is its wide online presence. The company saw a record 51% of its global sales come from online buyers in the second quarter of this year, which included a multi-million-dollar auction in Dubai in May, Werner says.

“The biggest Dubai auction we have had was around five years ago, which netted total sales of $57m.” Speaking about the prevailing conditions, he adds: “Last year we saw significant growth in our business here in the GCC, and the region has provided us consistent growth. There are strong markets in the GCC, but we’re also reaching out into Africa, Asia, Europe and the Americas to pull buyers in.” Over at Al-Bahar, the association with Caterpillar forms the backbone of their used equipment business. “All the used machines we sell are originally from our on-campus Cat Rental Store (CRS). Al-Bahar has invested hugely into the rental business, so all these used machines were used under our supervision and by our operators,” says the spokesperson. “We’re seeing customers for our used machinery from the contracting and transportation sectors and the machines in greater demand at the moment are medium wheel loaders, tele handlers, skid steer loaders and backhoe loaders.” The demand hints at maintenance operations and small jobs, rather than big projects, but Al-Bahar supports customers of all sizes, he adds. “Al-Bahar ensures that all used machines we sell are in good working condition and ready to work prior to delivery, as we offer warranty for our used machines.” Elaborating on the benefits customers derive from buying used, he adds: “With a proven track record of unmatched service, Al-Bahar is a trusted brand that not only sells used machinery, but offers unrivalled support to our customers with the warranty, parts availability, field service on call and a variety of other solutions for used machines.” For its part, Ritchie Bros sources its inventory from a variety of places, and Werner says: “We do the majority of our business with end users, whether it’s large construction companies or smaller ones that own just a few pieces of equipment. We also do a significant amount of business with dealers, brokers and OEMs. So you’ll see in some of our auctions, manufacturers from Asia shipping things here to sell into this market. Whether it’s going to stay in the GCC or go outside, we don’t know. But we can create that market for them where they feel comfortable sending their assets here to be sold.”

Machines consigned to an auction can be refurbished at Ritchie Bros.’ on-site state-of-the-art facility in Dubai, Werner adds. “Sometimes it is worth investing a certain amount of capital into a machine to bring a higher return. And we help our customers with that, first by machine evaluations and recommendation, and then with painting and refurbishing the machines both before and after an auction.” With the right resources in place and strategies on the table, there is little doubt that the used machinery sector in the Middle East will continue to supply the region and the world market with the used machines and equipment it needs to keep the wheels turning and the projects growing.

Participation in a Ritchie Bros auction starts with the registration, which is free. A refundable deposit equaling 25% of the total expected purchases, with a minimum deposit of US$25,000 or AED100,000 is required for all participants, says Karl Werner. Participants can either attend the auction in person at Ritchie Bros’ premises in Dubai’s Jebel Ali Free Zone or avail of the option to attend virtually by bidding on-line. Those registering on-line need to pay the refundable deposit by card or bank transfer, while participants wishing to attend in-person have the option of paying by cash or local cheques. However, only cash payments are accepted in case of those attending for the first time. Customers who wish to attend an auction can also avail of a special offer from Ritchie Bros. The company has a tie-up with Emirates airline that enables those registering to attend an auction to fly to Dubai on the carrier at a discount of 10% on the airfare. The discounted flights are available from five days before an auction to five days after it and, according to Werner, “is just another facility we provide that goes to show why we are the world’s preferred” auctioneer for used machinery. If the imposition of the bidding limit seems like a bit of a constraint for on-line bidders, there is a solution for that, too. “The entire inventory to be sold is up on our website before an auction, so if an online buyer knows what he will bid on, he can easily form an idea about how much it will go for. He can even view selling prices of similar items that sold at recent auctions. And then he can pre-clear his bidding limit based on his own projection of how much he will need to spend,” Werner says, adding that the management then decides how much can be approved based on the customer’s history.

The Ritchie Bros. yard is open for customers to come in and inspect the inventory up for sale.

“Many customers bring in experienced and qualified mechanics or machinery experts with them to inspect their prospective purchases,” says Werner. “We encourage our customers to freely take a look at the inventory to their satisfaction.” On-line bidders can also send their representatives to inspect the equipment on their radar. These representatives can be their own mechanics or experts, or third parties such as local machinery dealers who offer to perform inspection services on behalf of an on-line buyer. “Our processes are completely transparent,” Werner adds. “We endeavour to answer all questions that prospective buyers ask regarding the machines we sell. Whether they are in-person attendees or on-line participants, we provide them all the information at our disposal about their prospective purchases.”

Potain celebrates 90 years

 Manitowoc Cranes will have a sizeable presence at Intermat 2018 in Paris, as the company’s Potain tower crane brand celebrates its 90th anniversary.

It is fitting that Potain tower cranes will take centre stage on Manitowoc’s stand. The event coincides with Potain’s 90th anniversary—it was founded in 1928 in La Clayette, in Saoneet- Loire, France—and on display will be two examples of Potain’s technological advancements: the Hup self-erecting crane range and an MDT 389, the largest of its CCS topless top-slewing tower cranes.

The Hup range includes the Hup 32-27 and Hup 40-30. Potain claims versatility and ease-of-use for these.

They have a maximum capacity of 4t and rear-slewing radius of only 2.25m, enabling them to be positioned closer to buildings – a major benefit when working in tight urban areas.

The Hup cranes are taller than the Igo 36, one of their predecessor models, but occupy the same footprint, again making them ideal for space restricted sites. Three raised positions of the luffing jib, at 10°, 20° or 30°, in addition to horizontal, provide unprecedented options for a self-erecting crane. They have two height options for their telescopic masts and an exclusive new radio remote control with Potain’s Smart Set Up software.

The MDT 389 is the largest topless crane from the Potain line-up to feature the company’s Crane Control System (CCS). This user-friendly operating system offers the highest levels of comfort, flexibility and ergonomic control, reduces installation time and provides unequalled maintenance features, particularly when using Manitowoc’s CraneSTAR Diag tool, a telematics and maintenance system.

The MDT CCS Topless concept enables complex multi-crane installations, and the assembly, erection, transport and maintenance phases are shorter than for previous generations of tower cranes. All of these features lead to a better return on investment, and CCS has been proven to increase efficiency on the job site.

There are two versions of the Potain MDT 389, with 12t and 16t maximum capacity. Both have up to 75m of jib available. The 12t version can lift 3.4t at its jib end, while the 16t version can handle 3.3t.

The tower cranes that will be shown were developed with significant customer input and participation. The cranes were developed with much more speed to market than previous generations of cranes.

“2017 has seen an uptick in construction and infrastructure activity in Europe, so we have selected a pair of cranes that we feel can best serve this region in terms of speed, efficiency and versatility, and also when working on urban job sites,” said Jean-Noel Daguin, SVP, tower cranes at Manitowoc. “We are also featuring solutions that we can provide to stakeholders of the Grand Paris Project, which will accelerate the transformation of Paris ahead of the 2024 Olympic Games.”

“The two cranes we will have on display at Intermat reflect true innovation over their predecessors and prove their value from transport to tear down.”

Source: 

http://meconstructionnews.com/19115/second-life-used-machinery-market-gets-a-lift 

http://www.cranestodaymagazine.com/features/potain-celebrates-90-years-6084200/

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Confidence in the Crane market

Crane market is directly affected by an increase in construction and in an economy such as United Arab Emirates it means an increase in confidence of foreign buyers and also an increase in government expenditure in the construction industry. Therefore, it is important to analyze the growth and the health of the construction industry regionally and locally.

According to Real Estate Journals an increase in net crane count indicates that the construction market is not merely holding steady, but prospering. As Construction Business News had reported back in 2016, The number of cranes added to the Dubai skyline in the first half of the year provides further evidence that the emirate’s construction sector is defying expectations and bucking the stagnation trend seen elsewhere in the Gulf. Rider Levett Bucknall’s (RLB) latest Crane Index report shows the number of cranes operating in Dubai rose 18 percent in the six months to 30 June, compared to 6 percent in Abu Dhabi and 5 percent in Doha. In total there were 1,714 cranes in use across the three countries at the end of the period, a rise of 12 percent on the previous six months. So there has been a steady growth in the past.

As per a report by Construction Week Online, In recent times, the UAE has been a strong market for tower cranes, as a conveyor belt of hotel, residential, retail and commercial schemes have all needed “craneage”. The other countries of the GCC have been lagging behind, however.

The regional market for tower cranes has always been strong, and along with Europe and North America, it is one of the biggest worldwide. This report concludes that crane demands point to positive construction activity in the UAE.

A noticeable trend in the sector is for bigger and taller cranes, units that are able to cope with the higher and larger construction projects of the modern world. Suppliers who are able to provide tower cranes or equipment to any project type are the ones benefiting the most. The GCC is quite unique when it comes to special requirements for heavy capacity cranes 30T to 60T. The region definitely has the highest population of such cranes.  For example, Potain’s MD 1100 cranes are an increasingly popular option on large infrastructure projects that require the handling of large structural components. They have a maximum capacity of 50 t, while at their maximum jib length of 80 m they can lift 10.6 t.

Due to the increase in construction for high-rise in congested area, Potain luffing tower cranes have become very popular over the past three years. Indeed, high rise towers, which are very popular in this region, require luffing cranes with a big capacity. Luffing cranes are special as they allow you to maneuver in tight spaces, when you are surrounded by neighboring buildings.

Now, let’s look into a detailed report by Turner & Townsend on International Construction Market Survey of 2017:

The Expo 2020 Dubai is expected to have an influence on construction tender prices in 2017, with a number of projects expected to be awarded. This is expected to result in a high demand for tier one and tier two contractors and higher tender prices. The conclusion of the report and the outlook is as following:

Market: Lukewarm

Tendering: Staying the same

Cost escalation 2016–17: 1.5%

Cost escalation 2017–18: 2.0%

Contractor’s margin: 8.0%

Preliminaries: 11.0%

Location factor (USD): 52

PPP coefficient: 2.26

These figures show an overall healthy indication of the construction industry and consequently the confidence in the crane market.

According to a survey by International Cranes and Specialized Transport on Crane Rental Confidence 2018: A little under half (43 %) of respondents in this year’s crane rental confidence survey said that business conditions in their area of the crane rental market were improving. These responses were primarily from the Middle East, with the remaining respondents around the world divided between stable (35 %) and deteriorating (22 %). One respondent, from India, commented, “the market has been poor since 2016 but is now improving, albeit at a very slow rate.”

Globally, as per this survey Middle East seems to have the best outlook for crane rental: With regards to business activity, almost half (48 %) of respondents said business activity remained stable in 2017 compared to the previous year. Many of these replies came from the Asia Pacific region, while 30 % of responses said business had improved – particularly in the Middle East. Just 22 % reported that business had deteriorated, with the focus for this being centered around South Asian markets.

Source: International Cranes and Specialized Transport

Compared with last year’s survey this is a decrease of 10 % in respondents reporting improvement; yet despite this optimism for 2018 is high – with 48 % saying that they thought business levels would improve in 2018, particularly in the Middle East. It’s an increase of 16 % on last year’s figure – while 35% of those surveyed believed business levels would remain stable. This left just 17 % forecasting a decline, particularly around South Asia.

And in terms of rates, here is what the respondents had to say for this year:

Source: International Cranes and Specialized Transport

As it is apparent that the confidence in the construction and crane market here in the Middle East is higher than the rest of the world.

Why 2018 will see an uptick in tender prices?

2018 is expected to see a recovery in tender prices, driven in part by an uptick in activity and in part by growing costs. This, as companies face fiscal consolidation policies in cash strapped MENA countries, such as the introduction of VAT pushing up prices of materials, potentially cutting into margins. Whilst increased activity may allow some boost to tender prices, the market is still competitive and, as such, we may see some of the additional cost coming out of margins, rather than through increased tender prices.

With the construction market still reeling from a two year contraction in project spending, a fuller pipeline for 2018 is providing optimism in the region as economic reforms and fiscal consolidation start to pay off. However, financing is likely to remain a challenge, with increased reliance on private sector funding across the board. Going forward, demand for construction in the region remains strong and as solutions to the financing challenges are found, we can expect to see spending levels climb in the medium term.

“Increased project activity is anticipated to drive up tender prices across MENA markets, as contractors see their order books fill up again after the recent slowdown. However, the new economic reality means bringing financing to the table is becoming increasingly important, as contractors compete for diminishing government funding,” says Fergus Rossiter, director of Mace Cost Consultancy – MENA.

As oil prices and consequently budgets recover from the slowdown across the region and activity picks up, we are seeing a general recovery in tender prices. This
steady recovery is set to continue in Saudi Arabia, picking up to 2.79% growth in 2018 from 2.54%, reflecting the launch of many new projects to market and hence
increased competition for suppliers. Saudi Arabia is set to see strongest growth in tender prices of the countries considered, followed by Oman, which has seen a significant jump to 2.46% growth in 2018. Increased investment in oil and gas in Oman is tightening the market and allowing contractors to push for higher prices. A similar trend is reflected across the markets considered, apart from Bahrain which is due to see slower tender price inflation. Egypt is likely to see significant tender price inflation this year having jumped to the second largest MENA project market. This jump in project activity will dramatically increase contractor power to raise prices as demand squeezes limited labour and contractor capacity.

However, with the introduction of VAT and reduction in subsidies for power and water in some countries, as they seek to reduce expenditure and increase revenues, inflation could grow by more than tender prices where competition remains strong. For example in both the UAE and KSA consumer inflation is expected to be higher than tender price inflation. Where this occurs, and competition is too strong to allow for pricing in inflated construction costs, margins could be eroded as contractors fail to cover the increased costs from VAT and utilities with tender price increases.

The MENA construction sector is still reeling from the two-year contraction in project spending which saw the value of annual contract awards shrink by almost 40%. The lack of new project opportunities, combined with the delays in payments, meant that finding new revenues continued to prove challenging and cash flow remained a problem. Many construction companies have been downsizing in response to these tougher market conditions, and several international businesses have even reduced presence in the region.

However, at the national level, there has been positive news for some countries, with Egypt, the UAE, Iran, Iraq and Oman all recording sizable rises in contract awards in 2017, offsetting declines in other markets.

With a fuller pipeline going into 2018, the industry can see glimmers of hope, anticipating at least $170bn of awards in the coming year, a respectable increase on 2017’s figure. Driving this potential  improvement in the market are a host of flagship schemes across a range of sectors, highlighting an industry less reliant on key sectors than in the past. Areas of particular interest for the region include a resurgence of oil and gas activity, investment in power (and renewables) and ongoing development of transport infrastructure across the region. These flagship industry schemes will be accompanied by an array of real estate projects, led by the $5bn Dubai Creek Harbour.

Financing remains the biggest challenge for construction projects in the region, with government spending slashed, but private sector investment still weary of uncertainty.

Governments are therefore increasingly looking to use Public Private Partnerships (PPPs) to finance and operate public services. With a strong track record in delivering PPPs in the energy sector, but limited success in other areas, the coming year will likely see an increased focus on packaging commercially attractive projects for private investors. Meed estimates that about 156 PPP projects requiring about $206bn investment are planned across the region outside of the energy sector. Without sovereign guarantees for revenues, and with a limited track record of commercially successful PPPs, it is likely progress will be patchy. In addition to the use of PPPs, increasing use is being made of export credit support brought in by contractors and suppliers from overseas.

During the challenging years since 2014, many contractors in the region have learnt to rely on the Dubai market for new opportunities, with other markets such as Saudi Arabia likely to disappoint. There are signs that this is now shifting.

Although contractors remain busy tendering for work in Dubai and continue to struggle in other markets, consultants coming in at an earlier stage, are telling a different story. Whilst fewer new opportunities for work are coming out of Dubai, they have been increasingly competing for work in KSA. In 2017 the kingdom launched a slew of major projects, including Neom City, which are now starting to engage consultants for PM, design and engineering. As the boost to pipeline in Saudi Arabia progresses, it should absorb any slowdown in Dubai as Expo 2020 projects are completed and not immediately replaced.

Despite the challenging circumstances of 2014-2017, the long term drivers of project activity remain positive. There are still $2tn of projects in the GCC’s pipeline: with expanding populations and economies, the demand for housing, education, healthcare and utility schemes is as great as ever. Given their restive populations, the governments of the MENA region know they cannot afford to fall behind for too long on their social infrastructure programs. Solutions to the financing challenges will be and are being found. Once they are we can expect project spending to once again climb to historic levels.

COSTS
Across the region construction costs will receive a shock from fiscal consolidation policies, with the worst effects of this felt in Saud Arabia and the UAE, with the introduction of VAT raising the cost of many construction materials by 5%, and cuts to energy subsidies impacting on the cost of construction. With exemptions to the most onerous parts available to public sector companies in Saudi Arabia for example, minimising tax burdens could be another incentive for private contractors to enter into PPPs, further financing the government’s spending plans.

Aside from costs related to government policy, we are also likely to see the depreciation of the MENA currencies feed through into higher material prices, with most countries in the region heavily reliant on imports of materials for construction.

ECONOMICS
Mixed fortunes are generally anticipated for the MENA region: whilst greater stability in oil markets is expected to restore confidence, political shocks are expected to continue to affect investment and confidence in 2018. Both the increased price of oil (from an average of $54 per barrel in 2017 to an anticipated average $62p/b in 20181) and the economic reforms undertaken to diversify economies are contributing to an improved regional economic growth outlook. GDP growth in the region is expected a whole percent point faster in 2018 than 2017, at 3.2%. This outlook is supported by the strengthening global economy, which is enjoying the first period of coordinated recovery in both advanced and emerging markets, since the financial crisis.

However, while the macroeconomic outlook may be improving, challenges at the operational level will remain, with the region continuing to adjust to a new economic paradigm in which oil revenues are not sufficient to fund government spending requirements. However, efforts are being made to reduce fiscal reliance on high oil prices. Most countries have reduced the oil price required to fiscally break even (see figure below). The impact of the UAE and KSA’s recent fiscal reforms can be clearly seen in the significantly lower price of oil needed for their budgets to break even.

In addition to fiscal reforms, in 2018 privatisation of state services across the MENA region will accelerate as governments seek to reduce their balance sheets. This will be a significant opportunity for the private sector to pick up lucrative contracts and develop long term relationships in markets newly open to them. This will be dominated by plans to publicly float 5% of Saudi Aramco, the state’s oil company, the unbundling and privatisation of state utilities and sales of other state owned enterprises across the region.

Egypt is set to see a take-off in growth, growing at the strongest rate of countries considered in 2018 (4.46%) and averaging 5.5% growth annually through to 2022. This strong growth is anticipated to be driven by strong external investment into the country, particularly from China and Middle Eastern investors. Kuwait is also anticipated to see significant growth over this period, with 4.1% growth in 2018 and averaging 3.5% annually to 2022. Oman (3.74%) and the UAE (3.36%) will see stronger growth levels in 2018, and consistent average growth through to 2022.

However, Bahrain and Saudi Arabia are both set to remain in lower growth cycles, without sufficient momentum to improve conditions for the majority in these countries, at 2% and 1.7% average growth to 2022 respectively. In the meantime, Saudi Arabia will be grateful for relief from 2017’s negligible growth, rising from only 0.1% growth to 1.13% this year. It is worth highlighting that with better prospects for the price of oil, and the oil based economies increasingly diversifying, the dichotomy we noted between diversified and non-diversified economies in the H1 2017 update, appears no longer applicable. Egypt, Kuwait and the UAE are set to see the highest average growth rates to 2022, and Saudi Arabia and Bahrain the lowest. This mix of fortunes is unrelated to diversified vs non-diversified economies.

INFLATION

Inflation is due to pick up across the board in the Middle East region, reflecting several contributing factors driving prices up. These include:

  • The impacts of fiscal policy such as VAT introductions, removal of subsidies on utilities, and increased taxes. VAT, in particular, will drive price growth in the UAE and Saudi Arabia
    • Depreciating currencies making imports more expensive, a significant factor in markets mostly dependent on imported consumer goods and materials
    • Economic expansion driving prices higher

Of the Middle Eastern countries, Saudi Arabia and Qatar are to have the highest inflation, at 4.96% and 4.85% respectively, having both grown from minimal levels (and even minor deflation in Saudi Arabia’s case) in 2017. Whilst the rates are similarly high, the drivers are very different. In Saudi Arabia, the fiscal impacts of VAT and tax/subsidy changes have significantly raised prices domestically. These represent the main influencing factor, with VAT alone adding 2.5% to inflation in 2018. The impacts will be felt strongly in construction markets, and we can expect to see some impact on margins if tender prices cannot be raised to cover these increased costs. The other Middle Eastern countries remain within the acceptable range for the region of 2-4%, with all either registering a pick-up in 2017 or remaining steady. Egypt on the other hand is a different story. The very high inflation in 2017 will ease slightly in 2018 as the effects of the major currency crash continue to work their way through the system. Inflation will nonetheless remain very high at 21.34%. However, over the longer term, inflation in Egypt is expected to moderate down to 7% (by 2021) which would bring it within the acceptable range for stable growth in the country.

EXCHANGE RATES
With many currencies in the region pegged to the dollar, its continuing strength against the euro means a similar story to the last update. USD depreciation against the euro is linking through to roughly 15% depreciation for the pegged currencies (Dirham, Riyal, Rial and Royal) over the past year. However, the rate of depreciation in these markets has slowed considerably, seeing only 1.1% change over the past  month, as compared to 3% in the H1 2017 update. This depreciation continues to make investment in the MENA region comparatively cheap and will take the edge off growing inflation for foreign investors as fiscal measures, such as introduction of VAT, start to bite.

The Egyptian pound has seen slightly less depreciation against the strong Euro at 14.22% over the past year, 1.24% of which over the last month. After the currency crisis of 2016 resulted in a dramatic 112% yearly depreciation, recorded in our H1 2017 update, the pound has stabilised, moving in line with other countries in the region. However, the continued depreciation against the Euro maintains favourable investment conditions for foreign direct investment, a significant driver in the Egyptian construction market.

Source:

 http://www.turnerandtownsend.com/media/2389/icms-survey-2017.pdf

Insight: Why 2018 will see an uptick in tender prices