Although experienced in pulp and paper mill operations and allied
consulting activities,
the writer does not profess to have expertise in the acquisition
and selling of used and surplus equipment. However, specifying
and purchasing manufacturing and converting equipment over the
years has provided an admittedly biased and somewhat limited view
of the used equipment business. Many of the more well known established
dealers are full service operations providing and/or arranging
for equipment dismantling, removal, refurbishing and warehousing.
Further, many dealer/brokers tend to specialize in an industry
segment such as pulp and paper manufacturing, converting or corrugated
operations. This specialization certainly enhances their expertise
in a particular segment of the industry, and equally important
is the inherent familiarity they've acquired regarding the many
aspects of their market.
It is not unusual that used equipment
may not perform to the production or quality level of its
prior installation
Generally, there are few compromises that can be made when purchasing
used pulp and paper manufacturing and converting machinery. Applicable
considerations include: specific type and function; size/capacity/speed;
condition and/or suitability for rebuilding; spares availability,
price and dismantling/shipping costs. Additionally, there are
government regulatory requirements, installation permits and licensing
issues for certain equipment. Prime examples are steam generators,
pulp mill digesters and paper machine dryers. As these are pressure
vessels, many countries require they be inspected and coded equivalent
to the US ASME or German DIN standards. Also, converting equipment
such as coaters, rewinders, rotary sheeters and guillotine trimmers
must in many countries meet stringent safety requirements relative
to connected power, personnel guards, and interlocks on moving
components.
Clearly, the promotion and sale of new equipment is much more
straightforward than selling used equipment for one simple reason.
New equipment buyers can specify their exact technical requirements.
Important when considering used equipment is the matter of condition
and serviceability. Although there are exceptions, used equipment
is usually sold 'as is where is'. Interestingly, and hopefully
without a subtle inference, 'as lying' is descriptive terminology
sometimes used when promoting used equipment in the UK.
It is not unusual that used equipment may not perform to the production
or quality level
of its prior installation.
Not unheard of, and
not always acknowledged, is that operator skill can significantly
impact the performance level of some equipment. Stated another
way, the former owner's crews were familiar with, and knew how
to compensate for any of its operational deficiencies. An extremely
important concern is the availability of spares, particularly
for older models. Another consideration for some buyers is that
used equipment can be more difficult to finance when there are
no performance guarantees. However, this legitimate concern can
in many situations be alleviated. Several prominent pulp and paper
equipment manufacturers have established used equipment divisions.
Equipment refurbished in the manufacturer's works, or by others
using the manufacturer's components is of considerable appeal
to prospective buyers, provided it is affordably priced. Further,
some manufacturers may provide financing from 'in house' sources.
It is a given there are many variables that can impact the serviceability
of used equipment. Further, there is an absence of an industry
standard for used equipment selling prices and sales commissions.
Therefore, the value of used equipment is the price it can be
sold for, and not what it cost the owner or dealer/broker. Additionally,
there are two factors that can have a significant impact on sales
transactions. They are: how quickly must the equipment be removed?
and how badly is it needed by the prospective buyer? In these
not uncommon situations, price is not always the prime consideration
when locating equipment that can quickly get an operation back
on line. Here's where astute dealer/brokers who are aware of the
situation on both sides of these transactions can do really well.
Simply stated, the adage, 'trash to one may be another's treasure'
is often applicable in these instances.
The value of used equipment is the price it
can be sold for,
and not what it cost the owner or dealer/broker
Not surprisingly, prices quoted to prospective purchasers can
vary widely. One dealer noted that a multi-mill conglomerate might
be quoted a higher price for a given piece of equipment than he
would quote to a budget-constrained one-paper-machine mill. The
reasoning is relatively simple. When a major conglomerate needs
something now, it will buy it now. However, if there are no other
prospects, the dealer may sell to the smaller operation at a lower
price provided there is a nominal profit. Further, mills will
often ask dealer/brokers to 'get offers' since they are not aware
of its value in the current market. Again, here's where personal
relationships can come into play, whereby mill personnel may contact
favoured dealer/brokers.
Most of the larger used machinery dealers have been in business
for a long time,
some over 50 years.
In addition to their
excellent reputations,
many have substantial
inventories and the resources to take advantage of exceptional
buys at auctions and shutdown facilities. In some cases, the equipment
is available simply for its expeditious removal. Some dealers
have excellent relationships with engineering and purchasing personnel
in the pulp, paper, converting and graphic arts industries and
know well in advance when equipment becomes available. They are
often knowledgeable of, and/or are advised of the equipment's
overall condition that permits an easier assessment of sales potential.
Given their long experience, the dealer/brokers' extensive files
enable them to be conversant with their prospective customers'
operations and specific requirements and preferences. Interestingly,
there are few used equipment salespersons trekking the world making
cold calls. Generally, dealer/brokers respond to inquiries as
a result of their advertisements in trade publications, direct
mailings, web sites, trade shows and perhaps most importantly,
their reputation
in the industry.
Assessing the quality of, and/or the interest level of an inquiry
made by a few clicks
on a web site is not really possible. Conversely, people telephoning
or e-mailing a few specifics of their interests readily identify
themselves as being more viable prospects than those who simply
click for more information. Those making legitimate inquiries
are not likely to be dissuaded by responding to a few reasonable
questions regarding their requirements. With respect to the promotion
of complex machinery on web sites, there's little that can be
drawn from experience with regard to evaluating the quality of
inquiries.
The time between an initial
inquiry and a purchase can take from weeks to months, and
it's not unusual for some of these transactions to drag
on for over a year
Purchase decisions are based on inspection
of the equipment by the prospective
buyer and/or the specifications
provided by the owner/seller.
As noted earlier, in most
cases, with the exception
of equipment refurbished
by the manufacturer, there are no performance warranties.
Therefore, prudent buyers will try to know everything they
can about the equipment. Herein is the major difference
between buying new and used equipment. Information needed
by the buyer to make an informed decision is not always
complete or available in a timely manner. After identifying
an item of interest, the prospective buyer normally requests
additional information. Often, responses can be fragmented
since the applicable files
may have long been archived, or in the case of multi-mill
conglomerates, filed at the corporate engineering offices.
Further, the task of seeking the requested data at the equipment
location is usually assigned to maintenance personnel. However,
due to their workload in most mills, gathering data on nonoperating
equipment for a possible sale to dealer/brokers is
not a priority.
Assuming the item continues
to be of interest after receipt of the requested data, there
may be a request for drawings, photographs and operating records.
After a review of this information, and provided the prospective
buyer's interest remains positive, an inspection trip may
be scheduled. When working internationally this can be a time-consuming
exercise due to company approvals, visas and travel schedules.
Finally, assuming the equipment has been approved to buy,
purchase terms and conditions are negotiated. And not unheard
of, deals can fall apart even at this late stage. To summarize,
the time between an initial inquiry and a purchase can take
from weeks to months, and it's not unusual for some of these
transactions to drag on for over a year.
While new equipment can be
designed and manufactured to comply with a buyer's precise
requirements, this is not
the case with used equipment since reconfiguration to meet
a buyer's specific needs is usually not technically or economically
possible. Although price is a factor, the equipment must conform
to the buyer's precise requirements. Stated in simple terms,
the situation is similar to a new pair of $200 shoes on sale
for only $20. Irrespective of the very low price, unless they
are the right type and size, they are of no interest to a
prospective buyer. Therefore, it follows that the most important
aspect in the promotion and
economic disposition of used and surplus pulp and paper industry
machinery and equipment is to make known its availability
to the widest possible base of prospective buyers throughout
the world.
TW
| Richard C Dow, Cape Elizabeth, Maine, USA, is
a consultant specializing in feasibility studies for the development
of tissue mills and evaluating manufacturing and converting
process efficiency. E-mail: rcdow@maine.rr.com. |
Used machinery and
equipment - an overview
