Fleet expansions scored the same as 2007, but replacement rates bounced upward last year. Managers of the country’s mining and energy fleets want to replace at an even higher rate in 2009.
All three nonconstruction vocations were down last year, with expectations limited for 2009. Material producer were hardest hit, but utilities reported a decent 2008 and some optimism for 2009. What follows is a detailed look at the results for each vocation.
Materials producers
In our 2008 Giants report, we noted that material producers had been “blindsided.” The results of our Annual Report & Forecast do nothing to dispel that reading. Materials producers labeled 2008 “poor,” falling short of their expected “off” year. The forecast for 2009 is also “poor.”
Work volume trends have shown a precipitous decline since 2005, when the net (increases in volume minus decreases) was 25 percent. For 2008, 59 percent of materials producers said volume decreased compared to the year before and 12 percent said it increased, leaving a net of -47 percent. The projection for 2008 work volume was a net of -10 percent.
For this year, materials producers project a net of -12 percent: 33 percent say volume will be below 2008 levels and 21 percent say it will be above last year. Competition within the materials production market is highly competitive, say respondents. About six out of 10 label it “very competitive,” and 17 percent call it “intensely competitive.”
Fleet size trends also indicate blindsiding, following almost 10 years of consistent net numbers in the 20- and 30-percent range. In 2008, the net was -3 percent (forecast as 8 percent) as 17 percent decreased fleet size and only 14 percent increased the number of machines in their fleets compared to the previous year. This year, fleet size nets out at 3 percent, with 14 percent anticipating growth in the numbers of machines compared to 2008 and 11 percent expecting fewer machines in the fleet.
Not surprisingly, replacement rates fell in 2008. Materials producers replaced 4.7 percent of their fleet last year; they had anticipated a rate of 5.2 percent. This is down from a peak rate of 9 percent in 2004. Next year, the replacement rate is forecast to increase to 5.6 percent.
Overall fleet condition, also down from 2007 numbers, was rated “excellent” by only one in 20 respondents in 2008, and “very good” by 32 percent. About 16 percent said overall fleet condition as “fair” or “poor.”
Mining and energy
Business fell off dramatically for mining and energy firms, according to those reponsible for managing the fleets of construction equipment, who rated 2008 as “off” after having projected it to be a “good” year. The exceptions were respondents in the Northern Plains and Mountain regions, who rated 2009 as “very good.” Expectations for 2009 do not move from 2008 as managers forecast another “off” year, with Northern Plains and Mountain regions expecting another “very good” year.
Work volume trends in mining and energy sectors provide the reality behind the rating, with 39 percent of respondents saying 2008 work volume was less than 2007. Volume, measured in total machine hours, increased for 24 percent, which leaves a net of -15 percent. This was the lowest net in more than 10 years, and well off the 25 percent net forecast for 2008. For 2009, 30 percent predict work volume will be higher than in 2008. Subtract the 17 percent that project lower work volume, and 2009’s net is 13 percent.
Fleet trends for mining and energy fleets were not as negative as business trends. About one in four respondents reported increasing the size of their fleets vs. 2007 levels and 10 percent said fleet size decreased for a net of 16 percent. The projection had been a net of 20 percent, and it is forecast again for that level for 2009.
Replacement rates increased last year after a dipping in 2007. In 2008, managers reported replacing about 8 percent of their fleet, which is one of the highest rates in the past 10 years but less than the predicted rate of 11 percent. For 2009, the projected replacement rate among mining and energy fleets is 9.5 percent.
Mining and energy fleets were rated in “excellent” or “very good” condition for 44 percent of respondents in 2008. This is down from 2007 levels, when 55 percent of respondents said their fleets were in similar condition. For 2008, 18 percent of managers said fleets were in “fair” or “poor” condition.
Utilities
Fleets in this sector are the one shining light in this report, although respondents also report trends down from 2007. For 2008, utilities fleets rated business “good,” down from last year’s “very good.” The Mid-South region rated 2008 as “very good.” Expectations for 2009 are also “good,” with again one region flying above the rest. New England expects this year to be “very good.”
Looking at total machine hours, 32 percent of respondents said 2008 work volume was less than 2007. Add the 29 percent who said volume was higher, and the net for 2008 was -3 percent. This was off 2007’s net of 20 percent, and far below expectations for 2008 of 26 percent net. For this year, 30 percent expect total machine hours to increase and 17 percent expect hours to decrease for a net 2009 work volume projection of 13 percent.
Fleet size trend tapered in 2008, although the net was still in positive territory at 14 percent. One if four fleets increased the number of machines last year compared to 2007, and 11 percent said they reduced the number of machines in their fleet. The net remains the same for 2009 projections, with 23 percent expecting to increase their fleet size minus 9 percent who say they will decrease the number of machines in the fleet.
Replacement rates, however, continue to run about 10 percent. Last year, the rate came in at 10.3 percent against a forecast of 10.6 percent. For 2009, the replacement rate is anticipated to stay close, at 10 percent.
Fleet condition, as a result, remains “excellent” or “very good” for more than half of the respondents. Over the past few years, this number has hovered in the 55-percent range. On the other end, only 8 percent rated their fleet condition as “fair,” with none saying their fleet rated “poor.”
