Storage Sector Facing Challenges

By Hal Vandiver

At this time last year, signs pointed to storage equipment sector growth through 2008, extending into 2009. Recent economic developments worldwide force us to revisit these predictions.

According to Global Insight, as of August 2008, little to no production growth is expected in the manufacturing sector until at least August 2009. “Big Ticket” consumer sectors such as automobiles, appliances and household goods will be hit hardest, with inflation up and employment down in those segments.

Meanwhile, investment sectors are a mixed bag. Energy and aerospace should do well, but a downward correction may take place in other traditional investment sectors. Housing is forecasted to decline again in 2009, and now it will be joined by non-residential construction. The weak U.S. dollar may help some industries, but there will be little, if any, capacity expansion in the near term.

Where Material Handling Comes In
According to the Material Handling Equipment Manufacturing (MHEM) report produced quarterly by Material Handling Industry of America, new orders grew 8.3% in 2007 and by a modest 4.8% in 2008. MHEM shipments expanded 8.9% in 2007 and by 11.9% in 2008.

However, taking the trends above into account, new order contraction in the range of 5% to 10% is expected in 2009. The latest available data indicate possible recovery in late 2009 or early 2010. Shipments are projected to contract 7.0% to 10.0% in 2009 and remain flat in 2010.

In 2007, MHEM domestic demand (shipments plus imports minus exports) grew by 5.3%. Domestic demand grew and finished 2008 slightly ahead of 2007, but it will contract during 2009. Exports grew 23% in 2007, grew 18% in 2008 and will slow modestly in 2009.

Rack Industry Projections
For the 12 months ending June 2008, rack industry bookings were up 6.4% and shipments were up 5.3%. Interestingly, however, units shipped dropped about 3%. Looking forward, U.S. domestic production of rack equipment is estimated to be $1.3 billion in 2008 and is forecasted to end up flat or slightly (2.3%) ahead of 2007.

Rack remains a ubiquitous infrastructure in virtually all end-use applications, whether the solution is stand-alone or integrated into automated solutions. Rack products are consumed throughout industry, addressing needs in manufacturing, wholesale, retail, warehousing, distribution and transportation applications.

Key issues of concern for the storage equipment sector will be consolidation, globalization, changing workforce demographics and the availability and volatility of raw materials.

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The MHEDA Journal • First Quarter 2009 • Volume 38, No. 1 • Contents are Copyright © Data Key Communications, Inc.
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