The Machine Tool Industry 2018

The machine tool industry received some positive news in 2017 as it was the first year to see positive gains in consumption. Reporting firm Statista found that consumption in 2017 was 1.6% more over the previous year. Although this seems like a small blip on the radar, with the constant ups and downs of the machine tools industry, any shift in the right direction is always celebrated.

This is just the beginning, in fact, according to that same report, experts are predicting positive gains in consumption over the next few years which is great news for machine tool lenders and buyers in the U.S. and across the world.

The Top Five Machine Tools Lenders

EDA recently published its annual report on the machine tool industry analyzing the most successful lenders and buyers alike. According to their research, the top five machine tool lenders are the following:

1.     CNC Associates Inc.
2.     Banterra Bank
3.     DMG Mori Seiki USA
4.     Ellison Tech
5.     Hartwig Inc.

All five of these lenders accounted for 42.6% of the total units sold. Of all of the top 20 lenders that EDA followed, they filed a combined 481 new machine tool related financial statements in November 2017.

Number one on this list, CNC Associates, had a great year as they accounted for 15% of the total share with 72 units sold in EDA’s report.  Additionally, industry research firm AMT reported that October 2017 machine tool orders were up 7.6% over October 2016’s numbers.

Who’s Buying?

EDA also compiled a list of the top five buyers in the U.S. as follows:

1.     Kennametal                 Pennsylvania, USA                  16
2.     TE Connectivity           Pennsylvania, USA                   9
3.     Aerofit                          California, USA                         8
4.     C&C Machine Tool       Minnesota, USA                       8
5.     FMI Holdings               Texas, USA                               8

Buyers come from a variety of different industries, and as we mentioned, the success of various manufacturing sectors ultimately drives the success of the machine tools financing market as well.

Explaining the Ups and Downs

Over the last few decades, the machine tools market has seen many changes that seem to happen for no apparent reason. Most recently, IndexBox reported that the value of the entire industry in the U.S. decreased by 4.5% from 2014 to 2015. It can seem hard to determine exactly what is hurting the machine tools industry but many have pointed to a few different ideas.

China’s Expanding Manufacturing Sector

Many analysts believe that China’s increasing hunger for more machine tools largely drives the market and keeps the highs higher than expected and the down periods less devastating than in decades past.

Additionally, more manufacturing overseas, in general, has given the world manufacturing industry a boost. The primary reason that more companies are investing in production abroad can largely be contributed to the near-zero interest rates over the last decade.

Low Interest Rates 

Low interest rates caused many U.S.-based companies to invest in production overseas where the labor is cheaper. This is detrimental to the U.S. market but provides these overseas businesses a boost in their manufacturing and in turn, their machine tools purchases.

We can’t look into a crystal ball to predict exactly what the market will do in 2018, however with industry analysts all predicting an increase in the machine tool consumption and recent shifts in economic policy, expect 2018 to be a good year for the industry.

*The original article The Machine Tools Industry 2018 posted first on Viking Equipment Finance Voog Blog page.

The Logging Industry 2018: Boom or Bust?

Logging equipment purchases are off to a strong start, but many experts fear that the U.S. import duties will hurt the industry.  Late last year, the U.S. Department of Commerce ruled that it would levy total countervailing duties (CVD) and anti-dumping duties (ADD) at 20.83% on lumber imports from Canada. Canadian lumber exporters were quick to get a jump on their prices before the duties took effect, and lumber prices have remained at record-highs ever since.

Now that four months have passed, what effects has the industry experienced? Experts are concerned for the future and warn of a supply gap if importers and exporters aren’t careful, although equipment purchases still remain strong.

More Money for Less Lumber

Increased prices on lumber have taken a toll on the entire supply chain. From exporters to importers and the final consumer, everyone is paying more for lumber. Many experts are signaling that these prices won’t ease anytime soon, so U.S. companies are actively finding ways to help mitigate any financial risks. Luckily for United States companies, the U.S. housing market is entering a slow period, meaning lumber won't be in as much of a demand. This could change in the coming years, however, so industry leaders must stay ready.

To help put off a potential supply gap in softwood, many importers are relying on European lumber exporters to fill the gap that higher-priced Canadian lumber once held. 

Even with these high lumber prices in mind, logging equipment is off to a strong start this year, with recent data showing strong sales numbers from logging equipment finance companies and buyers alike.

A Look at the Data

Industry research firm EDA recently posted financial data for the most popular equipment types sold in the U.S. Felling equipment is highly ranked in many lists, closely followed by building equipment. These are the ten most popular equipment types from EDA’s database:

EQUIPMENT TYPE                           BUYERS          UNITS

LOG LOADER                                    41,547              89,621
SKIDDER                                           46,872              89,598
GRAPPLE SKIDDER                         24,636              60,225
CHIPPER                                           36,962              58,767
FELLER BUNCHER                          18,252               43,563
CRAWLR DOZER (LOG)                  20,806               38,263
STUMP CUTTER                              23,829               33,041
SAWMILL                                          19,883               25,644
WHEEL LDR (LOG)                          11,647                23,443
EXCAVATOR (LOG)                         10,087                23,435

EDA also has data on the top logging equipment lenders and buyers for the month of February 2018:

Top Lending Companies

JOHN DEERE INDL CREDIT                       78
CATERPILLAR FIN SVC CORP                   46
DE LAGE LANDEN FIN SVC                       25
WELLS FARGO VENDOR FIN SVC LLC    18
STEARNS BANK                                         15

Top Equipment Buyers

BLUE STAR EQT LLC               DETROIT, MI                           10
LOGGING EQUIPMENT           BANDIT                                      5
LOGGING EQUIPMENT           MORBARK                                 5
TREESMITHS INC                    SPRING BROOK TWP, PA        5
LOGGING EQUIPMENT           ALTEC                                        5

Predictions for the Rest of the Year and Beyond

Although the lumber prices continue to remain at record highs, many industry experts predict that demand for forestry equipment will continue to rise into the next year. The U.S. will lead the pack in the demand for newer logging equipment, although nations in the Asia/Pacific region follow closely behind.

Predictions for the Commercial Trucking Industry 2018

The U.S. manufacturing sector relies heavily on commercial trucks to haul goods from one end of the supply chain to the next. Without these trucks, the U.S. manufacturing industry would fall flat. Both work hand in hand, and when the trucking industry is doing well, so is the manufacturing industry.

Over the last year, we've seen many companies promise to bring more manufacturing jobs back to the U.S. and industry researchers, and analysts predict the trucking industry to grow by 3.4% in 2018. Will these predictions ring true and what does it mean for commercial truck finance providers? To better understand these predictions let's take a look at 2017's numbers.

                      

Commercial Trucking Finance in 2018

With a boom in demand, that means that there will be more buyers, and financiers will have their work cut out for them to keep up, which is a good problem. Commercial trucks come in a variety of shapes and sizes, but a few are more popular than the rest.

2017 saw an increase in demand for commercial trucks and trailers, both setting records in December 2017.  According to EDA, a leading industry research firm, these are the most popular truck types from 2017:

EQUIPMENT TYPE      UNITS       BUYERS
Class 8 Truck               849,681       252,705
Mechanic                     171,994       161,832
Class 7 Truck                 92,711         38,064
Class 6 Truck                 64,438         34,300
Svc Vehicle Body             9,763           4,989
Class 5 Truck                   1,452             852
Bus                                     454              200
Class 4 Truck                     439              303
Class 3 Truck                     167              152
Class 2 Truck                     137              106

Class 8 trucks are by far the most popular option for most companies, and in 2018, financiers will have a profitable year helping buyers secure the vehicles they need to build up their fleet.

Class 8 Trucks Set a Record

Analysts at ACT, a leading research firm, note that orders for Class 8 trucks in North America rose to a new 37-month high in December 2017. More and more manufacturers and logistics companies are seeking vehicles to haul their goods across the country and borders, and Class 8 trucks offer a flexible option for them while also being able to tow heavy loads.

Trailers Faired Well Too

The trailers that store the goods trucks haul also experienced a boost in orders due to the increased demand. Research firm FTR reported that trailer orders rose to 47,000 in the month of December 2017, which is the most orders in one month ahead of the previous record held by October of 2014.

The Electronic Logging Device (ELD) mandate goes into effect this year and is forcing drivers to spend less time behind the wheel, requiring they take two full days off after a 50-hour week. With this new mandate, carriers are required to install the ELD on all of their vehicles and tighten their workload, so drivers don't over exhaust themselves each week.

Looking Beyond 2018

Even with these new regulations, commercial trucking will remain a prominent component of logistics. With a boost in manufacturing, the demand for commercial trucking will continue to rise as over 70% of all U.S. freight moved across the country is by trucks. If analyst predictions hold true, 2018 could be a successful year all around for carriers and financiers.

Commercial Printing 2018: What to Expect from the Industry

With minimal growth and a shift towards digital media, how can commercial printing adapt?

The once dominant industry of commercial printing has been on the decline over the last several years, and with the adoption of new digital technologies, many fear the commercial printing industry as we know it could be obsolete within the next few decades.

Industry reporting firm Idealliance reported that the commercial printing sector grew by 1% in 2017 which, while a positive sign in the right direction, is not impressive for this once booming titan of an industry. The good news is, with the acceptance of changing times and investment in different printing technologies, the same report predicts that in 2018 the commercial printing industry could grow by as much as 3%. 

Many experts believe that the industry must continue investing in new technologies to prepare for the future while also promoting the benefits of traditional printed materials to remain relevant.

2018 Will Be a Big Year For 3D Printing

IDC, an industry intelligence reporting firm, made a promising prediction that companies will invest nearly$12 billion in 2018 towards Discrete Manufacturing for the production of unique items like plane parts, toys, and other objects. Additionally, experts predict continued investment in emerging medical-based printing such as bioprinting and regenerative medicine. This is a great opportunity for the commercial printing industry to innovate and adapt to changing times as a shift away from traditional printed materials like business cards, newspapers, and direct mail flyers.

A Look Back at Financing in 2017

2017 was a big year for new print equipment financing. EDA, and industry reporting firm recently published their yearly insight report for 2017. In the report, they list the top equipment financers and buyers for 2017 with specific emphasis on November. The top financiers for the month including the five that tied for fifth place are the following organizations:

GENEVA CAPITAL                                     17
TCF EQT FIN INC                                      11
HEIDELBERG USA INC                              8
BOBST NORTH AMER INC                        5
CIT BANK                                                    4
KBA NORTH AMERICA                               4
PNC EQUIPMENT FINANCE                      4
MACDERMID PRINTING SOLUTIONS       4
WELLS FARGO EQUIPMENT FINANCE    4

All of these top companies combined for 65.6% of total new printing equipment financial statements. Even the top lender alone, Geneva Capital financed enough equipment to account for 18.3% of the total. The same report also lists the top U.S. printing equipment buyers as well:

Marketing Instincts California Epson          4
School of Visual Arts New York Epson       3
GameTime Wraps Arkansas HP                 3
RR Donnelley & Sons Delaware KBA         3
Quality Printing Massachusetts Ploar         2

From this list, you can see the company, their location along with the units that they financed.

Moving Forward into 2018

With more companies choosing to embrace the digital age and investing in more advanced technologies, shifting focus away from traditional printing methods, the commercial printing industry could be ready for its next phase. We'll just have to wait and see, but with experts predicting slightly more growth this year, 2018 might be a prominent year for the industry as a whole.

What is Section 179?

Section 179 is the Internal Revenue Service (IRS) tax code which allows individuals or businesses to fully deduct certain assets (usually equipment and software). This incentive was created by the IRS to encourage business to buy machinery and equipment for their business and take a full tax deduction in the year it’s placed in service. This has been very important for many construction or manufacturing companies and other industries which require large, expensive machinery in the course of the business. If any asset is not eligible for Section 179, it may still be available for bonus depreciation or regular depreciation. Certain limitations are also put in place in the type of assets and amount that can be expensed on the tax return.

Qualifying Property

Section 179 was created for business so most business equipment qualify for Section 179. All business that use equipment for their business such as machinery, computers, furniture, software, vehicles greater than 6,000lbs and other business assets are eligible for a 100% deduction under Section 179. If you have purchases or financed any assets for your business, you consider Section 179 deduction. In order to take the deduction, the asset must have been purchased and placed in service during the tax year.

Property not qualified for Section 179

Although most business assets will qualify for Section 179, some assets such as real property is not eligible for a Section 179 deduction. Real property is defined as land, buildings, permanent fixtures and other improvements to real property. Any property that is not eligible for Section 179 may still be available for capitalization and depreciation. Bonus depreciation is available for these assets as an accelerated depreciation method.

Vehicles under 6,000lbs also do not qualify for section 179 deduction. When section 179 was originally introduced, SUV’s were acceptable for a full Section 179 deduction, however this loop-hole created many business purchases of Hummers and other expensive luxurious SUV’s for a full tax deduction.

LimitationsThere are different limitations to Section 179. The maximum amount that can be deduction for most section 179 assets is 510,000. This limitation is also reduced by the amount of the assets the exceeded $2,030,000 (for 2017).

Form 4562

If your business qualifies for a Section 179 deduction, a Form 4652 must be completed and filed with your annual tax return. The Form 4562 is required for all depreciation and amortization deduction expenses on the tax return. In Part I of the Form 4562, you will list the cost of the asset and calculate the Section 179 deduction you are eligible for. The Form 4562 must be filed with your business or individual tax return.

Summary

Section 179 has helped many businesses for numerous years and it’s still available for tax year 2017. Many businesses rely on this code section to relieve the tax burden during tax years where large equipment is purchased, financed or leased and placed in service during the tax year. The Section 179 limitations vary by year so be sure to check the IRS.gov website for the deduction limits during the tax year you are filing for.