Majority Sees Forging Activity Rising in 2004

After a series of annual forecasts in recent years, in which most forgers predicted they would stay even in the upcoming year, a majority of respondents--53.8% to be exact--are saying they will do better in the year ahead.

During the fourth quarter of 2003, we 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.

A total of 93 companies filled in questionnaires and mailed them back to us. That number of responses represents one of the best returns in recent years, and probably is itself an indication of optimism. A summary of survey responses is presented in this article with details illustrated in accompanying charts and graphs.

Forecast overview

One year ago, the results of our Outlook Survey 2003 were typical of recent forecasts: forgers predicting mixed results. With the results of our 2004 Outlook Survey now in, we can report what those results were for 2003. A total of 25.8% of the respondents said they shipped more tons of forgings in 2003 compared to 2002, and 44% shipped about the same amount. The balance, 30.1%, shipped less tonnage in 2003 than during the previous year. Those results are similar to those reported in the 2003 Outlook Survey comparing 2002 with projections for 2003.

In the 2004 Outlook Survey, we see growing optimism among forgers. As mentioned, 53.8% expect to do better in 2004, 7.7% expect to ship fewer tons, and the balance, 38.5%, expect to ship about the same number of tons in 2004 compared to the year just completed.

We asked respondents to project their percentage change in tons to be shipped in 2004 versus 2003 results. Averaging the expectations of the respondents results in a projected improvement in shipments of 9.1%. Not too shabby if it comes to pass!

The specter of imported forgings continues to loom over the industry. In 2003 Outlook Survey, we inquired with a separate question whether or not imported forgings were having a growing impact on the business of domestic forgers. Respondents indicated by a wide margin that they were seeing an increasing effect of imports on their business. Size of the reporting company was a factor, with every single responding forger with over 100 employees reporting that imports were a growing factor in their business. At the other end of the spectrum, a large percentage (42%) of forge shops with under 20 employees reported no change in effect from imports.

For 2004, 70% of the respondents indicated that imported forgings were “becoming more of a factor” in their businesses. Only 3.4% indicated “no effect,” and 29.2% indicated that imported forgings were “becoming less of a factor.” Again, among the forgers with more than 100 employees, nearly all reported being affected by 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 2004 would compare to those of 2003, and what forgers planned to invest in during the coming year.

From responses to these questions we can say that 32.9% expect their capital spending to increase in 2004, and 52.9% expect to hold steady on spending. New equipment is on the shopping list of 52.7% of respondents, and 11.8% are expecting to add to existing facilities or build new ones. An accompanying table spells out what forgers are planning to purchase.

As far as debt is concerned, 30.2% said they were planning to retire debt in 2004, 38.4% plan to maintain their current debt level, and 7% plan to add to their debt, while 24.4% of the respondents indicated that they currently had no debt.

Accompanying tables present details by employment size for these questions.

Top Concerns

We asked executives to indicate what factors had been major problems for them this year, plus which ones were likely to be major problems in 2004.

The cost of medical insurance was rated as a major problem by a wide margin during the past year, with 84% picking it as a concern. The subject continues to worry forgers as 83.1% picked it as a problem for 2004.

In the 2003 Outlook survey, most respondents worried that costs of raw materials would go higher in 2003. In this survey, far fewer respondents (30.4%) indicated that higher raw material prices were actually a problem during 2003. A similar percentage of respondents predict raw material prices to be a problem during the coming year.

The cost of energy has been a top concern in previous surveys, and it continues its high ranking with this survey as the No. 2 problem for both 2003 (picked as a major problem by 65.2%) and for 2004 (66.6%).

Forgers rated foreign competition as the No. 3 problem for 2003 and 2004. See also the earlier comments on responses to this situation in a separate question.

Another problem on the minds of many respondents was the cost of workers compensation insurance. For 2004, it ranks as No. 4 with 57.8% of respondents picking it as an important problem.

Using the Internet and Computer Simulation

Again this year we asked how forgers were using the Internet and if they were using computer simulation.

The Internet is used by 92.5% of the respondents for e-mail, 80.6% use it for information searches, 31.2% use it for procurement, 34.4% use it for e-commerce, and 5.4% for enterprise management. Many usage categories showed increases over previous surveys. Only 5.4% of respondents indicated that they didn’t use the Internet at all.

A total of 35.5% of the survey respondents said they use computer simulation in planning for producing forged parts. As in previous surveys, respondents using forging simulation value its use for reducing of shopfloor trials and after-the-fact analysis in response to process problems countered during production.

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 93 forging executives. Among respondents, carbon, alloy steels, and stainless steels were the most widely forged metals: 76.4%, 67.8%, and 47.3% respectively. High-temperature alloys were forged by 21.5% of the respondents, aluminum by 21.5%, brass and copper alloys by 17.2%, and titanium by 22.6%.

Of responding producers, 57% manufacture impression die forgings, 39.8% perform open-die operations, and 8.6% roll seamless rings, with 8.6% reporting they are involved with impact extrusion.

Thirty-five and a half percent of the respondents employ up to 20 people, 29% employ 20-49, 18.3% employ 50-99, 11.8% employ 100249, and 5.4% employ over 250. In terms of dollar volume of sales, 16.3% indicated they do under $1 million of business annually, 28.3% do $1-5 million, 18.5% do $5-10 million, 13% do 10-20 million, 18.5% do $20-49 million, 3.3% do $50-100 million, and 2.2% do more than $100 million.

INVESTMENT PLANS FOR 2004

CAPITAL EXPENDITURES FOR 2003

CAPITAL EXPENDITURES: 2004 vs 2003

FORECASTS: FORGING SHIPMENTS (TONNAGE) BY COMPANY SIZE

2003 vs. 2002

2004 vs. 2003