Long-term trends are fabricators' friends

With every conversation I have with a metal fabricator, I become more convinced that the companies left standing after two recessions within a 10-year span are primed to survive in this very competitive global economy. In essence, they have survived because they are the fittest.

In the wake of the bloodbath of U.S. jobs since the start of the Great Recession in the fall of 2008, these metal manufacturers represent a sector that is growing slowly—and successfully. These fabricators learned that it is much easier to make quick adjustments to a smaller, leaner enterprise than a bloated business. That's why they have leaned heavily on automation on the shop floor and software enhancements in the front office and looked to hire temporary employees when labor is needed to address short-term spikes in job activity. These company leaders know that the earlier they are able to react to drops in business, the better they will be positioned to take advantage of the inevitable upswing that occurs in the following months. The key is to have a core team of talented fabricators and the right technology mix ready to respond to new opportunities.

Well, it's been several months now of slow and somewhat steady growth. Capacity utilization rates for fabricated metal products remain in the 85 percent range, much higher than the 77.4 percent average from 1972 to 2012, and economic forecasts suggest that this year should be the same or a little better than previous years for fabricators. Fabricators, as a result, seem to have a somewhat cautious outlook.

But what about long-term prospects? If you believe the trends, you have to be optimistic, my friends.

A west Michigan fabricator put these long-term trends into focus for me during a recent conversation. After years in other industry sectors, he and his partners purchased a fabricating business that specializes in making parts for heavy-duty equipment.

"This opportunity was capped by the fact that the company's customers had good long-term prospects," he said.

These long-term prospects are pretty easy to recognize, if you give it a little thought. People all over the world are migrating from rural areas to urban centers as they pursue a better standard of living. Construction equipment is needed to create the housing, infrastructure, and commercial establishments needed to support this increasing population. Mining equipment is needed to harvest the minerals to create the building materialsm required for this building boom. Agricultural equipment is needed to grow the food to support this ever-expanding population.

This isn't a trend that is going to end soon. The masses are not going to flock back to the hard and meager life in the world's hinterlands. For the most part, when they get to the city, they are there for a long time.

Certainly, this isn't a guarantee of consistent business success for North American metal fabricators. But if they are serving companies involved in the production of agricultural, construction, mining, and transportation products, they should feel confident that they have a solid customer base from which to diversifytheir business further.