By Don Moss, CCIM, SIOR – Senior Director, Colliers International | Charlotte
Similar to the “Cotton Still the Fabric of Our Lives” which is now over thirty years old, the fabricated metal industry could be the ‘Underpinning of Our Lives’. Metals touch everything we do in life. From the Yeti Insulated Coffee Cup you use in the morning to the mold for plastic water bottles to the wheels on your vehicle. Fabricated metal touches all parts of our consumer lives and is a driving factor in everything from construction to manufacturing to the machines that pick the food we eat.
One only needs to stop and look around to notice the small welding shop to the large manufacturing plant in one’s town.
Future of the Industry
Metal Fabrication Market to Expand at Compound Annual Growth Rate (CAGR) of Over 3.4 Percent Through 2025
The global metal fabrication market was valued at around US$16,824M in 2016 and is anticipated to expand at a CAGR of over 3.4 percent from 2017 to 2025, according to a new report published by Transparency Market Research (TMR) titled “Metal Fabrication – Global Industry Analysis, Size, Share, Growth, Trends, and Forecast, 2017–2025.” Expansion of the market is likely to be driven by rising demand from construction and automotive companies.
The metal fabrication market in North America is expected to expand at a CAGR of over 4.8 perccent during the forecast period. An increase in automation and technological upgrades are likely to propel the metal fabrication market in the region.
While the growth of the fabricated metals industry is positive for the country and economy, it is most important to remember the employment and economic multipliers caused by the durable metals industry in which the fabricated metals industry falls. According to research by the Economic Policy Institute for every 100 jobs in the industry there are another 744 indirect jobs that are created. In addition, for every $1,800,000 in final demand for the durable manufacturing sector there is an additional $16,500,000 demand non direct jobs. Therefore, it can be concluded, that recruiting and retaining the fabricated metal industry in a community, region or state is vital to the economy.
Key areas that will affect the metal fabrication industry in the future are:
- Automation – The ability to integrate skilled workers and robotics.
- Employee Training and Recruitment – Currently there is a workforce shortage, especially in the highly skilled trades as the baby boomers retire.
- Agility – The ability of the industry to adapt to rapid changes in demand in a heavily capitalized industry. The growth of printed metals could be a solution to this issue.
- Strategic Decisions – Using the knowledge of talented site selection services to make decisions on the “right” location is paramount for long term growth and profitability of a company.
Automation and Robotics
Alabama has been one of the most forward-thinking states to invest in the field of robotics for training in the industrial sector. The Alabama Robotic Technology Park is a four-building campus for training and research and development. Kristi Bain, Assistant Director states views on the current and future of robotics in the metal industry, “Robotics has been a game changer with workforce retention and attraction. There is an application for the four generations that are currently in the workforce.”
For the Baby Boomers and the X Generation, it has enabled them to stay actively in the fabricated metals trades for potentially up to ten years longer. The formerly mostly repetitive motion is hard on muscles and joints as workers age. Robots have taken these tasks which are difficult on an aging worker and enable them to use their mind. Older workers are often excited about learning new skills and doing new and exciting tasks in their jobs.
For Millennials and the Zed Generation, robotics takes the “cool” factor of computers and programing and enable those individuals to come up with fresh new and creative ideas to the work place. A good example of new ideas is the automated guided carts (AGV) with robots attached to them so the AGV is able to both onload and offload materials across the shop floor which is a cost-saving measure.
Ultimately, robotics in the fabricated metals trades are pushing up the skill levels required for the shop floor with more programmers and maintenance technicians needed.
Employee Training and Recruitment
Bret Swango, Colliers Vice President of Workforce Analytics, weighs in on COVID-19 and the ability to find and train a talent pool for the fabricated metals industry.
Demand pull-back from end-consumers, particularly in the form of manufacturing shutdowns in the construction and automotive sectors, has slowed demand in the labor market for the metal fabrication industry. A sustained reduction in customer demand could lead to cash-flow and debt repayment disruptions, increasing the potential for staff reductions. Legislation like Paycheck Protection Program have helped to buoy employment across industries.
That said, labor was the most critical component in the site selection process prior to COVID-19 and we believe it will continue to be going forward. Though industry unemployment was down to single digits at 9.1 percent in June from its peak 13.2 percent in April, we are seeing polarization between skilled and unskilled labor.
As we enter the COVID-induced recession, we are seeing skilled talent like computer numeric controlled (CNC) welders and machinists to continue to be highly sought after as community colleges and technical colleges struggle to keep up with demand. The southeast continues to be a strong market producing these talent types, specifically in markets like Jacksonville, Florida; Monroe, Louisiana; and Houston, Texas.
On the other end of the spectrum, extensive research done on the phenomena of jobless recoveries from our last three recessions (1991, 2001 and 2008) showing that occupations that perform “routine tasks” like those of assemblers and fabricators, are often eliminated during downturns and do not return during the subsequent recoveries.
The driver behind these disappearing jobs is the age-old economics framework that positions labor and capital as substitutes. As interest rates sit near historic lows, the cost of investing in automation has never been cheaper. Additionally, this most recent pandemic has exposed the fragility of operations that relied heavily on manual labor.
Dr. Steve Schmid is a distinguished professor in the Department of Mechanical Engineering and Engineering Science at the University of North Carolina at Charlotte. Dr. Schmid indicates there is great enthusiasm for additive manufacturing among universities, technical colleges, and industry. He describes what is the “cool” factor of additive manufacturing and the ability to design a part on CAD and hold it in your hand in one hour or less. He says, this is perfect for design analysis, part validation and to see if your design measurements are accurate. In addition, additive manufacturing allows for cooling channels to be placed inside a mold to increase output for plastic injection molded parts.
Additive manufacturing or 3D printing of metal parts are best for the aerospace, defense, NASA, tooling, motor sports or medical devices where you have highly specialized parts with limited runs. The costs of the material and time for production is not as well suited for mass production. Dr. Schmid says it is better to use additive manufacturing to make the tooling and then use the tooling to produce a mass-produced product. The largest use of additive manufacturing believe it or not is for the casting industry. This has been a huge costs savings as sand cast molds can be printed for cooling channels and specialized shapes in a single mold.
However, this technology does have some costs disadvantages. Material costs are much higher than conventional manufacturing and needs to be stored in a climate-controlled explosion rated room. Also, parts need to be 3D printed slightly larger and machined down to the correct tolerance and finish by adding steps to the manufacturing process. Again, additive manufacturing is too expensive to mass produce parts so it is best for highly specialized or small runs of parts.
Still the costs of the machinery is going down and machines are getting larger to print bigger parts. Additive manufacturing will not replace conventional machining in the near future but does play an important part in the development and future of the fabricated metals industry.
What many companies are still beginning to understand is that the real estate costs are not the driver of the location strategy, but rather the output of the analysis that takes into account the variables that can create strategic advantages – primarily transportation costs, customer service level expectations, labor markets and availability of reliable transportation alternatives.
Greg Healy, Colliers Senior Vice President for Location Strategy and Supply Cain Solutions comments about location strategies:
“When evaluating a location strategy, companies need to remain laser focused on where their customers are located, as well as how the customers want to receive their product. Not every customer needs their product the next day. This allows for diversification of shipment mode, potentially to lower cost alternatives such as rail car or even barge. The costs, the speed and the reliability of the transportation options are all factors that need to be considered when determining the best location for a client.
Inbound transportation costs of raw materials typically are significantly less expensive than outbound costs and when evaluating the total transportation spend, should be weighted accordingly.
Across every industry, we are seeing the expectation of faster turnaround time being an important factor in determining consumer purchasing decisions. In a domestic market that has major population centers spread across the periphery, it means re-evaluating whether a one or two location strategy can meet the needs of both today’s consumer as well as the consumer of tomorrow. Much of our work involved modeling of manufacturing and distribution networks to get the greatest coverage/speed, at the lowest cost.”
Lessons from the Experts and Recent Announcements
• Alabama – Redline Steel is a customized decor manufacturing company headed by Colin Wayne any army veteran and body builder turned entrepreneur. We wanted to get a young company’s perspective on labor and automation.
Labor – As a young, successful start-up business, we’ve always believed in our ability to attract potential hires and view that as one of our strengths as a business. The concept of being able to grow indefinitely alongside the business has been a huge selling point in our hiring process. One of our main focuses is to hire from within rather than outsource talent. We plan on continuing to strive towards a culture that makes a positive difference in their lives. The happier and more comfortable the environment is at work, the better the performance is while on the job.
Robotics and Automation – We invest a lot into automation in practically all facets of our manufacturing process from start to finish, which helps in allowing our departments to run without human interaction. Given these capabilities, our team can allocate additional resources and time into other key areas that are needed.
Borbet Alabama announced plans Tuesday, March 4, 2020 to expand its Auburn operation with a $23.9 million project that will create 25 jobs over the next two years.
“Borbet is thankful for the support of city leadership and the commitment of those who make up the Borbet Alabama team that has allowed the Auburn operation to maintain continued growth and high company standards,” said Juergen Keller, CEO of Borbet Alabama.
• Georgia – In September 2019, RAI Industrial Fabricators, LLC announced it will build a new state-of-the-art steel fabrication facility, creating 30 new jobs and investing $20 million in Martin Bridge.
“We are excited about expanding RAI Industrial Fabricators with a new location at Martin Bridge in Banks County,” says Mark Christopherson, president of RAI Industrial Fabricators. “Site selection began over a year ago and quickly narrowed to this area along the I-85 corridor. Martin Bridge is ideally located to accommodate our growth among regional clients across the Southeast.”
RAI Industrial Fabricators, LLC headquartered in Athens, Georgia is an AISC certified full-service fabricator and erector of structural, miscellaneous, stainless and other custom designed metals to industrial and commercial markets throughout the Southeast.
• Kentucky – Wolf Steel Ltd., a manufacturer of fireplaces, grills, HVAC and other products sold under the Napoleon brand name, plans to invest $5.9 million and create as many as 30 full-time jobs with an expansion at Wolf Steel USA in Crittenden.
Wolf Steel manufactures Napoleon grills and fireplaces at the Crittenden location for distribution throughout the U.S. Company leaders plan to expand production and distribution capacity, allowing the company to increase its U.S. market share.
“We are very excited about the growth of our U.S. businesses,” said Ron McArthur, president of Wolf Steel. “We are committed to doubling the size of our business, and our Crittenden facility will play a major role in manufacturing and distributing products to our U.S. customers. We are fortunate to have a highly skilled and committed associate group who are committed to producing and distributing quality products that allow our consumers to have memorable experiences in their homes.”
The company established the entity Wolf Steel USA in 1997 to better serve the U.S. market, and production began in Crittenden two years later with 23 employees. The operation grew with the acquisition of additional property in 2009 and 2015. Since opening approximately two decades ago, the facility has increased from 39,000 square feet to over 180,000 square feet. Grant County Industrial Development Authority Executive Director Jamie Baker noted the expansion’s local, long-term impact.
“This is good news for Grant County,” Baker said. “Wolf Steel has been an excellent community partner since opening in 1999 and we are excited their business is growing. That means more jobs for Grant County residents and more tax revenue for the city and county.”
• North Carolina – Ames Copper Group announced in June 2020 it would invest at least $26.3 million to expand its current facility in Shelby. Over five years, however, Ames expects to invest $50 million in the expansion, which includes the construction of a new copper smelter plant. The facility manufactures copper for wiring, lightning rods and devices for the defense industry.
“The manufacturing industry is critical to our success as a nation, and currently, this operation will be the only custom smelter in the United States,” PMR CEO Bernard Schilberg said in a news release.
• South Carolina – Big Gun Robotics: Lee Norris and Jim Page own Big Gun Robotics in Newberry, South Carolina. Lee discussed the history of Robotic Welding and changes in the industry. Robotic welding has been around for around thirty years. However, recent developments in the robots have increased the reach of the welding capabilities to 92 percent which is up from 75 percent just a few years ago.
According to Lee, this is significant because robots are faster and provide higher quality and taking out the human factor not only decreases costs but greatly decreases through put time. Based on recent advances in automation, through put time has been by as much as 55 percent. It is easy to understand why this is important but also it is one of the only ways the United States can compete because overseas companies producing the same product will use an army of workers to keep their production levels high where in the United States we need automation to keep our output at the same levels.
Lee echoes what was discussed with Kristi Bain with the Alabama Robotics Center. Robotics are advancing not only for actual production tasks but for loading and unloading materials as well as delivery of materials to workstations. The human factor is only needed for running the robots and at the beginning and end of the production line. However, Lee pointed out an important point that will slow the advance of robotics, that is how capital-intensive robots can be depending on the application.
• Virginia – Maysteel in Lynchburg purchased Porter Inc. in December 2019. Porter specialized in ATM, security deposit boxes, and truck parts fabrication. Maysteel is out of Wisconsin/Mexico and specializes in data center box fabrication. They purchased Porters and expanded the struggling product line. Maysteel was able to take advantage of infrastructure and a skilled/trained workforce. It allowed them to expand into the East Coast seamlessly.
Maysteel specializes in designing, engineering, and manufacturing custom sheet metal enclosures, cabinets, kiosks and racks for specific industry solutions from its locations in Wisconsin, California and Monterrey, Mexico. Porter’s Group is a custom metal fabricator that serves 20 diverse industries from its three manufacturing locations in Lynchburg, Virginia, Sumter, South Carolina and Garland, Texas. The combined company will have over 1,000 employees with six manufacturing locations covering the U.S. and Mexico, and manufacturing partner locations in Europe.
It is important to understand that one size does not fit all. Too often communities, regions and even states want to increase their emphasis on metalworking and or metal fabrication without a specific plan on growing a segment of the industry that would most flourish. The overall industry is expansive in the segments of companies and end users it serves.
Writing this article has refreshed some of my experiences after many years of practicing economic development, site selection and industrial real estate. Similar to my thoughts on shovel ready sites, there are some key components a community can do to prepare for a company in the metal fabrication industry. Many companies need a site that will accommodate a building that has enough room for a large drive in door with a modest slope to receive raw materials. Soil strength and compaction is important to understand for foundations both for overhead cranes and isolated footings or concrete pads for machines. Electrical service is another key component. Metal fabrication processes are run by sophisticated equipment that cannot afford voltage spikes or sages. Proximity to an electrical substation with reliable electric feeds are important in choosing a location.
As mentioned by some of my colleagues, logistics and labor force are key components to any site selection. Most of the early site selection work is done in an office setting understanding the best location from a cost perspective for transportation, skilled labor availability and labor costs. Real estate searches are done on computer databases as well. Only then will a community, region or state get an email request or call to verify and get a deeper understanding of the data collected. Actual site and community visits come last only after meetings and discussions on collected information.
For a community, region and state the most important issues to continue your emphasis on growing metal fabrication industry is to remember one size does not fit all. The best success is to grow your existing industry. Understand their challenges and work to help solve those concerns.
If you want to broaden the type of metal fabrication sector, understand what parts of the industry you want to focus. Invest in your community or technical college on resources and training. Make sure you understand your limitations in terms of logistics and labor and work to improve areas of deficiencies.
Understanding long term goals of growing an industry sector starts with a commitment from local and regional leadership that it could take many years to be successful.