By Janusz Kowalewski, Ipsen Sales Director for Southeast Asia
As we enter the fourth quarter of 2024, companies start to look back – What were the trends that affected overall sales? Where did we see growth? They also look for ways to maximize the short-term – How do we meet our final sales and production goals before the year ends? What are the key opportunities we need to take advantage of right away?
In a time of reflection and anticipation, I want to take this idea further. There are bigger trends to think about in our industry – both opportunities to seize, and threats to prepare for in the future.
The global heat-treating market is poised for big changes in the coming years, and our industry needs to step up our game. In this article, I want to address several of the key factors that are driving these changes, and how our industry must adapt to meet the coming market pressures.
First, we need to recognize an important statistic, one that has sparked much discussion already. The total global heat-treating market is growing slowly in emerging markets such as India, Mexico, Indonesia, while remaining stagnant in major markets like the United States and European Union. Notably there is no sizeable movement in China’s market for heat-treatment equipment. The gain of one region or country is lost in another country or region. The only bright spots are the aerospace, defense, and maintenance-repair-operations (MRO) industries that are experiencing high growth and increased demand for production capacity.
Second, we need to address the problem of the aging trends of heat-treating professionals. Recruiting the next generation of metallurgists, pyrometry experts, furnace operators and maintenance teams will require better promotion of our industry and adaptation to modern expectations.
And third, we need to lower energy consumption and work towards reducing carbon emissions, taking advantage of renewable energy, and playing our part in slowing climate change. These are challenges that spark innovation, demand efficiency, and offer opportunities to improve our processes.
Emerging Markets vs. Established Markets
My analysis begins with looking at data as collected by Statista (www.statista.com) – a site that processes data from 170 industries across more than 150 countries. Having a large pool of manageable data sets can help us draw important conclusions about our industry.
Let’s compare what Statista has to say about the U.S. Gross Domestic Product to a sales growth report provided by the Metal Treating Institute, a body consisting of captive and commercial heat-treaters in the United States, international heat-treating partners, and associated suppliers.
The Metal Treating Institute, a non-profit trade organization for the heat-treating industry, is the leading trending and forecasting organization in the United States. If you would like more details on MTI’s industry forecasts, contact MTI CEO Tom Morrison at tom@heattreat.net.
When we look at the 2008-9 recession and the COVID epidemic of 2020 alongside the market rebounds in 2011 and 2022 on both graphs, it reveals how the overall U.S. GDP trends are mimicked as sales growth in the metal treatment industry. It seems very reasonable that demand for products in general will create a demand for heat-treatment production. What’s surprising, though, is that the production of new furnaces does not have the same correlation.
Even though the U.S. GDP almost doubled between 2010 and 2020, the total shipment volume of industrial furnaces and ovens only slightly increased, most likely mimicking the increased cost of operations and not market growth. Heat-treating companies are looking for lower labor and operations costs. This has led to a migration of manufacturing from the northern U.S. to the south, where labor and land is less expensive. In the global scale, the movement from high-cost country to lower-cost countries is evident.
Establishing global industry standards means that, as long as testing and certification are consistent, markets like Morocco, Poland, India, Saudi Arabia, Vietnam, Thailand and the UAE can supplement U.S. and European production facilities. Most companies in Southeast Asia are transplants established by U.S., European, and Japanese aerospace companies. The new growing trend is the expansion of Chinese manufacturing companies throughout Southeast Asia, with a corresponding expansion of Chinese furnace manufacturers to those markets.
There are growing heat-treatment industries in Indonesia, Brazil, Mexico, and the Philippines, while more vacuum furnace operations are emerging in Singapore, South Korea, and Malaysia.
The globalization of heat treating will take advantage of emerging markets to lower costs, looking for an outlet valve to offset rising costs in the developed markets. Manufacturing globalization is here to stay and will grow regardless of political trends or slogans.
Making Vacuum Furnaces that Meet Market Demands
Among leaders in the heat-treating industry, there is a looming aging problem. While many smaller heat-treating companies in the U.S. are entering their third generation of ownership, not every member of the younger generation has the aspirations of taking over their father’s company. This trend is also very noticeable in Japan – there are 270,000 small- and medium-sized companies with owners aged 75 and older and no successors to take over.
Recruiting talent to enter the heat-treating industry is harder now than ever. Many people outside the industry have outdated ideas about heat-treating careers. Poorly informed students imagine dirty rooms with furnaces belching fire into the air – heat and sweat, chemicals and gases. Hard work and long hours in sooty clothes.
First time visitors to a modern vacuum furnace cell would be stunned. Clean machines operating in well-organized plants, automated systems handling large and small parts alike. Computers handle the brunt of controlling temperatures, pressures, and recipes, while operators with the help of automation take care of loading, unloading, monitoring, and maintenance.
As an industry, we need to do a better job at telling the next generation about what we do. The next generation of workers comes with a different set of expectations. They’re looking to work with machines that are intuitive to use, reliable, handle most of the heavy work, are easy to troubleshoot, and are interactive with immediate feedback.
When it comes to ordering parts, the next generation has been brought up using portals like Amazon that are searchable, have images of their inventory, the ability to order instantly online, and offer a rapid turnaround from the point of sale to delivery.
Ipsen is working towards meeting those expectations. With PdMetrics, we’re incorporating a smarter feedback interface. By looking for ways to bring important events to the forefront, PdMetrics allows operators to have a better response time when unexpected situations arise mid-process. We’re pursuing machine learning to help us push the PdMetrics platform beyond descriptive data, offering data aimed at providing operators with the ability to better diagnose issues, with an eye on creating better predictive models as we continue to develop this software. At the same time, Ipsen has invested in the Ipsen Connect online platform, offering furnace owners a more robust place to find schematics, identify parts, and place orders. Ipsen Connect is particularly helpful when it comes to replenishing backups and spares that are consumable and frequently replaced.
These are the sort of innovations that our customers are demanding, and the kinds of corporate investments that furnace manufacturers need to be making to compete in a highly competitive marketplace.
And yet we need to go further. It’s our mission to continue looking for more ways to ease the burdens of operators by showing expertise beyond simply manufacturing the furnaces and shipping them to the end user. As we strive to continue being the market leader, we must improve our data delivery systems to go beyond merely diagnostic data, to become exceptional at predictive information delivery, and to develop robust prescriptive responses. We need to keep working on delivering expertise, not just equipment.
Get Behind Green Initiatives
Whether or not heat-treating professionals believe that climate change is real, that it’s caused by the actions of industrialized humanity, or that it will have a significant impact on the future of our planet, doesn’t matter in the current marketplace. Every company needs to be aware of how their work will survive the latest rounds of regulations.
Heat treatment is the most energy-intensive process in most production plants. Even small efficiency changes in our industry can make a significant difference in a company’s overall energy consumption. The rising costs of energy alone are reason enough to pursue sensible efficiency innovations.
One thing that detractors often overlook when it comes to finding ways to meet green initiatives is that there are opportunities everywhere for innovation and improving efficiencies. Market leadership means innovation. To remain on top, Ipsen is constantly looking for ways to outdo our competition.
In 2024, Ipsen received the German Innovation Award from the German Design Council for the ATLAS Green, an atmosphere furnace designed to process parts using heat generated from hydrogen and green electricity, with the flexibility to prioritize whichever source is most abundant for the customer. Ipsen’s TITAN line has been optimized to provide a robust set of processes, while operating within a compact footprint, using a design that makes shipping easier and minimizes setup time and costs.
Manufacturers are also looking for new ways to reduce costs, which will inevitably affect the heat-treating marketplace.
Take, for example, weight reduction. Transportation and aerospace industries in particular are looking for opportunities to replace current materials with lighter-weight materials, provided they can deliver the same qualities and durability. Innovations like additive manufacturing create lighter components to work with, while the growth of the electric vehicle market means fewer parts to manufacture and process.
In the case of EVs, it turns out that reducing the overall drive train from 2000 parts to 200, featuring transmissions with two gears instead of eleven, can reduce the cost to manufacture a vehicle, as well as reducing the overall weight of the motor. As the EV market continues to compete with internal combustion engines, demand for case hardening engines may diminish as well.
On the other hand, Boeing and Airbus pushing their fleet from a metal fuselage structure to more composite components in an effort to reduce weight increases demand for composite heat treatment. Titanium was always the metal of choice in aerospace, a trend that will continue increasing demand for the beta annealing process for titanium alloys such as Ti-5553. Demand for debinding and sintering furnaces and HIP (hot isostatic pressing) processes may rise to meet the growing additive manufacturing and powdered metal markets. Furnaces capable of processes with lower operational temperatures creating less distortion are in high demand. Demand for copper processing is growing very fast due to global electrification trends in industry and automation.
Looking Ahead
Understanding these larger market forces can help our industry better prepare for what is to come in the heat-treating marketplace. At a time when companies cannot afford to fall behind the trends, innovation will win the day.
This year, take your time to plan beyond 2025. Look at your industry trends, and how your company compares to your competitors. Talk to your human resources team and find out what candidates are applying for your entry-level positions. Look at your energy bills and compare them to your profit margins.
Then find ways to invest in the future. Look for opportunities to grow through expansion and acquisition. Find opportunities to improve efficiencies in energy consumption. And invest in education, whether through a robust internship program, or a collegiate scholarship partnership.
The opinions presented in this paper are solely those of the author and do not necessarily reflect the views or beliefs of Ipsen or its affiliates. All statements and perspectives are entirely the author’s own.
References
[1] Statista. “Annual Gross Domestic Product (GDP) Growth of the United States from 1990 to 2024.” Statista, 2024. https://www.statista.com/statistics/188165/annual-gdp-growth-of-the-united-states-since-1990/.
[2] MTI (Metal Treating Institute). Forecast Report February 2024. Prepared by ITR Economics. MTI, 2024.
[3] Statista. “U.S. Industrial Process Furnace and Oven Manufacturing – Shipment Value Forecast 2012-2024.” Statista, 2024. https://www.statista.com/forecasts/310979/us-industrial-process-furnace-and-oven-manufacturing-shipment-value-forecast-naics-333994.
[4] Statista. “Gross Domestic Product of the United States from 1990 to 2022.” Statista, 2024. https://www.statista.com/statistics/188105/annual-gdp-of-the-united-states-since-1990/.