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Fabricators navigate first three chapters of the pandemic recession

From the initial plunge to the uneven recovery to the continued recovery, what will the next chapter be for metalworkers?

Illustration depicting various COVID-19 related situations

Metal fabricators have already navigated the first three chapters of the pandemic: Chapter 1, the initial plunge. Chapter 2, the uneven recovery. Chapter 3, a continued recovery mixed with a period of wait-and-see. What will the next chapter be? Getty Images

So, how has your 2020 been? I’ve lost track of how many times I’ve asked custom metal fabricators across the country that question. The answers aren’t as homogenous as you might expect.

Answers depended on when I asked the question. Early on they were quite homogenous, for obvious reasons. Fabricators of every stripe scrambled for PPE, adapted shop floor routines and layouts to adhere to social distancing, and navigated customer plant closures and the legal and regulatory patchwork that defined what was and wasn’t an essential business.

Lou Zhang, chief data scientist at MachineMetrics, called that initial shock the “first chapter” of the pandemic recession. The Northampton, Mass.-based company, which offers machine monitoring technology such as uptime tracking, gave a telling webinar in late August, during which Zhang divided the COVID-19 recession into three chapters. The first lasted from mid-January through mid-April, the initial plunge. Outside certain shops with strong ties to sectors like medical equipment, IT infrastructure, and e-commerce, most fabricators faced similar challenges.

After the initial shock, business conditions among different fab shops became more varied. Most shops have a long tail of small customers that curve upward to a smaller collection of large—yet important—customers.

Exactly where most of the demand drops occurred—among the many small or important few—dictated how fabricators experienced the second chapter of the COVID-19 recession, what MachineMetrics’ Zhang called the “uneven recovery,” which occurred between mid-April and the end of June.

Many fab shops put their sales and estimating departments in high gear. They perhaps saw an opportunity to grab market share, especially if they played in hard-hit markets and saw less financially stable competitors fall by the wayside. The successful few have successfully “fattened the tail,” as smaller customers became larger. In this way these operations drove the uneven growth of the pandemic recession’s second chapter.

Then came the third chapter, what Zhang called “not exactly a rally.” Automotive manufacturing accelerated, then flat-lined around mid-August. In fact, activity in nearly every sector Zhang tracked, including contract manufacturing, flat-lined around the same time. “The industry is in wait-and-see mode,” he said.

MachineMetrics data preceded a host of positive data from manufacturing in early September, starting with very positive readings from the Institute for Supply Management’s Purchasing Managers Index on Sept. 1. Anecdotally, metal fabrication seemed to have escaped the worst. Here’s how one metal fabricator responded to the PMI survey: “Current sales to domestic markets are substantially stronger than forecast. We expected a recession, but it did not turn out that way.”

So are we in the clear? Not so fast. Consider a mid-September report from Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association. “Of the 11 indicators we watch, there has been a recovery in every one of them,” Kuehl wrote. “With gains like this, there should be dancing in the streets, but the majority of the industrial community remains subdued and cautious, and for a very simple reason: These gains come after record losses.”

Libertyville, Ill.-based Laser Precision’s situation illustrates the industry’s challenges, especially when it comes to winning certain types of large contracts in the pandemic age. The fabricator focuses on contract work that benefits from job-processing automation. A customer-triggered order at Laser Precision might require no human intervention until the laser starts cutting. Such automation makes the business scalable, but it also requires many points of connection between the fabricator, its customers, and its suppliers. It’s not a job shop winning a bid and delivering a one-time order.

“It’s been difficult to do the necessary due diligence to qualify new business and determine whether there’s a good business fit.”

So said Laser Precision President Jeff Adams, who explained that most new customer relationships at his company start with healthy due diligence. What are the quality metrics? How are processes developed? What will be the delivery and other performance metrics? These form the building blocks of what Adams called a “world-class supplier-customer relationship.”

These often involve customer visits, which can be tough to arrange in an era of social distancing and business travel restrictions. Sure, some visits can be accomplished virtually, but let’s face it, only so much due diligence can be accomplished over a video screen.

Adams added, “Once this is behind us, what does the recovery really look like? How much damage has been done to the underlying economy?”

That uncertainty is why Kuehl takes the positive indicators coming from manufacturing with a grain of salt. Certain businesses remain unscathed, some serving the right industries are thriving, while others are controlling what they can and are looking forward to 2021 and beyond.

That said, the best custom metal fabricators are agile. They’ll adapt. It’s baked into their business model. The hotel business could change for good. So might the airlines, restaurants, and large swaths of brick-and-mortar retailers. But fabricated metal will be needed somewhere. Although we all know the pandemic’s last page (a vaccinated public), we still don’t know exactly how its final chapter will play out. But metal fabrication will continue to play a role.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.