From 23 February 2022 to 9 March 2022, Australia's Eastern Seaboard suffered substantial flooding from heavy rainfall caused by a combination of two consecutive La Niña weather systems. According to the Australian Government's Bureau of Meteorology, Brisbane saw three consecutive days of rainfall exceeding 200mm, amounts significantly greater than the maximum recorded daily rainfall in the infamous January 2011 floods of 112mm. The intensity of flooding saw over 20,000 houses destroyed in Brisbane alone, requiring water damage restoration companies to work overtime to keep up with the exceedingly high demand for flood drying and restoration services.
The increased demand for equipment
The inundation of flood-related work required restoration companies to have large inventories of drying equipment. Google Search Trends revealed that the search term "water damage restoration" saw an almost 300 percent increase in Australia-wide search-frequency during the period of 27 February 2022 to 5 March 2022 in comparison to the average frequence of the 12 months preceding. On 26 February 2022, the Insurance Council of Australia declared an Insurance Catastrophe for South East Queensland in respect of the flooding, disclosing in a press release that insurers had received over 3,500 claims in South East Queensland between 23 February 2022 to 26 February 2022 alone. Thorair estimates, based on available Google and ASIC data, that there are likely less than 50 proprietary limited water damage restoration organisations with operations in South East Queensland, meaning that established restorers were likely receiving, on average, at least 23 jobs per day. National Restoration Network Pty Ltd has publicly notified us that it saw an over 15x increase in its booking-per-day metrics during the floods.
As a leading manufacturer and Australian supplier of restoration equipment, Thorair experienced a significant increase in product enquiries and sales. By 3 March 2022, Thorair's stock in LGR Dehumidifiers, Snail Air Movers and Square Air Movers was entirely sold out.
Increasing Chinese freight costs
The total value of Australian Imports from China have sharply increased in recent times, rising from ~$61 billion USD in 2020 to ~$72 billion USD in 2021 (Figure 1). Australia's increased demand for Chinese imports, in combination with diminishing buying power of (i) the USD in relation to the Chinese Yuan and (ii) the AUD in relation to the USD (though this has changed in the past two weeks), has increased the total cost of imports and freight to Australia. The HARPEX index demonstrates this on a worldwide scale, showing that the cost of container-freight is at a 24-month high (Figure 2).
Figure 1 - Australian Imports from China in USD (10Y Peroid)
Figure 2 - HARPEX Index Worldwide (2Y Period)
The increase in Chinese freight costs necessitated an increase in Thorair's equipment prices for containers of equipment that arrived subsequent to 3 March 2022. This increase in water damage restoration equipment prices was reflected industry-wide following the floods, with Thorair's leading Australian competitor retailing dehumidifiers manufactured by the same manufacturer as Thorair at over $3,600.00 per unit.
The equipment surplus
There will be a significantly diminished demand for water damage restoration equipment coming into April 2022 as firms will have large supplies of stock.
Water damage restoration companies will have a significant surplus of equipment and may have issues storing excess equipment (this has not been an issue throughout the floods as equipment has been left at job-sites) requiring them to either (i) expand their storage areas or (ii) sell their equipment.
The high supply of water damage restoration equipment will cause the market equilibrium price to gradually reduce (Figure 3).
The anticipated reduced demand for new water damage restoration equipment will decrease below normal levels as firms will attempt to sell excess supply of equipment through second-hand-goods channels like Facebook Marketplace, eBay and Gumtree.
The increase in revenue for water damage restoration companies will increase bars to market-entry for future firms as current firms will likely reinvest revenue into growth-related activities (e.g. Google Ads funding).
Figure 3 - Impact of Increase in Supply of Dehumidifiers, Air Movers and Air Scrubbers - Australia-wide Restoration Equipment Industry
Important considerations for restorers
Whilst the idea of purchasing restoration stock second-hand at lower prices may be appealing to many restoration companies, purchasers should be wary of the following:
Used water damage restoration equipment is frequently damaged when installed at jobs that have continual flooding or leakage. Dehumidifiers and air movers cannot fully operate if they suffer water ingress into their key components (compressors, fans, electrical components, etc.). This means that purchasers of used equipment may be sold damaged goods that require repairing.
Cash-sales on second-hand goods are sometimes done 'off the books' which will mean that your business may not be entitled to deduct the equipment from its taxable income. In a financial year where many businesses have seen fruitful profits, deductions may be as important as ever to your business's bottom-line.
The resale of Thorair equipment to other parties voids Thorair's complimentary One-Year Full Replacement Warranty. Whilst warranties provided under statute may still be applicable, Thorair will be unable to action complimentary replacements of units that are not required by law.
Thorair currently have the cheapest prices on brand new air movers, dehumidifiers and air scrubbers in Australia. We can organise bulk-order discounts and fast freight for our clients. If you find an identical item stocked at an Australian retailer, we guarantee to match the price. Restorers purchasing directly through Thorair or All Imports can be confident in receiving quality equipment and a warranty unmatched by any competitor.
Organise an quote or order today
If you are looking to expand your restoration company, or enter into the ever-expanding industry, please reach out to our friendly team to discuss your next Thorair order.