The road to recovery continues
Most will welcome the end of 2020, but what does 2021 bring? Will we see a return to normal? Unlikely, but the root cause is not buried in the dangerous cracks in the global financial system. The root cause is painfully obvious, and once the COVID-19 vaccine is more widely distributed, global economies will once again head in the right direction – perhaps not quickly or even steadily, but the light at the end of the long tunnel. will be there . Gross domestic product will likely continue to rebound well into 2021. But as always, the trajectory of the pandemic could change everything.
“By the second or third quarter, we’ll probably see GDP increases in the range of 3% to 4%. We will be looking at a nice recovery, but that of course depends on whether we have another lockdown. »
It was Chris Kuehl, economic analyst for the Association of Manufacturers and Manufacturers Intl. (FMA). He added that the dramatic economic rebound reported in Q3 2020 – over 30% year-over-year – does not indicate an economic panacea; the rebound comes from an exceptionally low place. The second quarter of 2020 could be considered the toughest in recent metals manufacturing history, surpassing even the challenges encountered during the depths of the financial crisis.
November’s presidential election all but assured a divided government in 2021, and as Kuehl explained, the business world doesn’t care. “If you had asked the business community for a preferred outcome, they would have chosen a divided government. As the saying goes, “What governs least governs best”.
Manufacturers, not the service economy, are leading the recovery, and for obvious reasons. Since metal fabrication serves many end markets, manufacturers in the United States experienced 2020 in different ways. With OEM shutdowns earlier this year, most manufacturers had a tough first half. Even so, many stores in the right markets (renewable energy, e-commerce, IT and communication infrastructure) never took the plunge.
How a manufacturer performs in 2021 will depend a lot on the end markets it serves. Market behaviors vary widely, but manufacturers serve them all with metal fabrication equipment. This is why projected capital expenditures can be so telling.
Enter the “Capital Spending Forecast 2021” published this month by the FMA. Total planned spending for 2021 is down, sure, but not off the charts. In 2019, readers are expected to spend nearly $2.8 billion on gear. In 2021, they expect to spend over $2.4 billion. That’s less than 15% down from the 2019 peak, which isn’t bad considering.
These numbers are extrapolated from over 400 survey respondents. So, yes, this is just a statistical sample, but the results are still eye-opening, especially when it comes to spending trends for different types of equipment. For the first time in the history of the survey, the fiber laser came out on top. This is important considering that not all metal fabricators embrace laser cutting.
For years, spending on welding equipment and power sources dominated the survey, which was no surprise. A manufacturing operation may cut and bend with different technologies (plasma, punch, water jet, laser, press brake, brake, panel maker, edgebander, etc.), but most shops weld. The large number of welding power source purchases also represents any work shops that might only offer welding and a few other basic metalworking processes. Not every shop can afford a laser.
Despite this, forecasts for 2021 predict that nearly $300 million will be spent on fiber lasers alone, and that’s not even including the more than $85 million expected to be spent on new CO2 laser cutting machines. and used. Fiber laser spending exceeds welding power source spending by millions of dollars.
A few years ago, press brakes and related forming equipment showed huge gains in the survey, a phenomenon attributed to the need for greater throughput. As more and more companies increased their fiber laser cutting capacity, they also needed to increase their forming capacity. Otherwise, they would simply push their forming stress downstream.
But fiber lasers could be reaching an inflection point on the innovation curve. Machine OEMs introduced new ways to manipulate the beam, new forms of material handling automation, and new levels of laser cutting power. A productive fiber laser can now serve a multitude of downstream forming and welding operations. It is not as if the formative constraint had disappeared; it’s just that recent innovations in laser cutting are changing the throughput equation, in turn driving equipment investments.
During the financial crisis, consumables were at the top of the expense categories, which seemed logical. It was time to retreat, to watch and to manage. The 2021 projections, however, run counter to conventional thinking. You would think that after a brutal 2020, manufacturers would think twice before making a huge capital purchase. Nevertheless, significant investments in equipment continue.
Kuehl was not surprised. He recalled a recent conversation with a manufacturer outside of the manufacturing industry, but still facing similar skilled labor challenges. 2020 has been tough, but now the operation needs to grow again, but it’s not hiring. Instead, it invests in flexible automation.
The global pandemic has thrown a wrench in the global supply chain. Relocation trends will continue, as will customer demand for manufacturers to respond quickly. Manufacturers have two choices: they can hold more inventory (which could become obsolete or remain unsold) or they can increase their capacity to manufacture on demand. Very often, automation is the only practical way to increase production that quickly.
The complete “Capital Expenditure Forecast 2021” will soon be available on www.fmamfg.org/store.