Metals & Manufacturing Outlook July 2015

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Metals & Manufacturing Outlook – July 2015

I. Cover Story: GREECE VOTES NO IN EU BRINKSMANSHIP GAMBLE IN UNCERTAIN GLOBAL ECONOMY
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE MANUFACTURING SCENE
IX. THE FINAL WORD


Publisher’s Statement

It is a curious time in business and industry.  While the forecasts are for a rising GDP, 93 million Americans remain unemployed or underemployed and employment remains above 5 percent at 5.3.  This is the slowest economic recovery since Franklin Delano Roosevelt was president of the United States (1933 – 1945).  Manufacturing is anxiously awaiting the 3 to 4 percent GDP growth predicted for the second half of 2015, but no one is holding their breath.

All the noise about Greece exiting the Eurozone and the brinksmanship played by the Greek government and even its people resulted in new loans but no debt forgiveness as yet.  That may happen down the road since the Greek economy is likely to slip further into recession with no way to pay back the mounting debt.  Pushing out the repayment dates or cutting the interest rates is unlikely to unburden the economy sufficiently for any near-term recovery.  The balance of the EU nations appear steady although Ireland, Spain and Italy are struggling.

There does not appear to be any upward movement in metal prices as demand for raw materials in the manufacturing sector remains weak.  New orders, while hovering above 50, have not proven strong enough to support price increases.  With Russian nickel hitting the market, nickel prices are sliding to historical lows and will likely remain so throughout 2015 into 2016. Even the Institute for Supply Management’s Purchasing Managers Index in the low 50’s for 30 consecutive months, indicating continued growth in the economy, has not resulted in significant price increases except for materials in short supply.  However, manufacturer’s took a big bite into their backlog of orders because of weak new order books, which may translate into manufacturing weakness in the coming months.

Be sure to tune in to Manufacturing Talk Radio at www.mfgtalkradio.com to hear the Tuesday, July 21 broadcast from 1:00 – 2:00 p.m. ET with Dr. Daniel J. Meckstroth, Vice President, Chief Economist and Purchasing Council Director with the Manufacturing Alliance for Productivity and Innovation discuss the next quarterly outlook.  This in-depth report examines activity in multiple sectors and is an invaluable resource for the manufacturing industry.

We hope you enjoy this issue of Metals & Manufacturing Outlook. Feel free to send your comments, positive or pensive, to publisher@steelforge.com.

Sincerely,

Lewis A Weiss – Publisher
Tim Grady – Editor In Chief
Royce Lowe – Contributing Writer

 COVER STORY: GREECE VOTES NO IN EU BRINKSMANSHIP GAMBLE IN UNCERTAIN GLOBAL ECONOMY

financial-freedomIn a bold move to force the EU to provide better terms on bailout funds, the Greeks, on a 62.5 percent turnout on July 5, voted 61.31 percent No to austerity. No to austerity, no to blackmail as recommended by Greece’s Prime Minister Alexis Tsipras, who said a No vote would strengthen Greece’s negotiating hand.  The Greek debt crisis has been going on for five years, during which time the country has lost 25 percent of its GDP and has an unemployment rate of over 50 percent amongst its young people.

On June 30 Greece failed to make a €1.55 billion payment to the IMF, the biggest default in the fund’s history. This in itself does not have immediate consequences, but failure to make a payment of €3.5 billion on July 20 may mean Greece is likely to leave the euro, maybe even the EU. ‘The Greek Thing’, a situation where one country’s overwhelming debts may change the present and future face of Europe, is grist for the media mill, with some already predicting Armageddon.  But the EU will provide new bailout funds and will have to look at debt forgiveness, according to the IMF, if Greece is ever to recover.

In spite of all this, the Eurozone economy did reasonably well in the month of June, with even France showing some mettle again.   The US economy continues its expansion, but there was a dip in the UK.  Asia might be said to be holding its own, with an encouraging intake of new orders in China.  Brazil’s manufacturing sector is still in a tailspin, with its president, Dilma Rousseff, circumnavigating the globe looking for countries willing to invest in hers.  It is a daunting task, given the nascent corruption clean-up and resulting uncertainty about the Brazilian economy and navigable Brazilian politics, not to mention punishing tariffs on imported goods that protect domestic production in Brazil.

The PMI figure from the Institute of Supply Management was at 53.5 percent in June, 0.7 percentage points above May’s 52.8 figure, representing manufacturing expansion for the 30th consecutive month and growth in the overall economy for the 73rd consecutive month.  While that reads well, it doesn’t feel good in manufacturing at the moment.

The Markit PMI for the US manufacturing sector was at 53.0 percent in June, down from May’s 54.0 reading. Markit stated that June saw the slowest improvement in business conditions since October 2013, and that the slower growth in production led to the decrease in the PMI reading.  Weaker exports – the dollar? – and investment spending in the energy sector were said to be responsible for this slower production situation. On the other hand, states Markit, new orders are expanding at a faster pace, despite the drop in export sales, and employment is up at the fastest pace since September 2014.  Some of Markit’s respondents are having difficulty finding staff with skills that are suited to their business.

The Bureau of Economic Analysis came out with its ‘third’ estimate for the annual rate of Real GDP growth in the first quarter of 2015, placing it at minus 0.2 percent, compared to the second estimate’s value of minus 0.7 percent.  With this third estimate, exports decreased less than previously estimated and personal consumption expenditures and imports increased more.

The Boeing Company recently came out with a new 20-year forecast wherein it sees a demand for 38,050 new jets over the period, worth $5.6 trillion. By 2034 the number of commercial aircraft will have doubled from 2014’s 21,600 to 43,560. Boeing says the single-aisle aircraft, which is said to carry 75 percent of the world’s passengers on 70 percent of its routes, will remain the fastest-growing and largest segment of the industry. Low-cost carriers will account for some 35 percent of demand.  And Boeing has 2720 new orders from 57 customers worldwide for its 737MAX, the fourth generation of what Boeing says is the best-selling commercial jet in history. The newest version will have a 20 percent lower fuel consumption than the current version.

US home sales rose to their best pace in over nine years. The National Association of Realtors reports that contracts signed for home purchases are up 0.9 percent, with sales gains in the Northeast and West of 6.3 percent and 2.2 percent respectively being offset by dips in the Midwest and South. Year-on-year, the pending home sales index rose 10.4 percent to its highest level since April 2006, when the housing market was near the peak of a bubble. The present situation is attributed to a steady pace of job creation.

The Dun and Bradstreet Economic Health Index for June showed that 232,000 new non-farm jobs were added to US payrolls in the month. The business services segment continued to lead, with the real estate sector declining for the second straight month. The Small Business Health Index fell 1.4 percent in June, a decline for the third straight month. D and B noted a continuing year-on-year decline in the Business Health Index in June as it slipped for the third consecutive month.

GALLUP’s US Economic Confidence Index was a flat -8 at the end of June.            The Gallup Job Creation Index for the month of June stayed at the record high figure of +32.

World crude steel production for the 65 reporting countries for the month of May 2015 was 139Mt, down 2.1 percent from the May 2014 figure. The capacity utilization ratio, at 72.1 percent, was down 3.4 percent y-o-y, and down 0.4 percent on April 2015.

US crude steel production for May 2015 was 6.8Mt, down 8.5 percent y-o-y. Imports of steel into the US in this same period were 3.374Mt.

Primary Global Aluminum Production in May 2015 was 4.892 million tonnes. Of this total, 2.668 million tonnes, almost 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 435,000 tonnes and North America produced 385,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for June  2015.

The ‘Big Eight’ June ’15 June ’14 YTD % change
General Motors 259353 267134 -3
Ford 224681 221319 1.5
FCA 185035 171012 8.2
Toyota 179953 173532 3.7
Honda 134397 128979 4.2
Nissan 124228 109645 13.3
Hyundai/Kia 121639 118096 3
VW Group 53144 49994 6.3
Total new  cars and light trucks 1476472 1421051 3.9

 

The SAAR – seasonally adjusted annualized rate – is over 17 million cars for the year, as it was in the month of May. Total sales for the month of June, though up on last year, are 10 percent below May 2015’s figure.

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 least the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, 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.

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA.

GDP Indl Prodn Cons prices Unemployt
United States +0.2 (qtr) +1.4 (May) nil (May) 5.5 (May)
Canada -0.6 (qtr) -0.6 (Mar) +0.9 (May) 6.8 (May)
China +5.3 (qtr) +6.1(May) +1.2 (May) 4.1 (Qtr 1)
Japan +3.9 (qtr) +0.1 (Apr) +0.6 (Apr) 3.3 (Apr)
Britain +1.2 (qtr) +1.2 (Apr) +0.1 (May) 5.5 (Mar)
Euro Area +1.5 (qtr) +0.8 (Apr) +0.3 (May) 11.1 (Apr)
France +2.5 (qtr) -0.1 (Apr) +0.3 (May) 10.5 (Apr)
Germany +1.1(qtr) +1.4 (Apr) +0.7(May) 6.4 (May)
Spain +3.8 (qtr) +2.7 (Apr) – 0.2 (May) 22.7 (Apr)
India + 11.0 (qtr) +4.1 (Apr) + 5.0(May) 4.9 (2013)
Brazil -0.6 (qtr) – 7.6 (Apr) + 8.5 (May) 6.4 (Apr)
Taiwan +2.7 (qtr) -3.2 (May) – 0.7 (May) 3.8 (May)
Mexico + 1.6 (qtr) + 1.1 (Apr) + 2.9 (May) 4.3 (Apr)

 

NORTH AMERICAN PERSPECTIVE

American flag and banknotes

American flag and banknotes

The Institute of Supply Management PMI figure registered 53.5 percent in June, 0.7 percentage points above May’s reading, representing expansion in manufacturing for the 30th consecutive month and growth in the overall economy for the 73nd consecutive month. Eleven of the eighteen industries reported growth in June; in order,  Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Machinery. The four industries reporting a decrease in new orders during June are: Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.

Comments on the month from the manufacturing sector are as follows: Food, Beverage & Tobacco Products are expressing concern about the Avian flu outbreak.  Fabricated Metal Products point to automotive still being strong, and expecting this to continue throughout 2015. Transport Equipment reports good US business, but a softening in Europe and a decline in Asia. Chemical Products report a slight improvement in the manufacturing business. Computer & Electronic Products report a slight improvement in defense spending. Nonmetallic Mineral Products report stable business and prices. Miscellaneous Manufacturing say the downturn in oil and gas prices is affecting demand. Textile Mills report stable business with available capacity. Machinery states that business is down from last year. Furniture & Related Products report that increased housing starts are behind continuing strong business.

US-PMI-Chart

 

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.

  • The ISM New Orders Index for June, at 56.0 percent, was up by a very slight 0.2 percentage points from May’s 55.8 percent reading, representing growth in new orders for the 31st consecutive month. Eleven industries reported growth in new orders in June; in order, Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Paper Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Machinery. The four industries reporting a decrease in new orders during June are: Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.
  • The ISM Employment Index for June, at 55.5 percent, is up 3.8 percentage points on May’s 51.7 reading. Growth was reported in ten industries, namely, in order,  Textile Mills; Furniture & Related Products; Fabricated Metal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; Paper Products; Chemical Products; and Primary Metals. The three industries reporting a decrease in employment in June are: Apparel, Leather & Allied Products; Machinery; and Petroleum & Coal Products.
  • The ISM Production Index, is at 54.0 percent in June, a slight decrease of 0.5 percentage points on May’s 54.5 percent reading representing growth in production for the 34th consecutive month. Growth was noted in ten industries in June; in order, Furniture & Related Products; Nonmetallic Mineral Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Primary Metals. The three industries reporting a decrease in production during June are: Petroleum & Coal Products; Machinery; and Food, Beverage & Tobacco Products.
  • The ISM Supplier Deliveries Index – The delivery performance of suppliers to manufacturing organizations was faster in June as the Supplier Deliveries Index registered 48.8 percent, which is 1.9 percentage points lower than the 50.7 percent reported in May. This is the first month supplier deliveries have been faster than the previous month since October 2012 when the index registered 49.5 percent. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The two industries reporting slower supplier deliveries in June are: Food, Beverage & Tobacco Products; and Fabricated Metal Products. The six industries reporting faster supplier deliveries during June — listed in order — are: Computer & Electronic Products; Miscellaneous Manufacturing; Paper Products; Transportation Equipment; Machinery; and Chemical Products. Ten industries reported no change in supplier deliveries in June compared to May.

  • The ISM Inventories Index, at 53.0 percent for June, is 1.5 percentage points higher than the 51.5 percent reading for May. This indicates that raw material inventories are growing in June for the second consecutive month.  Ten industries reported higher inventories in June, namely Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Primary Metals. The four industries reporting lower inventories in June are: Textile Mills; Nonmetallic Mineral Products; Paper Products; and Plastics & Rubber 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 48.5 percent in June, 3.0 percentage points higher than May’s 45.5 reading, meaning that customers’ inventories are considered to be too low, but higher than in May. Six manufacturing industries reported customers’ inventories as being too high during the month of June, namely, listed in order —  Primary Metals; Furniture & Related Products; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products. The five industries reporting customers’ inventories as being too low during June are: Machinery; Transportation Equipment; Plastics & Rubber Products; Miscellaneous Manufacturing; and Computer & Electronic Products.
  • The ISM Prices Index registered 49.5 percent in June, the same reading as in May, indicating a decrease in raw material prices for the eighth consecutive month. In June, 14 percent of respondents reported paying higher prices, 15 percent reported paying lower prices and 71 percent reported paying the same prices as in May. Five industries reporting paying increased prices for their raw materials in June, namely: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; and Machinery. Seven industries reported paying lower prices during the month of June, namely: Primary Metals; Electrical Equipment, Appliances & Components; Furniture & Related Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Computer & Electronic Products. Six industries reported no change in prices in June compared to May.
Up in Price in June were:

Aluminum*, HDPE Resin (2)

Down in Price in May were:

Aluminum* (7); Corn (2), Natural Gas; Stainless Steel (8); Steel Cold-  Rolled and Hot-Rolled (8).

           In Short Supply in June:

Egg Powder and Eggs

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

* Aluminum reported as both up and down in price.

  • The ISM Backlog of Orders Index was at 47.0 percent in June, 6.5 percentage points lower than the May reading of 53.5 percent, indicating a contraction in order backlogs following a month of growth. Of the 89 percent of respondents who measure their order backlogs, 21 percent reported greater backlogs, 27 percent reported smaller backlogs, and 52 percent reported no change from May. Four industries reported increased order backlogs in June, namely: Furniture & Related Products; Computer & Electronic Products; Fabricated Metal Products; and Machinery. The 10 industries reporting a decrease in order backlogs during June are: Wood Products; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; and Chemical Products.

 

  •  The ISM New Export Orders Index was at 49.5 percent for June, a slight decrease from May’s 50.0 reading. The month’s reading indicates that the volume of new export orders was unchanged from May. Five industries reported growth in new export orders in June, namely: Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Fabricated Metal Products. Six industries reported a decrease in new export orders during June, namely: Wood Products; Primary Metals; Paper Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Chemical Products. Seven industries reported no change in New Exports Orders in June compared to May.
  •  The ISM Imports Index, at 53.5 percent in June, or 1.5 percentage points lower than May’s 55.0 reading. This represents the 29th consecutive month of growth in imports. Eight industries reported an increase in imports in June, namely : Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Chemical Products; and Computer & Electronic Products. The two industries reporting a decrease in imports during June are: Apparel, Leather & Allied Products; and Nonmetallic Mineral Products. Seven industries reported no change in Imports in June compared to May.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI was at 51.3 percent in June, up from May’s 49.8 reading. There was a modest recovery in the manufacturing sector, with improvements in production, new orders and employment. Export demand, surely mostly from the US, was at its highest level since November 2014.  Most provinces recorded improvement, with the exceptions of Alberta and British Columbia, but these latter two report slower declines in production and new orders compared to May.  Canada produced 1.15Mt of crude steel in May, up 8.3 percent y-o-y.

Canadian auto sales were up 1.2 percent y-o-y in June at 177,857 units, with light trucks up 11.5 percent at 109,400 units and cars down 11.7 percent at 68,457 units.

Mexico saw its manufacturing PMI for June fall to 52.0 from May’s 53.3 reading, on the back of the slowest improvement in business conditions since July 2014. But expansion continues in Mexico, and positive expectations for the year ahead continued to boost capital investment and employment in the manufacturing sector in June.  Mexico produced 1.455 Mt of crude steel in May 2015, down 7.9 percent y-o-y.

III.  U.S. FORGING INDUSTRY: A PIONEERING COMPANY’S BIRTHDAY

50th-LogoThis is the fiftieth birthday of  Aluminum Precision Products Inc (APP) of Santa Ana CA. Fifty years ago, Philip S. Keeler founded the company based on his ‘precision forging’ innovation which allowed him, back then, to forge to +/- .015 inches (0.38mm).  Innovative tool and die designs and close control of temperature, pressure and lubrication for aluminum, later titanium, parts, put the company on the road to success.

APP counts among its aerospace clients Airbus, Bell Helicopter, Boeing, Bombardier, Cessna, Embraer, Gulfstream, Honeywell, Learjet, Lockheed Martin, Northrup Grumman and Skorsky.  In the automotive field, APP forges wheels, engine blocks, pistons and suspension parts and supplies, among others, Alfa Romeo, Aston-Martin, Ferrari, Lamborghini and Porsche.

The company practices continuous development of new technologies and processes for applications in industries such as solar and wind energy and marine systems. It is constantly searching out new markets and plans expansion in the Asian Pacific area.  The company credits its success in large part to the proven skill and ongoing dedication and loyalty of its employees.

 

IV  MANUFACTURING TALK RADIO

Manufacturing Talk RadioManufacturing Talk Radio (www.mfgtalkradio.com) continues to broadcast industry leading information for manufactures around the globe.

On the June 2nd broadcast, Brad Holcomb, Committee Chair of the ISM Manufacturing Report on Business put into context the Institute for Supply Management’s Purchasing Managers Index number for May 2015, and Senior International Correspondent for Corporate Compliance and Ethics, Professor Adriana Sanford, discussed counterfeit parts and products in the supply chain.  Counterfeits appear in virtually every part and product category, from pharmaceuticals and aerospace to luxury goods and chemicals, and present a serious threat to health and safety across the globe.  It is also a difficult issue to resolve with prosecutions being difficult and time-consuming to conclude successfully.

On Tuesday, June 9, Alex Pietsch, Director of the Office of Aerospace for the State of Washington and Lawren Markle, Director of Public Relations and Marketing, Los Angeles County Economic Development Corporations joined hosts Tim Grady and Lew Weiss for the final episode of our Aerospace series, “Aerospace on the West Coast.”

June 16th included chief financial officers from several corporations sharing tidbits of information helpful for any enterprise looking to get, and stay, out front in today’s business climate, broadcast from MetLife Stadium in Rutherford, NJ at CFOStudio’s Innovation Conference and Awards Ceremony held in May 2015.

The June 23rd show  discussed how small to mid-sized industrial manufacturers often overlook the substantial benefits of engaging existing and potential customers via virtual forums. Hosts Tim Grady and Lew Weiss were joined by Derek Edmond, Managing Partner, Director of SEO and Social Media Strategies for KoMarketing Associates, and Danny Mishek, Managing Director of VistaTek, to discuss effective strategies for creating, maximizing or taking to the next level, your company’s online social media presence.

The June 30th episode included Dan Clifton, head of Policy Research for Strategas, an institutional investment firm, Congresswoman Debbie Dingell, Representative for Michigan’s 12th congressional district, and Linda Dempsey, Vice President of International Economic Affairs at the National Association of Manufacturers to discuss the obstacles and benefits of the reauthorization of the Export-Import Bank.  The federal bank has lost its charter, as Congress disputes whether the government should continue to support a financial institution that supports over one million jobs in the U.S., contributes over a half billion dollars to the U.S. treasury, and facilitates the sales of billions of dollars in U.S. goods to overseas buyers.  While it seems ludicrous that the U.S. Congress wouldn’t support it in the face of much larger operations in many competing countries around the world, the loss of the charter may be only temporary.  Stay tuned to here if this important vehicle regains its charter or is forced to dissolve.

 

V.  EUROZONE

european economyMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for June, at 52.5, was slightly up on May’s 52.2 reading.  There was growth in all countries except Greece, where uncertainty over the country’s future as a member – or not – in the Eurozone continues to cloud issues in Greece and in the Eurozone as a whole.

The growth rate of the Eurozone manufacturing sector continued its improvement in June and employment was near April’s three-and-a-half -year high.  The second quarter as a whole shows progress in the manufacturing sector, with production and new orders at their highest levels since Q2 of 2014.

The Netherlands knocked Ireland from the top of the league table, and Germany, France and Austria showed improvements on May. France, in fact, went into expansion following 13 months of contraction.

The pace of increase in new orders, both domestic and export, matched May’s 13-month record. Employment growth was noted in the Eurozone manufacturing sector for the 10th consecutive month in June.  It may be that the Greek situation is holding growth back somewhat, and that its resolution, one way or the other, may spark a further improvement in the Eurozone manufacturing sector.

 

PMI High/low
Netherlands 56.2 (55.5) 18-month high
Ireland 54.8 (57.1) 16-month low
Spain 54.5 (55.8) 2-month low
Italy 54.1 (54.8) 2-month low
Germany 51.9 (51.1) 2-month high
Austria 51.2 (50.3) 14-month high
France 50.7 (49.4) 14-month high
Greece 46.9 (48.0) 2-month low

 

A Dutch engineering startup company, MX3D, has had a project approved to build a bridge over an Amsterdam canal by 3D printing. Sounds like really something, and the only thing yet to be decided is where the bridge will be built. But somehow, specially designed robotic arms heat metal – must be steel – to 2700ºF (1480ºC) to weld the structure drop by drop using a computer program to plot the design. It is hoped to start the project this September for completion in mid-2017. The process has many potential uses on construction sites.

Crude steel production in Germany in May 2015 was at 3.7Mt, down 5.4 percent y-o-y; in Italy 2.0Mt down 12.6 percent y-o-y; in France 1.4Mt, up 5.8 percent y-o-y and in Spain 1.4Mt, up 1.9 percent y-o-y.  Russia’s crude steel production for May was at  6.1Mt, down 1.9 percent y-o-y, Ukraine’s was 2.2Mt, down 23.0 percent y-o-y.

There were two extra sales days in the month of June, and new car registrations in Germany, at 313,600, were up 13 percent y-o-y, with the six-month figure at 1.62 million units, a 5 percent y-o-y increase. France registered a 15 percent increase in June with 225, 645 units sold and a six-month figure at 1.01 million units, a 6.1 percent y-o-y increase. Italy saw a 14 percent sales increase in June to 146, 682 units and a 15 percent increase for the first six months to 872,951 units. Spain, still helped by the scrappage program, saw sales jump 24 percent in June to 111,333 units, and a 22 percent y-o-y increase for the first six months to 555,222 units.

The UK saw its Markit PMI at 51.4 percent in June, down from May’s 52.0 figure, and a 26-month low reading. The UK manufacturing sector showed softer growth in June as rates of expansion in production and new orders slowed to, and remained well below, those seen in the year’s first quarter. Growth in production and new orders in Q2 of 2015 averaged the weakest seen since the first quarter of 2013.

Domestic consumer goods production was healthy, but production fell in investment goods and was effectively stagnant in the intermediate goods sector.  Manufacturing employment is up for the 26th consecutive month in June. Exports to mainland Europe, a staple for the UK manufacturing economy, are down, due probably to the strength of sterling and the Greek situation. It seems that domestic consumer demand is presently keeping the UK manufacturing sector’s head above water.

Following protests by citizen groups, fracking in Britain was halted on rejection of drilling plans in Lancashire, in England’s northwest, by ‘local authorities.’ This is bad news for both Cuadrilla (The Fracker), and the British Government, which was hoping to get energy prices down.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.0 in June, its lowest reading since July 2013.  During the second quarter of 2015, the average expansion rates in both global manufacturing production and new orders were the weakest since Q2 of 2013. That said, manufacturing production rose for the 31st consecutive month in June, with average numbers up in North America and Europe compared to mild decreases in Asia.

 

VI  ASIA OUTLOOK

asia-economyChina produced 70Mt of crude steel in May 2015, down 1.7 percent y-o-y; Japan 8.9Mt down 7.0 percent y-o-y; India 7.68Mt, up 4.0 percent y-o-y and  South Korea 6.0Mt, down 2.6 percent y-o-y. Taiwan produced 1.965Mt in May, up 1.2 percent y-o-y.

The HSBC China manufacturing PMI for June was up very slightly to 49.4 from May’s reading of 49.2. Operating conditions continued to deteriorate in June, but at a slower rate. Total new orders were up slightly for the first time in four months, while production contracted at a slower rate than in May.  Employment was down again in June, with the rate of job cuts faster than that seen since February 2009.  However, there is a renewed increase in total new orders and new export orders, suggesting that client demand is on the rise.

It has been China’s way to keep Western nations from treading on its pitch in emerging economies, especially in Africa. This all appears to be changing with a deal signed recently and called ‘historic’ by France’s Prime Minister, Manuel Valls.  The agreement, signed on Chinese Prime Minister Li Keqiang’s high-level visit to France, will involve China-France cooperation on infrastructure and energy projects and will introduce ‘new forms of co-contracting, co-production and co-financing.’ It’s safe to say that for the most part China will supply the money and France the engineering know-how.

From January through May  2015, passenger vehicle sales in China were up 6.36 percent y-o-y to 8.58 million units, but just 1.2 percent y-o-y in May to 1.61 million. SUVs and MPVs are the growth engines of the Chinese automobile industry, pushing the five-month figure up 2.11 percent to 10.05 million units.

In Japan, the Markit manufacturing PMI went from May’s 50.9 reading to 50.1 in June, along with a weakening of production growth and a reduction in new orders. New export orders, however, increased in June at the fastest rate in one-and-a-half years, while employment showed a modest growth for the third consecutive month.

Total vehicle sales in Japan for the month of May 2015, including ‘regular’ vehicles and ‘mini’ vehicles, came in at 335,644 units, a 7.6 percent y-o-y decrease on May 2014’s figure of 363,369 units.

In India there was a moderate expansion in manufacturing production, in June, coupled with the slowest increase in new orders since September 2014. The PMI for June slipped back to 51.3 percent from May’s 52.6 reading, reflecting slower increases in both production and new orders.  Overall the Indian manufacturing economy showed further improvement in June, but employment figures were once again unchanged, suggesting a combination of incredulity about the strength of the upturn and a need to keep costs down.  New export orders received by Indian manufacturers are up for the 21st consecutive month in June. In the month, consumer, intermediate and investment goods all recorded growth.

 

VII.   SOUTH AMERICA

South America geographical view

South America geographical view

Brazil’s crude steel production for the month of May 2015 was 3.8Mt, a 3.8 percent y-o-y increase.  The  manufacturing PMI in Brazil, at 46.5 in June was slightly up on May’s   45.9 reading. Although this was the fifth consecutive month below 50, the reading was in fact the highest since February.  The deterioration continues however with both new orders and production sharply down. Inflation in June was a little less  hurtful than in recent months.  The end of Brazil’s downturn is as yet an enigma.

Brazil’s president, Ms. Dilma Rousseff, who has gone through all kinds of trouble in her second term, recently visited Washington to try to defrost  relations that suffered badly a couple of years ago when it came to light that American spies had been into Ms Rousseff’s email.  Relations were warmed up and a 14-year ban on imports of Brazilian beef was lifted. Infrastructure concessions worth $64 billion were wooed from New York investors. Brazil wants to sell lots of beef and a few aeroplanes to the US, and Ms Rousseff will flit around the world seeking help for her country and her approval ratings. China is already on board.

 

VIII.  THE MANUFACTURING SCENE : MANUFACTURING AND PEOPLE

steelforge-energyiStock_000018266452_LargeDeWys Manufacturing is a fairly small, family-owned business located in Marne, Michigan, that has historically had a problem finding skilled workers, welders, machinists and press brake operators. It has a name nobody recognizes and is located in Marne, an unincorporated community of about 3,000 just inconveniently too far from Grand Rapids. They put a lot of effort into a job fair a few years ago to which only a handful of people came and the one person who met interview standards didn’t get the job.

So back it was to the proverbial drawing board where it was decided to create an in-house training program and to find the right people.  It took a few desks and chairs, a hardly-used room and a few people who knew about training, and DeWys University was born. The company’s workforce development manager came up with a 12-month training course tailored to company requirements, and skilled company workers with some training experience were brought on board to help things through.

After about four years almost all the staff of 150 received additional training in all company disciplines – welding, press brake, machining, paint line and laser cutting. The company has developed a close relationship with high schools and colleges within a 10-15 mile radius.  The biggest investment here was the time of the people who did the training, most of whom work for the company.  This would seem to be a good example of imagination winning out in the face of a dilemma, of people willing and able to teach and of employees willing to listen and learn. It all sounds very simple, but requires dedication.

The US Department of Labor recently announced a grant of $158 million for regional and industrial specific job training of which a good portion will be allotted to training in manufacturing and advanced manufacturing industries.  The grants will range from $500,000 to $7 million and will at this time be distributed to 27 states. These grants will promote work-based learning opportunities such as apprenticeships. This is good, but is it enough?

Two short stories, two different scenarios. There’s room for both. Of course Big Government should support manufacturers; in fact, it should be behind them every step of the way. But there’ll always be the DeWys of the world, companies that use their own people resources to better their output and their quality.

We all understand the need for productivity and quality, and how we attain them should be a partnership between manufacturing, education and government, most ably aided by the industry’s willing participants. It’s a safe bet that there are thousands of eager people out there willing to be trained to fill the thoudands of jobs available in manufacturing.

 

IX.  THE FINAL WORD

time

The final word this month is…confusing.  At this moment, nobody can predict the effects of the Greek No vote, but perhaps the less attention it gets the less will be its overall effect.

 

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