Coating, Engraving, and Allied Services, NEC

SIC 3479

Companies in this industry

Industry report:

This industry includes establishments primarily engaged in performing the following types of services on metals for the trade: (1) enameling, lacquering, and varnishing metal products; (2) hot dip galvanizing of mill sheets, plates and bars, castings, and formed products fabricated of iron and steel; hot dip coating such items with aluminum, lead, or zinc; retinning cans and utensils; (3) engraving, chasing, and etching jewelry, silverware, notarial, and other seals, and other metal products for purposes other than printing; and (4) other metal services, not elsewhere classified. Also included in this industry are establishments that perform these types of activities on their own account on purchased metals or formed products. Establishments that both manufacture and finish products were classified according to the products.

Industry Snapshot

According to indutry statistics, approximately 3,540 establishments employed 51,500 workers in the $6.1 billion metal coating and allied services industry in the early 2010s. The larger firms that participated in this industry were often more diversified in their finishing activities, while independents tended to specialize in one or two types of finishing. During the 1950s and 1960s, there was a tendency for manufacturing firms to set up their own finishing operations. With the increased environmental regulation of the industry beginning in the 1970s, many manufacturing firms opted to subcontract for finishing services, thus getting around the added costs of waste treatment. Parts to be finished were typically shipped to finishing firms by their customers, after which they were shipped back. Since the mid-1970s, about three-fourths of a finishing firm's business has come from within a 50- to 75-mile radius of the firm. Because finishers needed to be near their customers, their operations are often located in the same areas as producers of durable goods.

Organization and Structure

Just over half the output of this industry consisted of the application of organic coatings such as paints, varnishes, and lacquers. Next to the application of organic coatings, galvanizing was the largest activity in the industry, making up 22 percent of output. Metal coating and allied services, not specified by kind, made up 21 percent of output. The remaining six percent consisted of engraved and etched products.

The industry was served by the National Association for Surface Finishing (NASF). The NASF was formed in 2007 by bringing together three already-existing organizations: the National Association of Metal Finishers (NAMF), the Metal Finishing Suppliers' Association (MFSA), and the American Electroplaters and Surface Finishers (AESF). The mission of the NASF was "to promote and advance the North American surface finishing industry globally" and consisted of three types of members: corporate suppliers, corporate job/captive shops, and individuals. The organization's committees were devoted to various industry issues, including regulation, technology, and communication.

Background and Development

The industry's primary focus is the application of coatings, including paint, lacquer, and varnish. Although metals had been coated by like means since ancient times, their modern application was dependent on the development of phosphating as a surface preparation. Phosphating involved treating a metal, usually steel, with phosphoric acid. This greatly improved the adhesion and durability of coatings. Phosphating alone was also used as an anticorrosive coating on steel in conditions where the potential for corrosion was not high. Although phosphating was developed in the 1860s, treatment times were exceedingly long until iron filings were added to the phosphoric acid bath after 1906 (following Thomas Watts Coslett's patent), shortening treatment time to about two and a half hours. The treatment time was shortened to 10 minutes by the addition of copper salts in 1929, after which the process became generally used as a surface preparation for organic coatings. More recent developments lowered treatment times to just five seconds.

Galvanizing is the process of dipping steel or iron into a bath of molten zinc. The zinc coating served as a corrosion prohibitor, and was applied to structural parts, sheeting, pipe, various containers, and hardware. During this process, the metal to be coated was immersed until it reached the same temperature as the bath (typically 1,562 degrees Fahrenheit). Thus, the process could not be used on springs or other objects in which desirable properties would be lost by such exposure to heat. Because uniformity of thickness was not readily controllable in hot dip processes, galvanizing was limited to applications in which such uniformity was not required. Electroplating with zinc was sometimes also referred to as galvanizing or electrogalvanizing. This process was done cold and could assure high uniformity of thickness, getting around the aforementioned problems.

As with all metal-coating processes, it was vital that parts were thoroughly cleaned before being galvanized. This typically involved treating the parts to be galvanized in an acid bath, after which they were fluxed, a process that generally used hydrochloric acid. The wastes produced by such pretreatment were toxic, as were the solvents used in the organic coatings processes. The minimization of such wastes continued to be central issues for the industry, as did the development of alternative solvents.

The industry received a boost in the early 1990s with the Intermodal Surface Transportation Efficiency Act of 1991, which required that all highways, bridges, and tunnels built with federal funds take into account the costs of materials over their lifecycles. This strongly favored the use of galvanized metals. Subsequent legislation that affected the industry included the Transportation Equity Act for the 21st Century (TEA-21) in 1998 and the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA-LU) in 2005. Although SAFETEA-LU was meant to provide funding for highway-related construction for five years, by 2009 the fund had run dry and began to be subsidized by revenues from the Federal Treasury. As of mid-2010, no new highway bill had been passed.

The industry was also strongly affected at the end of the twentieth century by increased concerns about the environment. The most promising of the environmentally friendlier alternatives to electroplating were the application of metal powders and vacuum deposition. From the perspective of the firms, the question remained whether plating or coating firms could more readily diversify into these technologies.

The relative ease of entry into the industry made for highly competitive conditions in which small independents were sandwiched between the large suppliers of finishing machinery and materials and the large firms for which they provided services. This meant relatively low profits for independents. Profit rates varied greatly among firms in the industry. Taking rates of return on equity, a firm ranking at the median had less than half the profitability of a firm ranking at the upper quartile.

The value of product shipments in 1995 was approximately $7.0 billion, up from $4.9 billion in 1990. Growth of output and employment stagnated entering the 1990s, but profit rates remained close to the average for the period 1982 to 1992. The industry benefited from growth in the use of galvanized steel and in the use of alternatives to electroplating that it offered. With shipments valued at $8.5 billion in 1997, the industry showed steady growth throughout the 1990s.

Theoretical knowledge, as opposed to empirical knowledge, also rapidly increased in importance in the 1990s. Equipment and material suppliers developed many new techniques. Smaller firms were able to obtain some of the same innovations as larger firms. Nonetheless, given the greater purchasing power of the captive and large independent firms, suppliers allocated a disproportionate amount of their research and technical support to such firms.

Another issue inhibiting investment by smaller firms in more capital-intensive techniques was that, unlike large captive firms, they were less able to absorb the losses resulting from excess capacity in the face of an economic downturn. Because the greater profitability of the more successful firms could be used to finance techniques that were more productive and sophisticated, the gap between large captive firms and smaller independents remained.

In 1997, the National Metal Finishing Strategic Goals Program allied the industry with the Environmental Protection Agency and other environmentalists to cooperate in creating blueprints of how best to solve the environmental challenges facing the industry. Instead of working as adversaries, the groups worked together to devise and implement realistic guidelines for issues such as the storage, recycling, and disposal of wastewater treatment sludges. Often the industry had better solutions to the problems than the EPA or environmentalists could suggest, since the industry best understood its own processes. In this sense, the Goals Program sought to move beyond compliance in ways that benefited the industry and the EPA and also satisfied environmentalists.

As with most manufacturing industries, the concerns in the mid-2000s were related to competition from foreign markets and trade issues. Particular to the steel industry, tariffs were impacting both employment and industry production in a negative way, hindering efficiency and bottom line economics. This, in turn, adversely affected those in the metal finishing industry, as finishers were both losing money in the form of discounted prices and losing business completely.

Because the industry needed to comply with regulations from the government, new coatings and methods of handling were developed in the 2000s. Metallized materials were coming into more frequent use as well. While electrocoating and powder coating remained the leading processes, many companies in this industry offered diversified finishing services rather than specialization in one area, due to the changing tastes and wishes of the customer base and the need to keep the business they had in a shaky market.

Current Conditions

According to the American Galvanizers Association, 108 galvanizing companies in the United States produced 3.2 million tons of galvanized steel annually in the late 2000s. Production grew at an annual rate of three percent between 2002 and 2008.

In terms of revenue, Ohio was the number-one state in the metal coating and allied services industry in the early 2010s, accounting for $2.1 billion, or 35 percent, of the $6.1 billion in total annual sales. Washington was second with $505 million, followed by Indiana with $495.8 million, California with $390.1 million, and Illinois with $366.4 million. Top employers in the industry included California, Michigan, Ohio and Texas. Approximately 81 percent of establishments engaged in the industry were small, employing fewer than 25 workers, although firms employing more than 25 people accounted for more than 75 percent of total sales.

Industry Leaders

Industry leaders in the late 2000s included The Crown Group Inc. of Warren, Michigan, with annual sales of $290 million and 800 employees in the early 2000s; St. Louis-based Precoat Metals, with $270 million in 2009 sales and 750 employees; and Acheson Colloids Company of Port Huron, Michigan, with $165 million in annual sales and 900 employees.

Research and Technology

As with the metal-plating industry, a number of innovations in the metal-coating industry were motivated by increasingly pressing environmental regulations. For the process of stripping coatings from rejected parts, blasting with plastic particles was seen as a viable alternative to the more toxic methods of chemical stripping and incineration.

New developments in the deposition of metal coatings caused a shift away from electroplating to alternative methods. Some of these included the use of plasmas, which helped to reduce process temperatures; heating and energizing only the surface, rather than the entire object; and vacuum deposition, a nonliquid process. Vacuum deposition involved reducing pressure in a closed container to produce a vacuum in which pure metals could be vaporized at low temperatures and then allowed to condense on a surface. Laboratory tests of vacuum methods produced high-quality coatings with fast coating times. Vacuum coating also had a significant advantage in that it did not generate the toxic sludges of electroplating processes. The application of metal powders by spraying or through the use of centrifugal force was also becoming more common. As with vacuum deposition, such applications of metal powders had the significant advantage of not producing toxic sludges. In the late 2000s, MacDermid Industrial Solutions was developing an additive that was free of PFOS (perflurooctane sulfonate), which was a pollutant shown to cause harm to fish, mammals, birds, and insects. Called "MiniMist Liquid," MacDermid's new solution was promoted as a safer alternative that required little investment.

The initial cost of many of the pollution abatement technologies was prohibitive to smaller firms, although many of these technologies were also shown to lower production costs. For example, the BASE Corp. reported that pollution abatement measures at two of its coating plants saved it $1.3 million and that the payback period after initial investments ranged from 15 to 20 months.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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