What An Industrial Depression Looks Like: Photos From An Australian Heavy-Machinery Auction

Tyler Durden's picture

Two weeks ago, when looking at the latest Caterpillar retail sales data...

 

... we said that "If Caterpillar's Data Is Right, This Is A Global Industrial Depression."

Today we get visual evidence of this, courtesy of an Australian heavy industrial equipment auction where machines such as a Caterpillar 992C wheel loader, which normally costs $2.9 million, can now be bought for just $15,000, a 99% discount!

As Australia's ABC reports, now that the commodity bubble has burst for good, auctioneers are hard at work selling tens of millions of dollars of suddenly useless coal mining machinery for just a fraction of its original market value.

The reason is known: the severe downturn in the Australian resources sector (courtesy of China's whose commodity imports are declining with every passing month) has led to a massive oversupply of equipment, and much of it is unsuitable for use in any other industry. This means unwanted excavators, trucks and sundry heavy machinery will end up as scrap, if not sold at auction.

ABC's reporter visited just one such auction in New South Wales, which was owned by Big Rim, a mining services contractor which also collapsed after the miners it serviced also closed.

What he saw was stunning:

"At the moment we've probably got the worst downturn I've seen in 25 years," said Chris Hassall, whose company is conducting the auction.

Peter Turner's Gold Coast company Turner Engineering used to compete for contracts with Big Rim. "I'd be interested in at least 50 per cent of what's here, and there are at least 100 machines here," he said.

One of those machines was a large water tanker which Peter Turner was running the ruler over. "It's not worth a lot. It's worth $75,000 or something, but you can't build the tank for that."

Worse, when the auction began the owners of a once-thriving business were hoping this fire sale would at the very least cover their debts. No such luck as the photos of the epic discounts on the equipment show.

"Some of the old equipment that was working in the last two years is now redundant, won't go back to work," said auctioneer Chris Hassall.

"We had 20 trucks in the Hunter Valley recently that 18 months ago were probably worth $600,000 each. We've just cut 'em up, returned about $40,000."

It's prices like these which help explain why shares of the Kerry Stokes-controlled Seven Group are less than half what they were two-and-a-half years ago. Seven holds the largest Caterpillar franchises in both Australia and China.

Coupled with the mining downturn, with good second hand machinery so cheap, it is little wonder new sales have been hit hard.

For the sellers it was a bloobath; however at least some of the buyers were happy. "Contractor Peter Turner had been hoping to pay $75,000 for a water tanker, and in the end paid a little more at $77,500."

As ABC concludes, "it was a day which displayed the stark reality of a coal mining industry which has gone from boom to bust in a very short space of time."

Unless China ravenous appetite for all possible commodities returns, the industrial depression, already the worst Australia has seen in 25 years, will only get worse.

And this is what an industrial depression looks like in numbers:

Was: $2.9m | Now: $15,000: Caterpillar 992C wheel loader

 

Was: $1.4m | Now: $50,000: Hitachi EX1200 hydraulic excavator

 

Was: $2.7m | Now: $46,000: Caterpillar D11N crawler tractor

 

Was: $900,000 | Now: $47,500: Caterpillar 775D rear dump truck

 

Was: $200,000 | Now: $2,000: Large workshop with water tank

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DeadFred's picture

Dude, I want one of those for Christmas. Can you FedEx it?

stinkhammer's picture

parker schnabel wants that d11 dozer to get to the glory hole of tradition!

Occident Mortal's picture

"Today we get visual evidence of this, courtesy of an Australian heavy industrial equipment auction where machines such as a Caterpillar 992C wheel loader, which normally costs $2.9 million, can now be bought for just $15,000, a 95% discount!"

 

That's a 99.5% discount actually.

Bunghole's picture

A C series loader from 1988 probably sold for parts.

Happens all the time.

I think CAT is up to the K series in wheel loaders right now.

metastar's picture

Get one for Christmas, Festivus or whatever ...

 

https://www.youtube.com/watch?v=n_hrJyoKmDk

 

Stackers's picture

Take those numbers with a grain of salt. Mining equipment runs 24/7 and is not like equipment that comes out of construction companies. It is bascially throw away junk not worth rebuilding in 5-7 years of use.

True auction sales of good construction equipment has seen a 30% collapse in values from early 2014.

Handful of Dust's picture

It be all about " Legacy. "

two hoots's picture

Interesting how it is easy to see the potential value setting there in this equipment as it is easy to understand why it is setting there.

Why is it so difficult to see the same value in people with degrees setting and know why they are setting?   Like the equipment, if there is no demand, no work, no matter the potential.    People are just as much in the demand/supply mix as is the equipment.

 

QQQBall's picture

i would have up arrowed you, but "setting"?

Stuck on Zero's picture

I could use that Cat 775D to show up the dudes across town who cruise around in their tricked out F350s.

eatthebanksters's picture

They ought to figure out what it costs to ship this stuff to heartleand USA and advertise it to all the ranchers and farmers...at these prices it would all get sold.  I would love one of those loaders in snow country.

AnAverageBear's picture

That's what I was thinking. Roll up to Sonic in that bad boy and order myself a chocolate shake.

Killdo's picture

I am in Melbourne at the moment - it feels quite rich and happy - ots of people in restaurants and bars, and I have never seen so many of them even in Paris or London - pretty full of young people even on Monday night. People seem happy and optimistic and also very friendly. I've only seen 2 (well dressed and very polite) homeless in my 2 weeks here. 

It's probably the nicest city I have ever seen. I was told yesterday mnimum wage is quite high too and their tax-free annual allowance is 18200 (twice as much as in the US) - so mre poeple have more money to spend in bars etc. It also feels much freer and happier than SF, LA or London

If this really is a depression it feels much wealthier and ahppier than any 'prosperity' I have ever seen living in the Uk and the US

Antifaschistische's picture

I think you mean....more poor people living below the poverty line have money....raising min wage does not increase collective income.

COSMOS's picture

The newly painted siding always covers the rot inside.  I'd be scared it I see too many happy faces.  Usually means folks are going to get blindsided.

Killdo's picture

Antifascistiche -I don't know I've only been here 2 weeks or so but it seems happy and wealthy, full bars and restaurants, relaxed, well dressed peopel that seem to get on well and enjoy talking to each other. 

There is no poverty like the USSA poverty - even (or especially ) in San Francisco where I live. Actually I think I have never seen more or worst cases of poverty than I see daily in the USSA - the most hopeless, dirty, sick, left on your own to die kind of poverty that shoudl not exist anywhere

PS I love your username - always reminds me of WW2 movies I've seen as a kid in Yugoslavia

mrpxsytin's picture

I keep trying to tell people to get to Australia. I suppose you just have to see it with your own eyes to understand why.

Nassim's picture

I also live in Melbourne. I have a different impression.

Last Tuesday - Melbourne Cup day and a public holiday - I walked along the South Bank and looked carefully at the restaurants. Most of them were over 50% empty. The weather was great and there was no shortage of people walking about.

Killdo's picture

you probably know better since you live here. I am just visiting for the first time- I spent that weekend in Brighton I thnk (it was raining I think until noon or so) - I was impressed with how many little bars there were in that  area close to the roller coaster. Or where I live in South Yarra. The coffee they sell, (haven't seen any Starbucks anywhere in Melbourne yet), maybe because I live in SF - these bars look pretty full to me (like in Tokyo). Last night on Chapel St all those little bars and restaurants were pretty full at 8pm

ombudsmanrules's picture

I live in both Melbourne and Sydney - if you were in Brighton, Melbourne, you're seriously in the richest part of town.   I live in Brighton 6 days a week but I don't own any Ferraris or Lambos or Porsche GT Cup cars  unlike just about ALL my neighbours.  There are a few tiny SBUX around, but there are more in Sydney; Melbourne people are coffee snobs and refuse to drink anything mass produced - has to do with the large Italian migrant heritage.  

Australian wages are totally unsustainable and property prices in Sydney and Melbourne are beyond insanity.

The China mining mega-boom was a once in multi-generation event.   The worst part is everyone including the government have has just pissed away the enormous proceeds of that boom.   Most of the population is in a state of denial about where the economy is headed - the GDP forecasts look wildly optimistic and the debt and deficit are growing at an astounding pace with no real plan.                                                                           

Killdo's picture

my Irish friends (recent grads) got jobs aroudn Perth (200k USD a year plus I think) - they have been there since about 3 years ago and they tell me their contracts are expiring - so the party is over. One of them is probably moving to Melbourne soon

 

Dugald's picture

Of course 50% empty........They were all at the races or race parties.....you pillock!

ForTheWorld's picture

Sure, the tax free threshold is $18200, but from that up to $37K you're taxed at 19%. After you get past $37,000 per year, you're taxed at 32.5%, then 37% over $80K, and 45% over $180K. Payments to your superannuation (similar to 401K, but far more restrictive from what I understand), are taxed between 15% and 45%. Then there's your Medicare Levy obligation which is 2% of your total taxable income. So on a good day, you'll end up paying more than $15K a year just in various income taxes. Then almost everything you purchase will have another 10% tax on it.

Those two well dressed and polite homeless people? Hipsters. The homeless here are just as drunk and beligerent as they are anywhere, unfortunately.

Keep in mind the median wage is around $57K a year, but that won't be anywhere near enough to allow you to borrow the $300K most people need to get a dump of a house on the edge of any of the 6 major cities in Australia. Average rents across the nation are $486 a week (Source: http://www.abc.net.au/news/2015-08-10/rents-fall-in-every-capital-city-r...), and that doesn't include utilities (like it does in the US), which will get more expensive as wages rise, which then forces retailers to raise prices.

Things sure look rosy in Australia, but scratch the surface and you'll find that people are up to their eyeballs in debt, and have no way of getting out.

RaoulDuke66's picture

I believe you're forgetting the "temporary" (ahem!) debt levy which applies on top (another 2%), making a highest marginal tax rate of 49%. Maybe the feds hope that sticking below that magic 50% will make the larceny magically invisible. Then, for what's left, there's the current debate (guarantee) that sales tax is going to be increased by 50% and newly applied to fresh food, education and health care (because those things are obviously not expensive enough). And don't forget to pay your property taxes, water taxes, and road tolls (obviously not a tax). When the government takes the majority of the fruits of your labour, and it's still not enough, it's time to vote with your feet. Or with a gallows.

ForTheWorld's picture

Yes I did forget that. So I went looking, and found this glorious comment:

"I'm all for rich people coughing up a bit more dough so we can get out of Labor’s debt, but Abbott broke a promise. Another one. How many more broken promises until we’re fed up?!".

Moar fair shares!

As I posted in another thread - NSW councils are "asking" IPART for a 47% increase over 7 years, which in pure numbers terms, is 6.7% per year, but those who understand exponentials know it's going to be much more than that in the end. Plus, if these amalgamations occur, who knows how many extra funds councils will claim they need to help offset the costs of the amalgamations they decided upon.

Killdo's picture

Thanks FTW and RD66 for very useful info and for clairfying tax rules etc. 

Compared to where I live in San Francisco this is still a bargain (compared to the rent one of my friends is paying close to South Yarra  - roughly the same are to where I live in SF (Russian Hill - although I think South Yarrra is better and livelier)- but his place is better and has a pool - my rent costs about 3.3 times more. 

the way tax works in the AUS seems similar to the UK . I've always thought we pay more tax in teh USA and get nothing in return pretty much. 

I've lived all over the place - but Melbourne seems maybe the best place I have ever seen - a mx of Notting Hill, Charleston and Venice Beach - with nicer people and better looking and friendlier women

ForTheWorld's picture

Taxation in the US and Canada is, for the most part, less than in Australia. The consumption taxes in North America is where you get stung. Another example of absurdity is that payroll tax in Australia is 30% (last time I checked), which also contributes to the high prices in Australia.

Melbourne is quite nice. It also has the largest population of Greeks in the world, outside of Athens.

Killdo's picture

In canada there are hidden costs (almost like a tax)  (i.e. car insurance is much more expensve than in the US - and I think it operates as a monopoly in each province. You end up paying 5 times or so as much compared to the US

bunnyswanson's picture

Rackets hidden by duct tapped investigative journalists have made weak shallow men very rich.

Meet the real King of England, King Hastings and the beautiful royal family found down under (Let's plead with him to step up the plate.)

https://www.youtube.com/watch?v=z5fIwLo1Trs  (Documentary, An illegitimate Hair)

Captain Obvious.'s picture

I rode out of Melbourne on my bike on the freeway. The most terrifying 2 hours of my life. And yes. I have fought a war.

You can shove that place.

Killdo's picture

I am just a toruist but compared to SF or London and LA (constant traffic jam and pollution) - this is like traffic in a little Serbian town where I come from

 

RaoulDuke66's picture

Victoria isn't a resources state. WA and Queensland are, and the economies (especially WA) are crashing hard. Also, the average house price in Melbourne is $800,000, thanks to negative gearing for property speculators, concessional capital gains tax for property speculators, and the government's refusal to enforce rules preventing foreign buyers taking existing homes. Young Victorians will never be prosperous enough to own their own homes. Sounds more like poverty to me.

Killdo's picture

yes that 's what everyone tells me - and I believe it. Yet still more people I know here have more and better houses than the ones I know in London, Toronto, LA or Tokyo - so cmparatively it's still better. and you seem to have better architectural code - I don't see any new ugly buildings being built like in London,or Toronto. Archtecture is well preserved and new buildings fit in (a rare thing in today's world I thnk). 

Amicus Curiae's picture

if you buy in the city , yes  non affordable

but a 1/4acre block  n 3brm house ,small rural towns 120k or less avg

it depends on your choice of area and acceptance of lower paid lesser jobs BUT a huge increase in quality of life overall.

city living sux...

Killdo's picture

that's always a good idea in every country and if I move here that's what I will do

Amicus Curiae's picture

as   someone living on that taxfree base income

its NOT an income that allows any outings to bars etc.

rent in Melb? have you looked?

prices of a loaf of bread?

3/4$ avg

dozen eggs $4

cheese 13$ a kilo avg

potatos 2 to 3 a kilo

electricity 30c per kw hr some more some less.

the poorer still pay the gst and the same price for food n rent etc

but the avg lowest wage is near 20$ n hr.

the base dole is around 250 a week small flat is 2oo+ a week

not much left to eat let alone pay fares to go for a job is it?

what youve seen is the well off , you need to look around in the less "nice" areas.

 

 

Max Cynical's picture

Not buying the "was" prices.

Pun intended.

MalteseFalcon's picture

If ZIRP and NIRP are official policy, then I say:

SHUT.IT.DOWN

Osmium's picture

I would imagine that a 992C would have close to 50,000 hours on the frame.  

Sudden Debt's picture

Most of these trucks need 3 to 4 gallons of fuel per mile.

So if they're somewhere in the outback, you'll need about 20 to 50K to get them to the coast.

But if you want to do some landscaping, these are what you need!

 

The best Sun's picture

However, you could make a lot of soylent green with that big ass front end loader if you drove through a few farmers markets.

GMadScientist's picture

The Mad Max sequel got a little less action-packed when the vehicles slowed to 4mph and started beeping incessantly.

KnuckleDragger-X's picture

I get flyers from all the area auction houses and there's an absolute auction coming for heavy equipment and according to the auctioneer, there isn't much interest. If I can figure out an excuse for bidding on giant pieces of heavy equipment I have no use for, I might make a few bids......

Sudden Debt's picture

This summer I was at a auction of repo'd company cars and man... bmw 5, 6, I8.... everything! 10 to 15K miles 

and those prices where just insane!

On the other side, there's people making some serious profit from those repo's.

These days, it's nearly insane to buy a new car, you can buy the nearly new at 1/4th of the price.

KnuckleDragger-X's picture

Gravediggers always have a job......

Skateboarder's picture

Skatedad has a superstition that reposessed things have bad juju associated with them. I tend to agree.

A car sold on Craiglist from a responsible and happy seller is a better deal, though you are likely to pay half the new price instead of a quarter.

Yeah, it's an inanimate object and serves the purpose of getting you from point A to point B, but.... beware the juju!

@_@

COSMOS's picture

I have a feeling Skates is spreading false rumors to make sure there are fewer people at  the repo auctions.  See ya at the repo auction Skates, look for my roller blades and wave high buddy.

ghostzapper's picture

Are those figures comparing sales prices of the depicted equipment or before and after figures for the Cramer and Gartman trading "accounts"?