HDD Used Equipment Market Remains Strong

By Sharon M. Bueno - Managing Editor of Trenchless Technology - November 30, 2016


The time has come to take the plunge and increase the number of drill rigs in your fleet. Or perhaps your need is to replace one of the aging rigs in the yard. What do you do? Do you immediately start researching the latest and splashiest rigs in the manufacturers' catalogs or do you explore high-quality previously owned rigs available for sale?

The used equipment market for horizontal directional drilling (HDD) is an interesting one, as well as a popular one. While a potential buyer may be tempted by the newest rigs on the market, the availability of used HDD equipment provides budget-conscious contractors with a purchasing option that will still get them a solid piece of equipment to meet their needs.

Domestically, the HDD market is experiencing a slowdown in the oil and gas sectors but the strong fiber-optic work has buoyed used equipment sales for compact and midsize rigs in recent years. Internationally, used equipment sales aren't faring as well, hit hard by oil prices and the weakness of international currency vs. the U.S dollar. We spoke with two of the leading HDD used equipment companies, HDD Broker and MTI Equipment, for their insight on the market, as well as the mindset of the customers.

Both companies sell and buy used Vermeer and Ditch Witch HDD rigs. HDD Broker, a Vermeer Mfg. company, was founded in 2001, born out of the need for customers worldwide to have access to used HDD equipment. Today, the company also represents sellers of other industry equipment such as vacuum systems, fluid recyclers, auger boring equipment and more. MTI Equipment, a Charles Machine Works company, was founded in 1986 and began selling HDD rigs during the 1990s. Today, MTI buys and sells HDD rigs and related support equipment all over the world.

Both companies view the used equipment market as strong and thriving.

"Overall, the current state of the used marketplace is positive," says HDD Broker general manager Renée Lauzon-Martin. "Consumer confidence remains high, though some people have raised concerns about the outcome of the U.S. elections, concerned there will be an escalation in regulation and EPA standards in an already heavily-regulated industry ... However, most contractors report they remain busy, depending on the HDD segment. The used equipment marketplace is alive and healthy. While the global economy is still recovering, the future is looking bright for HDD utility installations and the equipment that installs it."

"The U.S. market is driving our business right now with the overseas market being very strained," says MTI Equipment purchasing manager Shawn Hendricks. "We have found that the strength of the U.S. dollar vs. the other currencies has been a large reason for this tough international market.

"Things are similar to last year with the demand for the 20,000-lb class down a little and the 9,000-lb class seeing an increasing demand. The biggest change we have seen in the last few years is the decrease in international sales, which seems to get a little worse each year. With the introduction of Tier IV over the past few years, the used market has attracted more customers wanting very low hour Tier III units," Hendricks says.

Both Hendricks and Martin attribute the strong used equipment sales status to a few factors, including the fiber-optic and telecom market, as the need for faster and stronger bandwidth continues to grow. These installations have bolstered the compact to midsize rig sales. "The U.S. fiber market has really driven the small to mid-class drill market with a very strong 9,000 to 20,000-lb class," says Hendricks. "The fiber projects have been driving a large portion of the market demand over the last two years. It really has been the No. 1 biggest factor that directly impacts the sale of rigs."

While the fiber demand has netted an uptick in sales for the compact and midsize rigs, Martin also sees the larger rig market opening a bit, even though oil and gas work is down. "Recently, we've noted that used pricing is coming down on the big rigs and, as a result, we've seen some promising sales activity," she notes.

Martin also points to the new equipment market as a contributor to the strong used market, explaining it this way: "New model releases always create waves in the used marketplace. The impact of used pricing depends on the success of the launch. If a rush of buyers trade up in to the new model, it can flood the used market with the older model, thereby putting downward pressure on the pricing. Conversely, we have seen circumstances where new model launches actually increase the value of its predecessors. For example, when Tier IV final units were released, some contractors specifically strove to avoid them. The ultimate impact of Tier IV engines has yet to be fully felt in the marketplace, especially since emerging markets have yet to implement the infrastructure needed to support and operate them."

She says the new and used markets are interconnected, with the ebbs and flows for both tied to overall industry demand, as well as regional, national and global economic drivers. "Just like the stock market, forecasting these ebbs and flows can help with deciding when to replace a piece of inventory in your fleet, getting maximum resale value from the used piece while paying the best possible price for the new asset," Martin explains.

According to HDD Broker general manager Renée Lauzon-Martin, new and used sales are intertwined. Historically as new equipment sales fall off, used equipment sales climb and as new equipment sales climb, used equipment sales drop off.

Knowing What to Buy

Just like any significant purchase you want to make, you need to prepare yourself before pulling the trigger on a deal. Knowing what to ask during this process, makes everything go much smoother. Many of the questions customers have mirror those you would have for a new equipment purchase: cost, bells and whistles, financing options and how it fits your needs. But with used equipment, there are other factors to consider before making your purchase, such as dealer support for your used rig.

"Dealer support is one of the biggest, and the one with the biggest potential impact to the profitability of your new machine," Martin says. "Some questions to ask yourself include whether the dealer has mobile service capabilities, how far away from your shop they're located and how much support they're willing to offer for a machine that was not sold by them. While that last question may sound surprising, we hear constant stories from our customers that their local dealer has offered little to no support for their purchase because it was not bought through the dealership."

What are used equipment buyers looking for? The reasons for buying may vary but Hendricks says buyers do hold one thing in common: they want reliable equipment. "They want something that is a good, usable piece of equipment at a good price," he says. "In the past, many buyers were OK with buying a used machine and then spending their time working on it themselves. Over the past few years, I have seen an increase of customers wanting a machine that can go right to their jobsite without them spending their time working on it ... Whether you are buying new or used, reliability and getting right to work matter to the customer."

Hendricks further notes the importance of working with an experienced salesperson with knowledge of the HDD industry, who can direct customers to correct size rig that has the capabilities to do the job they are asking it to. "Most people look for make, model, year, hours, condition, which are all very important things to talk about but it is not the only things that should be discussed. Considerations including the frame, gearbox, rod, mud pump, hydraulic system, and is this a good year for that particular model machine. Certain year model machines are better than others and have different features that an experienced salesperson can help you make the right decision [which, in turn,] can help make you more successful. Many times, I find that customers are looking for the wrong size machine to effectively do their job. It is all about getting the right machine in the best condition possible to fit your budget."

There's no right or wrong time to buy used equipment; however, spring and fall often see an upswing in volumes during those two periods. "These small HDD units typically get worked until the last moment and then go thorough post-season maintenance, or are sold in preparation of new assets coming into play for the next work season, "Martin says.

You can also buck that trend and buy small units when the interest is low: in the dead of winter, she says.

by Bueno, Sharon M. "HDD Used Equipment Market Remains Strong" Trenchless Technology

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