Though some optimism appears on the mid-term horizon, the state of the manufacturing industry remains challenging.Ã‚Â The Manufacturer’s Alliance/MAPI US recently released its quarterly industrial outlook that examined 27 different industries. The report cites a range of factors that will lead to a modest upturn by 2010. These factors include: pent-up demand, lower mortgage interest rates, depletion of inventories, fewer imports, lower commodity prices (including oil) and the stimulus package. According to the report, manufacturing will contract 12% during 2009 and grow 2% in 2010. Several sectors led the decline including steel production (down 61%) and material handling (56%), automotive, housing and semiconductors, which all showed steep drops.
The only industry in the decelerating decline (meaning late recession or mild recession according to the study) is aerospace parts and products. This seems surprising given the state of air travel but military spending has likely supplied the demand. This sector, expected to grow 5% still this year along with communications equipment and medical equipment and supplies each growing at 1%, could lead the recovery. The report predicts 17 of 24 industries will grow next year led by housing and motor vehicle and parts production. Industries that will decline include mining as well as oil and gas field machinery.
What does this mean for the metal buying community? As we have previously predicted (here are MetalMiner predictions for steel, here is aluminum and here is copper), metal prices will largely remain flat for 2009 due to continued weak demand. Any uptick in demand could create the impetus for some price increases particularly for steel (auto and housing), stainless steel (which led the recession and for which we have a post coming out later this morning), copper and metals such as titanium and chrome. But that will be in 2010. In the meantime, now remains as good a time as ever to identify cost savings opportunities and re-negotiate long term supply agreements. And for those in industries such as oil and gas field service equipment or companies engaged in major capital projects, as one of the few remaining volume buyers, despite decreased budgets and cuts in capital expenditures, the timing for sourcing has never been better.