Metals & Manufacturing Outlook October 2016


 

metals & Manufacturing Outlook Newsletter

Presented by All Metals & Forge Group, the MetalsWatch! newsletter was first published in print in 1988 for All Metals & Forge Group. Its primary focus was to be informative to the metalworking industries in the United States. Its original circulation was 2500 organizations. In 1994 we converted to electronic version only, therefore our first archived edition is dated Dec 1994 . Previous printed issues are not available for archiving. Today, Metals & Manufacturing Outlook™ (formerly MetalsWatch!) has a global circulation of 60,000 subscribers at 50,000 companies from a very diverse group of industries, including Aerospace, Defense, Oil, Chemical, Automotive, Medical, Electronics, Heavy Industry, Shipbuilding, amongst many others. Feel free to read the most current issue below, or Click here to view the back issues in our Library at the bottom of the page. To Subscribe to Metals & Manufacturing Outlook™ and receive future issues, please enter your e-mail address and click on Submit below.

 

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Metals & Manufacturing Outlook – October 2016

I. Cover Story: THIS WAS AN UP AND DOWN, ROUNDAND ROUND MONTH
II. NORTH AMERICAN PERSPECTIVE
III. EUROZONE
IV. MANUFACTURING TALK RADIO
V. ASIA OUTLOOK
VI. SOUTH AMERICA
VII. FORGING AND CASTING
VIII. BUSINESS SURVEY INSIGHTS
IX. THE SKILLS GAP
X. AUTOMOTIVE
XI. AEROSPACE
XII. THE MANUFACTURING SCENE
XIII. TECHIE CORNER
XIV. OTHER NEW NEWS
XV. THE FINAL WORD

PUBLISHER’S STATEMENT

Publisher’s Statement

Focus – keep your eye on the ball and think longer term.

This presidential election is more debacle than debatable. In fact, it is one of the worst election cycles many of us have lived through. We politely call it mudslinging, but it isn’t mud – same color, but not mud. And it appears the deeper anyone digs in either camp, the more we feel like we are standing somewhere between a cesspool and a failed septic system. So, pardon us if we focus on manufacturing rather than electioneering.

As we trudged our way through September on the heels of a down ISM report from August, we hoped that the drop-off was just manufacturing taking a breather, the wrap up of summer vacations or the gray funk from the election nonsense, and we looked forward to signs of improvement. The pleasant surprise was that we actually got them; albeit, manufacturing still shed several thousand jobs and hiring slowed overall in what the government calls ‘full employment’.

However, according to the ISM, new orders popped upward while backorders moved only slightly higher, meaning there will be a growth in backlog for the moment. The forecast for 2016 GDP inched up to 1.6% according to the NAM, which was the same number from the IMF although they lowered their expectations from 2.2%. While the new order number is good and GDP growth is tepid – month-to-month ISM growth didn’t slide further down from August as September wrapped up. That tends to bolster the notion that 2016 GDP will be a soft year but a positive one.

Now we will begin hearing the pundits talk about upcoming holiday sales – will consumers buy more this year and give the economy a further boost, as they have been each year since The Great Recession, conceding that 2010 was still part of the recovery cycle? Likely so as the real story may be to put things into perspective in dollars.

In 2000, the U.S. GDP was $12,560 billion dollars. By 2007, it had grown to $14,874 billion. In 2008, it dropped to $14,830 billion and to $14,419 by the end of 2009. In 2010 it had recovered to $14,784 billion and by the end of 2015 it stood at $16,397 billion. It isn’t easy to grow the largest economy in the world by 3-4% but even this year-over-year growth has resulted in an overall real GDP that has more than doubled since 1987 when GDP stood at $8,133 billion.

At its highest point in 1987, the DOW stood at 2,477 before the October crash when it hit 1,738.74. Today, the DOW is more than ten-fold that crash number. So as I often tell others, just look in the rearview mirror once in a while to see where we’ve been and how far we’ve come without a 1929-style collapse. And thus, my expectations for 2016 through 2018 or even 2020 are optimistic, even as manufacturing struggles with a transition from dark, dirty and dangerous to digital, dynamic and maybe a little dysfunctional as IIoT, Big Data, Cybersecurity and globalization seep further in.

Enjoy the following upbeat news and take a breather yourself from the election fodder to evaluate manufacturing in America in a broader and more retrospective light. It isn’t awful; a bit slow, but not hurdling toward the edge of a cliff. It may not boom upward but growth over the next 5 years appears to be fair to midling (often pronounce ‘midlin’ when we drop the ‘g’ to ‘fair to midlin’). It means it’s okay.

Best Regards,
Lewis A. Weiss
Publisher

   

I. THIS WAS AN UP AND DOWN, ROUND AND ROUND MONTH

by Royce Lowe

np directionISM PMI comes back up again from 49.4 to 51.5.

Brexit-bound Britain, due to start exit proceedings next March; sees its September manufacturing performance reach new recent highs.

 U.S. car and light truck sales drop slightly, 0.5 percent y-o-y, Canada’s light vehicle sales drop similarly, 0.5 percent y-o-y and Western Europe car sales increase 6.6 percent y-o-y. China’s increase is over 20 percent.

From September 2017, car manufacturers will submit vehicles for on-road testing as well as in laboratories. This will force adoption of more effective anti-pollution systems.

Boeing and Airbus will supply aircraft to Iran. See Aerospace for details.

 The U.S. economy created 156,000 non-farm jobs in September, which has been described as a ‘solid’ figure. This was less than the 170,000 jobs the economists were calling for, and the unemployment rate rose very slightly to 5.0 percent from the 4.9 percent figure that had been in place since spring. Wage gains over the past 12 months moved to a figure of 2.6 percent. However, manufacturing continued to shed jobs at over 40,000 for 2016.

The ISM PMI figure for U.S. manufacturing turned right around in the month of September, moving back into growth mode with a reading of 51.5 up from August’s 49.4 percent. The overall economy grew for the 88th consecutive month. See North American Perspective for details.

 The IHS Markit PMI for the U.S. manufacturing sector eased back to 51.5 percent in September, a 3-month low, from August’s 52.0 reading. IHS Markit state that ‘manufacturing growth slows amid weakest upturn in new orders for nine months’ with production and new orders expanding at a slower pace. There was a generally subdued client demand and a drop in export sales for the first time in four months.

Manufacturers were looking to bring their inventories into line, and along with this the rate of job creation picked up from August’s low. It is said that new business is being affected by delays in pre-election decision making.

There was a slight increase in backlogs of work.

The five ISM components are equally weighted at 20 percent each. The IHS Markit components are weighted: 30 percent New Orders, 25 percent Production, 20 percent Employment, 15 percent Supplier Deliveries and 10 percent Raw Materials Inventories.

 The Bureau of Economic Analysis came out with its ‘third’ estimate for the annual rate of Real GDP growth in the second quarter of 2016, putting it at 1.4 percent. The figure for the first quarter was 0.8 percent.

GALLUP’s U.S. Economic Confidence Index was at -12 in early October, with the coincident job creation index remaining at a record +33.

 World crude steel production for the 66 reporting countries for the month of August 2016 was 134.13Mt, 1.9 percent up y-o-y.

 U.S. crude steel production, for August 2016 was 6.70Mt, down 3.4 percent y-o-y.

 Primary Global Aluminum Production in August 2016 was reported at 4.944 million tonnes, of which 2.713 million tonnes, over 54 percent, was produced in China. The Gulf Corporation Council (GCC) produced 438,000 tonnes, North America 335,000 tonnes, Western Europe 317,000 tonnes and Eastern and Central Europe 334,000 tonnes.

 The American Aluminum Association is now asking the U.S. government to          do something about Chinese aluminum, since if the price goes down much          lower it may put an end to the U.S. aluminum industry.

Here are the latest figures for US new car and light truck sales for ‘The Big Eight’for September 2016.

The ‘Big Eight’ September ’16 September ’15 YTD % change
General Motors 249777 251310 -0.6
Ford 203444 221269 -8.1
Toyota 197260 194399 1.5
FCA 189929 189567 0.2
Honda 133655 133750 -0.1
Nissan

127797

 

121782 4.9
Hyundai/Kia 115830 113835 1.7
VW 24112 26141 -7.8
Total new   cars and light trucks 1435689

1442467

 

-0.5

 Total cars               575,114                619,112                -7.1

Total l/trucks         860,575                823,355                4.5

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The industrial production figures represent year-on-year changes, as do the consumer prices increases. The unemployment figures, %, are for the month as noted.

  GDP Indl Prodn Cons prices Unemployt
United States +1.1 (qtr) -1.1 (Aug) +1.1 (Aug) 4.9 (Aug)
Canada -1.6 (qtr) -1.3 (June) +1.1 (Aug) 7.0 (Aug)
China +7.4 (qtr) +6.3 (Aug) +1.3 (Aug) 4.1 (Qtr 2)
Japan +0.7 (qtr) -4.2 (July) -0.5 (July) 3.0 (July)
Britain +2.4 (qtr)

+2.1 (July)

 

+0.6 (Aug) 4.9 (June)
Euro Area +1.2 (qtr) -0.5 (July) +0.2 (Aug) 10.1 (July)
France -0.4 (qtr) -0.1 (July) +0.2 (Aug) 10.3 (July)
Germany +1.7 (qtr) -1.2 (July) +0.4 (Aug) 6.1 (Aug)
Italy + 0.1 (qtr) -0.3 (July) -0.1 (Aug) 11.4 (July)
Spain +3.4 (qtr) -5.2 (July) -0.1 (Aug) 19.6 (July)
India +5.5 (qtr) -2.4 (July) +5.0 (Aug) 5.0 (2015)
Brazil – 2.3 (qtr) -6.6 (July) +9.0 (Aug) 11.6 (July)
Taiwan + 0.2 (qtr) +7.7 (Aug) +0.6 (Aug) 4.0 (Aug)
Mexico – 0.7 (qtr) +1.0 (July)

+2.7 (Aug)

 

3.7 (Aug)

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

North AmericaThe Institute of Supply Management PMI figure registered 51.5 percent in September, up 2.1 percentage points from August’s 49.4 reading, representing a return to growth in manufacturing following a month of contraction. There was growth in the overall economy for the 88th consecutive month, which is now the 4th longest expansion is U.S. history, exceeding the Nov. 2001 to Dec. 2007 expansion of 73 months, and just behind the Dec. 1982 to July 1990 expansion of 92 months.

 Seven of the eighteen manufacturing industries are reporting growth in September in the following order: Nonmetallic Mineral Products; Furniture & Related Products; Textile Mills; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Paper Products. Eleven industries reported contraction in September, namely, listed in order: Printing & Related Support Activities; Petroleum & Coal Products; Wood Products; Apparel, Leather & Allied Products; Transportation Equipment; Machinery; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Chemical Products; and Electrical Equipment, Appliances & Components.

There were a number of good, positive comments from Chemical Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Furniture & Related Products and Plastics & Rubber Products. There was a concern from Transportation Equipment regarding the Hanjin Shipping bankruptcy as it involved lost time tracking containers. There is further concern about the capacity and ocean rates in the near to medium-term future. Petroleum & Coal Products say oil prices are still an issue.

The following 5 components of the ISM’s PMI, New Orders, Production, Employment, Supplier Deliveries and Inventories are equally weighted and used to calculate the PMI number. A monthly PMI over 50.0 indicates an expanding economy; a number over 60.0 indicates strong manufacturing output, although overheating may occur.

ISM PMIThe New Orders Index was at 55.1 percent in September or six percentage points up on August’s 49.1 figure, representing growth in new orders after one month of contraction. Growth was noted in nine industries in September, including Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Computer & Electronic Products; Fabricated Metal Products; Paper Products; and Machinery. Six industries reported a decrease in new orders during September, including Transportation Equipment; Electrical Equipment, Appliances & Components; Chemical Products; and Textile Mills.

 The Production Index also went back into growth territory in September at 52.8 percent, representing a 3.2 percentage points increase on August’s 49.6 reading and a return to growth following one month in contraction. Growth was   noted in 10 industries during the month of September including Nonmetallic Mineral Products; Primary Metals; Petroleum & Coal Products; Plastics & Rubber Products; Chemical Products; and Paper Products. The eight industries reporting a decrease in production during September include Wood Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Fabricated Metal Products and Transportation Equipment.

 Employment increased 1.4 percentage points in September to 49.7 from August’s 48.3 reading, representing contraction in employment for the third consecutive month. Seven of the 18 manufacturing industries reported employment growth in September, including Textile Mills; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; and Computer & Electronic Products. The eight industries reporting a decrease in employment in September include : Transportation Equipment; Primary Metals; Fabricated Metal Products; Chemical Products and Machinery.

 The delivery performance of suppliers to manufacturers was slower in September as the index registered 50.3 percent, or 0.6 percentage points lower than August’s 50.9 reading. Seven industries reported slower supplier deliveries in September, including Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Chemical Products; and Primary Metals. The four industries reporting faster supplier deliveries in September are: Petroleum & Coal Products; Fabricated Metal Products; Plastics & Rubber Products; and Computer & Electronic Products. Seven industries reported no change in supplier deliveries in September compared to August.

Raw Materials Inventories contracted for the 15th consecutive month in September as the Inventories Index increased slightly to 49.5 percent from August’s 49.0 reading. Eight industries reported higher inventories in September, including Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Chemical Products. The nine industries reporting lower inventories in September include Wood Products; Machinery; Primary Metals; Plastics & Rubber Products; Paper Products and Petroleum & Coal Products.

The following 5 components of the ISM’s PMI, Customer Inventories, Prices, Backlog of Orders, Exports and Imports are not used to calculate the PMI number but are tracked for trends in the marketplace

The ISM Customers’ Inventories Index registered 53.0 percent in September or 3.5 percentage points above August’s 49.5 reading, meaning that customers’ inventories are considered to be too high in September. The eight manufacturing industries reporting customers’ inventories as being too high during the month of September include Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; and Fabricated Metal Products. The three industries reporting customers’ inventories as too low during September are: Printing & Related Support Activities; Paper Products; and Electrical Equipment, Appliances & Components. Six industries reported no change in customer inventories in September compared to August.

 The ISM Prices Index registered 53.0 percent in September, unchanged from August’s reading, indicating an increase in raw material prices for the seventh consecutive month. In September 20 percent of respondents reported paying higher prices, 14 percent lower and 66 percent the same prices as in August. Of the 18 manufacturing industries, the 10 industries that reported paying increased prices for their raw materials in September include Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Chemical Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The four industries reporting paying lower prices during the month of September are: Primary Metals; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Computer & Electronic Products.

Up in Price in September were:

Caustic Soda (2); Garlic — Dehydrated; HDPE; Petroleum; Plastic Resins    (2); Polyethylene; Polypropylene; Propylene (2); Stainless Steel (6); Steel* (9); and Titanium Dioxide (2).

Commodities Down in Price:

Copper; Corn (3); Electric Components; Scrap Steel (2); Steel* (3); Steel — Cold Rolled (2); and Steel — Hot Rolled (2).

Commodities in short supply:

Electronic Components.

Note: The number of consecutive months the commodity is listed is indicated  after each item.

*Reported as both up and down in price.

The ISM Backlog of Orders Index was at 49.5 percent in September, 4.0 percentage points up on the August reading of 45.5 percent, indicating contraction in order backlogs for the third consecutive month. Of the 87 percent of respondents who measured their backlogs, 19 percent reported greater backlogs, 20 percent smaller backlogs and 61 percent no change from August.

The seven industries reporting growth in order backlogs in September include Petroleum & Coal Products; Plastics & Rubber Products; Computer & Electronic Products; Machinery; and Chemical Products. The eight industries reporting a decrease in order backlogs during September include Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Transportation Equipment; Primary Metals; Food, Beverage & Tobacco Products; and Paper Products.

The ISM New Export Orders Index was at 52.0 percent for September, 0.5 percentage points down on August’s reading, and representing growth in new export orders for the seventh consecutive month. The seven industries reporting growth in new export orders in are Wood Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Computer & Electronic Products. The seven industries reporting a decrease in new export orders during September are Apparel, Leather & Allied Products; Furniture & Related Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Machinery; and Plastics & Rubber Products.

The ISM Imports Index is at 49.0 percent in September, two percentage points above August’s reading of 47.0 percent, representing contraction in imports for the second consecutive month. The four industries reporting growth in imports during the month of September are Computer & Electronic Products; Furniture & Related Products; Transportation Equipment; and Fabricated Metal Products. The 10 industries reporting a decrease in imports during September include Primary Metals; Miscellaneous Manufacturing; Paper Products; Plastics & Rubber Products; Machinery; Food, Beverage & Tobacco Products; and Chemical Products. 

CANADA’S IHS Markit Manufacturing PMI decreased to 50.3 in September from August’s 51.1 reading, with production effectively stagnant, new orders down for the first time since February and a slight drop in employment in September. Manufacturing production growth was largely confined to Alberta, B.C. And Quebec, with Ontario recording a drop in production for the first time in just over three years.

Export sales fell across the country, but Western Canada showed its first growth in new orders since January 2015.

Canada produced 1.10 Mt of crude steel in August, down 1.6 percent y-o-y. Canada’s light vehicle sales were off 0.5 percent y-o-y at 173,460 units in September, dragged down mostly by poor results for a third consecutive month by FCA Canada. Sales for the first nine months of 2016 were up 3.2 percent y-o-y at 1,507,975 units.

MEXICO’s PMI increased from August’s 50.9 to 51.9 percent in September. The month saw the best performance in new orders, production and employment in four months. Export sales were also up. Mexico produced 1.69Mt of crude steel in August, 1.9 percent up y-o-y.

 

III. EUROZONE

by Royce Lowe

IHSIHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for September, at 52.6 was up from August’s 51.7 amid improved production, new orders – both domestic and export – and employment. Job creation was registered for the 25th consecutive month and there was further backlog accumulation. Germany and Austria showed the fastest growth, with Italy returning to expansion and France nearer to stabilization.

There are signs of improving demand from both European and export clients. The PMI has grown for 38 consecutive months.    

  PMI High/low
Germany 54.3 (53.6) 3-month high
Austria 53.5 (52.1) 3-month high
Netherlands 53.4 (53.5) 2-month high
Spain 52.3 (51.0) 5-month high
Ireland 51.3 (51.7) 2-month low
Italy 51.0 (49.8) 2-month high
France 49.7 (48.3) 7-month high
Greece 49.2 (50.4) 2-month low

Car sales in Western Europe were up 6.6 percent in September, with a record September in the UK, and total passenger car registrations, including the UK, of 1.4 million units. Increases were seen in Germany, 9.4 percent; Italy, 17 percent; Spain, 14 percent; and France, 2.5 percent.

Crude steel production in Germany in August was at 3.51Mt, up 2.4 percent y-o-y; in Italy 1.08Mt, up 7.4 percent y-o-y; in France 0.98Mt, down 5.2 percent y-o-y and in Spain 1.04Mt, down 11.8 percent y-o-y.

Russia’s crude steel production for August was at 5.92Mt, down 1.9 percent y-o-y; Ukraine’s was 1.84Mt, down 4.1 percent y-o-y.

IHS Markit reports a further strengthening in the UK manufacturing PMI from August’s 53.4 to a 27-month high of 55.4.

 There was growth in production, new orders and employment, with new export orders rising at the fastest pace since January 2014. Demand was good from both domestic and export, and growth in consumer products was best for one-and-a-half years, for intermediate for 11 months and for investment for 8 months. It is thought the UK manufacturing growth was triggered by a weak Sterling.

The UK produced 0.582Mt of crude steel in August, down 37.5 percent y-o-y.

IV. MANUFACTURING TALK RADIO

by Tim Grady

hostsEach month, listeners download previous podcasts nearly 20,000 times from mfgtalkradio.com at their convenience to catch up on pieces of information in those discussions with industry professionals and thought leaders. This was one of the objectives of Manufacturing Talk Radio – to build an evergreen reference library of useful information for listeners.

The original advertisements broadcast within those shows remains in place, and some new ad content is occasionally added. Each new broadcast is released on Tuesday at 1:00 p.m. in either a live and lively discussion or pre-recorded segments to capture the thinking of our guests “as catch can” during their busy schedule across time zones and their travels.

Recently added on the third Tuesday of each month is the Global Outlook, presented by Chad Moutray, Chief Economist from NAM, along with MFG Talk Radio’s senior international correspondents, Chong Wang covering China, Royce Lowe discussing the EU and UK, and Norbert Ore reviewing the 18 Purchasing Managers Indices from Manufacturing that he follows from countries around the world.

If you are looking for powerful economic overviews, trending information, new manufacturing developments and breaking industry news, go to mfgtalkradio.com to hear from association experts, industry professionals, local and national politicians, and academic educators focusing on manufacturing.

V. ASIA OUTLOOK

by Royce Lowe

ChinaCHINA produced 68.6Mt of crude steel in August, up 3.0 percent y-o-y; Japan 8.91Mt up 1.5 percent y-o-y; India 8.14Mt, up 9.4 percent y-o-y and South Korea 5.87Mt, up 1.8 percent y-o-y. Taiwan produced 1.89Mt in August, up 10.7 percent y-o-y.

 The Caixin China manufacturing PMI increased very slightly from August’s 50.0 to 50.1 in September, as a result of a slight expansion in production and total new orders. The export business was stable in September, ending nine months of reduction. Cost-cutting measures in the industry led to a reduction in employment.

Figures from the Chinese Association of Automobile Manufacturers (CAAM) say that total light vehicle sales were up 24.2 percent y-o-y at 2,071,000 units.

JAPAN’s manufacturing PMI increased from August’s 49.5 to 50.4 in September, with conditions in the industry showing a marginal improvement for the first time since February. Production was up for the second consecutive month, with new orders off at a slower pace. New export orders were up for the first time in eight months, and there was a slight improvement in employment.

Consumer and intermediate goods producers reported increases and there was greater trade with China, Taiwan and Europe.

Japan saw a 3 percent y-o-y increase in car sales in August, with 2016-to-date car sales falling 4.1 percent y-o-y – with a big drop of 14 percent y-o-y in mini-class vehicles.

The INDIAN manufacturing sector’s PMI eased back slightly from its 13-month high of 52.6 in August, to 52.1 in September. There was slightly less growth momentum than in August, but improvement in manufacturing continued for the ninth consecutive month, with expansion in new orders and production and the best export performance since July 2015. There were reports from India of increases in steel prices.

 

VI. SOUTH AMERICA

by Royce Lowe

South America In Brazil, the manufacturing downturn continues with drops in production, new orders and employment. New export business is down at the quickest pace since 2009.

 The PMI for September, at 46.0, very slightly up from August’s 45.7 figure, represents the 20th consecutive month of contraction in the Brazilian manufacturing industry. Industrial production is down and inflation and unemployment seem to be out of control.

No light has been spotted at the end of any tunnel.

Brazil’s crude steel production for the month of July was 2.77Mt, a 1.1 percent y-o-y decrease.   

 The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – increased slightly in September to 51.0 from August’s 50.8 reading.

 There was a moderate rate of expansion in September, with a good performance in consumer and intermediate goods, and a slight contraction in investment goods. The U.S. PMI was in fact at a three-month low; (note…this is IHS Markit figure) there were slight increases in China and Japan but continuing downturns in France, South Korea, Turkey, Malaysia, Thailand, Myanmar and Brazil.

Europe was slightly brighter with a solid improvement in Germany, Austria and the Netherlands. The UK was at a 27-month high, with growth also up in the Czech Republic, Poland and Russia.

September saw global employment up for the second time in the past three months. Employment was up in the U.S., the Eurozone, Japan, UK, Taiwan, India, Indonesia, Vietnam, Malaysia, Philippines, Poland and Czech Republic. There were employment losses in China, South Korea, France, Brazil, Canada, Thailand, Russia, Ireland and Myanmar.

In conclusion, the global manufacturing sector remained in low growth mode at the end of the third quarter, although there has been an improvement in recent months. Based on the global PMI it appears that global output growth is firming modestly from a 1 percent pace to a 2 percent pace.

 

VII. FORGING AND CASTING

by Royce Lowe

DanaDrivetrain manufacturer Dana Incorporated plans a new plant in Gyõr, Hungary, to produce gears for European vehicle manufacturing. The new, ‘state-of-the-art’ plant, would cover 140,000 sq.ft. and is budgeted at $51 million. Construction would start in early 2017, and manufacturing would begin in 2020, with about 200 employees.

Dana already operates three plants in Gyõr and this new project will benefit from a non-refundable cash grant from the Hungarian Investment promotion Agency.

EJ —the group that produces and distributes municipal and infrastructural castings in North America, Europe, and Australia — is laying plans to relocate from its original location in East Jordan, MI, to a new foundry at a greenfield site. The project is in its very early stages and is not final. It is pending final approval from local and state officials. The intention is to build on a site in Warner Township, MI, within 20 miles of its current location, with manufacturing at the new plant to begin in 2019.

The foundry has been operating for 133 years, and none of the 350 jobs at the present location are said to be at risk.

Long known as East Jordan Iron Works, EJ renamed its organization in 2011, establishing a global brand for products it manufactures at foundries in Australia, Canada, France, and Ireland. It has a second U.S. plant in Ardmore, OK.

Fritz Winter, a group based in Germany, has started construction on a $200 million project in Franklin KY. This is the first time the company has established a production facility outside Germany. The site was selected because it is near customers, skilled workers and site infrastructure.

Fritz Weaver produces almost 800 cast iron parts for automotive and commercial vehicle brakes, chassis and motors, and hydraulic systems, in gray, ductile and compressed graphite iron. Components will be supplied as rough castings, pre-machined or fully-machined parts.

The Kentucky operation will produce around 60,000 tonnes per year and will employ over 200 workers when operations start in 2017, with this number increasing to 340 workers with a full, five-year development.

VIII. GLOBAL ECONOMIES PROVE RESILIENT

by Norbert Ore

SEPTEMBER 2016 BUSINESS SURVEY INSIGHTS

Recent months have featured mixed results as the various PMIs have bounced around the mid-point of the scattergram. This month, the survey data presents an interesting mosaic of the major global economies. The trend of slow, persistent economic growth continues, but we see, at least for this month, more positives than any month since March.

While global economies are still considered to be underperforming, September is encouraging as 15 of the 18 (13 in August) surveys that we follow are above the mid-point; only Australia, South Korea and Brazil failed to grow. Even more encouraging – 12 of the 15 were both expanding and strengthening. Can this continue? Doubtful! We would judge it to be more coincidence than a new trend.

In spite of the continuing trepidation with regards to BREXIT, the UK (55.4, +1.9) gained momentum in September posting its best reading since mid-2014. It is likely this level of activity can be explained by inventory replenishment and/or favorable exchange rates.

China’s Official Report, the CFLP PMI (50.4, unch), has averaged 49.9 for the first nine months of the year. The Caixin China General Manufacturing PMI (50.1, +0.1) fell to the mid-point and has averaged 49.3 for the first nine months. Manufacturing in China has shown little change since we began tracking both surveys in 2012.

In North America, Canada (50.3, -0.8) reported growth for the seventh month following a seven-month contraction. Meanwhile, Mexico (51.9 +1.0) recorded its thirty-eighth consecutive month of growth as it continues to recover after posting its lowest level in 33 months in July.

Scattergram

IX. THE SKILLS GAP, EMPLOYMENT, AND ASSOCIATED

by Royce Lowe

Engineer Teaching Apprentice PwC (Price Waterhouse) is having its say on the talent (shortage) issue by offering suggestions as to how to develop a competitive industrial workforce. Although around one third of manufacturing companies say they have no or only a little difficulty in finding suitable employees, the number of job openings is still higher than the number of hires, pointing again to the fact that here is a problem to be addressed. 

PwC suggests workplace training, community colleges, recruitment of STEM (Science, Technology, Engineering and Math) graduates directly, hiring outside the industry, apprenticeships and the hiring of talent from outside the U.S., although this would mean the U.S. would need to raise the number of visas for skilled, non-U.S. Workers.

Meanwhile the majority of U.S. higher education admission directors say they are losing potential applicants because of applicants’ concerns about accumulation of student loan debt. At public colleges 51 percent say they are losing potential applicants, but the figure rises to 87 percent for private colleges.

X. AUTOMOTIVE

by Royce Lowe

automotive mfgFord hit back at Trump, as CEO Mark Fields says he’s ‘disappointed’ by DT’s accusations – when politics gets in the way of facts. Ford is moving the slow-selling Focus and C-Max Hybrid to Mexico and replacing them, in the Michigan factory with two new products which ‘those in the know’ say are the Ranger compact pickup and a revived Bronco SUV.

Meanwhile a Tesla hit a tree somewhere – does it really matter where – at 155kph/96mph -with the auto pilot not on, and there was a crash on an Autobahn in Germany where the driver claimed to have activated the autopilot system. Tesla looks like being on track to reach its target shipment of 80,000 vehicles for 2016.

GM says its Bolt EV will travel 238 miles (383 kms) on a charge, beating earlier estimates, and that after a $7,500 federal tax credit the car will sell for $30,000. 

Three Austrian brothers, the Kreisels, are coming hot on Tesla’s heels. Kreisler Electric GmbH, says that companies that include BMW, McLaren Automotive Ltd and VW are looking to them to get away from fossil fuels and join the EV revolution. They work out of a three-door garage and are making battery packs and electric drivetrains for a new generation of plug-in cars, boats and airplanes. The brothers have so far designed lithium-battery production lines for OEMs and have created prototypes for top-tier carmakers. 

VWVW is, not surprisingly, still getting an awful lot of press coverage, some of the latest being about its hounding by the U.S. Justice Department, who are also investigating Deutsche Bank AG. The two German companies account for 320,000 jobs. VW, with a net liquidity of just over $32 billion, has already agreed to pay $16.5 billion in civil litigation fines in the U.S., but this is not the end as there are civil claims from several states and $9.2 billion in lawsuits in Germany. And the whole darned Dieselgate thing is spreading to the Group’s real cash cow, Audi. In spite of all this, VW maintains it will end up being the numero uno in the electric vehicle business.

Canada hits the automotive news this month with word that as part of a settlement with Unifor, GM will invest handsomely in the assembly plant in Oshawa, an engine and transmission plant in St. Catharines and a parts depot in Woodstock, all in the province of Ontario. Some engine production will be moved from Mexico to St. Catharines, and hundreds of millions will be invested in Oshawa. The Canadian Government says it will match GM’s investment with tax dollars. 

Hyundai, recently ranked number three for quality in the J.D. Power survey, says the U.S. is a key export market destination for its Kia Motors plant in Pesqueria, Mexico. Kia was recently voted number one in the J.D. Power survey. The plant has been producing since May 2016, will have 14,000 employees by the end of 2017, and will produce 300,000 units per annum when wound up to a three-shift operation. The plant will max at 400,000 units per annum, raising Kia’s global capacity to 3.56 million units per annum.

This plant will augment production at the Kia plant in West Point GA and the Hyundai plant in Montgomery, AL.

XI. AEROSPACE

by Royce Lowe

BoeingUnder the terms of a license granted by an obscure U.S. Treasury Department bureau, both Boeing and Airbus will supply aircraft to Iran Air.

Boeing will supply up to 109 jetliners, 747s, 777s and 777Xs; an order for 80 aircraft for $17.6 billion plus a further 29 via leasing companies. Airbus has a $27 billion order for 118 jetliners with licenses issued for the first 17.

Congressional opponents have vowed to block the exports. What if the next U.S. President decides to reinstate sanctions?

Boeing’s crystal ball sees a demand for 6,810 new aircraft in China over the next 20 years, worth $1.025 trillion, on the back of an annual 6.4 percent increase in passenger traffic in the next 20 years. Worldwide demand over the next 20 years is estimated at 39,620 new aircraft worth $5.9 trillion. 

Boeing is on the road to Morocco, where it will open a major Boeing hub. King Mohammed VI, who has the last word on all things major, oversaw the signing of a memorandum of understanding in Tangiers to establish an industrial zone where up to 120 Boeing suppliers and sub-contractors could operate, and where some 8,700 jobs will be created. 

Morocco’s aeronautical industry has seen a six-fold growth in ten years, with 121 firms employing 10,000 people for annual revenue of $1 billion.

The World Trade Organization (WTO) claims that the EU has failed to eliminate subsidies to Airbus Group SE that were previously found to violate trade rules. This opens the door to billions of dollars in sanctions against Brussels. The U.S., through Airbus vs Boeing, will seek $10 billion in sanctions.

To quote a Boeing V.P., ‘ What we’ve always aspired to is for Europe and Airbus to stop the practice of market-distorting launch aid.

XII. THE MANUFACTURING SCENE: ENERGY, ENERGY, ENERGY

by Royce Lowe   

energyThe world’s ever-increasing need for energy is responsible for new developments in ‘alternate’ forms of energy. The day of the fossil fuel is not at hand, in fact steps will surely be taken to ensure it isn’t. And fracking looks like it’s here to stay for quite a while, in spite of Friends of the Earths’ wishes to the contrary. Progress is being made in energy generation by alternate means, and that can be nothing but good. 

Nuclear power is not something that hits the headlines very often in the U.S. There are regulations, of course, and nuclear power plants take eternities to build. Forgings, and big ones of supreme quality, are required for construction of reactor vessels, and only a small number of forgers are able and certified to produce the required parts. The slow development of nuclear projects discourages more forgers from getting into the business, and the fewer projects there are, the fewer companies there are to participate.

A U.S. developer has recently come up with a new, small modular reactor design that is providing a new line of activity for a renowned forging operation. A company in Portland,OR, NuScale Power LLC, claims to be the only U.S. company to commercialize small modular reactor (SMR) technology. It says its plant design is ‘simple, safe, economic and scalable’ and a full-scale, upper module mock-up of its NuScale Power Module (NPM) has been fabricated.

The plan is to build the first commercial-scale reactor near the Idaho National Laboratory in Idaho Falls. The U.S. Department of Energy will grant $217 million over five years. The plant would be operational in 2024.

The Forger, open-die forger Sheffield Forgemasters International Limited (SFIL), will work with NuScale to develop the manufacturing techniques that will be required to install SMRs in the UK. SFIL will forge a large, civil nuclear reactor vessel head by the end of 2017 as part of a program supported by Innovate UK, a governmental arm that promotes technical research efforts for commercial interests.

SFIL has extensive experience in forging reactor vessel components, and an unparalleled track record in the production of (civil) nuclear forgings of this size.

Here comes Tesla again, this time to generate and supply 20 megawatts of energy storage to Southern California Edison as part of a wider effort to prevent blackouts by replacing fossil-fuel electricity generators with lithium-ion batteries.

They will be operational in record time, at the end of 2016. This is all following the biggest natural gas leak in U.S. history.

Tesla’s contribution is 2,500 homes for a day, but the speed of deployment of the lithium-ion battery packs is the ‘real significance of the deal.’ A 2-megawatt Tesla battery system normally goes for $2.9 million, but negotiation is in order for contracts over 2.5 megawatts. No comment was available on the value of this deal.

Fossil fuels will not go down without a fight, as U.S. shale gas from Pennsylvania is set to save 10,000 jobs in Grangemouth in Scotland. A tanker arrived on September 27 with 27,500 cubic meters of ethane. Eight tankers are lined up to make regular shipments to Britain and Norway. There is a moratorium on fracking in Scotland, so there will be protests about this arrangement. Supplies from the North Sea are becoming increasingly difficult and costly to extract since the wells matured.

XIII. TECHIE CORNER: A LITTLE MORE 3D PRINTING

by Royce Lowe

3D printer

3D printing, though not as new as it might appear, has been responsible of late for some quite remarkable structures. A Chinese company, WinSun, has 3D printed villas, apartment buildings and homes. In 2014 it built a 200 square meter home from concrete and later the highest 3D printed building, a five story apartment block, as well as the world’s first 3d printed villa at 1,100 square meters. The innovative 3D printing material is a mix of recycled construction waste, glass fiber, steel, cement and other additives, and the large-scale 3D printer is 6.6 meters high, 10 meters wide and 150 meters long

Back in Houston, TX, student Alex Le Roux has 3D printed a tiny house, 8′ x 5′ x 7′ – by himself, using his own V2 Vesta 3D Printer with a build volume of 10′ x 10′ x 10′. The Tiny House is being heralded as the United States’ first liveable 3D printed structure and was printed from a cement-based mix in only 24 hours. Bit small though?

XIV. OTHER NEW NEWS

by Royce Lowe

rolled metalNucor Corp., the largest U.S. steelmaker, says its growth prospects and profits picture are looking much better following anti-dumping measures against Chinese steel products. Nucor recently purchased Independence Tube Corp. (ITC) for $435 million. ITC makes High-Strength Structural Tubing in Illinois and Alabama, and is situated close to Nucor’s sheet mills. This is part of Nucor’s efforts to get into value added products.

(China’s) Fuyao Glass America Inc. has given rebirth to an abandoned GM plant in Ohio and will, some say, one low wage at a time, produce glass for 4 million vehicles per year. This project represents a potential $200 million investment and creation of more than 2,000 jobs, a lot of them not very well paid – but they are jobs. The company will receive a $9.7 million tax credit from Republican-run Ohio and $1 million for road work. The plant was officially opened on October 7.

China’s Baosteel Group Corp., its number 2 steelmaker and Wuhan Iron and Steel Group Corp., its number 6, will swap shares to become the world’s second largest steelmaker, hot on the heels of ArcelorMittal. There could be other mergers.

According to the China Iron and Steel Association the country has steelmaking capacity of 1.2 billion tons, and made 803 million tons in 2015. These mergers represent an effort on China’s part to reduce its steelmaking capacity, something it has pledged to do over the coming years. In the meantime, things look better for the U.S. steel industry since very heavy duties were levied against a whole range of Chinese steel products.

XV. THE FINAL WORD

by Royce Lowe

Things look better this month in the U.S. manufacturing sector, and further, in the global manufacturing sector also. 

Tesla attracts media attention whenever one of its vehicles has an accident or an incident, driver’s fault or no. Mr. Musk, unusually propelled as he may be, deserves some credit for what he is trying to do.

Cautious optimism might be the order of the day, or the month, again.

Last Months Issue can be seen HERE

 

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