Insight

A review and preview of the global fastener industry

A wide cross section of global fastener business leaders have contributed their retrospective of 2015 and thoughts on the prospects and challenges for 2016. We asked them to consider not just economic and financial issues but also technology drivers for the fastener industry and to identify priorities for the upcoming year. Here is National Machinery LLC's article:

National Machinery LLC
Andrew H. Kalnow, CEO

It’s always interesting to compare the economic, as well as global, news headlines from around the world. Trying to match those headlines with the on the ground views of local businesses in the metal forming/fastener industry is yet a further interesting exercise.

In early December 2015, as I toured our global operations at National Machinery and met with customers from China, Japan, and Europe (as well as the States), I had the opportunity to gain a first person read of local reactions to some of the economic headlines, as well as hear their views about prospects for their business in 2016 and beyond.

The last few years have brought prosperity to most in the metal forming/fastener industry and its machine builder suppliers, at least in the developed countries part of the world. This clearly has been on the back of the strong automotive and aerospace sectors, while other end market sectors or industries have been more of a mixed bag. Business volumes have been at high-levels for most manufacturers, and many machine builders have reported extended delivery schedules. Times are good, it would seem, and should continue to be good.

But you wouldn’t know that from the headlines. Of course media headlines and lead stories tend to hone in on the negative or unfortunate, as this is what is newsworthy or simply sells. However, in all fairness, there have been some big economic events and news stories in the past year or so. These have created turbulence in the financial markets and strong headwinds for some businesses.

On the economic front, these events or trends range from the unprecedented plunge in oil prices (for non-recessionary times); to the high volatility in major currencies; to Eurozone stress from testy Greece; to the faltering growth of China. On the geopolitical side, events and themes of the past year have been rather momentous, and have potential short and long term economic as well as political repercussions. These include – naming just a few – a new large-scale cold war developing from the modest turf war in the Ukraine; the hordes of Syrian immigrants into Europe; and terrorist attacks by ISIS and others in Europe and the States.

Rationale for optimism

Against this backdrop, it seems to me that we are doing pretty darn well, particularly given the fact that the economy is becoming a bit late cycle in its recovery from the great recession of 2009. So, what is it that our industry knows or assumes that keeps its confidence up with regard to business outlook? As I travelled the world on my recent trip, I have the sense that our industry feels it will continue to experience relative prosperity. Despite a series of alarming headlines over recent weeks and months, and a plentiful plate of worry factors to feed any respectable pessimist, the outlook for 2016 and beyond appears to be one of cautious optimism.

There is some rationale behind this, it seems to me. One key explanation behind this is simply that the anaemic growth of this economic recovery (post 2009) is a positive in itself. Financially, asset bubbles seem to be under control with the possible exception of things in China, which has been a rather constant source of anxiety for watchers from the West. Yet even with China there is a view that the central government can (and will) always move quickly to fix gaping economic potholes as they pop up. However, that still gives room for new concerns regarding how steady and able is the hand at the helm (for example the ‘flash crash’ problem of the China stock markets). Notwithstanding China anxieties, the businessman optimist is looking down the road and seeing what others call anaemic growth as an opportunity. Namely, that in the absence of an overheated situation in the western economies, no apparent asset bubbles, low inflation and low oil prices, there is plenty of room for the good (but not great) economy to keep chugging along. Certainly this view is fortified by the positive factor that a lower oil price brings to a potential increase in consumer spending. While retailers in general may not yet have seen the benefits of this, it does appear that lower oil prices have been a nice boost for auto sales and vehicle use.

Automotive sector and China

Clearly the industry’s positive outlook in large part hinges on the fact that a very big slice of the metal forming/fastener industry pie, by value, is tied to the automotive and aerospace end markets. Automotive and aerospace are experiencing healthy build rates, and have the prospect of continued strong levels of global volumes. Ironically, the problem child on everyone’s mind is, of course, China with its ‘slow down’ that is also hitting its automotive industry. This is causing some angst and possible upheaval amongst local automotive fastener and parts manufacturers. It may end up being a situation where the stronger players, both financially and with more value added products, survive and prosper, while there is fallout for others. However, although there are questions abound about China, there remains an undercurrent of guarded optimism about its large automotive market. Even though it is conceivable that auto sales may plateau for a few years in China, the longer-term demographic fundamentals seem favourable for growth not just in the vehicle population but also annual sales levels.

Technology to the rescue

On the more micro trend level, a concern in our industry that I found to be omnipresent around the world in developed countries (and also even China to some extent) was the issue of finding and retaining skilled machine operators and maintenance people. It’s an issue everywhere. With the population of cold forming machines and experienced operators/maintenance staff getting older and older – and pushing to retirement every year – there is a slow burning crisis in human resources in the industry. The older style and aged machines require more know-how to operate than new equipment with modern electrical controls. The production speeds and uptime of newer equipment are such that fewer operators are required. This ‘technology solution’ whereby modern equipment is deployed to address human resource needs, as well as gains in capacity, can be a double win. It will be interesting to see how the cold forming/fastener industry responds to this underlying micro trend challenge.