Metal Stamping Machinery

James Brodie analyzes the metal stamping machinery industry’s market trends and pricing and provides advice for lenders based on its long-term outlook.

 

 

 


Current Trends

  • Gordon Brothers’ research indicates the overall stamping presses market is relatively flat despite increasing demand for late-model presses with 600-ton capacities or more.
  • Chip shortages have slowed automotive demand from Tier 1 and Tier 2 buyers.
  • Research indicates late-model presses remain the most desirable across press sizes.
  • The electric vehicle market segment is driving increased demand for high-tonnage transfer presses in 2022.
  • Mixed auction results show some older equipment gets little or no interest from buyers, and orderly liquidations may take up to 12 months to sell equipment.

Market Outlook

While the overall market for metal stamping presses has been relatively flat for the first half of 2022, the ongoing chip shortage and rising inflation will continue to affect demand for new and used equipment in the near-term.

Auto Manufacturing Trends Shape Industry

Gordon Brothers’ research indicates the overall stamping presses market is relatively flat. The auto industry is a significant driver within the segmented market, and the U.S. Bureau of Economic Analysis reported total, seasonally adjusted U.S. vehicle sales rebounded in 2021, increasing 3.7% over 2020. However, the ongoing microchip shortage, rising consumer microchip demand and higher prices for new vehicles drove a 17.3% decrease in total unit sales for the first four months of 2022 over 2021.[1] Microchip shortages and their related challenges for the industry could continue into 2023. AutoForecast Solutions reported a shortage-related global production deficit of 11.3 million vehicles in 2021.[2]

In January 2022, the National Automobile Dealers Association projected 2022 new U.S. vehicle sales would increase 3.4% over 2021[3] based on rising demand. However, following the outbreak of the Russia-Ukraine war in March 2022, S&P Global Mobility downgraded its global light vehicle production forecasts by 2.6 million units for 2022 and 2023 to 81.6 million and 88.5 million, respectively. Additionally, the firm reduced its outlook for North American light vehicle production by 480,000 units for 2022 and 549,000 units for 2023. A March 2022 Business Wire report described this reassessment as a reflection of “broad-based reductions given the conflict and subsequent sanctions,” which experts anticipate will affect the production of semiconductors in the second half of 2022 amid ongoing supply chain, labor and logistics issues for the industry.[4]

U.S. Total Vehicle Sales

Source: Federal Reserve Economic Data

Steel Market Affects Industry Performance

An estimated two-thirds of the metal stamping industry’s products are made of ferrous metals like iron and steel alloys. High steel prices raise input purchase costs and boost the value of end-product inventory. Conversely, low steel prices hurt inventory value, selling prices and revenue.

After falling in 2020, steel prices increased steadily in 2021, reaching new highs in September, but decreased again in the fourth quarter and early 2022 as supply exceeded demand. The global steel market has rallied since March 2022 as disruption to the crude iron supply in Ukraine and Russia drove a spike in raw material costs. Sanctions imposed on Russia after its invasion of Ukraine in February 2022 have largely halted the country’s exports, while shipping disruptions in the Black Sea have blocked Ukraine’s crude iron exports.[5]

Russia and Ukraine’s crude iron supplies account for 60% of U.S. imports, and the supply cut from both countries has led to higher crude iron costs and steel prices since the war began. Hot-rolled coil steel traded on the Chicago Mercantile Exchange at $994 in late February and hit a one-month high of $1,175 on March 4, 2022. Although prices have fallen slightly to $1,170 as of April 29,[6] they remain above pre-crisis levels, which should increase the value of end-product inventory.

Valuation Considerations

Class size and equipment age are key value drivers for all machine types. Limited equipment availability and increased raw material and shipping costs are influencing current demand and pricing for new and used machinery.

Value Trends Vary by Size Class

The market for higher-tonnage machines with 600- ton capacities or more improved in the first quarter of 2022 over 2021 with increased activity in the automotive segment, a significant driver of manufacturing demand for larger presses. Additionally, the growing electric vehicle market has affected demand with historically high gasoline prices driving a surge in sales in the U.S. Gross sales of electric vehicles soared in the first quarter of 2022, and market consultant AutoPacific projects U.S. sales will total around 700,000 units in 2022 with strong annual increases expected over the next six years. Chip shortages continue to affect demand for new and used equipment.

Gordon Brothers recommends lenders seeking valuations on specialized equipment across a range of sizes should consider asking detailed questions about machine specifications to understand the implications of value changes within equipment segments.

Late-Model Presses Drive Demand

Research indicates late-model presses remain the most desirable across press sizes. Current values for late-model, medium-tonnage machines with about 400- to 600-ton capacities continue to yield stable results because of higher demand for this equipment, which can be used for smaller precision-stamping piecework. Servo presses in all size ranges are still in high demand, though they have a limited installed base compared to mechanical and hydraulic presses. Values continue to decrease for all press sizes older than 20 years as buyers prefer later-model presses.

New presses prices have increased since 2020 because of increased raw materials costs, long lead times, shipping delays and skyrocketing shipping costs.

[1] https://fred.stlouisfed.org/series/TOTALSA

[2] What Happened with the Semiconductor Chip Shortage—and How and When the Auto Industry Will Emerge (motortrend.com) December 27, 2021

[3] https://blog.nada.org/2022/01/11/nada-issues-analysis-of-2021-auto-sales-2022-sales-forecast/

[4]https://www.businesswire.com/news/home/20220316005784/en/SP-Global-Mobility-Significantly-Lowers-its-Light-Vehicle-Production-Outlook-81.6-Million-Units-Expected-in-2022#:~:text=As%20a%20result%2C%20S%26P%20Global,88.5%20million%20units%20for%202023.

[5] https://capital.com/steel-price-forecast

[6] https://www.cmegroup.com/markets/metals/ferrous/hrc-steel.quotes.html

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