Forgers Predict Another Good Year

An overwhelming majority 95.5% of forgers responding to Forging's annual survey indicate 2006 was a successful year, with shipment totals equaling or bettering their results for 2005. And, 85.5% expect to ship the same volume, or more, in 2007.

Each autumn for the past 17 years, Forging has asked U.S. forging industry executives to project the outlook for their respective companies for the coming year. To measure their expectations for 2007, we sent our annual survey to every forging operation in the United States. The survey results for 2006 indicate a very optimistic industry, one that's pleased with the past year's results and bullish about the year ahead. A summary of survey responses is presented in this report and detailed in the accompanying charts and graphs. We also have included some of the respondents' comments on the state of the forging industry.

Equal or Better?
The most critical question in our survey asked forging executives to project next year's business conditions. A majority of the respondents—32.3% to be exact—are looking forward to shipping more forgings in 2007 than they did in 2006. Another 53.2% expect next year's shipments to stay even with shipments in 2006. Only 14.5% are braced for a decline in shipments.

When we considered the positive projections, we learned that these respondents expect to boost their shipments in 2007 by an average of about 10%. The relatively smaller number of respondents braced for a decline in shipments project an average decrease of about 20%.

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 2007 would compare expenditures in 2006, and we asked the respondents to indicate what types of investments they planned over the coming year.

According to the survey, 32.3% of respondents expect to increase capital spending in 2007, while 53.8% expect their 2007 spending to match that of 2006. Only 13.8% plan to cut their capital spending in 2007 versus 2006.

As far as debt is concerned, 44.37% of the respondents indicate they expect to remain at their current debt levels, 23% report that they currently have no debt, 24.6% say they are planning to retire debt in 2007, and 8.2% plan to add to their debt to finance capital-equipment purchases in 2007.

Accompanying tables present details of these spending plans according to the operations' employment sizes.

Insurance, energy, raw materials: As in previous surveys, we asked executives to indicate what factors were major problems for them during the past year, and which major problems they were anticipating in 2007.

The number-one concern among forging executives was — and will remain — the high cost of medical insurance; 72.7% of the survey's respondents list this as their top concern during 2006, and 65.2% believing that it will remain their top concern during the coming year.

The second-ranking concern during 2006, for 71.2% of the survey respondents, was the cost of energy; 60.6% expect it to remain a leading problem in the year ahead. The cost of energy has been a recurring concern in recent surveys: in 2005, 72.5% of the respondents picked it as their top concern, and in 2004 66.6% said it was the most pressing issue.

As in recent years, many forgers worry about high raw material costs: 65.2% indicate that it was a big concern for 2006, while 56.1% expect it will remain a concern for 2007.

The issue of raw-material lead times is the top concern for 47.0% of the survey respondents during 2006, and 39.4% expect it to have to deal this problem in 2007. Rounding out the top five concerns of forging executives is the cost of workers compensation. Highlighting it as a problem during the past year were 39.4% of the respondents, while 36.4% expect it to remain as a problem category for 2007.

It should be added that foreign competition maintained its sixth-place ranking from 2005 into 2006, with 34.8% saying it has been a problem during this year, and that same percentage expecting it to remain a problem during 2007.

Connection, simulation
In the 2006 survey we once more asked forging executives how they are using the Internet, and whether or not they have adopted computer-simulation programs for their operations.

A high percentage of forgers are using the Internet for various activities, but it may be surprising that only 95.5% of the respondents used it for communication, i.e., e-mail. Beyond that, 83.3% use the Web to search for information, 65.2% use it for e-commerce, 50.0% use it for procurement — and just 4.5% have adopted Web-based enterprise management technology.

A total of 40.9% of the survey respondents, a rising number from past surveys, said they use computer simulation to plan production of forged parts. As in previous surveys, these respondents value forging simulation for its effectiveness at reducing shop-floor trials and after-the-fact analysis, in response to process problems encountered during production.

Most non-users of forging process simulation cite the lack of trained personnel to operate the programs for their decision, a reason that is followed by cost concerns.

Who participated?
As explained at the beginning of this report, a questionnaire was sent to every forging plant in the United States. Among the respondents, carbon and alloy steels were the most widely forged metals, at 80.3% and 77.3% respectively. Stainless steels were forged by 43.9% of the respondents, high-temperature alloys by 21.2%, titanium by 24.2%, aluminum by 25.8%, and brass and copper alloys by 21.2%.

Of responding producers, 60.6% manufacture impression-die forgings, 37.9% perform open-die operations, and 9.1% roll seamless rings, with 7.6% reporting they are involved with impact extrusion, 3.0% performing upsetting, and 1.5% performing powder forging.

The employment size indicated by respondents was as follows: 27.3% employ up to 20 people, 18.2% employ 20-49, 19.7% employ 50-99, 27.3% employ 100-249, and 7.6% employ 250 or more.

As for sales volumes, 6.2% of the respondents indicate they record under $1 million of business annually; 27.7% do $1-5 million; 10.8% operate in the $5-10 million range; 10.8% record $10-20 million per year; 33.8% do $20-49 million; 7.7% do $50-100 million; and 3.1% list more than $100 million in sales per year.

VALUE OF 2005 SHIPMENTS BY EMPLOYMENT SIZE
Value of forgings ($ millions) Number of Employees
Less than 20 20-49 50-99 100-249 250 or more % of TOTAL
Less than 1 6.06% 0.00% 0.00% 0.00% 0.00% 6.2%
1-5 15.15% 10.61% 0.00% 0.00% 1.52% 27.7%
5-10 1.52% 3.03% 4.55% 1.52% 0.00% 10.8%
10-20 3.03% 0.00% 4.55% 3.03% 0.00% 10.8%
20-50 1.52% 1.52% 18.18% 10.61% 1.52% 33.8%
50-100 0.00% 3.03% 0.00% 3.03% 1.52% 7.7%
More than 100 0.00% 0.00% 0.00% 0.00% 2.63% 3.1%

INVESTMENT PLANS FOR 2007
Machine rebuilds, modernization 50.0%
Forge furnaces, billet/bar heaters 36.4%
Machine tools 28.8%
New forging equipment 24.2%
Training 21.2%
Lift trucks 21.2%
Heat treating equipment 21.2%
Die sinking equipment 21.2%
Robots or manipulators 19.7%
Cutoff equipment 18.2%
Billet feeders 18.2%
Testing equipment 16.7%
Quick die-change equipment 12.1%
Cranes, hoists 12.1%
Forging handling equipment 10.6%
Air compressors 10.6%
Cleaning/finishing equipment 9.1%
Grinding equipment 7.6%
Simulation software 6.1%
Process control hardware/software 6.1%
Pollution control equipment 6.1%
Product research 4.5%
Process monitoring equipment 4.5%
Design software 4.5%
Market studies 1.5%

BORROWING PLANS FOR 2006
Under 20 20-49 50-99 100-249 Over 250 Total
Not Currently Carrying Debt 35.3% 27.3% 18.2% 5.9% 40.0% 23.0%
Retire Debt 11.8% 18.2% 45.5% 35.3% 0.0% 24.6%
More Debt 17.6% 9.1% 9.1% 0.0% 0.0% 8.2%
About Same 35.3% 45.5% 27.3% 58.8% 60.0% 44.3%

CAPITAL EXPENDITURES FOR 2007
No. of employees New Plant Plant Additions New Equipment None
Under 20 5.6% 11.1% 72.2% 27.8%
20-49 0.0% 16.7% 91.7% 8.3%
50-99 0.0% 15.4% 100.0% 7.7%
100-249 0.0% 16.7% 77.8% 16.7%
Over 250 0.0% 20.0% 60.0% 20.0%
CAPITAL EXPENDITURES: 2007 VS 2006
No. of employees About Same Increase Decrease
Under 20 52.9% 35.3% 11.8%
20-49 40.0% 40.0% 20.0%
50-99 58.8% 29.4% 11.8%
100-249 58.8% 29.4% 11.8%
Over 250 50.0% 25.0% 25.0%
FORECASTS: FORGING SHIPMENTS (TONNAGE) BY COMPANY SIZE 2006 vs. 2005
No. of Employees About Same Increase Decrease
Under 20 38.9% 55.6% 5.6%
20-49 41.7% 50.0% 8.3%
50-99 23.1% 69.2% 7.7%
100-249 27.8% 72.2% 0.0%
Over 250 40.0% 60.0% 0.0%
2007 vs. 2006
No. of Employees About Same Increase Decrease
Under 20 33.3% 60.0% 6.7%
20-49 25.0% 41.7% 33.3%
50-99 46.2% 46.2% 7.7%
100-249 29.4% 58.8% 11.8%
Over 250 20.0% 60.0% 20.0%
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