Welding To Play A Key Role In Industrial And Construction Prosperity

2008 presents a great opportunity for distributors to realize business growth.

By Ray Shook

While the welding industry still faces some challenges this year, the overall picture looks good from the American Welding Society’s perspective. Based on our own recent business experiences, AWS is “bullish” for 2008, with the possible exception of housing, which has some impact on construction, and the credit crunch that has affected the sub-prime mortgage industry.

Because of its broad application across many industries, welding achieves a level of relative economic stability, even in widely fluctuating markets. Thus, we see healthy conditions continuing for welding in such areas as pipeline construction, bridge building and maintenance, aircraft and automobile production, defense applications and, especially, energy production.

2008 by the Numbers
While AWS does not maintain financial statistics for the industry, we do commission quarterly economic reports from the Institute for Trend Research (ITR) that we share with our Welding Equipment Manufacturers Committee (WEMCO). Looking at the latest WEMCO Quarterly Economic Forecast, dated September 2007, we can offer the following general economic predictions:

Macronomic Overview: The general economy is currently moving through a decelerating growth phase, but the operative word here is “growth.” Production indices for various types of machinery show some segments are well above levels a year ago, and are rising. These include Mining & Oil Field (up 12.3%), Industrial Machinery (up 3.5%) and Agricultural Implements (up 0.9%).

The credit crunch of the past few months, combined with an already slowing economy, results in a current forecast of a soft landing for the overall U.S. economy in 2007 and 2008. Next year will probably see a moderate spurt, providing some opportunities for growth, but not as great as 2006.

U.S. Industrial Production:  The trend here is positive, with estimated annual growth rates of 2.0% in 2007 and 2.3% in 2008. Advice for planning is to reduce costs where possible, and be careful with capital expenditures.

Industrial Machinery Production: The trend remains positive, but with a decelerating rate of increase. The estimated annual growth rate is 2.1% in 2008. The annual average index is at a 6½-year high, with more gains projected through 2008. Industrial Machinery New Orders in August were 4.4% higher than last year, but slower growth is projected going forward. 

Metalworking Machinery New Orders:  While the current trend is negative, a mild rise is expected in 2008. The estimated annual growth rate is a solid 5.4% for 2008.

Ship Production:  ITR sees a positive trend here with relatively steady growth. The estimated annual growth rate is 4.7% in 2008. The annual average data trend here is the best in 22½ years. The planning recommendation is to expect a busy 2008, while working to improve efficiencies that lower costs.

Spirit of Optimism
The success of the recently completed 2007 FABTECH International and AWS Welding Show illustrates these positive trends. Paid space in the welding portion of the November 2007 exhibition at Chicago’s McCormick Place topped 160,000 square feet, a 25% increase over the 2006 show in Atlanta and a jump of 67,000 square feet (58%) over the 2005 show, which was also held in Chicago. Moreover, the average amount of space booked by individual exhibitors grew significantly in 2007, an indication of building confidence among exhibitors in both the show and the economy. Early response from exhibitors for the 2008 Welding Show in Las Vegas is also good. Space sold for 2008 so far is even greater than it was for Chicago 2007 at the same point in time.

This spirit of optimism is reflected in the AWS membership figures. Our current total of 52,232 members is a record high—for both individual and corporate members—and this comes at a time when many associations representing other industries are facing membership declines. Similarly, the number of AWS-certified professionals around the world has topped 23,000, another all-time high.

Recent participation in AWS seminars and conferences also reflects a growing market. This tells us not only that we are offering the right products at the right time, but that industry recognizes the value of educating its personnel. Of course, growing investment in training is always a sign of a healthy economy.

Welding Workforce Development
A good example of various entities working together to address a common problem is the work many firms and organizations are doing to build a stronger welding workforce of highly skilled individuals. As you have doubtless heard, most industrialized countries are facing a serious shortage of skilled workers, especially in the manufacturing industries. The AWS Foundation’s “Welding for the Strength of America” capital campaign and its AWS Welder Work Force Development Program represent an organized approach to alleviate the shortage of welders. In 2006, the capital campaign set a $5 million goal over five years to fund the program, and we recently reached the halfway point in this fundraising effort.

The AWS Foundation sincerely appreciates the generosity of its donors, who clearly recognize the importance of maintaining a skilled workforce. Moving forward, we have retained the services of Al Crichton—a respected, recently retired Airgas executive—to help us expand our plan. We have also formed a Special Committee on the “Shortage of Welders,” chaired by AWS Vice President-Elect John Mendoza. WEMCO is helping through its Image of Welding Subcommittee and through automatic contributions to the capital campaign from its annual membership dues. We are asking GAWDA members to lend a hand in this effort, and we invite you to contact AWS Foundation Executive Director Sam Gentry for information on how you can help. Clearly, a strong and capable welding workforce benefits our entire industry, as well as our nation.

The Road Ahead
We are confident that the market for welding products and services will continue to grow for the next several years. Industrialized countries will be heavily reliant on welding as the most effective and durable means of metal joining in construction, manufacturing, and maintenance and repair. Developing nations have similar needs for welding, in addition to the construction of critical infrastructure, the utilization of natural resources and more efficient methods of feeding and housing their citizens. While industrial growth and a strong GDP are important for every country, all of us in the welding industry can also feel proud that we are helping people live better lives.

AWS sends best wishes to GAWDA members for a safe, healthy and productive 2008. We are looking forward to working with you as friends and partners.