Upload
nicki
View
53
Download
0
Embed Size (px)
DESCRIPTION
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. The Economic Outlook. Slower Growth Ahead. - PowerPoint PPT Presentation
Citation preview
U.S. Economic, Industry and Gears Outlook: What’s in Store for 2012 andBeyond
Gear Expo – Cincinnati November 2, 2011
Tom Runiewicz(Principal/Economist US Industry Practice)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
2
Gear bookings and the economy do not move in lock step…but
1600
2100
2600
3100
-4
0
4
8
1993 1997 2001 2005 2009
Bookings - $ Mil. GDP - % Change
Gear Bookings & The U.S. Economy
-60-30
0306090
-3036912
2000 2002 2004 2006 2008 2010
Bookings GDP %
Growth in Gear Bookings & The U.S. EconomyPercent change from a year earlier
The Economic Outlook
Slower Growth Ahead
Copyright © 2009 IHS Global Insight. All Rights Reserved.
4 4
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%.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
5
Consumers are not happy
50
64
78
92
106
120
1979 1983 1987 1991 1995 1999 2003 2007 2011
Consumer Confidence Index (University of Michigan)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
6
Housing continues to struggle…light vehicle sales are improving helped by incentives
0
500
1000
1500
2000
2500
1996 1998 2000 2002 2004 2006 2008 2010
Monthly 3 Month Moving Average
Housing Starts(Millons of Units)
8
12
16
20
24
1996 1998 2000 2002 2004 2006 2008 2010
Monthly 3 Month Moving Average
U.S. Light Vehicle Sales(Millions of Units - SAAR)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
7
ISM Indexes Signal Slow Grow in the Economy
25
50
75
1998 2000 2002 2004 2006 2008 2010
ISM Nonmanufacturing & Manufacturing Indices(over 50 = Expansion)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
8
Rail traffic slowdown confirms economic distress
1110090807060504
20151050
-5-10-15-20-25
US Railroad Ton-Miles(3 month moving average)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
9
Trucking company volumes have leveled off
70
82
94
106118
130
1996 1998 2000 2002 2004 2006 2008 2010
(2000 = 100)
ATA Truck Tonnage Index(Index 2000 = 100)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
10
Small businesses remain depressed
80
86
92
98
104
110
1996 1998 2000 2002 2004 2006 2008 2010
Monthly 3-Month Moving Average
Small Business Optimism Index1987 = 100
Copyright © 2009 IHS Global Insight. All Rights Reserved.
11
Corporate America is becoming more cautious about CAPEX
-40-30-20-10
0102030
1998 2000 2002 2004 2006 2008 2010
New Orders for Nondefense Capital Goods Excluding AircraftPercent change from a year earlier
Copyright © 2009 IHS Global Insight. All Rights Reserved.
12
Equipment leasing companies have soured on the economy
45
51
57
63
69
75
2009 2009 2010 2010 2011
Equipment Finance Confidence IndexIndex begins in May 2009
Copyright © 2009 IHS Global Insight. All Rights Reserved.
13 13
-8
-6
-4
-2
0
2
4
6
8
2001 2003 2005 2007 2009 2011 20133
4
5
6
7
8
9
10
11
Real GDP Growth (Left scale, annual percent change)Unemployment Rate (Right scale, percent)
Modest US Economic Growth Results in a Persistently High Unemployment Rate
Copyright © 2009 IHS Global Insight. All Rights Reserved.
14 14
(Percent)
0
2
4
6
8
10
12
1990 1993 1996 1999 2002 2005 2008 2011 2014
Federal Funds 10-Year Treasury 30-Year Mortgage Rate
Interest Rates Will Stay Low for Several Years
Copyright © 2009 IHS Global Insight. All Rights Reserved.
15 15
-25
-20
-15
-10
-5
0
5
10
2000 2002 2004 2006 2008 2010 2012 2014
All Manufacturing Excluding Information Technology
(Percent change, annual rate)
Manufacturing Production Has Decelerated
Copyright © 2009 IHS Global Insight. All Rights Reserved.
16 16
-30
-20
-10
0
10
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Equipment and Software Structures
(Year-over-year percent change, 2005 dollars)
Equipment and Software Lead the Recovery in Business Fixed Investment
Copyright © 2009 IHS Global Insight. All Rights Reserved.
17 17
0.50
0.75
1.00
1.25
1.50
1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Major Trading Partners Other Important Trading Partners
(Real trade-weighted dollar index, 2005=1.00)
The US Dollar Will Depreciate Against Currencies of Emerging Markets
Copyright © 2009 IHS Global Insight. All Rights Reserved.
18 18
Canada19.5%
Mexico12.8%Other
Americas10.8%
Pacific Rim25.5%
Europe22.4%
All Other9.0%
(Percent of total, 2010)
China 7.2%Japan 4.7%
Destinations of US Merchandise Exports
Copyright © 2009 IHS Global Insight. All Rights Reserved.
19 19
-20
-10
0
10
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Real US Exports Real US Imports
(Year-over-year percent change, 2005 dollars)
Real Export and Import Growth Patterns Reflect the Business Cycle and Exchange Rates
Copyright © 2009 IHS Global Insight. All Rights Reserved.
20 20
0 5 10 15 20
Foods & Feeds
Industrial Materials
Consumer Goods
Autos & Parts
Aircraft
Other Capital Equipment
Computer Equipment
2005-10 2010-15
(Annual percent change, 2005 dollars)
Capital Goods Lead Growth in Real Exports
Copyright © 2009 IHS Global Insight. All Rights Reserved.
21 21
2010 2011 2012 2013
Real GDP 3.0 1.5 1.8 2.3
Consumption 2.0 2.1 1.9 1.8
Residential Investment -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
(Percent change)
US Economic Growth by Sector
Copyright © 2009 IHS Global Insight. All Rights Reserved.
22 22
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
(Percent change unless noted)
Other Key US Indicators
Copyright © 2009 IHS Global Insight. All Rights Reserved.
23 23
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.• Pent-up demand for housing will eventually be the key to stronger
economic growth.• The Federal Reserve powers to support growth are limited.• Fiscal tightening is coming, but the big issues (entitlements and
taxes) will not be settled until after the 2012 elections.
The Outlook for Key Gear Markets
Some Opportunities, But An Overall Downshift
Copyright © 2009 IHS Global Insight. All Rights Reserved.
25 25
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%)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
26
Industrial Machinery
500
1400
2300
3200
4100
5000
1999 2001 2003 2005 2007 2009 2011
New Orders for Industrial Machinery(Millions of Dollars)
8000
9800
11600
13400
15200
17000
1999 2001 2003 2005 2007 2009 2011
Unfilled Orders for Industrial Machinery(Millions of Dollars)
YTD Jan-Aug = Orders +15%, Unfilled Orders +22%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
27
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
Copyright © 2009 IHS Global Insight. All Rights Reserved.
28 28
Much Slower Production Growth Anticipated for Industrial Machinery over the Next Few Years, But Still No Decline
-30
-20
-10
0
10
20
30
40
1998 2000 2002 2004 2006 2008 2010 2012 2014
Production of Industrial Machinery(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
29
Construction Machinery
1200
2100
3000
3900
4800
1999 2001 2003 2005 2007 2009 2011
New Orders for Construction Machinery(Millions of Dollars)
1000
3200
5400
7600
9800
12000
1999 2001 2003 2005 2007 2009 2011
Construction Machinery Unfilled Orders(Millions of Dollars)
YTD Jan-Aug = Orders +43.5%, Unfilled Orders +45%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
30 30
2010 2011 2012 2013Total 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
Public Utilities -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
(Percent change, 2005 dollars)
US Construction Growth by Sector
Copyright © 2009 IHS Global Insight. All Rights Reserved.
31
Construction Machinery: Slower growth in the near-term…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
Copyright © 2009 IHS Global Insight. All Rights Reserved.
32
Farm Machinery
0
1000
2000
3000
4000
1999 2001 2003 2005 2007 2009 2011
Farm Machinery Shipments(Millions of Dollars)
YTD Jan-Aug = Shipments +17%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
33
When farmers have money they buy equipment
30
50
70
90
110
1999 2002 2005 2008 2011 2014
U.S. Net Farm Income(Billions of dollars)
0
1500
3000
4500
6000
2008 2010 2012 2014 2016
Canadian Net Farm Income(Millions of Dollars)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
34
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
35 35
Much Slower Production Growth Anticipated for Off-Highway Equipment over the Next Few Years
-40
-30
-20
-10
0
10
20
30
1998 2000 2002 2004 2006 2008 2010 2012 2014
Ag Equipment Construction Equipment
Production of Agricultural & Construction Machinery
(Percent change from a year earlier)
Ag equipment index also includes lawn & garden equipment
Copyright © 2009 IHS Global Insight. All Rights Reserved.
36
Commercial & Service Equipment (Material Handling Equipment)
1000
1400
1800
2200
2600
3000
1999 2001 2003 2005 2007 2009 2011
New Orders for Material Handling Equipment(Millions of Dollars)
4000
5000
6000
7000
8000
9000
1999 2001 2003 2005 2007 2009 2011
Unfilled Orders for Material Handling Equipment(Millions of Dollars)
YTD Jan-Aug = Orders +16%, Unfilled Orders +19%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
37
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
38 38
Much Slower Production Growth is Expected
-20
-10
0
10
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Production of Commercial & Service Machinery(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
39
Metalworking Machinery
1200
1500
1800
2100
2400
2700
3000
1999 2001 2003 2005 2007 2009 2011
New Orders for Metalworking Machinery(Millions of Dollars)
01000200030004000500060007000
1999 2001 2003 2005 2007 2009 2011
Metalworking Machinery Unfilled Orders(Millions of Dollars)
YTD Jan-Aug = Orders +10%, Unfilled Orders +37%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
40
Slower growth in metalworking industry activity will be reflected in equipment demand
80000110000140000170000200000
14001800220026003000
1999 2001 2003 2005 2007 2009 2011
Metalworking Industry Orders (Left)Metalworking Machinery Orders (Right)
Metalworking Industry Orders & Metalworking Machinery Orders
(Millions of Dollars)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
41
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
42 42
Much Slower Growth is Expected for Metalworking Machinery Output Over the Next Few Years
-30
-20
-10
0
10
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Production of Metalworking Machinery
(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
43
Power Generation & Transmission Equipment
1500
2400
3300
4200
5100
6000
1999 2001 2003 2005 2007 2009 2011
New Orders for Power Equipment(Millions of Dollars)
5000
8000
11000
14000
17000
20000
1999 2001 2003 2005 2007 2009 2011
Unfilled Orders for Power Equipment(Millions of Dollars)
YTD Jan-Aug = Orders +19%, Unfilled Orders +33.5%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
44
Generating capacity additions will come slowly
75
85
95
105
1998 2000 2002 2004 2006 2008 2010
Electric Utilities Have Adequate Generating Capacity(Percent, electric utility operating rate)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
45
Capacity additions remain modest
0
10000
20000
30000
2009 2011 2013 2015
Total Gross Electric Power Generating Capacity Additions
(MW)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
46
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. • U.S. exports of turbines and generators fall 1.5% last year and this year they are
on track to decline 1.0%. • 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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
47 47
The Turbine Industry is on Track to See the Best Growth in Years, Following Two Years of Substantial Decline
-30
-20
-10
0
10
20
1998 2000 2002 2004 2006 2008 2010 2012 2014
Production of Turbines & Power Generating Equipment(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
48
Mining, Gas Field & Oil Field Machinery & Equipment
0
800
1600
2400
3200
4000
1999 2001 2003 2005 2007 2009 2011
New Orders for Mining, Oilfield and Gas Field Machinery(Millions of Dollars)
0
3000
6000
9000
12000
15000
1999 2001 2003 2005 2007 2009 2011
Unfilled Orders for Mining, Oil Field and Gas Field Equipment(Millions of Dollars)
YTD Jan-Aug = Orders +25%, Unfilled Orders +58%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
49
Oil prices/demand will remain favorable for investment…Shale gas gale continues
20
40
60
80
100
120
3
4
5
7
8
9
2002 2004 2006 2008 2010 2012 2014 2016
Crude Oil WTI(Left scale, dollars/barrel)Natural Gas Henry Hub(Right scale, dollars/mmBtu)
Crude Oil and Natural Gas Prices
Copyright © 2009 IHS Global Insight. All Rights Reserved.
50
Shale gas related investment will continue
72.0
74.5
77.0
79.5
82.0
2010 2011 2012 2013 2014 2015 2016
North American Natural Gas Production Capacity
(Billions of cubic feet per day)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
51
51
“Tight Oil” Plays in North America
Cardium, Viking
NiobraraMowry
Bakken, Three Forks
Utica
Marcellus
Heath
Cane CreekWasatch
Green River
MonterreyNiobrara
Granite Wash
Bone Spring/AvalonWoodfordSpraberry
Eagleford
Tuscaloosa
Barnett
Copyright © 2009 IHS Global Insight. All Rights Reserved.
52
52
Tight Oil Leads the Way for US Capacity Growth
Sources: Projection from IHS CERA, historical data from IHS, US Energy Information Administration.Note: Condensates are included in crude oil.10904-4
Sources: Projection from IHS CERA, historical data from IHS,US Energy Information Administra tion.Note: Condensates are included in crude oil.10904-4
11
MillionBarrelsper Day
2010 20200
9
2000 2005 2015
87
654
321
Yet to Find
Biofuels
Natural Gas Liquids
Tight Oil
Deepwater Crude Oil
Conventional Onshoreand Shallow Water Crude Oil
10
Copyright © 2009 IHS Global Insight. All Rights Reserved.
53
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
54 54
Oil/Gas/Mining Machinery Production Is on Track to Increase over 20% in 2011. Growth Then Tapers Off.
-30
-20
-10
0
10
20
30
40
1998 2000 2002 2004 2006 2008 2010 2012 2014
Production of Oil/Gas/Mining Machinery(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
55
Replacement demand will drive the next freight car buying cycle
5
13
21
29
37
45
0-5 6-10 11-15 16-20 21-25 26+ Avg. Age
North American Freight Car Fleet Age ProfileAge Profile - %
Copyright © 2009 IHS Global Insight. All Rights Reserved.
56
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 multi-year equipment buys. The freight car backlog reached 57,308 units at mid-year, 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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
57
New Orders for Nondefense Aircraft
-50000
50001000015000200002500030000
1999 2001 2003 2005 2007 2009 2011
New Orders for Nondefense Aircraft(Millions of Dollars)
0
90000
180000
270000
360000
450000
1999 2001 2003 2005 2007 2009 2011
Unfilled Orders for Nondefense Aircraft(Millions of Dollars)
YTD Jan-Aug = Orders +46%, Unfilled Orders +8%
Copyright © 2009 IHS Global Insight. All Rights Reserved.
58
Airbus is ahead of Boeing when it comes to orders this year…but both have huge backlogs.
0
500
1,000
1,500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Boeing Airbus *Through August
New Aircraft Orders Improving
Copyright © 2009 IHS Global Insight. All Rights Reserved.
59
Commercial air transport production heads higher
0
50
100
150
200
2007 2008 2009 2010 2011 2012 2013 2014
Commercial Aircraft Production Set to Increase(World real production revenues, 2007=100)
Source: IHS Jane's
Copyright © 2009 IHS Global Insight. All Rights Reserved.
60
Commercial market in detail
Copyright © 2009 IHS Global Insight. All Rights Reserved.
61
Backlogs will fuel near term production increases
Copyright © 2009 IHS Global Insight. All Rights Reserved.
62
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
63 63
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.
The US Gear Manufacturing Outlook
A Weaker Economy Will Take A Toll
Copyright © 2009 IHS Global Insight. All Rights Reserved.
65 65
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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
66
Expect Metal Prices to Stabilize
66
-40-30-20-10
010203040506070
2001 2003 2005 2007 2009 2011 2013 2015
Steel, Cold Finished Special Bar Grade 1018 Steel, Scrap
Ferrous Metal Prices(Percent change from a year earlier)
-40-30-20-10
010203040506070
2001 2003 2005 2007 2009 2011 2013 2015
Aluminum Titanium
Nonferrous Metal Prices(Percent change from a year earlier)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
67 67
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
Machine & Other Tools Mfg 10.6 14.1 3.9 1.8
Turbines & Power Trans Equip -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
(Percent change)
Summary: Key Gear Industry Markets
Copyright © 2009 IHS Global Insight. All Rights Reserved.
68 68
2010 2011 2012 2013
Railroad Rolling Equipment -10.5 60.0 25.0 12.0
Aerospace -2.3 10.0 17.9 16.7
(Percent change)
Summary: Key Gear Industry Markets (Continued)
Copyright © 2009 IHS Global Insight. All Rights Reserved.
69 69
2010 2011F 2012F 2013FBookings Percent Change
2,970.766.9
4,157.840.0
3,793.7-8.8
3,529.7-7.0
Shipments Percent Change
2,778.724.1
3,613.630.0
3,791.54.9
3,736.8-1.4
Domestic Demand Percent Change
3,700.717.4
4,885.132.0
5,101.24.4
4,988.2-2.2
Exports Percent Change
1,269.927.6
1,551.222.2
1,720.710.9
1,813.55.4
Imports Percent Change
2,192.014.8
2,822.728.8
3,030.47.4
3064.81.1
(Million dollars)
U.S. Gear Bookings, Shipments, Demand, Exports & Imports
Copyright © 2009 IHS Global Insight. All Rights Reserved.
70
This Year is On Track to be a Record, But the Next Few Years Will be More Difficult
70
1500
2000
2500
3000
3500
4000
4500
5000
5500
1998 2000 2002 2004 2006 2008 2010 2012 2014
Mill
ion
Dol
lars
U.S. Gear Bookings & Shipments
BookingsShipmentsDemand
Copyright © 2009 IHS Global Insight. All Rights Reserved.
71
The U.S. Has Increased its International Competitiveness in Gear Production
71
0
500
1000
1500
2000
2500
3000
3500
1998 2000 2002 2004 2006 2008 2010 2012 2014
Mill
ion
Dol
lars
U.S. Gear Imports & Exports
Exports
Imports
Copyright © 2009 IHS Global Insight. All Rights Reserved.
72 72
Exports
Canada 26%
Mexico 13%
Brazil 9%
China 8%
Belgium 7%
Germany 4%
Australia 4%
(Percent Market Share)
Current U.S. Gear Export Partners
Copyright © 2009 IHS Global Insight. All Rights Reserved.
73 73
Imports
Germany 22%
China 15%
Japan 14%
Italy 12%
Canada 5%
Mexico 5%
Belgium 4%
(Percent Market Share)
Current U.S. Gear Import Partners
Copyright © 2009 IHS Global Insight. All Rights Reserved.
74 74
The Gear Markets Bottom Line
• This is an excellent year for traditional capital equipment overall as replacement and pent-up 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.
Copyright © 2009 IHS Global Insight. All Rights Reserved.
75
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]