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Heavy equipment builders and their parts suppliers look to rebound in 2020

Jun 10, 2020

A machinist works on an FTP Sirio mill at a company facility in Concord, Ont. Photo courtesy of The New Era Group.
Article from Canadian Metalworking, text and images by The Right Image Ltd, https://www.canadianmetalworking.com/canadianmetalworking/article/metalworking/building-heavy-equipment

Heavy equipment manufacturers and those Canadian companies that machine and fabricate parts for the industry have their fingers crossed that 2020 will be a productive year after a relatively lacklustre 2019.

While there are still challenges on the horizon, namely that factories and machine shops are having difficulty finding skilled labour and machinists to do the work, the consensus is that the heavy equipment manufacturing industry will be in good shape, and many are looking to more automation and technology to keep their machines humming.

The only real uncertainty, it appears, is in the agricultural manufacturing sector, which has been affected by an embargo of canola to China that has led to lower farm incomes and fewer machinery purchases.

For the most part, though, the glass is half full.

“We just got a large contract so that's quite good,” said Patrick Dano, director of procurement at Whiting Equipment Canada, Welland, Ont., a company that designs and manufactures heavy industrial equipment. “So, things appear to be looking quite busy for us so far this year, to be quite honest with you. That's not to say that somebody couldn’t cancel or whatever, but things appear to be looking quite robust.”

Whiting makes a lot of equipment for the mining industry and furnaces and ladles for steel mills, and last year was relatively flat, noted Dano. “It was OK, nothing stellar. But right now it's looking like a strong year. It all depends on the U.S. and what's going to happen to them, but being an election year, who knows,” he said.

Anthony Tersigni, vice-president at New Era Group in Toronto, a privately owned group of companies that specializes in the field of precision machining and turnkey manufacturing for OEMs worldwide, said while some sectors have dipped, he's optimistic about 2020.

“We're quite busy and we're expanding. We just bought a new company. We have positive vibes for 2020,” said Tersigni.

While the oil and gas and co-generation industries are slower, aerospace and infrastructure projects are doing well, he said, noting the company has pulled away from the oil and gas sectors and largely reinvented itself.

Presently, he said, the companies in the group are doing a lot of in-service and on-service work, repairs and overhauls, because new builds are slower just now. Some automotive machinery is being built by companies in the group, and other divisions are concentrating more on the heavy industrial equipment market.

An operator uses a Delta CMM for guaranteeing part accuracy at the Cameron Steel facility in Lindsay, Ont. Photo courtesy of Cameron Steel.

Market needs skilled labour

The big fly in the ointment, according to Tersigni, is getting enough qualified machinists and operators for the projects. The company is planning to automate more of its processes, but it still needs qualified labour.

“We're mostly focusing on developing new employees because there's a shortfall in the province,” he said. “We've been working with local colleges and managed to get a few candidates, but they're very green.”

To deal with the skills shortage, company executives are also looking into new digital industrial technology, known as Industry 4.0, which uses cyberphysical systems and cloud computing that make it possible to gather and analyze data across machines, leading to more efficient processes to produce goods.

“We're exploring this technology, 4.0,” Tersigni said. “It's something that we're trying to concentrate on these days. The parts that we make are bigger, so we see an opportunity there through automation to try and lessen the blow. Finding people is very hard, so we're trying to automate as much as we can.”

Companies have to look at automation to keep products moving on the factory floor, he said, although Industry 4.0 might not be the answer for machining companies because of the specific types of parts New Era produces.

“A lot of people are exploring that. For what we do it's difficult,” said Tersigni. “It's a good thing and a bad thing.”

Jim Bogar, owner/president of Cameron Steel, a full-service industrial machine shop and metal fabrication company in Lindsay, Ont., anticipates a decent year but said the skilled labour shortage is a problem for his company, too, so he's focused on automating where he can to keep the production process flowing.

“Our base is steady and we have a repeat customer base,” he said. “The majority of our backlog is three months, and we usually have one or two projects that we're working on that are six months or more. We have a good client base and we're a go-to supplier, so the quotes come in on a regular basis.”


Adding new equipment is key

Bogar is pushing to automate processes where possible to keep projects moving forward, so the focus has been on bringing in new equipment.

“Automating is key to moving forward, including robotics. The way I feel is that if it's not done you will not succeed,” said Bogar.

A double-pallet Toyoda FH1250SX CNC horizontal machining centre increases spindle up-time at the Cameron Steel facility in Lindsay, Ont. Photo courtesy of Cameron Steel.

A double-pallet Toyoda FH1250SX CNC horizontal machining centre increases spindle up-time at the Cameron Steel facility in Lindsay, Ont. Photo courtesy of Cameron Steel.

To that end, the company recently purchased a new horizontal machining centre (HMC) with dual pallets. Work can be loaded on one pallet of the HMC while machining occurs on the other pallet.

“Currently we're having a big push in our machining facility to increase spindle time and so we purchased a large horizontal machining centre,” said Bogar. “It can basically fit a 2-metre tube in it and it has dual pallets, so while the machine is working on one part, the other part can be on deck and ready to go in.”

The company also bought a 3D measuring arm, a device that more accurately gauges a part against the design. It will be used for castings before they're machined.

“We're trying to utilize it for one-offs,” explained Bogar. “We'll be setting up the part on fixtures and sub-plates offline and we'll be using the measuring arm and aid to do that. The idea is that the parts will be set up offline, and when they go in the machine, all the machining allowances and pickups are already done.”

Automation is important going forward, he said, because it's becoming more challenging to find machinists.

“It's very difficult. I haven't had a bad problem finding fitters or welders or millwrights, but machinists are tough. As far as machinists goes, it's a big problem. Hence, the reason to automate and do more planning ahead of time,” said Bogar.


Keep machines busy

Paul Tamlin, sales manager at Cameron Steel, said shops need to make sure their machines are running, and updating their equipment, because when they're not producing, it's costing companies money.

“If the machine's not turning the spindle, you're not making any money. Metal stamping went through that trend 30 years ago and it's becoming more important all the time. The idea is to have the machine running lights-out.”


Industry looking forward to 2020

Doyle Sumrall, managing director for the National Truck Equipment Association (NTEA), which represents more than 2,100 companies across Canada and the U.S. that manufacture, distribute, and sell work trucks, also said the industry outlook is fairly positive for 2020 and companies have work lined up.

“We've been on such a tremendous expansion since 2009. The members that we talk with still have pretty solid backlogs and they're feeling good. They're going to be up a little bit over last year. I don't think there's any real market concerns,” said Sumrall.

A Toshiba Tue-150 vertical turning lathe produces large parts at the Cameron Steel facility in Lindsay, Ont. Photo courtesy of Cameron Steel.

He noted that IHS Markit, a provider of information and analytics for major industries, forecasts that there might be a slight softening in the second half of 2020, but for the most part, there are no real market concerns. Indeed, the company anticipates growth in the Canadian and U.S. economies will be around 2 per cent this year, and global growth will be 2.5 per cent and higher in 2021 and 2022.

According to Sumrall, manufacturers are tackling the labour deficit by installing automated machinery where possible.

“The market has been so strong for so long and employment levels are so high that people are a barrier to expanding business. So companies have had to go automated,” he said.

Robotics have been around in manufacturing circles for some time, but the work truck industry has really stepped it up lately. Sumrall said it is deploying automation on a larger scale due to labour shortfalls.

“We haven't seen the kind of deployment in robotics that are going on today. There's a lot of companies who are putting in automated machinery. It's certainly coming into our industry and being utilized,” said Sumrall.

In the work truck industry, Sumrall said companies are also being innovative and starting to look at alternative manufacturing methodologies like using super-strong glues to bond items together and more sophisticated fastener systems as opposed to traditional welding, which requires more skilled manpower.

There has also been a move to adopt more lean manufacturing techniques and kata, a structured process for continuous improvement, he said.

The China factor

Yannick Montagano, vice-president sales, marketing, and operations at Kubota Canada, Markham, Ont., said the company had a flat year in 2019 because Western Canada was not firing on all cylinders, which affected the construction equipment sales side of the business. Another reason was that weather and trade issues with China affected yields and crop sales for the agricultural sector, leading to lower sales of farm equipment.

“Certainly we'd like to have better relations with China because they've thrown a wrench in there with some of their actions on our agricultural products.”

Although there are still substantial headwinds, Montagano is hopeful that 2020 will be better.

“There's some uncertainty with regards to the economy, but some of what we've been hearing about a potential recession has kind of receded a little bit. The U.S. market seems to be still performing well, so that's probably going to carry the economy. We're not necessarily upbeat, nor are we pessimistic about it,” he said.

Kubota recently launched a new higher-horsepower tractor and has an agreement with Buhler Industries in Winnipeg, Man., to manufacture the vehicle. Although the company has a number of products that are used and sold in Canada, the tractor is the first Kubota product to be built in the country.

The Saskatchewan-based Agricultural Manufacturers of Canada expects the market to be challenging again this year because of the ongoing embargo on canola and impact of a challenging 2019 harvest season.

Donna Boyd, executive director of the association, said farmers had reasonable yields but lower-quality crops in 2019, which led to lower farm incomes.

For manufacturers of farm equipment, the cost of investing in new technology has been prohibitive, she noted, because many are working with low volumes.

“As enhancements in technology are often related to volumes, the timing is not optimal for many of our manufacturers to invest in machining technology. Some will explore flat and laser tube cutting perhaps and/or continue to focus on robotic welding, assembly automation and in-line testing.”

She expects developments in areas such as 3D printing, or metal additive manufacturing, will follow market conditions.

“3D printing is one area being used in the development process for rapid prototyping and, in some cases, to manufacture low-volume pre-production parts,” said Boyd.

The need for new equipment

While some companies are embracing new technologies, a report released by the Canadian Manufacturers & Exporters (CME), called Embracing Change: Industry 4.0 and Canada's Digital Future in Manufacturing, noted that manufacturers are struggling when compared to their international counterparts.

The report identifies three hurdles to technology adoption for manufacturers: high purchase costs and uncertain return on investment, lack of information and testing opportunities, and skill and labour shortages.

CME chief economist Alan Arcand said that while manufacturers might have many reasons to shy away from investing, there are also plenty of benefits, such as lower operating costs, an increase in product quality, faster response times, and an ability to create more specialization and customization opportunities.

Manufacturing has always been an innovative industry, but lately the investment trend in Canada has been weak, he noted. “There is change happening, but it's probably not happening as fast as it needs to be.”

Contributing writer Grant Cameron can be reached at grantalexandercameron@gmail.com.

Agricultural Manufacturers of Canada, www.a-m-c.ca

Cameron Steel, www.cameronsteel.com

Canadian Manufacturers & Exporters, www.cme-mec.ca

Kubota Canada, www.kubota.ca

National Truck Equipment Assoc., www.ntea.com

New Era Group, www.neweragroup.co

Whiting Equipment Canada, www.whiting.ca

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