2026.09.23 | GP | Industrials | Grainger & Fastenal 3Q26 Reads

the Outlook for 4Q

Primary:

GWW

FAST

Associated:

MSM

Viewpoint:

Competitor

Moderator: Robert Jacapraro (RJ)

| Sep 23, 2026 | 33 Min Read

Bill Henricks (BH), Principal - DoALL Company

SU MMARY

Overview

The discussion focused on the industrial distribution sector, specifically examining the performance of companies like Grainger and Fastenal in the recent quarter. The expert provided insights into sales trends, pricing dynamics, and market conditions affecting the sector. The conversation also touched on the impact of global supply chain issues, particularly concerning critical minerals like tungsten, and how these are influencing pricing and demand.

Key Insights

The expert highlighted strong sales growth in the recent months, attributing a significant portion of this growth to pricing increases, especially in the metalworking space. There is a notable impact from China's restriction on tungsten exports, which has significantly affected pricing and supply chain dynamics. The expert emphasized the growing importance of automation and AI in the industry, noting increased investments in these areas. The robotics market is evolving rapidly, with advancements in AI enabling more complex applications.

Competitive Landscape

Company/Sector

Positive Aspects

Negative Aspects

Grainger & Fastenal

Strong sales growth driven by pricing and demand

Affected by supply chain disruptions and pricing volatility

Metalworking

Benefiting from pricing increases and demand for high-performance tools

Supply chain issues due to tungsten restrictions

Robotics & AI

Increased investment and advancements in technology

Concerns over potential overinvestment in AI

Quantitative Insights

Metric

Recent Performance

July Sales Growth

Increased by 20%

August Sales Growth

Increased by over 10%

September Sales Growth

Increased by 15%

Tungsten Pricing

Significant increases due to export restrictions

Price Increases

Multiple increases, with some as high as 19%

Clinical Data

Not applicable for this sector.

The discussion provided a comprehensive view of the current state and challenges within the industrial distribution sector, highlighting both opportunities and obstacles faced by companies in this space.

RJ: Hello, everyone. My name is Rob Jacapraro, and I am an industrial analyst here with Guidepoint. I would just like to welcome everyone to our industrial distribution, Grainger and Fastenal, recap on third quarter 2026 sales trends and the outlook for fourth quarter teleconference with Bill Henricks. If you have any questions for our advisor today, please feel free to email them to ask@guidepoint.com. Again, that email address for questions is ask@guidepoint.com. We will try to get to your questions in the order that they are received, and as always, they would be asked anonymously. Just before we start, I would like to introduce our advisor for today, Bill Henricks. Bill, welcome and thank you for your time today. If you wouldn't mind giving us a little bit of background on yourself, especially for those that might be less familiar with you, that would be great and then we can begin.

BH: Sure. Thanks, Rob. Nice to talk to you again. So my name is Bill Henricks. As Rob indicated, I work for Newall and DGI Supply. We're coming up on what we're in our 99th year right now, coming up on 100 years in business. We're third generation family held, started as a manufacturing company, got into distribution kind of late 60s, early 70s. I joined the organization in the kind of mid-90s and have held just about every position, an operator and very temporarily in a room, CEO for one of our manufacturing companies, but I spend the majority of our time in and around wholesale industrial distribution. I also sit on a couple of different boards, including Affiliated Distributors, which is a buying group, and more specifically on the Industrial Safety and Construction Board, which is 1 billion of their, close to 100 billion in total turnover. And I'm excited to talk to you about the goings on in our space. It's certainly interesting times right now.

RJ: Well, Bill, we had a headline this morning of a very positive result in the latest monthly PMI hitting highest level, I think, since 21 by some reports. Have you seen average daily sales trends over the months of July, August and September react as that trend has indicated?

BH: Yeah, yeah. And you should, I guess there's no I told you so's in business or in love, but I think you get the credit for calling that out, predicting that. So kudos for your call there. Yeah, last several months have been quite strong. It's been a bit of a, you know, I won't say a roller coaster, but there's definitely some big swings with the pricing. That's 1 of the big drivers that's affecting our space which I'll drill into a little bit. But yeah, in July, I'm not sure that we talked about this last time, but July daily sales ended up 20%. August slowed down a little bit, but still, you know, double

digit north, just north of 10% in August. And so far in September, we're 15% and change. So very robust. And, you know, I've kind of buried the lead there. 1 of the big drivers there is pricing. You know, full disclosure, we've got more exposure to the metalworking space than probably the typical industrial distributor. You know, I think we are decent analogs. We are a decent analog for Grainger and Fastenal. Probably MSC is a closer analog to us because MSC has got more exposure to the metalworking space as we do. And what's happening, and I think we talked about this last time, but the tungsten pricing and a few others, but the tungsten pricing in particular has been pretty crazy. It starts off with, and again, apologies if this is a little bit of a refresher from the last time we talked, but China, it originates from China kind of cutting off, you know, Japan and putting limits on the rest of the world on the tungsten that was going to be, you know, exported. And so it's a statement that they're, you know, kind of weaponizing their supply of critical minerals. There are some other critical minerals that it seems like China is now limiting, but tungsten is chief among them. And what it has done kind of down the supply chain is, you know, tungsten is pretty critical in cutting tool manufacturing, indexable carbide and round tools, things like drills and taps and reamers, and a lot of what goes into manufacturing is really reliant on those consumables, those production consumables. So it's the P in the MROP. And, you know, the pricing itself has kind of created some winners and losers, both on the supplier side, the larger guys that have inventory when there are supply chain disruptions like there clearly are right now. And on the pricing side and even on the demand side, you know, kind of weirdly abrasives, you know, has benefited and abrasive suppliers have benefited from this because, you know, tungsten is becoming so expensive. Right. You know, in a kind of weird way, high performance tools have now fared better than the general purpose because the gap between general purpose and high-performance tools is now narrowed, and then people are extending their tool life using things like abrasives and resharpening their tools when perhaps they weren't resharpening their tools before. So it's created some other challenges, kind of winners in that kind of pricing. People ask me all the time, what percentage of the growth would you say is the pricing? So I'm kind of already anticipating that question. And I don't know if I can give you a real precise answer. I'm kind of using Jeffro math to come up with this, but my kind of walking around percentage is around, you know, fully 75% of that is pricing. To put it into perspective, Sandvik alone, Sandvik, the largest provider of indexable carbide tooling in the world, OSG, the largest round tool provider, those 2 have had increases. The latest increase was somewhere on the order of 19%, and that was their second or third price increase for this year. So it kind of puts things into perspective. Now, not all MRO categories have had the same price increases, but you know, because the production consumables tend to drive a lot of activity, it's clear pricing has gone up more than, you know, more than seasonal, more than typical. And I would speculate that's kind of driving a good portion of the overall growth. The other part of that, of course, is, and I'm not trying to minimize the impact of all the construction related to the non-residential construction related to the data centers and the power gen related to the data centers and all the infrastructure. Nor would I, you know, kind of downplay the, you know, the impact of the, I'll call it the war machine that's fired back up making bombs and, you know, military instruments, the DOD, all the government contractors are clearly doing well. Offset on that is I'd say, you know, many of the other categories are really kind of mediocre. Weirdly, automotive is doing okay right, right this second, but automotive is not really in any kind of great... it's, you know, we're still a long way off from, you know, our highs in automotive. You know, agriculture is okay. Medical's, you know, done fairly well for the year, but it's the other industrial categories, which have traditionally been the bread and butter of, you know, certainly the metalworking space, but I would argue more, you know, more broadly manufacturing, just in general. Like the smaller job shops, the machine shops, the diversified machine shops, they really haven't done that great, to be quite honest. And so there are certainly losers in the space as well, you know, slow demand and, you know, high costs, high input costs and raising and increasing, ever- increasing them is, you know, not a terrific recipe for those people. But fortunately, I guess fortunately for us and certainly for the large nationals that are more diversified, having these other industries kind of pick up has been a breath of fresh air. And it's clear there's investment going on, not just around... I mean, principally around... the AI play and all the infrastructure to support the AI play, but also now it seems more recently the robot, you know, robot stuff's not going away. For those who were at IMTS, we just came from IMTS last week, that is the largest tool show in the world. It takes place right here in my backyard in Chicago at McCormick Place. And, you know, the cliff notes from the show, which is usually a pretty good indicator of overall sentiment... you know, are people spending money on

CapEx?... that's a decent indicator for how things are, how people are feeling. You know, not surprisingly, the overall numbers for the show were, I'm not going to say anemic, but, you know, certainly a far way away from the high water mark from shows of yesteryear. As the ongoing joke continues, the leads are better. Of course, it's what gets said every other year. It's an every 2-year show. But fewer people attend, but it seems like, again, anecdotally between us and all the other, you know, players in the space, the sales from the show exceeded expectations and the people that were there were more serious minded. And there's definitely money being spent, particularly on automation. You know, not surprising at all that anything that has AI attached to it is all the rage. You can take an otherwise dumb machine, some sort of conventional machine, even maybe blasphemous for me to say, but even a bandsaw, which is, you know, kind of where our company got its roots. You put AI at the end of it, and everyone wants to be a part of it. And then the other play is the robots. The robots themselves have gotten a lot smarter and a lot cheaper. So, and even though that's probably not a, you know, a revolution, it's more of an evolution. It's not a new trend. We've been seeing robots for 20 to 30 years, but what's different now is, you know, I can't remember a time when robots were under $30,000 and were doing more than just simple, you know, lift, carry, place function. Now the robots are smarter, they're less expensive. You know, there are a handful of companies, and not just Tesla, but a handful of companies that are looking at mass producing robots, so that's a trend that's not going to go away. If anything, it's going to accelerate. Yeah. When I look at the actual customer verticals that are, you know, kind of, you know, lifting all tides, it's kind of a lot of the same. It's aerospace is up 9%. Auto, a little misleading. You know, I'll say auto is hard to fall off the floor, so the fact that it's up now, it had to be up at some point. I mean, gosh, we were down for, it looks like, 5 consecutive quarters, so yeah, it's got to go up at some point. So it's up, still way off from historical highs. Government is doing quite well. Ag, which was doing well in the beginning of the year, has kind of softened a little bit in the third quarter. Medical, same, had a good start to the year, softened a little bit. Steel service centers are still well off from highs. So those are the end user markets. And then, of course, clearly what's driving everything is PowerGen. Oil and gas is still doing great. For us and still lifting a lot of tides. And I guess more remarkable still is my MRO categories. It's clearly being led by cutting tools, indexable cutting tools, braces are doing great. And I'll say the majority of that is pricing related to tungsten. My MRO category itself, I feel like I need to explain the MRO category a little bit. So for us... We put a category out for MRO, which is like a catch-all, basically everything else that can't fit nicely into occupational health and safety, cutting tools, capital equipment, hand tools, power tools, metrology, you know, fasteners and fittings, work holding. Anything that doesn't nicely fit into that, you know, one of those categories we kind of lump into, even though they're frankly, everything is technically MRO because it's all maintenance, repair, and operating supplies. But in my parlance, MRO is, you know, things like adhesives and... You know, some janitorial supplies, things like, you know, sorbents and things like that, that are just, you know, too small as a category to fit, to have its own category. So that's, sometimes I'll... Sometimes when I use MRO as a category, I'm calling out the miscellaneous, all others. Not surprisingly, machine tool 'n accessories saw a little bit of a drop right before the show. That's very typical right before IMTS. You know, the trend is people will wait a little bit on their capital equipment in advance of the show to try and get show deals. And that's very typical. And then once the show happens, you know, the kind of purse strings are let go. Frankly, we were seeing a little bit of softness even in advance of that, but now, you know, kind of as predicted, the show and the kind of the general sentiment of things, people are definitely making some investment and that has been right-sided so far in September. Same is true with cutting tools, excuse me, power tools. Power tools similarly are durables, they're not consumables, they're typically like CapEx. They're purchased on different cycles and they tend to follow the machine tool 'n accessories, at least in our world they do. Where, and I'm not sure if we talked about this before, where safety typically is a pretty good indicator of employment. Makes sense, right? You've got more hands, you've got more hands to protect. So it's a pretty good indicator that people are full staffed, where cutting tools and abrasives, all the production consumables are a decent indicator of the actual units being produced, if that makes sense. So, you know, typically in a normal environment, you know, when the production consumables are up, cutting tools, abrasives, and indexable carbide, you know, things like that, it means that, you know, true manufacturing output is up. And when, you know, safety is up, it typically means people are staffing again. And, you know, you'll see, I guess, in a typical year towards the end of summer, you see plants shut down and safety goes down. Maybe there's some, you know, additional maintenance spending, and some

cleanups, and, you know, things like floor cleaners and paint, you know, tend to go up, you know, towards the end of summer. Well, this has not been typical at all. I'd say that right now what's driving, again, the cutting tool spend is really not true demand. It's a little bit of demand, but it's a lot of pricing. So the cutting tools, abrasives, the production consumables that are way up right now, I would say it's a little misleading in terms of the true industrial output and more an indication of, you know, just this, you know, wackiness with respect to pricing. I will say maybe a better indicator of the overall health is safety right now, occupational health and safety. The fact that it seems, again, anecdotally that, you know, Fridays are more full staffed than they have been in prior years; that, you know, the end of the summer where, you know, again, most typically, you know, plants do shut down towards the end of summer. We haven't seen those same sort of shutdowns, at least in our customer base. Yeah, they've been, you know, more, you know, open longer and... And then finally, a good more recent indicator has been CapEx, you know, a little bit of a pause for us, you know, towards the end of really starting in June, some softness June, July, August. Some softness in CapEx spending, in power tool spending. Possibly it's a consequence of the overall pricing environment, too, when things are more expensive on the consumable side. Maybe there's a little less willingness to open up the purse strings on the CapEx side. But, you know, again, very relieved and optimistic that the show did release some of that CapEx spending. And that's a pretty good indicator that, you know, people are still feeling good about things. I guess another storyline that's, you know, a driver for the underlying demand is semiconductors. It's still, I'd say, a relatively small part of the, you know, overall, you know, MROP market, but it continues to grow. It's another kind of, you know, little bright spot in the space. And frankly, you know, if I'm being honest, I don't know that I completely understand all the drivers there. When we've talked in the past, you know, it... it's, you know, intuitively it should have been, you know, because of, even if you go back to the Chips Act and kind of the reshoring that happened, you know, really starting under the Biden administration, we really should have seen more of a steady incline, just intuitively, going back to the chip shortage and just the, you know, the Internet of Things and everything having an onboard computer and everything having chips and cars needing chips and everything needing chips, you'd think that just intuitively the chip space and the semiconductor space would be just a steady, you know, increase year over year, you know, the demand is clearly, unequivocally, the demand itself is going to rise and rise steadily, and there's going to be no end to it. I mean, just intuitively. Now, practically speaking, the effect on manufacturing just hasn't been that slow and steady rise. And we've had a couple years where it was, you know, really not great for the semiconductor space. But I guess the good news there is that, you know, the "for business" signs are all there. You know, all these companies are open for business and they're all hiring, and the overwhelming sentiment is that the manufacturers that are driving this, the big names in the space, are going to have, you know, at least 3 to 5 years worth of runway. And even with all the, you know, the, you know, the perhaps reservations about, well, is the AI play overbuilt? Are we creating another dot-com bubble? I guess my speculation is there's just more things with computers in them. And there's more need for compute. There's more chips in freaking everything. And, you know, I spent 3 weeks in Northern California visiting a number of our large customers, and it just seems like the contracts are such that, you know, I think that 3 to 5-year mark is a safe bet, even if we have a fairly big correction in the market. And you know, people get spooked and, as oftentimes happens with manufacturing, you know, a lot of the, particularly the tier 2 and tier 3 stop spending, that I just don't see a scenario where we're not, you know, continuing to have this need for compute and chips. It's going to benefit the space in an ever-prescient way. So, those are my Coles Notes, as the Canadians would say.

RJ: Yeah, I wanted to double click on 2 of your points, Bill. First, in terms of past experience with the IMTS show, when you see those orders come through, given current lead times for CapEx items, are those usually realizable as fourth quarter shipments or do they tend to bleed out some?

BH: Yeah, that's a good question. And I'll say one thing that I didn't touch on just in general were the lead times and supply chain. So I'll tackle that a couple of different ways. First on the equipment side, that's really probably not our core business, even though that's where, ironically, that's where we got our start was in the manufacturing and distribution of bandsaws. But that's really not. That's less than 5% of our total turnover. But I do have some insight into that. So I'll say that because the demand did taper off or was relatively slow in that June, July, August timeframe, and

it's not just us. A lot of the suppliers found themselves with a decent amount of inventory. I think the shipments are going to realize in a way this year that they perhaps haven't in prior years that, like as you put it and I think rightfully so, when you have a good show, it doesn't necessarily mean a good month, right? It means you're going to have a really good January or February in some cases, depending on the lead times of the larger equipment. But in this year, by contrast, I'd say it's going to materialize faster. It's going to materialize faster because of that kind of pig through the python... On the opposite side of that is the production consumables that we talked about. I'd say that the lead times are unseasonably worse than they've been. Even the suppliers that are... I mean, world-class suppliers... have really struggled given this environment. It's not an exaggeration to say Sandvik, as an example, has their own tungsten mine. Okay. That's not an exaggeration. You can imagine end users are like, well, how can you be out of stuff? You've got your own mine just for this very scenario. Well, yeah, they do. But this is a major shock. This is an exogenous shock. So their lead times are the worst I've ever seen. And I'd say the same with the winners and losers that were created as a consequence of this... abrasives... it's created some supply chain issues and abrasives. And then even further down the supply chain, just when things were starting to catch up and get... I'll call it the Stanley Black & Decker and the Milwaukee's, just as they were starting to really catch up and do well on their lead times, not all categories, but certain categories have been kind of thrown upside down as a consequence of this too. And... yeah, so the lead times, I'd say also maybe help. It's not the entire story, but that probably helps explain a little bit the bumpiness in the... I had an outrageous July. And part of that is, frankly, I was... last July, I was lapping a pretty easy comparable. Last July was awful. So... The fact that I'm up 20% in July is in part a consequence of the pricing and part a consequence of, you know, there is good demand going on, but then also just last July sucked. And then, August 10%... well, 10% is not there, north of 10%, 10.19%, call it 10.2% for between us friends. And you'd say, well, nothing to throw out of bed, but shoot, I mean, my price increases are close to 10% on just the cutting tool side. So what happened with the 10%? And then, September up 15% again, purse strings are opening up with the IMTS show. And some of the impact of the price increases weren't completely realized as part of it. And then, yeah, like I said, finally, again, another part of it is there were just some supply chain issues in August, I think that we would have, and that's evidence also in our backlog. Our backlog grew over that same horizon. And backlogs really... we've got a couple of little manufacturing companies. Our portfolio, I typically don't report out on those numbers. I really just talk about distribution. But I will say, backlog means something in a typical environment. Backlog means something in a manufacturing space, but not so much in distribution because the lead times are typically... they're just not remarkable. But I guess these are not typical times. So, yeah. You know, we looked at August and it was like, how can August only be up 10% and change when bookings are outrageous? And yeah, well, looks like the backlog has grown and that part of that is obviously the supply chain stuff. So yeah, that's a true driver. Good call out on that.

RJ: When you say, I think you mentioned that there's been 3 price increases this year on cutting tools. What was the timing of those? And further on that question, are you seeing people try to pull ahead of what they're seeming to put together as a market that isn't going to get solved anytime soon other than things like allocation or shortages?

BH: Yeah. Two good questions there. I'll take the latter first, which is that... are people trying to buy ahead? And I guess I'll say, well, of course, people are trying to buy ahead. Now, I'm going to be careful about using... I'm not going to call out any specific supplier. I don't want to do that to my partners, but I will say that the household name suppliers are being more careful than maybe even historical; they've been historically in terms of allocations and allowing suppliers to buy ahead and allowing even end users, because big end users have a lot of pull with these suppliers, as you can imagine. Big automotive companies, big aerospace companies, if you're a top 50 worldwide brand, you can exert some power, as you can imagine. I've been impressed with how disciplined these other... well, I mean, perhaps it's not disciplined, perhaps it really is just a matter of life and death that they've really toned down. Several of them have made procedures such that you can't order more than 20% more than your three-month average. Some of them have even gone to greater lengths to try and avoid the hoarding mentality... and it really comes down to... when there's a shortage, you kind of have to pick what child you like best. And I think we talked about this maybe last time, but I can't remember all the statistics off the top of my head, but it was something on the order of a 10X increase in

the tonnage cost of the metric ton of tungsten. Well, by the time it gets to me, here's what I know is that the blank, the example that I do remember was that the three-eighths inch blank for a very common end mill used to be $2.50, and that was last February. It went from last February from $2.50 to $35. So, that same tool that you throw that tool on a Walter grinder and you put a flute on it and you charge $14 normally... You can't hardly charge $14 if the blank itself is $35, right? I mean, this is... and further, again, I'm just trying to put it into perspective. As a manufacturer, there were early in the year, there were 10% increases, 12% increases. Well, yeah, 10% or 12% increases, but the majority of that tool is the carbide. And if the carbide went from $2.50 to $35, 10% is not going to cut it. I mean, again, there's no I told you so's in business, but I'm fairly certain when we last talked, I'm like... You think it's bad right now? Relax. It's far worse than you think. Because we're not done. You're going to have more... you will absolutely have more increases. We are not done with this. And that was my... that was pretty certain that was my call. Like we're in unprecedented times with respect to the price increases. But if you think we're done, you're crazy. I mean, the inputs themselves just make it impossible for these guys to live, and it was like this weird game of chicken where no manufacturer wanted to be the first person to say, "Okay, your prices have to go up," some crazy amount. Well, again, I know I told you so, but what we saw subsequent to that... A call out was increases of 15% and now just more recently like 19%, 20% increases. And I think Sandvik's overall blend was 19% in all the SMS Group, which is the Seco's and the other brands under Sandvik Machining, Seco and Walter and GWS and all the rest of them, they're all in that same order of magnitude, which individually would be a lot, but it's particularly a lot on top of the other increases that they've had. So I think we're starting to catch up to where we are. I will mention there is one other, I guess, give back or call out. I think maybe they did this strategically, or a couple of the big ones have done this strategically, just more as a safe face. But several of the large manufacturers have put together a program to attempt to give back the tariff drawbacks, if you will. This is another one. Well, this is one that I think I was wrong on because I didn't think for one, for a New York minute, that any of these manufacturing companies were going to try and give back anything. And nor is it... like it's freaking impossible to try and figure out how you would do it. I mean, I just don't know how you do it. So, and it's not just one, it's a couple of them. What I think they're doing, what my read is, is they're using it to save face a little bit on the price increases. They're saying, "Well, we're going to get back some tariff dollars." And so we're just going to divide or proportion the tariff dollars out according to the size of our customer purchases and figure out a way to get back some of the tariff dollars to the channel. Now, it hasn't happened yet, but they've all signaled it publicly. So I'm more confident now that it would be hard to not do it if they've signaled that they're going to do it... it kind of kicks the can down the road to the channel partners. Frankly, if I get it, I don't... I mean, the only way I would know how to do it is kind of a similar... something similar where you take some, a real swag of a real wild ass guess of what people were spending on those cutting tools, and then you just proportion it about based on their purchases with you. Well, I guess we'll have to see what that's going to be. I have the feeling it's a little bit more window dressing than anything else. I mean, it might be a benefit to the manufacturing. I thought for sure there's no way they're just going to keep that money and that will go straight to their bottom line. But yeah, a couple of the larger ones have said, "Well, maybe save face on the pricing side by attempting to give it back to customers somehow." You know, I mean, these are 30- year, crazy, complicated supply chains. I mean, I'm still struck by the example in... One of the tools shows that Saint- Gobain said... Saint-Gobain said, "Consider a wheel that is forged in China that goes first to East Longmeadow and then down to Reynosa and then to California." And then try and figure out what my tariff impact is on that tool. And then further try and figure out what the impact is on demand if I increase that particular tool by 60%, 70%. But there's another comparable tool... I can't have all the demand jumping to another tool. It's hugely disruptive to my manufacturing, so I have to just make my best guess at what the blend is going to be, and then I have to increase the pricing accordingly. I'm still struck by that. So, this was their justification on price increases towards the beginning of the year. And so now they're going to get that... they're going to get some sort of rebate back or some sort of tiering back from the government somehow, you know, imagine how difficult that would be to figure out how to get that to an end user. I just... I mean, there's just no one, someone smarter than me for sure is going to have to figure that out.

RJ: So, BH: Yeah.

RJ: Bill, when it comes to the situation with tools, you mentioned abrasives getting a benefit here as people resharpen tools, how impactful can that be to tool life, but also to abrasive demand if this trend builds up to adjust because of the lack or the restriction of supply.

BH: Yeah, lots to optimize there. One is, you know, the true units, undeniably down. Undeniable, the unit demand has to be down. It just has to be. If in normal times a general purpose tool is $14 and a high performance is, you know, $70, $80, something like that. Well, the moment the general purpose goes up to $50, $60, well, now that gap and the high performance, it goes up too, but not on the same order of magnitude. So it might go up. Now that gap is different. So now, the same manufacturer, they might use a high-performance tool because they're going to get better performance. There's at least an opportunity that they can actually drop their spend if they can increase their tool life just by going to a high-performance tool; that's the first part of it. So they're going to use fewer tools, higher price point, fewer tools, and possibly an overall drop in total tools consumed, you know, if done perfectly. But then not only that, you generally wouldn't... I mean, you can, but you generally don't try and extend the general purpose tools with resharpening. Again, you can, but you might get, you know, 3 times the tool life, like 3x the tool life. I mean, that's a real wild ass guess. You can resharp generally twice on, you know, a good amount of the round tools. And each time the spend in abrasives for that might be, you know, somewhere on the order of 20% the cost of a new tool. Again, that's in kind of normal times. Everything is a little bit upside down because the cost of the tools got so much more expensive, so it might actually be less than that now, although I imagine abrasives have gotten more expensive too. So... even before this happened, my contention has always been that there's not great cutting trend data. We don't have a USCTI version. Something called USCTI, US Cutting RJ: Yeah BH: Tool Institute does a lot of good statistics about demand and pricing and market share and all the rest of it. There's no equivalent on the abrasive side. So we kind of have to back into it in terms of, you know, by taking the 2 monsters in the space, Norton and 3M, that have the biggest amount of market share and then kind of backing into the long tail of independence, which we do. And our contention is that the super abrasive space has been growing. Up until recently, our contention was conventional abrasives has been shrinking. It's been shrinking as a consequence of just the fewer combustible engines being made. And so there are fewer gears that are being ground. And that said, now almost unequivocally, both are growing. The conventional abrasives is probably growing again. And unquestionably, the super abrasives is growing and becoming a larger portion of it. The fear now is that's another market. That's another critical mineral that really China controls. All the natural diamond comes, you know, from Africa, but all the synthetic diamond overwhelmingly comes from China. And that's another, it could be another domino to fall. Knock wood, so far it hasn't been, but there's certainly fear about that. And it's not... that's another one where it's... these are, I mean, Rob, these are probably 50-year supply chains. You just cannot build a, you cannot easily build or reshore a new synthetic diamond manufacturing company someplace else. It takes an enormous amount of capital and know-how and, you know, decades of experience. It's like having a new vintage wine; you know, it'll be good in 50 years. So, you know, it's growing now and there's a lot of reasons to be positive right now and my one hedge is, I mean, just be careful. We might need to plant some seeds right now for new synthetic... polyamide and other synthetic diamond and abrasive material because it's such a critical driver for everything that's happening in power gen, everything that's happening in aerospace, everything in defense and certainly everything that's happening in chip manufacturing.

RJ: Hey, Bill, 1 last thing to double click on in our remaining moments here is your mention of the robotics market, and it started with general description of the industrial robotics market, but then you threw in reference to Tesla and humanoids. Have you been surprised by how quickly the talk or the... inquiries regarding supplying that manufacturing base have arisen.

BH: Surprised? I don't know if surprise is the right word. I went to... When I was in Northern California, I went to Palo Alto and, you know, Palo Alto is not a hub for heavy manufacturing. It's all R&D. I mean, you walk down the street and

you just feel 20% smarter. It's a who's who of technical manufacturing, but they are not doing anything to scale. They are just coming up with new stuff. And so I got the privilege to see some of the new stuff while I was out there. And yeah, the things that I just didn't think were going to be possible in our lifetime, like humanoid robots at scale. That is 100% going to happen. There's no scenario where that doesn't happen. That is happening right now. And it's happening, you know, largely because of AI. I'll pick one very simple example: the gripping. When you think about what it takes to grip something, just your own hand and pick something up and move it to a space, there are, you know, hundreds, if not thousands of little decisions that are made. Is it slippery? What's the weight? How does the weight change as I lift? And your brain just does that behind the scenes. Until prior to AI, it was impossible to train a robot with the kind of complexity and the kind of decision-making that your hand just does naturally. And think of every application. The one that comes to mind for me is welding. Well, you know, now that's a real thing. We visited a company that is building in AI around the kind of grip move. And their, you know, value add is a small piece of it, but their value add was basically just the AI that drives that. But think about the AI that helps to develop that too. I mean, creating new industries. It's very exciting.

RJ: That concludes our agenda for today's teleconference. I would like to thank Bill Henricks again for his time today, as well as his valuable and extensive contributions to today's topic and our audience for their interest in the topic. A final reminder for the audience that a replay and a transcript of this call will be available shortly following. Bill, as always, interesting discussions. I wish you a great rest of your day, and as always, I look forward to our next opportunity to catch up.

BH: Thanks, Rob. Take care.

DISCLAIMER: The statements or opinions expressed today are those of the Advisor and not Guidepoint, who disclaims all liability for the content provided. The Advisor may not disclose material nonpublic or confidential information or any information that would cause the Advisor to breach any duty or obligations. Guidepoint is not a registered investment advisor and the information provided is not intended to constitute investment advice.