Conveyor Manufacturing Activity Points to Recovery
By Ron Bargman
Posted: Apr 12, 2013
Conveyor and conveyor equipment makers are showing excellent growth with record high order rates after being hit hard by the effects of the economic recession in 2008 and 2009. With economic fears easing, the industry has been fairly optimistic about its future performance.
The Conveyor Equipment Manufacturers Association (CEMA) recently reported that shipments in 2012 rose 22.44% at an estimated value of $10.41 billion. However, industry insiders at CEMA’s 2013 Annual Meeting do predict growth for 2013 to be in the single-digit range at roughly 5%. In contrast, 2007 conveyor shipments only totaled $7.82 billion with a 5.9% increase following sales recorded in 2006.
As pointed out by John Hill, a Director at supply chain consultancy firm St. Onge, the turnaround in the last three years can be attributed to businesses that have been expanding operations after needing to cut back spending during the economic downturn. As these plants kept up utilization rates and increased capacity, capital spending for conveyor equipment also climbed up.
The performance of the conveyor sector can be directly related to the amount of growth in the manufacturing industry which has become extremely reliant on these machines. While the U.S. economy still deals with issues surrounding an ongoing recovery, typical end-users such as manufacturers, warehouses and distribution centers have begun to moderate their spending and opt to make the most out of the facilities already in use.
The manufacturing climate in the U.S. is continuing to expand albeit at a slower pace than originally expected. The Institute of Supply Management (ISM) even reported a dip in overall manufacturing activity going from 54.2% in February to 51.3% in March 2013. This is further indication that companies are being careful about increasing workforces, capacity and spending on equipment.
Many of the manufacturing industry executives included in ISM's survey still expressed uncertainty largely due to current government policies and spending cuts. An $85 billion federal spending cut was recently enacted and the effects of this are yet to be felt. At the moment, businesses are taking a wait-and-see attitude before making any drastic moves such as allocating more capital for capacity that may not be necessary.
St. Onge's John Hill also states that even if plants in the U.S. achieve utilization rates between 60% and 70% across the board, it is not enough to merit more purchases for material handling equipment like conveyors. When plant capacity levels begin to exceed the 70% level, only then will businesses consider looking for new equipment to keep up with production rates. Otherwise, if conditions remain stagnant, companies would rather just wait for better economic forecasts rather than risk losing money for equipment that may go underutilized.
Despite a slight slowdown in growth forecasts, the conveyor industry’s overall outlook is still positive. Shipments in 2009 were at record lows standing at only $6.082 billion. Sales figures from 2010 and 2011 have already surpassed pre-recession levels with slow but positive growth still expected in 2013 and years beyond. Leading economic indicators such as increased housing starts and decreased unemployment numbers and better consumer spending all bode well for the manufacturing industry in general, consequently giving conveyor equipment makers more hope for the future.
For more information:
Submit Press Release
