Wall Street hasn’t been kind to companies tied to commodities, but sometimes
the view may be a bit skewed. Take the railroads. “People are freaking out about
coal,” Kuehl said, yet not all railroads are utterly dependent on coal. Intermodal
shipping—with a hub of rail and spokes of trucks—is still growing. And rail companies are still looking to save fuel costs in the long term, despite lower oil prices today. So trends toward lighter, stronger materials in rail will likely continue.
“Rail players have a far-out timeline,” Kuehl said. “They’re not reacting to the
near-term oil price. They’re still into fuel efficiency and using lighter cars.”
Following the intermodal trend, the trucking sector has become more region-
al, again going by the hub-and-spoke model. Thanks in part to the rising dollar,
the outbound activity to the ports is down, but the inbound activity is up.
Meanwhile, some in the aerospace business reported record deliveries of
commercial aircraft in 2015. As of October, Boeing had announced it had a record 580 deliveries for the year.
It’s true that the pace of orders declined in the third quarter of 2015, according
to durable goods data from the government. But long term, the strong growth
is expected to continue during the coming years. According to a report from
Aviation Week Intelligence Network, the world’s in-service commercial fleet will
increase from 31,700 aircraft in 2016 to almost 42,660 aircraft at the end of 2025.
Kuehl added that defense spending will probably continue strong into 2016,
though the spending may shift to equipment for personnel, not large machinery
investments seen in recent years.
When’s the Next Recession?
Kuehl said that most predict GDP growth for 2016 to be between 2. 5 and 3 percent. The growth continues, steady, but nothing spectacular.
Still, economic news doesn’t lack for glass-half-empty outlooks. Some pre-
dict another downturn on the horizon. Allianz economist Mohamed El-Erian, for
instance, predicts a downturn in 2017 of between 25 and 30 percent. In early No-
vember he told CNBC, “People forget how exposed we are to financial instability
in the rest of the world.”
When you boil it all down, the rest of the world is really the concern. How long
can the U.S. hold its own? But custom fabricators have one advantage. When
one market tanks, they tackle another. Consider Springs Fabrication, an indus-
trial fabricator in Colorado Springs, Colo. Until this year oil and gas represented
its bread-and-butter work. Not anymore.
“We had about a week’s notice,” said CEO Tom Neppl. “When it fell apart, it fell
apart almost instantly.”
So what happened? Springs Fabrication moved on. “We’re moving into other
markets. We see some infrastructure spending in Colorado, and construction is
booming, so we feel like there is opportunity there too.”
Some opportunities in metal fabrication come from markets that simply
didn’t exist several years ago. For instance, walk into a fast-food (or their pre-
ferred name, “quick service”) restaurant during the next few years, and you’ll
likely see a touchscreen where people place their order. All those touchscreens
need a sheet metal enclosure.
“The food service sector is really perking back up again,” Kuehl said. “The sec-
tor is expecting big changes during the next few years, including the rollout of
‘robotized’ fast-food operations.”
Robotized fast-food operations need sheet metal, and so do countless other
sectors. Serving a lot of them can reduce a fabricator’s exposure to the risk of
downturns. In 2016 and beyond, having a diverse customer base will continue
to be the name of the game.
Senior Editor Tim Heston can be reached at email@example.com.
Fabricators & Manufacturers Association International, 888-394-4362, www.fmanet.org
BTD Mfg., 866-562-3986, www.btdmfg.com
Mayville Engineering Co., 920-387-4500, www.mecinc.com
Special Products & Mfg., 972-771-8851, www.spmfg.com
Springs Fabrication Inc., 800-466-5896, www.springsfab.com
Tekla Inc., 770-426-5105, www.tekla.com