It is clear we are nearing the end of the Chavez-Maduro era: the “starting bell” is now ringing for organizations yet to establish an exploratory group tasked with assessing commercial opportunity. For those planning to participate in the recovery and reconstruction of Venezuela, it’s time to consider historical context, make reasonable comparisons (pre-Chavez vs now) regarding transformation of local cultures, current societal realities (in-country & diaspora), and focus on what comes next.
What organizations should know regarding opportunities and expected duration –
- Venezuela is a founding member of OPEC and possesses the world’s largest known oil & gas reserves, approximately 20% of the global total
- Chavez Era production peaked in 2008 at 2.4 MM BPD, currently production hovers around 700,000 BPD and declining
- Oil & Gas required annual investment = USD$15-$20 Billion, medium-term (5-10 years) – predominantly from private sources – with expectation of three (3) years to increase production to 1.5 MM BPD – per Francisco Monaldi*
- Agricultural Equipment required annual investment = USD$5 Billion, during next 5-8 years – per Hiram Gaviria*
- Transportation Infrastructure estimated annual investment = USD$10 Billion, next 5-10 years
- Electrical Power Grid investment requirement = USD$1.5 Billion – next 3 years
Who are likely candidates from the USA? We begin with Oil & Gas Exploration companies and their classic support network (Chevron is currently operating there under a US Govt waiver). Engineering, Procurement & Construction (EPC) firms: Bechtel, Foster-Wheeler, Fluor, others, and their competent sub-contractors – teams capable of handling projects broad in scope: oil & gas facilities to transportation infrastructure, water systems, electric power plants/grids and likely some expansive agricultural/farming infrastructure. Original Equipment Manufacturers (OEM) of earthmoving, mining, construction, power generation, agricultural, pipeline and associated machinery. Manufacturers & Suppliers of Construction Material. USA-based Service Partners engaged in rebuilding high-value capital equipment and spares for heavy industry – in Venezuela these networks, contractors and service providers have been depleted and are currently unreliable.
In my opinion, an irreversible process leading to change in government consistent with the demands of the political opposition lead by Juan Guaido, National Assembly President, will likely commence within sixty (60) days, and certainly by the end of 2019. Criteria as follows –
- El Cese de Usurpación – End of the Usurpation of Power (by Nicolas Maduro)
- Gobierno de Transición – Transitional Government based on Plan Pais model*
- Elecciones Libres – Free and Fair Elections within 9-12 months
Involving oneself in “nation building” is not a typical career discussion; however, my unique experience and strong ties to Venezuela & Latin America require a sharing & transfer of knowledge intended to accelerate relief for a traumatized population and commence a complete rebuild of their Country. Déjà vu, all over again…what happens next has been foreshadowed by what transpired two decades ago during Venezuela’s brief, and sole period of Oil & Gas industry privatization in the last 43 years.
Upon arrival in Venezuela (April 1996), I was an ExPat “operations manager” for a coal stockpile & loading facility on Lake Maracaibo: receiving product (predominantly from Colombia), sizing and loading oceangoing ships with tugboats, barges and clamshells into the holds: a process built on archaic technology, as was the reality for many sectors of society. Coincidentally, a longer-term opportunity was just ramping-up under the administration of President Rafael Caldera: Venezuela’s “Apertura Petrolera”, a privatization effort inviting multi-national companies into the Oil & Gas industry via partnerships with PDVSA and other government entities. Oil & Gas revenues were in decline following twenty years of “nationalization” (1976-1996) which left production infrastructure poorly maintained and dilapidated due to endemic corruption.
The first round of privatizations began in January 1996, and structured to leverage the capital, experience and technology investment of international partners. Bidding packages were presented on specific oil field “blocks” via long-term production leases, usually 20 years – with the government taking royalties after partner-operators met a measurable threshold, defined by unique agreements. The clock started when a partnership deal was signed. At the time, Venezuela was exporting crude at approximately 2.8 MM barrels per day, sourced mainly from mature fields on Lake Maracaibo, Cabimas and several others in Western Venezuela. By mid-1997, the vast, previously unquantified reserves in the East of the Country (Orinico Belt, Anaco, Jusepin, El Furrial, Dacion, Pariaguan, etc), were undergoing significant expansion on the shoulders of the new “private sector partners”, increasingly managing operations, exploration and refinement of the Country’s vast petroleum and natural gas deposits.
Chevron, Conoco, ENI, Total, LASMO, ExxonMobil and a multitude of other “internationals” were participating, mainly building new facilities in Eastern Venezuela with experienced, domestic contractors executing the civil works and mechanical builds under project management by competent international contractors – a classic Oil & Gas boom. The Venezuelan Government was “having it’s cake and eating it too”, overseeing a revenue-earning model with much needed investment financed predominantly by international corporations.
Enter President Hugo Chavez in February 1999, with a socialist agenda including the re-nationalization of Oil & Gas exploration, extraction, refining, and other natural resource industries: most notably coal, gold, iron ore mining and processing. Fortunately for Venezuela’s petroleum industry, three years into the front-end investment significant completion of upgrades and new facilities construction had been executed by the international partners, most were in early production mode. Over the next few years President Chavez methodically began the “buyouts” of block concessions granted under the “Apertura Petrolera”, and the Country was again subject to the “culture of corruption” that had precipitated the decline of production experienced several years prior. Chavez also had a popular revolt on his hands in response to aligning his government with Cuba. Venezuela became polarized as dissident businesses, politicians and individuals were marginalized – property and commercial interests were confiscated and placed under the management of Military leaders and Chavista loyalists. Capital flight and a “brain drain” ensued, finally capped with currency controls instituted in Q1/2005. Once again, the mismanagement, inexperience, ineptitude, corruption and lack of maintenance in the Oil & Gas sector – responsible for 85% of export revenue – set the table for another decline in production and revenues.
The similarities between Venezuela “then & now” are clear – so are the stark differences. Expectations moving forward require the recognition of a “new reality”: a country void of technical experience, competent general contractors, heavy machinery, materials and social stability. For the next several years, direct investment in Venezuela won’t be for the faint of heart, while the upside could be strong and sustained for decades.
Demand for the human capital required to competently manage the massive slate of projects will far exceed short-term supply. In my view it is naïve to expect educated and experienced Venezuelans in exile to return in large numbers, at least not quickly. Plan Pais*, a Venezuelan Exile’s think-tank based in the United States, estimates only twenty percent (or less) would consider such a commitment. They would have to see an indisputable level of national unity, reconciliation and public safety to consider repatriation. An influx of Ex-Patriot talent will be required for a minimum of several years.
Painting an accurate picture of what Venezuela will be initially must include known current challenges and expected conditions on the ground based on experience – including, but not limited to the following:
- Humanitarian Relief – immediate needs to be addressed by Governments and NGO’s while economic reconstruction is simultaneously planned and executed – expect many private businesses coming into Venezuela to include staff for community outreach and quasi-NGO activities
- Original Equipment Manufacturers (OEM) and Dealer Networks – international companies complete with physical presence to support the rebuild of Venezuela – example: Caterpillar currently has no in-country representation as their long-standing Dealer Agreement with Venequip, was recently voided – expect a boom of new machinery imports, all types
- Offshore Service Support & Equipment Sourcing – due to the mass exodus of Venezuelan contractors and support business in the 2003-2006 time-frame, “outsourcing” with USA-based (and other international) businesses will have representatives deployed to manage local administration & logistics serving heavy industry and others using their products – expect massive imports beginning with second-hand machinery of all types
- Engineering, Procurement & Construction (EPC) Contractors – as with the “Apertura Petrolera”, large contractors (complete with equipment fleets) will be required to execute the construction of facilities in all sectors: Oil & Gas, Mining, Agriculture, Water Systems, Power Generation, Health Services, Education, etc – long-term operating contracts with guarantees will be required to mitigate risk and entice investment
- Oil & Gas Exploration and Production – international companies will arrive in droves to bid on long-term contracts in this industry and other infrastructure projects – natural resource wealth will serve as collateral for direct foreign investment, crafted with financial instruments to guarantee performance of all parties
- Dollarization of Economy – happening now (by necessity) and likely to become an interim policy for the transitional government, remaining until economic stability is achieved
- Security, Public Safety & Bad Actors – upon regime change Nicolas Maduro, top level political cronies, Venezuelan military brass and security forces, Cuban influencers will depart, be taken into custody and/or fracture into formidable elements bent on survival until they are dealt with depending on agreements, reconciliation attempts and public sentiment. Under Hugo Chavez, many private businesses were expropriated and handed over to military brass, thereby politicizing the armed forces and empowering leaders to manage graft and their own enrichment – Colectivos, Cuban-style civil obedience enforcer groups will be disbanded and disarmed – Colombian guerilla groups (FARC) operating in Western Venezuela on the Colombia Border and (ELN) profiteering via wildcat gold mining mainly in Eastern Bolivar State, likely dealt with via limited military incursion
- Military Rank & File – lower level officers and their subordinates will be needed in restructuring the National Guard and Security Forces loyal to the transitional and future governments – prior to the ascension of Hugo Chavez, the armed forces were a neutral body, expect a future Constitution to restore that status
- Socio-Economic Inequality – fighting corruption and inequality (not socialism) were the principal planks of Hugo Chavez’s original campaign in 1998: a winning message resonating with the vast-majority of the population, desperate for relief from the scourge of corruption and perpetual relegation into poverty – no solution can be considered “long-term” without addressing these issues in a way which instills confidence and trust within the disenfranchised
- Chavismo as a Political Force – Hugo Chavez was a charismatic phenomenon, and a logical human response to many decades of poor governance and disregard for the masses by the “connected elite”. To that end, Chavismo will never die in Venezuela because it represents “gained ground”, hope and true representation for those previously marginalized. Much like the FARC peace accord of 2016 in Colombia, a “reconciliation with reality” is required to lend legitimacy and empower the political voice of those who subscribe to the fairness principles of the Chavismo vision
- Culture of Corruption & Descension into Criminality – a sensitive issue in any country, but very real and thriving in Venezuela decades before the emergence of Hugo Chavez, the Socialist rhetoric and grandiose projects during the early years (perfect with abnormally elevated crude-oil prices) fueled even more opportunities for graft by cronies and a newly politicized military elite charged with managing confiscated private businesses. By the time President Chavez was diagnosed with pancreatic cancer (2011), he was already surrounded by a close-knit group of beneficiaries and enablers who were so entrenched and enriched via their corruption, there was no breaking their grip on power: enter Nicolas Maduro (2013). For the self-proclaimed “Son of Chavez”, hapless to prevent the downward spiral of institutionalized corruption & criminality, finding new revenue sources was a priority. In the last several years, wildcat gold mining, the drug trade and “refuge for protection” deals with Colombian rebel groups have provided much-needed cash flow, as have massive loans from China and Russia based on repayment via natural resources yet to be extracted. Ineptitude, greed and a willingness to remain in power “at all costs” has ensured a recovery cannot succeed under the Maduro regime, and led to US Sanctions (August) currently stifling all forms of trade and designed to force imminent change
- Crimes Against Humanity – repression and Human Rights abuses on a criminal scale have now been officially documented (July) by the United Nations OHCHR* – including 6,800 “resistance to authority” killings in 2018 alone – leaving many in the highest circles of power petrified of their likely fate and seeking to make eleventh-hour deals – when the boxes are checked for outside forces to take action in recovery of a failed State, this ranks highly
- Organization of America States & TIAR* – last week the OAS convened to discuss and approve the request of the Venezuela Interim-Government, led by Juan Guaido, to invoke the “Inter-American Treaty of Reciprocal Assistance”, allowing for military intervention into Venezuelan Territory – this does not mean it will happen, but now serves as another pressure point on the Maduro-Chavista regime. In my view Colombian Armed Forces will cross Venezuela’s Western Border (at some point) in pursuit of FARC guerillas who receive safe-haven there – current political rhetoric out of Colombia alludes to the threat
- Plan Pais & Institutional Change – identifying the need for rebuilding Venezuelan institutions across all sectors – public & private – this organization’s roadmap serves as the basis of public discourse by National Assembly Member & Interim President, Juan Guaido, and on behalf of Venezuela’s opposition government. The most contentious and complicated issue, without question, will be the reversal of private property and business confiscations, a common policy tool of the Chavez Regime in the 2002-2008 period
As I position my company to participate, lead and partner in reconstruction efforts, it’s critical we share relevant experience, cultural knowledge and recent events to assess opportunities and create realistic expectations. Contact me at your convenience to discuss your interest and how we may partner.
*Links and References –
Francisco Monaldi (Plan Pais event, Tampa, March 23rd) – https://youtu.be/zZ2ioUHQgds
Hiram Gaviria (Plan Pais event, Caracas, February 1st) – https://youtu.be/rCNbMPS2L7A
Washington Post (September 15th) – OAS Treaty Invoked https://www.washingtonpost.com/national-security/fears-of-military-conflict-between-venezuela-and-colombia-as-tensions-over-maduro-government-escalate/2019/09/15/c2a4ff88-d621-11e9-9610-fb56c5522e1c_story.html?noredirect=on
Bloomberg (August 2nd) – US Blockade/Quarantine – https://www.bloomberg.com/news/articles/2019-08-02/u-s-headed-toward-blockade-of-venezuela-trump-official-says?utm_campaign=socialflow-organic&utm_source=twitter&cmpid%3D=socialflow-twitter-politics&utm_medium=social&utm_content=politics
Wilbur Ross (August 1st) – US Commerce Secretary – https://www.reuters.com/article/us-usa-venezuela-reconstruction-idUSKCN1UR4GS
United Nations Human Rights Council, OHCHR Report (July 5th) – https://news.un.org/en/story/2019/07/1041902
Plan Pais – Tampa Event Summary (March 22nd – 23rd) – https://www.planpais.com/segmentos2019.html
As we monitor the ongoing political power-struggle, humanitarian crisis and breakdown of basic public services, one thing is clear: Venezuela will require a massive rebuild of their government, financial and oil and gas sectors, transportation infrastructure, water systems, food production capabilities, among others. The Country’s “opposition in-exile” has developed a plan to remove the current government from power and address the complex array of challenges facing their population – the organization is “Plan Pais” and they have a conference here in Tampa, March 22-23, 2019 – take a look…
While Plan Pais has existed as an organization since 2011, “Interim President” Juan Guaidó brought it to the fore in late-January, and, addressed staff and supporters at a Plan Pais news conference in Caracas on February 1, 2019. Mr Guaido references the strategies of the organization regularly in his public speeches with thoughtful detail, while self-exiled Venezuelans manage international support from the United States and dozens more Nations around the world.
Notwithstanding recent events, change will come, and soon Venezuelans will be faced with a “complete rebuild” of their economy and social structures as they navigate the “undoing” of twenty years of administrative mismanagement under the Chavez & Maduro regimes. Prior to the Plan Pais news conference in Caracas (February 1st) a reporter interviewed Hiram Gaviria, National Assembly member and career agronomist. Explaining the critical need to reconstruct Venezuela’s ability to feed its population, Mr Gaviria stated the estimated requirement for agricultural equipment in Venezuela to be US$5Billion annually for the next 5-8 years (https://youtu.be/rCNbMPS2L7A). Expect that budget to be multiplied many times over in both the Oil & Gas and Transportation Infrastructure sectors.
Mister Maquinaria will be represented at the Tampa conference this week and seeks discussion with global partners who recognize this unique opportunity to take part in the stabilization, recovery and expansion of the Venezuela society and economic engines. Having lived, worked and married in Venezuela (1996 – 2002), I am keen to be a part of the reconstruction of the Country specific to my experience in the oil and gas sector, transportation infrastructure, and other sectors based on priorities established by Plan Pais. Please contact me with interest and let’s have a chat!
Industry news has been conflicted regarding the economic outlook for 2019. As a company who is in the “trenches” daily working with industry leaders and equipment users worldwide, we believe there is a significant need to reestablish export channels into reliable secondary markets outside North America. Over the last several months OEM Dealers, Trade Association Members and other owners have increasingly expressed concern over their limited options for expected and orderly liquidation of equipment inventories.
Starting the 2019 New Year with the effects of increased Federal Reserve rates, the nuisance of a “Trade War cloud” and record partial shutdown of the US Government: this year is unique to say the least. The United States GDP annual growth through Q3/2018 was 3.5% and reflected a red-hot construction market widely believed to be unsustainable going back to last summer. Currently, most financial analysts anticipate a pullback this year, nuanced by volatility of consumer confidence and continued uniformity of the pessimism regarding the United States and broader world economy. We agree, believe the US Economy has strong fundamentals and anticipate a soft-landing into a 2.0-2.5% GDP growth range.
The Construction Equipment industry is a leading economic indicator and much has changed since the “malaise of 2007-2011” brought on by a collapse of the US housing market – but much has also remained the same, mainly options. Secondary markets for used construction and earthmoving equipment continue to be limited to the domestic playing field, mainly due to the expensive & cumbersome bureaucracy of modifying Tier IV machines (engines) for export and use internationally with locally available fuels. The “world region model” that characterizes current OEM behavior does not lend to changes, and manufacturers won’t purposely enable their North American Dealers to engage in this activity. Void of the historical “safety valve” for exportation of used machinery into Latin America/Caribbean, Africa, the Middle East and elsewhere – owners have a looming problem.
Some aggressive OEM & Independent Dealers are actively fortifying their capability for international trade via acquisition of non-EPA Compliant machines (Tier II, III) from other regions, shipping them to Free Trade Zones (FTZ) within the USA with intent to resell internationally. These players are setting themselves up for future throughput by ensuring their export sales activities are adequately staffed, supported and ready for an increase in business. In lieu of “de-tiering”, they are currently playing the only game available to them as OEM Dealers
Ritchie Bros Auctioneers (RBA), an industry bell-weather, covered 2018 sales targets domestically due to a strong US economy. We expect their marquee event next month in Orlando will marginally eclipse the record-setting US$278MM of a year ago, which was their first February event post-acquisition of “IronPlanet”. As a market-maker, RBA has yet to introduce a solution for Tier IV (interim, final) machinery being refitted for export, and thus, shares the experience and consequences of limited international trade in their core asset group.
Meanwhile, our industry continues to suffer as existing trade platforms remain outdated, fragmented and generally inefficient compared to other industries. Fee-based tools and websites which emulate and facilitate age-old behaviors have taken some shallow roots, but it’s not enough. End-users need complete platforms which simplify direct involvement and control in the trade of their equipment (usually their largest single capital expense) at a reduced cost. Expect “new players” to emerge, challenge and compete in the sale of quality used equipment currently being relegated to local brokers, auction houses, and via trade-ins on the sale of new machinery – options which relinquish significant value as owners do not perceive better solutions.
The next phase of our economic cycle will be the first real observance of a market dominated by Tier IV machines entering secondary markets in North America. We anticipate equipment owners will seek solutions in a new landscape which include an international component. The low-hanging fruit are machines produced prior to 2012, or, “pre-Tier IV” machines, which generally require no engine modifications for use overseas. Tier III machines (2007-2011) are perpetually in high demand in a very diverse international market, as are the Tier II predecessors. With our first-hand experience in the “de-tier for export” process at the OEM level (CAT, Volvo), we are increasingly being approached for discussion by organizations throughout the industry. Necessity is the “Mother of Invention” on the “de-tier for export” front, and solutions outside the OEM channel do exist.
To learn more about our export and other services click here
A seismic-shift is underway in Venezuela, with myriad implications worldwide. This is “Cuba on steroids”, with the titanic exception of a population “who once had everything” in a globally connected society, then “lost everything” under exceptionally poor governance, all while continuing to preside over unparalleled concentrations of natural resource wealth.
For those who understand the culture, society and follow events in Venezuela, the current situation and accelerated demise of President Maduro’s “Chavista” regime has a ring of finality – an overdue outcome to witness, study and document. Venezuela’s “next government” and entire Western Hemisphere, must have a cohesive plan moving forward. It appears the early chapters of transition were already written, now playing out coinciding with significant historical, recent & upcoming events:
· – Juan Guaidó chosen to lead the Venezuela National Assembly, an elected body widely recognized as the only remaining entity with a mandate from the people
· – President Maduro’s inauguration for a second, six-year term based on a rigged-election in May 2018, and boycotted by the opposition
· – mass demonstrations across the Country and embassies around the world to coincide with this date in 1958 when a civilian-military movement overthrew the government of the Country’s last dictator, General Marcos Pérez Jiménez
· – Caracas, Juan Guaidó, speaking to tens of thousands of supporters at the main opposition rally, declares himself “acting” President of Venezuela (referencing a clause in the current Constitution to legitimize the action) – his claim quickly recognized by the Organization of American States (OAS) and several governments, including Argentina, Brazil, Canada, Colombia, Ecuador, Peru and United States
· – President Maduro (now disputed) announces cutting diplomatic ties with the United States: all embassy personnel ordered to leave within 72 hours; subsequently, “acting” President Juan Guaidó requests the United States diplomatic mission remain in the Country
· – deadline looms per “disputed” President Maduro’s call for all United States diplomatic personnel to depart Venezuela
· – in eight days-time, the 20th anniversary of the first Inauguration of President Hugo Chavez – for “Chavistas” and opposition followers, a significant date
It is clear Venezuela’s “opposition in-exile” had a plan developed to remove the current government from power, finally set in-play by a convergence of events favorable for launch. Today, confrontations loom as “acting President” Juan Guaidó has stated “demonstrations and rallies will continue until liberty is achieved”. The current situation is complex but not surprising – if scripted, a compelling end to the “Chavista Era” would culminate with Nicolas Maduro standing down at the recommendation of the Armed Forces, “acting President” Juan Guaidó addressing the nation on February 2nd, calling for national peace and reconciliation, detailing the structure and actions of his transitional government, addressing the current humanitarian crisis, plan to stabilize the economy, and announcing a firm date for fresh elections later this year. The appearance of a democratic path for a peaceful transition per the Venezuelan Constitution has allowed increased international pressure which, in my view, will become overwhelming for the Maduro Regime.
President Maduro must have received the message that violent suppression of opposition dissidents at his direction, or otherwise on his watch, would bring dire consequences to himself and his “Chavista” cronies. In fact, the International Criminal Court (ICC), has a pending request by six neighboring Countries to initiate an investigation on crimes against humanity allegedly committed in the territory of Venezuela since February 12, 2014. The rank and file of Venezuela’s Armed Forces have no stomach for committing atrocities domestically, nor defending “La Patria” from regional military forces (supported by the United States) whose abilities dwarf their own experience, competency and power. Colombia comes to mind, Venezuela’s neighbor to the West and “cultural sister”, as a Peace-Keeper of good will.
Nicolas Maduro – uncharismatic, weak, inept – was always a strawman for the corrupt political beneficiaries enabled and entrenched by Hugo Chavez. The legacy and cohesion sustained under Chavez died with him in March 2013, and the fuse lit for the regime’s eventual demise.
Regardless of imminent events, change will come, and soon Venezuelans will be faced with a “complete rebuild” of their economy and social structures as they navigate the “undoing” of twenty years of administrative mismanagement, squandering of natural resources, embezzlement, fascism, thuggery and corruption. Having lived in Venezuela “before-during-after” Hugo Chavez’s ascension to power, my experience suggests there will be a powerful and admirable effort on the part of those who remained behind (a majority with no other choice) and those who fled & return quickly, to work for peace and reconciliation. National unity is another matter, a longer-term goal that is required before many others who departed – Venezuelan Nationals, business partners, etc – will feel secure enough to return.
As a “Space Race Brat” born to Parents who lived in Brevard County, Florida & were employed in the Space Industry fresh out of high school (late-1950’s), those insightful parental tech nerds made it my business to engage and leverage technology from an early age (see photo at Pad 39A and Apollo 11, I’m in red). In hindsight, the habitual application of technology has been a fruitful gift.
While Technology, the Digital Age & Social Media have changed most aspects of life as we know it, the construction equipment industry is a prime example of “old habits dying hard”, when secondary markets and participant behavior are considered. The current landscape is painted with auction houses, dealer-to-dealer networks, antiquated websites, poor marketing platforms and even locals attempting to DIY on Craigslist – as with the “late adopters” of the Space Race, the current state of our equipment industry demonstrates collectively we are some of the last to understand it and use it to it’s full potential.
The fact is, most equipment owners/users are not equipped to manage the marketing and sale of their used iron – they wisely invest their time in estimating, bidding, winning and executing projects, as it should be: but something is missing. At the end of the efficient life of machinery it is common to accept low trade values, sell machines to intermediaries and auctions: all paying/netting typically 65-80 cents on the retail dollar. The lack of in-house staff and supporting network charged with creating increased net worth for machinery assets affects competitiveness for contractors and other owners/end-users.
Mister Maquinaria has now “gone live” with our website and set to leverage the power of our global database for email marketing, extensive use of digital and social media platforms & iPhones that have more computer power than Apollo 11 when it launched in July 1969.
Contact us at your convenience to discuss your specific needs – let’s launch a partnership to increase returns on your equipment!
The final result: US$278 Million in gross auction sales, all unreserved – Ritchie Bros Auctioneers did it again and set market values across 12,500 lots of construction equipment over six days.
As expected late-model, low-hour gear was in high demand for domestic end-user’s as the US Economy remains strong – sellers have the advantage in the marketplace on all platforms as supply is squeezed.
Latin American, Caribbean and other International players showed a resurgence of this buyer-base, swarming the Tier III gear, rarely being outbid during the week.
Ritchie Bros has some tweaks to make – it comes with the territory – but considering the impact last year’s acquisition of Iron Planet had on sale volume they pulled it off well, congratulations on a great event!
Mister Maquinaria is ready to assist international buyers in locating and purchasing the machinery from reliable sources in the USA – contact us and let’s talk machinery and exporting!
Three weeks ago we were onsite checking out the iron and the gross sale estimate was $195MM, now that’s been obliterated with the latest estimate rolling in above $275MM – apparently RBA & IronPlanet are “Better Together” as the early media tagline suggested. If the primary goal is volume then this should be no surprise, be ready to reset your marks as the previous high was $203MM in 2012.
Who will be there and what should we monitor to better understand our market?
Late-model, low-hour gear will serve to quench the domestic end-user’s appetite as the US Economy remains hot, providing sellers the power position in the marketplace. We believe prices will be retail (as is typical) and the spectacle of the environment will certainly provide some bidding behavior of note.
Expect to see Latin American, Caribbean and other International Buyers swarming the pre-Tier IV gear, rarely being outbid: a resurgence of this buyer-base.
During the sale and after the dust settles a hot topic will be the simultaneous sale of iron sold “as-is” with descriptions on the RBA Orlando Yard versus the online offerings of remote equipment complete with IP-style inspections. Suffice to say Ritchie Bros will intensely monitor the results, attitude of their clients and trends – as will we.
Look for Mister Maquinaria staff all week and let’s talk machinery and exporting!
Securing the deal to rebuild 6 x CAT 789, 240-Ton Capacity Mining Trucks several years ago was a satisfying professional experience – to date these remain the largest machines ever rebuilt by Ring Power CAT. Freight from the BHP Mine in Chile was expertly handled by an experienced logistics group, leaving the beds behind – rebuilds from the frame-up across all units were complete in about five months after some change orders – they sold to Queensland, Australia in Q2/2012 – let’s do that again starting with mining components!
It’s been several years since we’ve seen Tier III & older legacy machines on the US Resale Market in a big way, I see that changing in 2018. Contrary to what many believe, the US Export Market is not dead, it simply took an extended break due to supply issues, not a decrease in demand. Historical buyers found machines to import from other regions (mainly Tier II & III units from Asia) in lieu of their traditional US-based sources.
Tier III units in the US market produced/delivered between 2008 – 2012 will represent the bulk of this export opportunity. In my view the upcoming market will offer a large volume of this iron (trades, fleet buys, etc) beginning in Q1 2018 and extending a few years as significant inventories tap-out: it is a finite resource. Most “post-recession end-users” who held Tier III machines in lieu of purchasing Tier IV-interim machines in the 2011-2014 time-frame will move forward and out of those aged, higher-hour units as confidence in the United States Economy propels new machine sales.
For makes/models with historical overseas market acceptance, “pre-Tier IV machines” will again flow into the Latin American region and other parts of the world. Having a relationship with an experienced, bilingual/fluent and seamless connection to those customers will be crucial in capitalizing on this opportunity. Social Media & more contemporary Marketing Solutions will commonly be used alongside classic Email Marketing Campaigns. Overall 2018 should be a good year for US Machinery Exports and the annual milestone February Auctions in Orlando are just around the corner as a measure, stay tuned…Prospero Año Nuevo!
This Volvo L350F spent it’s “first life” in a Bio-Fuel operation in the Deep South, one of three (3) equipped with Wicker Logging Grapples: all over 16,000 hours. We took them in-trade, sold the first to another USA-based Dealer and the remaining two (2) units to this Brazilian customer who owns several quarries, produces huge granite slabs, polishes, preps and containerizes for export worldwide – one source for your fine granite countertops!