NEW YORK Oil rigs, ammunition and electronics: in a U.S. economy that has come precariously close to stalling, these and other thriving industries are proving an unexpected boon for niche metal manufacturers.
While the construction industry, which accounts for more than a third of the country's copper and steel demand, still languishes, other metal-intensive markets are racing ahead, helping demand pull out of a protracted slump.
Eric Letz has doubled his staff in 18 months at the Fort Worth, Texas-based fabrication business Willbanks Metals Inc. Demand for steel parts and products used in oil and gas extraction has seen strong growth due to the boom in drilling.
"We see oil and gas as a sector that will continue to be extremely robust and vibrant for the next few years," says CEO Letz. He said 35 to 40 percent of Willbanks' business now comes from those industries, up from 15 to 20 percent before the decline in the U.S. construction sector.
Growth of green energy is also helping. The Texas public utility has placed orders for power lines that transfer energy from wind turbines in West Texas to the state's cities.
Olin Brass in Kentucky, part of which supplies about half the U.S. mint's coins, credits its ammunition division for helping the company maintain steady overall growth. Its sales of copper strip for military ordinance has remained robust.
"We've grown 10 percent year on year in commercial ammunition. That's pretty good growth," said Tom Werner, vice president of sales and marketing at Olin.
A pull-back in U.S. military presence overseas may cause growth in that segment to slacken to 2 to 4 percent next year, but Werner still sees Olin growing in 2012.
President Barack Obama announced on October 21 that he would bring the more than 40,000 U.S. troops remaining in Iraq home by the end of this year.
Metals demand depends on China, which consumes more than 40 percent of the world's copper, more than four times as much as the United States. But growth in niche U.S. markets has helped put a floor under a decade-long decline caused by substitution and recession.
For U.S. steel use, Charles Bradford, metals analyst at Bradford Research Group in New York, said to expect growth in the low single-digits, near zero percent, for 2011 and 2012.
Demand from the transport sector is revving up too. The U.S. auto industry is on track to sell 13.26 million vehicles this year, up more than 8 percent from the year-ago rate.
Accuride, in Indiana, which makes steel and aluminum wheels and other parts for commercial trucks, has seen orders jump.
U.S. truck output is recovering from a steeper decline than other sectors during the recession, when fleet operators were forced to extend trade-in cycles and rely on repairs. Today, many of those trucks have become irreparable.
"When trucks get too many miles on them, the aging fleets have to be replaced. Even if you just replace trucks that die, it still keeps you pretty busy these days," says Accuride's global sourcing executive Ben Laaper.
Ship and boat construction and railroad equipment components in the U.S. industrial output index were up 12 to 14 percent in September, outpacing most other segments.
Small and medium sized U.S. manufacturers have had to find growth in niche segments, keep inventories lean and fill orders quickly. Many have needed to refocus people, equipment and material away from floundering industries like construction.
"We had a very painful 2008. We got caught speeding, like a lot of people. But we've cut our expenses, dramatically. We're all working harder. And we're very disciplined," said Jerry Henry, chief executive of Midwest Pipe & Steel in Indiana, a service center that fabricates steel parts to customer order.
Like other executives, Henry talked of competitors that had gone by the wayside during the 2008/09 downturn. Fabricators or processors who hung on make the most of business that remains.
"Auto stamping plants and machine shops and second and third tier manufacturers that survived tend to have a decent book of business. Projections right now are for a decent 2012," said Matthew Heitmeier, director of nonferrous metal marketing at Louis Padnos Iron & Metal Co. in Michigan.
"While it's not completely busy, all those places are quite busy compared to 2009. Those that are left after the recession in 2009 are probably stronger than before," said Heitmeier.
NO MATERIAL SUBSTITUTIONS
U.S. demand for industrial metal copper has slumped by a third from 10 years ago, due in part to consumers finding cheaper materials as red metal prices surged.
For 2011, Rodman & Renshaw Capital Group managing director Wayne Atwell said he is forecasting a 3.1 percent increase in copper consumption for the United States.
The transition to substitutes has pretty much run its course, especially with copper, as many users replaced it long ago with materials like plastics in the case of pipes. But some applications still require copper, or other high-priced metals, because their unique properties cannot be easily substituted.
Copper's durability is superior to plastic pipes. And, its conductivity has made its use in electronic products, like cell phones, computers and portable computing devices a necessity.
"That's all brisk business and we supply all the copper connector parts for those electronics," said Olin's Werner.
Demand is also assured for a range of copper alloys made by National Bronze & Metals. Alternatives for their unique applications do not exist, said President Michael Greathead.
"We are seeing good demand in environments like aviation, oil and gas, and engineering. The gloom and doom in the stock market is more of an emotional issue than a factual issue. The U.S. economy is slowly recovering," he said.
(Reporting by Carole Vaporean and Chris Kelly; Editing by Jonathan Leff and David Gregorio)