In this anecdotal approach to next year’s business outlook, we interviewed a sampling of industry executives to get their viewpoints on business conditions as we move toward 2008. Here’s what they had to say.

It’s that time of year again.

Calendar 2007 is winding down and business people are starting to turn their attention to their future prospects as this year fades and 2008 approaches the starting blocks. We, too, have been considering the prospects of metal-forging markets for next year and beyond. In so doing, we spoke with several industry leaders, asking them all similar questions about current and future forging markets. In this article, we’ll share their comments and insights, starting with current business conditions and leading into issues that affect the future of metal forging in the years to come.


Virtually everyone we interviewed was in the midst of a fiscally successful 2007.

One person with a good overview of the industry is Charles F. Hageman, executive director of the Forging Industry Association, Cleveland, Ohio. “Business conditions are strong, though orders have become a little more erratic recently. There has been some slowing of orders in the automotive and heavy truck sectors,” said Hageman. He adds that the really strong markets for North American forgers are power generation, aerospace and oil-patch industries – including petrochemical generation.

He is, however, a little less sanguine about the automotive markets. “The Detroit Three and the condition of their Tier-I suppliers, one of which (Delphi) is in bankruptcy, add uncertainty,” adds Hageman, who also points out that the recent opening of contract talks between the United Auto Workers and its companies adds further uncertainty into the future mix.

Hageman indicates that aerospace is on a roll right now, stating that demand for military and commercial aircraft components are both peaking about the same time. He feels this upward cycle has “several more years” left in it.

Kerry L. Woody, president and CEO of Ladish Corporation, Cudahy, Wis., couldn’t agree more. Ladish (profiled in FORGE, April 2007), according to its annual report, “makes hundreds of different parts for just about everything that flies,” and Woody indicates that “business is very good.” Aerospace, being Ladish’s largest market, is “driving growth for us right now,” according to Woody, who adds that Asian demand for commercial airliners is currently the biggest driver in commercial aviation.

But Ladish has also seen growth in orders for other defense, space and mining equipment applications. Ladish has benefited from space-program demands, not only for launch-vehicle components, but also for future NASA manned space flights. Additionally, the company is cashing in on the construction boom in China, which is building infrastructure at an extraordinary pace. This development requires heavy equipment for construction and the extractive industries, which, in turn, require forgings. To a lesser extent, similar development is also occurring in India and Russia.

Woody succinctly explains a good year, a strong backlog and a good outlook: “All the markets we serve are trending upward, but things are actually better than that. For a variety of reasons, markets we have not served in years are returning to us with orders, so we are not only up across the board, but the board is bigger.”

Keystone Forging Company, Northumberland, Pa., is a full-service producer of closed-die forgings for assorted markets including automotive, truck, off-road equipment and tool markets. Joe Cipriani, Keystone’s president and CEO, says “business is good” despite a slight drop off from last year’s levels. He notes that business was up 30% in 2006 from the year before (2005), so the slight drop this year is not as bad as it could have been. Citing some weakness in the automotive and truck markets and a drop in demand for stainless steel parts, Cipriani nonetheless expects next year’s bookings to increase by 5-10% compared to this year.

Current FIA president Don Larson, who is also president of Charles E. Larson & Sons Inc., Chicago, Ill., says his business is “strong right now.” His company – primarily a job shop specializing in products for the aerospace and petrochemical industries – has found its strength in producing quality, short-run products.


Any examination of the forging industry’s outlook must take some account of what is happening to the industry around the globe and how any of these developments could affect the North American manufacturing base.

According to Cipriani, “We used to view global competition as a threat, but now feel we can make our own opportunity.” At Keystone Forging they have found their niche in high-quality, short-run products and in maintaining flexibility enough to add new products to serve customers. The company used to do some large production-run work, but “we took our big hit between 2000 and 2003,” said Cipriani, “when this work disappeared to China and India.”

This parallels Larson’s experience. Larson says his company lost its edge in long-production-run contracts because of low-wage competition, at first from Mexico, then from China and India. “We have been affected by our customers’ attitudes,” said Larson. “Some buy only by price and without regard to quality customer service, which is often lacking from foreign suppliers.”

The view of globalization from a larger public company like Ladish is a little different. Woody says, “We long ago recognized that globalization is not going away and that any effort at protectionism will eventually backfire. We have addressed the matter by acquiring a forging operation in Poland and readying it to expand participation in the global aerospace market. This shop is already a force in European forging in a dozen or more general industrial market categories, so through that acquisition we have both extended our aerospace capability and diversified our product mix.”

Regarding global competition, there is clearly no single answer or corporate strategy appropriate to every forging supplier. To some suppliers, the strategy of following their customers is appropriate. This may be particularly true in the automotive markets. To smaller companies, finding and defining their niches – by product, by material or by end-use market – may be the best way to go. Other companies may choose to become multinationals and build their strength that way.

According to FIA’s Hageman, “One of the biggest problems our membership is facing is that their customers are moving offshore and sourcing offshore. This is a bigger problem than having foreign product coming in. Global competition is both a threat and an opportunity, but it is particularly a threat when coupled with currency manipulation, as practiced by some Asian countries.”

There is, in fact, a real problem with China, whose government artificially manipulates its yuan exchange rate against the dollar. But setting this aside, the effects of a weaker dollar have been noticed by the forging community.

“The weaker dollar has brought some business back to us,” said Cipriani.

“We’re actually hearing of some work coming back into North American shops,” observes Larson, “and we’ve received more foreign inquiries for forgings.”

“We may pick up a few orders because it is temporarily advantageous for someone to source a part in the U.S. rather than Europe, but we don’t count on exchange rates to improve our global competitiveness,” says Woody.


No forward-looking discussion of business conditions would be complete without some examination of the price and availability of inputs to the process. In this case, we asked our industry executives about material inputs, energy and labor.

Of these three, the price and supply of appropriate metals and alloys was of greatest concern. “Raw-material prices are bouncing all over the place,” said Larson, perhaps inadvertently giving new meaning to price theories of elasticity. He said it was extremely difficult to pass on price increases to customers in the past, but that “all of a sudden customers are starting to realize our cost pressures are real.”

The cost of metal represents a significant percentage of a forging’s production cost. Given that, it is not surprising that the volatility of metals markets is of great concern to forging producers. Forging companies have done their best to mitigate the effects of metal-price fluctuations by working with suppliers and customers to strike agreeable terms, sometimes through long-term agreements.

“Our outlook is that the metals market will remain volatile,” says Woody. “It’s encouraging to see that the price of nickel, for example, has dropped dramatically [as of August]. In part that is because new capacity is coming on-line. We hope this situation prevails, but we won’t relax our vigilance in monitoring metals pricing or our efforts to better cope with volatility.”

Regarding the supply and price of energy, our sampling of industry executives was unanimous in recognition of the fact that there would be no let up in energy prices and that “they would continue to escalate,” as Hageman put it. Cipriani agrees that energy will continue to increase. No shortages or failures of the energy grid are expected, but even though the energy component of a finished forging will remain roughly the same, it will behoove all producers to improve efficiency in their energy-consuming areas of operation.

Regarding labor, nearly every forging manufacturer will agree that it is difficult to find and retain a quality labor force. Fortunately, metal forging is not that labor intensive a process, so the supply of labor is not that much of an issue in the industry at present. That does not stop a company like Ladish from partnering with local colleges to fill its internship program with qualified engineering talent, leading to job placements after graduation. The company also has formalized, on-the-job training programs for its skilled operator positions.

One big question mark for the coming year looms among UAW-organized forge shops that serve the automotive industry. At the time of this writing, contract talks are under way but without resolution.


There are no competitive materials or processes on the horizon or in the marketplace that might jeopardize the role of forgings in the long run. The bottom line is that demand for metal forgings will continue to increase because of their superior mechanical and metallurgical performance.

“There are no big megatrends knocking forgings out of their current applications,” said Keystone Forging’s Joe Cipriani. “On a worldwide scale, more people are driving every year and demand for forgings is on the rise.”

Don Larson at Charles E. Larson & Sons notes that aluminum is becoming increasingly important. There is more demand for it, he notes, because the aluminum alloys used in aerospace applications are becoming superior in strength-to-weight properties.

But Larson also observes that the biggest megatrend is the uncertainty of how emerging economies will affect the global marketplace. “We don’t really know how it will all play out yet,” he said, referring specifically to the rise in manufacturing strength of countries like China, India and Poland.

According to Ladish’s Kerry Woody, brisk demand from the aviation sector and rapid infrastructural development in emerging economies are helping fuel demand for all sorts of metal forgings. The construction of cities, airports, industrial parks, office buildings, roads, bridges, railroads and other projects will “keep demand for metal forgings strong for years to come,” he said.

Finally, FIA’s Charles Hageman notes the emergence of what may become a significant new market in the U.S. – wind-power generation. “Strength is emerging in the wind-power industry. Its continuing emergence as a green and alternative-energy source has increased demand for windmill equipment. Forgings are used in windmill gear and energy-conversion systems,” notes Hageman.


Generally speaking, those concerned with business conditions for the metal-forging industry next year are optimistic, though overall optimism may be tinged pending the outcome of labor negotiations. If the UAW was to strike domestic auto plants for a prolonged period this year or next year, the current positive outlook for forging suppliers to that market could change dramatically.

Rose-colored glasses or not, the transition into 2008 will find the forging industry ever-vigilant in its efforts to cut costs where it can, to deal with the problems of volatile and escalating raw materials or energy prices, to fight against rising employee medical insurance costs, and to refine its products and processes as a means of staying globally competitive.

Reflecting the prevailing optimism, Woody speculates that “barring unforeseen or unpreventable geopolitical events, there is no reason the current global aerospace and industrial markets cannot sustain their growth for several years to come.”

Cipriani is expecting business to grow 5-10% next year over this year’s levels, citing an expected increase in defense work. “Next year will probably be another good one,” he said.

At Charles E. Larson & Sons, Don Larson also sees continued growth. He stated that he “expects the current business momentum to carry though 2008.”

But, donning his hat as current FIA president, Larson also urges his fellow FIA members to become more politically active. “We have to worry about getting our members involved in political action,” he commented. “They need to talk with Congressmen and discuss the problems of surviving as an industry. We need to focus on saving and creating jobs.”