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Financing as the tide turns

Financing as the tide turns

There is general consensus here and globally that retirement criteria for a crane and the major inspection during its lifetime should not solely be based on the years since it was manufactured. A great many number of factors impact a machine’s lifespan and perhaps more importantly, its inspection and maintenance cycles, writes Jacqueline Ong.

There’s been quite a bit of movement over the last 16 years when it comes to major inspections in Australia.

It all began in 2002, when a 10-year threshold was implemented on major inspections, moving away from the 1993 Australian Standard where these inspections were akin to periodic third-party inspections. Standards in 2011 and 2016 then superseded those set in 2002. Along the way, what was forgotten were recommendations by the manufacturer and a crane’s design life – its end usually set by the manufacturer.

President of The Crane Industry Council of Australia (CICA) and Terex Australia general manager, Danny Black, said that while “10 years” is not  the right terminology and that it should have been simply left as “major inspection”, he acknowledged that the reason authorities set a timeline was because record keeping around a machine’s utilisation was hardly consistent and largely lacking. Additionally, a lot of routine maintenance that should have been performed, hadn’t been.

The problem, however, is that 10 years is a design life criteria for crane mechanisms and has resulted in setting theoretical lifespans of machines and when they are due for an inspection based on assumptions around load cycles and spectrums, as well as environmental conditions – all of which are conditional and circumstantial.

“Realistically, you’re talking about mechanical components with a finite fatigue life, like winches and gearboxes, which can’t be readily visually inspected… and they’re really based on a theoretical lifecycle of so many hours of utilisation at a certain state of loading,” Black said.

Jeff Wilson, equipment finance broker, speciality- cranes and construction at Finlease, an equipment finance expert, added: ”Any major inspection should be similar to that of the aviation industry in that it is based on the usage of the machine and the records that are kept for it, rather than just at a point in time the inspection is due.”

Things are a-changing

In July last year, CICA released a guidance note on major inspections, putting forward two recommended approaches.

The first – condition monitoring approach – is a combination of condition monitoring and the manufacturer’s recommendations. It is a method that requires crane owners to follow the recommended maintenance regime laid out by the manufacturer. At the same time, crane owners need to maintain detailed records of operation, service and maintenance.

The transition to this approach could be a smooth one, with advancements in CICA’s CraneSafe assessment forms assisting in consistent record keeping during a CraneSafe inspection. Additionally, putting on his Terex Australia general manager hat, Black told Cranes and Lifting that most new machines now come with recording devices to document the utilisation of components, giving owners a much clearer picture of how their machines have been used.

The second recommendation is a utilisation/time-based approach but instead of the arbitrary 10-year period, this approach is based on crane operation cabin engine hours.

At the moment, Black pointed to Queensland as the state with the most prescriptive code of practice but this code is currently under review.

“CICA is participating in that review and we are trying to further an outcome that would be more aligned to the approaches [we’ve recommended],” Black said, adding “that is how we’re going about it [sector-wide, with CICA’s recommended approaches].”

The financing scenario

The 10-year major inspection is a hugely expensive undertaking, costing tens of thousands, in some cases even upwards of $100,000, because of the need to strip down and repair or replace critical parts of the crane. Then, there’s the rebuild of the crane after the fact.

Finlease specialises in crane finance and is in the business of doing all of the leg work to make it easy for their clients and, of course, their crane finance solutions to cover the major inspections and rebuilds. It is something that has been done for a number of years and will continue to be done while there is a need. Wilson noted an example of some six years ago where an 80t all-terrain crane in good working order with good history would have its major inspection completed at an average cost of some $60,000 to $70,000. Today, that same crane would cost on average some $40,000 to $45,000.

Ultimately, and in the not too distant future, what financing will look like, including what boxes companies such as Finlease want ticked to proceed with financing, may start to depend more on the factors that determine when a crane should undergo a major inspection. While this could be a turning point for the value of the machine, Black does not think it should be.

“Major inspections should be treated as part of the ongoing maintenance of the machine, based on actual utilisation, and not a step function of cost after a 10-year calendar period of time,” he said.

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