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2016 Forging Business Outlook
publish date:2015-12-23 source:cfmjs view times:405

The proliferation of data has transformed manufacturing into a high-tech business, and there is a scarcely any manufacturer that has not made a serious commitment of time, resources, and personnel to collecting and analyzing it. All data is subject to interpretation, of course; what is good news to some may not be good news for all. And, vice versa.

As 2015 ends and 2016 approaches, we went looking for data to define the state of the forging industry and its prospects for the year ahead.

The general analysis of U.S. manufacturing is not good. While the forecast for the broad U.S. economy is mostly positive, U.S. manufacturers are fighting for every decimal point of revenue growth, according to the national manufacturing data reported by the Institute for Supply Management. The latest ISM manufacturing index shows contraction in 13 of 18 industries surveyed, and the manufacturing recession that has been frequently declared based on varying evidence for the past 12 months is now gaining wide consensus among analysts and forecasters. The primary reason for this gradual realization has been the slow deceleration of global industrial demand, a problem that has restrained economic growth for materials, energy, capital goods, and construction, as well as manufacturing.

But the big picture can obscure clear facts, and while forgers are manufacturers in the fullest sense, their operations frequently show an ability to outperform the broader trends. Forgers know this better than anyone.

That’s one reason we conduct the annual FORGING Business Outlook survey each year. Every September and October, we survey readers to measure the outlook of men and women responsible for North America’s forging operations. We seek to identify the problems they face in the economy, in their markets, and in their businesses. We also seek to learn what plans theyre making for the coming business cycle, and to understand better theyre expectations for the year ahead.

This past fall we surveyed readers by email over a period of six weeks, with a detailed study that focused on their forging businesses, their activities and prospects, and the internal and external factors shaping their strategies. Their perspective is valuable not only because of their insights and their experience, but because they occupy positions that are critical (perhaps essential) to the prospects of so many other elements of the global industrial economy.

Notwithstanding the indications of softening industrial demand, domestic manufacturing remains a vibrant and creative sector of the overall economy. It’s still an attractive place for long-term investors seeking a healthy return, still a dependable stage from which to launch an engineering or managerial career, and an increasingly reliable venue for testing new technologies. In recent quarters, though, manufacturing has been an unreliable sector for economic growth.

U.S. manufacturing expanded in October but at the slowest rate in more than two years, according to ISM. Various indexes have shown orders for raw materials and capital equipment falling flat or declining through much of 2015. The ISM survey of manufacturers’ purchasing managers showed the index rising to 51%, where 50% indicates the separation point between expansion and contraction. The same survey found manufacturing employment at the lowest level since mid-2009, the bottom point of the most recent recession. Still, there is confidence among manufacturers, as ISM’s new-orders index rose to a three-month high.

Approach with confidence — That confidence is apparent among the respondents to the 2016 FORGING Business Outlook Survey. They are confident that their operations will report increased revenues for 2015, and they look for that growth to continue in 2016.

The executives, managers, and operators we surveyed represent the diversity of interests and experience across North America’s forging industry. They are producers of all major types of metal — alloy, carbon, and stainless steels; aluminum, brass and copper, and titanium. Their operations realistically reflect the various plant sizes of the forging industry, from less than 20 workers to 250 or more.

Furthermore, the respondents represent operations that perform all major types of forging, from open- and closed-die forging to impact extrusion, as well as ring rolling.  Equally relevant, the scale of their production activities during 2015 shows a comprehensive range of commercial impact, from less than $1 million/year in shipments (25.5% of respondents) to over $100 million in shipments (14.5%.)

While the survey is designed to track shipments as a measure of business performance, we also seek information on production activity: Just 19.6%% of respondents indicated their operations have been active at 80-100% or more of installed capacity; 43.5% of all respondents indicate their operations have been active at less than 70% of capacity. Such details spark questions that are beyond the scope of the survey, but also provide some evidence of the top-level analysis of a manufacturing sector recession.

In line with this data, the FORGING Business Outlook survey respondents are almost evenly split in their assessment of their current business conditions: 33.3% of all respondents are confident their 2015 shipment volumes will rise over the 2014 record, 30.3% indicated their shipment totals will be down year-on-year; and 36.4% stated they expect results that are “about the same” as 2014. (For comparison, the Forging Industry Association reported the industry’s total 2014 shipments rose 10.8% in value from 2013, to $11,918.8 million.)

Looking more closely at respondents’ assessments of 2015 shipments, the positive evaluations show no particular bias toward any single metal, though impression-die forgers appear most confident that their 2015 shipments will improve on last year’s results. Among the major production classes, ring rollers appear least confident about their 2015 results.

Taking the same approach to the 2016 prospects, we can detect a slight bias toward the positive outlook (49.2%) over the “about the same” crowd (41.5%). Aluminum forgers (61.1%) and impression-die forgers (62.5%) are the most likely to expect rising shipments in 2016.

In general, the differences between those predicting increased shipments in 2016 and those predicting shipments to remain steady with 2015, are distributed fairly evenly across the various metal and alloy categories.

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