What's Hot, What's Not

Hassalls 'What's Hot, What's Not' identifies key movements and value shifts among asset classes in the Australasian resources sector.

What's Hot
  • Cat 793 D or F models - Almost none of these available on the used market and demand for them is red hot. Supply and demand factors indicate the pricing for used models is lifting.
  • +500T Excavators. Lead times for these are out to 14months in some cases with OEM’s incurring a backlog of orders as the capex tap gets turned back on.
  • Cat D11T / D10T - Very limited availability of low houred units (e.g. sub 5,000 hours); demand is strong and market factors indicate value is rising.
  • Cranes - less than 10 yrs. old in the circa 250T category are hot, and common comments from industry professionals are values have moved upwards by 10-15% in the past 6 months for mid-sized cranes.
  • Drilling. Late Model High Spec Exploration Drilling Rigs. With the coal industry turning the demand for late model gear has increased.
  • Graders - Strong resurgence in buyer interest in the older H model graders. Interestingly, the later M models are proving not to have the longevity as their predecessors, nor are as sought after.
  • Cat D6 - D8 dozers - These units are in strong demand driven by the beef and cotton industries. We have received strong interest from Western NSW buyers for these.
  • NSW - In Q1 of 2017 our main buyer geography has come from NSW, particularly in regional parts of the state. Regional Victoria has also seen strong buyer interest for assets to service the Ag sector.
What's Not
  • Rigid trucks with prefix A, B or C in model - On the current market, C models are at the outer edge of what buyers are seeking.
  • Old Cranes - specifically cranes out of the required 10 yearly certification are challenging to sell unless they're from a tier 1 brand and boast good tonnage.
  • Old Exploration Drilling Rigs, Mines are not allowing old gear to go onsite and older low spec gear is only going to be sold to second tier operations.
What's Steady?
  • Iron ore - With the base price currently being above $70 US/t since late December 2017. 41% upward change from June 2017 when the price was $51 US/t.
  • Coal commodity price (see below)
  • USD$ (see below)
Commodity Pricing and FX

Coal Commodity Price. Macquarie Bank’s latest bulk commodity price forecasts with factors from both within and outside of China seeing the bank upgrade its views over the next couple of years. “The biggest deck hike in the space was for metallurgical and thermal coal with prices for 2018-19 lifted 10-45%. World Bank suggests Coal prices are expected to average $85/ton in due to continued efforts by China to reduce coal supply. However Coal faces environmental headwinds going forward, and China’s coal policy will be a key driver given that the country consumes half of the world’s coal output and that coal accounts for more than 60 percent of the country’s energy needs. Let’s not discuss Adani…

Iron Ore Price. With the base price currently being above $70 US/t since late December 2017. 41% upward change from June 2017 when the price was $51 US/t. UBS and Citi suggest iron ore prices to average around $64 a tonne in 2018 - flat on 2017’s $64.30 - with the market proving surprisingly resilient. Spot iron ore, currently around $75 a tonne, last traded below $52 in June 2017, but there are signs of an (expected) contraction in China’s steel industry.

USD$; Depending on who you listen to the USD is predicted to sit in the 76c to 80c to the AUD in the next 2 years. The pundits have been well off before though predicting low 70c only a year ago.

Trending

Mergers and Acquisitions. The last 12 months has seen Emeco buy Force, NRW buy Goldings, MacMahons buy TMM Group which suggest consolidation and non-organic growth are in vogue. Market sources suggest the next 12 months may be much bigger that the last 12 months in the M&A space with larger firms potentially being acquired and further consolidation or acquisitions of smaller company’s highly likely.

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