Business as usual in 2023

It may take time to narrow the gap between the global demand and supply of spare parts. The possibility of a hard lockdown in China, where the bulk of products is sourced, has dashed any hopes of the resumption of mass production. In addition, global inflation, fuelled by increasing rising energy prices, will continue to occasion an increase in shipping costs, which will result in high equipment and spare parts costs. And, due to these two factors, MHS Plant & Equipment predicts, that increasingly, mining companies will turn towards procuring second-hand yellow equipment.

The Managing Director of MHS Plant & Equipment, Conrad Smith, does not proclaim to have in his possession a crystal ball to tell the trajectory of the secondhand yellow equipment in 2023 and beyond. Nevertheless, based on the impact of current developments in the global economy on the equipment and spare parts sector, he foresees a repetition of the 2022 scenario.

In this atmosphere, he looks forward to MHS Plant & Equipment growing its core business portfolios of second-hand yellow equipment sales and equipment rental.

“It will generally be more of the same,” he states, highlighting the supply chain disruption and global inflation heavily impacting the management of equipment inventory of mining companies.

• The supply chain disruption

As this publication heads to press, due to the rise in COVID-19 infection, there is a huge possibility of the imposition of hard lockdown COVID-19 restrictions in China. This has dashed initial expectations of the resumption of mass production in the country.

Since the first quarter of 2003, hard lockdowns have caused costly disruption of the operations of equipment factories in China, with massive ramifications across various industries globally.

Observing the recent development, Smith says it reinforces the moral of the risk of putting all their eggs in one basket in the supply chain and the importance of having contingency plans firmly in place. Based on this, he sees secondhand yellow equipment remaining a proverbial low-hanging fruit for industries seeking a viable alternative to filling the gap in equipment supply.

• The impact of global inflation

Supply is not the only factor shaping current purchasing trends.

In 2022, prohibitive equipment prices, mainly on the account of astronomical shipping costs, compelled mining companies to shift to the second-hand yellow equipment market to replenish their inventory. What was witnessed was that clients deferred new equipment purchases and elected to retain their old stock. Instead of new purchases, they explored the cost-effective option of the second-hand yellow equipment market.

Looking forward to 2023, Smith expects more of the same in equipment purchase trends with the war in Ukraine showing no sign of ending soon. Concurring with his viewpoint, a World Bank forecast for 2023 paints a gloomy picture of the world economy, against the backdrop of record-high energy inflation in western countries. “Global growth is expected to decelerate markedly from 4.1 per cent in 2022 and 3.2 per cent in 2023,” notes the report.

Equipment rental

MHS views equipment rental continuing as a strong growth avenue in 2023, especially in South Africa where it is domiciled. This is based on a recent trend.

In 2022, opportunities opened up for small contractors, following the closure of some big contractors to mining companies (only five remained at the last count). So, MHS views this development as a potentially lucrative market for its second-hand yellow equipment. ‘Currently, there is a gap in the market for small and medium-sized players which discerning providers of second-hand equipment should be able to service,” Smith is upbeat

Perfectly positioned

Given the above mentioned developments, Smith declares that MHS is adequately resourced to meet the increase in demand for yellow equipment – both in equipment purchases and rental - as it has always done in recent years. Specifically, he mentions access to equipment from a diverse database of suppliers worldwide which has been built over the past twenty-five years, as a strong point in the area. This is above and beyond the know-how of helping mining companies get the best value for money from the disposal of their redundant stock and new purchases.

As to handling requisite logistics, the client can rest assured that everything is in the capable hands of its experienced team. The team can handle the entire process from start to finish - procurement, shipping, marine insurance, clearing and forwarding to delivery and commissioning on site.

In equipment rental, MHS is going all-out to seek innovative ways of meeting the needs of upcoming contractors, especially black-owned who may be under-resourced. In particular, it has created tailor-made packages for selected smaller Black Economic Empowerment (BEE) groups and communities that work for the large mining Houses.

Regarding black-owned businesses, the company has taken a broad approach, encompassing assisting with equipment, training and expertise that guarantee great ‘uptimes’ for the sites. “There are various models which we offer from normal dry rate rental (no operators) through to a Rent to Own model (with MHS support). This model is especially attractive and supported by the blue-chip mining houses, assisting them to empower local communities without any disruptions to their operations,” Smith expounds. “We have devised what we hasten to call a model of sustainable empowerment.”

While MHS Plant & Equipment is relishing emerging opportunities, when persuaded to comment on the possibility of being overwhelmed by increased demand, Smith says: “We have already proven that, perfectly positioned, we can handle increased orders from clients worldwide. As we did in 2022, in 2023, it will be business as usual.”

Based in Midrand, Johannesburg, MHS Plant & Equipment specialises in the import and export of new and used mining and construction equipment. The company buys and sells construction and mining equipment throughout Africa, Australia and the Americas. It provides solutions to liquidate assets for mining and financial institutions on a global scale.

International company shift to local companies

There is a mindset shift, witnessed in 2022, noticeably, amongst Australian and European companies, augurs well for the company’s immediate and medium-term growth plans. Interestingly, the companies have shifted from engaging international suppliers to local players for their yellow equipment disposal or procurement requirements. “International companies have noticed the convenience of using local players with experience on the ground. We are keen to play a role in meeting their specific needs in yellow metal equipment procurement or disposal,” Smith underlines.

What gives MHS the edge as the go-to supplier/seller of second-hand yellow equipment is the experience of the common risks encountered in Africa. The risks include poor infrastructure, political instability and red tape involved in getting the necessary paperwork.

Predictable redundant asset disposal

MHS guarantees that it can carry out disposal of the redundant equipment smoothly and on time, ensuring that clients get real value. This is thanks to its extensive database of potential buyers of the equipment and the capacity to deal with the buyers effectively.

“We ensure transparency in the transaction process. Our transactions are more predictable than unreserved options (in-house asset disposal). This eliminates sales fees and buyer’s commission. We offer the most cost-effective option,” states Smith.

“As we know models which sell well into a territory or the region, we do assure the sellers of the best possible returns at all times,” Smith adds.

Through unreserved auctions, sales attract an 8 to 10% fee for the sale, plus a 10% buyer’s commission (almost 20%), before factoring in any marketing costs. The buyers take this 20%, plus the cost to relocate the equipment into consideration when bidding.