Business Forecast

GAWDA Suppliers Project Modest Growth in 2020

Consistent with what the GAWDA distributors projected, GAWDA suppliers are also predicting modest growth in store for 2020. While the disparity of answers varied a little bit more widely among the suppliers, the consensus was for continued, albeit slowing growth in store for 2020. Also consistent with the distributors projections was a fear of election year softness and the continued impact of trade barriers and tariffs. However, even with those fears looming over 2020, most suppliers still projected growth ahead.

The following are responses from GAWDA suppliers across North America about what they expect to see in 2020. Thank you to those who participated.

With the oil and gas and automotive markets projecting strong years in 2020, Arcos Industries General Manager Harry Wehr projects an 8-10% increase for the manufacturer. Arcos is also a strong supplier to the U.S. military. “We’re a major supplier to the military, especially the Navy,” Wehr says. “There are currently 25-30 years of contracts for new ships, aircraft carriers, destroyers and submarines that have been awarded. That will be a big plus for us.” Aside from being involved with strong growth markets, 2020 is slated to be an exciting year for Arcos. The company will complete a new warehousing facility by the end of March and a complete office renovation by the end of the summer. The company also has plans to build a new manufacturing facility, which Wehr predicts will increase capacity and make the manufacturing process more efficient and modern. “There are a lot of things going on here at Arcos and where I was thinking about retiring at one time, now I’m going to stay until these projects are completed,” he says. “We’re probably looking at a time frame for the new manufacturing building and moving the equipment of 2.5 to 3 years. It’s going to be a challenge and that’s what I like. I honestly believe the welding industry would see a world-wide growth in 2020 unless something unexpected happens on the world stage. Arcos will continue to grow with new business opportunities. Arcos has been serving the industry with a quality product for the past 101 years.”

Based on the trend shown in the Purchasing Managers’ Index (PMI), Weldcoa President and Co-Owner Hector Villarreal anticipates a level year in 2020. “Normally, the PMI is about six months ahead of us,” Villarreal says. “Right now, it’s in its fifth month of contraction.” He notes, however, that there haven’t been any signs of the industry slowing down to date. “Last year was our third record year in a row,” he says. 2020 will be an exciting year for Weldcoa, as it gets ready to debut a new product for a growth segment of its market. “We’re basically automating a process that has never been automated before. And it really needs it. The cost savings are going to be tremendous and the quality improvements are going to be off the charts,” Villarreal says. He does not expect the looming election to have a tangible impact on sales in 2020 and notes that, “Regulations have eased up. Money is still cheap. The economy isn’t overboiling but it’s still moving in the right direction. It’s a good time to be in business, so take advantage.”

Mercer Industries will see high single-digit growth in 2020. President Jim Wallick explains that distributors continue to seek value, something that Mercer provides. “I think that distributors and their end users, welders, are looking for common-sense purchases,” says Wallick. “They’re not looking to spend more; they’re looking to get more value for what they purchase and to understand how they can get that value.” Mercer expects to add new products in wire wheels, wire products and advanced zirconia products in the 2nd Quarter of 2020. “We’re continuing to expand our line with products that give value, increased performance and durability to our users,” Wallick says. He adds, “The support of independents and family businesses for companies like ours, with a 50-year history is overwhelming. We truly appreciate it.”

2018 was a record year for Norton Abrasives in the entire 130+ year history of the company. 2019 maintained that record number. And 2020 projects to be another record year. Director of National Distribution for Norton Abrasives and Carborundum Abrasives Jim O’Connor projects an increase this year. Last year, the company contended with the fallout from the Chinese tariffs, driving the decision to leverage its strong global manufacturing footprint. “We had hoped that the tariffs would be resolved quickly in China,” O’Connor says. “When it didn’t look like it was going to be a quick fix, we made the decision to review those products where it made sense to move the manufacturing while maintaining our quality and market position.” Though the company’s core business is abrasives, it has seen substantial growth in its non-abrasive business. “We’re expanding the non-abrasive side of the business,” O’Connor says. “That is pneumatic tools, carbide burrs, wire brushes and other corresponding accessories that go with them. That’s a big growth area for us.”

As Controlled Efficiencies continues to grow its business, President David Graves anticipates strong growth for 2020 and beyond. “The knowledge of our product is getting out there and the word of mouth is picking up,” Graves says. “And we’re planning on continuing to add product. As our customers want new products added, we then offer those enhancements to everybody.” Customers that have implemented the Controlled Efficiencies software have all seen a significant increase in productivity, sometimes as much as 25-35%. “Compliance paperwork is one of the most labor-intensive processes that plant managers deal with,” says Graves. “So having that data instantly available at their fingertips and automating that process allows companies to spend more time utilizing their labor to produce profit.”

Kaplan Industries Executive Vice President of Operations Jim Johnston forecasts a growth year in 2020. “We’ve just gotten involved with providing hydrocarbons to our customer base,” Johnston says. “We’ve seen some real growth in that this year and anticipate it growing even more next year.” To capitalize on that hydrocarbon market, Kaplan installed two new bulk tanks. “When we entered this market, the thought was that butane was going to be the major hydrocarbon that would be used in the extraction of the cannabis oil,” he says. “But as things have developed, a wide variety of mixes and combinations have been used. These tanks allow us to have individual tanks for butane, isobutane and propane. So now we can provide the mixes that are required.” Another exciting development for Kaplan this year is the addition of a new paint line, with 1,000 stations. Says Johnston, “This paint line will enable us to be a true, consistent just-in-time supplier.”

Select Arc President Dale Stager anticipates a level year in 2020 compared to 2019. He notes that the company, like many others in the industry, is being impacted by the tariffs. “I think that if they ever get that straightened out it would certainly help people,” says Stager. He does think that 2020 being an election year will have an impact on the economy, and notes that the result of the election could have an impact on the economy beyond 2020.

FIBA Technologies has seen their backlog grow significantly over the past year, leading Sales Director Chris Finn to forecast continued growth this year. As the industry continues to experience a helium shortage, more and more wells and sources are coming on line. “Historically, with the BLM, you had helium coming from central locations in the Southwest,” Finn says. “Now you have a variety of different sources of helium, so that drives demand for storage tanks FIBA manufactures and assembles. If you have everything coming out of one central location, you don’t need as many trucks. But if you have a dozen sources of helium now from Canada through the Midwest, now you need a lot more equipment. The ever changing landscape of supply is the biggest driver of change.” The company is in the process of expanding its service locations in Pennsylvania and Louisiana, and recently completed a massive expansion of its manufacturing facility in Massachusetts. Those expansions, combined with its recently launched Type IV helium trailer, will all start hitting the bottom line in 2020.

2020 is poised to be an explosive year for Anthony Welded Products, Inc. according to President Frank Salvucci, Jr. The company plans to open a new manufacturing plant in the first half of the year. “This plant will double our manufacturing capacity,” Salvucci says. “It also enables us to go into different sectors of the business. We’re exploding with new products and new innovative ways to move and store cylinders.” Salvucci forecasts a sales increase for 2020. “Part of that growth will be the result of expanding our product line which includes new patented products, like the new 3n1 cart design,” he says. “It takes three carts that we currently offer separately and rolls them into one cart keeping it the same cost as a standard cart.”

Hyperkinetics Corporation Executive Vice President Wade Holt is very bullish on the company’s prospects for 2020. “We’re forecasting a 10-15% increase over 2019,” says Holt. “I think what’s driving this forecast are the favorable actions taken by the Trump administration to reduce taxes and hold back on regulations that may have popped up had someone else been in control.” In addition to the favorable business climate, Hyperkinetics is excited about two new product launches: A security cap for the beverage CO2 industry that will protect the fill connector from contamination, and a new line of caps for NPT threads. The company is also looking at the possibility of building a new warehouse that will increase its storage space by about 100%. “We’re very excited about that,” says Holt. “Right now, we have two different warehouses that are in different locations. We’re excited to put everybody under one roof.”

2020 projects to be a strong year for Flange Wizard, according to Owner and CEO Bob Doan. The company is highly dependent on the oilfield business, pipelines and natural gas, all of which project to see growth in 2020. “We have seen huge increases last year and the year before,” says Doan. “We’re developing new tools, especially for the pipeline industry and have seen a very strong increase.” Among those new products are a new wrap around and new cutting guides, which debuted at the end of 2019. “On the wrap arounds, I had my own material made. The welders seem to really like it,” Doan says. “We’ve made some improvements on our new cutting guides, as well. We’ve developed a couple new ones that are just now coming on the market that not only cut, but they bevel at the same time.” Doan, who has been in the business since he was 13 years old, says that working in the welding business is the greatest thing that ever happened to him.

Coming off a strong 2019, California Cylinder will continue that momentum into 2020, according to President of Sales and Purchasing Curtis Brown. With competitors moving out of the state and a continued growth in the cannabis extraction market driving increased CO2 cylinder sales, California Cylinder sees strong trends signaling growth in the new year. “Things have picked up at the end of the year,” Brown says. “We’ve seen a big uptick and I see our business staying pretty strong.” Brown saw the warning signs of the coming trade war with China and was able to secure deals on steel from other countries and lock in rates. “While other companies were scrambling, we had our prices locked in,” he says.

Hypertherm CEO Evan Smith predicts a continued softening of the global industrial economy through the first half of 2020, followed by a recovery in the second half of the year. All told, Smith forecasts sales to be relatively flat next year leading into a growth year in 2021. He looks forward to a degree of stability in the market in 2020, after an uncertain 2019. “I think 2019 has certainly been affected by the trade conflict. That’s resulted in some materials cost inflation plus the absorption of import tariffs going into China. I would say the strengthening dollar through the year also had adverse impacts for multi-national companies like Hypertherm,” says Smith. “The dollar has stabilized and is not likely to strengthen much further, and the Fed is likely to remain on the sidelines on interest rate policy. Trade conflicts, especially going into an election year, seem to be settling down a bit. That would normally be conducive to some return to risk-taking by business decision-makers. So, I think that could be helpful in the second half of 2020, dampened perhaps a little by policy uncertainty surrounding the election.” The company expects a major generational product launch in one of its plasma lines in 2020 and will continue to invest time and resources into continued integration of OMAX, a leading waterjet cutting company acquired in 2019.

McDantim CEO Dan Fallon projects a level year for the company in 2020. He notes that McDantim operates in two very diverse markets: the beer market and the industrial market. The craft beer market has been a major growth driver for the company, but Fallon sees a slowdown in growth for that market, which he believes will negatively impact McDantim. However, he sees positive growth on the industrial side of the business that he believes will balance out that decrease and lead to level growth. The company plans to debut two new products in 2020. Says Fallon, “These products will give us the ability to provide a better product to specific niches in the marketplace.”

Eleet Cryogenics forecasts double-digit growth in 2020. The primary drivers of that growth engine include the company’s new bulk tank rehab services facility in Houston continuing to ramp up production, and a new Taylor-Wharton microbulk tank stocking location on the West Coast that is anticipated to come online in early 2020. The new stocking location will give Eleet a stocking presence in all areas of the country, with the West coast joining its Ohio, Georgia and Texas locations. “There seem to be new applications in cryogenics and we have found the trend to be that customers want to work with companies that offer quality product, with people they can trust and that offers technical expertise,” says Eleet Cryogenics VP of Sales Doug Morton. “There is continued confidence in the time-tested performance of our products as we expand our territory.” Eleet, which is the exclusive provider of Taylor-Wharton bulk and microbulk tanks in the U.S., has been unaffected by the tariffs on Chinese goods as their tanks are manufactured in Malaysia. “The facility in Malaysia is the newest state-of-the-art manufacturing facility in the world for microbulk tanks with a recent $6MM investment in the new production line,” Morton says. “And the quality, standard features and performance are unmatched.” The company continues to make investments in inventory and increasing throughput at its Texas and Ohio bulk tank rehab facilities.

With microbulk being one of the most aggressive growth markets in the gases and welding industry, Taylor-Wharton expects see strong growth in 2020. “From a microbulk standpoint, our recent expansion in Malaysia, which doubled our production capacity, is going to be a great driver for us,” says President Tim Miller. “We see great growth in microbulk, with this expanded capacity and with new products coming online. We continue to build larger tanks and penetrate more markets and industries with those.” In the U.S., Taylor-Wharton is exclusively distributed by Eleet Cryogenics, Inc. which plans to add an additional stocking location for the new Taylor-Wharton micro-bulk tanks this year.

Coming off of a strong 2019, with a strong backlog and a continuing strong GDP, TOMCO2 Systems Vice President Sales & Market Development Jeff Holyoak is expecting to see solid growth in 2020 across all of the company’s market segments. Two markets that Holyoak is especially excited about are CryoSystems and cryogenic freezers. “One of our growth platforms is going to be what we classify as CryoSystems, which includes ambient vaporizers, vacuum insulated pipe and vacuum insulated valves,” says Holyoak. “We’ll have a commercial product coming online in Q2 for ambient vaporizers for all atmospheric gases, vacuum insulated pipe soon thereaftere. We do a lot in service and installation and we partner with a many companies in those markets, but this puts us back into the manufacturing footprint to give us the beginning to end, from all product applications.” He continues, “The other dynamic opportunity that we have is our partnership with Dohmeyer cryogenic freezers. They come in both liquid nitrogen and liquid CO2. TOMCO the exclusive distributor for Canada and the U.S. With our strong position in the food processing industries and market segments, we fully anticipate a greater expansion of cryogenic freezer applications in the U.S. through the Dohmeyer partnership.”

Bill McCloy, Managing Director of AmWINS Program Underwriters’ (APU) Welding Supply Distributors insurance program, recently provided insight to GAWDA members regarding an important issue that is impacting the entire industry for 2020 and beyond. “Auto liability continues to be a difficult line of insurance and coverage,” he says. “A lot of it has to do with ‘social inflation.’ Economic trends and political views are causing the cost of insurance claims to increase. Which in turn is escalating verdicts, litigation funding and jury distrust of big corporations.” McCloy adds, “Millennials are becoming a larger portion of the jury pool and their tendency to be more mistrustful of big corporations is driving up the cost of insurance for companies.” APU’s Welding program is committed to working with GAWDA members in an effort to keep the cost of insurance down. “We’re placing a larger focus on loss control and ways to educate members on risk mitigation,” McCloy says. “However, our program is impacted by these issues as well. Our carriers are not only looking at welding supply distributor accounts, they are reviewing the entire auto portfolio.” McCloy likens the issue to the recent helium crisis, stating, “The increase in premium is affecting welding distributors’ cost structure and, in some cases, taking a toll on their ability to do business. The issue is real and not going away for the short term.”

SuperFlash Compressed Gas Equipment will see a continued increase in sales in 2020. CEO Victoria Marquard-Schultz, Esq. says, “Our products such as gas mixers, flashback arrestors and manifolds are vital to gas safety and management, especially in the welding industry, our largest market. As the cost of treating injured workers soars, more companies are investing in a culture of safety aimed at preventing injuries in the workplace.” The company set the stage for expansion by opening new offices in Phoenix, Arizona, and Orlando, Florida, in 2019. These allow SuperFlash to provide greater customer service in the West and Southeast. “These regions are among the fastest growing in the U.S.,” says Marquard-Schultz. “We are excited about the opportunity our expansion will give us to reach and serve new and existing customers with greater speed and efficiency. New warehouses associated with these offices will allow us to ship products faster and with greater flexibility.” She also points to the welder shortage as something that will impact our industry going forward, saying, “We should all support programs, such as those sponsored by AWS and other organizations, to help close the skilled trade gap and encourage high school students and others to consider careers that involve welding, gases and metalworking.”

Tom Bennett, President of Cyl-Tec, Inc. anticipates 5-7% growth in 2020. The biggest factors behind that growth will be additions to Cyl-Tec’s product lines, particularly in cryogenic vessels and specialty gas cylinders. “We continue to add new products such as more sizes and types of cryogenic vessels, more telemetry offerings, more specialty gas cylinders and valves,” Bennett says. “We will continue to expand and improve our efficiency in our plants with new production equipment.” Bennett notes that the increased use of CO2 and N2 in concrete production, the growth in the cannabis market and CBD oil extraction, and new micro-breweries are some of the new markets that Cyl-Tec has entered, and he projects that they will continue to provide Cyl-Tec with growth opportunities in 2020.

Computers Unlimited-TIMS Software plans to make additional investments in mobility, business intelligence tools, and logistics capabilities to help distributors achieve additional operational efficiencies and insights, according to President David Schaer. This will enable customers to “Capitalize on Microsoft’s advanced business intelligence capabilities and realize additional operational efficiencies through the use of smartphone apps,” says Schaer. “Mobile technology advancements continue to make day-to-day business processes more streamlined than ever, especially in regards to gas and hardgood deliveries, gas production in plant operations, and customer information such as open orders, cylinder balances, and inventory availability all readily accessible on smartphones and tablets.”

The 3G Network Shutdown will be the biggest factor behind an increase in sales at Wise Telemetry, according to CEO Eric Wise. “I believe we will continue to see positive growth in the gases and welding industry as long as the overall economy continues to perform well,” says Wise. “I believe the telemetry industry, specifically, will continue to see exponential growth as technology becomes more powerful and cost-effective.” The trend that Wise has seen most in recent years is companies monitoring assets that historically would not have been cost-effective. Wise plans to launch new products in 2020 that “will allow us to provide additional monitoring services to our existing and new customers,” according to Wise.

Geographic expansion will pave the way for double-digit growth in 2020 for Exocor Filler Metals. “Exocor has expanded into new geographies in each of the last three years, and the plan is to continue to bring our ‘partnership’ philosophy to a greater number of independent distributors in new U.S. markets in 2020,” Paul Kinsella, President and COO at Exocor says. “Based on the enthusiasm and results from prior expansions we can’t help but think this will continue our growth trajectory.” Kinsella notes that as we get closer to the election, buyers’ behaviors could be impacted by who is predicted to win and thus what they think the business landscape will be heading into 2021. But, despite some uncertainty ahead, one thing is constant, he notes, “I truly believe that all of us are in the service business and it becomes more apparent every day when you are dealing with a company that lives to serve vs. one that forgets this important fact. ‘Make it easy for customers to do business with us’ is a frequently used expression at Exocor and if we practice that each day, then only positive results will occur.”

Bill Dwyre, Managing Director at Weiler Abrasives, says that the election and continued trade unrest, especially tariffs, are causing uncertainty in the industry. Because of this, Weiler is expecting low single digit market growth, but expects to outperform that in 2020. He also notes that the oil and gas markets have been a market that Weiler has had success in and mentions that Weiler will continue to focus on new products in the new year

According to Mike Verne, Director of Strategic Accounts at Worthington Industries, 2019 was a neutral year for the company and 2020 should follow a similar trend. “At Worthington, we’re excited by potential growth in areas that can benefit our unique expertise in materials science, purchasing, design and manufacturing, supply chain, and insights and analytics to create new solutions,” says Verne. He notes that the raw material tariffs initially led to a spike in demand, however lack of tariffs on finished goods neutralized the effects of early sales. Says Verne, “As the nation approaches an election year, it will be difficult to forecast how the regulatory environment will evolve.” Worthington is seeing increased demand for transportation and storage of hydrogen fuel, which Worthington is well-positioned to capitalize on, with nearly 50 years of experience building composite high-pressure cylinders. Worthington has also increased its workforce at its Alabama facility as a result of an increased demand for domestically-produced microbulk tanks.

Growth in specialty markets and a new product pipeline will lead Chart Industries to grow at a rate greater than GDP in 2020, according to President of Distribution & Storage, Western Hemisphere Grady Walker. Among those specialty markets is food and beverage, cannabis, space flight and industrial lasers. “We have quite a few exciting new products in the pipeline and are planning for some important launches in 2020,” says Walker. “Among these will be a new 7,200 gallon Orca™ MicroBulk Delivery Trailer featuring a hydraulically driven pumping system with 500 psig discharge pressure and a magnetic coupling.” The trailer couples Chart’s existing automated filling technology with the capability of filling laser accounts without having to lower the tank pressure and potentially interrupting the operations of the customer.

The Walker Family, owners of SafTCart in Clarksdale, Mississippi, project 2020 to be around level with 2019. The company notes that evolving markets mandate product changes. SafTCart plans an expansion of existing buildings and the addition of new buildings in 2020. These facilities will give the company more room to fabricate. Two niche markets that have been providing dividends for the manufacturer are the composite cylinder market as well as pods. They note that this is mainly driven by the natural gas and fracking industries. The biggest challenge that SafTCart, and many others in the industry, currently face is the shortage of skilled labor. “There is considerable need for more skilled labor due to the shrinking skilled workforce.”

Catalina Cylinders, Inc. forecasts 2-3% growth in 2020, according to VP of Strategy & Operations David Silva. “One of the biggest factors for us will be the direction of the U.S. economy, specifically the industrial sector. We’ve been watching the yield spread closely for inversion (bond-market recession indicator). So far, the Fed has managed to keep rates low enough to continue stimulating the overall economy, and there hasn’t been a meaningful inversion yet which is good,” says Silva. “However the manufacturing segment of the U.S. economy has been slowing down this past year, and with the upcoming election we expect to see increased volatility in the market as well as with our customers’ CAPEX spending.” Silva notes that Catalina Cylinders plans to launch its largest CO2 high-pressure package cylinder in 2020, the B63, which can hold 63 pounds of CO2. The previous largest package gas CO2 aluminum cylinder contained 50 pounds. Not only does the B63 provide 26% more capacity, it doesn’t require the expense of refrigeration or venting that is required for bulk systems. Like many others, Silva says that the aluminum tariffs have negatively impacted Catalina. He also notes that an election year brings uncertainty to the market.

“Investment in software automation is a must to ensure that the distributor can compete in any marketplace, up or down,” says Prism Visual Software Vice President Andrew Kuneth. “For these reasons, Prism expects sales to continue to grow. Kuneth notes that customers want technology to make it easier to do business with distributors and distributors want to do more in their business, with less labor. “Prism expects to continue to invest in webstore and app technologies so the distributors can have a more loyal and committed relationship with the customer in the store or on their phone,” Kuneth says. “This, coupled with Prism’s inventory management and automated communication tools, will help customers remember to contact their local welding supply distributor to point, click and pickup or receive delivery on more hard goods and gases.

Rafael Arvelo, GM of EQUIGAS, Inc. forecasts a robust 35% increase in sales, which he attributes to a strong economy and increased market share. “2019 was an excellent year, I believe that 2020 being an election year there will be lots of uncertainty but it is still a strong economy,” says Arvelo. “I believe it will keep growing in 2021 if the current president gets reelected.” EQUIGAS will be making new hires in 2020, as it expands its location by 30%. Says Arvelo, “I believe that in the last 10 years, MBAs and U.S. Manufacturers have been drinking the LEAN Manufacturing Kool-Aid too strong with no common sense. They teach to measure savings, but they do not measure every time they lose a sale or market share because they cannot ship. While foreigners are investing millions of dollars in warehouses in the USA.”

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