Over the last few months, I’ve chatted with several fluid power manufacturers who have stated that their business is busier than normal in any type of recovery mode. It’s an all-hands-on-deck situation, where every employee is pitching in and hiring has become a challenge.
These were all just passing conversations. NFPA data also indicate that shipments of fluid power products for April 2021 increased 35.4% when compared to April 2020, but decreased 9.5% when compared to last month. Mobile hydraulic, industrial hydraulic and pneumatic shipments all jumped between 25% and 35% in April 2021 when compared to April 2020, when indexes dropped sharply with the onset of the Covid crisis. All of the April 2021 shipment indexes dropped back about 12% from the high levels of March 2021. This comes from data collected from more than 80 manufacturers by NFPA’s Confidential Shipment Statistics (CSS) program.
I reached out to Peter Alles, VP of Member Services and Marketing for the NFPA to gain some insight into what these numbers mean for both users and manufacturers of fluid power technologies.
“The fluid power industry, and many industries that are customers to fluid power, are experiencing an exceptionally sudden and steep bounce back from an exceptional event. And many of us are seeing numbers we aren’t used to seeing. This is unlike a ‘normal’ recession in which there’s often a more lengthy recovery curve. So, supply chains weren’t ready. Labor wasn’t always in place, and is hard to put in place,” Alles said.
As a result, there has been some speculation of panic ordering. Alles said in usual circumstances, you may see supply chain purchasers add a 5-10% cushion to orders, but indications show maybe 20 to 25% more demand than actually exists downstream in the marketplace. Alles said the drop down in April numbers are closer to historically normal levels.
Forecasts are showing a strong 2021 overall. “But a strong 2021 is probably going to feel more hectic, and hard to keep up with than if we had a more gradual return to these levels of activity,” Alles said. “The new normal we see for a while could be some continuation of the heightened level of uncertainty, supply chain difficulty and labor market disruption we have now.”
The pandemic and concerns about supply chain capabilities significantly increased talk about reshoring. Alles said that the start of tariffs helped kick this into gear, as an annual reshoring report and index from AT Kearney shows the import percent peaked at 13% in 2018, and dropped back to 12% in 2019, the lowest level since 2014. AT Kearney attributes that drop in import impact to the trade war.
Imports of fluid power products from China peaked in 2018, and dropped by 12% in 2019, prior to the industry decline in 2020. That would be consistent with AT Kearney’s findings. “You would have to go back a long time to find the last downturn in imports from China. During that same time period, from 2018 to 2019, imports from Canada (+20%), Mexico (+8%), Germany and Japan continued to trend upward. Again, this is seemingly consistent with at least the idea that China is becoming less of a source for fluid power products, with companies based in countries such as Canada and Mexico picking up that business.”
“Looking at the first four months of 2021, and comparing to the more normal year of 2019, imports of fluid power from Canada and Mexico are keeping pace, but China is lagging its 2019 pace, which was already behind the 2018 pace,” Alles continued. “This could be evidence of significant shifts in where fluid power products are imported from.”
The NFPA IEOC will provide more insight into these numbers with two more months to report. The conference is slated for August 17 and 18, at the Hilton Chicago/Oak Brook Hills Resort & Conference Center. Registration is open; learn more here.
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