The moment has arrived

The moment has arrived

Metalcasters may arrive at GIFA full of expectations they've built over the past four years, but what happens from that point will matter even more.

Robert Brooks
Robert Brooks
Editor

Soon the waiting will be over. The metalcasting world will assemble in Germany next month for GIFA, the 12th International Foundry Trade Fair, the unofficial reunion of an extended family of producers and their suppliers, as well as product designers, researchers, and engineers in related disciplines. Much will have changed since their last gathering— a global recession, of course, as well as the ongoing shift of industrial might from North America and Europe to lowercost markets — but the quadrennial exposition and its parallel conferences and events stand as a gauge of the market’s vitality and potential.

There are other trade shows, of course, but this one draws the most exhibitors and attendees. New products will be introduced there. Deals will be announced. And, individual metalcasters will be able to see for themselves the breadth of the global market, and evaluate the strength of their own business and that of their competition, the viability of technologies, the reliability of their colleagues and customers, and their prospects for growth.

The industry has been anticipating this event for four uncertain years, and those expectations are themselves the basis of much optimism (expectations being so easily read as “demand.”) As a whole, it is an industry that is benefitting already from global industrial expansion. It is a global industry, of course, shaped by global costs like commodities and labor, among other factors, but driven by healthy worldwide demand for industrial goods.

A new study by Pricewaterhouse Coopers finds that 89% of U.S.-based executives with multinational manufacturing organizations expect positive revenue growth for 2011. This number has risen 14% in the past year and 5% in the past quarter, and one-third of these executives forecast double-digit revenue growth.

There is some evidence that the optimism is not limited to the multinational manufacturers. Another study, by Prime Advantage, a purchasing consortium, finds similar optimism among small and midsized North American manufacturers of durable goods. They are more confident about their growth prospects than they were six months ago; 72% report their companies will see revenue increases in 2011, and 24% anticipating those increases to exceed 10%.

Still, if metalcasters focus on events in that last week of June another development at that time may prove more consequential. That week the Federal Reserve Board is scheduled to end a $600-billion cycle of purchasing long-term U.S. Treasury bonds. This has been the Fed’s QE2 (“quantitative easing”) strategy to keep interbank interest rates low in order to promote lending and capital investment, to sustain economic growth. It sounds highly theoretical but it is nothing more than printing dollars in the expectation that the U.S. economy will grow large and fast enough to give those dollars a strong value. Another part of the QE2 calculation had to be that more dollars in circulation would spur commodity price increases, and that this would spark broader economic growth as businesses and then consumers borrow and spend to keep up with the process.

Commodities prices are rising, thanks to global demand as well as cheap currency, but the domestic economic growth that the Fed anticipated is still not apparent. The U.S. economy cannot match the global economy in scale, so prices are rising out of pace with demand. Banks are not lending and consumers are not spending in any way that would mark QE2 as a successful economic growth strategy.

QE2 has been the banking equivalent of the U.S. government’s 2009 stimulus plan: both are based on assumptions that do not acknowledge the autonomy of individuals to make alternative decisions. But they do make those choices, and the global economy provides many options other than investing further in an over-regulated U.S. economy with both inflation and spending out of control.

We’ll begin to see how this will matter when QE2 ends and global markets begin to process the implications of U.S. debt that is no longer supported by the Federal Reserve and (for all we know now) not acknowledged in any serious way by a federal government unwilling to contain its expenses. Metalcasters may arrive at GIFA full of expectations, but what happens from that point will matter even more. They may find that in a global economy it’s easier to come together than to pull apart.

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