Effects of Covid-19 on the machinery market

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6 minutes


Published

Nov. 24, 2021

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The covid-19 pandemic has first and foremost been a health crisis, but it has clearly had a large impact on the majority of industries and the businesses within them worldwide, including the sectors reliant on industrial equipment.

The worldwide pandemic has introduced a lot of uncertainty with phrases like “new normal” rather than “business as usual”. This uncertainty is leading to a lot of changes both generally and within specific industries as companies adapt to a variety of new challenges and a vastly different outlook going forward.

Covid and general impacts

Within the industrial equipment sphere there have been a wide-ranging number of impacts. These include changes to the new equipment markets and the impact this has on 2nd hand machinery, the shift from in-person to virtual appraisals, new government funding available to organisations and logistics and shipping difficulties. The impacts have differed across different sectors vastly and this has obviously filtered down into the impact of the second-hand machinery supply, demand and prices.

Going forward, no ones knows exactly how this is going to fully play out but it is clear that some changes are here to stay and some future changes will be accelerated as companies adapt to the fast changing world and will continue to do so as future challenges are presented.

New machines and impact on 2nd hand mkt

From early 2020 when Covid-19 was first discovered in China, the impact on the new machines market was immediate. There was soon to be shortages in both components including semi-conductors, filters and and tubing. There was also a knock-on effect to the supply of new machines, both in terms of lengthier leads times and increased prices. This has all led to an increased demand in some sectors for 2nd hand machinery and ultimately created upward pressure on the prices of these machines as well, especially in areas where supply is scarce.

Repurposing of some manufacturing plants to covid focussed production (sanitiser, ventilators, ppe)

Early on in the pandemic, it was clear that there was going to be huge demand for specific items including, ventilators, masks, other PPE and hand sanitiser. This astronomic demand which arose almost overnight led to a lot of manufacturing companies repurposing their resources to focus on these areas rather than their existing areas of expertise.

Car manufacturers started manufacturing ventilators, breweries starting manufacturing hand sanitiser and a whole host of companies raced to gear up to be able to produce ppe including masks and gowns to fulfil the huge demand and in a bid to win some of the large contracts that were available.

The repurposing of manufacturing plants also created a high demand for new machines to enable them to fulfil their new contracts as well as some machinery quickly becoming surplus to requirements, providing high demand in some sectors for 2nd hand machines whilst increasing supply of the 2nd hand machines in some others.

One company that hit the headlines in the UK was Dyson Ltd. Well known for producing vacuum cleaners, James Dyson and his team developed and began to produce ventilators within a matter of weeks in response to the UK governments “ventilator challenge”.

Another example was LVMH a luxury brands organisation, who switched production lines used for manufacturing perfumes into ones producing hand sanitiser.

Virtual rather than in-person appraisals

One very clear impact of the pandemic, not only within Industrial Equipment, was the move from in-person activities to virtual and remote ones. This was seen greatly within equipment appraisals with it becoming far harder to do in person, especially where machines were located overseas to the potential buyer. Since the start of the pandemic almost 2 in 3 purchases have derived solely from virtual appraisals. One big impact of this has been to reduce the number of large value purchases, especially where detailed appraisals were required (and often compounded by the additional difficulties in logistics and shipping).

Available funding

Government loan schemes providing increased working capital as well as some large manufacturing contracts for the production of items required in the fight against covid-19 led to some firms having increased budgets for manufacturing investment leading to some increased demand for both new and 2nd hand machines.

Logistics and shipping

One huge impact of the covid-19 pandemic is the massive increase in logistic and shipping costs. According to Drewrys composite World Container Index, the cost of a 40ft container at the start of 2020 prior to the onset of the pandemic was just under $2,000. Today the cost stands at just over $9,000 having peaked at over $10,000 a few months ago

Along with the inability to appraise machinery in person, this huge uplift in shipping costs has led to a large decrease in volume of larger transactions.

Sectors that have gained

• Pharma

The impact on pharma was not surprisingly widespread in a worldwide health pandemic. Development and production of new drugs and treatments for covid-19 including vaccinations created a huge demand throughout the supply chain as well as huge increases in demand for PPE including masks and gowns, sanitiser and other cleaning and hygiene products.

• Food processing

Food consumption changed throughout the pandemic in many countries, with restaurants forced to close due to lockdowns. There was a huge uptake in home cooking, especially in areas such as baking and demand for machinery increased greatly.

• Packaging

Driven largely by both the pharma and food sectors, as well as a huge uptick in home deliveries there was an increase in demand for packaging, in spite of the drive to reduce the use of plastics in the face of climate change.

• Construction/Agriculture

Both industries have continued at pace throughout the pandemic and very quickly it became apparent that there was a shortage of new machinery which very quickly translated into an increase in demand for second hand machines, with increased demand and decreased supply ultimately leading to an uplift in prices.

Impact of home working

Going forward, no one is sure exactly how this is going to fully play out but it is clear that some changes are here to stay and some future changes will be accelerated as companies adapt to the fast-changing world and will continue to do so as future challenges are presented. Where possible, companies are going to look to use machines rather than people and the speed of transfer between the two has increased greatly as a result of Covid-19 and will continue to do.

Advances in technology are accelerating at great pace as more time and resources are allocated towards automation, artificial intelligence and big data analytics as companies look to improve their processes, increase their productivity and lower their costs, leading to higher margins and increased profitability.


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