02.01.2009

Malaysian crane companies cut rates

The Malaysia Mobile Crane Owners Association (MMCOA) has announced that it is cutting its official rates by five percent “in an effort to help the construction industry.”

MMCOA president Lai Keng Guan said the reduction was a temporary measure to help contractors mitigate the effects of the current economic slowdown. It also wanted to assist the Government to lower construction costs.

He added: “If the economy continues to deteriorate, we may revise the rental rates again to help the construction industry. But that depends on whether the price of diesel and maintenance costs fall. When the economy recovers, the original rental rates will be reinstated,”

The association increased prices by 20 percent for both cranes and aerial work platforms in June, following the rise in fuel costs.

The association now claims that the slowdown in the construction sector, has led to the mobile crane utilisation dropping by over 20 percent. The change also includes an extension to the payment terms to 120 days from the normal payment period of 30 to 60 days.

After the five percent reduction the rental rate for a 20 tonner will be RM617 ($180/£122) or RM11,875 ($3,440/£2.350) per month.

The MMCA has over 300 member companies operating 2,000 mobile cranes and 600 aerial lifts.

The rate reduction, came after pressure from the Master Builders Association of Malaysia (MBAM) which is holding meetings with the trade associations of its major suppliers in order to drive down costs.

Vertikal Comment

Given the fall in oil prices since June the five percent reduction is modest compared to the June increase in rates. However a five percent reduction is unlikely to make a great deal of difference to utilisation although it is a significant gesture.

The change to payment terms though could be suicidal, and is bound to lead to more bad debts and business failures. It is also counterproductive, creating sluggishness in the economy. The Association would have been far better offer a 10 percent reduction along with a reduction in payment terms.