While various industries in the U.S. have had some interesting trajectories while rising or dropping up and/or down the sales graph in recent years for obvious reasons, the metal fabrication sector has served as a sea of relative calm.
Generally speaking, the metal industry can be said to be experiencing remarkable growth, with the U.S. market estimated to reach a value of $22 billion by 2024; in addition, 34,461 fabricated metal companies nationwide provide 1,373,057 jobs. This is an increase of 3.26 percent from the previous year, according to IndustrySelect.
Not that the overall horizon has been perfect. Metal fabrication is having some of the same problems other industries are experiencing, which often concern pinpointing ideal locations for reshoring, dealing with inflation and attracting new workers to replace the generation of baby boomers that are aging out.
But even though “there has been some softening in certain sectors, metal fabrication has stayed strong, even in today’s higher inflationary environment,” said Larry Gigerich, executive managing director for Fishers, Ind.-based Ginovus.
And why is that? If you’re not sure, just check your surroundings. Metal fabrication is ubiquitous.
Stable Force
The industry touches so many different areas of the economy “that it has stayed fairly stable,” said Gigerich, who quickly cited aerospace and defense as key sectors for metal fabrication, as are life sciences, and medical and orthopedic devices, which is a high impact market in Indiana. Those latter two categories are keys to the market for a simple reason: people are living longer.
Another key, he said, is the vast universe of consumer products, which encompasses everything from appliances, building supplies and tools to … well, the many, many items that are used in the business and consumer sectors every day. “In that case, demand [for various goods] was exacerbated coming out of COVID-19 because the market shifted when so many people were suddenly home more often than not,” said Gigerich.
Automotive is the other hot market for metal fabrication. While demand for electric vehicles has softened, in the overall automotive market “it has continued to rise. While the cost of used cars has gone up and the demand for new cars has softened, there is not a dramatic delta between their respective costs today,” which means more parts are needed by mechanics and the millions of car owners who are avoiding buying a new one.
In addition, the general market effort to move overseas more manufacturing back to the U.S. in response to not having access to products and parts during the pandemic-inspired supply chain issue has also improved the market.
“Some of it has been reshored to Middle America and the Southeast, but more has been nearshored,” said Gigerich. “Mexico has also been a huge beneficiary, as manufacturers are going there” if they can’t find a satisfactory domestic location.
While there are many metal fabrication projects going on south of the border, it’s important to note that it’s not for complicated projects. “But this way, the larger volume, standard parts that used to be imported from China,” he said, “are being made closer to the U.S.”
Inflation Drop
It was when Gigerich discussed the inflationary angle to today’s economy that the challenges of the market came to the fore.
“The interesting thing here is that unlike past inflationary times, while inflation has dissipated to a degree, I don’t think we’re going to see consumer prices retreat to where they were two years ago,” he said, “even though we’ve seen some raw material costs going down. For instance, plywood is about $75 per unit today; it was up to $95 eighteen months ago. Before COVID-19, it was $55. So inflation has hurt all aspects of the economy.”
Inflation “has dropped from eight-nine percent to two-three percent range for the past several months, which is still a bit high,” he said. “But unlike past inflationary times, we will not see the prices go back down.”
That relative leveling of consumer costs has led to some other trends. Manufacturers, for instance, “are looking to renovate existing facilities versus building new ones because of the cost impact of interest rates, which have gone from zero to 1.5 percent to 5.5-6 percent and higher for mortgages,” he said.
“Those costs have kept companies from building new facilities and making capital outlays for equipment, thus are using the Band-Aid approach,” said Gingrich, “while they try to wait it out and get a better rate until inflation stabilizes.”
Then comes the seemingly always looming discussion of the “R” word ― as in recession. “We didn’t have a hard landing after COVID-19, but there is still some risk of a recession because of national and international policies,” he said, “and geopolitical issues like Ukraine-Russia conflict and its impact on Europe as a whole due to agricultural products that comes out of Russia.”
World View
Courtney Dunbar, site selection director with Omaha, Neb.-based Burns & McDonnell, further discussed some of Gigerich’s observations.
“Manufacturers are faced with a couple of significant challenges currently that are impacting their trajectory of growth,” said Dunbar. “The two primary challenges, from my standpoint, are the lack of access to affordable capital and geopolitical turmoil.”
“Growth demands are placing manufacturers into a position of finding the most logical means of meeting demands. Many times, this involves a physical plant expansion, retooling, retraining and/or relocation of operations,” she said.
But as Gigerich also noted, the numbers haven’t been adding up. “Interest rate volatility, coupled with the unknown pertaining to the future of U.S. policies impacting tax and trade, is causing many manufacturers to pause and attempt to ‘bandage’ without significant capital investment,” said Dunbar, “until they can get a better idea as to how these they will be impacted.”
“It will be those companies with a more robust balance sheet filled with cash-on-hand,” she said, “that are likely to make more sweeping changes at this time to meet current demands.”
This means, in order to meet growth demands in light of the challenges, “Many manufacturers are finding value in assessing the efficiency of operations and considering optimization methods,” said Dunbar, “that will keep them from having to make major capital investment decisions in the near-term.”
Then after any upgrades are made (or not), more workers are needed. Or at least talented machines.
“Because a national gap in the availability of skilled workforce to meet job demands exists, it is necessary for companies to consider adjustments that can help them meet demands. We have an entire team within Burns & McDonnell that assists companies as they consider optimization of operations or converting from manual to automated processes so that they make wise choices for growth,” she said.
But despite today’s challenges, Dunbar, reported that the company is “still seeing a good amount of activity in our site selection practice,” though she noted that “the lag times are growing between setting search criterion and when decisions are made.”
“I anticipate stalling of decisions or a significant slowdown until after the 2024 election cycle is complete. That could continue into the second quarter of 2025,” she said. “Of note at this point in history, states and their communities are not just competing against other states and communities for manufacturing attraction, they are competing against the company itself.”
This means that, now more than ever, it is critical for states and communities work with the industry.
They need “to thoroughly review their tax policies, incentives offerings, workforce training options and logistical advantages,” Dunbar said, “to strategically position as a partner to the manufacturers they desire to attract.”
Enter Robots
While its critical for governments to work with the industry, it’s just as crucial that the industry integrate with its new electronic side of the workforce, which will be a product of “Industry 4.0 or the Fourth Industrial Revolution,” said Jay Garner, president of Garner Economics, in Atlanta.
“It’s revolutionizing metal fabrication,” Garner said, explaining that this revolution involves the integration of digital technologies, the Internet of Things and artificial intelligence in day-to-day processes. “The aim is to create smart factories characterized by real-time data collection and analysis, enabling reduced downtime, efficient processes, predictive maintenance,” etc.
As for this recent shift in perspective, “Robots and automation have proven to be valuable assets on the factory floor,” he said, and bring a key to the future for the manufacturers and fabricators of tomorrow. They also greatly heighten efforts to keep workers safe.
“They excel at handling repetitive and potentially hazardous tasks that can be time-consuming,” Garner said, “or unsafe for human workers.”
But those are just two of the big steps into tomorrow that automation brings to the industry.
“Robotic technology offers numerous advantages over traditional manufacturing methods,” Garner said. “One application of robotics in metal fabrication is in welding processes. Welding robots exhibit faster and more precise welding capabilities compared to human welders. They can access difficult-to-reach areas and operate in hazardous environments, ensuring worker safety and enabling efficient completion of welding tasks.”
Market Scan
The demands of a rising industry are also key to the market in the Austin suburb of Cedar Park, Texas, the home of the Cedar Park Economic Development and its new CEO, Arthur Jackson. He showed the depth of the national market by pointing out that the fabricated metal product manufacturing industry employs more than 1.4 million people across the U.S., according to the U.S. Bureau of Labor Statistics, and is also a very healthy part of the market in that region.
“Overall, we’ve seen growth in that sector,” said Jackson, who observed that “There are demands from many industries” that are prominent in the state, including renewable energy, aerospace, machinery and equipment, and semiconductor industries.
But scanning the landscape that was left in the pandemic’s wake, Jackson couldn’t say that reshoring “has had the impact we thought it would,” he said. “However, here in Williamson County we have seen an increase in jobs of 23 percent from 2019 to 2023, with 41,640 more jobs according to The New York Times, so that indicates that there has been a certain need for building, thus metal fabrication.”
Jackson also cited impressive numbers for the state of Texas, as 4,499 companies are operating under that industry code and 478,390 people employed in metal fabrication, according to Fiscal Management Texas Comptroller of Public Accounts.
From his new station in economic development, he expects that the strong Central Texas market will grow in the coming years, with “a major boost coming from its automotive sector, with Tesla and its suppliers moving in,” he said, as well as another of Elon Musk’s growing businesses, The Boring Co.
But as Gigerich noted, not all the companies that are working into this massive equation need large parts.
“There is also plenty of need here for smaller [items] from companies like Samsung, which recently announced 20,000 more jobs to work at its new semiconductor fabrication facility” in another Austin suburb, Taylor, Jackson said. And Cedar Park is also home to Firefly Aerospace and its nearby Rocket Ranch; and Hyliion, which builds a propriety additive manufacturer-enabled generator.
That’s plenty of good news to make him bullish on metal fabrication. “Overall, in the manufacturing sector, we’ve seen mixed results in the state,” he said, “but in the metal fabrication market, we’re still seeing growth in revenues and employment.”
New Laws
Count Jerry Szatan among the professionals who also sold on the metal fabrication market for a reason Dunbar also cited, which concerned getting the assistance needed from elected officials.
Szatan said he “was optimistic” about the plight of the metal fabrication sector two years ago “because there were potential laws in the pipeline, such as Chips Act and the Inflation Reduction Act, as well as the recently passed Infrastructure Act, that I felt would boost the industry.”
Today the principal of Chicago-based Szatan & Associates is “still optimistic, because that legislation is in place and is in the process of being implemented, and there are now even more projects that have to get built.”
His positive feeling is partially due to rapid growth in manufacturing facility investment. According to the Bureau of Economic Analysis, after the aforementioned laws were passed, manufacturing facility investment in the last quarter was more than double the rate of early 2022.
“I think [the laws] will help create demand for all sorts of metal products across the board, from sheet metal to equipment to parts large and small,” Szatan said, “and while that’s a great thing, bear in mind that getting public infrastructure up and running is a challenge, simply due the slow processes of government and the need to bid out projects, wait for approvals, etc., before shovels go into the ground.”
But very shortly, a potential obstacle could arise: the presidential election.
“I just read that Former President Trump said, if elected, he wants to repeal the green aspects of President Biden’s Inflation Reduction Act. That likely would reduce investment and related manufacturing, fabrication,” etc., said Szatan. “However, I think his actions might be constrained because the majority of those investments are going to into red states and I think he’d get some blowback if he takes that course. Still, it’s a concern.”
As for the “R” word, two years ago Szatan was among the observers who wondered if there was going to be a recession. “However, it looks like we dodged that bullet,” he said. “So I think if we can keep moving forward, the outlook for metal fabrication market looks good for the next several years.”
Getting Skills
Given the metal fabrication market’s estimated revenue of $22.4 billion in 2024, the even better news and is that it is expected to witness a compound annual growth rate of 3.4 percent during 2024–2030 and reach $27.4 billion by 2030, also according to IndustrySelect.
Such growth is why observers like Gigerich also see a bright horizon as he, like many market watchers, thinks the fed will cut rates not once but “twice by the year’s end, so that also will help.”
He’s even “very optimistic” about improvements in the tight labor side for the metal fabrication sector. “We’ve gotten beyond the idea of pushing every kid to go to college,” Gigerich said. “Now the general public can see that there are multiple career paths and programs for people in this industry and many others.”
And what that does is “gives students and workers greater skill sets and thus more earning power,” he said, “because they can become anything” from machine operators to CAD designers to quality control engineers.
And what’s done is address a big industry issue and reopen an important door to make a strong industry even stronger.
“This is key because, as we’ve seen in recent years, the general workforce got older and no one was coming up through the pipeline to replace them,” said Gigerich. “Now due to this change in thinking, we’ve got an expanding pipeline of workers who come in with more varied skills.”
So the strengthening workforce with more versatile workers and new automated colleagues, combined with more convenient manufacturing facilities, softening inflation and (hopefully) pending lower interest rates, that sometimes jagged line the sales chart with smooth out and continue its upward trek.
Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the 
business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
