macroeconomic outlook, the GDP outlook and forecasts for trade policies, external political and policy-making factors, the business sentiment and the Purchasing Manager’s Index, technological shifts taking place, the impact on business, investment activity, and so forth. There are many index drivers which will provide such data, allowing us to understand what factors might be influencing the sector.

Published data from particular associations or companies that specialise in this industry are also useful resources. LMC Automotive track the production of vehicles as well as forecasting the outlook as far as 2025. Their prediction is that in the US light vehicle production will reach pre-COVID levels in mid-2022, however truck production won’t be reaching pre-COVID levels even in their five year outlook, and knowledge of movement within the automotive sector will have a knock-on effect on the metalworking sector.

Overall indicators for which areas will lag and which will lead include industrial output, manufacturing indexes and PMI, while sector specific indicators include overall output/production, utilisation rate, new orders, and energy usage.

If we take mining, specifically the US Mining Association, as an example, we can see that there will be a degree of sharing production output, perhaps some utilisation rates. Some mining- focused consultancies may also publish papers that help outline what is happening in the mining sector. This means that businesses operating in the metalworking fluids segment can use both the mining forecast or the construction forecasts (as well as any potential government stimulus into construction) as a barometer. It is also important to track the interdependencies between sectors to assess the demand drivers which in turn will help to facilitate better forecasting. Outlook for vehicle sales will impact automotive manufacturing and its supply chain, tyre manufacturing sectors, demand for metals (and mining), and similarly, electricity demand will impact the demand for coal/mining sector.

The automotive industry is another such barometer which can be used to forecast for the metalworking fluid segment. Factors such as vehicle sales and the impact of vehicle sales and auto manufacturing on the

supply chain will impact the manufacturing sectors, and ultimately the demand for metals and primary metals and finally into mining; this flows right through that value chain.

To explore the direct link between the automotive industry and metalworking fluid demand further, it is necessary to break things down a little. The energy can be subdivided into four key sectors; Transportation Equipment (TE), Fabricated Metals (FM) and others, Primary Metals (PM) and Machinery (Mac). Metalworking fluids primarily provide for the transportation equipment industry, which includes facets such as automotive production, aerospace equipment, and so on. Second to that is the fabricated metals industry with machine shops, hand tooling, followed by primary metals and then machinery and the manufacturing of industrial machinery.

Figure 2: US Metalworking fluids consumption by product and end-use sector

Understanding the end use sector outlook is essential to predicting future MWF demand. As the volumetric outlook for MWF (and most other sectors) is negative, it is more important than ever to understand how to capture value. Whether a business is primarily conducted through distributors or directly, understanding what is driving the behaviour of the end customer is critical.

In terms of commercial aerospace, they have reported a 45% reduction in aircraft production just in 2020. However, even in sectors so heavily impacted by the pandemic, there are also some opportunities. As people delay purchasing their next vehicle or maybe purchase a second hand vehicle.

Continued on page 16 LUBE MAGAZINE NO.163 JUNE 2021 15

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