Canada's fabricated metal products industry is benefiting from pent-up demand for new vehicles in the US
OTTAWA—The outlook is good for Canada’s fabricated metal products industry, as pent-up demand in US vehicle sales fuels growth, according to the Conference Board of Canada.
Its spring 2013 industrial profile on the sector shows short-term forecasts are “strong” for both profits and production. A backlog of orders in the aerospace sector is also contributing to growth.
Though demand for machinery has weakened, investment in major energy and mining projects—along with growth in transportation manufacturing—will shore up fabricated metals.
Major automakers in the US this spring announced they would forego the usual two-week summer shut-down, in order to meet demand for new vehicles—boding well for parts suppliers and fabricators in the automotive sector.
Market data out of the US supports the trend. The May 2013 survey of metal fabricating companies by the Cleveland-based Precision Metalforming Association (PMA), points to stable business conditions and higher shipments, at least in pockets of the industry.
The PMA surveyed 110 metalforming companies in both Canada and the US, and found 63 per cent expect economic conditions to remain unchanged for the next three months. That’s up from 56 per cent in the April report.
Nearly half (47 per cent) predict no change to the volume of incoming orders, and only 19 per cent expect a decrease.
The stability plays out in shipping data. Average daily shipping levels increased in May, with 41 per cent of respondents citing levels above those of three months ago. The percentage of metalforming companies with a portion of their workforce on short time or layoff dipped to 11 per cent in May—down from 14 per cent in April.
Even so, performance by sectors is mixed, the association reported.
“The automotive market is the sector with the strongest shipments, but most other markets have leveled off or declined somewhat from levels consistent with 2012,” said William Gaskin, president of the PMA.
Gaskin said the potential growth of the metalforming sector depends on US Congress sorting out its tax and spending cut issues.
Aside from fiscal uncertainty in the US, the fabricated metal products sector will have to overcome a spate of other challenges, according to the Conference Board.
The shift in North American manufacturing capacity to overseas destinations is still a concern, and products made from other compounds, such as plastics, ceramics and carbon fibres are gradually replacing fabricated metal, threatening long-term growth.