Challenge And Opportunity Ahead For Conveyor Industry

Weather-related events impact projections.

Weather! Global demand for the material handling industry is ever-evolving, and weather-related events have created needs not anticipated by the industry. A cross-section of executives and industry leaders from the Conveyor Equipment Manufacturers Association (CEMA) originally projected that growth in manufacturing business spending in the United States would increase by 7% in 2006. However, major weather occurrences likely will alter those projections. In comparison, industry demand slumped in 2001-2003, caused by poor economic growth, weak corporate profits and depressed levels of capital equipment spending. 2004 was a transition year for demand, while 2005 growth approached 8.5%.

CEMA Member companies supply statistics in seven classes of unit handling conveyors and five classes of bulk handling conveyors. Based on CEMA statistics, booked orders for 2005 were $5.6 billion and shipments were $5.5 billion.

Bulk Handling Conveyor
Construction projects that fuel aggregate, cement, sand and gravel production continue to increase. Capital investments that were shelved from 2001 through 2003 were approved in 2004, and project demand increased in 2005. Demand for bulk material products continues to drive investment for new equipment, particularly bulk conveyors. Coal is now positioned as the preferred fuel product for power energy generation, and with domestic power plants at near-capacity levels, increased mining operations for coal extraction will continue to add demand for bulk conveyor equipment.

Unit Handling Conveyor
Unit handling conveyors represent the largest number of CEMA product sections, with demand for these types of conveyors coming primarily from large distribution centers and manufacturing plants. The majority of unit handling members continued to report increases for new conveyor systems in 2005. Bill Casey, president of production & assembly for SI Systems in Easton, Pennsylvania, reports, “As we move to less manufacturing in America and import more from Asian countries, we will, out of necessity, need more distribution.” He explained that this translates into more distribution centers and faster technologies to speed the distribution process as consumers expect quicker delivery.

Historically, increases in consumer confidence and spending are necessary to deliver growth in unit handling conveyors. In 2001-2003, many unit handling equipment manufacturers struggled with overcapacity, which impacted price/margin positions and created mergers and consolidations. Today, unit handling companies that are flexible and deliver customer value, particularly with strong technical innovations, are securing leadership recognition and market share.

Key Barometers of Growth
Leading economic indicators still point to continued strength in consumer spending, which can provide growth in business spending. Business profits are the key ingredient in funding new capital investment, especially for automation and conveyor equipment. There are continued “worrisomes” for CEMA members, stemming from steel consolidation, surcharges, energy issues, medical costs and a growing national deficit. Overall, CEMA member companies see challenge and opportunity for 2006. Most importantly, we are optimistic about the future and the ever-evolving challenges occurring within the global material handling industry.