ME: After reaching their most recent high points of $209.44 million in October 2014 and $204.34 million in April 2015, US cutting tool consumption has trended downward, dropping 4.3% in 2016 overall, according to USCTI figures. Consumption was $169.00 million in October 2016. What were the reasons behind the decline in cutting tool sales?
Stokey: There was a steady stream of bad news that affected our industry. The big shoe that dropped was the dramatic decline in oil prices. This shut off the oil patch and led to large declines in cutting tool consumption. The next decline was in the heavy equipment industry. With the “war on coal,” market leaders such as Cat [Caterpillar] saw a reduction in demand, which again hurt our industry. Agriculture was also soft. The strength of the US dollar in 2016 hurt the ability of US manufacturers to export by reducing demand for products being made in the US, which means there were fewer cutting tools being made. On a positive note, aerospace, automotive and firearms kept the downward trend from being even worse.
ME: December 2016 saw a healthy rebound in US cutting tool consumption, to $176.04 million. In January 2017 consumption was $173.05 million, up 8.7% from the previous January. While month-to-month variations are common, do you see this as an indicator of an upward trend?
Stokey: Yes. The industry is seeing a turnaround. Talking to people in the supply chain, I am hearing very optimistic comments. People are very upbeat about the prospects for manufacturing and that is good news for cutting tools.
ME: Some economic forecasts see US manufacturing output increasing in 2017, which should boost cutting tool sales. What economic factors in key industries such as automotive, aerospace/defense and energy would support increased cutting tool sales?
Stokey: We are hearing about rig counts going up in the oil patch. Automotive and aerospace should continue to maintain their strength; Boeing and Airbus have a strong backlog looking out five years. Automotive may not be growing at the same rate it has recently, but it appears to be stabilizing at a high level. And with the rebound in energy and a pro-manufacturing administration, we should see a rising tide that will lift all ships—including the cutting tool ship!
ME: Outside of purely economic factors, what changes do you see that will affect how cutting tool manufacturers go to market and how customers use cutting tools?
Stokey: This is going to sound odd for a cutting tool guy to say, but there is a great deal to be said for “Big Data.” Manufacturers are embracing the ability to gather data; the challenge is what to do with the data once they have it. As they get their arms around the information, it will allow them to have leaner, smarter manufacturing facilities that will optimize the demand for everything used in the manufacturing process. While you might think this would reduce demand for cutting tools, if companies can increase productivity, they can pay their people more, which puts more money in people’s pockets, which allows them to go purchase items that starts the demand for more of our products over again.
Also, cutting tools will get smarter; there will be sensors and feedback. Troubleshooting of customer problems can go online or live through the use of today’s technologies, adding value to the customer right at the spindle. The use of technology will allow smaller cutting tool manufacturers to compete more effectively with larger ones by leveling the playing field. Developments like this demonstrate that this is an exciting, energetic time to be alive. As companies and as people, we need to challenge the status quo, continuously improve, keep embracing opportunities to change and know that it is part of our lives going forward.