Ritchie Bros. Plans Largest Canadian Auction April 28-May 1
Ritchie Bros. Auctioneers is set to hold its largest Canadian auction next week, and the downturn in the energy sector is playing a significant role in adding equipment to the auction block, according to Ritchie and Canadian industry officials.
Publicly traded Ritchie Bros., which describes itself as the world’s largest industrial auctioneer, will conduct the auction April 28-May 1 in Edmonton, Alberta.
It expects to sell all of the more than 8,000 items on its auction block and top its previous Canadian record of C$143 million in sales, set last year.
“The energy sector is the obvious culprit here; trucks are sitting and just aren’t moving,” said Marco Beghetto, a spokesman with the Canadian Trucking Alliance in Toronto.
“It will be our largest Canadian auction, by quite a margin,” said Randy Wall, president of Ritchie Bros.’ Canadian operations.
“The impact of lower energy prices is a large macro factor that’s caused businesses to decide this is a good time to shed capital goods in their fleets, until demand reverses and activity levels rise,” Wall told Transport Topics.
“The change in energy prices has created a reason for companies to analyze the composition of their fleets,” he said. “Rather than hold assets that may be unproductive, they may choose to sell.”
Ritchie Bros. has had larger U.S. auctions, typically an annual February event held in Orlando, Florida. That set a record of about US$200 million in 2012.
Wall said that while “a lot of people presume that if supply is at a high ebb that must mean that demand will be lower and prices will fall, we have not seen that this year, because while energy is an important sector, it’s not the only sector.”
For example, a bulldozer that was used in oil and gas operations could be sold and used in the construction, forestry or mining industries, he told TT.
“So what we’re seeing is a redistribution of assets today to other areas where there are current strengths,” Wall said. “Where the energy sector is slower and prices are down, obviously, there’s less investment in capital and infrastructure . . . [which] translates to less people active, less machinery being deployed and utilized, and that means more product is available.”
Ritchie held a recent auction in Houston at which it sold more than 3,800 items, including excavators, crawler tractors and cranes — and about 280 truck tractors and 350 trailers.
With oil prices falling to a six-year low around $42 a barrel last month, Canada’s growth in oil production will slow this year amid declining conventional oil output, Bloomberg News reported April 22, citing the Canadian Energy Research Institute.
The slowdown in energy exploration is “definitely a factor in what we’re going through right now” with more equipment becoming available, a Canadian energy association executive said last week.
Auctions in the Alberta region “have always been a significant indicator of the state of the energy industry,” said Mark Salkeld, president of the Calgary-based Petroleum Service Association of Canada, which represents about 235 energy services companies.
Salkeld, who has worked in the energy sector for 35 years, said he is familiar with the area.
“When you get downturns like this — I’ve seen about five of them, and four in this neck of the woods — that happens regularly when companies are upgrading and getting rid of old equipment,” he told TT.
“You’ve got a lot of entrepreneurs that invest heavily, then all of the sudden drilling programs are cut way back, they don’t have a revenue source to make payments, so the bank tells them they’ve got to sell it,” he said.
But he added that there are companies in other sectors that “buy equipment at a reasonable price, overhaul it and put it back to work.”
The energy industry “moves rigs — a lot of that is bed trucks, or transport trucks and big off-road trucks as well as highway transport,” he said. “You’ve got everything from the fracking companies hauling mud to big container trucks and everything in-between.”
“It’s not all bad news,” he said. “Ritchie Bros. is a place where equipment is moved through. I’ve been in situations where we’ve gone in and purchased 2- or 3-year-old Kenworths [trucks], where we’ve taken them back to our shop and stripped them down, and they’ve worked well for us.”
Ritchie’s Wall said all of the equipment on the block will sell at the auction.
“Everything is unreserved and everything will sell, regardless of price, on that day to the highest bidder,” he said, estimating that about half will stay in the Alberta region and half will go to other areas in North America and around the world.
He added that the equipment is likely to go to a variety of sectors.
“Transportation has been quite good [along with] agriculture, construction and forestry,” he said, adding that those sectors were likely to pick up the bulk of the equipment.
