The electrical wholesaling industry can look forward to a solid year, judging from responses to Electrical Wholesaling’s annual ElectroForecast survey, which will be published in this month’s issue of EW. Many electrical distributors, electrical manufacturers and independent manufacturers’ reps were downright optimistic in their forecasts this year. However, they are still worrying about copper and steel prices and the industrial market’s health.
Respondents had a wide variety of responses on the direction of copper and steel prices, ranging from double-digit increases or decreases, as well as moderate movement up or down. Said one wire manufacturer, “We are predicting copper to trend downward in 2005 as new primary production is coming on board. Also, China’s consumption is predicted to be lower in 2005 than 2004.
Another industry executive also factors China into his forecast on copper and steel pricing. “Steel should decline a little,” he said. “Much depends on China. Copper will continue to be in the $1.50 to $1.60 range.”
Two reps said copper and steel prices will level out in 2005. Said Buddy Binyon, president, Bell and McCoy, Carrollton, Texas, “It’s a gut feeling, but I expect to see steel prices stabilize without much fluctuation. It’s difficult to get a handle on the copper issue, but I expect to see copper settle between $1 and $1.25 in 2005.” Gerald Rayborn, president, Tri-Rep Associates, Willow Spring, N.C., believes electrical conduit manufacturers were about 20 years past due for a price increase, and that, “They made up for it in one shot.” “They may be well advised to take a small increase every year instead of creating havoc in the construction market,” he said. “It’s very funny how other steel products have increased no more than 10 percent to 20 percent.”
The skid has stopped in the industrial market, as far as most ElectroForecast respondents are concerned. Many reps, manufacturers and distributors were even willing to go out on a limb and predict growth of at least 5 percent in this market. However, no one expects the market to recover to where it was in the late-1990s because of how many industrials have shifted capacity to China and other parts of Asia.
One electrical distributor didn’t think the U.S. industrial market can ever recover because of China’s cost advantages. Steve Rector, manager, Arizona Electric Supply, Phoenix, said, “We are in a world market and we can’t compete with China. Half the products in my warehouse have a U.S. name on it with a made in China label, and it’s good stuff. Even Mexico is having a tough time competing with China. Even the continuing devaluation of the U.S. dollar will not be enough to stem the tide.”
On the flip side, one respondent is seeing some U.S. manufacturers shift capacity back to the United States, and he believes this trend could help the industrial market slowly recover. Said Hank Bergson, president, National Electrical Manufacturers Representatives Association (NEMRA), Tarrytown, N.Y., “Industries are creeping back for a myriad of reasons: quality, assured supply, logistics and control.”
Industrial business seems to be picking up in some regions faster than others. Rayborn of Tri-Rep Associates said North Carolina and South Carolina are struggling in many sectors. “Textiles have gone down to niche markets only, due to the World Trade Organization lifting tariffs on imports,” he said. “Telecom manufacturers continue to downsize, and there could be some hard times for pharmaceuticals. We do have a diverse industrial market in the Carolinas overall, and I feel in spite of the industries that I have mentioned, we will still see increases in the industrial market.”
Several respondents saw pockets of growth in tightly defined industrial niches. For instance, the industrial market in Ohio has been hammered worse than in many regions of the nation. But one rep in the Buckeye State has found systems integrators in the automation market to be quite busy. Said John Bovyer, president Bovyer Electrical Sales of Ohio, Hudson, Ohio, “Many integrators are booked well into 2005. The industrial market will recover to a certain extent due to need for heavy maintenance and updating plants and processes — much of which has been put off in the last three years.”
The industrial market in the Pacific Northwest is beginning to improve, said Ken Adams, Shaffer and Nelson Inc., Portland, Ore. “We will not see a return of the aluminum industry, but we will see strength in electronics, transportation and wood products.”
Bob Powell, principal, Kunz Powell and Associates, Deveault, Pa., also sees growth in some segments in the metropolitan Philadelphia market. “I believe high-tech manufacturing including the pharmaceutical sector will continue to prosper,” he said.
In the Pacific Northwest, Ralph Bliquez, principal, TSS Portland, Ore., looks to the use of new technology and new manufacturing methods to provide some sales opportunities for the electrical market. Bill Devereaux, president, and Mark Schon, vice president of sales and distribution, R/B Sales Corp., Marion, Iowa, agreed with Bliquez, and said the industrials that survive will be based heavily on automation, be technically advanced or require detailed processing. They are looking forward to 5 percent to 10 percent growth in their Midwestern market, due in part to several large, agriculturally-based projects slated for development in 2005. “It’s welcome news after four years of stagnation,” said Schon.
Many respondents expressed quiet optimism regarding the fortunes of the industrial market. However, several distributors, reps and manufacturers believe this business segment needs the U.S. government to master some tricky international trade issues such as tariffs and customs, and to offer incentives to manufacturers for operating factories in the United States.
Said Paul Suzio, vice president and general manager, Edwards, Signaling and Security Systems, Cheshire, Conn., “Sustained growth in low single digits can happen. However, incentives by federal and state governments have been non-existent for the most part in keeping manufacturing in the United States. Unless something dramatic changes, more manufacturing jobs will be lost to offshore manufacturing.”
John SantaCroce, president and CEO, Argo International Corp., New York, agreed. “The market cannot recover without the U.S. government ensuring all countries compete equally,” he said. “Import duties and customs are too high in certain countries and this hurts U.S. competitiveness.”
Bill Elliott, president, Elliott Electric Supply, Nacogdoches, Texas is of the same mind. “The industrial market will recover some on it’s own, but the government needs to negotiate better to level the playing field,” he said.