"Several jobs that we lost to overseas forgers are coming back to us."
"Imports are more of a threat than anything else."
During the fourth quarter of 2004, Forging polled U.S. forging industry executives to assess business conditions in their respective companies, and to gauge the outlook for the forging industry as a whole. We mailed a survey questionnaire to every forging operation in the United States.
In all, 51 companies filled in questionnaires and returned them before our deadline for tallying the results. A summary of survey responses is presented in this article with details illustrated in accompanying charts and graphs.
Forecast overview
It is interesting to look back at previous surveys and compare those results with what was actually achieved. In the Outlook Survey we conducted during 2003, 53.8% expected to do better in 2004, 7.7% expected to ship fewer tons, and the balance, 38.5%, expected to ship about the same number of tons in 2004 compared to the previous year. We now can compare those projections with what forgers achieved in 2004 versus 2003. The survey shows that 22.2% did about the same in 2004 as a year earlier, while 78.8% did better. No respondent reported shipping fewer tons in 2004 than a year before.
Nearly half of the respondents in the current survey (49%) are looking to do better in 2005 than they did in 2004. Another 43% expect next year's shipments to stay even with shipments in 2004. Overall, the respondents project an increase in shipments of 5.5%.
Imported forgings continue to be problem for many of our respondents. Nearly two-thirds of respondents— 62.7%—indicated that imported forgings were "becoming more of a factor" in their businesses. A total of 27.5% indicated "no effect," and 7.8% indicated that imported forgings were " becoming less of a factor." Some survey respondents made the effort to write in comments to the effect that they were seeing jobs being returned to domestic producers after unsatisfactory experience with imports.
As in previous Outlook Surveys, we asked forging executives a number of other questions, as well.
Capital spending
We asked how capital expenditure plans for 2005 would compare to those of 2004, and what forgers planned to invest in during the coming year.
From responses to these questions we can say that 48% expect to increase their capital spending in 2005, 42% expect to hold steady on spending, and 10% expect to see their spending decline.
New equipment is on the shopping list of 59.6% of all respondents, and 8.5% are expecting to add to existing facilitiesor build new ones. An accompanying table spells out what forgers are planning to purchase in the coming year.
As far as debt is concerned, 30.7% plan to maintain their current debt levels; 30.7% of the respondents indicated that they currently had no debt; 28.8% said they were planning to retire debt in 2005; and 9.8% plan to add to their debt to finance capital equipment purchases.
Accompanying tables present details by employment size for these questions.
Top concerns
As in previous surveys, we asked executives to indicate what factors had been major problems for them during the past year, and which ones were likely to be major problems in 2005.
The top concern of forging executives during for 2004 has been the cost of energy: 72.5% picked it as their No. 1 problem area. Respondents don't see the situation changing for 2005 as it was picked as the top concern by an identical percentage. In our last survey, 66.6% of the respondents picked energy costs as a top concern, while in 2003, the percentage was 65.2%.
Close behind high energy costs as a major problem in 2004 has been the cost of medical insurance for 70.6% of the respondents. There was a slight drop in the rating of medical insurance for 2005, with 68.6% selecting it as a major problem.
Interestingly, the same percentage of respondents (70.6%) picked high raw-material costs as a major concern during the past year. For 2005, concern drops off a bit to 68.6% of the respondents.
The related issue of raw-material lead times was a top concern for 60.8% of the survey respondents during 2004. For the coming year, 54.9% foresee this as a continuing problem.
Rounding out the top five concerns among forgers is foreign competition, with 41.2% identifying it as a problem during 2004, and the same percentage seeing it continuing to be a problem in the months ahead.
Internet, and computer simulation
Again this year we asked how forgers were using the Internet for their business, and if they were using computer simulation.
The Internet is used by 90.0% of the respondents for e-mail; 78.0% use it for information searches; 36.0% use it for procurement; 48.0% use it for ecommerce; and 6.0% for enterprise management. The results in this survey were nearly identical to those reported in last year's survey.
In all, 22% of the survey respondents report using computer simulationto plan production of forged parts. As in previous surveys, respondents using forging simulation value its use for reducing shop-floor trials and after-the-fact analysis in response to production-process problems.
Those who don't utilize simulation cited the lack of trained personnel to operate it, followed by cost concerns.
Who responded?
The results reported here are based on the responses received from 51 forging executives. Among respondents, carbon and alloy steels were the most widely forged metals, 84.3% and 74.5% respectively. Stainless steels are forged by 35.3% of the respondents; high-temperature alloys by 21.6%; titanium by 19.6%; aluminum by 11.8%; and brass and copper alloys by 9.8%.
Of responding producers, 58.8% manufacture impression-die forgings; 43.1% perform open-die operations; 11.8% roll seamless rings; 5.9% report they are involved with impact extrusion; and 2% each performing upsetting and roll forging.
Respondents indicated their operations' employment sizes as follows: was: 32.7% employ up to 20 people; 30.6% employ 20-49; 18.4% employ 50-99; 16.3% employ 100-249; and 2% employ 250 or more.
In terms of dollar volume of sales, 14.5% of the respondents indicated they do under $1 million of business annually, 18.8% do $1-5 million, 12.5% do $5-10 million, 27.1% do 10-20 million, 23.0% do $20-49 million, and 4.1% do $50-100 million.
Business Outlook Report
"Steel lead times are outrageous."