In 2023, the European economy was affected by high energy prices and inflation. The interest rate hikes by the ECB and overall economic uncertainty also dampened investment readiness. Nevertheless, the trade in used machinery remained stable, for various reasons according to supplier Surplex.
2023 was the year following a turning point. The war in Ukraine entered its second year and became a permanent factor in global consciousness. Although there are more conflicts in the world, such as the hostilities between Israel and Gaza, the war in Ukraine still impacts the European economy. High energy prices and inflation caused significant market uncertainty this year as well.
Despite these global challenges, one market segment proved surprisingly resilient: the trade in used machinery. “Since the coronavirus epidemic, this sector has grown significantly,” says Ghislaine Duijmelings, one of the directors at Surplex. “We held almost 10% more auctions for used machinery on our platform compared to last year, selling correspondingly more machines and installations. The reasons for this in 2023 were varied, but especially our stable prices despite high energy costs and inflation played a major role.”
The Energy Year 2023
The year 2023 was marked by the energy transition – decided in 2019 by the European Green Deal and accelerated by the war in Ukraine. Around the New Year, high energy prices and concerns about energy scarcity predominated. In response, European governments came up with subsidies, tax cuts, and market-stabilizing reforms. This led to the peak in energy prices already being reached at the end of 2022. In 2023, the downward price trend continued. Nevertheless, the high price level remained a challenge for both consumers and industry. However, the prospects are favorable: the situation is expected to improve significantly in 2024.
“The effects of energy prices were also reflected in our customer surveys,” explains Duijmelings. “At the beginning of 2023, nearly a third of our customers named high energy prices as the biggest burden on their business. In the summer, priorities shifted: in a later survey, high energy prices dropped to third place, with staff shortages and inflation seen as more urgent problems.”
Regarding inflation, the worst seems to be over. The inflation in 2022 and 2023 was mainly caused by high energy prices. After peaking in October 2022, inflation in the European Union continuously fell to currently 3.6% (October). The eurozone is doing even better, with inflation at just 2.4% in November.
Duijmelings: “In 2023, used machines were hardly affected by rising prices. Compared to last year, prices on Surplex.com only increased by an average of 0.5%.” This modest increase contrasts sharply with inflation-driven price increases in many other products. The price of a used machine mainly depends on factors like type, manufacturer, year of manufacture, demand, and availability. The prices of new machines, on the other hand, are mainly influenced by increased material and energy costs.
The most expensive machines sold via Surplex in 2023: a production line of a furniture manufacturer (top left), a complete silo production installation (bottom left), and a Schiess heavy-duty lathe (right).
The Economy in 2023: Growth or Recession?
To combat high inflation, the European Central Bank (ECB) also gradually increased the base interest rate in 2023. High capital costs dampen investment readiness. Those who did invest focused on cost efficiency. Another plus point for the used machinery market: used machines are cheaper than new ones.
More good news in 2023: The coronavirus epidemic was officially declared over this year. On May 5, 2023, the global health emergency in effect since January 30, 2020, was lifted by the World Health Organization (WHO) – 1,251 days after the first officially confirmed coronavirus case. Corona primarily disrupted supply chains, but now there are practically no bottlenecks in delivery. These difficulties peaked at the end of 2021, when over 80% of companies complained about material shortages. Now, only a sixth of manufacturing sector companies report delivery problems. In 2023, full order books could therefore be processed continuously.
However, the combination of lagging investments and declining order books is pressing production and sales. Overall, the EU Commission expects GDP growth in the eurozone of 0.8% this year. A recession is even predicted for Germany, with a contraction of the economy by 0.4%, likely as the only major industrial country.
Supported by rising private consumption, increasing wages, and a stable labor market, a significant improvement in the economic situation is expected in 2024. This is also reflected in Surplex’s customer surveys: At the beginning of the year, companies showed cautious investment readiness for their machinery. According to the latest survey, they are now planning to invest more in this area. This shift indicates growing
However, a slight increase in the number of bankruptcies is predicted for 2024. Especially smaller companies and the construction sector are affected. A bankruptcy wave problematic for the overall economy is not expected, though. The current increase is more seen as a normalization after the ending of state support. Duijmelings notes: “More bankruptcies in 2024 also means a larger supply of machines and installations on the used machinery market. This could lead to slightly lower hammer prices, offering our customers more attractive investment opportunities and keeping the market dynamic.”
Photo: The management of Surplex: Uli Stalter, Ghislaine Duijmelings, and Michael Werker (from left to right).