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Metal fabricators said wary of rules, health care

Keywords: Tags  Karen Kurek, Metals Service Center Institute, tubular conference, MSCI, regulations, health care, McGladrey, Thorsten Schier

BONITA SPRINGS, Fla. — Despite some positive developments in the U.S. economy, including a resurgent residential housing market and improved consumer confidence, metal fabricators are worried about the impact that increased government regulation and changing health-care laws could have on their businesses.

“There is a big concern about what’s happening or not happening in Washington,” Karen Kurek, partner and managing director of assurance, tax and consulting firm McGladrey LLP, told Metals Service Center Institute (MSCI) Tubular Conference attendees in Bonita Springs, Fla., citing results from the company’s 2013 manufacturing and distribution monitor report.

The report gauged sentiment from more than 1,000 manufacturers, including nearly 200 metal fabricators, Kurek said.

Part of the problem is that regulations aren’t uniformly applied, she said.

For example, a metal fabricator with two domestic facilities reported having “someone from the Environmental Protection Agency come to both of their plants, and the outcome in each case was totally different,” Kurek said.

Meanwhile, manufacturers expect health-care costs to rise by more than 10 percent this year due to the implementation of the Affordable Care Act (ACA), she said.

Only 19 percent of metal fabricators polled for the survey described their business as “thriving” during 2013, down from 41 percent the previous year, according to the survey.

Chicago-based McGladrey attributed the decline to low or stable energy prices, cuts in defense spending and a slowing economy.

Metals fabricator should benefit from reshoring despite these lower numbers, with large companies like Benton Harbor, Mich.-based Whirlpool Corp. and Caterpillar Inc., Peoria, Ill.—attracted by low energy costs, a shrinking wage gap and customer demands for short lead times—relocating manufacturing facilities to the United States from China.

“Customers are demanding not a six-week lead time, not a seven-week lead time, but they want it in two weeks,” Kurek said.

About 18 percent of respondents to McGladrey’s 2013 manufacturing survey are looking to reshore some manufacturing over the next year.

Meanwhile, manufacturers decreased their dependence on foreign materials slightly during 2013, with the average percentage of inventory purchased from outside the United States falling to 13.2 percent from 16.2 percent in 2012, according to the survey.

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