The practical implications of the FORGING Business Outlook survey are seen most clearly in forgers’ capital investment plans for 2015. Whereas confidence may be invaluable to an individual, to a group — even to a well defined group, like the forging industry — confidence is difficult to measure, except in financial terms.
We asked survey respondents to describe their capital expenditure plans for 2015 — see Chart 14. Nearly 60% of all respondents indicated their operations will be investing in new manufacturing equipment during 2015, while 11.1% have plans to expand their existing operations. A smaller portion of the respondents, 3.7% — no doubt a financially significant detail — have plans to build new plants during the coming year. A still notable percentage, 11.1%, have no capital expenditure plans during 2015.
We pressed the affirmative respondents to project their capital spending plans during the upcoming year — see Chart 15. Among those indicating the value of their investments, 30.3% indicated spending programs of $300,000 or less; 12.1% estimate their forthcoming investments at $500,000; 33.3% project spending of $1 million to $10 million; and 24.2% of all respondents indicate spending plans of more than $11 million or more. Anecdotally, among this last segment of respondents, three respondents indicate their spending plans for 2015 total more than $30 million.
For perspective on these spending plans — see Chart 16 —we asked respondents to characterize their 2015 plans in relation to the current year’s programs: 40.8% of all respondents’ operation will see increased capital investment totals during 2015, compared to 2014; 46.9% will have capital investment totals that are “about the same” next year as they have been this year; and 12.2% will experience declining capital investments next year.
Pressing on this point, we segregated the respondents according to their capital investment projections (increase, decrease) and asked in each case for an estimate on the change. In the case of those anticipating an increase in capital investments — see Chart 17 — 31.25% of respondents forecast increases of 5-25% over the current year’s spending; 12.5% will increase investments by 25-35%; 25% of respondents will raise investments 50-75; and 31.25% will raise capital investment by 100% over the 2014 level.
On the other side of the ledger, those forgers indicating their operations’ capital investments will decline from 2014 to 2015 — see Chart 18 —represent a smaller cohort: their estimates of reduction range from 50% who project decreases of 15-25%; 33.3% projecting a decrease of 40-50%; and 16.6% who project a 100% decrease over this year’s capital investment volume at their operations.
Among all respondents, organizational debt remains an obvious concern — see Chart 19: 11.5% of respondents aim to retire debt in the coming year; 36.5% intend to maintain current debt levels; and 38.5% report they are not carrying significant debt at this time. Only 13.5% of respondents plan to increase their organizations’ debt levels in 2015.
The specific contents of respondents spending plans are instructive of the current conditions of forging operations, of forging buyers’ interests and demands, and of forgers’ own evaluation of their needs and opportunities. In a survey question incorporating multiple selections from respondents — see Chart 20 — we learn that 54% of all plan investments that involve heating systems, meaning bar/billet heaters; and 50% of all respondents will invest in new forging equipment (including presses, hammers, upsetters, ring mills, etc.) Another large cohort, 40% of all respondents, indicated plans to complete forging machinery rebuilds, including modernization of control systems.
Other spending programs that drew large responses included heat treating equipment, 32.0%; robots/manipulators, 30.0%; training/education programs, 30.0%; billet feeders/conveyors, 28.0%; and cleaning/finishing equipment, 28.0%. Smaller cohorts selected other investment options, with notable emphasis on product software programs (process control, simulation, and design software.) Finishing and machining equipment also draw considerable interest among survey respondents.
We took the same, multiple-choice approach to evaluating problems afflicting forging operations, during the past year and in expectation for 2015. In the first case — see Chart 21 — respondents by a notable margin (40.8%) identified “energy costs” as the most significant problem during the past year. Other “problems” eliciting high response rates were “foreign competition” (34.7%) and “shortage of qualified labor” (34.7%); “medical/insurance costs” (32.7%) and “raw material lead times” (32.7%).
Recasting the same question toward 2015 — see Chart 22 — respondents offered some similar insights about their operations’ future “problems”: 37.5% of all respondents expect “energy costs” to be a problem for their operation in 2015; and an equal portion, 37.5%, anticipate “raw material lead times” to top their operating concerns next year. Following closely, at 35.4% of all respondents, is the expectation of “higher raw-materials costs” in 2015.
Other significant “problems” on the 2015 horizon for readers will be: “higher labor costs,” 27.1%; “medical/insurance costs,” 27.1%; “general labor shortage,” 25.0%; and “raw material quality,” 22.9%.
One area of forging operating practice has gained a specific focus over several years of surveying: simulation software. We asked respondents to indicate their use of computer simulation for forging design or forging analysis — see Chart 23 — a selection affirmed by 46.4% of all respondents; 53.6% indicated they do not uses such technology.
Among those affirming their use of simulation technology — see Chart 24 — 33.7% use it as part of their design process, including to reduce shop-floor trials and to optimize forging processes; and 3.7% indicating their use of simulation is limited to performing post-forging analysis. A much larger cohort, 55.6%, indicated they use simulation for both applications.
The respondents who do not currently use simulation software — see Chart 25 — indicated their decisions are based on several points, including cost (26.7%) but also their own conclusions (20%) that the technology provides no value to their processes.
In the final phase of the survey, we sought respondents’ prescriptions for the growth and expansion of the forging industry. Inquiring about the industry’s most pressing needs — see Chart 26 — respondents indicated “increased availability of qualified workers” (34.7%) would be the most positive improvement in the future development of the forging industry. Other respondents identified an "ability to retain the current workers, (16.3%) "Continuing education and training for the existing workforce, (20.4%); and "programs to grow the incoming workforce (internships, scholarships, etc., 14.3%) would have a positive impact on the industry.
With an effort to focus their responses more directly on professional growth, we asked respondents — see Chart 27 —methods would be most advantageous to that end: greater corporate involvement (42.9%) and additional or alternative training programs (34.7%) drew the highest volume of interest among respondents.
Finally, we asked respondents where the commercial opportunities are most promising for forgers in 2015 — see Chart 28: By a considerable margin (25%), respondents identified the oil/natural gas sector as the most promising for forgers, followed by aircraft/aerospace (19.6%) and automotive components (17.9%), as the leading markets for the forging industry's growth and development.