Issue link: https://read.dmtmag.com/i/622612
I DA U N I V E R S A L J a n u a r y - Fe b r u a r y 2 0 1 6 45 TRENDS AND TIDBITS continued from page 43 US rental fl eet sizes have increased dramatically since 2010 in order to meet increasing rental demand, according to the Wells Fargo Construction Quarterly report for the third and fourth quarter of 2015. e report said the fl eet sizes of the major US national and regional rental companies had increased over 55% on an original equipment cost (OEC) basis since 2010. From June 2014 to June 2015, the report said large general rental companies increased their fl eet OEC by 12.6%, while original equipment manufacturer (OEM) dealer rental opera- tions and independent rental companies had increased their rental fl eet size by 17.9% Organic growth had fuelled some expansion in rental fl eet portfolios, but other changes in the last two to three years had also had an impact, according to the report. It said contractors were facing unpredictable work backlogs and projected business activity levels, contributing to an unwilling- ness to commit to equipment purchases. Lack of an extended Federal infrastructure funding bill added to this uncertainty. It also pointed out that short-term rental contracts better aligned with end-users in the volatile oil and gas industry, while there were a number of other end-users whose fi nancial conditions remained weakened by the economic downturn, resulting in a reliance on rental arrange- ments rather than purchasing equipment. It also said there was a demand from bonding compa- nies to shi debt/liabilities off contractor balance sheets as well as broader OEM support to increase rental activity in their dealer network. All these factors have lead US rental companies and dealers to increase their fl eet sizes to accommodate this increased activity, according to the report. Optimism and Concern However, the report said sentiment in the rental sector for the fi rst half of 2015 had been a mixture of optimism and concern. "Many dealers believe that when a Federal road bonding bill is passed and economic outlook stabilises, contractors would rather own than rent their core equipment and will return to the market. Others feel that this will be a perma- nent shi to renting equipment rather than owning," it said. " e second half of 2015 should see most rental outfi ts posting better results benefi t- ting from the recent stabi- lisation in oil rig count and redeployment of excess fl eet that was servicing the oil and gas sector." e report said utilisation (as measured by average OEC on rent against agerage OEC) has been coming in lower on a year over year basis beginning in February 2015, peaking at 330 bps down year-on-year in April and improving to 220 bps down in May 2015. Most of this lower utili- sation was a result of lower demand and utilisation in the oil and gas end markets, as well as weather eff ects that extended in to May this year, according to Wells Fargo. Rental Rates e report said rental rates, which had seen a nearly 26% increase since January 2011, came under pressure for the fi rst half of 2015 for much of the industry. "While most OEM dealer rental fi rms and general rental companies continue to see higher average equip- ment costs many have had a more diffi cult time in the fi rst half of 2015 passing on these higher costs to customers in the form of higher rental rates. "On average, rates went slightly down in March this year which was the fi rst rate decline observed by Rouse for a month other than December or January since 2011. April and May saw rates improve slightly on a sequential basis," the report said. It also said Equipment values were currently running 56.2% higher than the 2009 trough (according to data from the Rouse Value Index). However, it said lower auction prices in the second quarter of 2015, largely attributed to the stronger dollar having an impact on foreign purchasing power, have begun to impact the index which in June came in at 0.8% below the May index value. ● www.khl.com, 12/17/15 US Rental Fleet Sizes Increase