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Article Written By: Clayton Arnold
According to the U.S. Bureau of Economic Analysis, Texas’ natural resources make it a leader in petroleum and chemical manufacturing. The manufacturing industry in Texas manufactures a variety of products; such as computer equipment, industrial machinery, fabricated metal, automobiles, aerospace products, and much more.
Texas is only second to California in the number of workers employed in the manufacturing industry, with 7% of manufacturing jobs in the U.S. located in Texas. Accordingly, Texas has a large industrial sector that manufactures machinery used in the agricultural, construction, industrial, and mining industries; such as diggers, drills, engines, tractors, transmission, turbines, etc.
Metalworking machinery is widely utilized in advanced industries such as oil and gas, aerospace, energy, and automation. Accordingly, there is a demand in Texas for metalworking equipment in order to meet growing manufacturing needs.
In this article, we will explore the metalworking industry in Texas to help you gain a better understanding of factors that will effect you if you are interested in selling metalworking equipment in Texas. To better understand the market for metalworking equipment in Texas, this article will explore:
Table of Contents:
Texas is a leader in the nation’s oil and gas industry, and despite the slump in oil prices in 2015 and 2016, the state has turned its economy around in the past year, producing 29.8% of the nation’s total refining capacity. In 2017, Texas added 306,900 jobs and expanded 10 of 11 industries. As a result, Chief Executive Magazine named Texas the “Best State for Business” in 2017 for the 13th year in a row.
Figure 1: Texas Manufacturing Output, in Billions, 2005-2016
Figure 2: Top Ten Texas Manufacturing Sectors, in Millions, 2015
Source for both graphs: U.S. Bureau of Economic Analysis and the U.S. Census Bureau
If you refer to the graphs above, Texas has a large manufacturing sector that drives its economy which is dominated by the oil and gas industry.
Steel and Iron Industry in Texas:
When it comes to manufacturing steel and iron, Texas is not the first state that comes to mind. Yet, the state is home to many steel facilities that provide employment for Texans and millions of dollars in tax revenue. As you can see depicted in the map below, there are more steel facilities in comparison to iron facilities in Texas; with the greatest number of steel facilities concentrated in the Houston area.
Source: Texas State Historical Association
According to statistics provided by Friends of Texas Iron & Steel, the iron and steel industry in Texas:
In 2017, Texas was the nation’s largest steel importer, accounting for more than $8.3 billion. However, with the emergence of tariffs on steel and aluminium, U.S states that directly import these commodities will have bear most of the impact. According to an analysis released by Tax Foundation, two-thirds of the new taxes imposed steel and aluminium will be born by 10 states, with Texas, New York, California, and Utah being the top five affected.
Compared to all states, Texas is the largest employer of workers in industries that use steel and aluminium with 496,039 employees.
Tariff on Steel and Aluminium in Texas:
Steel and aluminum tariffs imposed by the Trump administration were intended to protect American industries and workers from unfair international trade practices. The tariffs were presented as an avenue to increase the production of American-made products, increase jobs, and sustain a skilled workforce.
The Senate Bill 1289 seeks to encourage American business owners to reinvest in the U.S. steel industry and revive the manufacturing industry in Texas. Accordingly, Stan Baucum, Director of Structural and Merchant Products at Gerdau, told Texas Tribune that buying American-made steel products will be instrumental in rebuilding Texas’ iron and steel industry. “Taxpayer dollars should not benefit offshore producers who heavily subsidize their industries and dump their products on Texas shores … This commonsense bill will help support highly skilled, high paying jobs in the Texas economy,” explains Baccum.
However, Texas Governor Greg Abbott expressed his concerns regarding the steel tariffs as he emphasized the importance of imported steel on the growth of Texas oil and gas industry. Currently, the gas and oil industry accounts for twice as many jobs as the national steel and aluminum industry. Abbot estimates that the new tariffs will jeopardize jobs in Texas and “hinder the U.S. gas and oil industry from surpassing its competitors”.
What Tariff on Steel Means for Pricing of Metalworking Equipment in Texas:
Interestingly, despite widely accepted claims, steel in the U.S. is doing quite well. According to the Commerce Department, U.S. steel earned more than $2.8 billion, up from $714 million in 2016. Accordingly, the steel industry added more than 8,000 jobs between January 2017 to January 2018.
Interestingly, due to uncertainty surrounding steel pricing and a general increase in manufacturing processes, rising steel prices could negatively impact Texas industries that utilize steel in their manufacturing processes. Likewise, tariff on steel will affect pricing of machinery.
A survey conducted by Federal Reserve Bank of Dallas finds that due to an increase in metal costs, prices of machinery and equipment will increase as a result. Tariff on steel increases the cost to manufacture industrial equipment, making the end product more costly for the consumer.
For example, Edwards Ironworkers, a manufacturing company that makes products for ironworkers recently raised prices for their ironworker machines due to steel tariffs. Edwards Ironworker machine are manufactured in the U.S and are made mostly of steel; as a result, tariffs on steel means that Edwards Ironworker had to increase the price of their equipment. American Machine Tools explains that the average prices increase for Ironworker machines 60 tons or less is 8% and, for machines 65 tons or larger, it’s 10%. Consequently, industrial equipment manufactured in the U.S. renders “Made in the USA” products uncompetitive against foreign equipment manufacturers.
The metalworking industry across the U.S. is especially concerned about rising steel prices as many manufacturers, especially manufacturers of fabricated metal, utilize steel in creating strong pieces of equipment. General Kinematics estimate that a 20% increase in cost of obtaining steel will increase equipment prices by 2 – 2.5%. Accordingly, manufacturers are seeking alternative ways to reduce costs. For example, 69% of manufacturers making products larger than 6-foot cube would rather buy equipment than manufacture it to reduce costs.
Hence, companies that produce large products, such as automobiles and planes are more likely to purchase good quality used equipment to compensate for reducing costs in other areas.
Environmental Concerns Surrounding Metalworking Processes in Texas:
A lot of development has been made in recent years to improving metalworking processes as laws surrounding the discharge of manufacturing processes into the environment have become stricter. The metalworking industry has to juggle meeting new manufacturing processes while continuously working to decrease the waste discharge going into the environment. Accordingly, metalworking fluids (MWF) utilized by metalworking companies constitute for the majority of waste discharged. Thus, minimizing waste discharged by metalworking fluids has proven to be an effective method for meeting environmental expectations.
Accordingly, in an article titled “How clean is the air in your manufacturing facility?” Jim Reid, explains how metalworking facilities pose health threats to workers because they produce pollutants like oil mist, emit fumes containing lead, manganese, hexavalent chromium and many others. Hence, Occupational Safety and Health Administration (OSHA) monitors metalworking facilities in order to ensure they are constantly refining their manufacturing process to decrease discharge of waste and improving working environment for employees. Interestingly, 90% of local manufacturers in Austin, TX, do not comply with OSHA workplace regulations.
Metalworking facilities in Texas need to consider how the discharge of fluid from their metalworking processes is affecting the external environment. Accordingly, Fluid Service Technologies (FST), located in Houston, is an industrial fluid maintenance company that specialize in maintaining fluids in metalworking facilities. Their services encompass machine tool cleaning, implementing custom recycling systems, minimizing waste discharge, and many more.
How to Sell Metalworking Equipment in Texas:
When it comes to selling metalworking equipment in Texas, we recommend using an online auction marketplace. Previously we had discussed how online auctions are changing the way we buy and sell industrial equipment and we highlight some tips on how to get first time buyers and sellers started.
Accordingly, if you have metalworking equipment that you want to appraise, sell, or fix, then there are many dealers in Texas that can assist you.
While Texas may not be known for metalworking, there is no denying that the state is home to a growing manufacturing industry. With latest innovations in gas and energy, industries in Texas will be able to use natural resources to fuel manufacturing facilities and increase import and exports. Accordingly, there is no denying that the future for industrial equipment is bright as expansion in manufacturing processes create demand for quality equipment.
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