June 17, 2008
For the past decade or so, the headline stories have painted a grim picture for the world's economies. The Asian financial crisis (1997) was followed by a free-fall in stock prices (2000) and a recession that stalled many of the world's leading and emerging economies (2001), leaving many to wonder if it was the beginning of a catastrophic worldwide depression. The tragedies of Sept. 11 (also in 2001) battered the tourism and airline industries in the U.S., the latter of which was plagued by a series of bankruptcies that continued well into 2008.
Recovery from the 2001 slump was slow in Europe. The euro area's economy grew little more than 1 percent every year from 2001 to 2003. From 2002 to 2004 the growth engine of Europe, Germany, experienced an average 0.4 percent growth. In the U.S., stock prices and manufacturing finally hit bottom in 2003.
The following economic expansion was prosperous, but later it turned out to be supported by subprime real estate lending that turned into a catastrophe (2007).
If you didn't know better, you'd think all these problems had spread to every sector of every economy and that every industry was struggling, if not collapsing.
In fact, a deeper look at other data reveals resilience and strength in economic activity and especially industrial output. From 2000 to 2007, U.S. gross domestic product (GDP) grew 20.4 percent, an average of 2.9 percent per year. During this time total manufacturing output in the U.S. increased by 12.1 percent, and durable goods manufacturing increased 19.1 percent. Energy demand increased 9.9 percent.
In Germany the economy rebounded at a relatively rapid pace, 2.9 percent growth in 2006 followed by 2.5 percent in 2007. It led the entire euro area to nearly identical growth (2.8 percent and 2.6 percent, respectively). The pace was much quicker in emerging and developing economies throughout the world, which averaged more than 6 percent in 2003 and nearly 8 percent in 2006 and 2007.
A general indicator of economic activity, the price of oil supports these estimates. Increases in manufacturing and transportation worldwide drove crude oil prices from less than $12 per barrel in 1998 to nearly $120 a barrel in 2008. This has led to increased drilling activity and greater demand for steel pipe and tube. According to the Baker Hughes rig count, the number of rotary oil rigs in the world increased from 560 in January 2000 to 1,054 in March 2008, an 88 percent increase in approximately eight years. According to the Steel Tube Manufacturers Association, world output of steel pipe and tube was 63.1 million tons in 2000, which increased to 110 million tons in 2007, an increase of 75 percent in just seven years.
While the high price of oil is a major indicator for increases in industrial activity—leading to capacity increases for exploring, drilling, pumping, transporting, and refining petroleum—it certainly isn't the only one. Metals prices have soared to new heights by surging demand, a reflection of worldwide construction and manufacturing activity. The Commodity Research Bureau's Metals Index went from 203.34 in January 2003 to 909.03 in March 2008, a nearly fivefold increase in five years. Also, lead-times for many materials are lengthy, another reflection of growing demand.
High costs and long lead-times have put manufacturers under more pressure than ever to get the most they can out of the materials they use. High scrap rates are not acceptable, so many manufacturers are looking for machines that offer easy, accurate setups and produce good parts right away.
It was against this background that Düsseldorf hosted three industrial tradeshows—Tube, wire, and METAV—March 31 to April 4.
The pace of industrial activity has picked up considerably since 2003, and judging by the new products offered at Tube, tube and pipe manufacturers and fabricators are looking at every angle—versatility, productivity, and accuracy—to keep up with the nonstop demands of their customers.
Lang Maschinenbau GmbH & Co. KG, Michelstadt, Germany, introduced a free-form tube bending machine. Rather than using bending dies with fixed radii, free-form benders use three rollers; the middle roller's position changes during the bend to create a variable-radius bend. Lang's bender uses a sensor connected to the middle roller. The sensor compares the measured radius against the specified radius for bending accuracy, explained Sabine Neff, Lang's general manager.
As with any bending machine, good bending practices are necessary. For example, Neff mentioned that for optimal repeatability, users should place the tube seam in a consistent location and develop a new set of bending values for every new tubing lot.
Lang also manufactures rotary benders that detect springback and correct the bend automatically. This feature is especially useful when bending exotic, expensive materials or small lots that have big variations from one product to another. However, the process is slower—after the bend is made, the clamp unit opens and the measuring unit measures the bend; if the bend isn't exact, the clamp unit closes and the bender makes the necessary correction.
BLM Group, Cantù, Italy, introduced four new machines at Tube: two benders, an end former, and a laser cutting machine. The benders, Dynamo LR150 and Elect, are all-electric models that bend tubing up to 25 mm OD and 80 mm OD, respectively. The company's end forming machine, Tubeform, has an indexing rotary table and loads two tubes at a time. It is capable of end forming straight or bent tubes.
The laser it introduced is the eighth generation of its model LT722D. Depending on part complexity, it is up to 80 percent more productive than previous lasers in this model series,said Antonio Farese, product manager for BLM.
"The more complex the part, the higher the productivity increase," said Farese. The biggest changes are in the software, he explained. The programmers designed the software around the machine's capabilities, he added. The machine also has some hardware improvements, he added.
The goal in developing all four machines was high productivity, Farese said. "For example, the Dynamo bender can make one bend per second, allowing it to make quick work of symmetric bends," he said.
The four new products were designed for jobs shops and fabricators doing work in a variety of industries: agricultural, heavy equipment, outdoor furniture, and health and fitness.
Like many other exhibitors at Tube, Combilift Ltd., Monaghan, Ireland, encountered geographically diverse booth visitors, with many inquiries from companies outside Europe.
"We have had inquiries from the U.S., Algeria, Argentina, and Cyprus," said Martin McVicar, the company's managing director.
The company manufactures side-loading lift trucks, which don't need a lot of room to operate. This niche so far has done well in good times and bad, according to McVicar.
"Combilift didn't see a downturn in 2002 and 2003," McVicar said. "Two reasons for this—first, we were a new company, and second, our products bring added value because they allow companies to reduce the amount of storage space. When business is booming or business is in a downturn, reducing storage space is a good strategy."
Combilift goes further than providing side-loaders to help conserve storage space; it helps its customers in a more direct way.
"We have four engineers who work on warehouse layout," McVicar said. "This service is free of charge to all Combilift customers."
For tube and pipe operations that typically use electric trucks and run three shifts, for example, service centers, Combilift developed several models that run on liquefied petroleum gas (LPG). Because they don't run on electricity, they don't require a charge or battery change between or during shifts.
Unison, Scarborough, U.K., showcased the Uni-vercell robotic handling cell, which loads, end-forms, bends, inspects, labels, and stacks tubular parts. The inspection is performed by a camera that checks the integrity of the end form and the shape of the tube. An all-electric machine, it is intended for manufacturing tubular components typically found in automotive and appliance applications, said Alan Pickering, managing director.
Other suitable applications for this bender are in the aerospace industry, especially for difficult-to-bend and expensive materials such as titanium.
"With a machine such as this, the tooling setup is automatic, the onboard inspection system means the first part is a good part, which reduces scrap rate, and the all-electric technology provides very precise bends," said Pickering.
"In many cases, you simply can't bend the titanium on a hydraulic bender," he said. "It has to be done hot. However, an all-electric machine can bend very slowly, enabling cold bends on titanium."
"When bending this material, it can take up to 15 minutes to do a 90-degree bend," he said.
SST Forming Roll Inc., Buffalo Grove, Ill., a manufacturer of specialized roll tooling for niche markets, has watched as various geographic markets have risen and fallen over the past few years. Mexico and Arabia were growing markets for SST two years ago, according to Aki Washinushi, company president. These days the company is seeing much more activity in Europe, which Washinushi thinks is based on the strength of the euro currency.
Washinushi added that Europeans put a premium on the cosmetic appearance of manufactured goods, prompting inquiries from Europe about tooling for manufacturing stainless steel products.
Michigan Seamless Tube, South Lyon, Mich., does about 10 percent to 12 percent of its business in exports. It has found that its business model—short production runs and quick changeovers—is well-suited to a global energy market that puts increasing demands on companies that extract and process crude oil.
"We recently shipped 60 tons of product to Kuwait," said L.H. Whitver, vice president of operations. Michigan seems like a long way from Kuwait, but when the price of crude oil is well over $100 per barrel, distance doesn't matter. "A refinery was down and they needed to get it up and running immediately.
"European pipe mills usually are large and they have long production runs," Whitver explained. "For quick deliveries, they rely on small mills like ours. We can break into a production schedule and do a changeover in little more than 10 minutes," he added.
Bronx/Taylor-Wilson, North Canton, Ohio, a manufacturer of pipe mills largely focused on the oil and gas industry, received inquiries that reflected the global nature of the energy boom—from China, Russia, and the Americas, according to Mike Pollard, company president.
"We have been exhibiting at Tube since 1996 and have never seen this much traffic," he said. "It's all driven by the price of oil."
Abbey International, Perrysburg, Ohio, a Bronx/Taylor-Wilson partner that produces mills for API pipe and structural applications, is riding twin booms in construction and energy. Tom Thomas, technical sales manager for Abbey, commented that Abbey's construction-related inquiries pertain to rebuilding efforts and new construction. In some cases, the inquiries come after a disaster, such as an earthquake or a tsunami; in other cases, it's simply a matter of construction activity to house expanding populations.
Regardless of the reason, the inquiries are more than just casual requests for information.
"In many cases, we are getting commitments right here at the show," Pollard said.
Magnetic Analysis Corp. (MAC), Mount Vernon, N.Y., a manufacturer of eddy current, magnetic flux leakage, and ultrasonic testing equipment, is seeing slow but steady business in the U.S. and fast growth overseas. Ten years ago approximately 20 percent of its business was outside the U.S.; that has grown to approximately 50 percent today, according to Don Bugden, vice president of marketing. The company has made recent deliveries to companies in Ukraine, Russia, Turkey, Brazil, Poland, and the U.K.
Despite the North American automotive industry's woes, MAC has enjoyed brisk business in automotive applications outside North America.
"The fact is, quite a few people in the world don't have automobiles," Bugden said.
MAC's equipment is also well-suited to manufacturing products that must conform to internationally recognized manufacturing standards, such as API's.
"In the past many facilities didn't utilize testing equipment if the domestic market didn't require it," Bugden said. "These days, if they want to manufacture goods for export, they have to upgrade their facilities, and that usually includes testing equipment."
MAC is in the comfortable position of supplying testing equipment necessary for many energy applications. For instance, testing is necessary to verify the integrity of the titanium tubes used in power generators, INCONEL® alloys used in nuclear reactors, titanium used in condensers, and so on.
Aircraft is still a viable market for MAC, but that industry generally doesn't require large quantities of testing equipment, Bugden added.
Siempelkamp Maschinen- und Anlagenbau GmbH & Co. KG, Krefeld, Germany, which designs and manufactures equipment for a variety of industries, including wood processing, metals processing (forging, forming, and drawing), and nuclear technology, recently installed a pipe forming press that the company claims is the world's largest. With a capacity of 79,366 U.S. tons, it can bend plates up to 16 feet wide, 59 ft. long, and 1.6 inches thick to produce pipes up to 56 in. in diameter. Commissioned for Baoshan Iron & Steel Co. Ltd., China, the press's annual output, when processing the heaviest material possible, is 224 miles of pipe.
In addition to China, India and Russia are two markets with extensive potential for Siempelkamp, according to Rüdiger Bartz, sales manager of the company's metal forming division.
"We see quite a bit of interest in these two countries because quite a bit of the technology they use is outdated," he said. Commodities have generated windfall revenues for many countries, making replacements affordable. The company has several projects in the planning stages in Russia and also some of its neighboring countries, he said.
The company is also preparing for a big jump in the level of investment in India, according to Bartz. For example, one of Siempelkamp's presses in India, one that manufactures half-shells for boilers and nuclear power stations, is 20 years old. It's a large hot-forming press that can form plate up to 300 mm thick and up to 12 m long. An increase in energy demand is prompting interest in a second press, Bartz said.
The big economic stories at Tube, of course, were the subprime lending fiasco and the value of the U.S. dollar. The second has already had a direct effect on manufacturing, whereas the first is likely to have a much smaller, indirect one.
Although it originated in the U.S., the subprime problem has spilled over to non-U.S. financial sectors.
"Many investments based on subprime mortgages were sold to Europeans, so now they are in a little bit of trouble," said BLM's Farese. "Still, it is largely a financial problem, and has not had a big effect on manufacturing."
Christian Rogiers, vice president of marketing for AddisonMckee, Lebanon, Ohio, observed that although manufacturing is suffering from a slowdown, it's not from the usual cause—a slump in demand—but a matter of finance. Although manufacturing firms are not subprime mortgage borrowers, it makes no difference. Bankers are wary of getting burned.
"It's a recession in lending for capital investment," he said.
Some of the latest predictions and indicators provide a mixture of optimism and pessimism for the economy at large and for manufacturing. In the April 14 issue of StraightTalk®, Gail Fosler, president of The Conference Board, predicted that the U.S. economy would continue to grow, although slowly, throughout 2008 and into 2009. For manufacturing, the Institute for Supply Management's PMI was 48.6 percent in March, 48.3 percent in February, and 50.7 in January. This data indicates that the manufacturing sector's output had declined for two straight months, but the rate of decline was slowing.
According to the Bureau of Labor Statistics, the unemployment rate was climbing and increasingly volatile at the end of 2007 and in the early months of 2008. From January 2006 through November 2007, the unemployment rate usually changed just 0.1 percent per month and never strayed below 4.4 percent or above 4.8 percent. In December 2007 it jumped 0.3 percent, from 4.7 percent to 5.0 percent, and it jumped 0.3 percent again in March, from 4.8 percent to 5.1 percent.
Perhaps the most visible economic indicators of all are the price of crude oil and inflation. The spot price for a barrel of West Texas Intermediate was $100.92 on April 1. By April 28 it was $119.93. Although inflation was fairly stable throughout 2007 and early 2008, usually increasing by 0.3 percent and rarely more than 0.4 percent per month, the oil price spike is sure to show up as a spike in inflation in April.
How the economy shapes up and whether manufacturing thrives in 2008 remain to be seen, but the inflation rate, crude oil price, and unemployment rate are three key indicators that bear watching.
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