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U.S. Economic, Industry and Gears
Outlook: What’s in Store for 2012 and
Beyond
Gear Expo – Cincinnati
November 2, 2011
Tom Runiewicz
(Principal/Economist US Industry Practice)
Gear bookings and the economy do not move in
lock step…but
Gear Bookings & The U.S. Economy
3100
8
2600
4
2100
1600
1993
1997
Bookings - $ Mil.
2001
2005
2009
GDP - % Change
Growth in Gear Bookings & The U.S.
Economy
Percent change from a year earlier
90
60
12
9
0
30
0
6
3
-4
-30
-60
0
-3
2000 2002 2004 2006 2008 2010
Bookings
GDP %
2
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Economic Outlook
Slower Growth Ahead
Diminished Expectations for the US Economy
•
Slow recoveries are typical in the aftermath of a financial crisis.
•
The US economy is dangerously close to stall speed;
consumers and businesses are extremely cautious.
•
Confidence in US policy-making has hit new lows.
•
Business equipment investment, exports, and consumer
durables will drive the economy’s modest near-term growth.
•
A recovery in housing markets will be the key to more robust
economic growth in 2013-15.
•
The probability of a double-dip recession is 40%.
4
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Consumers are not happy
Consumer Confidence Index
(University of Michigan)
120
106
92
78
64
50
1979
1983
1987
1991
1995
1999
2003
2007
2011
5
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Housing continues to struggle…light vehicle sales
are improving helped by incentives
Housing Starts
U.S. Light Vehicle Sales
(Millons of Units)
(Millions of Units - SAAR)
2500
24
2000
20
1500
16
1000
12
500
0
1996 1998 2000 2002 2004 2006 2008 2010
Monthly
3 Month Moving Average
8
1996 1998 2000 2002 2004 2006 2008 2010
Monthly
3 Month Moving Average
6
Copyright © 2009 IHS Global Insight. All Rights Reserved.
ISM Indexes Signal Slow Grow in the Economy
ISM Nonmanufacturing & Manufacturing
Indices
(over 50 = Expansion)
75
50
25
1998
2000
2002
2004
2006
2008
2010
7
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Rail traffic slowdown confirms economic distress
US Railroad Ton-Miles
(3 month moving average)
20
15
10
5
0
-5
-10
-15
-20
-25
04
05
06
07
08
09
10
11
8
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Trucking company volumes have leveled off
ATA Truck Tonnage Index
(Index 2000 = 100)
130
118
106
94
82
70
1996
1998
2000
2002
2004
2006
2008
2010
(2000 = 100)
9
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Small businesses remain depressed
Small Business Optimism Index
1987 = 100
110
104
98
92
86
80
1996
1998
2000
Monthly
2002
2004
2006
2008
2010
3-Month Moving Average
10
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Corporate America is becoming more cautious
about CAPEX
New Orders for Nondefense Capital Goods
Excluding Aircraft
Percent change from a year earlier
30
20
10
0
-10
-20
-30
-40
1998
2000
2002
2004
2006
2008
2010
11
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Equipment leasing companies have soured on the
economy
Equipment Finance Confidence Index
Index begins in May 2009
75
69
63
57
51
45
2009
2009
2010
2010
2011
12
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Modest US Economic Growth Results in a
Persistently High Unemployment Rate
8
11
6
10
4
9
2
8
0
7
-2
6
-4
5
-6
4
-8
3
2001
2003
2005
2007
2009
2011
2013
Real GDP Growth (Left scale, annual percent change)
Unemployment Rate (Right scale, percent)
13
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Interest Rates Will Stay Low for Several Years
12
(Percent)
10
8
6
4
2
0
1990
1993
1996
Federal Funds
1999
2002
2005
10-Year Treasury
2008
2011
2014
30-Year Mortgage Rate
14
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Manufacturing Production Has Decelerated
(Percent change, annual rate)
10
5
0
-5
-10
-15
-20
-25
2000
2002
2004
All Manufacturing
2006
2008
2010
2012
2014
Excluding Information Technology
15
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Equipment and Software Lead the Recovery in
Business Fixed Investment
(Year-over-year percent change, 2005 dollars)
20
10
0
-10
-20
-30
1998
2000
2002
2004
2006
2008
Equipment and Software
2010
2012
2014
Structures
16
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The US Dollar Will Depreciate Against Currencies
of Emerging Markets
(Real trade-weighted dollar index, 2005=1.00)
1.50
1.25
1.00
0.75
0.50
1978
1982
1986
1990
1994
Major Trading Partners
1998
2002
2006
2010
2014
Other Important Trading Partners
17
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Destinations of US Merchandise Exports
(Percent of total, 2010)
Pacific Rim
25.5%
China
Japan
All Other
9.0%
7.2%
4.7%
Canada
19.5%
Europe
22.4%
Other
Americas
10.8%
Mexico
12.8%
18
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Real Export and Import Growth Patterns Reflect
the Business Cycle and Exchange Rates
20
(Year-over-year percent change, 2005 dollars)
10
0
-10
-20
1998
2000
2002
2004
2006
Real US Exports
2008
2010
2012
2014
Real US Imports
19
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Capital Goods Lead Growth in Real Exports
(Annual percent change, 2005 dollars)
Computer Equipment
Other Capital Equipment
Aircraft
Autos & Parts
Consumer Goods
Industrial Materials
Foods & Feeds
0
5
10
2005-10
15
20
2010-15
20
Copyright © 2009 IHS Global Insight. All Rights Reserved.
US Economic Growth by Sector
(Percent change)
2010
2011
2012
2013
Real GDP
3.0
1.5
1.8
2.3
Consumption
2.0
2.1
1.9
1.8
-4.3
-2.5
5.1
17.1
Business Fixed Investment
4.4
7.8
4.3
5.7
Federal Government
4.5
-2.3
-2.9
-3.6
State & Local Government
-1.8
-2.7
-2.9
-0.8
Exports
11.3
6.7
6.4
8.8
Imports
12.5
4.9
2.6
4.7
Residential Investment
21
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Other Key US Indicators
(Percent change unless noted)
2010
2011
2012
2013
Industrial Production
5.3
3.7
2.0
2.9
Payroll Employment
-0.7
0.9
1.0
1.3
Light-Vehicle Sales (Millions)
11.6
12.5
13.5
15.0
Housing Starts (Millions)
0.58
0.60
0.67
0.94
Consumer Price Index
1.6
3.2
1.6
1.8
Core CPI
1.0
1.6
1.7
1.7
WTI Oil Price ($/barrel)
79
94
98
106
Federal Funds Rate (%)
0.2
0.1
0.1
0.1
10-Year Treasury Yield (%)
3.2
2.8
2.7
2.9
22
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Bottom Line
•
With US economic growth near “stall speed”, the risk of a return
to recession is high (40%).
•
•
Consumers and businesses remain very cautious.
•
•
The Federal Reserve powers to support growth are limited.
Pent-up demand for housing will eventually be the key to stronger
economic growth.
Fiscal tightening is coming, but the big issues (entitlements and
taxes) will not be settled until after the 2012 elections.
23
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Outlook for Key Gear Markets
Some Opportunities, But An
Overall Downshift
The Outlook for Key Gear Industries
(With Market Demand Percentage From the 2007 Economic Census)
1) Industrial Machinery (27.4%)
2) Construction Equipment (22.0%)
3) Commercial Machinery (9.6%)
4) Agricultural Equipment (9.4%)
5) Shipbuilding (Including Offshore Rigs) (8.9%)
6) Railroad Equipment Manufacturing (6.1%)
7) Machine and Other Tool Manufacturing (5.8%)
8) Power Generating Equipment (5.4%)
9) Mining, Oil & Gas Field Equipment (3.7%)
10) Aerospace (1.7%)
25
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Industrial Machinery
New Orders for Industrial Machinery
Unfilled Orders for Industrial Machinery
(Millions of Dollars)
(Millions of Dollars)
5000
17000
4100
15200
3200
13400
2300
11600
1400
9800
500
1999 2001 2003 2005 2007 2009 2011
8000
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +15%, Unfilled Orders +22%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
26
Industrial Machinery Overview: Slower growth
ahead
• New orders for industrial machinery face something of an uphill
battle.
• Traditional manufacturing is slowing down as the “soft patch” in the
economy proves softer and longer-lasting.
• The high-tech sector is not immune to the weakness in the economy.
• CAPEX programs among traditional manufacturers are coming under
increased scrutiny.
• The semiconductor equipment spending spree is winding down.
• Exports account for 40%-50% of U.S. industrial machinery
shipments.
• Export growth is likely to slow over the near-term
27
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Much Slower Production Growth Anticipated for Industrial
Machinery over the Next Few Years, But Still No Decline
Production of Industrial Machinery
(Percent change from a year earlier)
40
30
20
10
0
-10
-20
-30
1998
2000
2002
2004
2006
2008
2010
2012
2014
28
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Construction Machinery
New Orders for Construction Machinery
Construction Machinery Unfilled Orders
(Millions of Dollars)
(Millions of Dollars)
4800
12000
3900
9800
7600
3000
5400
2100
1200
1999 2001 2003 2005 2007 2009 2011
3200
1000
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +43.5%, Unfilled Orders +45%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
29
US Construction Growth by Sector
(Percent change, 2005 dollars)
2010
2011
2012
2013
Total Construction
-10.9
0.5
0.3
9.5
Residential
-4.6
-2.7
5.0
17.4
Commercial
-30.6
-5.4
0.6
7.1
Manufacturing
-31.8
-14.4
5.2
14.1
Mines & Wells
16.6
25.8
-6.2
-2.4
Health Care
-5.7
-4.7
5.8
4.2
-12.8
2.7
-7.4
-3.8
Highways & Streets
-1.5
-11.8
-6.8
-1.2
Public Education
-7.9
-14.2
-9.7
-3.2
Public Utilities
30
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Construction Machinery: Slower growth in the nearterm…faster growth as US market snaps back
•
New orders for construction machinery have exhibited
considerable strength.
•
Recent pick up in domestic demand tied to dealer and leasing
company replacement buying.
•
U.S. exports of construction and related equipment have
staged an impressive comeback since the recession.
•
Domestic sales growth stabilizes in the near-term and then
accelerates in 2013 as construction recovers
•
Exports will gain additional ground but growth slows in the
near-term
31
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Farm Machinery
Farm Machinery Shipments
(Millions of Dollars)
4000
3000
2000
1000
0
1999
2001
2003
YTD Jan-Aug = Shipments +17%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
2005
2007
2009
2011
32
When farmers have money they buy equipment
U.S. Net Farm Income
Canadian Net Farm Income
(Billions of dollars)
(Millions of Dollars)
110
6000
90
4500
70
3000
50
1500
30
0
1999 2002 2005 2008 2011 2014
2008
2010
2012
2014
2016
33
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Farm Machinery: Still going strong for now
•
U.S. Farm income came in at $79 billion in 2010, an increase
of 27%. Healthy demand and lofty prices push farm income to
$92 billion in 2011 and $105 billion in 2012 before drifting off to
$91 billion by 2016.
•
U.S. farm tractor and combine sales and production will hold
up in the near term...but the farm sector CAPEX cycle is
maturing.
•
Following a sharp falloff in 2009, U.S. exports of farm
machinery rose 12% last year and have accelerated in 2011.
•
Export prospects remain bright, with the Canadian and Latin
American markets providing the most support.
34
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Much Slower Production Growth Anticipated for OffHighway Equipment over the Next Few Years
Production of Agricultural & Construction Machinery
(Percent change from a year earlier)
30
20
10
0
-10
-20
-30
-40
1998
2000
2002
Ag Equipment
2004
2006
2008
2010
2014
Construction Equipment
Ag equipment index also includes lawn & garden equipment
Copyright © 2009 IHS Global Insight. All Rights Reserved.
2012
35
Commercial & Service Equipment (Material
Handling Equipment)
New Orders for Material Handling
Equipment
Unfilled Orders for Material Handling
Equipment
(Millions of Dollars)
(Millions of Dollars)
3000
9000
2600
8000
2200
7000
1800
6000
1400
5000
1000
1999 2001 2003 2005 2007 2009 2011
4000
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +16%, Unfilled Orders +19%
36
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Material Handling Equipment: Domestic demand
will be hurt by slowdown in manufacturing
•
New orders for material handling equipment surged 24% last year and have
gained additional ground in 2011.
•
Industrial trucks have led the way but future demand for this equipment will
taper off as activity and capital expenditures for manufacturers and
wholesale and retail trade weaken.
•
Leasing has become a big option for many users of equipment during this
recovery.
•
With the recovery in industrial, warehouse, retail, and office construction
delayed, the second leg of the recovery in material handling equipment—
more spending on big-ticket items—will also be postponed.
•
The prospects for exports remain bright but growth will slow from the 20%plus rate we have seen in 2010–11.
•
Asia-Pacific and Latin America remain the most fertile markets for U.S.
manufacturers, while European sales will continue to struggle.
37
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Much Slower Production Growth is Expected
Production of Commercial & Service
Machinery
(Percent change from a year earlier)
20
10
0
-10
-20
1998
2000
2002
2004
2006
2008
2010
2012
2014
38
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Metalworking Machinery
New Orders for Metalworking Machinery
Metalworking Machinery Unfilled Orders
(Millions of Dollars)
(Millions of Dollars)
3000
7000
2700
6000
2400
2100
5000
4000
3000
1800
2000
1500
1000
1200
1999 2001 2003 2005 2007 2009 2011
0
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +10%, Unfilled Orders +37%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
39
Slower growth in metalworking industry activity will
be reflected in equipment demand
Metalworking Industry Orders &
Metalworking Machinery Orders
(Millions of Dollars)
200000
170000
3000
2600
140000
110000
2200
1800
80000
1999
1400
2001
2003
2005
2007
2009
2011
Metalworking Industry Orders (Left)
Metalworking Machinery Orders (Right)
40
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Metalworking Machinery: Slower growth ahead
• The rebound in metalworking industry activity and pent-up demand
has allowed CAPEX programs to proceed to the benefit of U.S.
metalworking machinery manufacturers.
• Metalworking industry activity and CAPEX in the rest-of-the world—
and in developing economies in particular—has also strengthened.
• The "soft patch" in the economy is proving softer and longer-lasting,
which is not good news for the metalworking industries.
• Consumers and businesses are becoming more cautious with their
financial resources. At the same time, the prospects for exports have
been toned down.
• Motor vehicle industry capital spending is expected to provide
support, as will the Boeing and Airbus ramp-up of production.
41
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Much Slower Growth is Expected for Metalworking Machinery Output
Over the Next Few Years
Production of Metalworking Machinery
(Percent change from a year earlier)
20
10
0
-10
-20
-30
1998
2000
2002
2004
2006
2008
2010
2012
2014
42
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Power Generation & Transmission Equipment
New Orders for Power Equipment
Unfilled Orders for Power Equipment
(Millions of Dollars)
(Millions of Dollars)
6000
20000
5100
17000
4200
14000
3300
11000
2400
8000
1500
1999 2001 2003 2005 2007 2009 2011
5000
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +19%, Unfilled Orders +33.5%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
43
Generating capacity additions will come slowly
Electric Utilities Have Adequate
Generating Capacity
(Percent, electric utility operating rate)
105
95
85
75
1998
2000
2002
2004
2006
2008
2010
44
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Capacity additions remain modest
Total Gross Electric Power Generating
Capacity Additions
(MW)
30000
20000
10000
0
2009
2011
2013
2015
45
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Power Equipment: Modest growth ahead
•
Power equipment manufacturers posted a 10% increase in shipments last year.
Business has continued to improve in 2011, with year-to-date shipments up 19%
versus a year ago, while new orders are up 33.5% and unfilled orders are up 66%.
•
There remains little pressure on electric utilities to aggressively boost generating
capacity.
•
New additions for power generating equipment were actually off 19% last year, but
should be up over 8% this year and close to 4% in 2012.
•
Electrical generating capacity should grow over the long-term, but the growth will
come in bunches.
•
•
The domestic commercial and industrial markets will not rebound until 2013.
•
The demand for power equipment in developing economies will expand further as
investment in industrial and power sectors continues. Growth in the economies of
China, India, Brazil, and other developing nations is expected to taper off.
U.S. exports of turbines and generators fall 1.5% last year and this year they are
on track to decline 1.0%.
46
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Turbine Industry is on Track to See the Best Growth in
Years, Following Two Years of Substantial Decline
Production of Turbines & Power
Generating Equipment
(Percent change from a year earlier)
20
10
0
-10
-20
-30
1998
2000
2002
2004
2006
2008
2010
2012
2014
47
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Mining, Gas Field & Oil Field Machinery &
Equipment
New Orders for Mining, Oilfield and Gas
Field Machinery
Unfilled Orders for Mining, Oil Field and
Gas Field Equipment
(Millions of Dollars)
(Millions of Dollars)
4000
15000
3200
12000
2400
9000
1600
6000
800
3000
0
1999 2001 2003 2005 2007 2009 2011
0
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +25%, Unfilled Orders +58%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
48
Oil prices/demand will remain favorable for
investment…Shale gas gale continues
Crude Oil and Natural Gas Prices
120
9
100
8
80
7
60
5
40
4
20
3
2002 2004 2006 2008 2010 2012 2014 2016
Crude Oil WTI(Left scale, dollars/barrel)
Natural Gas Henry Hub(Right scale, dollars/mmBtu)
49
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Shale gas related investment will continue
North American Natural Gas Production
Capacity
(Billions of cubic feet per day)
82.0
79.5
77.0
74.5
72.0
2010
2011
2012
2013
2014
2015
2016
50
Copyright © 2009 IHS Global Insight. All Rights Reserved.
51
“Tight Oil” Plays in North America
Cardium, Viking
Bakken, Three Forks
Heath
Utica
Niobrara
Mowry
Cane Creek
Wasatch
Green River
Marcellus
Barnett
Monterrey
Niobrara
Tuscaloosa
Granite Wash
Bone Spring/Avalon
Woodford
Spraberry
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Eagleford
51
52
Tight Oil Leads the Way for US Capacity Growth
11
Yet to Find
10
Biofuels
9
8
Natural Gas Liquids
7
Million
Barrels
per Day
6
Tight Oil
5
Deepwater Crude Oil
4
3
2
Conventional Onshore
and Shallow Water Crude Oil
1
0
2000
2005
2010
Sources: Projection from IHS CERA, historical data from IHS, US Energy Information Administration.
Sources:
from
Note: Condensates
areProjection
included in crude
oil. IHS CERA, historical data from IHS,
10904-4US Energy Information Administra tion.
Note: Condensates are included in crude oil.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
2015
2020
52
Mining and Oil & Gas Field Machinery: CAPEX
projects should continue
• Expanding demand and lofty energy/commodity prices have triggered
stronger CAPEX programs in the energy and mining industries.
• As long as the global economy continues to expand, energy and
commodity demand will keep prices high enough to promote
additional exploration, development, and production CAPEX
programs.
• Our current forecast has Dated Brent averaging about $112 per
barrel in 2011 and 2012 before rising to $117 in 2013.
• On the natural gas front we are seeing a lull in the action as domestic
supply has been expanded dramatically in recent years as a result of
shale gas projects.
• However, North American natural gas productive capacity expands
8% over the four years from 2013 to 2016.
53
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Oil/Gas/Mining Machinery Production Is on Track to Increase
over 20% in 2011. Growth Then Tapers Off.
Production of Oil/Gas/Mining Machinery
(Percent change from a year earlier)
40
30
20
10
0
-10
-20
-30
1998
2000
2002
2004
2006
2008
2010
2012
2014
54
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Replacement demand will drive the next freight car
buying cycle
North American Freight Car Fleet Age
Profile
Age Profile - %
45
37
29
21
13
5
0-5
6-10
11-15 16-20
21-25
26+
Avg.
Age
55
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Railroad Equipment: Another buying cycle
underway
•
Freight car builders have survived yet another mega downturn. Peak to
trough, deliveries fell from 74,729 units in 2006 to their low in 2010, a drop of
78%.
•
In the previous cycles of 1998–2002 and 1979–1983, deliveries tumbled 76%
and 93%, respectively.
•
New orders have strengthened considerably this year, aided by some multiyear equipment buys. The freight car backlog reached 57,308 units at midyear, the biggest backlog since the second quarter of 2008.
•
Freight car builders have enough business on the books to keep them happy
into 2012.
•
However, rail traffic is moderating along with the overall economy, putting the
freight car recovery at risk.
•
Deliveries are pegged at 47,799 units in 2012, 59,015 units in 2013, 65,790
units in 2014, 61,925 units in 2015, and 56,474 units in 2016.
56
Copyright © 2009 IHS Global Insight. All Rights Reserved.
New Orders for Nondefense Aircraft
New Orders for Nondefense Aircraft
Unfilled Orders for Nondefense Aircraft
(Millions of Dollars)
(Millions of Dollars)
30000
450000
25000
20000
360000
15000
270000
10000
180000
5000
0
-5000
1999 2001 2003 2005 2007 2009 2011
90000
0
1999 2001 2003 2005 2007 2009 2011
YTD Jan-Aug = Orders +46%, Unfilled Orders +8%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
57
Airbus is ahead of Boeing when it comes to orders
this year…but both have huge backlogs.
New Aircraft Orders Improving
1,500
1,000
500
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Boeing
Airbus
*Through August
58
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Commercial air transport production heads higher
Commercial Aircraft Production Set to Increase
(World real production revenues, 2007=100)
200
150
100
50
0
2007
2008 2009 2010 2011
Source: IHS Jane's
2012
2013
2014
59
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Commercial market in detail
60
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Backlogs will fuel near term production increases
61
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Aerospace Outlook: Commercial market takes
off…defense eventually slows down
•
Boeing and Airbus backlogs contain six to seven years of production at current
levels.
•
Significant production increases were announced late in 2010 and should stretch
through 2014.
•
Long-term demand will be fueled by fleet growth in developing markets…and need to
replace aging and less fuel efficient aircraft in developed markets.
•
Most programs will see higher production rates in 2011, with more following in
subsequent years. Global production will rise near 18% in 2011.
•
Some signs of life have emerged in the business jet/general aviation markets.
•
Aftermarket and service business for business jet and commercial airplane has
improved.
•
Monies from base and supplementary defense budgets are propping up defense
contractor activity…but withdrawal from Iraq and Afghanistan and budget woes will
pressure military spending.
62
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Key Gear Markets Bottom Line
•
Despite slowing substantially, manufacturing growth will outpace GDP growth
in the years ahead.
•
However, it will take some time for manufacturing to get back to pre-recession
levels.
•
The capital goods industries will continue to fuel the economic recovery in
2012 and 2013. Replacement and pent-up demand remain supportive...but
Corporate America is becoming more cautious.
•
For many capital goods manufacturers backlogs are currently very high and
should help carry production into 2012.
•
The long order pipeline for aircraft should result in double-digit growth for the
industry over the next three years.
•
•
The oil and gas sectors will continue to be a growing user of capital equipment.
Capital good exports will continue to expand but growth is expected to slow.
63
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The US Gear Manufacturing Outlook
A Weaker Economy Will Take A Toll
Metal Prices to Flatten Out As Global Demand
Growth Slows
•
Global economic conditions look considerably less rosy than originally
expected. Although demand from China should still increase, its growth
should slow significantly.
•
The United States and Europe are on the back side of a manufacturing
recovery, and demand for capital equipment should increase minimally.
•
Primary metal operating rates are in the mid-to-lower-70% area and are not
expected to increase much over the next few years--this should keep price
increases to a minimum.
•
Also expect little movement in stainless steel prices over the next couple of
years.
65
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Expect Metal Prices to Stabilize
Ferrous Metal Prices
Nonferrous Metal Prices
(Percent change from a year earlier)
(Percent change from a year earlier)
70
60
50
40
30
20
10
0
-10
-20
-30
-40
2001
2003
2005
2007
2009
Steel, Cold Finished Special Bar Grade 1018
2011
2013
2015
Steel, Scrap
70
60
50
40
30
20
10
0
-10
-20
-30
-40
2001
2003
2005
Aluminum
2007
2009
2011
2013
2015
Titanium
66
Copyright © 2009 IHS Global Insight. All Rights Reserved.
Summary: Key Gear Industry Markets
(Percent change)
2010
2011
2012
2013
Industrial Machinery
27.4
16.3
4.7
3.4
Construction Equipment
10.6
4.4
2.3
5.4
Farm Machinery
9.2
0.0
4.4
2.9
Commercial & Service Equip
3.4
11.9
1.4
0.8
10.6
14.1
3.9
1.8
-19.1
8.5
3.6
0.5
Mining, Oil & Gas Field Equip
4.6
24.5
8.4
4.8
Shipbuilding & Offshore Rigs
0.5
1.3
-4.3
-4.8
Machine & Other Tools Mfg
Turbines & Power Trans Equip
67
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Summary: Key Gear Industry Markets (Continued)
(Percent change)
Railroad Rolling Equipment
Aerospace
2010
2011
2012
2013
-10.5
60.0
25.0
12.0
-2.3
10.0
17.9
16.7
68
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U.S. Gear Bookings, Shipments, Demand, Exports & Imports
(Million dollars)
Bookings
Percent Change
Shipments
Percent Change
Domestic Demand
Percent Change
Exports
Percent Change
Imports
Percent Change
2010
2011F
2012F
2013F
2,970.7
4,157.8
3,793.7
3,529.7
66.9
40.0
-8.8
-7.0
2,778.7
3,613.6
3,791.5
3,736.8
24.1
30.0
4.9
-1.4
3,700.7
4,885.1
5,101.2
4,988.2
17.4
32.0
4.4
-2.2
1,269.9
1,551.2
1,720.7
1,813.5
27.6
22.2
10.9
5.4
2,192.0
2,822.7
3,030.4
3064.8
14.8
28.8
7.4
1.1
69
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This Year is On Track to be a Record, But the Next
Few Years Will be More Difficult
U.S. Gear Bookings & Shipments
5500
Bookings
Shipments
Demand
5000
Million Dollars
4500
4000
3500
3000
2500
2000
1500
1998
2000
2002
2004
2006
2008
2010
2012
2014
70
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The U.S. Has Increased its International
Competitiveness in Gear Production
U.S. Gear Imports & Exports
3500
3000
Exports
Million Dollars
2500
Imports
2000
1500
1000
500
0
1998
2000
2002
2004
2006
2008
2010
2012
2014
71
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Current U.S. Gear Export Partners
(Percent Market Share)
Exports
Canada
26%
Mexico
13%
Brazil
9%
China
8%
Belgium
7%
Germany
4%
Australia
4%
72
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Current U.S. Gear Import Partners
(Percent Market Share)
Imports
Germany
22%
China
15%
Japan
14%
Italy
12%
Canada
5%
Mexico
5%
Belgium
4%
73
Copyright © 2009 IHS Global Insight. All Rights Reserved.
The Gear Markets Bottom Line
•
This is an excellent year for traditional capital equipment overall as replacement and pentup demand remain strong despite little interest in capacity expansion. This year should be a
record in terms of bookings, shipments, demand and exports for gears.
•
U.S. gear manufacturers are also much more globally competitive. Import’s market share
of consumption has declined. Imports this year remain well below the record.
•
The economy and manufacturing will be horribly slow during 2012 and also sluggish in
2013. Look for a decline in gear bookings as businesses soften their focus on CAPEX.
Shipments should still be slightly positive in 2012 because unfilled orders are high.
•
Export opportunities still exist for non European countries. Domestic business opportunities
for material handling equipment, mining, oil & gas field equipment, railroad rolling stock,
and aerospace should remain strong, but growth should be slower than this year.
•
The next major upturn for the gear industry should start toward the end of 2013 going into
2014 and beyond.
74
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Thank
you!
For more information on these slides and IHS Global Insight Industry
Service, please contact your IHS Global Insight Account Manager or the
following members of the Industry Practices team:
Tom Runiewicz -- [email protected]
75
Copyright © 2009 IHS Global Insight. All Rights Reserved.