2015 Manufacturers Liaison Committee Reports STAFDA officers met separately with vending machine will still be treated as a an explosion like gas or powder actu- the Manufacturers and Rep Liaison commodity. But a product with features ated tools, they don’t require as much Committees earlier this month in and benefits designed to add value and maintenance or, in the case of powder Las Vegas during World of Concrete productivity to the customer that comes tools, the need for a license. (WOC). The two Committees meet an- out of a VMI system is a true solution to nually to discuss business conditions, the customer’s needs. Rocky Eggeman, Nor- industry trends, and STAFDA activi- ton Abrasives, Mission ties. Here’s a summary of what the John Dominice III, MAX Viejo, CA: We manufac- Committees see in their respective USA Corp., Mineola, NY: ture abrasives, diamond industries or regions. Full versions of MAX is a Japanese man- blades, and equipment their reports can be found on STAFDA’s ufacturer of pneumatic for the construction, in- website under the “Liaison Commit- nailers and battery oper- dustrial, metal fabrica- tees” tab. ated rebar tying tools. We tion, and assembly markets. Of the $5.8B expect to see a continued abrasive market, segmented by foundry Jared Carter, Edge Eye- increase in construction spending, es- (5%), bearing manufacturing (20%), au- wear/Wolf Peak Intl., pecially in the highway and bridge cate- tomotive (15%), electronics (10%), min- Layton, UT: As we closed gory. There is no shortage of reports on ing and stone cutting (10%), aerospace out 2014, many safety the deteriorating state of the infrastruc- (5%), and telecommunications (3%); manufacturers posted ture in the U.S. The government has al- the housing, non-residential building growth numbers and most no choice but to fund the rebuild- and highway construction market is the have a positive outlook ing of our infrastructure. The American largest segment accounting for 32% of for 2015. We’ve seen a lot of changing Society of Civil Engineers reports, the total industry revenue for 2014. Be- trends the past 10 years of how business “Over two hundred million trips are sides diamond blades and equipment, is done. The way a manufacturer and taken daily across deficient bridges in the housing and nonresidential build- distributor goes to market today is very the nation’s 102 largest metropolitan ing market consumes large volumes of different than it was 10 years ago, and it regions. In total, one in nine of the na- manufactured abrasives for cutting and will be very different in years to come. tion’s bridges are rated as structurally finishing of gypsum wallboard; timber Companies like Amazon, Grainger, and deficient, while the average age of the contributes about 30% of the industry Fastenal will continue to force indepen- nation’s 607,380 bridges is currently 42 revenue. In addition, construction ser- dent distributors to change and adapt years. The Federal Highway Adminis- vice companies’ use of industrial dia- to the demand of safety products in the tration (FHWA) estimates to eliminate monds for stone and concrete cutting marketplace. VMI (vendor managed in- the nation’s bridge backlog by 2028, in the road construction market con- ventory), a term around since the mid- $20.5 billion needs to be invested an- tributes 2% annual revenue. From 2010 80s, is now a major competitive advan- nually while only $12.8 billion is being onward, strong growth in housing starts tage to many distributors. Just because spent currently.” The Dodge Construc- helped the construction market’s share there is a vending machine sitting on a tion Outlook estimates a 3% growth in of industry revenue increase slightly jobsite doesn’t mean it’s profitable or highway and bridge construction starts during five years to 2014. U.S. highway providing value to the customer. Some in 2015; however, the funding approved construction has been level and not companies are basing their future on a last year by Congress only lasts until seen significant growth since 2007. The machine they feel will be the solution May 2015. When we look at the future Dodge Outlook Report is optimistic for to all. But without service, training, and of pneumatic nailing tools, the trend is construction expansion and stated total support these machines are just a very improved durability, ergonomics, and U.S. construction starts for 2015 will rise expensive chunk of metal. Safety prod- power. In Japan, the market has already 9% to $612B, a larger gain than the 5% ucts have now become a vital part of this switched to high pressure nailers as the increase to $564B estimated for 2014. equation and are being stocked in many standard, replacing traditional 100 PSI Commercial building will increase 15%, of these machines. But if the product se- nailers. High pressure systems not only slightly faster than the 14% gain esti- lection is based on what the distributor offer more power to drive fasteners but mated for 2014. Institutional building feels is most profitable, and not what are lighter, more compact, reduce con- will advance 9%, continuing its moder- the customer really needs, then the tractor fatigue, and improve productiv- ate upward trend established last year. VMI program will fail. Many distributors ity. One of the influences for the change Low interest rates and more private eq- haven’t realized that providing a vend- to high pressure nailers is the continued uity continues to flow into the construc- ing machine to a customer is a value- introduction of new building materials tion market. Key distributors through- added proposition, yet they fill the ma- such as lvl’s and lsl’s that traditional 100 out the U.S. are expecting larger growth chine with commodity products that are PSI nailers cannot adequately penetrate. in ’15. The worst of the unemployment price driven rather than value driven. The increased use of steel and concrete crisis seems to be over. Due to low in- For a VMI program to be successful, the in construction projects also requires terest rates, including equity lines, lower overall program must be consistent. A more powerful tools for fastening appli- gas prices, and better consumer confi- commodity coming out of an expensive cations. Since these tools don’t create dence, the residential construction mar- ket is looking the strongest it’s been in a as a supplementary item rather than as a automotive warehouse distributor. United long time. standalone product. The U.S. represents Stationers’ vast nationwide distribution 23.5% of the world adhesive and sealant network coupled with CPO’s powerful on- Michael Ervin, MKT Fas- market. Distribution networks typically line presence positions the company to be tening, LLC, Lonoke, AR: parallel OEM successes, as well as power the premier supplier of business essentials We are a domestic manu- independently. A 2.2% CAGR in adhe- as well as construction and automotive facturer of mechanical ex- sives and sealants in the U.S. is forecasted tools. This activity sets the stage for a va- pansion and adhesive an- through 2019. Commercial construction, riety of challenges, but also opportunities chors along with powder led by hotel and retail project categories, for the entire industry. Having monitored actuated tools. In 2014, we is expected to see the biggest gains in the automotive channel’s stagnancy the saw the impact of the big getting bigger construction spending. Adhesive bonding past few years, our company anticipated with the acquisitions and mergers of an- has become a strong enabler in the au- a reduction in automotive distributors and chor and screw companies combining for tomotive and marine industries. Transpor- hired a national independent sales force one stop shopping. Construction should tation adhesives and bonding processes in ’14 to increase penetration into the in- be one of continued growth in 2015 with have become increasingly sophisticated, dustrial/STAFDA channels. With Grainger commercial building estimating modest driven by concerns about performance and Fastenal selling its imported West- growth in 2014. Office construction has and durability. The focus here includes ward® and Jonnesway® brands at a low- assumed a leading role in the commer- cost reduction, weight savings, safety, and er retail cost than American-made tools, cial building upturn aided by expanding regulatory demands. In addition to fasten- distributors are looking for tools to com- private development as well as healthy ing, adhesives are used to seal, dampen vi- pete. Another trend we identified was a construction activity related to technol- brations, be electrically insulating or con- demand trend with larger industrial and ogy and financial firms. E-commerce had ducting, and provide corrosion resistance. multi-branch farm supply houses wanting a major impact on sales in 2014 and will Attention to public infrastructure is con- an exclusive or private label brand. This only get stronger in 2015. The explosive siderable. Nearly every concrete roadway will allow them to market their own brand growth of e-commerce and its impact on or airport requires crack filling/joint seal- without national or Internet competition small package and LTL deliveries due to ing. Issues resulting from cost fluctuations thus enhancing margins. We see this as a inefficient packaging has forced carriers to in raw material prices have prompted the high growth area, so much so that we re- turn the tables and push the inefficiency industry to develop bio-based adhesives cently created a Director of Private Label penalty back to the shipper. Bottom line: and sealants which provide environmental position to better capitalize on the oppor- It’s time to rethink your packaging or benefits by reducing their carbon foot- tunity. get ready for even higher shipping costs. print and overall costs of manufacturing Highway repair work was down 9% in versus their synthetic counterparts. While Wayne Quarls, Spec- 2014, but this business is expected to rise this does not directly affect us as an ap- tra Precision, Dayton, 5% in 2015. Highway and bridge construc- plicator manufacturer, our customer base OH: Spectra Precision tion should stabilize with modest gains for includes some of the major companies in- is a division of Trimble environmental and public works. Federal volved in developing and manufacturing Navigation that provides spending restraint will be offset by the them. Technical development and willing- positioning-centric infor- greater financing role played by the states, ness to adapt in parallel to adhesive and mation with laser and opti- involving higher user fees and increased sealant advances is critical for an appli- cal instruments. This year marks the 50th use of public-private partnerships. The de- cator manufacturer. Moving forward into anniversary of the invention of the con- mand for domestic-manufactured wedge 2015, branded and generic imports will struction laser. The first laser was the size anchors is still a priority for government- continue to penetrate the U.S. and Canada of a household dishwasher. Today, that in- funded projects. Most STAFDA distribu- in all channels of distribution. strument can just about fit on a tool belt. tors would rather have a domestic prod- The evolution of the laser has now made uct as opposed to an import, but price Tom Northcott, Sunex it hard to find a construction jobsite that and availability are the deciding factors. Tools, Travelers Rest, SC: doesn’t utilize a laser sometime during the Imported anchors are still coming in at a In 2014, the construction project. We recently introduced a receiv- cost that continues to hold selling prices and automotive industries er that fingerprints the laser it’s working at an artificially lower level. However, a saw two major acquisi- with so it won’t conflict with other lasers stronger U.S. dollar should drive up im- tions by United Statio- on the jobsite. Every manufacturer in this port costs in 2015. ners, parent company of sector continues to innovate and bring ORS NASCO. The purchase of CPO Com- more advanced products to the market. Kari Holcomb, COX North merce is the company’s inaugural foray Smarter, easy to use, high accuracy, in- America, Haslett, MI: Our into a direct-to-consumer sales channel. tuitive, more robust — all are words used company manufactures It allows Stationers to expand its portfolio to describe new laser and level products sealant applicators (caulk with an established Internet business and recently introduced. Technological ad- guns and epoxy dispens- strengthen its e-commerce business offer- vances continue to be incorporated into ers). Sealant applicators ings. Shortly thereafter, they entered an- measurement devices. Smartphone and piggyback on the sealant other new channel through the procure- tablet apps, Bluetooth technology and and adhesive markets, typically purchased ment of Medco/25, the second largest instrument generated Wi-Fi networks are being incorporated into new products to nated a few months ago to help shore national average (Nebraska 3.4%; Iowa, improve data transfer and efficiency.Who up the nearly broke trust fund that pays 4.3%; Kansas, 4.4%; and Missouri, 5.9%). knows what’s next? Our parent company for New Jersey’s road and bridge repairs. Commercial and residential construction was one of five out of 167 companies to Final bids are in for the Philadelphia spending is expected to increase 10% recently be granted an exemption by the 76’ers $82M practice stadium to be built throughout our region in 2015. The Mid- FAA to commercially operate Unmanned in Camden, NJ. A highlight in last year’s west is fortunate to have some large proj- Aircraft Systems (UAS), or drones, in the news was the $1.2B Comcast Innovation ects including the U.S. Strategic Com- U.S. The unmanned fixed-wing aircraft is and Technology Center in Philadelphia. mand Headquarters, UNMC’s Fred and targeted at the surveying, agriculture, oil It was recently transformed from a huge Pamela Buffet Cancer Center, McCon- & gas, mining, and construction indus- hole in the ground, filled with 4,000 cubic nell Air Force Base expansion, National tries. Now they are providing geospatial yards of concrete that will make up the Bio and Agro-Defense facility, and CF data, topographic maps, and models for foundation for Philly’s soon-to-be-tallest Industries fertilizer plant. We’re also see- drainage among other applications. One building, the largest concrete pour in the ing new construction of data centers for day they may be delivering your products history of Philadelphia. Once complete, Fidelity Investments, Travelers Insur- to the jobsite. Tradesmen and distributors the CITC will be the tallest building in the ance, Google, and Facebook, in addition have always demanded better products. United States outside of Manhattan and to Alliant Energy’s 600-megawatt, com- Contractors have come to rely on these Chicago. Right now, there are 78 other bined-cycle natural gas-fired generating products to make their living. The manu- development projects in the Philadelphia station. Warren Buffet’s Mid-American facturers in this category have been deliv- area. Later this year, the city hosts Pope Energy, Wind VIII expansion already has ering for quite some time now. Francis which is expected to generate large commitments from both Google more than $417M in economic impact and Facebook in Iowa to purchase this Rep Liaison Reports and attract two million visitors. In Mary- new clean energy source. All five states Ray Geiger, PG Tool land, nine tower cranes will go up over we serve are expanding wind farms. Iowa Sales Agency, LLC, Wood- the next six months as construction goes alone has spent $9.8 billion on wind en- bury, NJ: We serve the vertical at the $1.2B MGM National Har- ergy and expects to spend $8-10 billion Mid-Atlantic states along bor Casino. The Red Line in Baltimore more over the next three to five years. with parts of New Jersey and the Purple Line in suburban Wash- Our territory is looking good for the next and New York. Consistent ington, two of the U.S.’s largest light rail several years as long as politicians and among many, are the con- projects, are fully funded and ready to world events don’t muck it up! cerns that construction and manufactur- break ground. As we approach or exceed ing wages were moving up because of energy self-sufficiency, the energy sector Steve Kraft, Pro Staff labor shortages along with the high de- will seek overseas markets. Virginia feels Sales, Inc., Atlanta: mand for project managers. New York it can serve as a vital connection between STAFDA distributors in the and Washington D.C were among the domestic energy production and exports Southeast are cautiously top 10 cities with the highest demand to European/Asian markets through its optimistic about 2015. Ala- for PMs within specialty contractors, con- Port of Virginia, one of only two East bama is steady with pock- crete and masonry, infrastructure, min- Coast ports currently equipped for the ets of growth in the coastal ing, power, and oil and gas. Finding and larger ships that will pass through the ex- areas. The new Airbus facility is helping retaining effective leaders, executives, panded Panama Canal. The development with that growth and they should see tradesmen, and workers remains a prima- of Craney Island Terminal could double additional manufacturers entering the ry challenge. What holds promise in the the capacity of the Port of Virginia. region to support the company. Tennes- Mid-Atlantic region for 2015 can be de- see is showing positive growth with the scribed as transformational. The New NY Craig Johnson, Johnson TVA leading the way with several proj- Bridge project’s first of 86 vertical piers Brothers & Associates, ects. The Carolinas should show good was unveiled in November 2014, which Shawnee, KS: In “America’s growth for 2015. Georgia and Florida will stand in procession across the river Heartland,” tourism re- will post the largest growth due to some to support the new bridge’s road deck. mains stagnant due to the big construction projects. McGraw Hill Another marvel is one of the world’s big- lack of forests, mountains, is forecasting a $48.7B increase in hous- gest solar panel factories, Solar City, ris- and beaches. Agriculture, ing contracts of which $39.1B will be in ing from a long-abandoned steel plant in however, is our mainstay. Food process- single family homes. That will mark the Buffalo, NY. State officials are optimistic ing and meat production are our largest largest totals since 2007. Atlanta has seen that area of New York state will become industries followed by insurance, tele- two major stadium contracts ramp up in a center for solar energy manufacturing. communications, aircraft and automobile 2015: the MLB’s Braves $670M stadium Concerns about infrastructure in New Jer- manufacturing, energy, and manufactur- and the NFL’s Falcons $1.4B stadium. sey reached increased awareness when ing of machinery and fabricated met- Other big startups in the Southeast are government officials recently called for als. Recent Midwestern indices suggest the $1.2B Lynx Blue Line light rail ex- immediate safety inspections on every growth in all these sectors for 2015 due to tension in Charlotte, NC, and the $840M bridge in the state. Reportedly Gov. Chris lower energy costs, increased consumer Northwest Corridor project in greater Christie plans to redirect money from spending, and new insurance legislation. Atlanta. Walt Disney World kicked off the Hudson River train tunnel he termi- Unemployment remains well below the construction last year in Orlando on the $500M Avatar-themed project, and ued growth. The west has always been a strong 2014. In general, we expect an Greensboro, NC, is continuing building a strong residential market and there is even better 2015. All except West Vir- their Eastern Loop improvements with a some recovery in single family units, ex- ginia saw drops in unemployment and $117M project. NASA is modifying their cept the Phoenix market, which is flat. those drops were impressive, ranging Vehicle Assembly Building’s High Bay The general outlook for 2015 is optimis- from 15-30%. Residential construction 3 spending approximately $100M and tic. The “resi” market will hold with some was flat on average across our region the Navy Federal Credit Union in Pen- modest growth and more expansion in with single family down and multi-fam- sacola, FL, is starting their $150M phase multi-family units. I expect the overall ily up. Non-residential increased overall one expansion. No other Southeastern market to push a 10% growth number. and is forecast to grow again in 2015. metro construction market is building The Marcellus and Utica shales have high-rise towers like Miami! There is Patrick Willey, Bel- created projects and their plans mea- the $430M SkyRise Miami Observa- mont Ent., Houston, TX: sure in the tens of billions of dollars with tion, the 80-story Panorama Tower, 2014 was a very strong natural gas production forecasted to the $1B Brickell City Centre, along with economic year for the increase dramatically for several more the $2.3B, 235-mile Miami-to-Orlando construction and indus- years. Extensive pipeline networks have passenger train system starting their trial markets in the South been, and continue to be, constructed southern leg. Central states. Continued to supply multiple $100M regional pro- spending on new projects and infrastruc- cessing plants. That processed liquid Bob Patch, Canow West- ture had a major influence with oil and natural gas will travel to the east coast ern, Inc., Chino, CA: The gas spending having the largest impact. via pipelines including the newly ap- western region is coming We see this trend continuing. The lower proved $2.5B Mariner East 2 project. off a fairly strong 2014. costs of natural gas are driving the glob- Utilities are investing — both in power There was no real solid al shift back to the U.S. to utilize lower transmission and in generating stations run of business that led energy costs and supply surplus. 2015 is powered by natural gas. New business to confidence, yet no lack expected to be a strong year with con- created directly by shale activity is pri- that caused concern. The end result was tinued infrastructure spending in our re- marily benefiting distributors in Western a net gain with double digit growth for gion. Many of the projects have longer PA, Eastern OH, and West Virginia. The most. The outlook for 2015 seems to be a term commitments and the price of oil outlook for more traditional commer- continuation of the same cyclical trends doesn’t impact that sector in the short cial construction in 2015 is also strong. we experienced in 2014. For example, term. Our customers are encouraged Detroit’s new “Sports & Entertainment” January by most reports has been fairly about business going forward through district, anchored by a new Red Wings weak, yet everyone sees more business 2016. Many are not reducing employ- stadium, will cover 45 blocks and cost on the horizon. This has led to some ees but poised to increase employment. $650M. A second bridge from Detroit to hesitancy with inventory levels. This is Basic industrial business continues to be Windsor, ON, is expected to start in 2015 especially critical as contractors are de- steady-to-strong in our area. Upstream (a $2B, five-year project). Cleveland area manding much higher service levels and business will see a 25-35% reduction in projects include a $350M mixed-use quicker than ever response times. This, spending, but mid-stream and down- development anchored by a new head- of course, leads to higher demands on stream business remains even. We’re quarters for American Greetings; a new manufacturers to get product to the dis- seeing a slight increase in customer in- $270M Hilton to connect to the recent- tributor in a shorter time. In spite of the ventory. Some of the major projects in ly completed Convention Center, and demand for higher service, the pressure our region are a Toyota line expansion with the Republican National Conven- on price still remains very high. Mar- in San Antonio; an Apple expansion in tion coming to Cleveland in 2016, we’re gins are being pressed as hard as ever. Austin; a new Dallas Cowboys practice seeing a flurry of smaller renovation and There are some large size jobs driving field and shopping complex; Sabine remodeling jobs. Kentucky has a $2.3B volume in the west. The largest is the Pass Liquefaction project in Cameron, Ohio River Bridges project continuing Tesla battery facility in Nevada. Other LA ($4.75B); Eagle Ford Shale Area and and regional universities have big plans high profile jobs in the region are Ap- Copano Energy’s $120M pipeline ex- that will benefit STAFDA members. Al- ple, Google, and Stanford University pansion; a new $721M, 550-MW natu- though not all markets in our territory expansions. The government side of the ral gas plant in Westwego, LA; and a GE are enjoying the same level of construc- business is expecting a strong year with Global research Oil & Gas Center for tion, we foresee a strong year for most water treatment plants and other infra- $125M in Oklahoma City. We see con- STAFDA distributors, their manufactur- structure projects. The southern section struction remaining strong for 2015 and ers, and rep partners. of the west has some good projects only improving for 2016. running already. The Wilshire Grand project is a long term job and power- Cliff Williams, Wil.Com ing nice volume in Los Angeles. The LAX Associates, Inc., Green, project continues as well. The common OH: We cover the Ohio theme in all areas of this region is multi- Valley to West Virginia family residences. This market seems to and our agency, as well as have the most consistent and contin- STAFDA distributors, had