Manufacturers Grow Confident as They See Rising Demand

Machine-shop operators at the International Manufacturing and Technology Show in Chicago in September were scouring the show floor for robotic equipment and other machine tools they’ll need to keep pace with rising demand from OEMs for parts for cars, appliances, jets and other durable equipment, The Wall Street Journal reported. Tool makers entered the year expecting a rebound after a 5.4-percent order drop in 2013 in the $5-billion-a-year business, according to the Journal.

“We’ve seen more activity in our business dedicated to non-residential, and we’re doing better than a year ago in those businesses.”

Meanwhile, the metal-service-center industry is finally seeing a significant uptick in one of the few remaining sectors of the U.S. economy where improvement hadn’t been much in evidence before: non-residential construction. Demand for metal components for pole buildings, bridges, waterworks, transmission towers and other industrial construction finally has begun kicking in, according to David Hannah, CEO of Reliance Steel & Aluminum in Los Angeles.

“Close to 30% of our revenue is related to non-residential construction, and it has been the laggard in terms of recovery from the recession,” says Hannah. “Pretty  much all other areas we touch in the industrial economy—energy, manufacturing, capital goods, aerospace—have recovered quite a bit more than non-residential construction so far.”

Non-residential construction, Hannah says, is the largest consumer of steel products in the country, even more than the auto industry. Although, “we’re still close to 20 percent off of what we think normal should be in the non-residential area.” Since 2009, he says, there have been a few attempts at recovery in that category, but they’ve been sidetracked because of domestic or international political issues. “They have the effect of creating uncertainty, and that’s not good for large decisions.”

What he’s seeing most this year, he says, is work from steel mills. “Our suppliers are talking more about big projects,” Hannah continued. “For the first time they’re talking positively about non-residential activity. We’ve seen more activity in our business dedicated to non-residential, and we’re doing better than a year ago in those businesses.”

As a result, he adds, “I’ve got a little more confidence through the remainder of this year and next year and even into [2016] that part of our business should continue to improve more than it has. And we are well positioned as a company because we’ve made some fairly substantial acquisitions over the last few years in non-residential construction.”

Whether organic or acquired, demand appears to be improving, and that’s good for manufacturers all the way around.

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Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.

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