Full of Eastern promise?25 April 2012
While the US recovery continues with mixed fortunes from region to region, some are finding East Coast demand isn’t as flat initially feared. Kevin Walsh gets a feel for opportunities on the East Coast
Since 2009 the US government has allocated $750bn in stimulus packages to spend its way out of recession. Although the going has been slow the recovery continues, and concerns over a backsliding economy instigated by cataclysmic events in the Eurozone or the bursting of an emerging market bubble elsewhere begin to diminish.
According to the MHIA's Material Handling Equipment Manufacturing forecast released in January, the US material handling business has edged away from the precipice of an accelerated decline in new orders throughout 2011, with business investment encouraging modest growth.
While the manufacturing continues to grow in the oil-rich Gulf of Mexico and the Midwest is seeing step changes across several industries generate new opportunities for those prepared to switch focus, along the East Coast the message seems to be that demand is stable, but not great. At the same time, and as discussed elswhere in this issue in our Modex review and dockside sector report, the widening of the Panama Canal will bring changes to trade flows that will bring more goods by sea to the East Coast.
A fairly strong rebound was experienced along the coast in 2010, helped by firms gearing up for work related to the Marcellus Shale and the recommencement of projects postponed during the global financial crisis. However even with continued public spending in the region, for those who have the means to cover a wider geography other regions seem to provide more of a draw.
Although crane builder G W Becker might seem to embody this view, with the lion's share of its work sourced from around the Great Lakes region, the firm is still seeing significant prospects towards the Eastern seaboard.
"I would say 10% of our customer base is from the East Coast," explains Brent Rozar, marketing and sales manager for G W Becker. "It has been a mix of modernization projects and new installation work. Some projects have been expansion within the company, so it has been an even mix.
"Along the East Coast and Mid-West area we continue to see strong opportunities in that area and we have seen some inquiries for new facilities in the New York State area."
"Our main end-user markets are steel, railroad and transportation, tube and the oil and petrochemical markets. Another industry worth mentioning is the nuclear industry as we recently installed a new 2USt automated crane with dual 1USt hoists for use in a pickle house application, where they treat the product.
"It was custom built to specifically handle long lengths of material used in the nuclear industry. The operator controls the crane wirelessly from a floor mounted touch screen at a control pulpit. The operator can run the unit through a pre-defined program of dips and moves, or can modify the process accordingly. The display also provides crane drive status telemetry and fault information."
Along with this nuclear project other work undertaken by the firm has been generated by the rail and shipbuilding industries on the East Coast, including the commissioning of a 65/30t outdoor gantry crane for a barge manufacturing facility at the end of last year.
"Most of West Pennsylvania's steel industry is tied to the Marcellus Shale, it directly or indirectly supports their businesses. Rail in this area has been big.
"We're in the process of modifying six existing EOT cranes at a locomotive engine anufacturers facility. It's a turnkey field project that involves new powered rotating lower hook blocks, new radio control units, associated electrical control upgrades installation, commissioning and training."
Despite these project wins for G W Becker, the firm says that pickings from the shipbuilding industry and military contracts have been slim. It has received a number of inquiries from potential customers, but not many firm orders.
When compared to some of the orders the firm took even just a year after the global financial crisis had started there is little surprise that its performance in the region, while satisfactory considering the prospects, doesn't quite stack up.
For instance on one contract for a rail manufacturer in Alabama, G W Becker managed to supply nearly 100 units for that crane package from 2008-2009.
However inspection and crane maintenance company Crane1Services is optimistic about prospects in the region and has established two premises along the East Coast over the last two years.
While based at a number of locations, Crane1Services has a similar base of operations to G W Becker, namely around the Great Lakes region, with its main office between Dayton and Cincinatti, Ohio. It also has premises in Columbus and Toledo, Ohio as well as in Indianapolis, Indiana; Louisville, Kentucky; Charleston, West Virginia; Richmond, Virginia and Baltimore,
Having set up in Baltimore over a year and a half ago to undertake a military contract for work on Aberdeen Proving Grounds, the oldest active US Army proving grounds in America, the firm's vice president of sales, Steve Harris acknowledges that some opportunities related to government military spending are still there.
"What brought us to Baltimore to begin with was a government contract with Aberdeen Proving Grounds," says Harris. "It was for inspection and maintenance on quite a number of cranes and hoists ranging from half-ton units to 20-30USt. Prospects are still reasonable. I think it's much stronger in the Midwest and North than it is out East, but it's reasonable."
The firm also set up a branch in Richmond, Virginia just over six months ago. "Our focus in Richmond is heavy industrial and our focus in Baltimore is government contracts with some industrial work as well.
"So far these have been military-type contracts, maintenance of the cranes on military contracts."
Despite the majority of its current workload coming form smaller accounts, Harris expects 2012 to be a very strong year for the firm, with growth plans for the region contributing.
"We have approximately six staff in Baltimore, and we have three in Richmond, so not very many yet.
"Our plan would be to continue to pursue the general industrial market and build crews of 15 to 20 each in each location."
Commenting on the region' prospects in light of industrial growth around the Marcellus Shale, Harris says: "I think that it's a good time to build a business right now. The metals business continues to be strong, primarily metals and metals producers continue to be strong."
However for G W Becker even with 'reasonable' demand in the region its East Coast projects represent a small proportion of its income.
Rozar says: "Our outlook for 2012 is positive. We carry a large backlog of work into the summer, currently including 15 orders for new cranes ranging in capacity from 1t to 40t, as well as a significant amount of field service projects.
"Our engineering department was augmented again this year with the addition of a structural design engineer. In addition our engineering manager obtained a PE licensure and continues to be an active community member on ASME B30.2 -- Overhead and Gantry Cranes.
"If the recent trend of increased monthly sales continues as expected, our enthusiastic workforce of 50 people may need to be enhanced."
Likewise Crane1Services' journey to the East seems comes on the back of a successful year in other areas. "Our sales are up over 60% in 2011 versus 2010, so we saw substantial growth in 2011. 2012 has been very strong so far," says Harris.
With this seemingly lukewarm demand along the East Coast, developments such as the closure of three oil refineries in Yorktown, Virginia, Marcus Hook and Trainer, Pennsylvania this month will doubtless have an effect on future prospects for modernization works on the East Coast.
Similarly President Obama's endorsement this month of new offshore oil and gas exploration efforts in the Atlantic will be sure to produce a surge of opportunity for those already in place to take advantage.
So while demand in the East Coast may have steady and fairly flat and only very gradually improving for the past year, it is in this modest and steady recovery that some in the crane industry see the seeds of future prosperity.