Editorial Feature

The Metals Heat Treatment Industry in the USA

Foxys Graphics / Shutterstock

Metal Treating Institute—the global trade association—represents commercial heat treating companies, suppliers, captive heat treaters, and educational/technology transfer organizations across Asia, North and South America, South Africa, Europe, and Australia.

For apparent reasons, it would be an understatement to mention that the climate of the heat treatment industry in North America reflects that of the industry in general. Even conventional economic barometers may be obsolete, as the traditional way of carrying out business meets challenges that are already imminent.

The General Economic Climate

It is no secret that the North American industry has been on a roll for the past six years. Business is thriving. The Gross National Product (GNP) is on an upward trend (and it is not entirely attributed to the dramatic rise of the service industry), unemployment is close to its historic low, productivity is increasing rapidly, and technology is transforming the labor force for the better.

Growth in the Contract Heat Treating Industry

In particular, the commercial (contract) heat treating industry in North America is a 1.8 billion dollar industry that has expanded 25% over the past five years with only 1999 displaying a minor loss of 1.6%. The figures reveal 4.1% growth through the first half of this year.

As anticipated, the total growth was tempered by downturns in certain industries that had been conventionally robust. The realities of the end of “Cold Wars” resulted in major downscaling in the defense industry, and the petrochemical production in Southwest USA became almost non-existent.

Between these two industries, three regional areas in the United States had witnessed a business decline of nearly 40%. Luckily, a robust economy supported by hi-tech, transportation, and construction segments offset those slumps.

Expenses for Contract Heat Treaters

Net profitability floats between the 8% and 10% mark with margins being narrowed down by higher costs of governmental compliance and, this year particularly, the cost of natural gas increased phenomenally. Return on invested capital is almost 16% with labor costs topping the list of expenses at 20% of the sales dollar and utilities a distant second at more than half that amount (11.5%).

Workforce Retention

The major hurdle that North American companies face is trained people. Heat treating is still viewed as a “hot, dirty” place to work. Regardless of the wages that are comparable to other industries, the industry loses plenty of good hires to more “environment-friendly” employers. Therefore, something has to be done to draw and retain a dependable workforce.

Other Problems with the Contract Heat Treatment Industry

Other issues center around increased costs of conducting the business, that is, increased benefit packages for healthcare, etc.; more expenses for certification to certain quality initiatives (ISO 9002, etc.); and government, to a certain degree. The upcoming Federal elections will reveal a lot about whether pro- or anti-business culture is a possibility in the near future.

Speaking about the future, one is reminded of the French author and poet, Paul Valery, who said, “The trouble with our times is that the future is not what it used to be.” And, in this industry, these words ring true.

Predicted Short-Term Industry Growth Trends

One of the members, when asked to provide a forecast about the future said, “I don't even know what our trucks will bring in tomorrow, much less six months from now.” Although that is a little far-fetched from the standard, the speed at which industry and technology are moving makes any prediction speculative at best. However, MTI’s forecasting service envisages that the pace of the current economy will remain the same throughout 2001 but at a lower growth rate than the current year.

Long Term Trends for the Contract Heat Treatment Industry

In the long term, things may not be crystal clear. But there is a vision that was developed a few years ago by industrial leaders through the support of the Metal Treating Institute, ASM International, and the U.S. Department of Industry. IC is called “Vision 2020...The Heat Treating Industry of the Future.”

The Future for Contract Heat Treating

The vision for the next two decades calls for a heat treating industry that is recognized as being a champion for quality, manufacturing parts with zero variability to international standards while returning attractive profits. Although the vision may be a stretch, it reveals that zero-emissions are characteristic in all processes and energy efficiency would increase by 80%.

To continue, the industry is likely to be recognized as an essential part of the manufacturing operation and characterized by long-standing partnerships with governments, universities, customers, and suppliers. On the technical front, besides metallic alloys, heat treaters will process intermetallics, composites, and other advanced materials.

The work setting will be comfortable, clean, and safe, and the workers will be highly skilled in the application of advanced technologies.

Changes within the Contract Heat Treating Industry

But beyond all this is a changing structure of the industry, not unlike what is occurring in other regions of the world. The entire notion of industry consolidation has adopted a life of its own ...and the end is nowhere seen.

Mergers and acquisitions are taking place at such a rapid pace that it is hard to differentiate the players without a program. This is particularly inherent in an industry that is mainly made up of closely-knit family corporations where a dearth of leadership succession has made many second-and third-generation companies an attractive bait to the conglomerates.

Tell Us What You Think

Do you have a review, update or anything you would like to add to this article?

Leave your feedback
Your comment type