Things are tough all over — especially when you are talking about real estate development. This is particularly true in Dubai, the Arab emirate with the world’s tallest building and a really big pile of debt. That debt came (in part) from a construction binge and that construction binge meant they had a lot of cranes. Dubai was widely reported to be home to 25% of the world’s construction cranes. Now that number might be utter nonsense (see this Numbers Guy column from the Wall Street Journal for more on that), but it is clear that Dubai is now home to too many cranes:
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This is an interesting capacity and demand management problem. Having a crane sit around is expensive but the market is incredibly soft. I suspect that moving cranes to other markets is possible (e.g., China), but that will also be expensive and there may be a question of whether the owner has the sales organization in that part of the world. So what’s a crane owner to do? Clearly, the guy in the video who is angry that competitors are letting cranes out at less than cost didn’t take Econ 101. Assuming that a contract covers the added cost of repositioning the crane, getting 50% of the cost incurred when the crane sits idle is better than having the crane just sit idle.
I wonder how contract length has changed since the start of the crisis. Given that much excess capacity, short-term contracts that contribute to overhead but don’t tie up a crane for a long time have to be desirable.