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Metals & Manufacturing Outlook December 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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IN THIS ISSUE:

MANUFACTURING OUTLOOK

CREDIT MANAGER’S INDEX

METALS OUTLOOK

AUTOMOTIVE AND AEROSPACE OUTLOOK

AUTOMOTIVE OUTLOOK

AEROSPACE OUTLOOK

ISSUES OUTLOOK

ENERGY OUTLOOK

GLOBAL OUTLOOK

EUROZONE OUTLOOK

ASIA OUTLOOK

SOUTH AMERICA OUTLOOK

GLOBAL BUSINESS SURVEY INSIGHTS

THE FINAL WORD

PUBLISHER’S STATEMENT

Publisher’s Statement

As we all make a collective sigh, some in relief, some in resignation, the good news is that the daily noise of the election distraction is over, although some pollsters are already weighing the public’s interest in potential candidates for 2020. That aside, it’s time to get back to business. Manufacturing has shown some signs of strengthening in the fourth quarter as we head into 2017, even though capital expenditures remain very weak for the sector. Machine tool orders for August, September and October were up and it is an important indicator for future production although reporting lags by a full 45 days. ewer countries are in recession territory and Brazil may be at or nearing their bottom. Brexit is the ho-hum we expected; albeit, no one really knows when it will play out or whether other countries will follow suit. Interestingly, there is more noise in Scotland about pulling out of the UK and rejoining the EU than there is in another EU country exiting the EU. Overall, the U.S. appears poised for GDP growth in the low 2’s according to most experts and analysts with an occasional loose hare suggesting some-thing above 3, which would include our President-elect. According to the charts in TradingEconomics.com, U.S. exports have tripled since 2002 in spite of the Great Recession of 2008 and the strong dollar since late 2014. As other country economies recover, their currency should strengthen against the dollar, stimulating more trade – unless – the President-elect slaps on tariffs, kills the TPP, cripples NAFTA and believes that isolationism and protectionism mixed with trickle-down economics will boost U.S. exports. Doesn’t exactly sound like a recipe for success, does it? Employment in manufacturing continues to be – odd. The industry shows somewhere near 300,000 open jobs without a headlong rush in hiring. Across the country we have heard that the absence of high-skilled workers, or those familiar with the digital machine world, is hampering hiring, despite more than 3 million teens graduating high school each year and STEM being part of the curriculum since 1985 with more and more refining emphasis on it each year since. By many measures, STEM is not turning out the skill set employers need and the knowledge gained during a four-year degree is two years old when new college grad hires take their first cubicle seat. Many were looking to the federal government to help – from any Department: Education, Labor, Commerce – but nothing of any significance has transpired over the last 8 or 12 years. “No Child Left Behind” left a mess in its wake, and Common Core is about as reliable as common sense. The answer to the skills gap may be at the state level, but even they move at a slow pace with limited budgets compromised by existing debt. The actual answer lies within each business itself, and many of the associations that serve them. While the risk is that a skilled-up employee may jump ship to another employer, it is more likely they will stay and apply their new skills if the cerebral environment and practical application is dynamic. Having spoken with more than a handful of companies about this issue, it becomes more and more apparent that the skills gap will be closed within the manufacturers themselves, and not by some government program whether state or federal. It is a retooling cost that manufacturers will have to pay as they transition from 20th Century production lines into 21st Century manufacturing from concept to consumer and back again. And don’t discount the impact of robotics and automation. If people are unwilling to enter the industry, the industry will still move forward; if people push their expense of wages and benefits and more paid leave, they may imperil their own positions in the future.

Best Regards,

Lewis A. Weiss Publisher

   

MANUFACTURING OUTLOOK

THAT WAS THE MONTH THAT WAS, AND A SURPRISE TO SAY THE LEAST

by Royce Lowe

metals economyThe month saw an election result that was a surprise, to say the least. Donald Trump, on the back of many lies, threats and promises to make America great again, will hold the reigns for a minimum of four years.

We will say goodbye to Obamacare and may see the flood gates open on coal again. The Paris climate-rescue may be in jeopardy. Tariffs might be levied against goods made anywhere but in the fifty states. Trade agreements might be torn up and the U.S. might decide not to help its allies in NATO. China will be ‘confronted.’

Trump took credit for preventing 1,100 jobs going to Mexico from Carrier Corp., a subsidiary of a defense contractor but for the employees, that became a bad dream about a red herring. The final jobs saved is likely to be less than 1,000 and may only be 700; a largely symbolic gesture that cost the state of Indiana $7 million.

Meanwhile, across the Atlantic, Theresa May, Britain’s Prime Minister, has been given the right to trigger Brexit late next March. But her plan may be subject to parliamentary scrutiny. Brexit is turning out to be something that most of the people who voted for it, and some of those who didn’t, would not recognize. It will be an ongoing saga for an indeterminate time.

Manufacturing in the U.S., Europe and most of Asia came through November in quite good health, and an optimism that things will continue accordingly through the end of 2016 into 2017. The U.S. private sector created 216,000 jobs in November according to CNBC, 178,000 according to The Washington Post. The unemployment rate eased back to 4.6 percent.

The ISM PMI figure for U.S. manufacturing continued in growth mode in the month of November, with the PMI reading moving to 53.2, up from October’s 51.9 percent. The overall economy grew for the 90th consecutive month.

The IHS Markit PMI for the U.S. manufacturing sector increased to 54.1 in November, up from 53.4 percent in October, on the back of the fastest rise in production in 20 months with an accom-panying rise in new orders.

Employment and input buying increased during November, and cost inflation slowed from October’s two-year peak. The increase was mostly domestic driven, with only a slight contribution from exports.

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

The Bureau of Economic Analysis revised its estimate for the annual rate of Real GDP growth in the third quarter of 2016, putting it at 3.2 percent, up from the advance estimate of 2.9 percent. The figure for the second quarter was 1.4 percent.

GALLUP’s U.S. Economic Confidence Index was running at post-recession highs following the election, at +10 in late November, with the coincident job creation index matching the highest level in Gallup’s nine-year trend at +33.

World crude steel production for the 66 reporting countries for the month of October 2016 was 136.52Mt, up 3.3 percent y-o-y. U.S. crude steel produc-tion for October 2016 was 6.38Mt, down 2.5 percent y-o-y.

Primary Global Aluminum Production in October 2016 was reported at 4.986 million tonnes, of which 2.727 million tonnes, over 54 percent, was produced in China. The Gulf Corporation Council (GCC) produced 440,000 tonnes, North America 337,000 tonnes, Western Europe 320,000 tonnes and Eastern and Central Europe 337,000 tonnes.

NORTH AMERICAN PERSPECTIVE

by Royce Lowe

na-flag

The Institute for Supply Management PMI figure registered 53.2 percent in November, up 1.3 percentage points from October’s 51.9 reading, representing the third consecutive month of growth in manufacturing. There was growth in the overall economy for the 90th consecutive month.

Eleven of the 18 manufacturing industries reported growth in November in the following order: Miscellaneous Manufacturing; Petroleum & Coal Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Nonmetallic Mineral Products; and Primary Metals. The six industries reporting contraction in November, listed in order are: Printing & Related Support Activities; Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Furniture & Related Products.

Comments from the manufacturing sector were to all intents and purposes positive, and most industries are looking for increased demand and strong bookings going into 2017.

Following is a summary of the five major indexes, each weighted at 20 percent in calculation of the PMI number for November. October’s readings are in parentheses:

    New orders                     53.0 (52.1)

    Production                      56.0 (54.6)

    Employment                   52.3 (52.9)

    Supplier Deliveries                  55.7 (52.2)

    Inventories                    49.0 (47.5)

The following five components are not instrumental in the PMI calculation, but are an important part of the manufacturing industry:

Customer Inventories    49.0 (49.5) 

    Prices                             54.5 (54.5)

    Backlog of orders           49.0 (45.5)

    New export orders          52.0 (52.5)

   Imports                         50.5 (52.0)

Commodities up in Price in November were:

Aluminum*; Caustic Soda; Copper; Corrugate (2); Corrugated Boxes; Linerboard; Methanol (2); Scrap Steel; Stainless Steel (8); Steel (11); and Steel — Cold Rolled.

Commodities Down in Price:

Aluminum* (2); Natural Gas; Plastic Resins; Propylene; and Steel — Hot Rolled (4).

Commodities in Short Supply

None.

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

*Reported as both up and down in price.

CANADA’S IHS Markit Manufacturing PMI increased to 51.5 in November from October’s 51.1 reading, as manufacturing growth picked up to a four-month high.. Production and new orders were up, with the fastest rise in new orders since April and the first rise in export orders since June. Employment was up.

Alberta and B.C. were the best performers, showing their fastest rise in new orders since August 2014. Ontario and Quebec showed lower new order volumes, largely reflected in lower export sales. Canada produced 1.03 Mt of crude steel in October, up 10.5 percent y-o-y. Canada’s light vehicle sales were up 10.4 percent y-o-y to 160,573 units, bringing the total for the year to 1.823 million units, just 75,000 short of the record 1.898 million set in 2015.

MEXICO’s PMI in November was at 51.1, down from 51.8 percent in October. Growth in production and new orders was relatively subdued compared to that in October, and there was a reduction in export orders.

Mexico produced 1.65Mt of crude steel in October, up 21.7 percent up y-o-y.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for November 2016.

The ‘Big Eight’ November   ’16 November   ’15

YTD

% change

General Motors 252599 229296 10.2
Ford 196441 186889 5.1
Toyota 197645 189517 4.3
FCA 158389 184871 -14.3
Honda 122924 115441 6.5
Nissan 115136 107083 7.5
Hyundai/Kia 115011 105560 8.9
VW 29672 23882 24.2
Total new cars and light trucks 1380558

1331056

 

3.7


Total cars                  531,108                547,946                -3.1

                      

Total l/trucks           849,450                783,110                8.5

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

Industrial

Production

Consumer Prices Unemployment
United States +3.2 (qtr) – 0.9 (Oct) +1.6 (Oct) 4.9 (Oct)
Canada +3.5 (qtr) +2.8 (Sept) +1.5 (Oct) 7.0 (Oct)
China +7.4 (qtr) +6.1 (Oct) +2.1 (Oct) 4.0 (Qtr 3)
Japan +2.2 (qtr) – 1.3   (Oct) +0.2 (Oct) 3.0 (Oct)
Britain +2.0 (qtr) +0.3 (Sept) +0.9 (Oct) 4.8 (Aug)
Euro Area +1.4   (qtr) +1.2 (Sept) +0.6 (Nov) 10.0 (Sept)
France +1.0 (qtr) -1.1 (Sept) +0.5 (Nov) 10.2 (Sept)
Germany +0.8   (qtr) +1.1 (Sept) +0.8 (Nov) 6.0 (Nov)
Italy +1.3   (qtr) +1.8 (Sept) +0.1   (Nov) 11.7 (Sept)
Spain +2.9   (qtr) +1.2 (Sept) +0.6 (Novt) 19.3 (Sept)
India +8.3   (qtr) +0.7 (Sept) +4.2 (Oct) 5.0 (2015)
Brazil – 3.3   (qtr) -4.9 (Sept) +7.9 (Oct) 11.8 (Oct)
Taiwan + 3.9 (qtr) +3.7 (Oct) +1.7 (Oct) 3.9 (Oct)
Mexico +4.0   (qtr) -1.3 (Sept) +3.1 (Oct) 3.6 (Oct)

CREDIT MANAGER’S INDEX
by Chris Kuehl, Ph.D.

look-aheadBusiness data has been more than unpredictable of late. The elections are to be thanked for much of this. There was a great deal of flux during the campaign as everybody seemingly waited to see what would happen next. The surprise win for Trump set off alarm bells, but these quickly faded as it was assumed that his policies were more overtly aimed at economic growth.

“Post-election, there is still trepidation in some sectors and enthusiasm in others,” said NACM Economist Chris Kuehl, Ph.D. The data from the CMI this month reflects this shifting attitude, but

there is an additional caveat to be aware of, Kuehl noted. The response to the survey was less robust than it has been in past months. This creates some concern that readings might be skewed as compared with where they have been and might be in future months.

The overall score for the index stayed close to what it has been the last two or three months. It is slightly down at 52.9 compared with 53.5 in October and 53.7 in September. The interesting dynamic is found in comparing the favorable factors with the unfavorable ones, however. Overall favorable factors improved to 60.3, back to the level seen in September when it hit 59.5. The score for the unfavorable factors caused the most concern as it has fallen to 48 from 50.3. This reading has returned to the levels seen earlier in the year when the numbers were in the high 40s. This month is the lowest reading yet this year, but only by a point.

“The manufacturing sector has been more than a little cautious this year as the outcome of the election promised major changes regardless of who the victor would be,” said Kuehl. “That caution played out in delayed orders and very careful management of cash flow.” This pattern was visible with this last month’s readings as well. The overall score was very close to what it was last month—52.3 vs. 52.9. There was not as much similarity between the favorable and unfavorable sections, however. The gains in the favorable category, with a reading of 5, put the numbers back to where they were a month ago. They were 56.4 in October and 59.1 in September. The overall score for the unfavorable readings was 47.8, considerably lower than the previous reading of 50.6, but frankly these numbers have been weak all year with six of the 12 months under 50. The devil (as always) is in the details.

METALS OUTLOOK by Royce Lowe

US Forging IndustryChina’s vow to eliminate 100/150 million tons of steelmaking capacity by 2020, from a total capacity of 1.2 billion tons, has culminated in the merger of Shanghai-based Baosteel Group and Wuhan Iron and Steel Group in the central province of Hubei. The two groups were combined to create China Baowu Steel Group, second only to ArcelorMittal. The company has assets of $105.9 billion and 228,000 employees. The two companies produced a combined total of 60 million tons in 2015.

The National Tooling and Marketing Association has stressed to the U.S. International Trade Commission the fact that high duties on tool steel imports would adversely affect U.S. tool and die manufacturers and would threaten thousands of jobs.

Tool steel is produced in insufficient quantities and grades in the U.S. to satisfy requirements, and as such imports of such products are a necessary part of U.S. manufacturing.

Is a steel problem bringing grief to France’s flagship energy supplier? EDF (Electricité de France) is in the midst of a crisis involving higher-than-specified carbon contents found in certain steel samples taken from (mostly) bases of cylindrical steam generators. The tests were ordered by the Nuclear Safety Authority (ASN) who are concerned that the high carbon levels, in some cases 50 percent above permitted levels, may cause fracture ‘in case of a sudden change in the temperature of the steel.’ In question are Creusot Forge, owned by France’s Areva, and Japan Casting and Forging Corporation.

Eight reactors are idle and coal is being burned at a rate not seen since the 1980s. Were data falsified and why was the problem not spotted? ASN are auditing files that go back decades.

Bad news for EDF and its customers – it has 88 percent coverage in France – and possibly bad news for the Paris Climate Change Agreement.

AUTOMOTIVE AND AEROSPACE OUTLOOK by Royce Lowe

AUTOMOTIVE OUTLOOK 

us-car-factiryGLOBAL AUTOMAKERS delivered 7.90 million vehicles in October, up 4.6 percent y-o-y. North America took 23 percent of the vehicles, Europe 22 percent, South America 4 percent, Asia/Pacific 50 percent and other markets 1 percent.

Tesla Motors will buy German manufactur-ing technology provider Grohmann Engineering GmbH in prepar-ation for production of its first mass-market model.

Grohmann will become the basis of an automation division Tesla is setting up in Germany. Several critical elements of Tesla’s automated manufacturing systems will be designed and produced at Grohmann’s plant, and it is believed these will aid both speed and quality of production and reduce capital expenditures required per vehicle.

The Model 3, priced at $35,000 before government incentives, will go on sale in late 2017, and Tesla is looking to increase production capacity by ten times from 2015 levels to 500,000 units per year by 2018.

VWVolkswagen has agreed with workers to cut up to 30,000 jobs worldwide, and to save $3.9 billion on expenses, as the company fights its way back from the emission-cheating scandal and to prepare to invest in electric vehicles, when it will need to hire software engineers and battery specialists. VW is talking of producing 3 million electric cars per year by 2025.

Reduction of the workforce by around 5 percent will be done by attrition as VW agreed to refrain from forced layoffs until 2025.

Toyota recently settled a class-action lawsuit for approximately $3.4 billion brought by owners of trucks and SUVs who complained of a lack of rust protection on vehicle frames, and consequent corrosion problems. One-and-a-half million Tacomas, Sequoias and Tundras, sold between 2005 and 2010 were involved.

Toyota admitted no wrongdoing, but offered to inspect the affected vehicles, to replace the frames free of charge, and to reimburse those owners who have already replaced the frames at their own expense.

President-Elect Trump’s threatened 35 percent tariff on cars made in Mexico would, Ford’s CEO Mark Fields reminds us, be imposed on the whole auto sector. Mr. Fields sent the President-Elect a congratulatory letter – on his election.

Following the reassurances that the British Government gave to Nissan, which persuaded them to continue manufacturing in the UK post-Brexit, the boss of Ford Europe has stated he will be looking for similar reassurances.

AEROSPACE OUTLOOK

Arconic, the Alcoa aerospace, automotive and construction products spin-off, reports a new, multi-year, $1 billion contract with Airbus to supply aluminum sheet and plate products for commercial aircraft programs, starting in January 2017.

Arconic will effectively be the sole supplier to Airbus for specific applications, including some wing, fuselage and structural components. Aluminum and aluminum-lithium alloy flat products will be processed on a new plate-stretching line which will reduce stresses in the products and allow easier forming and machining.

geGE Aviation has a new ‘memorandum of understanding’ (MOU) with COMAC, the Commercial Aircraft Corporation of China, concerning ‘digital collaboration’ that will outline how the two aviation-focused manufacturers plan to work together on digital solutions and applications for customer and product support monitoring and diagnostics, ‘intelligent aircraft’ and Brilliant Manufacturing – a GE software that will predict and react to changes in supply-chain conditions, manufacturing resources etc. GE says this partnership will assemble scientific personnel from the two companies so they may bring some semblance of scientific order to the ten billion data points produced annually by the aviation sector.

Following CEO Alain Bellemarre’s cost-cutting measures, profit forecasts at Bombardier are looking much more positive. The company has slowed the rate at which it has been gobbling up funds, and analysts are gaining confidence in the company’s ability to meet its long-term targets.

President-Elect Trump, referring to a new order for Airforce One, says he wants Boeing ‘to make a lot of money but not THAT MUCH money’ and is suggesting that the order should be cancelled. 

ISSUES OUTLOOK by Royce Lowe and Tim Grady

boeingSeattle, we have a problem? In spite of monthly reminders that the number of jobs in manufacturing is decreasing, we are periodically party to the news that almost 3.5 million manufacturing jobs will need to be filled in the next decade. At Boeing, some 35 percent of the 29,645 machinists in the company’s Seattle industrial hub are 55 or older, whereas overall, 23 percent of the 15.3 million Americans working in manufacturing are in that age group.

There has been a voluntary layoff offer with Boeing controlling who leaves; but people retire, and whichever way the situation is looked at there is a potential problem. The company is stepping up training and mentoring programs for the short term, and for the long term is investing in vocational training at middle schools, where it is trying to impress upon young people all the worthwhile qualities of manufacturing as a career; in other words, how ‘cool’ it is.

Siemens, meanwhile, has granted $357 million in software to Clemson University. The software will be incorporated into student coursework and projects that relate to computer assisted design, engineering simulation, industrial design, digital manufacturing and manufacturing management in Clemson’s College of Engineering, Computing and Applied Sciences.

China’s R & D spending, and innovation is overtaking that of the U.S. according to analysts from Credit Suisse Group AG. This is all to help China switch from investment-driven to knowledge-intensive growth as its labor force shrinks.

China’s R & D spending in 2015, at $205 billion, was more than double the 2009 figure, and as a proportion of GDP it climbed to 2.1 percent from 1.7 percent over the same period.

CEOs and Leaders, mainly American, have signed an open letter to President-Elect Trump, urging him not to withdraw the U.S. from the climate-rescue Paris agreement.

In a similar vein, American multinationals, with $228 billion in China investments have taken exception to Trump’s talk of trade confrontation with China., stating that such a confrontation would potentially disrupt China’s vast chain of suppliers throughout Asia, along with the price of consumer goods it exports to worldwide markets.

India’s Prime Minister MODI wants more manufacturing jobs in his country, which currently contributes only about 6 percent of the value of phones sold in India through local manufacturing or assembly. This could increase to 30 percent in five years.

India overtook the U.S. this year to become the world’s second-largest smartphone market and forecasts are for 1 billion sales in the next five years. In China and South Korea 70 percent and 50 percent respectively are the figures for work done domestically.

mtr-adManufacturing Talk Radio is experiencing more listeners live and downloading the podcasts each month, with over 400,000 downloads over the last 36 months. It is also kicking off a charter advertising program that companies can lock into at a very economical cost. It includes a 30-second ad during several radio shows, display ads in the Manufacturing Talk Radio website, and a display ad in this monthly newsletter, along with some additional exposures in show announcements. Advertisers who are interested in getting more details should send an email to info@mfgtalkradio.com and put ADVERTISING in the subject line.

Charter advertisers will obtain favourable ad rates for all of 2017.

Manufacturing Talk Radio is also expanding its content to include special in-depth reports by thought leaders and industry experts, along with on-site interviews with manufacturing mavens migrating from the 20th Century mass production model into the 21st Century specialized production model from concept to consumer and back again – a 360-degree approach to making products designed for smaller but more plentiful market groups or individuals.

Visit www.mfgtalkradio.com often for updates.

ENERGY OUTLOOK by Royce Lowe

energyCanada’s Prime Minister Justin Trudeau is facing off against Donald Trump on Old King Coal. Canada gets 80 percent of its electricity from non-emitting sources, and will phase out traditional coal power by 2030.

Coal power represents about 8 percent of Canada’s greenhouse gas emissions and accounts for 11 percent of the country’s electricity.

Ontario, Canada’s most populous province phased out coal over the past decade with a resulting improvement in air quality.

Electricity rates have roughly doubled.

Tesla Motors Inc. and SolarCity Corp shareholders approved Tesla’s purchase of

the solar installer. Over 85 percent of Tesla shares voted in favor and SolarCity’s shareholders also approved the $2 billion acquisition.

Despite major investors’ worries about the debt Tesla will be taking on, one Austen Allred, an executive at a San Francisco startup, tweeted Elon Musk to say he’d put all his money into Tesla and didn’t care if he lost it all, as he liked what Musk was doing and had done. Musk was suitably gracious in his acknowledgement. 

France’s TOTAL, one of the world’s biggest oil companies, has signed a memorandum of understanding (MOU) with Iran’s National Oil Company for the development of phase II of South Pars, the world’s largest natural gas deposit. As such the French group is the first western oil company to return to Iran. After many months of discussion a contract worth over $2 billion is in the offing. It is also a reward for a long presence in the country for a company that never closed its office in Teheran, not even during the sanctions period.

Iran has the world’s fourth-largest oil deposits and the largest (at 8 percent of global reserves) of natural gas. Total will act as project operator alongside China’s CNPC and Iran’s Petropar. Its role will be production of gas in a new zone of South Pars and the use of this gas to supply a liquefied natural gas plant. Negotiations are not complete but the final agreement should be signed within six months.

Solar-Panel Roads? Many methods of generating electricity have been tried over the years, but maybe this is totally new. A unit of Colas SA, a subsidiary of France’s Bouygues SA, has designed solar panels that embed into roads. Work is progressing on a large test site in Northern France.

The panels, now being built into road surfaces, will withstand the weight of an 18-wheeler truck. They are the result of some five years of research and laboratory tests and there are plans to commercialize in early 2018.

Why? It is said that solar farms use land that could otherwise be used for agriculture. Plans are afoot for further tests in Calgary, Alberta; the U.S. state of Georgia; Japan, Africa and the E.U.

The idea may not take off unless there is a serious shortage of land.

GLOBAL OUTLOOK by Royce Lowe

EUROZONE OUTLOOK

IHS Markit

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) took a further upturn in November to 53.7 from October’s 53.5 reading, its high-est level since January 2014, on the back of strong performances from The Netherlands, Germany, Austria and Spain.

Output prices were up at the fastest pace in over five years as cost inflation rose to a 56-month record. The month saw further growth in production, new orders and employment and overall expansion for the 41st consecutive month. There was increasing demand from both domestic and export markets.

Outstanding business was up at one of the quickest rates since early 2011, with increases in all nations with the exception of Greece and Italy.

New export orders for manufactured goods rose at the fastest pace since February 2014, aided by a weak euro.

 

  PMI High/low
Netherlands 57.0 (55.7) 35-month high
Austria 55.4 (53.9) 66-month high
Spain 54.5 (53.3) 10-month high
Germany 54.3 (55.0) 2-month low
Ireland 53.7 (52.1) 8-month high
Italy 52.2 (50.9) 5-month high
France 51.7 (51.8) 2-month low
Greece 48.3 (48.6) 12-month low

  

New car registrations in Germany were up 1.5 percent in November to 276,567; in Spain up 14 percent to 92,653; in Italy up 8.2 percent to 145,835 and in France up 8.5 percent to 163,170. In all cases there was a heavy percentage of business and rental sales. As there was in the UK, where registrations were up 2.9 percent to 184,101: demand from retail customers fell for the eighth consecutive month, but there was a strong demand from business.

Crude steel production in Germany in October was at 3.51Mt, down 3.7 percent y-o-y; in Italy 2.13Mt, up 11.4 percent y-o-y; in France 1.32Mt, up 12.8 percent y-o-y and in Spain 1.19Mt, down 10.5 percent y-o-y.

Russia’s crude steel production for October was at 5.94Mt, up 2.0 percent y-o-y; Ukraine’s was 1.93Mt, down 6.1 percent y-o-y.

IHS Markit reports growth in production and new orders in the UK manufacturing economy are trailing off, but remain above long-term trends. The PMI fell from Oct-ober’s 54.3 reading to 53.4 in November.

There was solid growth in production and new orders, both domestic and export, with the weak sterling being good for export orders but bad for input costs. Orders for investment goods eased sharply in the fourth quarter. There were reports of shortages in steel, paper and timber products.

The UK produced 0.707Mt of crude steel in October, down 22.3 percent y-o-y.

 

ASIA OUTLOOK

 Asia Outlook

Manufacturing production continued at a fairly healthy pace in China in November, albeit with a slower expansion of total new orders. New export business was mostly stable following a slight decrease in October.

Cost cutting saw a fall in staffing, but at the slowest rate seen in 18 months.

The Caixin PMI figure for November was 50.9, down slightly from October’s 51.2 reading. 

CHINA produced 68.5Mt of crude steel in October, up 4.0 percent y-o-y; Japan 9.06Mt up 0.6 percent y-o-y; India 8.27Mt, up 12.3 percent y-o-y and South Korea 5.96Mt, down 2.1 percent y-o-y. Taiwan produced 1.86Mt in October, up 9.9 percent y-o-y.

Chinese passenger car sales for the first ten months of 2016 were up 15.4 percent y-o-y to 19,095,800 units. In October the overall market was up 18.5 percent to 2,649,900 units. 

JAPAN’s manufacturing sector saw its PMI virtually unchanged in November, falling very slightly from October’s 51.4 to 51.3 in November.

New order growth went to a ten-month high, production was up for the fourth consecutive month, and new export orders increased for the third consecutive month. Both intermediate and investment goods producers noted production growth.

Rupee demonitization, or the withdrawal of high-value banknotes, is reported to have adveresely affected growth in INDIAN manufacturing, as manifested by a softer growth in new orders and production. November saw the eleventh consecutive monthly improvement in manufacturing conditions with the Nikkei PMI albeit down to 52.3 in November from October’s 22-month high of 54.4.

The reason for the cash withdrawal was to prevent hoarding of large banknotes and accompanying tax avoidance.

 

SOUTH AMERICA OUTLOOK

south-america

In Brazil, the manufacturing downturn continues with further falls in new orders, production and employment.

The PMI for November, at 46.2, very slightly down from October’s 46.3 figure, represents the 22nd consecutive month of contraction in the Brazilian manufacturing industry. There are no signs to suggest improvement in the near term.

Brazil’s crude steel production for the month of September was 2.72Mt, a decrease y-o-y of 8.8 percent.      

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)ticked up slightly from October’s 52.0 to November’s 52.1 reading, a 27-month high.

Of the 30 nations for which November data were available, 22 showed improved operating conditions, with growth up to a 13-month high in the U.S. and a 34-month record in the Eurozone. There was continuing, but slowing expansion in China, Japan, India and the UK. Russia and Taiwan also showed growth, but contraction was seen in South Korea, Indonesia, Thailand, Turkey, Malaysia, Brazil and Greece.

Global production was up for the sixth consecutive month in November, coincident with higher levels of new orders, both domestic and export. There was job creation at global manufacturers for the third consecutive month, with employment up in the U.S., the Eurozone, Japan, the UK, India, Canada, Mexico and Taiwan, while decreases were noted in China, S. Korea, Russia and Brazil.

Backlogs of work at manufacturers rose for the sixth consecutive month and to the greatest extent for 20 months.

 

GLOBAL BUSINESS SURVEY INSIGHTS by Norbert Ore

earthWe now have 11 months on the record for 2016 and from the standpoint of the global economy, it will be deemed mediocre at best. And that follows 2015 which is also noted for mediocrity. So we have two relatively weak years that teetered on a manufacturing recession, but somehow escaped major contraction.

In October, we indicated a possible “large step forward based on global survey data.” Now we see in the November data a further acceleration that isn’t easily explained – from the data, we can’t pinpoint “causes” that would change the “effects” to that which we are seeing. We see the world through a growth lens, and there hasn’t been much to observe in the last two years.

Now we are closing the books on November and in reviewing the data from 21 countries, we find 19 are growing and two (South Korea and Brazil) are declining. Among those growing, the U.S., the EZ, and the UK are the leaders. In the seventh year of a business cycle, a reacceleration of this nature is difficult to explain.

Scattergram

The Eurozone PMI (53.7, +0.2) rose to its highest level since January 2014. The strong showing was led by Netherlands (57.0, +1.3), Austria (55.4, +1.5), Spain (54.5, +1.2), Germany (54.3, -0.7), and Ireland (53.7, +1.6).

The UK PMI (53.4, -0.9) reveals slower growth when compared to October, but they are in their fourth month of growth following the BREXIT. Weaker sterling may make it difficult to sustain recent output levels.

In November, China’s Official Report, the CFLP PMI (51.7, +0.5) rose to its highest level in since July 2014, while the Caixin China General Manufacturing PMI (50.9, -0.2) decelerated slightly, but remains in positive territory for the fifth consecutive month. In North America, Canada (51.5, +0.4) reported growth for the ninth month following a seven month con-traction.

Mexico (51.1 -0.7) recorded its 40th consecutive month of 12/5/16 growth, however, a weaker trend is apparent as the PMI has averaged only 51.2 percent during the past six months.

THE FINAL WORD

Actually, in the overall, manufacturing is looking a better more solid at the moment with the PMI numbers moving in the direction of expansion and strengthening for most countries and most areas of the U.S. How long that positive riff continues depends largely on the new incoming administration of President-elect Donald J. Trump and several elections happening in Europe in 2017.

Last Months Issue can be seen HERE

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Metals & Manufacturing Outlook November 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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IN THIS ISSUE:

MANUFACTURING OUTLOOK

CREDIT MANAGER’S INDEX

METALS OUTLOOK

AUTOMOTIVE AND AEROSPACE OUTLOOK

AUTOMOTIVE OUTLOOK

AEROSPACE OUTLOOK

ISSUES OUTLOOK

ENERGY OUTLOOK

GLOBAL OUTLOOK

EUROZONE OUTLOOK

ASIA OUTLOOK

SOUTH AMERICA OUTLOOK

GLOBAL BUSINESS SURVEY INSIGHTS

SCATTERGRAM

THE FINAL WORD

PUBLISHER’S STATEMENT

Publisher’s Statement

The Metamorphosis of Manufacturing

Change is constant and manufacturing is the poster child of change in the 21st Century, driven or amplified by advanced robotics, additive manufacturing, horizontal and vertical integration, augmented reality, cloud and cybersecurity, simulation and rapid prototyping, big data and analytics, and the Industrial Internet of Things, or what people are collectively calling Manufacturing 4.0.

With all this change, you may begin to notice the transformation of this publication, Metals & Manufacturing Outlook. In this issue, we have created sections that organize information into broad topic areas. As we solidify this – and make sure it works for the reader, we will be adding some color elements and pictures to balance the look and feel of each page, and help tell the story. And in the not-to-distant future the name will be shortened to Manufacturing Outlook® since the content has morphed beyond its metal roots as MetalsWatch® back in the late 1980’s into an industry-wide publication. In addition, Manufacturing Outlook® will include advertisers at a low charter CPM rate as the periodical becomes an informative resource somewhere between an e-newsletter and an ezine.

We will be abbreviating some content to provide room to expand into feature articles, short stories and timely topical discussions of the rapidly evolving manufacturing sector in the dynamic U.S. economy, which when fully measured accounts for almost 1/3 of U.S. GDP. For those who may still see manufacturing as the dark, dirty and dangerous workplace of the 1900’s, our hope is to write about and show what modern manufacturing looks like in the 21st Century in the feature articles, while presenting the broad brush strokes of industry segments in the “Outlook” sections that include Manufacturing Outlook, Metals Outlook, Automotive and Aerospace Outlook, Issues Outlook, Energy Outlook, and the Global Outlook.

Your feedback will be important during the metamorphosis of Metals & Manufacturing Outlook into the more focused but expanded Manufacturing Outlook®, which will continue to be a monthly newsletter presently sponsored by All Metals & Forge Group. For over 35 years, All Metals & Forge Group has been providing the metals industry with useful information and helpful resources in addition to its superior line of open die forgings and seamless rolled rings. MetalsWatch® was birthed from that emphasis on a forging manufacturer being more than a ‘heat it and hit it’ operation, whereby customers would gain knowledge about those manufacturing processes, the melting ranges of metal, material specifications, alloy reports, metal tidbits, SteelWeights®, SteelLog® – a glossary of 5,000 metallurgical terms, as well as the uses and characteristics of open die forgings and seamless, drawn over mandrel, hand forged or press forged rings.

Part of the driving force for this publication to transform is Manufacturing Talk Radio, the weekly live broadcast across the Internet of information coming from thought leaders and key experts in the manufacturing sector. Change is not only constant but has become so rapid as compared to the evolution in the metals industry, that this publication has to respond to what is happening ‘on the air’.

We hope you will continue to enjoy the information presented herein and share it with your colleagues.

Best Regards,
Lewis A. Weiss
Publisher

   

MANUFACTURING OUTLOOK
THAT WAS THE MONTH THAT WAS, BY WHICH TIME YOU’LL KNOW WHO WON

by Royce Lowe

MFG outlook

What a month it was: first and foremost an election and what we might or might not get from it. By the time you read this it will all be settled, Energy might be what we get from it, something we all need, with ongoing developments in nuclear and oil and gas and others, not forgetting lithium-ion. There’s still Brexit and Tesla and GE, and Alcoa forging aluminum in Russia, and China’s steel companies not really cutting back on production at all. But first…                       

Growth was seen in manufacturing just about everywhere. The U.S. continued in growth mode following its move from contraction in September, and there were significant gains in The Eurozone, China, Japan and India. The Global index soared a little further away from the 50 mark.

In Brexit Land a panel of three judges ruled that it will be up to Parliament to decide whether or not Article 50 can be triggered at the end of March 2017. The pound rose on this news. The ruling will be appealed by the government before the supreme court and that result may not be known until January 2017. Theresa May is adamant she will stick to her timetable and has told the EU so. Brexit will fill even more column inches than the football/soccer Premier League. The longer this goes on the more complicated it will become and the less those who voted Brexit will know about what’s going on, or even why they voted how they voted.

The U.S. economy created 161,000 non-farm jobs in October, which has been described as a ‘solid’ figure. This was less than the 175,000 jobs the economists were calling for, but the unemployment rate eased back to 4.9 percent. August’s figure was revised up from 167,000 jobs to 176,000; September’s from 156,000 to 191,000. Weekly earnings were up by 2.5 percent y-o-y. It’s reported that manufacturing has lost 62,000 jobs this year to date.

Light vehicle sales in the U.S. in October were down almost 6 percent y-o-y, albeit with two fewer selling days than last year.

The ISM PMI figure for U.S. manufacturing continued in growth mode in the month of October, with the PMI reading moving to 51.9, up from September’s 51.5 percent. The overall economy grew for the 89th consecutive month.

IHS Markit

The IHS Markit PMI for the U.S. manufacturing sector jumped to its highest reading for a year in October, up from 51.5 percent in September to 53.4 in October. IHS Markit report a sharp improvement in production and new orders, with jobs added at a modest pace. They further report an increase in inventories of finished goods and raw materials since September. Domestic demand is quoted as strong with a modest growth in new exports.

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 ‘advance’ estimate for the annual rate of Real GDP growth in the third quarter of 2016, putting it at 2.9 percent. The figure for the second quarter was 1.4 percent.

GALLUP’s U.S. Economic Confidence Index was still running at -12 in late October, with the coincident job creation index remaining at a near-record +32.

World crude steel production for the 66 reporting countries for the month of September 2016 was 132.91Mt, 2.0 percent up y-o-y.

U.S. crude steel production for September 2016 was 6.31Mt, down 3.8 percent y-o-y.

Primary Global Aluminum Production in September 2016 was reported at 4.937 million tonnes, of which 2.751 million tonnes, over 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 426,000      tonnes, North America 325,000 tonnes, Western Europe 310,000 tonnes and Eastern and Central Europe 324,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘The Big 8’ for October 2016. There were almost across the board negative figures, and car sales were particularly badly hit. The only company to escape unscathed was Hyundai/Kia. Car sales results are shown in parentheses.

The ‘Big Eight’ October ’16 October ’15 YTD % change
General Motors 258584 262933 -1.7 (-14.1)
Ford 187692 213105 -11.9 (-27.5)
Toyota 186295 204045 -8.7 (-17.4)
FCA 173964 193376 -10.0 (-43.6)
Honda 126161 131651 -4.2 (-10.1)
Nissan 113520

 

116047 -2.2 (-13.3)
Hyundai/Kia 111482 110049 +1.3 (unchanged)
VW 24779 30387 -18.5 (-14.3)
Total new cars and light trucks 1372320 1456869

 

-5.8
Total cars 526,462 618,035 -14.8
Total l/trucks 845,858 838,834 +0.8 


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 Unemployment
United States +1.4 (qtr) -1.0 (Sept) +1.5 (Sept) 5.0 (Sept)
Canada -1.6 (qtr) -0.7 (July) +1.3 (Sept) 7.0 (Sept)
China +7.4 (qtr) +6.1 (Sept) +1.9 (Sept) 4.0 (Qtr 3)
Japan +0.7 (qtr) +4.5 (Aug) -0.5 (Aug) 3.1 (Aug)
Britain +2.7 (qtr) +0.8 (Aug)

 

+1.0 (Sept) 4.9 (July)
Euro Area +1.2 (qtr) +1.8 (Aug) +0.4 (Aug) 10.1 (Aug)
France -0.4 (qtr) +0.5 (Aug) +0.4 (Sept) 10.5 (Aug)
Germany +1.7 (qtr) +2.0 (Aug) +0.7 (Sept) 6.1 (Sept)
Italy + 0.1 (qtr) +4.1 (Aug) +0.1 (Sept) 11.4 (Aug)
Spain +3.4 (qtr) +6.8 (Aug) +0.2 (Sept) 19.5 (Aug)
India +5.5 (qtr) -0.7 (Aug) +4.3 (Sept) 5.0 (2015)
Brazil – 2.3 (qtr) -5.2 (Aug) +8.5 (Sept) 11.8 (Aug)
Taiwan + 0.2 (qtr) +5.0 (Sept) +0.3 (Sept) 3.9 (Sept)
Mexico – 0.7 (qtr) +0.3 (Aug) +3.0 (Sept)

 

3.9 (Sept)

CREDIT MANAGER’S INDEX

by Royce Lowe

Credit ReportThe news this month is not quite as uplifting as it was last month, but the numbers are still an improvement over what they had been for the last several months. The overall sense of the economy right now is mixed. Most of the indicators are telling the same jumbled story. We see improvements in parts of the Purchasing Managers’ Index and declines in other parts. “Retailers seem to be gearing up for a better season—at least they have been more aggressive as far as hiring,” said NACM Economist Chris Kuehl, Ph.D. “At the same time, consumers have continued to be somewhat reticent. It is a waiting game for many—a desire to see what happens once the dust settles from the election.”

Readings for the combined index were impressive last month, and there has been a bit of return to less exalted readings this month. The combined CMI was at 53.7 in September and is now at 53.5—close to what it has been for the year with the high point coming in April when the reading hit 54.6. The index of favorable factors was at year-long highs in September and has fallen back a little. It was 59.5 and is now 58.4. That is about where the numbers have been all year with two months (March and July) hitting 60.0. The index of unfavorable factors actually improved a little from what it was in September as it went from 49.9 to 50.3. This is certainly not a big change, but it is always significant to move out of the contraction zone.

There was quite a bit of variability within the sub-index readings for both the favorable and unfavorable categories. The sales reading slipped from 57.9 to 56.9. That is a little lower than the average for the year, but still respectable. In the last 12 months, four months had readings under 56.9. The rest have been higher with July sporting a 60.0 mark. The new credit applications index stayed almost the same as last month with a mark of 58.0 as compared with 58.6 in September. The dollar collections reading slipped a little more dramatically as it went from 59.5 to 57.0. The amount of credit extended also stayed about where it had been as it moved from 61.9 to 61.5.

“These are really good numbers and suggest that the best clients are asking for some substantial levels of credit to buy machines and inventory,” Kuehl explained.

 

METALS OUTLOOK

by Royce Lowe

steelforge-energyiStock_000016208139_LargeThe World Steel Association recently released its Short Range Outlook for world steel demand for 2016 and 2017. Overall world demand for finished steel is forecast to increase by 0.2 percent in 2016, and by a further 0.5 percent in 2017 to 1509.6Mt. By major region, NAFTA is forecast to decrease by 0.1 percent in 2016, then to increase by 2.9 percent in 2017 to 137.4Mt. The EU28 is forecast to increase by 0.8 percent in 2016 and by a further 1.4 percent in 2017 to 156.9Mt; and ASIA AND OCEANIA to increase by 0.5 percent in 2016 but to decrease by 0.4 percent in 2017 to 984.3Mt.

Meanwhile, China’s steel mills are producing more than they were a year ago thanks to a property boom, which has seen an increase in crude steel output for the first nine months of 2016 of 0.4 percent y-o-y. China’s investment in real estate and infrastructure was higher than forecast, and the GDP was up 6.7 percent in the third quarter of 2016. Data suggest that apparent steel consumption in China was up 9 percent y-o-y in September and that its steel exports in the first nine months were up 2.4 percent at 85.1Mt, the highest ever. Since heavy duties have been levied against Chinese steel in the west, China has turned to shipping large quantities to Vietnam, Thailand and the Philippines.

The U.S. aluminum industry is not in good shape, and there has been a tendency of late to put the blame at the door of Chinese production. It is reported that U.S. production of aluminum is at its lowest level since 1983. It is also reported that China’s factories are better and lower cost operations. It’s a well-known fact that it takes lots of electricity to remove aluminum form its ore, alumina, and in fact 1/5 to ½ the cost of raw aluminum is electricity.

In 2015, 8 percent of the electricity in North American smelters came from power stations owned by the plants themselves; the figure in China was 85 percent. Chinese producers with captive power pay $0.03 per kilowatt hour, versus $0.075 for power from the grid, according to Bloomberg Intelligence. Most North American smelters use hydroelectric power, whereas China’s are powered by the cheaper coal.

The big problem with U.S. smelters is their technology: the higher current that can be pumped through a smelting electrode, the lower are the energy costs per unit of metal produced. It seems that all U.S. smelters use old technology that runs at less than 300m kiloamperes, versus 23 percent in China. Some two thirds of U.S. smelters are even more antiquated, running on 200KA, versus 4 percent in China.

At least half China’s industry is on the latest technology, 400KA or higher, versus 4 percent elsewhere in the world. This of course does not apply to the whole of China’s aluminum industry, but the available information strongly suggests a technological advantage rather than a ‘commercial’ one. China produces some 55 percent of the world’s primary aluminum, and is intending to even surpass that. It is essential that U.S. smelters beef up their technology to get down their production costs if they are to survive in this critical industry.

And staying with aluminum, AlTi Forge is a joint venture formed by Alcoa and Russia’s VSMPO-Avisma in 2013. The JV has started producing titanium forgings for aircraft parts at Samara, Russia, with all the necessary consents and blessings of the Russian government. It will manufacture large titanium and aluminum forgings for aircraft manufacturers, including landing gear beams and wing pylons. It will further develop forgings in titanium aluminide (TiAl), a highly heat-resistant alloy much lighter than nickel alloys.

Alcoa’s complex in Samara will be part of the spin-off Arconic, which casts aluminum slabs and billets, rolls aluminum sheet and flat-rolled coils and produces extrusions and forgings.

VSMPO-Avisma is an integrated mining and metallurgy group and is the world’s largest producer of titanium ingots and forged products. No details have been announced regarding financial and ownership terms of the JV.

AUTOMOTIVE AND AEROSPACE OUTLOOK

auto-aero

by Royce Lowe

AUTOMOTIVE OUTLOOK
Hot on the heels of GM’s recent settlement with Unifor in Canada, FCA Canada, to avert a strike, has agreed to invest some C$400 million to rebuild an aging paint shop in Brampton, Ontario. And Ford has promised, as part of its labor agreement with Unifor, to invest over $470 million in its Windsor, Ontario engine plant and its Oakville, Ontario assembly plant. Ford has 6,400 auto workers in Canada.

Canada’s automotive output fell to 13 percent of North American production in 2015, from approximately 17 percent in 2009, whereas output in Mexico rose to about 20 percent over the same period. Canada lost over 53,000 automotive jobs between 2001 and 2014.

We’re OK and we know what we’re doing. Thus Ford to Silicon Valley, viz Apple and Google, who are OK when it comes to the software in their ‘future’ cars, but they seem to have forgotten, or never knew, what it takes to actually make a car, about dies and tools and stamping and steel and aluminum and dealing with suppliers for the 30,000 parts in a car. Makes one wonder where Tesla got its know-how.

BUICK, there’s a blast from the past, is the first U.S. model to crack the top three in the Consumer Reports’ reliability rankings, trailing only Toyota’s Lexus and other Toyota marques. Audi and Kia were in there, as was Tesla’s model S.

NISSAN, after threatening/warning that it might decide not to proceed with a couple of new models in the UK, (because of Brexit), has decided to stay and will build new versions of two sporty SUVs in its Sunderland, UK plant, safeguarding 7,000 jobs. The company built one of every three vehicles produced in Britain in 2015.

The UK’s business secretary told the Nissan board, in writing, that the government would ensure Nissan’s operations ‘remain competitive’ after Brexit, prompting some to wonder just what kind of deal Nissan had been offered. It is reported that the government privately advised the auto executives it is confident the sector can retain tariff-free access to the single market. [Ah, the joys of a free press.]

NISSAN is rescuing Mitsubishi – in trouble for improperly quoting fuel economy – with a $2.3 billion stake, to create Renault-Nissan-Mitsubishi, the world’s fourth largest auto group after Toyota, VW and GM. Carlos Ghosn, already chairman of Nissan and Renault SA, will share the role of Nissan CEO for the first time as he takes over Mitsubishi.

SUBARU and its parent Fuji Heavy Industries saw the first Impreza roll off the assembly line at its manufacturing operation in Lafayette, Indiana. Investment in this plant over the past four years is at $1.3 billion, with 1,400 additional workers being hired for the expansion. Production of the Impreza was moved to the U.S. because of increasing demand. The Indiana facility will now produce over 380,000 vehicles per annum, with the company planning a gradual increase to 436,000 units per annum by March 2019.

While FORD recovers from Donald Trump’s venom, GM is quietly making plans to invest $800 million in Mexico. The plans were initially announced in November 2015, and progress has been quietly made since.

A judge has approved VW’s $14.7 billion diesel-cheating settlement. Despite the bad publicity the company has been living through for over a year, it just recorded its biggest 2016 sales gain with September sales up 7.1 percent to 947,600 vehicles. Sales gains in China made up for fewer sales in Europe and Brazil.

TESLA MOTORS made a surprise profit, its first since 2013. It reported a net income of $22 million in the third quarter, versus a $250 million loss in the same period last year. Its revenues jumped to $2.3 billion.

U.S. sales of the model S sedan were up 59 percent over the same quarter in 2015, and the company now sells more than one third of large luxury cars in the U.S., beating out the BMW 7-series and the Mercedes-Benz S class. The luxury SUV new model X sold 5,428 cars for a 6 percent U.S. share in the third quarter, outselling both Porsche and Land Rover, but trailing SUVs from Mercedes, BMW, Cadillac, Volvo, Audi and Lexus.

Meanwhile Tesla cars are now fitted with eight cameras and a dozen or so sensors for 360º visibility and full self-driving capacity. A Los Angeles -to – New York drive, ‘without the need for a single touch,’ is planned by the end of 2017. BMW and Ford are generally ruling out self-driving capacity until after 2020. UBER says a self-driving truck packed with Budweiser made its first delivery in Colorado.

Overall, the question is whether the automotive industry in general and the U.S. automotive industry in particular can sustain record production levels. The answer lies in three pieces: 1) The average age of cars and light truck on the road in America is still around 11 years old, where the average used to be 7 years, 2) Cars and light trucks are being built more soundly, so the average age would likely rise, and 3) The consumer’s desire for ‘new’ over ‘old’ as well as the need for more and more vehicles in an aging population on the one hand, and youthful millennials on the other who may be more urban dwellers who may not see a vehicle as a necessity with the options of Uber or a car rental for longer trips.

We expect to see some cooling off in car and light truck production for 2017, but not dramatically so.

AEROSPACE OUTLOOK
BOEING has a deal to supply 40 jetliners, namely 30 787-9 Dreamliners and 10 777-300ERs to Qatar Airways, a transaction reportedly worth $11.7 billion. A letter of intent has also been signed for supply of 60 737MAX8s, for $6.9 billion.

Boeing has a further order with China Southern for the Dreamliner 787-9 valued at $3.2 billion, with a list price of $271 million each. The airline and its subsidiaries have ordered $15 billion worth of aircraft from Boeing and Airbus in the past year.

The U.S. Government Accountability Office (GAO) has overturned the protest by Boeing and Lockheed Martin regarding the choice of Northrop Grumman Corp’s winning bid to develop and build the U.S. Air Force’s new $80 billion bomber, citing significant structural advantages, in spite of the lower winning bid. The aircraft, to be designated B-21, will be ready in the mid-2020s, and will be a ”durable, stealthy aircraft that can fly deep into enemy territory and launch cruise missiles from safe distances.”

The F-35 needs a further $500 million for development: there has been a further warning from the Pentagon’s chief weapons tester to the effect that the aircraft is ”far from showing it has full combat capability.” The projected cost was $379 billion for a fleet of 2,443 aircraft. The development phase is already up to $55 billion.

Canada’s BOMBARDIER, in trouble with cost overruns and a two-and-a-half year delay on its $6 billion C series aircraft program, is to cut 7,500 more jobs, following the 7,000 job cuts announced in February, 60 percent of which were effected by the end of June. At December 31 2015, Bombardier’s workforce numbered 70,900.

Even before its single-aisle C919 aircraft goes into service, the Commercial Aircraft Corp. of China (Comac) is forming a joint venture with Russia’s United Aircraft Corp. to research and manufacture a twin-aisle jet aimed at the Beijing-New York route. Time to the maiden flight has been set at seven years, with a further three years before the aircraft sees service. The whole is to form serious competition to the Boeing-Airbus duopoly.

ISSUES OUTLOOK

by Royce Lowe and Tim Grady

Deloitte and the U.S. Council on Competitiveness have together compiled a listing of the top ten countries they predict to be the world’s most competitive in manufacturing in the year 2020. In ascending order they are: Singapore; Canada; Taiwan; Mexico; South Korea; India; Japan; Germany; China; The U.S.

The UK Tech Industry says that just under half the founders of UK startups in 2015 came from abroad, according to Balderton, a venture firm. Would-be entrepreneurs could just as easily go to Berlin, Amsterdam or Paris. Investment in European startups fell by a third between June and September 2016.

GE’s plans to acquire German 3-D printing company SLM Solutions Group AG were abandoned following a lack of support from shareholders including billionaire Paul Singer’s Elliott Management Corp. A further bid for Sweden’s Arcam has been upped from 285 to 300 kronors per share.

GE will in no way let its 3-D printing ambitions die, and it is offering to buy a 75 percent stake in Concept Laser GmbH for $599 million.

MFG Talk RadioManufacturing Talk Radio is experiencing more listeners live and downloading the podcasts each month, with over 300,000 downloads over the last 18 months. The show is also facing some positive changes as it consolidates its economic reports to make room for more features stories with manufacturers. While the live show on Tuesday’s at 1:00 p.m. EST will continue, breaking news articles and certain podcasts are posted separate from the live broadcast to stay current with a dynamic industry.

Recent articles include information on soaring solar advances, the slippage of oil, and the Dyson Institute of Technology to train tomorrow’s engineers, the many pros and few cons of TPP as presented by Ken Monahan from NAM, amazing developments in aerospace manufacturing, the continuing importance of Six Sigma and many other topical pieces relevant to everyone in manufacturing, from the C-Suite to the dock door.

A few selected articles will be appearing in future issues of Manufacturing Outlook where the subject matter is more evergreen than breaking news for this monthly newsletter delivered digitally. Visit www.mfgtalkradio.com often for updates. 

ENERGY OUTLOOK

energy outlook

by Royce Lowe

This section is new to Manufacturing Outlook beginning with this issue

The global energy situation is in a state of flux, from climate change and promises to solve it through the dilemmas caused by low oil and gas prices and closure of coal mines, to the present-day emphasis on alternate (clean) sources of power that will light our homes and factories and keep our trucks and automobiles on the road. In this section we will take a look at the countries and companies – both involved in the dilemmas and the solutions – who are grasping the problem and looking for the solutions.

JAPAN, before the Fukushima Dai-Ichi (FD-I) nuclear accident in 2011, generated 25 percent of its electricity from nuclear plants, and the government of the day was hoping to raise this to 50 percent by 2020. Since the disaster this figure is less than 1 percent. Before the disaster Japan had 54 working nuclear reactors. The six at FD-I are to be decommissioned and of the remaining 48 Japan’s new Nuclear Regulatory Authority (NRA) has received applications to restart 26.

The population is generally anti-nuclear, and post-disaster power generation has fallen back into the hands of plants powered by natural gas and coal; not an efficient way to meet Japan’s promised and hoped for reduction in carbon emissions.

The creation of the NRA means many new safety measures have been decreed, involving very high costs. The future of Japan’s nuclear industry is, to say the least, uncertain.

GE’s into wind, having made a $1.65 billion deal with Denmark-based LM Wind Power, a manufacturer of wind-turbine blades, owned by Doughty Hanson. This will increase GE’s ability to serve customers in onshore and offshore wind markets.

GE Renewable Energy is supplying equipment this year for the Block Island Project in Rhode Island, the first offshore wind farm in the U.S.

GE, Endeavour Energy Resources LP and Sage Petroleum Ltd. won approval from Ghanaian lawmakers for construction of the world’s largest liquefied petroleum gas (LPG) fired power plant, together with a 20-year purchase agreement with the nation’s electricity distribution utility. The plant will start producing, in a first phase, 144 megawatts for the Electricity Corporation of Ghana by mid-2017.

GE agreed to combine its oil and gas business with Baker Hughes Inc., creating a company that can offer much towards tackling the present slump in oil prices. GE will have a 62.5 percent stake in the combined provider of oilfield services, which will be publicly traded and have sales in the order of $32 billion. The ‘new Baker Hughes’ will profit from the companies’ combined experience in manufacturing and services, while broadening the use of digital technology, as exemplified by GE’s Predix operating system. Cumulative savings by cost cutting of $1.6 billion are forecast by 2020.

Robert Murray, CEO of Murray Energy Corp. (coal) has called Elon Musk a fraud, claiming that Tesla is being unfairly subsidized.

Royal Dutch Shell, who resumed purchases of Iranian oil in June 2016, has signed a letter of intent with Iran’s National Petroleum Company to ‘explore potential areas of cooperation.’

A Marathon Petroleum unit has sued BP for leaving its former Texas City refinery in shoddy condition and for lying about unfinished repairs and inspections. BP sold the refinery to Marathon in 2012 for less than originally asked. In 2015, 15 workers were killed and hundreds injured at the refinery due to equipment overflowing and igniting a blast. BP allegedly left thousands of critical pressure vessels untested and more than 500 electrical components out of compliance.

Meanwhile BP’s chief economist says that oil demand over the next two decades will likely overwhelm the impact of the electric car on crude markets.

Bloomberg Research suggests that battery-electric vehicles will displace 13 million barrels of oil per day by 2040. BP projects oil demand to increase by about 20 million barrels per day over the next 20 years. [We’ll see!]

If oil makes the vast majority of our cars run today, the electric car depends upon lithium, that very light, very expensive metal that is in no way abundant. Its price has almost tripled in the year to this past June, and China reports a y-o-y increase from $7,000 to $20,000 per tonne.

According to Bloomberg New Energy Finance (BNEF) and McKinsey & Co. the cost of a lithium-ion battery pack for electric cars has in fact fallen by 65 percent since 2010 and will keep falling. Vehicles and the way they are used will change more in the next 20 years than they have in the last hundred.

Cheaper batteries are the driver, and BNEF estimates that battery costs fell to $350 per kilowatt hour in 2015 from $1,000 in 2010. Electric car sales were at 448,000 in 2015 from 52,000 in 2010 and are on track to hit 647,000 this year. But to put this in perspective, present annual global auto sales are in the order of 90 million vehicles.

The cost of lithium-ion batteries, which make up around 40 percent of an electric car’s value, may fall by 16-20 percent with each cumulative doubling of vehicles’ manufacture.

TESLA and its relentless overlord Elon Musk are the driving forces, at least in the U.S., behind the push for generation and use of electrical energy. The cars are one story, the energy that will make them run another.

Tesla, for example, plans to collaborate with Panasonic Corp. to make solar energy components for SolarCity Corp. This is a final push by Elon Musk to merge the automaker and the solar company. Production of photovoltaic cells and modules for solar energy systems used by SolarCity will begin in 2017 at SolarCity’s factory in Buffalo, NY. This whole deal is contingent upon approval of Tesla acquiring SolarCity by the respective shareholders in a vote on November 17. There seem to be many good reasons for Tesla to purchase SolarCity.

Panasonic and Tesla are already ‘related’ in the $5 billion lithium-ion giga-factory in Nevada to produce batteries for the Model 3 electric car and energy storage products for home and utilities.

Elon Musk has one last card up his sleeve. To try to convince shareholders that Tesla must buy SolarCity, he invited hundreds of people to see ‘the roof,’ or many roofs, on an old Hollywood set, an artificial suburban neighborhood. His guests were met by new solar panels that replace shingles and are effectively the roof, rather than a panel that goes on a roof.

The roof tiles on a number of the houses in the neighborhood were made of textured glass, tough as steel – in fact they are quartz – that look like, well, ordinary roof tiles, that allow light to pass through from above onto a standard flat solar cell. It is planned that Panasonic will produce the solar cells and Tesla assemble the glass tiles and accessories.

The future looks like a house topped with solar tiles, where night-time electricity is stored in wall-hung Powerwall batteries, and where a model 3 prototype electric car has easy access to the home’s car charger.

The White House has announced plans to create a 25,000 mile (40,000 km) recharging network for electric cars that it hopes will encourage drivers to switch from gasoline-powered vehicles.

The Department of Transportation will designate 48 official electric vehicle routes on highways that cover 35 of the 50 states, with further building according to demand. Nissan, BME, GM and a number of major power companies will participate in the initiative.

There are currently around 16,000 charging stations across the U.S., up from 500 in 2008; and approximately 150,000 gas stations.

CHINA installed two wind turbines per hour in 2015, and in that same year 500,000 solar panels per day were installed around the world. For the first time ever, solar power capacity tops coal consumption.

CHINA is a country that really needs to up its installation of alternate energy sources. The country has excruciating problems with air and water pollution, due mainly to coal consumption, particularly in power plants and mining operations. In addition to pollution problems arising from coal consumption, the mining of the fuel is in itself dangerous and the cause of many deaths per year in China. But the country is the world leader in the use of alternate forms of energy.

 

GLOBAL OUTLOOK

Global Outlook

by Royce Lowe
EUROZONE OUTLOOK
IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for October, at 53.5 was up from September’s 52.6. There was a broad-based improvement led by the Netherlands and Germany, with growth in production, new orders, new export orders and employment all gathering pace to push the PMI figure to a 33-month high. The Netherlands and Germany were on top, with solid rates of expansion seen also in Austria, Spain and Ireland. France, long in the doldrums, went back into expansion territory with a 31-month high – despite a slight decrease in employment. Italy grew but slower than in September. Only Greece of the ‘big eight’ is in contraction.

In what was a good month for the Eurozone, it saw the sharpest expansion in production since April 2014 and the second-fastest increase in total new orders over the same period. New export business increased for the 40th consecutive month in October, and job creation was quicker than for the past 60 months.

  PMI High/low
Netherlands 55.7 (53.4) 15-month high
Germany 55.0 (54.3) 33-month high
Austria 53.9 (53.5) 4-month high
Spain 53.3 (52.3) 6-month high
Ireland 52.1 (51.3) 4-month high
France 51.8 (49.7) 31-month high
Italy 50.9 (51.0) 2-month low
Greece 48.6 (49.2) 5-month low

New car registrations in Western Europe were down 1.0 percent overall in October, with Germany down 5.6 percent, France down 4 percent, Spain up 4 percent and Italy up 9.8 percent, The UK was up 1.4 percent. There were two fewer selling days than in October 2015.

Crude steel production in Germany in September was at 3.25Mt, down 3.9 percent y-o-y; in Italy 1.99Mt, down 5.3 percent y-o-y; in France 1.28Mt, up 2.2 percent y-o-y and in Spain 1.19Mt, down 8.7 percent y-o-y.

Russia’s crude steel production for September was at 5.74Mt, down 2.1 percent y-o-y; Ukraine’s was 1.88Mt, down 8.0 percent y-o-y.

IHS Markit reports continuing growth in the UK manufacturing economy, but the PMI fell from September’s final 55.5 reading to 54.3 in October. There was growth in production, new orders and employment, with new export orders, aided by a weak Sterling, coming through from the U.S., the EU and China. The SMEs showed the best employment figures.

Higher demand was seen in both the domestic and export markets, with the intermediate goods sector the strongest. The weak Sterling also impacts on costs of raw material and semi-finished goods.

The UK produced 0.644Mt of crude steel in September, up 13.3 percent y-o-y.

ASIA OUTLOOK

There were general signs of improvement in Chinese manufacturing in October, with the Caixin PMI rising to 51.2 in October from 50.1 in September. Production grew at the fastest pace in five-and-a-half years and there was an accompanying growth in new orders, mostly domestic as there was in fact a slight decrease in export orders over the month. Staff cutbacks were at their slowest pace in 17 months.

CHINA produced 68.17Mt of crude steel in September, up 3.9 percent y-o-y; Japan 8.44Mt down 1.5 percent y-o-y; India 7.88Mt, up 8.5 percent y-o-y and South Korea 5.72Mt, up 1.1 percent y-o-y. Taiwan produced 1.77Mt in September, up 10.0 percent y-o-y.

Chinese auto sales jumped 26.14% on year to 2,564,100 in September, says CAAM. In the first nine months of the year automakers in the country delivered 19,360,400 vehicles in total, 13.17% more than a year earlier. The passenger car market expanded 28.94% to 2,268,300 units in Sept., and 14.75% to 16,752,000 units in the first nine months of 2016.

JAPAN’s manufacturing sector saw its PMI increase to its highest level in nine months, from September’s 50.4 to 51.4 in October. New orders, both domestic and export, grew for the first time since January. Employment grew to a two-and-a-half year high and production was up at its sharpest rate in ten months.

There was greater trade with China, Taiwan, Europe and Southeast Asian countries.

The INDIAN manufacturing sector’s PMI was at a 22-month high in October, thanks to strong increases in new orders, purchasing activity and production. October’s PMI was at 54.4, up from September’s 52.1 figure.

Consumer goods producers outperformed intermediate and investment goods producers. Production expanded at its fastest rate for 46 months, new orders at their fastest rate for 22 months.

SOUTH AMERICA OUTLOOK

In Brazil, the manufacturing downturn continues with new export orders falling at their fastest pace since the global financial crisis. There were further sharp decreases in employment. The downturn in new orders softens, but production falls at a quicker pace.

The PMI for October, at 46.3, very slightly up from September’s 46.0 figure, represents the 21st consecutive month of contraction in the Brazilian manufacturing industry.

Brazil’s crude steel production for the month of September was 2.58Mt, a 3.1 percent y-o-y increase.

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 significantly in October to 52.0 from September’s 51.0 reading, the highest reading recorded for two years.

Of the 31 nations for which October data were available, 22 showed improved operating conditions in October, and of the nine showing contractions six were in Asia, with Brazil, Turkey and Greece also showing declines.

All indexes, production, new orders, new export orders and employment were up, as were input and output prices.

 

GLOBAL BUSINESS SURVEY INSIGHTS

global-insights

by Norbert Ore

ECONOMY CHUGGING ALONG FOR NOW OCTOBER 2016

Last month we saw faster growth – albeit slow, persistent economic growth across much of the globe. And we also recognized more positive activity than we’ve seen in any month since March. So last month was a positive by most standards. Now we see October as a large step forward based on global survey data.

While there are still many challenges to global growth, October does provide short term encouragement. In reviewing the data from 21 countries, we find various levels of growth, while notably only Brazil, South Korea, and Greece remain in contraction. Admittedly, two months do not make a trend, but it does illustrate resilience in the global economy.

The Eurozone PMI (53.5, +0.9) rose to its highest level since January 2014. The strong showing was led by Netherlands (55.7, +2.3), Germany (55.0, +0.7), Austria (53.9, +0.4) and Spain (53.3, +1.0).

UK manufacturing has, to this point, not been negatively impacted by BREXIT. This is in spite of strong expectations to the contrary. The UK PMI (54.3, -1.1) reading is also the average for the past three months. It is likely this level of activity can be explained by inventory replenishment and favorable exchange rates and may not be sustainable. However, it is impressive in the short term!

Thanks to a modest improvement during October, China’s Official Report, the CFLP PMI (51.2, +0.8), raised the average for Jan-Oct to 50.1. Both the Official Report and the Caixin China General Manufacturing PMI (51.2, +1.1) rose to their highest level in 28 months.

In North America, Canada (51.1, +0.8) reported growth for the eighth month following a seven-month contraction. Meanwhile, Mexico (51.8 -0.1) recorded its thirty-ninth consecutive month of growth as it continues a stronger trend after posting its lowest level in 33 months in July.

October Scattergram

 

IX. THE FINAL WORD


Manufacturing from a global perspective looks better this month than it has done in a long time. Results from the U.S., Europe and Asia are encouraging.

Ongoing efforts are being made to replace some of the world’s fossil fuels with alternate forms of energy, while information continues to come to light as to how important this is. Much damage has been done to the planet, but we are told by those who know that there is still time to turn the situation around, but only if all concerned can put together a joint effort, and if certain politicians can take their heads out of the sand.

Last Months Issue can be seen HERE

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Metals & Manufacturing Outlook October 2016


 

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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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Metals & Manufacturing Outlook September 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.

 

Subscribe to Metals & MFG Outlook for the latest industry news!

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

So, here we are in September and nothing has changed much. A recent survey by CNN of working American’s mirrors the statements by employers across the country: America is in the doldrums.

It is surprising what a substantial difference there is between a 2.0 GDP and a 3.0 GDP. At 3.0, things are hopping; at 2.0, things are sluggish. At 1.0, things are stagnant. Most of the forecasts for 2016 are a GDP between 1.8 and 2.1 – sluggish. For 2017 and 2018, the projections are about the same, around 2. So far for 2016 we are at 0.8 for Q1 and 1.1 for Q2 – stagnant.

The problem? Any problem could cause the GDP to dip lower, and little is pointing to a higher GDP. Reason(s)? Consumer debt remains high – there is very little room for discretionary spending. Manufacturing is investing in short-term ROI projects like new technology, not long term projects like new equipment even though some plant construction is up. Some of that space may remain idle unless the economy picks up.

What is everyone waiting for? The election – lots of people are hoping that the outcome will trigger economic growth. The challenge? The country is mired in what will soon be $20 trillion in debt, or 120% of total GDP – not seen since World War II. And, there is no plan to work down the debt – just more talk of more federal spending. Where is that money going to come from? Your pocket!

Our clinically grossly obese government needs to go on a diet and shed debt, and probably some employees, too. Blindly going forward into $30 trillion in debt is a fools errand, but NO politicians are talking about ways to reduce spending. No one likes to hear about spending cuts or cuts to the government workforce.

What is the Fed to do? Raise rates? That will also increase the debt service cost, just like the rate going up on your credit card. Less goes to principal, more goes to interest, and the payoff stretches way off into the future. Raising rates is the way the government heads off inflation; they haven’t raise rates because their read is that the economy is weak and inflation is almost non-existent – unless you happen to include food, education, health care and housing – which they apparently don’t.

If the government cuts corporate tax rates, where will they get the money to pay their bills, pay the debt service, and pay down this national travesty? Your pocket! Expect personal income taxes to raise regardless of who gets elected – they will lie and tell you that won’t happen, but it will. It is either cut spending, shed debt, and reduce federal employee head count, or raise taxes on taxpayers. We would like to see them do the former before they do the latter, but there is no evidence they will cut their own throats or turn down the tap on the spending flow in Washington D.C.

If personal income taxes go up, the GDP goes down. Discretionary spending will drop and since consumers drive 70% of our nation’s economy, personal spending will decline because you won’t have it to spend anymore. So, people feel the country is headed in the wrong direction.

Manufacturers share the pain – laws, rules, regulations and policies coming out of every department and federal agency continue to dump some new and often ridiculous compliance issues the Utopians in Congress conjured up. How will companies pay for it? Eliminate a job or two – the minimum compliance cost across all businesses is now estimated at $35,000 a year for small businesses on up to over 100 fold that for major corporations, and it is rising.

All this won’t end well for America. The General Accounting Office, the Congressional Budget Office, Moody’s, Standard & Poor’s, and Fitch Ratings all agree that a $30 trillion national debt is not sustainable – it means the USA goes bankrupt like Russia did.

The bottom line? The days of boom/bust economic cycles may be gone forever. They were fuelled by debt: credit cards in the 80’s, home equity lines of credit in the 90’s, easy home mortgages in the 2000’s – there aren’t any other consumer debt instruments to drive the next boom and the government is out of gas, but they run deficits every year anyways. So the likely scenario for the foreseeable future are modest economic ups and downs instead of big waves we ride until they crash and we all tumble inside them. Put away your surfboard and get out your floaties – it’s going to be a dull day at the beach.

Best Regards,
Lewis A. Weiss
Publisher


I. COVER STORY: THIS WAS AN UP AND DOWN, ROUND AND ROUND MONTH

Metals and Manufacturing outlook newsletterISM PMI down in August.  

Brexit-bound Britain sees its August manufacturing performance rebound and then some. 

U.S. car and light truck sales drop over 4 percent y-o-y, Canada’s light vehicle sales drop 2 percent y-o-y and Western Europe car sales increase 8 percent y-o-y.

FCA sales executive found fudging figures. Sales weren’t what they were said to be. This will be an ongoing story as the U.S. Department of Justice is on the case.

The U.S. created 151,000 non-farm jobs in August. This was less than the estimated 180,000 jobs increase, but together with June and July’s figures which were over expectations, gave an average increase over the past three months of 232,000.

Meanwhile the Reshoring Initiative estimates that 265,000 jobs were brought back to the U.S. between January 2010 and July 2016. The reasons for the job return is said to be government incentives, ecosystems/localization, proximity to customers and availability of a skilled workforce.

Thanks to anti-dumping measures against a good number of countries, particularly China, the U.S. is seeing its steel prices holding up. A coincident reduction in demand from the manufacturing sector sees the start of a domestic price war. China exported 67.4 million tons of steel in the first seven months of 2016, a record for the period. Along with steel the U.S. aluminum industry is also crying for help. See XIV. Other New News.  

It is reported that orders for U.S. capital equipment recently rose by the most since January. There was a pickup in July, for the second consecutive month, in non-military bookings, excluding aircraft, of 1.6 percent, exceeding even the most optimistic forecast in a recent Bloomberg survey, and representing the first back-to-back increase since January 2015.

U.S. Construction coming back. See section XIV. Other New News.

The ISM PMI figure for U.S. manufacturing moved back into contraction in the month of August to 49.4 percent from July’s 52.6 percent, following five months of growth in manufacturing. The overall economy grew for the 87th consecutive month. Economic forecasts had predicted a PMI for August from 50.7 to 53.4. See North American Perspective for details. 

The IHS Markit PMI for the U.S. manufacturing sector eased back to 52.0 percent in August from July’s 52.9 reading. Markit’s August data pointed to a further moderate upturn in conditions across the U.S. manufacturing sector, but the overall pace of improvement was slower than in July amid weaker increases in new orders and employment. Inventories are down for the third consecutive month.

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.

Manufacturers said production volumes were up with the pace of expansion the joint-fastest since November 2015, and new export orders rising at the strongest pace since September 2014. Through all this there is talk of an underlying weak domestic demand and a possible temporary negative effect of the U.S. election campaign.

The Bureau of Economic Analysis came out with its ‘second’ estimate for the annual rate of Real GDP growth in the second quarter of 2016, putting it at 1.1 percent. The figure for the first quarter was 0.8 percent.

GALLUP’s U.S. Economic Confidence Index was at -11 in early September, with the coincident job creation index at +33. 

World crude steel production for the 66 reporting countries for the month of                             July 2016 was 133.74Mt, 1.4 percent up y-o-y.

U.S. crude steel production, for July 2016 was 6.88Mt, down 2.2 percent y-o-y. 

Primary Global Aluminum Production in July 2016 was reported at 4.897 million tonnes, of which 2.659 million tonnes, over 54 percent, was produced in China. The Gulf Corporation Council (GCC) produced 437,000 tonnes, North America 336,000 tonnes, Western Europe 315,000 tonnes and Eastern and Central Europe 335,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘The Big 8’ for August 2016. It will be noted that all of the big eight’s sales were down for August, with lower car sales responsible for the overall drop.

The ‘Big Eight’ August ’16 August ’15 YTD % change
General Motors 256429 270480 -5.2
Ford 213411 233880 -8.8
Toyota 213125 224381 -5
FCA 193987 198209 -2.1
Honda 149571 155491 -3.8
Nissan

124638

 

133351 -6.5
Hyundai/Kia 126263 130909 -3.6
VW 29384 32332 -9.1
Total new   cars and light trucks 1512556

1577407

 

-4.1 

Total cars        600,983                687,998                -12.6                   

Total l/trucks  911,573                889,409                2.5

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 +1.2 (qtr) -0.5 (July) +0.8 (July) 4.9 (July)
Canada +2.4 (qtr) -2.8 (May) +1.3 (July) 6.9 (July)
China +7.4 (qtr) +6.0 (July) +1.8 (July) 4.1 (Qtr 2)
Japan +0.2 (qtr) -1.5 (June) -0.5 (June) 3.1 (June)
Britain +2.4 (qtr)

+1.6 (June)

 

+0.6 (July) 4.9 (May)
Euro Area +1.1 (qtr) +0.4 (June) +0.2 (July) 10.1 (June)
France -0.2 (qtr) -1.3 (June) +0.2 (July) 9.9 (June)
Germany +1.7 (qtr) +0.5 (June) +0.4 (July) 6.1 (July)
Italy nil (qtr) -1.0 (June) -0.1 (July) 11.6 (June)
Spain +2.8 (qtr) +1.0 (June) -0.6 (July) 19.9 (June)
India +9.6 (qtr) +2.1 (June) +6.1 (July) 4.9 (2013)
Brazil – 1.1 (qtr) -5.9 (June) +8.7 (July) 11.3 (June)
Taiwan + 0.2 (qtr) -0.3 (July) +1.2 (July) 4.0 (July)
Mexico – 0.7 (qtr) +0.6 (June)

+2.7 (July)

 

3.9 (June)

  

FF Journal Magazine

II NORTH AMERICAN PERSPECTIVE

by Royce Lowe

North American manufacturing

The Institute of Supply Management PMI figure registered 49.4 percent in August, off 3.2 percentage points from July’s 52.6 reading, representing contraction in manufacturing following five months of growth. There was growth in the overall economy for the 87th consecutive month.

ISM PMI

ISM PMI for the past 90 days

Six of the 18 manufacturing industries reported growth in August in the following order: Printing & Related Support Activities; Nonmetallic Mineral Products; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Chemical Products. The 11 industries reporting contraction in August, listed in order are: Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Transportation Equipment; Machinery; Textile Mills; Paper Products; Petroleum & Coal Products; Primary Metals; and Fabricated Metal Products.

Despite the rather significant easing of the PMI figure in August, there were still some very positive comments from the industry. Albeit, Chemical Products, Computer & Electronic Products and Transportation Equipment spoke of flat conditions. On the other hand, there was positive feedback from Nonmetallic Mineral Products, Fabricated Metal products, Food, Beverage & Tobacco Products, Machinery and Miscellaneous Manufacturing. A respondent from Plastics & Rubber Products was concerned with the difficulty in finding suitable employees, and from a Petroleum & Coal Products respondent we heard of a rig count slowly increasing.

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 New Orders Index took a tumble in August to 49.1 percent down 7.8 percent from July’s 56.9 percent reading. This is the first time this index has been in contraction since February this year. Growth was noted in six industries, including Computer & Electronic Products; Miscellaneous Manufacturing; Chemical Products; and Fabricated Metal Products. Nine industries reported a decrease in new orders during August, including: Transportation Equipment; Plastics & Rubber Products; Machinery; Primary Metals; and Paper Products.

The Production Index also slipped into contraction territory in August, and at 49.6 percent or 5.8 percentage points below July’s 55.4 reading, represented the lowest figure since August 2012, when this index registered 49.5 percent. Growth was noted in eight of the eighteen industries, including Chemical Products; Primary Metals; Computer & Electronic Products; and Fabricated Metal Products; The eight industries reporting a decrease in production during August include Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Transportation Equipment; Machinery; and Paper Products.

Employment fell 1.1 percentage points in August with the index at 48.3, down from July’s 49.4 reading, representing contraction in employment for the second consecutive month. Employment growth was reported in five industries in August, namely Printing & Related Support Activities; Paper Products; Primary Metals; Computer & Electronic Products; and Nonmetallic Mineral Products. The nine industries reporting a decrease in employment in August include Transportation Equipment; Plastics & Rubber Products; Petroleum & Coal Products; Machinery; Chemical Products; and Textile Mills.

The delivery performance of suppliers to manufacturers was slower in August as the index registered 50.9 percent, or 0.9 percentage points lower than July’s 51.8 reading. Six industries reported slower supplier deliveries in August namely Nonmetallic Mineral Products; Transportation Equipment; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; and Chemical Products. The four industries reporting faster supplier deliveries in August are: Paper Products; Primary Metals; Plastics & Rubber Products; and Fabricated Metal Products. Eight industries reported no change in supplier deliveries in August compared to July.

Raw Materials Inventories contracted for the 14th consecutive month in August as the Inventories Index decreased slightly to 49.0 percent from July’s 49.5 reading. Four industries reported higher inventories in August namely Wood Products; Apparel, Leather & Allied Products; Transportation Equipment; and Nonmetallic Mineral Products. The 11 industries reporting lower inventories in August include Textile Mills; Chemical Products; Fabricated Metal Products; Primary Metals; Computer & Electronic Products; Machinery; 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

ISMThe ISM Customers’ Inventories Index registered 49.5 percent in August, or 1.5 percentage points below July’s 51.0 reading, meaning that customers’ inventories are considered to be too low in August, having been considered to be too high for three previous consecutive months. Five manufacturing industries reported customers’ inventories as being too high during the month of August, namely Petroleum & Coal Products; Furniture & Related Products; Transportation Equipment; Machinery; and Plastics & Rubber Products. The eight industries reporting customers’ inventories as too low during August include Primary Metals; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; and Fabricated Metal Products.

The ISM Prices Index registered 53.0 percent in August, which is 2.0 percentage points lower than July’s 55.0 percent reading, indicating an increase in raw material prices for the sixth consecutive month. In August 19 percent of respondents reported paying higher prices, 13 percent lower and 68 percent the same prices as in July. Of the 18 manufacturing industries, the nine industries that reported paying increased prices for its raw materials in August are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Transportation Equipment; Petroleum & Coal Products; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Nonmetallic Mineral Products. The three industries reporting paying lower prices during the month of August are: Electrical Equipment, Appliances & Components; Furniture & Related Products; and Food, Beverage & Tobacco Products. Six industries listed no change in prices in August compared to July.

Up in Price in August were:

Caustic Soda; Copper (2); Gold (2); Nickel; Plastic Resins; Propylene; Stainless Steel (5); Steel* (8); and Titanium Dioxide.

Commodities Down in Price
Corn (2); Corrugate (2); Diesel; Scrap Steel; Steel* (2); Steel — Cold Rolled; and Steel — Hot Rolled.
Commodities in Short Supply

None (5).

* indicates both up and down in price

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

The ISM Backlog of Orders Index was at 45.5 percent in August, 2.5 percentage points down on the July reading of 48.0 percent, indicating contraction in order backlogs for the second consecutive month. Of the 88 percent of respondents who measured their backlogs, 18 percent reported greater backlogs, 27 percent smaller backlogs and 55 percent no change from July. The four industries reporting growth in order backlogs in August are: Printing & Related Support Activities; Petroleum & Coal Products; Computer & Electronic Products; and Fabricated Metal Products. The 12 industries reporting a decrease in order backlogs during August include Transportation Equipment; Primary Metals; Paper Products; Machinery; Plastics & Rubber Products; and Chemical Products.

The ISM New Export Orders Index was at 52.5 percent for August, unchanged from July’s reading and representing growth in new export orders for the sixth consecutive month. The eight industries reporting growth in new export orders in August are: Wood Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; and Paper Products. The six industries reporting a decrease in new export orders during August are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Primary Metals; Plastics & Rubber Products; and Transportation Equipment.

The ISM Imports Index is at 47.0 percent in August, five percentage points lower than July’s reading of 52.0 percent, representing a decrease in imports after four months of an imports index of 50.0 or above. The four industries reporting growth in imports during the month of August are: Furniture & Related Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Machinery. The nine industries reporting a decrease in imports during August are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Textile Mills; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Miscellaneous Manufacturing; and Fabricated Metal Products. 

CANADA’S IHS Markit Manufacturing PMI decreased to 51.1 in August from July’s 51.9 reading, with a renewed slowdown in production and new order growth in the Canadian manufacturing sector.

August saw the slowest rise in production levels for six months, along with a further drop in export sales and a slower pace of employment growth.

All regions showed an increase in manufacturing production, with Ontario the best. Alberta and B.C. showed the slowest fall in manufacturing production for just over 18 months.

Canada produced 1.14 Mt of crude steel in July, up 3.5 percent y-o-y. Canada’s light vehicle sales were off 2 percent y-o-y at 172,277 units in August, due mostly to significant sales reductions by GM and FCA/Chrysler. Sales for the first eight months of 2016 were up 3.8 percent at 1,337,504 units.

MEXICO’s PMI increased slightly to 50.9 from July’s 33-month low reading of 50.6. The month saw a slight fall in production but a solid increase in new orders and a continuing growth, for the 25th consecutive month. in employment. There was a sharp drop in backlog. Mexico produced 1.65Mt of crude steel in July, up 8.8 percent y-o-y.

III.  EUROZONE

by Royce Lowe

IHS Markit

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for August, at 51.7 was down from July’s 52.0 reading, as some growth momentum was lost in August, with expansion rates slowing for production and new orders, both domestic and export. The PMI has grown for 38 consecutive months.  

Job creation in the Eurozone was the weakest since March, but the outlook remains ‘mildly positive’ as backlogs increased at the fastest pace in two-and-a -half years. Germany and the Netherlands are leading the Eurozone pack.

  PMI High/low
Germany 53.6 (53.8) 3-month low
Netherlands 53.5 (53.2) 5-month high
Austria 52.1 (53.4) 3-month low
Ireland 51.7 (50.2) 2-month high
Spain 51.0 (51.0) unchanged
Greece 50.4 (50.4) 2-month high
Italy 49.8 (51.2) 20-month low
France 48.3 (48.3) 2-month low

There was an extra selling day for cars in Europe in August and passenger car sales were up significantly, by 8.1 percent, with 765,383 cars sold in Western Europe, including the UK. Germany was up 8.3 percent, as VW’s sales moved from a 13 percent drop in July to a 16 percent hike in August, while France went up 6.7 percent, Italy 20 percent, Spain 15 percent and the UK 3.3 percent. 

Crude steel production in Germany in July was at 3.39Mt, down 6.1 percent y-o-y; in Italy 2.05Mt, up 6.2 percent y-o-y; in France 1.15Mt, down 4.7 percent y-o-y and in Spain 0.84Mt, down 13.0 percent y-o-y.

Russia’s crude steel production for July was at 6.13Mt, up 0.9 percent y-o-y; Ukraine’s was 2.06Mt, up 10.5 percent y-o-y.

IHS Markit reports a rebound in the UK manufacturing PMI from July’s three-year low level of 48.2 to a 10-month high in August of 53.3. Trends in new orders and production were definitely on the up, with a weaker Sterling good for export orders, as witnessed by increased sales to North America, Europe, China, South-East Asia, the Middle-East and Norway. Employment was up for the first time in the year-to-date. The UK produced 0.66Mt of crude steel in June, down 27.3 percent y-o-y.

IV. MANUFACTURING TALK RADIO – TELLING THE STORY BEHIND THE SOUNDBITES

by Tim Grady

Manufacturing Talk Radio has been doing deep dives into subjects that only get sound bites on main stream media. While the narrowest definition of manufacturing as a percentage of GDP is 11-12%, the impact of manufacturing is far greater. Various organizations that measure the multiplier effect gauge it between $1.40 and $1.80 that is generated for every $1.00 in manufacturing. That would make manufacturing from 25-33% of GDP. For example, what would retail sell without manufacturing? How would one construct homes or buildings without manufacturing? One might argue that mining and construction belong in manufacturing, but that’s a discussion for another day.

We encourage readers to look through the “Tags” at www.mfgtalkradio.com and listen to shows relevant to their business or industry. With over 150 shows in the library and guests from business, industry, state and federal governments, academia, associations and organizations, there will be several topics listeners will find useful.

V. ASIA OUTLOOK

by Royce Lowe

 - Japanese yen currency and Calculator

CHINA produced 66.8Mt of crude steel in July, up 2.6 percent y-o-y; Japan 8.87Mt up 0.5 percent y-o-y; India 8.08Mt, up 8.1 percent y-o-y and South Korea 6.01Mt, up 1.5 percent y-o-y. Taiwan produced 1.89Mt in July, up 4.0 percent y-o-y.

 The Caixin China manufacturing PMI dropped from July’s 50.6 to 50.0 in August, effectively into stagnation. Production and total new orders both rose at slower rates than in July, and export sales continued to decline. Employment contracted in August, albeit at the slowest rate to date in 2016.

Figures from the Chinese Association of Automobile Manufacturers (CAAM) say that passenger car sales were up 26.3 percent y-o-y in July at 1.6 million units. A government policy halved the sales tax on cars with a less than 1.6 liter motor and sales of these cars were up 38.6 percent y-o-y to 1.14 million in July, some 71 percent of total sales. Sales for cars for the first seven months of 2016 are up 11 percent to 12.64 million units, with combined sales of cars and commercial vehicles up 9.84 percent to 14.68 million units.

JAPAN’s manufacturing PMI increased from July’s 49.3 to 49.5 in August, the highest reading since February. The downturn in the manufacturing sector was at a weaker pace, with production picking up for the first time since February. New orders, both domestic and export, declined at the slowest rate in six months.

The INDIAN manufacturing sector’s PMI rose to a 13-month high of 52.6 in August, from July’s 51.8 figure. The month saw stronger growth in new orders – both domestic and export – and production. New orders increased at the fastest pace since December 2014, with consumer goods leading, but with solid growth in the intermediate and investment categories.

VI. SOUTH AMERICA

by Royce Lowe

bazil-badIn Brazil, the rate of contraction in new orders accelerates. Production decreases at a weaker pace and there are further reductions in employment. The PMI for August, at 45.7, down from July’s 46.0, represents the 19th consecutive month the PMI has been below the 50 mark. 

Dilma Rousseff has been impeached and the Vice-President Michel Temer, who has been at the helm since May, will serve out the 28-month balance of Rousseff’s term. Needless to say, Mr. Temer has resolved to do something about the economy.

Brazil’s crude steel production for the month of July was 2.70Mt, a 6.0 percent y-o-y decrease.

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

North America and Europe were the driving forces in the overall moderate expansion seen in August. Japan, South Korea, Malaysia, Thailand and Myanmar contracted while China stagnated. There was expansion in Taiwan, India, Indonesia, Vietnam and the Philippines.

The pace of increase slowed in the Eurozone while the UK rebounded sharply from July’s downturn. Global manufacturing saw the sharpest production increase in consumer goods, with modest expansion in intermediate and investment goods. New order growth was slower than in July and there was a marginal reduction in global manufacturing employment, with job creation slowing sharply in the U.S., easing in the Eurozone, stagnating in Japan and falling in China. The UK saw increases in employment, as did South Korea, Taiwan, India, Canada, Mexico, Turkey, Vietnam, the Philippines, Poland and the Czech Republic.

The big concern at the moment seems to be the level of new orders.

VII. FORGING AND CASTING

by Royce Lowe

Britain’s Sheffield Forgemasters International Ltd. has a new $30-million award from the U.S. Dept. of Defense to supply steel castings as part of the Columbia-class submarine program. The Columbia-class will be a series of nuclear-powered vessels in line to replace the current Ohio-class ballistic missile submarine, which is a critical element of the U.S. nuclear missile defense strategy.

Few details of the contract are available, but it is speculated that the castings will form part of the subs’ nuclear-missile launch system.

Ellwood Texas Forge Navasota (ETFN) made its first production shipment of 15-5PH flap-track forgings for the 737 program to the Boeing Portland (Oregon) fabrication facility. Ellwood and Boeing concluded negotiations on aseamless rolled ring new multi-year contract in May 2015 and shortly after began the qualification processes and testing required. ETFN is one of two closed-die forging companies owned by Ellwood Group Inc. of Ellwood City, Pa. Located in southeast Texas, ETFN uses conventional hammers, computer-controlled counterblow hammers and computer-controlled presses to manufacture near-net closed-die forgings in carbon, alloy, and stainless steels, and titanium. ETFN also has in-house heat-treatment and testing capabilities.

The Hirschvogel Automotive Group, headquartered in Denklingen, Germany, will set up a new plant in Mexico. Hirschvogel, a global producer of forged steel and aluminum components, will locate the facility in San Juan del Río in the state of Querétaro about 90 miles northwest of Mexico City. The new site spans 115,000 square meters, about 1.24 million square feet, and groundbreaking is expected to occur in September. Installation of the forging machines is scheduled for the end of 2017, and full production of constant-velocity joints and transmission shafts is expected to commence in early 2018. The company, Hirschvogel Components Mexico S.A. de C.V., will be managed by President and CEO Stephan Lutzenberger, who most recently served as corporate product and process development, forging at the Denklingen plant.

VIII. GLOBAL ECONOMIES CONTINUE EQUILIBRIOUS AUGUST 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore

global mfg

With only a couple of exceptions, bouncing up and down around the mid-point seems to be the trend for the August reports as it appears that many reports that were up in July fell in August and vice versa. While the overall picture appears eerily balanced, more remarkable is the resilience that keeps surfacing.

While global economies are still considered to be underperforming, 13 of the 18 (12 in July) surveys that we follow are growing at an average PMI of 51.9 and lower than the July average of 52.8 percent. The JP Morgan Chase Global PMI (50.8, -0.2) which measures over 30 countries indicates that August provides little change from July.

In the continuing saga of the Brexit, the UK (53.3, +5.1) reversed direction in August and made a substantial showing since the UK averaged only 51 for the first half of 2016. Last month we posited that there had to be some inventory accumulation as supply insurance prior to the vote and then a degree of liquidation afterward – that is still a likely explanation as it is punctuated by the bounce.

China’s Official Report, the CFLP PMI (50.4, +0.5), has averaged 49.9 for the first eight months of the year. The Caixin China General Manufacturing PMI (50.0, -0.6) fell to the mid-point and has averaged 49.2 for the first eight months. Manufacturing in China has shown little change since we began tracking both surveys in 2012.

ScattergramIn North America, Canada (51.1, -0.8) reported growth for the sixth month following a seven-month contraction. Mexico (50.9 +0.3) recorded its thirty-seventh consecutive month of growth as it recovered slightly after posting its lowest level in 33 months in July.

NOTE: If you are a manufacturer and want to receive two free reports without being solicited for anything else, simply participate in this survey by answering two short questions each month. Send an email to

IX. THE SKILLS GAP, EMPLOYMENT, AND ASSOCIATED TOPICS

by Royce Lowe

Engineer Teaching Apprentice To Use Milling Machine Together

Peter Feil heads U.S. operations for German gearbox and motor maker Stober Drives. The company has 120 employees and is located in Maysville KY, a town of 9,000 people, an hour from both Cincinnati and Lexington.

Mr. Feil is very keen on apprenticeships, and since launching a program some ten years ago the company has trained 32 apprentices and has 16 current. The community is relatively small, and the apprenticeship program is open to a broad age range, and has taken in applicants from 18 to 43 years of age, to study anything from machining to maintenance and in accounting, electrical, marketing, industrial engineering and quality.

The community needs good workers, hence the program, and to quote Mr. Feil, ‘anything we can do to provide opportunities and convince kids to stay is going to be critical for maintaining any kind of industry ……the more kids we can retain, the more businesses will thrive. Every kid we lose is a lifetime worker that’s not going to be in our town.’ The average age of an apprentice is 29, and as such it is not like Germany, but if someone is 40 and suitable they will be welcome and appreciated on the program.

Mr. Feil says one of the big secrets of his company’s success is that they’re in the power transmission and motion control business, ‘but to be sustainable we also need to be in the people development business’.

X. AUTOMOTIVE

by Royce Lowe

car productionNissan says that UK E.V. Chargers may outnumber fuel stations by 2020. More than 75 percent of gas stations in the UK closed in the past 40 years, whereas the number of EV Charging stations has increased from a few hundred in 2011 to 4,100 in 2016.

FORD says it will mass produce a fully autonomous, self-driving car without a steering wheel by 2021.

Local Motors – you already read about them here – manufacturers of Olli the minibus with IBM’s Watson computer, and other cars made to order, are now partnered with GE, Siemens, PLM, Sabic, NXP and IBM. They have received orders for Olli from around the world, possibly because Watson, along for the ride, will answer any questions passengers may have. LM is not looking to produce extraordinary numbers of vehicles, rather hundreds of mini-factories across the country that might produce 3,000 vehicles per year. The first mini-factory, in Knoxville, TN, will start producing cars in 2018. 

Tesla has developed a 100 KwH battery with a 315 mile (500 km) range, for a car that will go from 0 to 60 in 2.5 seconds (who needs it?)

It is estimated that in the first (just over) seven months of this year, 19,100 people were killed on U.S. roads, and that 2.2 million were seriously injured. The total cost was approximately $205 billion and the figures are about 9 percent up on the corresponding figures for 2015. Possible reasons being put forward are a stronger economy, lower unemployment, average gas price down 16 percent on 2015 and an increase in miles driven of 3.3 percent.

Driverless taxis will hit the streets of Singapore in the next couple of years, at least a 2.5 square mile area. Renault and Mitsubishi will collaborate on the vehicles for nuTonomy, a U.S. based tech start-up that developed the software used in the vehicles. Six taxis will take part in the trials, each accompanied by an engineer who will be ready to take over in an emergency.

Volvo and Uber are to venture together into driverless car technology.

VW meanwhile, even though it has come to a huge settlement with states and individual owners, has yet to pass by Federal and State authorities, including the Justice Department. Some 600,000 vehicles in the U.S. and about 11 million worldwide are ‘in question.’

XI. AEROSPACE

by Royce Lowe

747Joe Sutter, a Boeing engineer and Father of the 747, died recently at the age of 95. He led the team that crafted the ‘jumbo jet’ in less than two-and-a-half years, and left his influence on most of the aircraft that came after.

A week after the Air Force said its version of the Lockheed Martin Corp’s F-35 was ready for limited combat operations, Michael Gilmore, the Defense Department’s director of operational testing, said the $400 billion project was ‘still riddled with deficiencies.’ This is bad for both the Air Force and for those countries who have committed to buy, namely the UK, Italy, Australia, Japan and Israel – if the project moves into production in 2019.

China will invest $7.5 billion in a jet engine conglomerate with almost 100,000 employees, the Aero Engine Corporation of China (A.E.E.C.) President Xi Jinping said the company would make China an aviation power and would modernize its military.

China does not make large commercial jet engines of its own and its narrow-body aircraft, the C919, is powered by engines from CPM International, a joint venture between GE and France’s Safran.

This is a long-term project, and ‘getting it right’ will be a very long-term project.

ANA Holdings Inc., the world’s biggest operator of Boeing’s Dreamliner jet, is checking the Rolls Royce engines on its entire fleet of 787s following a February incident when an airliner had to shut down a power plant and return to the airport. Corrosion was found on turbine blades and Rolls Royce will supply modified versions of these blades.

All 787s worldwide were taken from the skies in 2013 following a lithium-ion battery meltdown, a problem Boeing fixed. This represented the first time in over three decades that an entire model had been grounded.

Rolls Royce meanwhile has a $1.5 billion contract to supply Trent 700 engines to power 15 Airbus A330 jets for China Eastern Airlines, a contract that includes long-term maintenance and support services.

XII. THE MANUFACTURING SCENE: EAST MEETS WEST, OR BUILDING THE LEXUS IN THE U.S.

by Royce Lowe

lexusWil James walked through mud when they were breaking ground for Toyota’s Camry plant back in the late eighties. He’s worked for Toyota since 1987, when the Georgetown, KY plant was going up, and is now president of Toyota manufacturing USA, and hence ultimately responsible for the recently completed $360 million second plant. Where they’ll build the Lexus ES 350.

Mr. James had 30 months to put together a 750-person team, trained to meet the standards required in a luxury brand producing 50,000 cars a year, a challenge bigger than building the plant and setting up the equipment. Some 75 percent of the Lexus workers came from the Camry plant, some of whom had been there since 1987, so they were thoroughly versed in the Toyota production system. The Lexus, however, required longer stretches on each process, more sensory tasks and more expertise. Workers who had been used to completing their process in 55 seconds found themselves on a line moving at about 4.1/2 minutes per process. This meant sensory, especially touch, detection of flaws as small as a human hair.

In Japan Lexus plant workers follow the principles of Takumi, or master craftsmen, whose expertise is so valued that their framed photographs hang on Lexus plant walls. The mindset of the Japanese counterparts’ 30 years had to be ‘transferred’ to Kentucky workers in 30 months. Toyota Kentucky employees were transferred only to Lexus areas matching their skills, an approach that worked so well that Toyota applied it across the entire Kentucky operation. One-and-a-half million training hours were given to the staff, much with trainers brought in from Japan, before the car went on line.

Some training was sensory, and involved detection of millimeter gaps and blindly pulling three different-sized bolts at a time, so the workers could pull out exactly what they needed for each task by feel. Sight, sound and touch were all involved. There was book learning and recitation of the information held in the pages. Here was perhaps a good reason for learning by rote.

The assembly team stripped and rebuilt 25 ES 350s.

Training was rooted in Kodawari, the Japanese principle that every tiny detail matters, and was at times almost poetic, for example, the plant’s master stitcher, to show what he could do, was required to master origami with his non-dominant hand.

The last word goes to Wil James: ‘Our single most accurate and valuable tool on our production continues to be the highly-skilled, well-trained worker.’

XIII. TECHIE CORNER

by Royce Lowe

geGE is out buying up new technology again. The world’s largest maker of aircraft engines made a bold move to acquire technology that could transform factory production in the coming decades. The company said it will spend $1.4 billion to buy two European makers of 3D printers to expand use for the manufacture of components such as aircraft parts.

GE offered to buy Sweden’s Arcam AB for 5.86 billion kronor (US$680 million) and, in a separate transaction, SLM Solutions Group AG of Germany. The Boston-based company said its first jet engine parts, called fuel nozzle interiors, made with the technology were introduced into service in July, paving the way for wider use.

The global market for 3D printing, or additive manufacturing, is growing as companies like GE move more toward commercial parts production from making prototypes. The aviation industry was a frontrunner in the use of the technology as it allows for more complex designs, helps to lower the weight of parts and cuts back on waste of expensive materials. GE Aviation has said it expects to print more than 100,000 parts for its jet engines by 2020.

GE is effectively buying into two competing technologies. Arcam promotes its proprietary technology, which uses electron beams, as a fast printing process with a greater ability to use a wide range of printing materials. SLM’s (Selective Laser Melting) laser-based systems are generally capable of making more detailed components. GE became Arcam’s top customer last year, placing the largest order to date to help produce turbine blades for jet engines.

The two companies bring together two different additive manufacturing technologies, and with time it is GE’s intention to extend the line of additive manufacturing equipment and products.

GE’s fuel nozzles made using 3D printing are a predominant use of the technology in the aviation industry, but airplane-makers Airbus and Boeing are also working on the process.

Airbus Group is just starting to incorporate 3D-designed parts on a test basis, and aircraft parts produced with such technologies will grow substantially over the coming years.

Siemens AG has acquired 85 percent of Materials Solutions Ltd., of Worcester, England, a company that also uses selective laser melting, in the production of nickel-superalloy parts for land-based and aerospace gas turbines, and specialty steel and titanium components for aerospace systems and performance automotive systems.

XIV. OTHER NEW NEWS

by Royce Lowe

century aluminumMichael Bless, CEO of Century Aluminum, in Hawesville, KY, is trying single-handedly to save the U.S. aluminum industry from China. Alcoa, who have a plant near Shanghai, will not step in, perhaps for fear of retaliation and trade cases.

China produces 55 percent of the world’s aluminum, and plans 9 percent more in 2017, according to Researcher Harbor Intelligence. In the past two years Century’s payroll has been cut by more than half.

Harbor quotes the LME price of aluminum at around $2,800 per ton in 2011, $1,682 in 2015 and recently at $1,564., and says any price below $1528 may result in Century shutting down its remaining smelters.

There are 140,000 workers in the U.S. steel industry, just 3,500 in its aluminum industry. Century and Alcoa are the last two U.S. makers of primary aluminum, which is used to make anything from beer cans to aircraft components. Outside China, Century’s Hawesville smelter is one of just two in the world that mass produces high-purity aluminum used in U.S. defense applications. The other is in Dubai.

We will follow this story with interest.

constructionU.S. Construction is coming back, and contributing more to the economy than it did in 2010. There is a demand for skilled workers.

The construction industry’s impact on the U.S. GDP has increased by over 21 percent since the low point in 2011, according to data from the U.S. Bureau of Economic Analysis. In 2016 construction’s contribution to the U.S. economy increased to over $650 billion for the first time since 2008.

Construction now counts 6.7 million employees, up from the low of 5.4 million in January 2011 and compared to the peak figure of 7.7 million in 2006. Recession-delayed work on roads, bridges and other infrastructure is fueling the increase.

As the building of new houses, offices and roads continues, many construction firms are struggling to find enough workers, especially carpenters and electricians. A 2015 survey by the Associated General Contractors of America (AGC) showed that 86 percent of respondents were having trouble filling available positions, compared to 81 percent in 2013, with carpenters, sheet metal installers, concrete workers, project managers and supervisors particularly hard to find. Lots of construction jobs evaporated during the recession and people left the business to do other things.

Arcelor Mittal, the world’s largest steelmaker, has been fined $110 million for price fixing in South Africa. By ‘colluding’ with competitors it kept prices high in 2008. The company supplies over 61 percent of South Africa’s steel. It will pay its fine in five annual instalments. Sounds like a drop in the ocean really.

GE is to break ground on a new $165 million Brilliant Factory in Welland, Ontario, where it will manufacture energy-efficient reciprocating gas engines and utilize the Industrial Internet of Things. The plant will occupy 450,000 sq. ft. and will employ 220 people by late 2020. Ontario will grant GE $20.5 million and the project will be supported by Canada’s Export Development Council (EDC) with whom GE has a very good relationship. The U.S. Export-Import Bank had not been reauthorized by Congress when the announcement of this project was made in September 2015, and in fact the E-I Bank remains unable to approve transactions over $10 million

XV. THE FINAL WORD

by Royce Lowe

The drop in the U.S. manufacturing PMI into contraction territory may have been an anomaly and there is some cautious optimism for the coming months. The Global scene is plodding along, with Europe and the U.S. being counterbalanced by China and Japan. There again, there are those who say that China is on the up again.

Automotive sales figures in the U.S. fell overall by over 4 percent in August, in spite of buyers being offered the best deals since the great recession. The industry may have peaked but who knows?

A lot is being written about driverless cars, but not too much about the people who may want to sit in them.

The Global manufacturing economy seems to be teetering. It’s month by month, strange but always interesting.

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Metals & Manufacturing Outlook August 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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I. Cover Story: THE MONTH THAT WAS: AND WHAT ANOTHER  MONTH IT WAS
II. NORTH AMERICAN PERSPECTIVE
III. EUROZONE
IV. MANUFACTURING TALK RADIO
V. ASIA OUTLOOK
VI. SOUTH AMERICA
VII. FORGING AND CASTING
VIII. MAINTAINING A PACE ABOVE STALL SPEED
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

Once Upon a Time, there was a tortoise and a hare. The hare was quite spritely and quick, like the 80’s, or latter 90’s or early 2000’s. The tortoise, however, won the race if you recall Aesop’s fable. In China, they celebrate each year with an animal, so by comparison, I guess we are in the year of the tortoise in the U.S. with a GDP that will finish the race likely below 2%. However, next year looks to be an exciting year represented by the tortoise’s twin brother.

Another fable is that presidential election years are good years for business. These may be just fond memories of a wistful past because the near future and 2016 bear no such resemblance. Oh, it isn’t a disaster where GDP is negative, and it’s okay, it’s good, but it just isn’t…great.

Oddly, the Purchasing Managers Index generated by the Institute for Supply Management shows that the U.S. economy is in its 86th month of expansion with July being one of the best month’s yet. But, it seems to be driven by automotive and perhaps aircraft manufacturing even though 11 industries in manufacturing report growth. Yet, it just doesn’t feel right.

Explain it as we try, “It’s the end of summer,” “It’s a goofy election year,” “The manufacturing industry is still recovering from the Great Recession,” “It is the coming of robotics and the Internet of Things,” “It’s an absence of capital investment,” “It’s the U.S. tax structure finally catching up with us,” “It’s the weight of the national debt finally choking off government spending,” “It’s the drop in the Chinese economy,” “It’s the mixed recovery/recession in the EU,” “It’s the Millenials inability to find jobs and spend,” nothing quite hits the mark. Even all that together doesn’t quite explain how the manufacturing industry is growing but the GDP is lackluster.

However, this is not new news. All of 2016 has been ‘off’ and it began back in 2015. It’s difficult to call it ‘the new normal’ because nothing about it seems normal. We continue to look for the car guys Click and Clack of manufacturing so we can call to tell them, “Well, it’s making a sound like this and there is this vibration in the steering wheel, but the engine doesn’t seem quite right either. Do you know what it could be?”

Absent that, we continue to hunker down with one foot on the gas and one foot on the brake as we drive forward at a very cautious speed ready to floor it or screech to a halt depending upon what we see ahead, “but the road is long with many a winding turn that leads us to who knows where, who knows where…” (with credit to songwriters Bobby Scot and Bob Russell, and The Hollies, He Ain’t Heavy He’s My Brother, Published by Spirit Two Music Inc.

Best Regards,
Lewis A. Weiss
Publisher


I. COVER STORY: THAT WAS THE MONTH:
AND WHAT ANOTHER MONTH IT WAS

what a monthIn the wake of Brexit, the falling pound and the halving of the interest rate to 0.25 percent, the UK’s ‘military contractors,’ aka arms dealers, are looking for new markets and have already had preliminary discussions with Turkey and India, two countries, particularly Turkey, who really need to buy arms.

The UK has its second female Prime Minister, Theresa May, who was quick to appoint Boris Johnson, the leader of the Brexit campaign, as Foreign Secretary. This blond, self-styled buffoon, whose antics both personal and political are forever in the news, will make an interesting addition to international diplomacy.

The U.S. created 255,000 jobs in July. This was less than June’s 292,000 jobs, but much better than the 175/180,000 figure analysts estimated. But, manufacturing has lost 24,000 jobs net year-to-date and has not caught up with pre-2008 employment levels.

Steel prices are continuing to hold up for the most part, particularly in North America and Europe, but there are still ‘gluts’ of steel around from China. Arcelor Mittal, the world’s largest steelmaker, announced its highest quarterly profit since 2014 following this recovery in prices.

China’s economy is said to have ‘stabilized.’

The ISM PMI figure for U.S. manufacturing was slightly off in the month of July to 52.6 percent from June’s 53.2 percent, indicating five months of growth in manufacturing and 86 months of growth in the U.S. economy as a whole.

The IHS Markit PMI for the U.S. manufacturing sector moved to 52.9 percent in July from June’s 51.3 reading. Markit noted faster growth in production, new orders and employment, heralding a strong start to the third quarter. Export sales increased at a modest pace in July, and employment was up, continuing an upward trend over the past three years, with the strongest rate of job creation since July 2015.

The five ISM components are equally weighted at 20 percent each. The 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 an ‘advance’ estimate for the annual rate of Real GDP growth in the second quarter of 2016, putting it at 1.2 percent.  The figure for the first quarter was revised from its latest figure of 1.1 percent down to 0.8 percent.

GALLUP’s U.S. Economic Confidence Index jumped from a lackluster monthly average to end the month of July at -10. The job creation index was hovering around +33 in late July.

World crude steel production for the 66 reporting countries for the month of June 2016 was 135.7Mt, effectively unchanged y-o-y.

U.S. crude steel production, for June 2016 was 6.83Mt, down 0.1 percent y-o-y.

Primary Global Aluminum Production in June 2016 was reported at 4.844 million tonnes, of which 2.686 million tonnes, over 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 421,000 tonnes, North America 324,000 tonnes, Western Europe 307,000 tonnes and Eastern and Central Europe 326,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for July 2016. There are those who say sales were better than expected, others who suggest that sales may have reached a plateau. The SAAR is estimated at 17.9 million.

The ‘Big Eight’ June  ’16 June  ’15 YTD % change
General Motors 267258 272512 -1.9
Ford 215268 222014 -3
Toyota 214233 217181 -1.4
FCA 180727 180124 0.3
Honda 152799 146324 4.4
Nissan 132475 130872 1.2
Hyundai/Kia 134972 127324 6
VW 28758 31300 -8.1
Total new  cars and light trucks 1522144 1511261 0.7

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) -0.7 (June) +1.0 (June) 4.9 (June)
Canada +2.4 (qtr) +0.9 (Apr) +1.5 (June) 6.8 (June)
China +7.4 (qtr) +6.2 (June) +1.9 (June) 4.1 (Qtr 2)
Japan +1.9 (qtr) -0.4  (May) -0.4 (May) 3.2 (May)
Britain +2.4 (qtr) +1.4  (May) +0.5 (June) 4.9 (Apr)
Euro Area +2.2  (qtr) +0.5 (May) +0.1 (June) 10.1 (May)
France +2.6  (qtr) +0.5 (May) +0.2 (June) 9.9  (May)
Germany +2.7  (qtr) -0.4 (May) +0.3 (June) 6.1 (June)
Italy +1.0  (qtr) -0.6 (May) -0.4  (June) 11.5 (May)
Spain +3.1  (qtr) +4.0 (May) -0.8 (June) 19.8 (May)
India +9.6  (qtr) +1.2  (May) +5.8 (June) 4.9 (2013)
Brazil – 1.1  (qtr) -7.7  (May) +8.8 (June) 11.2 (May)
Taiwan + 3.1 (qtr) +0.9 (June) + 0.9 (June) 4.0 (June)
Mexico +3.3  (qtr) +0.4 (May) +2.5 (June) 3.9 (June)

FF Journal Magazine

II NORTH AMERICAN PERSPECTIVE

by Royce Lowe

North AmericaThe Institute of Supply Management PMI figure registered 52.6 percent in July, off 0.6 percentage points from June’s 53.2 reading, representing growth in manufacturing for the fifth consecutive month, and growth in the overall economy for the 86th consecutive month.

Eleven of the 18 manufacturing industries reported growth in July in the following order: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Wood Products; Furniture & Related Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; and Computer & Electronic Products. The seven industries reporting contraction in July, in order are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; and Paper Products.

Respondents’ comments from the industry were positive from Fabricated Metal Products; Computer & Electronic Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products and Plastics and Rubber Products, whereas Wood Products respondents had problems with oversupply and weather, Transportation Equipment and Machinery noted a  slowdown in sales and production. Petroleum and Coal Products respondents say  $40/50 per barrel oil is the new normal. There is some vigilance noted regarding both Brexit, the U.S. Presidential race and steel prices.

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 PMI

ISM’s PMI for the past 6 months

New orders grew in July for the seventh consecutive month, with the index at 56.9 percentage points, hardly changed from June’s 57.0 percent reading. Growth was noted in twelve of the eighteen industries surveyed, including Chemical Products, Fabricated Metal Products, Petroleum & Coal Products and Primary Metals, with five industries, including Machinery, Plastics & Rubber Products and Transportation Equipment, showing a decrease during the month.

Production grew for the seventh consecutive month in July, with the index at 55.4 percentage points, 0.7 points up on June’s 54.7 percent reading. Growth was noted in nine of eighteen industries, including Chemical Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Fabricated Metal Products; and Paper Products. The six industries reporting a decrease in production during July include Machinery; Transportation Equipment; Plastics & Rubber Products; and Primary Metals.

Employment fell one percentage point in July to 49.4, from June’s 50.4 reading, representing contraction in employment following one month of growth. Employment growth was noted in eight industries, including Textile Mills;   Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The seven industries reporting a decrease in employment in July include: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products and Transportation Equipment.

The delivery performance of suppliers to manufacturers was slower in July as the index registered 51.8 percent, or 3.6 percentage points lower than June’s 55.4 reading. Ten  industries showed slower deliveries in July, including  Fabricated Metal Products; Petroleum & Coal Products;  Machinery; Plastics & Rubber Products and Transportation Equipment. The only industry reporting faster supplier deliveries in July is Primary Metals. Seven industries reported no change in supplier deliveries in July compared to June.

raw material

Raw Materials Inventories contracted for the 13th consecutive month in July but at a slower rate than in June, as the Inventories Index increased to 49.5 percent in July from June’s 48.5 percentage points. Eight industries reported higher inventories in July, including Wood Products; Chemical Products;  Fabricated Metal Products; Machinery; Transportation Equipment; and Furniture & Related Products. The eight industries reporting lower inventories in July include: Primary Metals; Electrical Equipment, Appliances & Components; Petroleum & Coal 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 51.0 percent in July, the same value as June’s reading, meaning that customers’ inventories are considered to be too high in July.  Six manufacturing industries report customers’ inventories as being too high during the month of July, including Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products and Transportation Equipment. Six industries report customers’ inventories as too low during July, including Primary Metals; Plastics & Rubber Products and Machinery. Six industries reported no change in customer inventories in July compared to June.

The ISM Prices Index registered 55.0 percent in July, which is 5.5 percentage points lower than June’s 60.5 percent reading, indicating an increase in raw material prices for the fifth consecutive month. In July 22 percent of respondents reported paying higher prices, 12 percent lower and 66 percent the same prices as in June. Twelve industries reported paying higher prices in July, including Petroleum & Coal Products; Plastics & Rubber Products; Machinery; Fabricated Metal Products; Chemical Products; Transportation Equipment; The three industries reporting paying lower prices during the month of July are: Textile Mills; Miscellaneous Manufacturing; and Computer & Electronic Products.

Up in Price in July were:

Copper*; Corrugate* (2); Dairy; Diesel (4); Gold; Natural Gas (2); Petroleum Based Products; Polyethylene Resins; Stainless Steel (4); Steel (7); Steel — Carbon (2); and Steel — Hot Rolled (6).

Commodities Down in Price

Copper*; Corn; Corrugate*; and Steel.

Commodities in Short Supply

None (4).

* indicates both up and down in price

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

The ISM Backlog of Orders Index was at 48.0 percent in July, 4.5 percentage points down on the June reading of 52.5 percent, indicating contraction in order backlogs following one month of growth. Of the 86 percent of respondents who measured their backlogs, 16 percent reported greater backlogs, 22 percent smaller backlogs and 64 percent no change from June. Six industries reported an increase in order backlogs in July, namely Textile Mills; Printing & Related Support Activities; Chemical Products; Paper Products; Miscellaneous Manufacturing; and Fabricated Metal Products. The 10 industries reporting a decrease in order backlogs in July include Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment and Machinery.

The ISM New Export Orders Index was at 52.5 percent for July, 1.0 percentage point down on the June reading of 53.5, representing growth in new  export orders for the fifth consecutive month. Eight industries reported growth in new export orders in July, including Miscellaneous Manufacturing; Paper Products; Fabricated Metal Products and Transportation Equipment. The six industries reporting a decrease in new export orders during July include  Primary Metals; Electrical Equipment, Appliances & Components; Machinery; and Plastics & Rubber Products.

The ISM Imports Index is at 52.0 percent in July, the same reading as June, representing growth in imports in for the second consecutive month. Six industries reported an increase in imports in the month of June, including Computer & Electronic Products; Fabricated Metal Products; Machinery and  Chemical Products. The four industries reporting a decrease in imports during July are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. Seven industries reported no change in imports in July compared to June.

CANADA’S IHS Markit Manufacturing PMI increased very slightly to 51.9 in July from June’s 51.8 reading, with production up at a faster rate in July as it moves up from June’s three-month low. This is the fifth consecutive month in growth territory.

Production, new orders and employment showed what might be termed modest increases. There has been a sustained increase in production levels since March, and there has been a joint-fastest rise in staffing levels since December 2014.

Manufacturing production expanded in all regions and the fractional rise in Alberta and BC put a stop to a 17-month period of decline in those provinces. Job creation was strongest in Ontario and the ‘Rest of Canada.’ Canada produced 1.04 Mt of crude steel in June, down 2.8 percent y-o-y.

Canada’s light vehicle sales were off 2.6 percent at 172,796 units in July, down from 2015’s 177,568 figure. This was due primarily to car sales being down 11.3 percent over last year, from 66,402 units to 58,900 units. It is interesting to note that the record for car sales in Canada was set back in July1985, when 91,765 cars were sold.

MEXICO’s PMI slipped to a 33-month low of 50.6 in July, from June’s 51.1 level. Manufacturing growth slowed in July on the back of the weakest increase in new orders since September 2013, with new export orders down for the first time since October 2014. There was a marginal improvement in employment. Mexico produced 1.525Mt of crude steel in June, down 0.9 percent y-o-y.

However, Mexico’s maquiladoras are coming online in the automotive industry, supporting jobs in the U.S. are component parts made in the USA are shipped to Mexico for assembly. Mexico already ranks as the seventh-largest car producer in the world. Chrysler, Honda and Volkswagen have major operations there. Over the next five years, big automakers including Ford, Audi and Toyota plan to bring new plants online.

III.  EUROZONE

by Royce Lowe

IHS

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for July, at 52.0 was down from June’s 52.8 reading, as growth slowed in the Eurozone at the start of the third quarter. Production stayed strong, as did an accumulation of order backlogs. Germany stayed up top, with good results on new export orders and production, whereas France and Greece were in contraction, in spite of higher export orders. Ireland’s poor performance in July is considered to be due to concerns over Brexit.

  PMI High/low
Germany 53.8 (54.5) 2-month low
Austria 53.4 (54.5) 2-month low
Netherlands 53.2 (52.0) 4-month high
Italy 51.2 (53.5) 18-month low
Spain 51.0 (52.2) 31-month low
Ireland 50.2 (53.0) 38-month low
Greece 50.4 (48.4) 25-month high
France 48.3 (48.4) 2-month low         

With fewer selling days and big hits on VW figures, car sales in Western Europe look somewhat different in July. Sales in Germany were down 3.9 percent to 278,866 units, in France down 9.6 percent to 132,999 units, in Italy up 2.9 percent to 136,275 units and in Spain up 4.9 percent to 107,306 units. Seven-month figures in all four major countries show a healthy increase over those of the past year.

Crude steel production in Germany in June was at 3.69Mt, down 2.1 percent y-o-y; in Italy 2.03Mt, up 5.9 percent y-o-y; in France 1.31Mt, down 5.1 percent y-o-y and in Spain 1.13Mt, down 13.7 percent y-o-y.

Russia’s crude steel production for May was at 5.78Mt, up 2.5 percent y-o-y; Ukraine’s was 1.83Mt, down 8.6 percent y-o-y.

IHS Markit reports that the UK manufacturing PMI fell to its lowest level since early 2013, coming in at 48.2 in July, down considerably from June’s 52.1 reading. The pre-Brexit optimism has turned into real pessimism, with sharp drops in production and new orders and the seventh straight monthly drop in employment which is in fact the sharpest drop in three-and-a-half years. The only bright light is a slight increase in intermediate and investment export orders. The UK produced 0.65Mt of crude steel in June, down 36.2 percent y-o-y.

 

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk Radio is covering an American travesty in the first of  three shows about the use of the 13th Amendment to create 21st Century slave labor in America’s penal system. Not only is it an abuse of human rights, the labor pool is being used to manufacture goods for the federal government, some states and even private industry in direct conflict with small and middle market manufacturers.

While America pokes it’s finger in the eye of China pointing out their use of prisoners for slave labor, this is mostly to deflect attention away from America doing exactly the same thing – but on a larger scale through FPI (Federal Prison Industries) and UNICOR. New Jersey jumped on the bandwagon with their own version called DeptCor (Department of Corrections).

Hundreds of American manufacturers have lost hundreds of millions of dollars in work and jobs because they are not allowed to compete on many contracts, or are simply told that the contract they have now will be taken over by Unicor, Deptcor or one of the other state slave labor systems where inmates get paid as little as 16 cents an hour, or may not get paid at all, such as in Texas and Georgia.

Originally created under the guise of training inmates for jobs outside of prison, it has morphed into a for-profit contract grab, even using prisoners as scab workers at the expense of union jobs. However, the jobs the inmates are trained for, many of which are garment piecework, only exist today in Indonesia, China, Bangladesh, Malaysia and a few other Asian countries.

And while we have been touting the efforts of big corporations to return jobs to America, we were shocked to learn that some Corporate America titans gave those jobs to inmates at slave labor wages under the guise that they could boast of it being Made in America. While FPI and Unicor use the most flowery language to position this as a benevolent effort to ready inmates for life on the outside, their lobbying group works the halls of Congress for longer prison sentences and states to adopt the Three Strike Law – which 25 states have done.

And it goes deeper – but tune in to Manufacturing Talk Radio to get more of the details of a dark, dirty and devious story where each step leads the listener deeper into the muck and mire of ‘legal’ slavery under the 13th Amendment to the U.S. Constitution.

V. ASIA OUTLOOK

by Royce Lowe

 - Japanese yen currency and CalculatorCHINA produced 69.5Mt of crude steel in June, up 1.7 percent y-o-y;  Japan 8.76Mt up 2.7 percent y-o-y; India 7.78Mt, up 3.9 percent y-o-y  and South Korea 5.47Mt, down 6.7 percent y-o-y. Taiwan produced 1.75Mt in  May, down 2.3 percent y-o-y.

 The Caixin China manufacturing PMI jumped from June’s 48.6 to 50.6 in July, the first expansion since February 2015. There was renewed growth in production and new orders, thanks mostly to domestic demand. There was a solid increase in order backlogs, although employment continued to decline.

Total vehicle sales in China in June were at 2,070,700, with passenger car registrations at 1,784,100.

JAPAN’s manufacturing sector deterioration proceeded at a slower pace in July, with an increase in PMI to 49.3. – the highest reading since February –  from June’s 48.1 reading. New export orders were down for the sixth consecutive month, due no doubt to some extent to the yen’s appreciation against the dollar. Some Japanese sources are blaming poor export performance on terrorism and ‘European economic demand weakness.’

The INDIAN manufacturing sector showed production and new orders growth at a four-month high in July, with both domestic and export orders on the up. Consumer goods orders are the driver.

The Nikkei PMI reading increased very slightly from June’s 51.7 to 51.8 in July.

There was no significant change in employment levels in July, but the rate of backlog accumulation was the fastest in eighteen months.

VI. SOUTH AMERICA

by Royce Lowe

crisis

In Brazil, the rates of contraction in new orders, production, employment and inventories all decreased in the month of July.  The PMI for July, at 46.0, up from June’s 43.2 is still in contraction but is at a four-month high. Brazil’s crude steel production for the month of June was 2.54Mt, an 8.5 percent y-o-y decrease.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – increased in July to 51.0 from June’s 50.4 reading.

The growth rate of the global manufacturing sector improved at the start of the third quarter, with production and new orders on the up and a slight increase in employment for the first time in six months. There was also a further build up of work backlogs.

There was good news from North America and the eurozone, and Asia struggled over the 50 line with China returning to growth. Increases were seen in India, Taiwan, South Korea and Vietnam, which offset contraction in Japan, Indonesia and Malaysia. All indices were up.

VII. FORGING AND CASTING

by Royce Lowe

seamless rolled ring

Japan Aeroforge, a joint venture established in January 2011 by Kobe Steel, Hitachi Metals Ltd. and several other companies, has begun mass production of large forged-titanium parts for France’s Safran Landing Systems, a leader in aircraft landing and braking systems. The forged parts are used in the landing gears of Airbus A350 XWB planes. Japan Aeroforge is in charge of the forging process, while Kobe Steel is responsible for product process planning, quality assurance and other processes. Japan Aeroforge manufactures large titanium forgings used in aerospace applications on a 50,000-ton hydraulic forging press, one of the largest in the world.

Consolidated Precision Products Corp. (CPP), a holding company headquartered in Cleveland, has operations specializing in cast parts and assemblies for commercial and defense aircraft construction. It recently purchased two metalcasting operations from Pratt and Whitney Rzeszow S.S. a business unit of Pratt and Whitney Canada located in southeast Poland. CPP has 19 casting and finishing plants for aluminum, magnesium, steel and super alloys. It has seven foundries in California, one in Minnesota, and two in France, together with foundries in Belgium, Mexico and Slovakia. Its customer list includes all major aircraft OEMs and aircraft engine manufacturers.

The University of Sheffield (UK) Advanced Manufacturing Research Center, with Boeing, is a world-class center for advanced machining and materials research for aerospace and other high-value manufacturing sectors. The center has a new foundry, with two induction furnaces with a combined capacity of 2.8 tonnes, and will cast parts to 1.3 tonnes. The center will develop new casting technologies and will provide design and manufacturing consultancy services for aerospace and other high-value manufacturing sectors.

VIII. MAINTAINING A PACE ABOVE STALL SPEED: JULY 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore

global mfg

Our look each month at global business surveys is intended to provide timely and credible insight into the global economy. Change is the driver for our analysis and the concept is quite simple. Is this month better than last month?

Of late, remarkably, there has been little change to assess, though the change that we do see is trending in a positive direction. While global economies are still considered to be under performing, 12 of the 17 (same as June) surveys that we follow are growing at an average PMI of 51.6 and higher than the June average of 51.3 percent.

The JP Morgan Chase Global PMI (51.0, +0.6) which measures over 30 countries indicates that July provides little change from June, but returns to the mid-point of the past 12 months. In the aftermath of the Brexit, UK (48.2, -4.2) manufacturing dropped to its lowest level since February 2013. The sector has averaged only 51 for the first half of 2016.

Our sense is that there had to be some inventory accumulation as supply insurance prior to the vote and then a degree of liquidation afterward. We continue to believe that buyers and sellers will continue traditional relationships and a weaker pound will facilitate such arrangements.

The Eurozone PMI (52.0, -0.8) is now in its 37th consecutive month of growth and showing a slight deceleration. Germany (53.8, -0.7) posted its 20th consecutive month of growth and its second highest reading since April 2014. The remaining seven Eurozone countries were led by Austria (53.4, -1.1), while France (48.6 +0.3) failed to grow. The Republic of Ireland (50.2, -2.8) also saw minute expansion as its PMI indicated little change from June.

Taiwan’s SMIT/CIER (54.2, +0.9) marked a fifth month of strong growth while Japan (49.3, +1.2) recorded a fifth month of contraction. China’s Official Report, the CFLP PMI (49.9, -0.1), has averaged 49.9 for the past 18 months. The Caixin China General Manufacturing PMI (50.6, +2.0) rose above the mid-point for the first time in 16 months. Of the two China surveys, the Caixin shows more variability and a recent slowly developing upward trend from the 47.2 reading that it hit in October 2015, while the CFLP survey has been flat.

In North America, Canada (51.9, +0.1) reported above 50 for the fifth month following a seven-month contraction. Mexico (50.6, -0.5) dropped to its lowest level in 33 months with a below 50 reading in New Export Orders declining for the first time since October 2014.

july scattergram

IX. THE SKILLS GAP, EMPLOYMENT, AND ASSOCIATED

by Royce Lowe

Engineer Teaching Apprentice To Use Milling Machine Together

The computers on wheels that are today’s automobiles are causing somewhat of a dilemma when it comes to servicing. The grease monkey of days past – a rather derogatory term in itself – is just not qualified to handle cars with up to fifty computers in them, so community colleges and auto dealerships are getting together to turn out technicians who can handle the high-tech autos. And it seems to work, as in the case of the Central Florida Auto Dealers Association (CFADA), where the association has built its own tech-training center at a local community college. Toyota is strongly into the idea, and recognizes the fact that what is being done is a start, but there will be an ongoing, increasing need for more and more service technicians. Mercedes is also into the idea, and we can only imagine the caliber of service technician they’ll be looking for.

Brand Ambassadors – it seems that teachers in certain school districts who are parents are effectively no more engaged than parents in promoting their school system in the community. Hence good teachers are not encouraged to seek employment in a particular district.

We read and hear a lot these days about robots and people working with robots and how the one complements the other. In fact, pretty soon we’ll be figuring we can’t have one without the other.

Ford assembly-line staff in Europe are working hand-in-hand with collaborative robots (co-bots) to fit shock absorbers to Fiesta cars. The job requires pinpoint accuracy, strength and dexterity, and the co-bots ensure a perfect fit and relieve the workers from having to access hard-to-reach places.

This is a trial at the moment in Cologne, Germany, and part of what Ford calls Industry 4.0, the fourth industrial revolution involving automation, data exchange and manufacturing technologies. Ford says it is at the forefront among automakers in the development of the new, closely integrated approach to humans and robots working together on an assembly line.

Ford of Europe, in fact, obtained feedback from over 1,000 production-line workers to identify tasks best suited for the new robots that come with their human-like hand.

 Workers use robots to lift and automatically position the shock absorber into the wheel arch, before pushing a button to complete the installation. High-tech sensors stop the co-bots if they detect even a finger in their path. Ford is looking at co-bots to perform more ordinary tasks, from shaking hands (??) to making coffee.

X. AUTOMOTIVE

by Royce Lowe

FCA will spend $700 million in Toledo,OH and $350 million in Belvidere, ILL, with 1,000 attendant new jobs, to produce a pair of Jeep SUVs. The Jeep has been the driver in FCA’s steady increase in U.S. sales, accounting for 41 percent of first-half sales.

The company will also spend $1.48 billion on its Sterling Heights plant, where it will shift from production of the Chrysler 200 to the Ram 1500, starting this coming December. The Ram 1500 may be ‘reimagined’ as an SUV to meet the increased demand for that kind of vehicle.

teslaTESLA, never out of the news these days, is now talking of a ‘Masterplan’ involving big trucks, solar charging and ride sharing. Meanwhile the Autopilot story is still up front, with the news that the deceased driver whose Autopilot apparently failed to function was doing 74m.p.h. in a 65 max zone. And it turns out that Tesla’s Autopilot does not require the driver to have hands on the wheel, whereas similar systems from Mercedes and Volvo DO require hands on wheel. This thanks to legal advice. GM is throwing in its ten cent’s worth, saying that autonomous vehicles are a safer mode of transport and that the technology will arrive more quickly than people expect, that it will just ‘creep up on us.’

A safer mode of transport would be most welcome. Figures show that 100 people per day are killed on U.S. roads, and that 6,000 people per day are injured to the point where they need to visit a hospital.

To summarize the electric vehicle (EV) news, and there’s a lot of it:

Mercedes-Benz is looking to come out with an electric, heavy-duty truck in about five years, Tesla maybe next year. 

IHS Markit says sales of electric models might account for 4 percent of EU and U.S. medium-and heavy-duty truck sales by 2025.

It’s mostly all about the batteries. VW is looking to start its own battery plant – if it can withstand the multibillion dollar bludgeoning to its reputation and bottom line, although it is squeezing all its suppliers for massive cost reductions to offset the hit VW will take; now, that is truly passing the buck!

Porsche is looking to come out with its first battery-powered sports car in 2019. $1.1 billion, 1,400 workers, 15,000 per year, 300 mile range between charges, and 0-60 m.p.h. in 3.5 seconds, 0-120 m.p.h. in 12 seconds (though you’d need to be on an Autobahn to do that), top speed 150 m.p.h.

Jaguar Land Rover will continue with plans to build a new, $1.32 billion plant in Nitra, Slovakia, to produce 150,000 vehicles per annum and create up to 2,800 jobs, with first production in late 2018. Spain’s Gestamp plans a €100 million stamping plant, right next door, to produce steel and aluminum parts.

XI. AEROSPACE

by Royce Lowe

F-35The F-35 aircraft, in development for over a decade, is now in testing and training by the U.S. Marine Corps. The Defense Department has forwarded $559.5 million to Lockheed Martin Corp. for assembly and $1.5 billion to Pratt and Whitney for 99 new F-135 engines. The project is embarrassingly over budget.

At this year’s Farnborough International Air Show in the UK, both Boeing and Airbus came away with substantial orders for narrow-body jets from budget airlines in Asia, for a total haul of about $23 billion, the lion’s share going to Airbus. Airbus and Virgin Atlantic are closing on a deal for Airbus’s A350 model.

Alcoa has a new plant at its research center near Pittsburgh where it will manufacture metal powders in proprietary grades of titanium, nickel and aluminum, to be used in its 3D-printing operations in California, Georgia, Michigan, pennsylvania and Texas. This is all part of a $60 million program announced last fall to expand and develop capabilities for 3D-printing of aerospace parts. The company will be a leader in additive manufacturing, with emphasis on metal powders as the critical input material, aimed particularly at the aerospace industry as well as other growth markets.

XII. THE MANUFACTURING SCENE: MANUFACTURING NEEDS A BIT OF A KICK

by Royce Lowe

made in USA

The U.S. manufacturing economy, which has seen serious losses in employment over the past 25 years, would be the world’s ninth largest economy, according to the National Manufacturer’s Association.

A recent survey by Industry Week Custom Research and Kronos Incorporated, polling 153 mostly senior executives and managers, concludes that manufacturing leaders are overwhelmingly positive about prospects for business growth and that nine of ten expect an increase, with over 50 percent looking for growth of 5 percent per year or more over the next five years.

There are challenges to all this, such as market volatility, rising material costs, pressures to reduce selling prices and increasing labor costs. As such, production processes must be improved, customer relationships must be strengthened and people with appropriate skills and experience must be brought on board and trained accordingly. Quality management and innovation must be brought up to scratch: 45 percent of manufacturers have not yet set specific goals for reducing new product development cycle times.

Employment growth expectations over the next five years are:

Decrease by 1-5 percent            10 percent of those surveyed

No change                                20 percent of those surveyed

Increase 1-5 percent                  31 percent of those surveyed

Increase 6-10 percent                16 percent of those surveyed

Increase > 10 percent                23 percent of those surveyed

The Brookings Institution has recently published a report entitled: America’s Advanced Industries: New Trends in which they look at the present status of this sector. They conclude that the sector is in reasonable condition, going forward with some slowdown, and that the majority of its growth, over 60 percent, is coming from the automotive and technology industries.

Eighty-five of the 100 largest metropolitan areas saw at least some positive change in the number of local jobs in advanced industries, with 38 percent increasing by at least 3% since 2013, and 16 percent increasing by at least 5%.

The paper, which is a very long read, and can be accessed at https://www.brookings.edu/research/americas-advanced-industries-new-trends/ points to the need for improved innovation, training, labor standards and a metro-by-metro ‘rejuvenation’ of the country’s high-tech advanced industries sector.

What are advanced industries? According to Brookings they are ‘those in which R&D spending per worker rates among the top 20% of industries and the share of workers with a high level of STEM – Science, Technology, Engineering and Mathematics – knowledge exceeds the national average.’

Advanced industries utilize new technology including robotics, machine learning and genomics, and in fact contribute to the further development of these technological advances. Advanced industries generate 60 percent of U.S. exports and pay well, with an average salary of $95,000 in 2015, a 68% increase over 1975, adjusted for inflation, compared to a 25% increase outside the sector.

For every new advanced industry job, 2.2 additional jobs are created in the economy. But the sector has slowed since 2013, due to a strong dollar and a major slowing of global demand for U.S. commodity and machinery exports.

The bottom line appears to be a need for innovation and training.

XIII. TECHIE CORNER

by Royce Lowe

norskNorway-based Norsk Titanium (NTi) produces aerospace structures using Rapid Plasma Deposition ™ (RPD), where titanium wire is melted by argon-shrouded plasma torches to form near-net-shape parts. The company is developing a plant in Plattsburgh, NY, scheduled to start in late 2017. NTi has a contract from Boeing to supply 3D-printed titanium engineering test articles for commercial aircraft structural components (few contract details are available.)

NTi will produce Ti-6Al-4V preforms for delivery to Boeing for further testing and evaluation. The project is effectively to demonstrate part-to-part repeatability and to optimize the operations processes necessary to enter into long-term production of structural components for commercial aircraft – according to NTi.

N.Y. State will contribute $125 million to the project. The parts are to replace forgings. Twenty NTi patented MERKE IV RPD printers with a combined 400 tonnes per year capacity of aerospace structural parts will initially be installed, with plans to eventually double this.

In 2015 NTi supplied parts to Airbus’s subsidiary, Premium Aerotech – in Ti-6Al-4V – and finish machining was performed with excellent results.

XIV. OTHER NEW NEWS

by Royce Lowe

Tata is looking at the possibility of a joint venture with ThyssenKrupp for its European operation, instead of selling off its UK businesses. The Port Talbot flat-rolled operation attracted seven bids from the industry, but four have pulled out because of Brexit uncertainty. Port Talbot is in Wales, and Wales voted heavily to leave the EU. This is a political hot potato and a hole-in-the head for the UK’s new government, which is reported to be willing to put money into any deal and to save the company pension fund.

XV. THE FINAL WORD

by Royce Lowe

Certain minority factions of the human race continue to display varying degrees of hatred and aggressiveness, while the vast majority of us are coming to terms with certain events as the ‘new normal,’ somewhat like the price of oil.

The global manufacturing economies, led by the U.S. and the eurozone, saw good results in the month of July. Things look somewhat better in Asia too, but we will await results for the next few months before getting too excited.

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Metals & MFG Outlook Newsletter

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I. Cover Story: THE MONTH THAT WAS: AND WHAT A MONTH IT WAS
II. NORTH AMERICAN PERSPECTIVE
III. EUROZONE
IV. MANUFACTURING TALK RADIO
V. ASIA OUTLOOK
VI. SOUTH AMERICA
VII. FORGING AND CASTING
VIII. U.S. STANDING OUT IN GLOBAL GROWTH PICTURE
IX. THE SKILLS GAP
X. AUTOMOTIVE
XI. AEROSPACE
XII. THE MANUFACTURING SCENE
XIII. TECHIE CORNER
XIV. OUT AND ABOUT
XV. THE FINAL WORD

PUBLISHER’S STATEMENT

What a mess in the U.S.! Chasing ISIS globally, the Brexit uproar, the highest business taxes in the world keeping trillions of corporate profits offshore instead of invested at home, an economy stuck in the doldrums, an election process yielding two of the least-liked candidates in more than 100 years, continuous bickering in Congress which has either been essentially lame duck or just plain disastrous for more than a decade, all of which has manufacturing caught squarely in the middle. There seems to be uncertainty everywhere and federal leadership nowhere.

There is no end in sight in the fight to limit the overreach of the bureaucracy of federal departments and agencies concocting rules and regulations with the force of law but without the legitimacy of being passed as law, impacting both business and everyday life. The intent of our forefathers to create a limited government of the people, by the people and for the people has morphed into a super control freak monster examining every aspect of how we work, live, play, eat, breathe, and sleep, and injecting some good but many bad ways to manage us and our employers. Is all this regulation really necessary? Really?!?

Just look at the many and never-ending issues being pursued by the National Association of Manufacturers, the premier lobbying organization for the industry. NAM’s work will never be done.

Witness one U.S. Senator, Richard Shelby (R-AL), blatantly ignoring the will of the people as expressed in the votes by their elected representatives to reauthorize the EXIM Bank, in his refusal to put forth nominations to complete the board because he personally disagrees with the existence of the bank as ‘crony capitalism’. I wonder how much corporate money he has accepted in his current re-election campaign? Isn’t real crony capitalism the big corporate bucks flowing into re-election coffers and Super PACs? It may be legal, but it smacks of bought-and-paid-for politicians.

The Boston Tea Party was all about “Taxation without representation”. Now we have taxation with misrepresentation – and it doesn’t end there. We have the Chairman of the United States Senate Committee on Banking, Housing, and Urban Affairs positioning himself as a Prince lording over the proper functioning of the Exim Bank based solely on his own personal objections and defying the will of the people. And he is hardly the only elected congressional politician to ignore the will of the people.

Little wonder that manufacturing is struggling in this country and stuck in a cycle of anaemic growth struggling to steer towards revival versus recession. And although it may only represent 12% of the economy, as manufacturing goes – so goes the entire economy. Manufacturing has led this country out of every recession since 1945 and is the leading indicator of economic health or hurt. There are no instances of the services sector preventing recession in this country when manufacturing retrenches.

So we encourage every reader to check out www.nam.org (the National Association of Manufacturers) as if your job depends on manufacturing even if you are in the services sector – because it does! For a list of industries in each sector, we refer you to the Report on Business® for Manufacturing and the Report on Business® for Non-Manufacturing issued each month by the Institute for Supply Management – or just tune into the radio show, Manufacturing Talk Radio at www.mfgtalkradio.com for an in-depth discussion of the manufacturing report each month, along with other meaty topics pertinent to the industry.

Above all, especially this election cycle, pay attention to business – your business, your employer’s business – and how the politicians you will be voting for could help or harm your livelihood. Manufacturing thrives on economic stability – and so do you, whether you know it or not. ISIS uncertainty, Brexit uncertainty, tax uncertainty, EXIM uncertainty, regulation uncertainty is all keeping a potentially vibrant economy tepid, at best.

Best Regards,
Lewis A. Weiss
Publisher


BREAKING NEWS ABOUT NICKEL PRICES

Spanish-based stainless steelmaker Acerinox said late Wednesday it does not expect nickel prices to fall again this year, leading the way for revenues in the remainder of 2016 after it reported its first quarterly profit in four quarters. Following a stabilizing and then slight recovery in nickel prices this year the company said in a regulatory filing: “a renewed fall in the nickel price is unlikely given that analysts forecast demand to exceed supply in 2016 for the first time in five years, as reflected in the drop in inventories at the London Metal Exchange.”


I. COVER STORY: THAT WAS THE MONTH: AND WHAT A MONTH IT WAS

Fear of the unknown, fear of too much immigration, together with politicians’ outrageous lies and irresponsible reporting from Britain’s ‘gutter press,’ sent record numbers to the polls for the EU referendum and a 52 to 48 percent vote to leave the European Union that Britain had worked so hard to join back in 1973. London, 18-25 year olds and Scotland all voted 70 percent or more to stay.

Stock markets and currency markets went wild globally and the British pound dived to its lowest level in over 30 years. The word stability was used a lot by politicians. The Prime Minister resigned.

The bottom line is that fear, perhaps of fear, among a large number of Brits (mostly English) seems to have shot The Island in more than the foot.

The two leading politicians, Johnson and Farage, who campaigned so strongly for Brexit, have since resigned and left others to clean up the mess. The UK Construction PMI fell from 51.2 in May to 46.0 in June, in its worst performance since the dark days of 2009, with residential construction being particularly hard hit.

Mark Carney, the (Canadian) governor of the Bank of England, says that body is ready to inject £250 billion into the economy.

To add to it all, England’s football team (as in soccer) lost to Iceland – yes Iceland – in the European Cup. The manager resigned.

In better news, the ISM PMI figure for U.S. manufacturing took a healthy jump in the month of June to 53.2 percent from May’s 51.3 percent, putting the seal on four months of growth in manufacturing and 85 months of growth in the U.S. economy as a whole.

The Markit PMI for the U.S. manufacturing sector moved to a three-month high of 51.3 percent in June from May’s 50.7 reading. Markit noted improvements in new orders, production and employment for the month.

The five ISM components are equally weighted at 20 percent each. The 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 first quarter of 2016, putting it at 1.1 percent. This is up again from the ‘second’ estimate of 0.8 percent and the ‘advance’ estimate of 0.5 percent.

GALLUP’s U.S. Economic Confidence Index was steady in June at -14. The job creation index was hovering around +34 in late June. 

World crude steel production for the 66 reporting countries for the month of May 2016 was 139.15Mt, down 0.1 percent y-o-y.

The ‘Big Eight’ June ’16 June ’15 YTD % change
General Motors 255210 259353 -1.6
Ford 239096 224681 6.4
Toyota 198257 209912 -5.6
FCA 194493 181873 6.9
Honda 138715 134397 3.2
Nissan 140553 124228 13.1
Hyundai/Kia 130083 121639 6.9
VW 23809 30436 -21.8
Total new   cars and light trucks 1513901 1476675  2.5

 U.S. crude steel production for May 2016 was 6.82Mt, down 0.4 percent y-o-y.

Primary Global Aluminum Production in May 2016 was reported at 4.905 million tonnes, of which 2.675 million tonnes, over 54 percent, were produced in China. The Gulf Corporation Council (GCC) produced 435,000 tonnes, North America 337,000 tonnes, Western Europe 322,000 tonnes and Eastern and Central Europe 338,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for June 2016. The sales trend from May was reversed as light vehicle sales for June were up 2.5 percent y-o-y. 

                    CARS                  LIGHT TRUCKS  TOTAL

 

JUNE   2015  676,627                800,048                         1,476,675

 

JUNE   2016  622,854                891,047                         1,513,901

 

                    -7.9%                  +11.4%                        2.5%

 

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) -1.4 (May) +1.0 (May) 4.7 (May)
Canada +2.4 (qtr) -0.2 (Mar) +1.5 (May) 6.9 (May)
China +4.5 (qtr) +6.0 (May) +2.0 (May) 4.0 (Qtr 1)
Japan +1.9 (qtr) -0.1 (May) -0.3 (Apr) 3.2 (Apr)
Britain +1.4 (qtr) +1.6 (Apr) +0.3 (May) 5.0 (Mar)
Euro Area +2.2 (qtr) +2.0 (Apr) -0.1 (May) 10.2 (Apr)
France +2.6 (qtr) +1.9 (Apr) nil (May) 9.9 (Apr)
Germany +2.7 (qtr) +1.2 (Apr) +0.3 (June) 6.1 (May)
Italy +1.0 (qtr) +1.8 (Apr) -0.3 (May) 11.7 (Apr)
Spain +3.1 (qtr) +8.9 (Apr) -0.8 (June) 20.1 (Apr)
India +9.6 (qtr) -0.8 (Apr) +5.8 (May) 4.9 (2013)
Brazil – 1.1 (qtr) -7.2 (Apr) +9.3 (May) 11.2 (May)
Taiwan + 3.1 (qtr) +1.9 (May) + 1.2 (May) 4.0 (May)
Mexico +3.3 (qtr) +1.9 (Apr) +2.6 (May) 4.0 (May)

FF Journal Magazine

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

ISMThe Institute of Supply Management PMI figure registered 53.2 percent in June, up 1.9 percentage points from May’s 51.3 reading, representing growth in manufacturing for the fourth consecutive month, and growth in the overall economy for the 85th consecutive month.

ISM ChartThirteen of the 18 manufacturing industries reported growth in June in the following order: Printing & Related Support Activities; Textile Mills; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Apparel, Leather & Allied Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Primary Metals; Machinery; and Nonmetallic Mineral Products. Three industries reported contraction in June, namely: Electrical Equipment, Appliances & Components; Transportation Equipment; and Plastics & Rubber Products.

Respondents’ comments from the industry were positive from Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Machinery; Miscellaneous Manufacturing; and Plastics and Rubber Products, whereas Chemical Products respondents had problems with flooding; Transportation Equipment noted a slight slowdown; Primary Metals say their China business is slowing, and Nonmetallic Mineral Products say business is slower than expected.

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.

New orders grew in June for the sixth consecutive month, with the index at 57 percentage points, 1.3 points up on May’s 55.7 percent reading. Growth was noted in twelve of the eighteen industries surveyed, including Petroleum & Coal Products and Fabricated Metal Products, with five industries, including Primary Metals and Transportation Equipment, showing a decrease during the month.

Production grew in June for the sixth consecutive month, with the index at 54.7 percentage points, 2.1 points up on May’s 52.6 percent reading. Growth was noted in twelve of eighteen industries, including Petroleum & Coal Products; Fabricated Metal Products, Food, Beverage & Tobacco Products, Primary Metals and Chemical Products. Three industries, Transportation Equipment; Plastics & Rubber Products and Machinery showed a decrease in the month of June.

Employment was up to 50.4 percent in June, from May’s 49.2 reading, representing growth in employment following six consecutive months of contraction. Employment growth was noted in seven industries, including Furniture & Related Products; Primary Metals and Chemical Products. Six industries reported a decrease in employment in June, including Machinery; Fabricated Metal Products and Food, Beverage & Tobacco Products.

The delivery performance of suppliers to manufacturers was slower in June as the index registered 55.4 percent, or 1.3 percentage points higher than May’s 54.1 reading. Eight industries showed slower deliveries in June, including Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery and Transportation Equipment. Three industries, Furniture & Related Products; Primary Metals and Miscellaneous Manufacturing showed faster deliveries in June. Seven industries showed no change in speed of deliveries from May.

Raw Materials Inventories contracted for the 12th consecutive month in June but at a slower rate than in May, as the Inventories Index increased to 48.5 percent in June from May’s 45.0 percentage points. Eight industries reported higher inventories in June, including Wood Products; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products and Primary Metals. Seven industries reported lower inventories in June, including Furniture & Related Products; Fabricated Metal Products; Chemical Products and Miscellaneous Manufacturing.

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 51.0 percent in June, 1.0 percentage points above May’s reading of 50.0 percent, meaning that customers’ inventories are considered to be too high in June. Five manufacturing industries reported customers’ inventories as being too high in June, including Fabricated Metal Products; Furniture & Related Products and Transportation Equipment. Six industries reported customers’ inventories as too low during June, including Plastics and Rubber Products; Machinery; Chemical Products and Food, Beverage & Tobacco Products.

The ISM Prices Index registered 60.5 percent in June, which is 3.0 percentage points lower than May’s 63.5 percent reading, indicating an increase in raw material prices for the fourth consecutive month. In June 27 percent of respondents reported paying higher prices, 6 percent lower and 67 percent the same prices as in May.

Only three industries, Wood Products; Petroleum & Coal Products and Paper Products reported paying lower prices in June.

Up in Price in June were: Aluminum* (5); Corn (2); Corrugate; Diesel (3); Fuel Oil; Gasoline (2); Natural Gas; Oil (3); Stainless Steel (3); Steel (6); Steel — Carbon; Steel — Cold Rolled (3); and Steel — Hot Rolled* (5).

Down in Price in June were: Aluminum* and Steel – Hot Rolled*

In Short Supply in May: None (2)

* Reported as both up and down in price.

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

The ISM Backlog of Orders Index leaped to 52.5 percent in June, 5.5 percentage points up on the May reading of 47.0 percent, indicating growth in order backlogs. Of the 89 percent of respondents who measured their backlogs, 24 percent reported greater backlogs, 19 percent smaller backlogs and 57 percent no change from May. Seven industries reported an increase in order backlogs in June, including Fabricated Metal products; Printing & Related Support Activities; Petroleum & Coal Products and Chemical Products. Six industries reported a decrease in order backlogs for June, including Wood Products; Primary Metals; Transportation Equipment and Machinery.

The ISM New Export Orders Index was at 53.5 percent for June, 1.0 percentage point up on the May reading of 52.5, representing growth in new export orders for the fourth consecutive month. Ten industries reported growth in new export orders in June, including Food, Beverage & Tobacco Products; Chemical Products; Fabricated Metal Products; Transportation Equipment; Machinery and Computer & Electronic Products. Three industries reported a decrease in new export orders during June, namely: Primary Metals; Non-metallic Mineral Products and Electrical Equipment, Appliances & Components.

The ISM Imports Index is at 52.0 percent in June, 2.0 percentage points up on May, representing growth in imports in June. Seven industries reported growth in imports in the month of June, including Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products and Fabricated Metal Products. Two industries, Chemical Products and Transportation Equipment, reported a decrease in imports in June. Eight industries reported no change in imports compared to May

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI decreased very slightly to 51.8 in June from May’s 52.1 reading, alongside the slowest improvement in business conditions for 3 months. 

Alberta and B.C. are still ‘suffering,’ and Ontario saw its slowest pace of production growth so far in 2016. 

Québec and ‘Rest of Canada’ recorded the fastest increases in manufacturing production in June. Canada produced 1.14 Mt of crude steel in May, up 6.5 percent y-o-y.

Canadian light vehicle sales were on the up again in June following May’s drop in y-o-y sales. June saw a 7.4 percent year-on-year increase to 191,088 units, with the big three and the Japanese big three all profiting.

In June, following May’s strong upturn, MEXICO’s PMI slipped to its lowest level since October 2013, ending the month at 51.1, down from May’s 53.6. There was a slight reduction in production after more than 2.1/2 years of production growth, and a stagnation in export sales. Employment growth, on the other hand, was maintained. Mexico produced 1.57Mt of crude steel in May, down 4.1 percent y-o-y.

III.  EUROZONE

by Royce Lowe

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for June, at 52.8 was up from May’s 51.5 reading.

eurozoneGrowth was noted in all nations except France. There was growth in production and new orders to the fastest level so far this year, led by Germany and Austria, where performances were at their best since February 2014 and March 2011 respectively.

Good performances were also noted in Italy, Spain and Ireland: Greece moved back into expansion, with France the only country in contraction. Strike activity in France may have been partly responsible for this.

Eurozone manufacturing has now increased continuously for three years. Germany, Italy, Austria and Ireland show the strongest growth of both production and total new orders in June. Employment is up across EU manufacturing.

PMI High/low
Germany 54.5 (52.1) 28-month high
Austria 54.5 (52.0) 61-month high
Italy 53.5 (52.4) 2-month high
Ireland 53.0 (51.5) 3-month high
Spain 52.2 (51.8) 2-month high
Netherlands 52.0 (52.7) 4-month low
Greece 50.4 (48.4) 25-month high
France 48.3 (48.4) 2-month low  

Car sales in Western Europe were up again in June, with sales in Germany up 8 percent to 339,600 units, in France up a mere 0.8 percent to 227,366 units, in Italy 12 percent to 165,208 units and in Spain up 11 percent to 123,790 units.

Crude steel production in Germany in May was at 3.86Mt, up 4.0 percent y-o-y; in Italy 2.19Mt, up 9.3 percent y-o-y; in France 1.17Mt, down 18.8 percent y-o-y and in Spain 1.25Mt, down 10.6 percent y-o-y.

Russia’s crude steel production for May was at 5.95Mt, up 0.4 percent y-o-y; Ukraine’s was 2.30Mt, up 5.7 percent y-o-y.

Markit reports that the UK manufacturing PMI rose to a 5-month high of 52.1 in June, up from May’s 50.1 reading.

There was growth in production and new orders, mostly domestic, with some improvement in export orders and a slight upturn from the U.S. and mainland Europe, particularly Germany. Employment was down for the sixth consecutive month. It should be noted that these data were collected before results of the EU referendum were known.

The UK produced 0.700Mt of crude steel in May, down 37.1 percent y-o-y

 

IV. MANUFACTURING TALK RADIO

by Tim Grady

With audience growing, the live radio show broadcast each Tuesday at 1:00 p.m. ET is building new content in both live interviews and podcasts, as well as adding more senior correspondents to present information on manufacturing, the global economy and the U.S. economy as it impacts U.S. manufacturing.

In addition, hosts Tim Grady and Lew Weiss present commentary on federal follies and government goof-ups that adversely affect manufacturing – and there is no shortage of things local, state and especially the federal government are do that retard manufacturing growth in America.

Recent shows have included guests from the National Association of Manufacturers, the Institute for Supply Management, Potomac Photonics, the Association for Advancing Automation, Armada Corporate Intelligence, the Carby Corporation, and the Office of Apprenticeship Training for the State of Connecticut Department of Labor.

In addition, news stories at www.mfgtalkradio.com include 4 Technologies to Create the Most Efficient Warehouse Possible, Massachusetts Get Serious about Closing the Skills Gap, and How to Improve Manufacturing Speed, Quality and Cut Costs, along with other informative and helpful articles for manufacturers.

We encourage every staff member at all manufacturers to tune in to Manufacturing Talk Radio or browse its website for the latest trends in the industry

V. ASIA OUTLOOK

by Royce Lowe

asiaCHINA produced 70.5Mt of crude steel in May, up 1.8 percent y-o-y; Japan 8.84Mt down 0.9 percent y-o-y; India 8.04Mt, up 4.9 percent y-o-y and South Korea 5.81Mt, down 3.5 percent y-o-y. Taiwan produced 1.81Mt in May, down 4.7 percent y-o-y.

The Caixin China manufacturing PMI for May slipped to 48.6 in June from May’s 49.2 reading. Poor market conditions, and a drop in new orders meant attendant cuts in production and employment. June saw the sharpest decline in operating conditions for four months.

Passenger vehicle sales – cars, SUVs and multipurpose vehicles – were up 9.8 percent in May in China, with passenger car sales up 11.3 percent to 1.79 million units. YTD sales are up 7 percent y-o-y to 10.76 million units.

New-energy’ vehicle sales are up 134.1 percent to 126,000 units in the first five months of the year.

JAPAN’s manufacturing sector saw continuing worsening operating conditions in June, with drops in new orders and a sharp drop in export orders – probably due to the strong Yen. Growth in employment slowed. The PMI for June, at 48.1 was up slightly from May’s 47.7 reading, and a slightly slower rate of deterioration was noted.

Some Japanese sources are still pointing to the aftermath of recent earthquakes as being part of the manufacturing sector’s woes.

The INDIAN manufacturing sector showed production growth at a three-month high in June, together with a sharp rise in new orders and a rebound in export orders.

The Nikkei PMI reading increased from May’s 50.7 to 51.7 in June. New orders are coming in best at the consumer goods level, but improvement is also noted in the intermediate and investment goods sectors.

There was no significant change in employment levels in June. Domestic demand is the real driver in India.

VI. SOUTH AMERICA

by Royce Lowe

south americaBrazil’s manufacturing sector sees new orders and production down, together with a near-record shedding of jobs in June. The PMI for June, at 43.2, recovered slightly from May’s 41.6 percent.

The news from Brazil is effectively all bad, with some deteriorations a little ‘softer’ than those seen in May. Brazil’s crude steel production for the month of May was 2.59Mt, a 13.2 percent y-o-y decrease.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – increased slightly in June to 50.4 from May’s 50.0 reading. A few nations showed solid improvement in June, all in the Eurozone, namely Germany, Italy, Austria and Ireland. Growth was also recorded in the U.S., UK, Spain, Netherlands, Russia, Mexico, India, Taiwan, South Korea, Indonesia and Vietnam. Contraction was noted in China and Japan, France, Brazil, Malaysia and Turkey.

VII. FORGING AND CASTING

by Royce Lowe

seamless rolled ring

Alcoa Titanium and Engineered Products plans to expand production at its Martinsville, VA, titanium forging operation, by the addition of a new grinding line and two new forging furnaces. The $8.6 million expansion, to be completed before the end of 2016, will double the plant’s forging operation. This plant represents part of the $1.5 billion takeover by Alcoa of RTI International in 2015. 

GE and Italy’s Cividale SpA will build a $400 million metalcasting and forging complex for Saudi Aramco, with production to start in 2020. The complex will supply critical finished parts for the energy and maritime manufacturing sectors in the Middle East and North Africa.

Siempelkamp will supply a new 6,000 tonne upsetting and piercing press to be installed in ThyssenKrupp’s Rothe Erde Dortmund works. The press will replace the existing 4,000 tonne press. Start-up is forecast for January 2018.

VIII. U.S.STANDING OUT IN GLOBAL GROWTH PICTURE

by Norbert Ore

global mfg

While global economies are still considered to be under performing, 12 of the 17 (up from 11 in May) surveys that we follow are growing, at an average PMI of 52.9 and higher than the May average of 51.8 percent. The U.S. stands out as both manufacturing and non-manufacturing set new highs for the year.

The JP Morgan Chase Global PMI (50.4, +0.4) which measures over 30 countries indicates that June provides little change from May, but is consistent with the 50.6 percent that it has averaged for the past 12 months.

With all eyes seemingly on the BREXIT vote, the UK (52.1, +2.0) manufacturing sector paid little heed and posted its best month since January (52.9). We believe the impact of BREXIT will be seen in the financial sector (currency and credit) much more than the actual manufacturing of products or provision of services. While trade agreements are to be negotiated, we believe that buyers and sellers will find creative ways to maintain supply agreements.

The Eurozone PMI (52.8, +1.3) is now in its 36th consecutive month of growth and showing a modest acceleration. Germany (54.2, +2.1) posted its 19th consecutive month of growth and its highest reading since February 2014. The remaining seven Eurozone countries were led by Austria (54.5, +2.5), while France (48.3 -0.1) failed to grow. Asia continues to send mixed signals.

Japan’s PMI (48.1, +0.4) recorded a fourth month of contraction while Taiwan’s SMIT/CIER (53.3, -1.3) marked a fourth month of strong growth. China’s Official Report, the CFLP PMI (50.0, -0.1) has averaged 49.8 for the past 18 months. The Caixin China General Manufacturing PMI (48.6, -0.6) has now been below the mid-point for 15 consecutive months with an average of 49.6. The surveys continue to show minimal change in China’s supply chains. In North America, Canada (51.1, -1.0) reported above 50 for the fourth month following a seven-month trend of contraction.

Mexico (51.1, -2.5) expanded at a pace below its six 7/6/16 Strategas Research Partners – Proprietary Research 2-month average of 52.6 percent and reported its first decline in production in over 2 years – possibly an inventory correction.

Note: Strategas invites all manufacturers to participate in their survey of manufacturers. In exchange, participants with receive the SLIM Report (Strategas Leading Indicators of Manufacturing) and the Strategas Global Survey Insights report. Simply send an email to Norbert Ore at njore5100@bellsouth.net and ask to be included.

IX. THE SKILLS GAP

by Royce Lowe

skills gapVolvo Construction Equipment’s Sean Glennon, President, Operations Americas, had a few choice words to say about his potential future employees, namely ‘ We can’t always hire the interns we train, but it’s our intent to prepare them. Because you never know how that may be returned to you. They may end up working with a supplier we work with. They could end up working for a dealer or a customer.’ Volvo believes in collaboration with universities, in fact they worked with academia to put together the curriculum. Their interns go through work and class training on a temporary or full-time basis.

There are those who say the skills gap shortage in manufacturing may be easing, with 33 percent of manufacturers saying they have little or no difficulty in hiring talent and 44 percent having ‘moderate’ difficulty. Yet manufacturing job openings are still far outnumbering hires, viz the Bureau of Labor Statistics’ figures for July 2015, where they were 388,000 openings and 294,000 hires.

A recent survey of 120 U.S. manufacturers by the PwC/Manufacturing Institute showed that 31 percent don’t see a skills shortage now, but anticipate one in 3 years; 26 percent say the shortage has already peaked and better days are ahead and 29 percent say the shortage exists and will only increase in the next three years. Advanced manufacturing technologies have prompted 37 percent of companies to hire more employees, 45 percent to stay as is, and 17 percent to hire fewer. Only 13 percent of manufacturers say they have no difficulty finding talent for advanced manufacturing jobs in 3DP, IoT, robotics etc.

There is clearly a serious problem to be addressed here. The U.S. Department of Labor talked of 450,000 registered apprenticeships in 2015, up from 350,000 in 2010 – a start.

X. AUTOMOTIVE

by Royce Lowe

kiaLet’s talk of quality first. In the latest J.D. Power annual survey South Korea’s Kia Motors Corp. went to the top in the U.S. new-vehicle quality ratings, the first time in 27 years a ‘non-premium brand’ held top spot. GM had seven winners in vehicle categories, the most of any company in the Initial Quality Study released June 22. Kia’s rate of 83 problems per 100 vehicles in the first 90 days of ownership was one fewer than Porsche, with Hyundai third at 92. The two Korean companies have been moving up the quality ladder for ten years, with quality a priority across the board. They worked very hard to improve quality.

The survey was carried out from February to May amongst over 80,000 purchasers and lessees of new 2016 model vehicles after 90 days of ownership.

vw scandalVolkswagen, meanwhile, finds itself with a bill of over $15 billion to pay to redeem itself for having cheated on emissions. Over $10 billion will go to buybacks or fixes for vehicles that used illegal software, and $2 billion, over 10 years, will go to fund programs directed by California and the EPA to promote construction of electric vehicle charging infrastructure and other programs to boost sales of cars that don’t burn petroleum. In doing this, of course, they are helping competitors in development of alternate vehicles. A further disbursement of $2.7 billion, over three years, will go to replace old buses or to fund infrastructure to reduce diesel emission.

475,000 2.0 liter diesel Jettas, Beatles, Audi A3s, Golfs and Passats, 2009-2015, are involved, and a separate $600 million settlement has been made with 44 U.S.states, D.C. And Puerto Rico.

GM is to open an Automotive Software Development Center in the Toronto area, near to ‘proven talent’ and a ‘strong ecosystem of great universities, start-ups and innovative suppliers.’ Its count of engineers in the area will jump from 300 to 1,000 and the center will research autonomous-vehicle software and control development, together with safety technology.

Toyota finds itself atop the Made in America car list, having eight car models built and sold in the U.S. with at least 75 percent of their parts made domestically. The Camry ranks number one, with the Honda Accord and the Toyota Sienna second and third. The Detroit three do not figure in the top five.

The Camry, the number one selling car in the U.S., has a 75 percent domestic content and is assembled at Toyota’s manufacturing plant in Georgetown, Ky, with parts from 270 U.S. supplier locations. This plant is Toyota’s largest worldwide.

The trade body for the UK automotive sector, the Society of Motor Manufacturers and Traders (SMMT) says Brexit must not adversely affect the nation’s car-making industry. UK automakers represent $100 billion in sales and some $20 billion value added, with 160,000 people directly in manufacturing and some 800,000 across ancillary industries, representing 11.8 percent of total UK export of goods and investing £3.3 billion each year in automotive R&D.

So now it is up to the government to secure a deal with the EU which safeguards UK economic interests.

XI. AEROSPACE

by Royce Lowe

aerospaceSkeptics, problems, sanctions, nuclear deals, 100 planes, $20 billion: a provisional agreement has been signed for the sale or lease of over 100 Boeing aircraft to Iran’s national carrier over the next decade.

One side says this will open up doors to other business with Iran, another side doesn’t want to do business with Iran under any conditions. Neither the U.S. financial system nor the U.S. dollar can be used to finance this deal, but ways will be found to push the deal through and any final agreement must be approved by the U.S. Treasury Department. Maybe that much maligned euro will come to the rescue. First deliveries are scheduled for 2017.

Bombardier ‘unveiled’ its new C series, narrow-body jets with a maiden Swiss Air flight from Dublin to Zurich. Bombardier Commercial Aircraft has a confirmation, finalization of a deal made earlier this year with Air Canada for 45 CS300 jets, with options for 30 more, a deal worth up to $3.8 billion. The CS300 is a 135-seat narrow-body aircraft for medium-range routes that will compete with the Boeing 737 and the Airbus A320 series. Bombardier has stated that it will offer ‘the best seat-mile cost in its category.’ Deliveries to Air Canada will be between 2019 and 2022.

Vietjet, the Vietnamese budget airline, has ordered over 200 LEAP (Leading Edge Aviation Propulsion) -1B turbofan jet engines to power the 100 Boeing 737 MAX aircraft it recently ordered, for delivery between 2019 and 2023. This is worth over $3 billion to CFM International, the joint venture of GE Aviation and France’s Snecma.

Alcoa will supply aluminum sheet and plate materials to Brazil’s Embraer SA for its new E-Jets E2 regional aircraft, scheduled for a commercial debut in 2018, for wing skins and fuselage sheet material. The jets, to be powered by Pratt and Whitney’s PW 1000G geared turbofan engine, promise lower fuel and maintenance costs per seat.

Boeing is nearing a deal for almost $4 billion with Russia’s largest air freight company, AirBridgeCargo, for ten 747s, to extend the life of this icon. AirBridgeCargo Airlines’ parent, Volga-Dneps Group, is Moscow-based.

XII. THE MANUFACTURING SCENE: WHITHER TESLA?

by Royce Lowe

teslaSmooth lines, exorbitant – yet unnecessary – acceleration, battery factories in the desert, charging stations around the world, and a larger-than-life South African-born Elon Musk for a CEO. That must be Tesla.

Constant berating from the press for late deliveries, particularly, and of late for offer to purchase SolarCity Corp., of which Mr. Musk is Chairman and the largest shareholder.

Unveiling of a new model, and almost 400,000 reservations at $1,000 each, for delivery late 2017, shows a daring and a go-ahead not normally seen in mere mortals. 

A really bad week to do with a death in Florida tied to Tesla’s ‘Autopilot’ and another accident involving an elderly man, both still under investigation.

Tesla Motors is not that new. It was founded in 2003 by a group of engineers in Silicon Valley who wanted to prove that electric cars could be better than gasoline-powered cars. Tesla cars would show instant torque, incredible power, and zero emissions, and each new generation would be increasingly affordable, allowing a whole bunch of buyers to speed the world’s transition to sustainable transport.

Tesla’s engineers first designed a powertrain for a sports car built around an AC induction motor, patented in 1888 by Nikola Tesla, the inventor who inspired the company’s name. From this sprang the Tesla Roadster, launched in 2008, a model that went from 0 to 60 mph in 3.7 seconds and gave a range of 245 miles per charge of its lithium ion battery. Tesla went on to sell over 2,400 Roadsters, now burning up the roads in more than 30 countries.

Tesla launched its Model S in 2012, as the world’s first premium electric sedan, a model conceived and built to be 100 percent electric. The Model S has room for seven passengers and more than 64 cubic feet of storage space, giving the comfort and utility of a family sedan and the performance of a sports car, going from 0 to 60 mph in about five seconds. Its flat battery pack is integrated into the chassis and allows 265 miles per charge. Model S was named Motor Trend’s 2013 Car of the Year and achieved a 5-star safety rating from the U.S. National Highway Traffic Safety Administration.

Now with a significant number of vehicles on the road worldwide, Tesla is preparing to launch its new model 3, starting at a base price of $35,000 and due to start delivery in late 2017. The latest count was 373,000 reservations at $1,000 each.

Tesla’s vehicles are produced at its factory in Fremont, California, previously home to New United Motor Manufacturing Inc., a joint venture between Toyota and General Motors. The Tesla Factory has brought thousands of jobs back to the area and is capable of producing 1,000 cars a week. Which, considering it has reservations for almost 400,000 cars is not an awful lot. Of late, Elon Musk is reputed to have been spending his nights next to the production line to cheer on that same production line.

Tesla and key strategic partners, including Panasonic, have begun construction of a gigafactory in Nevada that will reduce the costs of lithium ion battery packs, a necessity in the production of the Model 3. By 2020, the gigafactory will produce more lithium ion cells than all of the world’s combined output in 2013. The gigafactory will also produce battery packs intended for use in stationary storage, to help improve the power of the electrical grid, reduce energy costs for businesses and residences, and provide a power supply backup.

If the purchase of SolarCity Corp. goes through, Tesla will become more than just an automaker; it will become a total energy innovator.

At first sight this all looks rather good. It’s not every company that can persuade almost 400,000 people to cough up $1,000 as a down payment on a car whose delivery date they can’t really count on. Even though production has been ramped up at the Fremont plant, where forecasts are for 500,000 cars per year by 2018, delivery performance so far makes all this look like a tall order. Just over 14,000 cars were delivered in the second quarter of this year, missing a target of 17,000. If the 50,000 forecast are shipped in the second half of 2016, this will mean just under 80,000 shipped against a forecast of 80,000/90,000 units.

Early June saw investigation into a fatal crash using the ‘Autopilot’ feature on a Model S car that occurred in May this year. The feature apparently failed to pick up on the side of a white trailer, causing the driver to go under the ‘obstacle.’

The $2.86 billion offer for SolarCity Corp. was not popular on Wall St., but this story has not seen its end as yet, and things may not be as bad as they initially seemed.

The Tesla saga will continue. Cars and lithium batteries and solar panels will all play their part. Add to this competition from the world’s major players in the automotive and energy industries and we have a very interesting scenario. For Tesla, the Model 3 may well be the true test.

XIII. TECHIE CORNER

by Royce Lowe

local motors

There’s a little, well smallish, company based in Arizona called Local Motors. We’ve mentioned them before. They’re into 3D printing of automobile parts, and well, automobiles of sorts. They’re serious, very well managed and innovative. They do things small scale, if you can call printing vehicles small scale. The latest project is a minibus called “Olli.”

The minibus was recently unveiled outside Washington D.C. It’s self-driving and was designed and built by Local Motors in partnership with IBM’s supercomputer platform WATSON.

Olli was designed as on-demand transportation that passengers can summon with a mobile app., as in Uber rides. There will be demonstrations and trials over the next few months, possibly in Berlin, Copenhagen and Canberra.

The hope is to print in about 10 hours and assemble in another hour. The company envisages hundreds of ‘micro-factories’ producing the vehicles around the world. Driving will be controlled by a system developed by Local Motors and several software and technological partners: IBM are involved.

XIV. OUT AND ABOUT

by Royce Lowe

apple-indiaIndia is seeking a commitment from Apple Inc. to bring manufacturing facilities to the country before the government will approve Apple’s request to open its own retail stores. Apple is pushing to increase its presence in India as the country is on the verge of becoming the world’s fastest-growing smartphone market, and as sales slow in the rest of the world. 

India requires companies to procure at least 30 percent of their components locally if they want to sell through their own retail stores. Apple makes most of its products in China, via its main manufacturing partner Foxconn, which company has expressed plans to assemble in India and is talking of opening up to 12 factories there, to create a million jobs by 2020.

Reshoring is still in the news, and according to new data from Boston Consulting Group, manufacturers producing goods for domestic U.S. markets are increasingly likely to add capacity in the U.S. than in any other country.

Among those companies expecting to increase capacity in the next five years for goods consumed in the U.S., 31 percent intend to add capacity in the U.S. and 20 percent in China compared, two years ago, to 30 percent in China, 26 percent in the U.S.

Those surveyed, to 76 percent, said the primary reason for reshoring was to shorten the supply chain; 70 percent to reduce shipping costs and 64 percent to be closer to customers.

Nucor is going into a 50-50 joint venture with JFE Holdings Inc., Japan’s number two steel mill, in an autosheet venture in Mexico. The plant, to start production in 2019, will have a capacity of 400,000 tonnes per year and a price tag of $270 million. The product will be aimed at the U.S. market. 

Nucor will open a facility near Hamilton, Ontario, to produce ‘construction products.’ 

Siemens AG (59%) and Gamesa Corp. Tecnologica SA of Spain (41%) will combine their wind-turbine manufacturing businesses to give them the biggest installed capacity worldwide, a combined 69 gigawatts of installed turbines.

China is looking to rival Arcelor Mittal by merging its second (Baosteel Group) and sixth (Wuhan Iron and Steel Group) largest steelmakers by output. There is a capacity of 70 million tonnes.

China’s net 2016 exports may top 90,000 tonnes, with domestic consumption falling by 20 million tonnes to 650 million tonnes.

The European Machine Tool Industry Association (CECIMO) said recently at its AGM that there was an encouraging outlook for its machine tool exports.

CECIMO, based in Brussels, is the union of trade associations for over 1,500 companies across the EU, and accounts for more than a third of global machine tool production. Production in 2016 is forecast at €24.3 billion, with exports at €19.0 billion.

XV. THE FINAL WORD

by Royce Lowe

It’s not often these days that the UK takes center stage worldwide. It just had its turn, much to the disappointment of some, the disgust of others and the incredulity of millions.

This is a saga that will be long in the telling. Let us hope that from somewhere will appear men and women who are willing and able to make good this situation.

The manufacturing figures from the U.S. and Europe this month may be termed a pleasant surprise.

Onward and upward.

 

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Metals & MFG Outlook June 2016

Metals & MFG 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. Today, Metals & Manufacturing Outlook™ (formerly MetalsWatch!) has a global circulation of 85,000 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.

 

Subscribe to Metals & MFG Outlook for the latest metals industry news!

I. Cover Story: CONFUSION TIME AGAIN?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO

V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. APRIL BUSINESS SURVEY INSIGHTS
IX. THE MANUFACTURING SCENE

X. TECHIE CORNER
XI. THE FINAL WORD

PUBLISHER’S STATEMENT

As manufacturing moves into the summer months, we find ourselves staring into a cloudy crystal ball – is that a second half 2016 pick-up that we see or a cloud that looks like a bunny? Did the most recent prognosticators say 2.1 GDP or 1.2 for 2016? Did somebody mention that capital investment may be forthcoming in 2016 or 2017, or 2018?

It just seems all so sluggish. Fed Chair Janet Yellen points to slow growth and low rates in the long run, saying, “The central bank expects gradual rate increases if ‘headwinds slowly fade over time’.” That would mean the U.S. dollar would need to weaken against other currencies, exports would need to increase, Asian and Euro economies would have to strengthen, international demand for U.S. goods would need to rise, consumer spending would have to increase over current levels, manufacturing orders would need to improve significantly, the auto industry would have to continue to boom, new home construction would need to continue to gain strength, and a few other positive factors would have to kick in. Hmm, seems like a pretty long list.

Keep in mind that manufacturing still has not reached pre-recession levels in output or employment and has actually been shedding jobs recently. So it is little wonder that the Fed Chair isn’t cranking up interest rates now or near term. And while the U.S. economy may be the strongest one going right now, it cannot lift the world even with its great size.

And how about those politicians? They seem unable to pass legislation that makes sense but very capable of passing more rules and regulations that stifle growth, and the usual pro-business, pro-growth Republicans are proving they are wolves in sheep’s clothing. The Ex-Im Bank still lacks a full board and the ability to help support exports because one man – one person in all of America, the Senate Banking Committee Chairman, Republican Senator Richard Shelby of Alabama, refuses to advance any board nominations because he is ideologically opposed to the Ex-Im Bank. So regardless of bipartisan support reauthorizing the bank last December, one ideologue prevents companies from doing business if their transaction is over $10 million, and apparently, if Shelby had it his totalitarian way, the bank wouldn’t exist.

If you are looking to Washington D.C. for solutions or answers, ‘fahgettaboudit’. It just isn’t going to happen with a bunch of appointed kings keeping a stranglehold on their committees, causing the wheels of progress to grind against the rails until there is no metal left. Politics has become so divisive in America that Congress is now like a grudge match between two teams that hate each other and will do anything to deny the other guy a win, especially at our expense, and they have We, the People, sitting in the stands cheering for “our team” completely oblivious of the greater whole – America. We have allowed our elected misrepresentatives to divide us into ‘their’ camps, ignoring that a house divided against itself cannot stand. Want proof? Ask any of the living presidents their view of Congress, now or during their term(s).

We now suggest that the governors of each state begin to vigorously execute their states’ rights under the 10th Amendment, “Each state retains its sovereignty, freedom, and independence, and every power, jurisdiction, and right, which is not by this Confederation expressly delegated to the United States, in Congress assembled.”

Perhaps solutions can be forthcoming from the states, rather than an incompetent federal government. Perhaps the “new tomorrow”, instead of the ‘new normal’ are state by state solutions that leave the federal government to wallow in its own misery.

Likely you will be hearing more of this on Manufacturing Talk Radio in the coming weeks. Tune in to find out what Connecticut is doing, and if any governor wants to tout what their Department of Labor (think ‘skills gap’) or Department of Economic Development (think ‘winning new manufacturing plants’), is doing we invite them to join us on the air!

Best Regards,
Lewis A. Weiss
Publisher

I. COVER STORY: CONFUSION TIME AGAIN?

confusion in manufacturing

Manufacturing in the U.S. may not be pulling up too many proverbial trees, but is holding its head up well, particularly when compared with the other emerged economies. There is optimism, but optimism amidst conflicting reports as to the strength of the manufacturing sector.

The PMI figure from the Institute of Supply Management moved up from April’s 50.8 percent to 51.3 percent in May representing growth in manufacturing for the third consecutive month. There was growth in the overall economy for the 84th consecutive month.

The Markit PMI for the U.S. manufacturing sector moved down to 50.7 percent in May from April’s 50.8 figure. Markit’s analysis of this situation is initially quite pessimistic, mentioning the weakest manufacturing performance in six-and-a-half years, with production falling for the first time since September 2009, and new orders expanding at the slowest pace since December 2015.

Survey respondents are pointing to subdued demand and increased economic uncertainty as major issues, with the U.S. election campaign doubtless contributing also in its own way. But along with this, Markit state that employment picked up slightly in May, on the back of new product launches and sustained optimism regarding the longer-term business outlook.

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

But in early June Bloomberg News reported that ’employers in May added the fewest number of workers in almost six years, reflecting broad cutbacks that may raise concern about U.S. growth and prompt Federal Reserve policy makers to put off an increase in interest rates.’ Some 38,000 workers, the fewest since September 2010, followed a 123,000 April increase that in itself was smaller than previously estimated. Employment figures for April and May combined have been cut back by some 59,000 on initial estimates.

It isn’t every day we read about or hear of extraordinary engineering triumphs, but one has recently been accomplished. A tunnel 57.1 kms (35 Miles) long has just been completed in Switzerland after 17 years of excavation and construction, all following on from a referendum and aided by taxes on gasoline, value added taxes, road tolls for heavy vehicles and a state loan to be repaid in ten years. There may be lessons from this project – see Manufacturing Scene.

Michael Bloomberg, of Bloomberg LP and Bloomberg Philanthropies, and former mayor of NYC, and Jamie Dimon, chairman and CEO of JPMorgan Chase & Co. have come out in criticism of the education and training of young people for the U.S. manufacturing sector, and are contributing to programs that are being shown to improve it. They particularly cite YouthForce NOLA, created by a group of Louisiana education, business and civic leaders with the aim of providing high-school students with training and experience that will prepare them for well-paying jobs.

North American prices on hot-rolled and cold-rolled steel coil are holding up as of late May, but the steel situation as such is not causing the media furor it promised in April.

Meanwhile Asian stocks were climbing in early June, due to a non-increase in the Fed’s interest rate, and a greater than 20 percent increase in commodity prices, from soybeans to copper.

Lithium is in the news, and for one simple reason, namely that there are just over 60 kgs (132 lbs) of it in each electric car battery. There isn’t an awful lot of it around, and, poetically just, the countries that have all the oil have no lithium. The metal, the lightest known to us, is super reactive and not easy to extract. Chile, Australia and Argentina hold 81 percent of the world’s lithium reserves between them. If the electric car takes off as it threatens to do, demand for this metal will go from 184,000 tonnes in 2015 to 534,000 tonnes in 2025.

The Bureau of Economic Analysis came out with its ‘second’ estimate for the annual rate of Real GDP growth in the first quarter of 2016, putting it at 0.8 percent. The ‘advance’ estimate put the figure at 0.5 percent.

GALLUP’s U.S. Economic Confidence Index was flat in May at -14. The job creation index was hovering around +32 in late May.

World crude steel production for the 66 reporting countries for the month of April 2016 was 134.9Mt, down 0.5 percent y-o-y. For the first quarter it was 385.7Mt, down by 3.6 percent from the same period in 2015.

U.S. crude steel production, for April 2016 was 6.57Mt, up 2.5 percent y-o-y.

Primary Global Aluminum Production in April 2016 was reported at 4.721 million tonnes, of which 2.57 million tonnes, over 54 percent, were produced in China. The Gulf Corporation Council (GCC) produced 421,000 tonnes, North America 329,000 tonnes, Western Europe 311,000 tonnes and Eastern and Central Europe 327,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for May 2016. This was a 24-day sales month as compared to a 26-day sales month in 2015, and the month of May saw a 6 percent y-o-y fall in light vehicle sales.

The ‘Big Eight’ May ’16 May ’15 YTD % change
General Motors 240450 293097 -18
Ford 234748 250086 -6.1
Toyota 219339 242579 -9.6
FCA 201271 198320 1.5
Honda 147108 154593 -4.8
Nissan 133496 134779 -1
Hyundai/Kia 133932 126043 6.2
VW 28779 34758 -17.2
Total new   cars and light trucks 1536276 1635090  -6

 

                           CARS                  LIGHT TRUCKS  TOTAL

 

MAY   2015          764,697                870,393                         1,635,090

 

MAY   2016          645,763                890,513                         1,536,276

 

                           -15.6%                +2.3%                          -6.0%

 

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 +0.8 (qtr) -1.1 (Apr) +1.1 (Apr) 5.0 (Apr)
Canada +2.4 (qtr) -0.2 (Mar) +1.7 (Apr) 7.1 (Apr)
China +4.5 (qtr) +6.0 (Apr) +2.3 (Apr) 4.0 (Qtr 1)
Japan +1.7 (qtr) -3.5 (Apr) -0.3 (Apr) 3.2 (Apr)
Britain +1.4 (qtr) -0.3 (Mar) +0.3 (Apr) 5.1 (Feb)
Euro Area +2.1 (qtr) +0.2 (Mar) -0.1 (May) 10.2 (Apr)
France +2.6 (qtr) -0.8 (Mar) – 0.1 (May) 9.9 (Apr)
Germany +2.7 (qtr) +0.2 (Mar) +0.1 (May) 6.1 (May)
Spain +3.1 (qtr) -1.7 (Mar) -0.9 (May) 20.1 (Apr)
India +9.6 (qtr) +0.1 (Mar) +5.4 (Apr) 4.9 (2013)
Brazil – 1.1 (qtr) -11.3 (Mar) +9.3 (Apr) 11.2 (Apr)
Taiwan + 3.1 (qtr) – 4.1 (Apr) + 1.9 (Apr) 4.0 (Apr)
Mexico +3.3 (qtr) -2.0 (Mar) +2.5 (Apr) 3.9 (Apr)  

FF Journal Magazine

by Royce Lowe

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

mfg in north americaThe Institute of Supply Management PMI figure registered 51.3 percent in May, up 0.5 percentage points from April’s 50.8 reading, representing growth in manufacturing for the third consecutive month, and growth in the overall economy for the 84th consecutive month. Of the 18 manufacturing industries, 12 are reporting growth in May in the following order: Wood Products; Textile Mills; Printing & Related Support Activities; Fabricated Metal Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; and Primary Metals. The six industries reporting contraction in May, listed in order, are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Transportation Equipment; Nonmetallic Mineral Products; Chemical Products; and Furniture & Related Products.

Following are comments from the industry:

Fabricated Metal Products personnel say that there is brisk order flow for the business. Chemical Products respondents say there is consistent sales growth in greater China, North Asia, Southeast Asia, Canada and Mexico, but that it is flat for the Americas and Europe. Computer & Electronic Product respondents say a slowdown in the Chinese economy is causing low orders. Transportation Equipment personnel say that business is still good but slowing. Miscellaneous Manufacturing personnel say that business conditions are stable and that demand for products is steady. Plastics and Rubber Products say their business is strong, but that many of their suppliers say business is flat. Machinery reports steady to slightly up production rates compared to previous month. Food, Beverage & Tobacco Products respondents say that business conditions remain strong with the exception of South America. There is continued expectation for a strong year even with the headwinds of currency and economic slowdown. Wood Products point to   a market that is improving steadily in both orders and pricing, and Petroleum and Coal Products say that Oil & Gas continues to struggle to meet cost controls required in the new low-oil price environment.

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

  1. The ISM New Orders Index for May, at 7 percent, was down 0.1 percent on April’s figure of 55.8 percent., representing growth in new orders for the fifth consecutive month. The fourteen industries reporting growth in new orders in May, listed in order, are: Textile Mills; Printing & Related Support Activities; Wood Products; Miscellaneous Manufacturing; Primary Metals; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; Chemical Products; Paper Products; and Nonmetallic Mineral Products. The four industries reporting a decrease in new orders during May are: Apparel, Leather & Allied Products; Transportation Equipment; Petroleum & Coal Products; and Furniture & Related Products.
  2. The ISM Production Index for May is at 52.6 percent, down6 percentage points from April’s 54.2 percent reading, representing growth in production for the fifth consecutive month. Twelve industries reported growth in production during the month of May, namely, listed in order,: Wood Products; Primary Metals; Paper Products; Fabricated Metal Products; Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Machinery. The six industries reporting a decrease in production during May, listed in order, are: Apparel, Leather & Allied Products; Transportation Equipment; Nonmetallic Mineral Products; Chemical Products; Furniture & Related Products; and Plastics & Rubber Products.
  3. The ISM Employment Index for May registered a reading of 2 percent, unchanged from April’s reading, representing a sixth consecutive month of contraction in the Employment Index. Ten of the 18 manufacturing industries reported employment growth in May, in order, Textile Mills; Wood Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Primary Metals; Miscellaneous Manufacturing; Machinery; and Computer & Electronic Products. The six industries reporting a decrease in employment in May, listed in order, are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; and Furniture & Related Products.
  4. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was slower in May than in April, as the Supplier Deliveries Index registered 54.1 percent, 5.0 percentage points above April’s 49.1 reading. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. The six industries reporting slower supplier deliveries in May, listed in order, are: Plastics & Rubber Products; Machinery; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Transportation Equipment. The two industries reporting faster supplier deliveries during May are: Primary Metals; and Chemical Products. Ten industries reported no change in supplier deliveries in May compared to April.
  5. The ISM Inventories Index, is at 45.0 percent for May, 0.5 percentage points below April’s 45.5 percent reading, indicating a contraction of raw materials inventories in May for the eleventh consecutive month at a faster rate than in April. Four industries reported higher inventories in May, namely: Apparel, Leather & Allied Products; Wood Products; Computer & Electronic Products; and Fabricated Metal Products. The 13 industries reporting lower inventories in May, listed in order, are: Primary Metals; Textile Mills; Transportation Equipment; Machinery; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; Plastics & Rubber Products; and Printing & Related Support Activities.

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

  1. The ISM Customers’ Inventories Index registered 50.0 percent in May, 4.0 percentage points above April’s reading of 46.0 percent, meaning that customers’ inventories are unchanged in May relative to April. The seven manufacturing industries reporting customers’ inventories as being too high during the month of May are: Apparel, Leather & Allied Products; Furniture & Related Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing. The seven industries reporting customers’ inventories as too low during May, listed in order, are: Textile Mills; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Paper Products; Machinery; and Primary Metals.
  1. The ISM Prices Index registered 63.5 percent in May, which is 4.5 percentage points higher than April’s 59.0 percent reading, indicating an increase in raw material prices for the third consecutive month. In May 34 percent of respondents reported paying higher prices, 7 percent lower and 59 percent the same prices as in April.

Of the 18 manufacturing industries, thirteen reported paying increased prices for their raw materials in May, namely, in order: Fabricated Metal Products; Plastics & Rubber Products; Apparel, Leather & Allied Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; Paper Products; Transportation Equipment; Chemical Products; Furniture & Related Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The three industries reporting paying lower prices during the month of May are: Wood Products; Petroleum & Coal Products; and Textile Mills.

Up in Price in May were: Aluminum (4); #1 Bundle Scrap (2); Copper (3); Corn; Crude Oil; Diesel (2); Electrical Components; Gasoline; HDPE Resin (2); Oil (2); Petroleum Based Products; Polypropylene (4); Silver; Stainless Steel (2); Steel (5); Steel — Cold Rolled (2); Steel — Hot Rolled (4); and Structural Steel Tubing.

Down in Price in May were: Corrugated Boxes

In Short Supply in May: None

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

  1. The ISM Backlog of Orders Index was at 47.0 percent in May, 3.5 percentage points down on the April reading of 50.5 percent, indicating contraction in order backlogs. Of the 85 percent of respondents who measure their backlogs, 17 percent reported greater backlogs, 23 percent smaller backlogs and 60 percent no change from April. Six industries reported an increase in order backlogs in May, namely, in order: Textile Mills; Printing & Related Support Activities; Plastics & Rubber Products; Furniture & Related Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components. The 10 industries reporting a decrease in order backlogs during May, listed in order, are: Apparel, Leather & Allied Products; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Machinery; Nonmetallic Mineral Products; and Paper Products.
  1. The ISM New Export Orders Index was at 52.5 percent for May, the same   reading as for April. This represents growth in new export orders for the third consecutive month. Six industries reported growth in new export orders in May, namely, listed in order, are: Wood Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Paper Products; Transportation Equipment; and Computer & Electronic Products. The six industries reporting a decrease in new export orders during May, listed in order, are: Primary Metals; Nonmetallic Mineral Products; Chemical Products; Fabricated Metal Products; Machinery; and Plastics & Rubber Products. Six industries reported no change in new export orders in May compared to April.
  1. The ISM Imports Index, is at 50.0 percent in May, unchanged from April, representing imports in May as unchanged from those in April. Six industries reported growth in imports in the month of May, namely, Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Machinery; and Furniture & Related Products. The seven industries reporting a decrease in imports during May, listed in order, are: Primary Metals; Transportation Equipment; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Printing & Related Support Activities.

The biggest U.S. automotive industry news, apart from a drop in monthly light vehicle sales, might come from Tesla. The company is to sell $1.4 billion in shares to help pay for an expansion that includes its forthcoming Model 3 electric car, and boosting production to 500,000 vehicles in 2018.

The company is looking at a sharp rise in spending for its increased production plan, which includes making as many as 200,000 of its Model 3 cars by the second half of 2017. It is also beefing up its battery factory in Nevada, expanding global sales and service and adding more charging stations. Tesla had approximately 373,000 pre-orders for its Model 3, and around 8,000 cancellations.

In U.S. Aerospace news, Boeing Commercial Airplanes has an order from Vietjet Aviation, a low-cost Vietnamese airline, for 100 737MAX aircraft, the largest ever single commercial airplane purchase in Vietnam. The order is worth $11.3 billion and delivery is set to start in 2019.

Vietjet chose Pratt and Whitney to supply its PurePower Geared Turbofan engine for its 63 Airbus A320neo and A321neo jets, starting in 2017. 

Lockheed Martin Corp. is under orders from the U.S. Navy to correct quality control failures in building its version of the Littoral Combat Ship (LCS) under three citations from the service’s shipbuilding inspectors.

Quality questions, not previously disclosed, add to concerns regarding the $29 billion program that Defense Secretary Ash Carter reduced from 52 to 40 units. Austal Ltd., a competitor of Lockheed Martin for another version of the ship, had no citations.

The Defense Contract Management Agency found Lockheed has ‘systematic quality deficiencies’ at the Marionette Marine Yard in Wisconsin, where the ships are built.

Much manufacturing news these days concerns the difficulties companies have in finding qualified personnel. No more will minimum qualifications cut it in the manufacturing environment. Ford Motor Co., for example, stated at a recent Brookings Institution workshop that some 95 percent of the auto body construction process is automated, and that people who work on these lines are highly trained, specialized technicians. Ford says that U.S. universities are the best in the world at training engineers, but not enough U.S. students are leaving high school prepared for engineering school.

Delphi Automotive is concerned about the caliber of U.S.engineers and has been looking to Romania, Poland, China and Mexico to fill the gap. 

Microsoft wonders whether STEM investments in high schools have enough long-term impact.

The list goes on and on, and everywhere there are complaints that there are just not enough qualified people ‘out there.’ In line with this is a recent SME survey from which it is reported that over 20 percent of parents’ view manufacturing as outdated and/or a dirty work environment; 50 percent do not see manufacturing as an exciting, challenging or engaging profession, and almost 25 percent of parents surveyed do not think manufacturing is a well-paying job. All this regardless of reams of recent publicity pointing to changes in the manufacturing environment and the fact that jobs in the sector are indeed well paid. Question….At what age do students decide what THEY want to do?

The U.S. infrastructure is in bad shape. A recent report by the American Society of Civil Engineers (ASCE) states that over the next decade it would cost over $3.3 trillion to keep up with repairs and replacements, but with that based on current funding the nation will come up $1.4 trillion short.

In addition to the danger to human life, Americans can look forward to traffic jams, airport bottlenecks and potential power outs. Deterioration of U.S ports, roads, trains, water and electrical facilities will also take an economic toll, cutting payroll growth by some 2.5 million jobs and some $4 trillion of GDP in lost sales and higher costs.

Clean-energy jobs: the number of U.S. jobs in solar energy overtook those in oil and gas extraction for the first time in 2015. Employment in the U.S. solar business grew twelve times faster than overall job creation, according to the International Renewable Energy Agency. Some 8.1 million people worldwide had jobs in clean energy in 2015, up from 7.7 million in 2014. Projections are for worldwide clean energy jobs to hit 24 million by 2030 if the U.N. targets on climate change and development are met.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI decreased very slightly from April’s 16-month high 52.2 to 52.1 in May, to continue three months of sustained improvement. The manufacturing sector showed moderate improvement in May, with production, new orders and employment all generally on the up.

Again, Québec and Ontario were the bright spots, with continued declines in B.C. and Alberta. The forest fires in Alberta, which raged in a horrific way, are expected to put increased pressure on manufacturing in that province.

Canada produced 1.10 Mt of crude steel in April, down 1.6 percent y-o-y.

Canadian light vehicle sales fell by 1.6 percent in May, the first drop since December 2015. The fall in sales was led by a 16.5 percent drop at GM Canada. But at 194,866 vehicles sold in May, YTD sales are still up by 5.6 percent and analysts are forecasting another record year for the Canadian industry.

In associated news, Fiat Chrysler will create 1,200 jobs at its Windsor, Ontario plant, in preparation for the new Pacifica minivan.

Tesla Motors is to open six new charging stations in Ontario and Québec. One has to wonder if Tesla knows how big a space that is, Ontario plus Québec.

In May, MEXICO saw its strongest upturn in manufacturing since April 2015, with the PMI moving up to a 13-month high of 53.6 from April’s 52.4 reading.

There was a rebound in production and new orders – both domestic and export – and there was an accumulation of work backlogs for the first time since December 2011, which prompted a rise in employment numbers.

Mexico produced 1.31 Mt of crude steel in April, down 7.3 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

danaDana Holding Corp. will open a new high-tech axle manufacturing facility in Toledo, Ohio, on a site that was previously home to Willys-Overland Motors. The new facility is adjacent to I-75 and well positioned to support automakers throughout the region. Dana plans to expand a recently constructed 100,000-square-foot facility on the property to nearly 300,000 square feet, and to invest approximately $70 million during the next few years, creating 300 jobs by 2020. The facility will integrate the company’s best global manufacturing practices and advanced operating systems.

“The investment in this new manufacturing facility is another substantial example of Dana’s commitment to the city and our community. It is an honor for Dana to return manufacturing to the same historic site where Toledo’s automotive industry began more than 100 years ago,” said James Kamsickas, Dana president and CEO.

 

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk Radio continues to pursue breaking news, advanced technology stories, economic updates and other information important to all manufacturers and manufacturing suppliers across America. Updates include information about Europe, Asia, and emerging markets where fascinating developments are occurring in the industry.

It is also the political season, as if that actually ever ends, and it has become impossible to ignore some of the profound stupidity emanating from Washington D.C. For example, while gun makers might balk because of its very little impact on actual gun sales, Congress failed to pass a single gun control measure. Why?!? If you read our Publisher’s Statement, you learned why.

There are also some stubborn perceptions about manufacturing that prevail in spite of the facts, and it is clear that manufacturing continues to get a bum rap from a past of being dark, dirty and dangerous. It will soon get another bum rap as it puts robots and cobots to work because young adults are simply not going into the industry. Then manufacturing will be blamed for not hiring unskilled workers.

Coming up – what are the states going to do about the inability of Washington to perform? After all, education is more local than federal. We will be covering what several states are doing, from the governors’ offices through their Departments of Labor and Economic Development to local actions by mayors, tech schools and even chambers of commerce. Why? Because a skilled labor shortage across America will cripple America’s global competitiveness, not just in manufacturing but in technological innovation.

Listen for some exciting format changes that pack the show with ore guests and information. Tune in on Tuesday’s for the live show or visit www.mfgtalkradio.com anytime to hear recent shows on topics you cannot afford to miss.

V. EUROZONE

by Royce Lowe

erozone mfg

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for May, at 51.5, was slightly down from April’s 51.7 reading, and a 3-month low.

There was expansion in six of the eight countries surveyed, with downturns continuing in France and Greece. There was further growth slowdown in Eurozone manufacturing, as new orders from both the domestic and export markets continued to rise at lackluster rates.

Eurozone manufacturing production was up for the 35th consecutive month in May, with Germany, Italy, Spain and the Netherlands reporting increases in new export business, although all reported slower expansions than in April.

Manufacturing employment rose during May, with levels up in all nations except France and Greece, with Greece showing a slight drop and France reporting its most serious job cuts since August 2014.

  PMI High/low
Netherlands 52.7 (52.6) 2-month high
Italy 52.4 (53.9) 3-month low
Germany 52.1 (51.8) 4-month high
Austria 52.0 (52.0) Unchanged
Spain 51.8 (53.5) 7-month low
Ireland 51.5 (52.9) 34-month low
France 48.4 (48.0) 2-month high
Greece 48.4 (49.7) 3-month low

ASNFRENCH NUCLEAR regulatory agency Autorité de Sûreté Nucléaire (ASN) confirms the existence of safety defects in about 400 forged parts produced since 1965 for nuclear reactors built by Areva. About 50 of the parts are installed in nuclear reactor plants operating in France.

France has 19 nuclear power plants consisting of 58 nuclear reactors, to supply an estimated 75 percent of the nation’s electricity. The plants are operated by Electricité de France (EDF) which will take over construction of nuclear reactors, a business that was developed by Areva.

The enquiry started over a year ago after ‘weaknesses’ were discovered in forged steel parts being supplied for the new reactor under construction.

In May, with an extra selling day in a number of countries, passenger car sales in Western Europe rose to 1.06 million units. Western European car registrations grew 14 percent y-o-y, with sales in Germany up 12 percent, in France up 22 percent, in UK 2.5 percent (Brexit fears?), in Italy 27 percent and in Spain up 21 percent. Seasonally adjusted registrations are forecast to reach 14.08 million in 2016, up 5.7 percent on 2015.

Crude steel production in Germany in April was at 3.56Mt, down 1.5 percent y-o-y; in Italy 2.09Mt, up 14.5 percent y-o-y; in France 0.97Mt, down 26.5 percent y-o-y and in Spain 1.19Mt, down 10.6 percent y-o-y.

Russia’s crude steel production for April was at 5.89Mt, down 0.4 percent y-o-y; Ukraine’s was 2.15Mt, up 11.7 percent y-o-y.

Markit reports that the UK manufacturing sector saw a slight increase in the PMI figure from April’s 49.4 to 50.1 in May.

There was growth in production and new orders in the consumer and intermediate goods sectors, but ongoing downturns in investment goods. New export business was down for the fifth consecutive month.

Over one third of survey respondents see detrimental effects on manufacturing business from an uncertainty regarding the upcoming referendum vote, within which 8 percent see the impact as ‘strongly detrimental.’

Manufacturing employment was down for the fifth consecutive month, though at a slightly more modest level.

The UK produced 0.700Mt of crude steel in April, down 24.1 percent y-o-y.

The name British Steel has once again risen from the ashes. Tata Steel of India has completed a part sale of its European assets to safeguard 4,800 jobs, though thousands more are still threatened with no buyer found for the balance of the business. The Long Products Europe (LPE) business has been sold to Greybull Capital for an undisclosed sum, and this will see 4,400 jobs saved in the UK, a further 400 in Northern France.

This will be the first time the British Steel name has been in evidence since 1999.  Tata says it has chosen seven bidders as potential buyers of its remaining UK activities, most notably the flat-rolled works at Port Talbot in Wales.

In 1875, some 40 percent of world steel output came from Britain, mostly from the northern city of Sheffield.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased back in May to 50.0. The word from Markit is stagnation. Contraction in new export orders was one of the steepest in the past three years, and employment was down for the fourth consecutive month.

The global consumer goods industry showed slight expansion in May, with minor contractions noted in the intermediate and investment goods sectors. All three sectors reported slight drops in employment.

VI. ASIA OUTLOOK

by Royce Lowe

CHINA produced 69.42Mt of crude steel in April, down 0.5 percent y-o-y; Japan 8.50Mt up 1.2 percent y-o-y; India 7.80Mt, up 3.9 percent y-o-y and South Korea 5.67Mt, down 1.3 percent y-o-y. Taiwan produced 1.72Mt in April, down 8.3 percent y-o-y.

caixinThe Caixin China manufacturing PMI for May eased to a three-month low of 49.2 percent from April’s 49.4 percent reading. This represents the fifteenth month that the PMI has been below 50, but there was only a very slight deterioration in the manufacturing sector overall. There were declines in new orders, both domestic and export in May, along with a slight decline in production and a continuing drop in employment.

Passenger vehicle sales – cars, SUVs and multipurpose vehicles – were up 6.4 percent in April in China, with ytd sales up 6.7 percent at 7.36 million units. Dealers are reported to be offering an average 18 percent discount off the automakers’ retail sales price.

JAPAN’s manufacturing sector saw its operating conditions worsen at the fastest rate in over three years, and the PMI at a 40-month low. The PMI for May was down from April’s 48.2 reading to 47.7.  

Production and new orders were down in May at the quickest rates in 25 and 41 months respectively, with new export orders falling at the quickest pace since January 2013.

Japanese sources say the aftermath of recent earthquakes in one of the country’s key manufacturing areas is impacting unfavorably on the goods-producing sector.

In spite of all this, together with a drop in international demand, employment continues to show slight increases.

Japanese car sales, for May 2016 are reported as up 6.6 percent y-o-y, at 223,753 units. Minicars, with a 660 cc max engine, sold 107,834 units, down 14.3 percent and the 17th consecutive month of decline. Overall sales, at 331,587 units, were down 1.2 percent y-o-y.

Production growth eased in the INDIAN manufacturing sector in May, for the second consecutive month, with the slowest rise in manufacturing production in the ongoing five-month expansion sequence.

The Nikkei PMI reading increased slightly from April’s 50.5 to 50.7 in May. New orders are up in May at a slightly faster pace, but new export orders fall for the first time since September 2013. More workers were taken on in May

VII.  SOUTH AMERICA

by Royce Lowe

brazil

Brazil’s manufacturing downturn gets worse in May. Business conditions deteriorated, in May, to the greatest extent since February 2009, with new orders and production down at the fastest rate in over seven years. Plant layoffs were at record levels.

The PMI for May was at 41.6 percent, down from April’s 42.6 reading, an 87-month low. Inflation reached a 94-month peak, hence there was a continuing increase in raw material costs. There was a slight increase in export orders.

Brazil’s crude steel production for the month of April was 2.30Mt, a 20.6 percent y-o-y decrease.

VIII. SLOW GROWTH THE NAME OF THE GAME – MAY 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore

global mfg

The global economy continued to grow in May as 11 of the 17 (down from 13 in April) surveys we follow are growing, and combine for an average PMI of 50.2. The JP Morgan Chase Global PMI (50.0, -0.1) which measures 24 countries indicates that May is basically a repeat of April. Slowing growth is the name of the game.

Growth in the Eurozone PMI (51. 5, -0.2) is now in its 35th consecutive month. Germany (52.1, +0.3) continued positive and posted its 18th consecutive month of growth. The remaining seven Eurozone countries were led by the Netherlands (52.7, +0.1) and Italy (52.4, -1.5), while France (48.4, +0.4) and Greece (48.4, -1.3) failed to grow.

The UK (50.1, +0.9) returned to expansion in May after ending 36 months of growth in April. This is weaker than the YTD average of 50.8 percent. Employment of factory workers declined for the fifth consecutive month contributing to the weakness.

China’s Official Report, the CFLP PMI (50.1, unch) stayed precariously above the 50 mark for the third consecutive month, a questionably measurable improvement in the economy. The Caixin China General Manufacturing PMI (49.4, -0.2) has now been below the mid-point for 14 consecutive months. Of the select group, Taiwan’s SMIT/CIER (54.9, +0.3) Survey marked a third month of strong growth and led with the highest manufacturing PMI in May.

In North America, Canada (52.1, -0.1) reported above 50 for the third month following a seven-month trend of contraction. Mexico (53.6, +1.2) expanded at a pace slightly above its six-month average of 52.8 percent.

The following Scattergram of Purchasing Manager’s Index results will show which way the global manufacturing market is moving in the overall and what country or region is shifting direction.

strategas scattergram for June

IX. THE MANUFACTURING SCENE: WHERE HANNIBAL CROSSED

by Royce Lowe

hannibalIt’s a few years since Hannibal crossed the Alps to make himself a real nuisance to the Romans, but since that time that crossing was effectively the only way to get from northern to southern Europe. Until now.

In 1992 there was a referendum in Switzerland on whether or not to build the Gotthard base tunnel, through and under the Swiss Alps. It passed. Two years later the Swiss-backed a proposal from environmental groups to move all freight traveling through Switzerland from road to rail.

The tunnel, the world’s longest and deepest, officially opened in early June, after 17 years of construction work on a project that sounds like something out of the most fictitious of science fiction.

This project cost $12.5 billion – which in light of some of the sums we read about for defense spending is far from exorbitant – and was brought in on budget and on time, which again sounds fictitious. The tunnel, a twin-bore, 57.1 kms (35 miles) long, will complete a high-speed link under the Swiss Alps and will create a mainline rail connection between Rotterdam and Milan. The tunnel’s course is flat and straight instead of winding up through the mountains like the old rail tunnel and a road tunnel opened in 1980.

It was financed by value added taxes, fuel taxes, road charges on heavy vehicles and state loans to be repaid in ten years.

The tunnel runs to 2.3 kms deep, and during construction 73 different kinds of rock were encountered, some as hard as granite, some as soft as sugar. A boring machine 410 meters long, 10 meters diameter went through it all, at times at temperatures up to 46 ºC (115ºF) and 28 million tonnes of rock were excavated – then recycled to make concrete to build the tunnel. Four million cubic meters of concrete were used to build the tunnel. Reinforced steel rings – what else – were used to prevent gravity bearing down on the project.

Advantages cited for this huge feat of engineering are easier movement of goods and increased tourism plus, and a very important plus for residents, a dramatic decrease in air and noise pollution.

The tunnel will effectively replace movement of one million trucks per year, and 15,080 shipping containers per day will move through it on 260 freight trains, intermingled with 65 passenger trains, on a journey that will take as little as 17 minutes.

Two thousand six hundred people were employed on this construction project. A plaque near the tunnel’s northern end commemorates the four Germans, three Italians, a South African and an Austrian who died working on it.

Switzerland is a relatively small country, with a total population, at around eight-and-a-half million, not much bigger than those of New York, Paris or London. Its residents were ‘persuaded’ to pay extra taxes, including for gasoline no less, to bring in this project that will forever benefit them.

The country is at once renowned for cuckoo clocks, chocolate and secret bank accounts. And wonderful scenery, world-class skiers and enviable efficiency.

It doesn’t take an Einstein to figure what a small extra tax on the price of gasoline in other developed countries might contribute to the repair and maintenance of infrastructure, or the realisation of additional projects. It does take politicians with the courage to bring in the tax.

X. TECHIE CORNER

by Royce Lowe

gmGeneral Motors is looking to join steel and aluminum – an in-house development from the automaker. GM says the process solves the problem of spot welding the two materials, mainly due to the widely differing melting points of steel and aluminum. They plan to use the process this year on the Cadillac CT6, by means of a uniquely designed welding tip, which they say they are willing to license to other automakers.

The process will eliminate rivets which will cut costs and mass, for example on aluminum to aluminum welding, cost savings on rivets alone are $5-$60 per vehicle. But GM will be cautious and replace only a couple of rivets initially.

GM are also looking at carbon-fiber wheels and under-body magnesium parts -although results from the latter are so far not encouraging.

The CT6 body contains eleven different materials, while the new Malibu lost 300 lbs (136 Kgs) by using seven different types of steel for the body.

Add a little to a little and….you eventually come up with a fair bit.

XI. THE FINAL WORD

by Royce Lowe

The manufacturing environment may be confusing in its ups and downs, but it is nothing if not exciting. Manufacturing in the U.S., Europe and Asia will doubtless continue its months-up, months-down journey. We should be getting used to it by now.

The last decade or two have seen giant strides in the use of alternate production methods, materials and applications. We expect this to continue, and at an increased pace.

Manufacturing will continue to be exciting, and an exciting industry to work in

 

 

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Metals & MFG Outlook May 2016

Metals & MFG 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. Today, Metals & Manufacturing Outlook™ (formerly MetalsWatch!) has a global circulation of 85,000 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 & MFG Outlook – May 2016

I. Cover Story: ANOTHER BEND IN THE ROAD
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO

V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. APRIL BUSINESS SURVEY INSIGHTS
IX. THE MANUFACTURING SCENE

X. THE FINAL WORD

PUBLISHER’S STATEMENT

It seems we are cycling from cautious optimism to mild disappointment and back again month by month as 2016, now in its 5th month, creeps forward. It is not a boom and it is not a bust – just a rather humdrum, day-by-day drone of ameliorated ups and downs.

This may be the new normal, where 3%+ GDP isn’t on any radar. Capital investment continues to be on short ROI technology to squeeze efficiencies out of existing plants rather than new brick and mortar assembly lines in manufacturing. And the plants under construction are being designed with more technological efficiency and less human requirements on the shop floor, as heard during a recent discussion with Stephen Gray of Gray Construction in the design/build industry.

This is consistent with what we have been hearing in the industrial Internet of things and tepid new hiring numbers. It is fast becoming an automated, technology-driven manufacturing world where 2025 began a decade sooner than expected. Even with consumer confidence and spending fairly strong, no forecast calls for any U.S. GDP beginning with a 3, which isn’t all bad. The U.S. economy has a tendency to become overheated at times, driven by investment bubbles.

Perhaps an unheard of economic expansion from July of 2009 through 2020 of modest GDP wouldn’t be such a bad thing. In fact, if you look at average GPD growth since 1945, it has been steadily falling from 5.4 in the immediate post-war years to under 2.0 from November of 2001 to December of 2007 just before the bottom fell out.

Consistent with that is growth in business, which tends to mirror GDP or a small multiple thereof over the last several decades in manufacturing. There has been some big and flashy stuff in tech and some colossal busts, but manufacturing has been a good long-term bet for many decades, and has been the lead sector coming out of every recession since the 1950’s.

We are beginning to see some recovery in Europe and Japan, and some stabilization in China, so the world economies are looking better, which will help to weaken the dollar and strengthen exports. Consequently, as much as we all like the thrill ride up a booming economy, we can all do without the screaming descent into the trough of the next recession presently not forecast for awhile except by some prognosticators of doom.

Thus, the Metals and Manufacturing Outlook newsletter this month is a fairly unalarming read this month, with little need for excess blood pressure medication. .

Best Regards,
Lewis A. Weiss
Publisher

I. COVER STORY: ANOTHER BEND IN THE ROAD

us steel industryIn spite of all the newsprint recently allotted to the woes of the global steel industry, heavy price increases have been the order of the day, and week, since February this year. Steel prices may never aspire again to those dizzying heights of July 2008, when hot-rolled coil was going for $1091/short ton, or $1203/tonne, nor even to the prices hot-rolled coil was going for in 2011. The fact is that prices are on the up in the U.S. and Canada, China and the rest of Asia, and in Europe, with prices on hot-rolled coil and cold-rolled coil in both the U.S. and Canada up around 25 percent from early February. Further, it seems that mills won’t give a price for July delivery. The price of scrap, as normally happens, is following that of steel on its upward course. One thing that isn’t following the upward trend, at least to the same extent, is end-user demand.

Chinese steel production reached its highest ever tonnage in the month of March at 70.65Mt. Major price increases have been noted, with the domestic Chinese price up 45 percent this year, and Shanghai rebar futures up 30 percent. The Chinese economy is said to have stabilized and there has been a rebound in property prices. Billet and slab prices are also on an upward course.

Most observers still expect China’s steel production and demand to drop this year as policy makers ‘move away from heavy industry.’ Chinese output for this year will fall to 781Mt from 2015’s 806Mt, according to a projection from Australia, the world’s largest shipper of iron ore. We haven’t heard the end of this latest steel story, and analysts are having a field day.

Along with this we see drops in PMI values for most countries, and the news that (only) 156,000 jobs were added to the U.S. economy in April, with a loss of around 11,000 in manufacturing, due in large part to a continuing slowdown in the oil and gas sector and lackluster global demand. Manufacturing employment has fallen now for five consecutive months, but April’s drop was at a slower pace than March’s. New orders, Production and Inventories were all down in April from March.

Meanwhile Australia and Brazil, the world’s two largest iron ore producers, say that by 2021 they will account for 90 percent of global trade in the commodity. Australia is forecasting a rise in the price of iron ore through 2021.

U.S. Steel is to cut 25 percent of its non-union workforce.

Tesla now has apparently 400,000 orders for its model 3, due to start delivery in late 2017. That’s an awful lot of bated breath.

The world is falling in love with solar energy, from the deserts of Jordan and Morocco, through South Africa, Germany – yes Germany, India, Brazil, Mexico, and of course China and the U.S. King Abdullah of Jordan has bought Teslas for his senior ministers. Meanwhile Old King Coal is going through a very rough time, with several large bankruptcies recently announced.

tata steelTata Steel, the owner of most of the steelmaking capacity in the UK, is selling large parts of it to a company called Greybull Capital LLP, for a ‘nominal fee.’ Greybull – which is talking of an investment and financing package of $570 million – will take over plants in Scunthorpe, Teesside and northern France, representing a total of 4800 jobs.

Additive Manufacturing or 3D Printing is rarely out of manufacturing news these days. It is forecast that the worldwide market for 3D Printers and associated materials and services will reach $20.2 billion by 2019. For an update on 3DP see Manufacturing Scene.

The PMI figure from the Institute of Supply Management moved down from March’s 51.8 percent to 50.8 percent in April, representing growth in manufacturing for the second consecutive month. There was growth in the overall economy for the 83rd consecutive month.
pmi

markit

 

 

The Markit PMI for the U.S. manufacturing sector moved down to 50.8 percent in April from March’s 51.5 figure. Markit states that the PMI points to the weakest performance since September 2009, with production volumes and employment numbers rising only fractionally and new orders expanding at the slowest pace so far in 2016. What this all means is the slowest improvement in overall business conditions for just over 6 and 1/2 years.

Export orders are dropping at the fastest pace for 17 months. Markit state ‘There is no end in sight to the current downturn in manufacturing activity.’ And that ‘ Factory output is dropping at an annualized rate of approximately 3 percent, and that factory headcounts are being culled at a rate of around 10,000 per month.’

The five ISM components are equally weighted at 20 percent each. The 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 ‘advance’ estimate for the annual rate of Real GDP growth in the first quarter of 2016, putting it at 0.5 percent. The second estimate will be published on May 27. GALLUP’s U.S. Economic Confidence Index was hovering around -14 in          late April. The job creation index was at +30 in late April.

china oilWorld crude steel production for the 66 reporting countries for the month of March 2016 was 137Mt, down 0.5 percent y-o-y. For the first quarter it was 385.7Mt, down by 3.6 percent from the same period in 2015. Capacity utilization for March 2016 was at 70.5 percent, down 1.3 percent on March 2015, but up 3.9 percent on February 2016. This is fairly low capacity utilization overall. U.S. crude steel production, for March 2016 was 6.75Mt, up 4.9 percent y-o-y.

Primary Global Aluminum Production in March 2016 was reported at 4.856 million tonnes, of which 2.62 million tonnes, 54 percent, were produced in China. The Gulf Corporation Council (GCC) produced 442,000 tonnes, North America 329,000 tonnes, Western Europe 339,000 tonnes and Eastern and Central Europe 337,000 tonnes.

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

The ‘Big Eight’ April ’16 April ’15 YTD % change
General Motors 259557 269056 -3.5
Ford 229739 221652 3.6
Toyota 211125 203329 3.8
FCA 196526 185233 6.1
Honda 148829 130068 14.4
Nissan 123861 109848 12.8
Hyundai/Kia 118721 121291 -2.1
VW 27112 30009 -9.7
Total new cars and light trucks 1506977 1,454,951  3.6 

                        CARS                  LIGHT TRUCKS  TOTAL

APR 2015        665,924                789,027                         1,454,951

APR 2016        629,836                877,141                         1,506,977

                        -5.4%                  +11.2%                        + 3.6%

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 +1.4 (qtr) -2.0 (Mar) +0.9 (Mar) 5.0 (Mar)
Canada +0.8 (qtr) +0.6 (Jan) +1.3 (Mar) 7.1 (Mar)
China +4.5 (qtr) +6.8 (Mar) +2.3 (Mar) 4.0 (Qtr 1)
Japan -1.1 (qtr) +0.1 (Mar) nil (Mar) 3.2 (Mar)
Britain +1.6 (qtr) -0.5 (Feb) +0.5 (Mar) 5.1 (Jan)
Euro Area +1.3 (qtr) +0.8 (Feb) nil   (Mar) 10.3 (Feb)
France +1.3 (qtr) +0.6 (Feb) – 0.1 (Mar) 10.2 (Feb)
Germany +1.1 (qtr) +1.2 (Feb) +0.3 (Mar) 6.2 (Mar)
Spain +3.3 (qtr) +5.9 (Feb) -0.8 (Mar) 20.4 (Feb)
India + 4.4 (qtr) +2.0 (Feb) +4.8 (Mar) 4.9 (2013)
Brazil – 5.7 (qtr) -9.8 (Feb) +9.4 (Mar) 10.2 (Feb)
Taiwan + 2.2 (qtr) – 3.6 (Mar) + 2.0 (Mar) 3.9 (Mar)
Mexico +2.2 (qtr) +2.6 (Feb) +2.6 (Mar) 4.2 (Mar)  

 FF Journal Magazine

by Royce Lowe

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

north america

 

 

 

 

 

The Institute of Supply Management PMI figure registered 50.8 percent in April, down one percentage point from March’s 51.8 reading, representing growth in manufacturing for the second consecutive month, but at a slower pace than in March, and growth in the overall economy for the 83rd consecutive month. Of the 18 manufacturing industries, eleven industries are reporting growth in April, in order: Wood Products; Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; Primary Metals; Fabricated Metal Products; Chemical Products; Machinery; Computer & Electronic Products; Non-metallic Mineral Products; and Food, Beverage & Tobacco Products. The four industries reporting contraction in April are: Petroleum & Coal Products; Transportation Equipment; Miscellaneous Manufacturing; and Furniture & Related Products.

Following are comments from the industry:

Fabricated Metal Products personnel say that steel prices are increasing but that this is supply-side driven. The general economy is plugging along with no big changes and is kind of lackluster. Chemical Products respondents say business is remaining a bit sluggish overall, though certain areas are showing signs of pickup. Computer & Electronic Product respondents say that while oil prices have recovered slightly, the industry as a whole is in a struggle. Transportation Equipment personnel say that sales are firming at the reduced levels seen this year and the feeling is that a bottom has been reached. Miscellaneous Manufacturing personnel say that business is stable, and that sales and production rates are steady to improving. Printing & Related Support Activities say that activity is increasing on the eve of the busy season. Machinery reports that the auto industry is still going strong. Food, Beverage & Tobacco Products respondents say that they are still running at capacity and awaiting new capacity coming online.

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.

  1. The ISM New Orders Index for April, at 8 percent, was down 2.5 percent on March’s figure of 58.3 percent., representing growth in new orders for the fourth consecutive month. The fifteen industries reporting growth in new orders in April, listed in order, are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Paper Products; Wood Products; Plastics & Rubber Products; Chemical Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Furniture & Related Products; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment. The only industry reporting a decrease in new orders during April is Textile Mills.
  2. The ISM Production Index for April is at 54.2 percent, down1 percentage points from March’s 55.3 percent reading, representing growth in production for the fourth consecutive month. Fifteen industries reported growth in production during the month of April, namely, listed in order, Paper Products; Wood Products; Chemical Products; Plastics & Rubber Products; Fabricated Metal Products; Printing & Related Support Activities; Primary Metals; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing; Non-metallic Mineral Products; Machinery; Furniture & Related Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The two industries reporting a decrease in production during April are: Petroleum & Coal Products; and Textile Mills.
  3. The ISM Employment Index for April registered a reading of 2 percent, an increase of 1.1 percentage points on March’s 48.1 reading, representing a fifth consecutive month of contraction in the Employment Index, but at a slower pace than in March. Eleven of the 18 manufacturing industries reported employment growth in April, in order, Wood Products; Textile Mills; Printing & Related Support Activities; Paper Products; Primary Metals; Machinery; Furniture & Related Products; Non-metallic Mineral Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Chemical Products. The five industries reporting a decrease in employment in April are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Transportation Equipment.
  4. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was faster in April than in March, as the Supplier Deliveries Index registered 49.1 percent, 1.1 percentage points below March’s 50.2 reading. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. The five industries reporting slower supplier deliveries in April, listed in order, are: Fabricated Metal Products; Plastics & Rubber Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The five industries reporting faster supplier deliveries during April are: Paper Products; Non-metallic Mineral Products; Machinery; Transportation Equipment; and Primary Metals. Eight industries reported no change in supplier deliveries in April compared to March.
  5. The ISM Inventories Index, is at 45.5 percent for April, 1.5 percentage points below March’s 47.0 percent reading, indicating a contraction of raw materials inventories in April for the tenth consecutive month at a faster rate than in March. Three industries reported higher inventories in April, namely: Plastics & Rubber Products; Fabricated Metal Products; and Primary Metals. The 10 industries reporting lower inventories in April, listed in order, are: Furniture & Related Products; Textile Mills; Miscellaneous Manufacturing; Chemical Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; Machinery; and Printing & Related Support Activities.

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

  1. The ISM Customers’ Inventories Index registered 46.0 percent in April, 3.0 percentage points below March’s reading of 49.0 percent, meaning that customers’ inventories are considered to be too low in April for the third consecutive month. The four manufacturing industries reporting customers’ inventories as being too high during the month of April are: Non-metallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; and Chemical Products. The seven industries reporting customers’ inventories as too low during April, listed in order, are: Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.
  2. The ISM Prices Index registered 59.0 percent in April, which is 7.5 percentage points higher than March’s 51.5 percent reading, indicating an increase in raw material prices for the second consecutive month and only the second time since October 2014. In April 28 percent of respondents reported paying higher prices, 10 percent lower and 62 percent the same prices as in March.

Of the 18 manufacturing industries, twelve reported paying increased prices for their raw materials in April, namely, in order: Apparel, Leather & Allied Products; Primary Metals; Fabricated Metal Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Non-metallic Mineral Products; Machinery; Transportation Equipment; Chemical Products; and Paper Products. The four industries reporting paying lower prices during the month of April are: Textile Mills; Furniture & Related Products; Miscellaneous Manufacturing; and Petroleum & Coal Products.

Up in Price in April were: Aluminum (3); Aluminum Products; #1 Bundled Scrap; Carbon Steel Coil; Copper* (2); Diesel; Ethylene; HDPE Resin; Oil; Palm Oil; Plastic Resins; Polypropylene (3); Propylene; Scrap Steel; Stainless Steel; Steel (4); Steel — Cold Rolled; Steel — Hot Rolled (3); and Titanium Dioxide.

Down in Price in April were: Copper *

In Short Supply in April: None

Note: The number of consecutive months the commodity is listed is indicated after each item. * Reported both up and down in price.

  1. The ISM Backlog of Orders Index was at 50.5 percent in April, 0.5 percentage points down on the March reading of 51.0 percent, representing growth in order backlogs for the second consecutive month. Of the 87 percent of respondents who measure their backlogs, 24 percent reported greater backlogs, 23 percent smaller backlogs and 53 percent no change from March. Seven industries reported an increase in order backlogs in April, namely, in order: Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Chemical Products; Machinery; and Paper Products. The eight industries reporting a decrease in order backlogs during April, listed in order, are: Textile Mills; Non-metallic Mineral Products; Wood Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Furniture & Related Products; Computer & Electronic Products; and Transportation Equipment.
  2. The ISM New Export Orders Index was at 52.5 percent for April, 0.5 percentage points above March’s 52.0 reading. This represents growth in new export orders for the second consecutive month. Eight industries reported growth in new export orders in April, namely, listed in order: Wood Products; Printing & Related Support Activities; Chemical Products; Fabricated Metal Products; Transportation Equipment; Paper Products; Miscellaneous Manufacturing; and Plastics & Rubber Products. The four industries reporting a decrease in new export orders during April are: Non-metallic Mineral Products; Primary Metals; Machinery; and Food, Beverage & Tobacco Products.
  3. The ISM Imports Index, is at 50.0 percent in April, or 0.5 percentage points higher than March’s 49.5 reading, representing imports in April as unchanged from those in March. Four industries reported growth in imports in the month of April, namely, listed in order: Non-metallic Mineral Products; Chemical Products; Fabricated Metal Products; and Paper Products. The six industries reporting a decrease in imports during April, listed in order, are: Textile Mills; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Computer & Electronic Products; and Food, Beverage & Tobacco Products. Seven industries reported no change in imports in April compared to March.

In U.S. automotive industry news, Ford has committed to investing $9 billion in its U.S. manufacturing facilities. This will include $1.6 billion to upgrade plants in Michigan and Ohio, $1.4 billion in its Livonia Transmission Plant to build 10-speed transmissions for the F-150 Raptor and other F-150 models, and $200 million in Ohio to build a super-duty chassis cab.

Ford recently paid over $210,000 fpr Tesla’s 64th Model X. GM and Toyota also bought one. Hope they find what they’re looking for. The company is joining GM and Tesla in the electric car ‘race’ and will invest $4.5 billion in electrified vehicles, aiming to add 13 electric cars and hybrids to its stable by 2020.

In U.S. Aerospace news, Alcoa has been called upon by Airbus for a supply deal on the strength of its 3D Printing capabilities, involving the production of 3D-printed titanium fuselage and engine pylon parts. Airbus looked to Alcoa for its portfolio of materials design, various production capabilities and aerospace product experience. Alcoa’s expertise also runs to powder production and hot isostatic pressing.

boeinBoeing Commercial Airplanes has given a contract to India’s Bharat Forge Ltd. (BFL) for the supply of four titanium closed-die forgings for the forthcoming 777X, a redesigned version of the 777 long-range, wide-body jet that is the world’s largest twin-engine aircraft. Boeing has 320 orders for the plane and first deliveries are scheduled for 2020. The application of the new products was not revealed, but BFL are scheduled to begin shipping two of the new forgings to Boeing in late 2016, with two more deliveries for early 2017.Contract terms were not detailed, but BFL emphasized its significance to Boeing’s global supply chain, and that it is the only Indian supplier of globally-approved titanium forgings.

Earlier this year BFL began delivery of closed-die forgings for Boeing’s 737-Next Generation narrow-body jets in a supply program that will carry on through Boeing’s transition to the new 737 MAX.

geGE, never long out of the news, whose recent $1.9 billion profit result beat analysts’ estimates, is moving its headquarters from Fairfield, Ct to Boston, where it feels it will improve its chances of recruiting the best software engineers for its digital division.

In the not-everything’s-perfect zone, GE’s Genx-1BPIP2 engines have been plagued by icing issues and the company has been ordered by the FAA to repair them.

GE will upgrade a power plant with its newest gas turbine, the Winnebago-sized 660-ton HA, together with equipment from the Alstom energy business it acquired late last year.

PSE&G Power boosts the order book of GE’s HA turbine to 35: it includes the Alstom-designed steam generator. The turbine won recent orders in Pakistan and South Korea.

Under the latest agreement, GE will expand the Bridgeport Harbor Generating Station in Connecticut, boosting its capacity to a level sufficient to supply enough energy to power 500,000 homes when commercial operation begins in early 2019.

Allegheny Technologies Incorporated, (ATI), a one-time stalwart of the U.S. stainless steel industry, and now one of the more important specialty metals supplier to the aerospace, defense and medical industries, is restructuring its flat-rolled operations and will cut 250 jobs, over a third of its workforce, by this summer, with annual savings of $30 million. Stainless steel and grain oriented electrical steels are no longer profitable, and ATI is looking to a ‘smaller, more agile, streamlined, cohesive and efficient flat-rolled products operation that will lead into products and markets with significant technical barriers to entry.’ 

Non-fossil fuel energy generation is in the news a lot these days, and deserves to be there. It’s bringing out what could be considered to be the best in a number of companies who are working hard to improve present technology and to come up with new methods of harnessing Mr. Sun and Mrs. Sea.

oscalaA quick calculation told somebody there are 332,519,000 cubic miles of water on the planet, which equates to 352,670-and-15-zeros gallons. That’s a lot of water sloshing around out there, which means a lot of waves. Another quick calculation told somebody we could get a third of the U.S.’s electricity from the ocean’s waves. Oscilla Power of Seattle, working with researchers at the University of Maine, are moving towards a significant modification of ‘normal’ methods of getting energy from waves. All the moving parts in present equipment have a tendency to break down, in large part due to corrosion from sea water. The new idea, presently being tested in a large tank at the U of M, involves applying all this kinetic energy to a solid piece of metal, instead of using it to turn the blades of an impeller, thus creating an alternating magnetic polarity in the metal that can be converted into electrical current. The company and the university are looking to have a working ‘piece’ by 2020.

First Solar Inc. of Tempe Arizona, a manufacturer of solar panels and a provider of utility-scale Photovoltaic power plants and services, has for the first time in three years been making panels for less than China’s biggest producer, justifying the more than $3 billion in loan guarantees from the U.S. government. With $775 million invested, the company made panels for as little as 40 cents per watt, 15 percent less than China’s Trina Solar Ltd.

The U.S. will see its first ‘University Technology Partnership’ when Rolls Royce renews and expands a technology partnership with Purdue University to conduct research into new aircraft propulsion systems. Rolls Royce will put $33 million into the project, which will involve two research centers, one for thermal management systems and one for advanced compressor systems. 

Google is scaling up its digital skills teaching project to include a million Africans in the next year, aiming to deal with high unemployment on the continent. This will provide free digital training to 300,000 people in South Africa, where unemployment amongst 15-34 year olds is 35 percent, 400,000 in Nigeria, 200,000 in Kenya and 100,000 in other sub-Saharan countries. Google recently stated it had trained a million Europeans and had committed to training another million by the end of 2017.

Recent figures from the U.S. show that 34.1 percent of employees are engaged in their work – meaning they are involved in, enthusiastic about and committed to their work. This is the highest level since tracking began in January 2011. The global engagement level is around 13 percent.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI rose to 52.2 in April from March’s 51.5 on the back of the strongest improvement in manufacturing conditions since December 2014. Production, new orders and employment all took off from the previous month.

All monitored regions except Alberta and British Columbia showed upturns in manufacturing performance, with Québec recording a significant rebound with new orders up at the fastest pace since August 2012. Ontario continued to perform very well in April, but growth momentum slowed somewhat from March. Both domestic and export orders showed ongoing improvement.

Canada produced 1.14 Mt of crude steel in March, up 7.9 percent y-o-y.

Canadians bought 200,327 light vehicles in April, up 6.0 percent y-o-y, a record for any month of the year and the first time light vehicle sales have surpassed 200,000 vehicles. FCA sales were up 10 percent y-o-y, Ford up 11 percent and GM down 9 percent.

Bombardier Inc. rejected an initial investment offer from the Federal Government to help with its ongoing financial problems stemming from production of its C series jet aircraft. According to ‘people in the know’ the two sides have failed to come to terms regarding ‘corporate governance’ and other issues. The Federal Government is being tougher with the company than is the Government of Quebec.

Meanwhile Delta has ordered 75 of the aircraft with options on 50 more. Air Canada has given a letter of intent for 45 with options on another 30, but this has not as yet been translated into a firm order.

In April, MEXICO saw a weakening in manufacturing growth, coincident with the slowest upturn in new orders for six months The manufacturing PMI fell from March’s 53.2 to 52.4 in April.

Although production increased at the slowest rate since January, job creation strengthened and new order growth moderated.

All in all, the manufacturing sector in Mexico remains upbeat about its industry. Mexico produced 1.54 Mt of crude steel in March, down 1.5 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

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Ajax-Ceco, a U.S.-based press manufacturer, will supply a press frame that will be part of an expansion to Southwest Steel Processing’s forging plant in Newport, Arkansas. The press will be cast by Sheffield Forgemaster’s International (SFIL) in the UK, under a $1.4 million contract. This will involve the casting of 550 tons of liquid steel, to cast a frame almost 13 meters long, 3.5 meters wide and 3.2 meters deep. Once cast, the frame will take several weeks to cool, and completion, including heat treatment and machining, is scheduled for early 2017. 

In a surprising and unfortunate piece of news, Columbus Steel Castings in Columbus, Ohio, filed for Chapter 11 bankruptcy protection along with three other U.S. manufacturers of metal products that plan to continue operating during the case: Zero Manufacturing Inc., Jorgenson Forge Corp. and the operator of Commercial Metal Forming. Comments from Zero Manufacturing and Jorgenson Forge indicate that customer orders begin to fall in 2014 as the U.S. defense sector cut back spending. It remains to be seen when or how Jorgenson will emerge from the bankruptcy filing, but there are encouraging options on the table.  At the moment, Jorgenson Forge continues to operate, although the open die forging market has been very weak for many months. Other large open die forging companies have seen their revenues drop by precipitous percentages, approaching 50% in some cases, with the larger forge companies taking the biggest hits.  The industry is in a slump due to downturns in oil and gas exploration, and defense spending.

 

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk Radio will be tackling thornier subjects in manufacturing, particularly those where the federal government is hindering manufacturing growth.

An upcoming show will discuss the federal government’s use of inmates to directly compete with U.S. manufacturers with prison labor rates from $0.16 to just over $1.00 per hour. While the government effort is noble, it is training inmates in early 20th century skill sets of piecework instead of educating them to transition into 21st Century tech-savvy STEM jobs. Thus, after serving their time, they will be relegated to looking for the few low-paying jobs that still exist in the U.S. in garment work, non-automated sheet metal cutting and other declining industries. But, while incarcerated, they form a labor force to directly compete with American manufacturers. Hear from manufacturers who have been directly hurt by competing with government manufacturing in prisons.

Another show will discuss the myths of the $15 per hour minimum wage, why it may put more workers out of work and accelerate the move towards automation and robotics in both the manufacturing and the service sectors. It is entirely likely that more employees will be hurt rather than helped by laws forcing businesses to pay wages they cannot, and will not sustain when more economical and efficient solutions are just a iPad or touchscreen tablet away.

V. EUROZONE

by Royce Lowe

erozone mfg

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for April, at 51.7, was very slightly up from March’s 51.6 reading. The rates of expansion slipped back for both production and new orders, but employment was up. The fastest growth was seen in Italy and Spain, with moderate expansion seen in the Netherlands and Austria. In France, new orders and production fell at the fastest rates since February 2015 and April 2015 respectively.

The trend in new export business improved slightly, with Germany, Italy and Spain showing the stronger gains on new export business.

  PMI High/low
Italy 53.9 (53.5) 4-month high
Spain 53.5 (53.4) 2-month high
Ireland 52.9 (54.9) 1-month low
Netherlands 52.6 (53.6) 2-month low)
Austria 52.0 (52.8) 2-month low
Germany 51.8 (50.7) 3-month high
Greece 49.7 (49.0) 3-month high
France 48.0 (49.6) 12-month low   

In April, new passenger car sales were up 8.4 percent in Germany, 6.4 percent in France, 12 percent in Italy and 21 percent in Spain.

Crude steel production in Germany in March was at 3.81Mt, down 1.6 percent y-o-y; in Italy 2.02Mt, down 3.5 percent y-o-y; in France 1.13Mt, down 21.4 percent y-o-y and in Spain 1.16Mt, down 17.2 percent y-o-y.

Russia’s crude steel production for March was at 6.01Mt, down 2.0 percent y-o-y; Ukraine’s was 2.17Mt, up 28.1 percent y-o-y.

musMustangmania seems to have hit Germany. 780 of the U.S. sporty job were snapped up in March, compared to 752 Porsche 911s and 708 Audi TTs. Mustangs sold 1, 823 units in Germany in the first quarter of 2016.

The UK manufacturing sector did not have a good month of April. The PMI for April plunged into contraction territory, at 49.2, on the back of near-stagnant trends in production and new orders, and a decrease in employment – with job cuts for the fourth consecutive month.

Declines in production and new orders were noted in the consumer and investment goods sectors, with the intermediate goods sector sustaining some growth in new orders and production but at weaker rates than in March. Export orders were down for the fourth consecutive month.

The bottom line is the steepest decline in the manufacturing PMI for three years and the sharpest overall decline in employment for over three years.

The UK produced 0.675Mt of crude steel in March, down 39.5 percent y-o-y.

A UK organization called BRAKE is making lots of noise about diesel vehicles, after an industry-wide investigation conducted by the Ministry of      Transport found that none of the 37 cars tested met the EU’s NOx limit in real-world testing as opposed to laboratory testing.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased back in April to 50.1, its second-lowest level in the past 40 months. Global manufacturing remained in slow growth during April, with both developed and emerging markets showing weakness and lackluster growth, and production, new orders and export business down for the third straight month.

There was a sharp drop in the PMI finished goods inventory index, which once put into balance with sales should lead to faster gains in production.

VI. ASIA OUTLOOK

by Royce Lowe

asiaCHINA produced 70.65Mt of crude steel in March, up 2.9 percent y-o-y; Japan 8.65Mt down 6.8 percent y-o-y; India 8.06Mt, up 3.4 percent y-o-y and South Korea 5.43Mt, down 8.4 percent y-o-y. Taiwan produced 1.77Mt in March, down 14.7 percent y-o-y.

The Caixin China manufacturing PMI for April eased to 49.4 percent from March’s 49.7 percent reading. This is a continuing, but marginal deterioration. Operating conditions have now worsened in each of the past fourteen months, with production mostly unchanged and a further reduction in staff numbers.

China is in a very much wait-and-see mode, with the powers that be obviously keeping a very sharp eye on the manufacturing economy, but perhaps not quite sure which way to turn (it) at the moment.

China sold 5.67 million passenger vehicles and 0.86 million commercial vehicles in the first three months of 2016. Total vehicle sales in March 2016 increased to around 2.4 million units, from February’s 1.6 million units. Total sales for 2015 were 24.6 million units.

foxconnFuture Mobility Corp., a merger of Tencent Holdings Ltd., Asia’s biggest Internet company, and Foxconn Technology Group, a key assembler of iPhones, Pads and other Apple products, have been poaching key personnel from BMW’s i sub-brand, according to ‘people familiar with the matter.’ They seem in fact to have got the former project manager for BMW’s i8 plug-in sports car. Everyone is declining to comment, but BMW say they’ll carry on regardless.

JAPAN’s manufacturing sector witnessed a sharp decline in both production and new orders in April, with export orders down at the fastest rate in 39 months. Production was down at the fastest rate since April 2014 and new orders dropped at the fastest rate in over three years. The PMI for April was down from March’s 49.1 reading to 48.2 – its lowest reading since January 2013. But employment grew for the seventh consecutive month.

It is probable that the recent earthquake had an adverse effect on production, witness Toyota’s problems with their supply chains. There is of course reduced trade with Taiwan and China.

Toyota in fact lost significant production because of the recent earthquakes, knocking its first quarter deliveries down 2.3 percent to 2.46 million units, while Volkswagen, coping with its worst crisis in company history, saw deliveries rise 0.8 percent to 2.50 million units.

Japanese car sales, for April 2016 are reported as up 7.2 percent y-o-y, at 212,713 units. Minicars, with a 660 cc max engine, sold 112,035 units, down 7.5 percent and the 16th consecutive month of decline.

Production growth eased in the INDIAN manufacturing sector in April, on the back of a little-changed new orders situation, although an upturn in export orders was sustained. The Nikkei PMI reading fell back from March’s 52.4 to 50.5 in April.

Employment is effectively unchanged and the consumer goods sector is outperforming the intermediate and investment goods sectors where both production and new orders are down.

VII.  SOUTH AMERICA

by Royce Lowe

brazil

Brazil’s manufacturing job cuts rate was the sharpest in over ten years of the survey’s history. There was the sharpest reduction in production since November 2015, and new orders fell at the second-fastest rate since the global financial crisis, and for the fifteenth straight month.

The PMI fell from March’s 46.0 to 42.6 in April. To go along with all this, Brazil’s manufacturing sector saw its strongest rise in export business in the survey’s history. This would seem to be due to the weak real – which also increases the cost of Brazil’s raw materials.

Brazil’s crude steel production for the month of March was 2.51Mt, a 9.5 percent y-o-y decrease.

Embraer, the Brazilian jet builder, took an order for 30 new E175 regional jets from Horizon Air, an Alaska Air Subsidiary. The contract includes options for 33 more of this same model, on which delivery will start in the second quarter of 2017.

VIII. MANUFACTURING BOTTOMING, RECOVERY NOT V-SHAPED APRIL 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore

global mfgThe global economy continued to advance in April as 13 of the 18 (down from 14 in March) surveys we follow are growing and combine for an average reading of 50.7. Of the select group of surveys, Taiwan (54.6, -0.3) had the highest PMI in April as it continued to receive a post Chinese New Year bounce from February.

Growth in the Eurozone PMI (51.7, +0.1) is now in its 34th consecutive month as manufacturing continues a respectable trend. Germany (51.8, +1.1) continued its positive trend and posted its 17th consecutive month of growth. The remaining seven Eurozone countries average 51.8 percent and were led by Spain (53.5, +0.1), while France (48.0, -1.6) and Greece (49.7, +0.7) failed to grow.

The UK (49.2, -1.8) registered the end of 36 months of expansion as it fell below the 50 mark. Weakness in new orders and production drove the PMI lower.

China’s Official Report, the CFLP PMI (50.1, -0.1) stayed precariously above the 50 mark for the second consecutive month, and appears at best a marginal improvement in the economy. The Caixin China General Manufacturing PMI (49.4, -0.3) has now been below the mid-point for 14 consecutive months.

As for North America, Canada (52.2, +0.7) reported above 50 for the second month following a seven-month trend of contraction. Mexico (52.4, -0.8) expanded at a pace slightly below its six-month average of 52.7 percent.

IX. THE MANUFACTURING SCENE: A BIT MORE ABOUT 3DP

by Royce Lowe

 

If you have a yen for straight, shiny teeth, and have had dental maintenance, you may have in your mouth some of the first products of a new industrial revolution. Tens of millions of dental crowns, bridges and orthodontic braces have now been produced with the help of additive manufacturing, popularly referred to as 3D printing.

3D printers, which can cost up to $1 million, are changing the way we manufacture things. Take dentures for example. For the metal bits in false teeth, dentists have for a long time relied upon ‘investment casting’, where an individual model of a patient’s tooth is created, often in wax, enclosing it in a ceramic casing, melting out the wax and then pouring molten metal into the cavity left behind. When the cast is split open, the new metal tooth is removed. The method is fiddly and labor-intensive, not always accurate and 5,000 years old.

3d teethRenishaw, a British engineering company, does things somewhat differently at a plant near Cardiff. The plant is equipped with three 3D printers, to which more will soon be added, with each machine producing a batch of more than 200 dental crowns and bridges from digital scans of patients’ teeth. The machines use a laser to steadily melt successive layers of a cobalt-chromium alloy powder into required shapes. The process can take 8 to 10 hours, but it is unattended and each individual tooth is made to a design unique to a patient. Completed parts are shipped to dental laboratories all over Europe, where craftsmen add a layer of porcelain. 3D printing of the porcelain itself is the subject of ongoing research.

The process, of course, goes beyond the mouth. Figures dug out by consultancies show that over 60 million custom-shaped hearing-aid shells and ear molds have been 3D-printed since 2000. Hundreds of thousands of people have been fitted with orthopaedic implants, from hip-replacement joints to titanium jawbones, plus various prosthetics. Knee replacements number about 100,000 per year.

Machines for 3D-printed joints and other parts run on computer-aided design (CAD) software, which tells a printer to build up objects from successive layers: a medical scan effectively functions as an individual’s CAD file. Software is, of course, faster and cheaper to change than are tools used in a ‘traditional’ factory designed to produce identical products.

Compared to the $70 billion machine-tool market, additive manufacturing is still ‘small potatoes’ but it is rapidly expanding and going (way) beyond health care. It is estimated that 3D-printed products and services grew by 26 percent in 2015 to $5.2 billion, and McKinsey, a management consulting firm, foresees that in terms of better products, lower prices and improved health, 3D printing could have an economic impact of up to $550 billion by 2025. This technology will continue to develop, maybe even to astound.

Airbus is now using the machines to print internal cabin fittings for its new A350 XWB aircraft: the printers use a resin that meets aircraft safety standards. 3D printing saves on re-tooling and allows multiple components to be consolidated into a single part, thus reducing assembly costs.

The technology has proved its worth sufficiently to be used in products that must withstand high stresses. GE has spent $50 million installing a 3D-printing facility at a plant in Auburn, Alabama, to print up to 40,000 fuel nozzles a year for the new LEAP jet engine it is building in partnership with France’s Snecma. The nozzles will be printed in one shot, instead of being assembled from 20 different parts. They are made from a powdered cobalt-chromium-molybdenum alloy. The finished item will be 25 percent lighter and five times more durable than a fuel nozzle made by conventional methods.

Alcoa will supply Airbus with printed titanium fuselage parts and wing pylons. Alcoa is spending $60 million expanding its R & D center in Pennsylvania. Large 3D printers are being developed to make bigger things. Oak Ridge National Laboratory in Tennessee is working with Local Motors to print much of the structure of cars, using a blend of plastic and carbon fiber.

China is in there too. LITE-ON, has just installed a set of printers in Guangzhou that makes millions of smart phones and other portable consumer electronics. The printers, made by Optomec, an Albuquerque company, use a process called Aerosol jet to focus a mist of microdroplets into a tightly controlled beam which can print features as small as 10 microns (millionths of a meter.)

apple logoAPPLE’s U.S. Patent number 20160067766A1 proposes a method for forming a mold by 3D printing, filling it with a molten amorphous alloy, quenching the metal and removing the part – a housing for an electronic device. And GE is opening a $39 million Additive Manufacturing Development Center along the theme of Technology meets manufacturing. This Center for Additive Manufacturing Advancement (CATA) will be located in Findley Township, Pa, and will employ 50 engineers with disciplines from mechanical and electrical design to systems and engineering software.

3D printing is a technology that no company in manufacturing can afford to ignore. The process has already proved what can be done, and although it will never completely replace ‘traditional’ manufacturing, it will grow in its applications to an extent which we may not even understand at the present time. And along with this will be an ongoing demand for technologists at many levels to work in the industry.

X. THE FINAL WORD

by Royce Lowe

Another decline in the ISM PMI index after last month’s comeback takes us back into confusion territory. People are, for the moment at least, buying cars like there’s no tomorrow, but the overall manufacturing scene seems devoid of any real ongoing energy, with jobs being shed in the U.S. sector and economic confidence down from the past few months. The media speaks of a lack of global demand and ongoing   gloom in the U.S. energy sector, but exports were up last month for the second consecutive month, in spite of all.

New technology is making significant inroads, as witnessed by advances in Additive Manufacturing and Alternative Energy generation. And the global steel industry is playing its part in adding to the confusion.

Meanwhile Tesla’s CEO, Elon Musk, is reportedly spending his nights in a sleeping bag next to his production line to make sure his production forecasts are exceeded.

No wonder we’re confused. Next month is a new month, a new episode.

 

 

 

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Metals & MFG Outlook April 2016

Metals & MFG 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. Today, Metals & Manufacturing Outlook™ (formerly MetalsWatch!) has a global circulation of 85,000 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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I. Cover Story: CORNER TURNED?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO

V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. BUSINESS SURVEY INSIGHTS
IX. THE MANUFACTURING SCENE

X. THE FINAL WORD

PUBLISHER’S STATEMENT

For several months we have been reporting on economic conditions that were tepid at best with March as the possible turning point, at least in manufacturing. Generally, the indicators tend to move in a direction for several months rather than up one, down one, up one, down two.

The U.S. has been looking for a softening of the dollar which has been slight over the last 30 days as European economies begin to recover with the exception of France and Greece. Europe is in its 33 month of a weak expansion, the U.K. at 36 months, Canada at 1 month, U.S. non-manufacturing at 75 months and U.S. manufacturing at 82 months. Both Canada and the U.S. manufacturing sectors have broken through a soft patch at the moment with cautious optimism that the trend may continue.

So, what does the future hold? U.S. GDP growth is forecast at 2.2% for 2016, 2.1% for 2017 and 2.0% for 2018. Manufacturing production is forecast to grow 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018. Manufacturing growth is expected to slow to 2.6% in 2019 and 2.0% in 2020. What is interesting about these projections is that few forecast a downturn in the next 3 years, giving the U.S. an economic expansion of 115 months at the end of 2018 – a near 10-year run not experienced in decades. If it continues into 2019 and even 2020, it will be a record-breaking albeit slow growth expansion, which might be better than previous boom-bust cycles, ignoring for this discussion the advertorials you might see for “the end is near” investment strategies.

So, what is holding back an active boom cycle? The banks and federal tax policy. The banks are flush with cash into the trillions but they aren’t lending in traditional areas as a hedge against the possible shale oil bankruptcies and the auto loan bubble, even though auto lending continues aggressively. The government wants to heavily tax repatriated funds now parked offshore in the trillions of dollars by Corporate America which is depressing capital investment across the U.S. corporate landscape. Why onshore trillions of dollars for R&D and plant investment when 35% will evaporate into the government coffers with little or no impact on deficit spending? That just fuels the tax more, spend more mentality of Washington D.C. Apparently, fiscal conservatism left Washington years and administrations ago.

Consumer spending and consumer confidence continues to be favorable but cautious with a greater emphasis on reducing debt and increasing savings than the profligate spending of past expansions that were fueled by credit card debt or home equity lines of credit. So, quite possibly, slower growth is healthier growth – and the new normal.

We’ll test all these assumptions as 2016 rolls out, but for the moment the recent upturn is a welcome relief, just like warmer weather this spring – whenever that decides to arrive.

Best Regards,
Lewis A. Weiss
Publisher

I. COVER STORY: A TOUGH ROW TO HOE

by Royce Lowe

a bright future in manufacturing

It was noted, at the end of the month of March, that ‘the U.S. manufacturing recession may be over’ and Goldman Sachs was quick to announce ‘near-term optimism’ on U.S. manufacturing, citing regional surveys in factories in Philadelphia, New York, Richmond, Kansas City and Dallas Federal reserve districts that all showed marked improvement in March. This prompted Goldman Sachs to speak of corners being turned and to predict the ISM PMI index to break through the 50 barrier – which came to pass. The whole prediction was supported by railcar volumes, trucking activity and seaborne container traffic.

We had confidence in U.S. Manufacturing, even when it was down where it had been for the past several months. We saw in February that a breakthrough was coming in the month of March. Thus it did.

Already, of course, there are prophets of doom who are saying it’s all likely to be fragile, because no way can we carry on with the low oil price and the high dollar, and in any event how much longer will people continue to buy all those cars?

In what will be one of the world’s greatest displays of delayed gratification, it looks like around a quarter of a million people put down $1,000 as a deposit on Tesla’s Model 3, a (basic) $35,000 car that is scheduled to start production some time in late 2017. This all follows an impressive unveiling of the vehicle, and loud lauding following a Wall Street visit to the factory.

Europe’s two biggest economies, Germany and France are plodding along at the moment, while the overall eurozone performance is holding its own thanks to those of the smaller economies, particularly Ireland.

The UK , on the eve of a referendum to decide its continuing membership of the EU, or not, finds what is left of its steel industry in the greatest of jeopardy. India’s Tata Steel, who owns most of it, is on the verge of pulling the plug on the biggest pieces of what is left of a once-proud industry. This could cause widespread union protest and an in-your-face to David Cameron, a prime minister who (apparently) wants to stay in the EU. A space to watch.

Asia, meanwhile, is not in too comfortable a spot, but China’s latest PMI figures do show some improvement. Japan may be termed the latest casualty, and some of its woes may be attributed to much reduced imports by China.

IHS and Markit, two market and data providers, will merge in a transaction valued at $13 billion. IHS, Colorado – based, will move to London to take advantage of a considerable corporate-tax rate reduction, adding to other ‘tax inversion’ deals that are politically controversial in the U.S. It is understood that IHS has 57 percent of the merger, Markit the balance. It will be several months before we see published data from this new company.

There has been a recent upward blip in the global iron ore and steel business. Its magnitude will not be stated here but if it is still in effect next month further details will be given.

The PMI figure from the Institute of Supply Management moved up from February’s 49.5 percent to 51.8 percent in March, representing growth in manufacturing following five months of contraction. There was growth in the overall economy for the 82nd consecutive month.

The Markit PMI for the U.S. manufacturing sector moved to 51.5 percent in March from February’s 51.3 figure. Markit are still less than enthusiastic about the U.S. economy, and state that ‘U.S. manufacturing remains subdued in March’ with production growth the same as February’s 28-month low. They state there was a moderate upturn in new orders. So a faster increase in new orders and a sustained growth of employment numbers were what was positive in March. Markit goes on to say that manufacturers noted that generally improving global conditions had helped to offset some of the negative influence of the strong U.S. dollar on export sales.

Order backlogs are reported to have fallen again in March, extending the current period of decline to four of the past five months.

Overall growth in the U.S. in the first quarter slowed to its lowest since late 2012.

The five ISM components are equally weighted at 20 percent each. The 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, based on more complete source data, for the annual rate of Real GDP growth in the fourth quarter of 2015, placing it at 1.4 percent. The second estimate had placed it at 1.0 percent. The figure for the third quarter of 2015 was 2.0 percent. The Real GDP is the value of goods and services produced by the nation’s economy, less the value of the goods and services used in production, adjusted for price changes.

Dun and Bradstreet’s figures are unusually not available at time of writing.

GALLUP’s U.S. Economic Confidence Index was hovering around -10 in          late March. The job creation index was back up to +32 in late March/early April.

 World crude steel production for the 66 reporting countries for the month of  February 2016 was 120.41Mt, down 3.3 percent y-o-y. Capacity utilization for February 2016 was at 66.2 percent, slightly up from January’s 65.3 figure, but down from February 2015’s figure of 71.9 percent.

U.S. crude steel production, for February 2016 was 6.37Mt, up 2.9 percent      y-o-y.

Primary Global Aluminum Production in February 2016 was reported at 2.117 million tonnes. No data were available from China, probably because of    the New year celebrations. Of this total, the Gulf Corporation Council (GCC)        produced 413,000   tonnes, North America 344,000 tonnes, Western Europe 299,000 tonnes and Eastern and Central Europe 317,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big   eight’ for March 2016.

The ‘Big Eight’ March ’16 March ’15 YTD % change
General Motors 252128 249875 0.9
Ford 253064 234786 7.8
Toyota 219842 225959 -2.7
FCA 209712 192694 8.8
Honda 138221 126293 9.4
Nissan 163559  145085 12.7
Hyundai/Kia 133589 133790 No change
VW 26914 30025 -10.4
Total new   cars and light trucks 1595484 1545802  3.2 

                        CARS                  LIGHT TRUCKS  TOTAL

MAR   2015      730,723                815,079                         1,545,802

 

MAR   2016      687,460                908,024                         1,595,484

 

                        -5.9%                  +11.4%                        + 3.2%

 

North American light vehicle production was up 12.6 percent y-o-y in February, to 1,518,014 units, a 15-year high for the month. Light vehicle production in the U.S., at 1,048,481 units, was up 16.4 percent, while Canada was up 20.2 percent to 198,985 units. Mexico was down 3.9 percent to 270,548 units, due to production drops by GM and FCA. U.S. light truck output was up 20.4 percent y-o-y to 697,238 units, and overall, North American car production was up 4.5 percent to 588,772 units, with luxury cars up 29.8 percent and large cars down 8.4 percent.

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 +1.4 (qtr) -1.0 (Feb) +1.0 (Feb) 4.9 (Feb)
Canada +0.8 (qtr) – 2.2 (Dec) +1.4 (Feb) 7.3 (Feb)
China +6.6 (qtr) +5.4 (Feb) +2.3 (Feb) 4.1 (Qtr 4)
Japan -1.1 (qtr) -1.5 (Feb) +0.3 (Feb) 3.3 (Feb)
Britain +1.9 (qtr) +0.2 (Jan)  +0.3 (Feb) 5.1 (Dec)
Euro Area +1.3 (qtr) +2.8 (Jan) – 0.2 (Feb) 10.3 (Jan)
France +1.3 (qtr) +2.0 (Jan) – 0.2 (Feb) 10.2 (Jan)
Germany +1.1 (qtr) +2.3 (Jan) +0.4 (Mar) 6.2 (Feb)
Spain +3.3 (qtr) +0.6 (Jan) -0.8 (Feb) 20.5 (Jan)
India + 4.4 (qtr) – 1.5 (Jan) +5.2 (Feb) 4.9 (2013)
Brazil – 5.7 (qtr) -13.8 (Jan) +10.4 (Feb) 8.2 (Feb)
Taiwan + 2.2 (qtr) – 3.6 (Feb) + 2.4 (Feb) 3.9 (Feb)
Mexico +2.2 (qtr) +1.1 (Jan) +2.9 (Feb)  4.3 (Feb)

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II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 51.8 percent in March, a healthy increase from February’s 49.5 reading, representing growth in manufacturing for the first time since August 2015, when the PMI registered 51.0 percent, and growth in the overall economy for the 82nd consecutive month. Of the 18 manufacturing industries, twelve industries are reporting growth in March, in order: Printing & Related Support Activities; Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Machinery; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Chemical Products; Paper Products; Primary Metals; and Computer & Electronic Products. The five industries reporting contraction in March are: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; and Petroleum & Coal Products.

Following are comments from the industry:

Fabricated Metal Products personnel say that capital equipment sales are steady. Chemical Products respondents say business in telecom is booming and that the fiber plant is at capacity. Computer & Electronic Product respondents say that current trends remain steady and that there are no issues with delivery or costs. Transportation Equipment personnel say that the government is spending again and that they have received delivery orders. Miscellaneous Manufacturing personnel say that business is stable, noting little change from last month.   Furniture & Related Products report that incoming sales are improving. Printing & Related Support Activities are seeing a seasonal pick up in activity.Machinery reports strong requests for new equipment proposals. Primary Metals reports strong continuing business and Plastics & Rubber Products say that unemployment is low in certain areas, making it difficult to find workers, with an attendant understaffing and a need for lots of overtime.

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.

  1. The ISM New Orders Index for March, at 3 percent, was up 6.8 percent on February’s figure of 51.5 percent., representing growth in new orders for the third consecutive month. The thirteen industries reporting growth in new orders in March, listed in order, are: Furniture & Related Products; Textile Mills; Miscellaneous Manufacturing; Non-metallic Mineral Products; Chemical Products; Printing & Related Support Activities; Machinery; Petroleum & Coal Products; Primary Metals; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Paper Products; and Fabricated Metal Products. The three industries reporting a decrease in new orders during March are: Apparel, Leather & Allied Products; Computer & Electronic Products; and Transportation Equipment.
  2. The ISM Production Index for March is at 55.3 percent, up 2.5 percentage points from February’s 52.8 percent reading, representing growth in production for the third consecutive month. Twelve industries reported growth in production during the month of March, namely, listed in order, Furniture & Related Products; Primary Metals; Non-metallic Mineral Products; Machinery; Printing & Related Support Activities; Miscellaneous Manufacturing; Petroleum & Coal Products; Plastics & Rubber Products; Chemical Products; Food, Beverage & Tobacco Products; Paper Products; and Fabricated Metal Products. The two industries reporting a decrease in production during March are: Apparel, Leather & Allied Products; and Transportation Equipment.
  3. The ISM Employment Index for March registered a reading of 1 percent, a decrease of 0.4 percentage points on February’s 48.5 reading, representing a fourth consecutive month of contraction in the Employment Index, and at a faster pace than in February. Six of the 18 manufacturing industries reported employment growth in March, in order, Printing & Related Support Activities; Non-metallic Mineral Products; Furniture & Related Products; Machinery; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The nine industries reporting a decrease in employment in March, listed in order, are: Petroleum & Coal Products; Paper Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Primary Metals; Chemical Products; Computer & Electronic Products; and Plastics & Rubber Products.
  4. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was slower in March than in February, as the Supplier Deliveries Index registered 50.2 percent, 0.5 percentage points higher than February’s 49.7 reading. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. The six industries reporting slower supplier deliveries in March, listed in order, are: Paper Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Fabricated Metal Products; Computer & Electronic Products; and Transportation Equipment. The four industries reporting faster supplier deliveries during March are: Primary Metals; Machinery; Plastics & Rubber Products; and Chemical Products. Eight industries reported no change in supplier deliveries in March compared to February.
  5. The ISM Inventories Index is at 47.0 percent for March, 2.0 percentage points higher than February’s 45.0 percent reading, indicating a contraction of raw materials inventories in March for the ninth consecutive month at a slower rate than February. Four industries reported higher inventories in March, namely: Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; and Computer & Electronic Products. The 12 industries reporting lower inventories in March, listed in order, are: Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Furniture & Related Products; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Miscellaneous Manufacturing.

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.

  1. The ISM Customers’ Inventories Index registered 49.0 percent in March, 2.0 percentage points above February’s reading of 47.0 percent, meaning that customers’ inventories are considered to be too low in March for the second consecutive month. The five manufacturing industries reporting customers’ inventories as being too high during the month of March are: Fabricated Metal Products; Furniture & Related Products; Paper Products; Computer & Electronic Products; and Transportation Equipment. The eight industries reporting customers’ inventories as too low during March, listed in order are: Textile Mills; Non-metallic Mineral Products; Primary Metals; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Plastics & Rubber Products.
  2. The ISM Prices Index registered 51.5 percent in March, which is 13 percentage points higher than February’s 38.5 percent reading, indicating an increase in raw material prices for the first time since October 2014. In March 16 percent of respondents reported paying higher prices, 13 percent lower and 71 percent the same prices as in February. Of the 18 manufacturing industries, ten reported paying increased prices for their raw materials in March, namely, in order: Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Fabricated Metal Products; Paper Products; Petroleum & Coal Products; Non-metallic Mineral Products; Primary Metals; Transportation Equipment; Machinery; and Computer & Electronic Products. The seven industries reporting paying lower prices during the month of March, listed in order, are: Wood Products; Textile Mills; Furniture & Related Products; Chemical Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

Up in Price in March were: Aluminum (2); Busheling Scrap; Copper; Crude Oil; Iron; Polypropylene (2); Steel (3) * and Steel – Hot Rolled (2)

Down in Price in March were: Corrugate; Diesel (4); Plastic Resin; Polyethylene Resin; and Steel * (9) Steel – Hot Rolled (5); and Steel Products.

In Short Supply in March: Carbon Dioxide

Note: The number of consecutive months the commodity is listed is indicated after each item. * reported both up and down in price.

  1. The ISM Backlog of Orders Index was at 51.0 percent in March, 2.5 percentage points up on the February reading of 48.5 percent, representing growth in order backlogs for the first time since May 2015. Of the 86 percent of respondents who measure their backlogs, 21 percent reported greater backlogs, 19 percent smaller backlogs and 60 percent no change from February. Seven industries reported an increase in order backlogs in March, namely: Furniture & Related Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Chemical Products; Primary Metals; and Fabricated Metal Products. The seven industries reporting a decrease in order backlogs during March, listed in order, are: Apparel, Leather & Allied Products; Transportation Equipment; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; and Paper Products.
  2. The ISM New Export Orders Index was at 52.0 percent for March, 5.5 percentage points above February’s 46.5 reading. This represents growth in new export orders and is the highest reading since December 2014, when the reading also stood at 52.0 percent. Seven industries reported growth in new export orders in March, namely, listed in order: Wood Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Chemical Products; Fabricated Metal Products; Primary Metals; and Machinery. The 10 industries reporting a decrease in new export orders during March, listed in order, are: Textile Mills; Furniture & Related Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Paper Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Non-metallic Mineral Products.
  3. The ISM Imports Index, is at 49.5 percent in March, or 0.5 percentage points higher than February’s 49.0 reading, representing contraction in imports for the second consecutive month. Five industries reported growth in imports in the month of March, namely, listed in order: Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Machinery; and Miscellaneous Manufacturing. The eight industries reporting a decrease in imports during March, listed in order, are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Paper Products; Primary Metals; Non-metallic Mineral Products; Plastics & Rubber Products; Transportation Equipment; and Fabricated Metal Products.

Andy Grove, a Hungarian-born refugee, and sometime mentor to Steve Jobs and Bill Gates, built Intel into the household name it is. He got us all talking and looking at one another at the flick of a switch or a mouse. He recently passed away, aged 79.

Boeing is to cut 4,000 jobs, 40 percent voluntary, 60 percent either vacant or through attrition. They are going through reorganization at their aircraft assembly operations. Airbus, meanwhile, just saw its first U.S.-built aircraft take off.

VW’s top U.S. executive, Michael Horn leaves, by mutual agreement, some six months after the emissions scandal.

The Harvard Business Review has come out on 3D Printing, stating that 30 percent of the top 300 largest global brands are either using or evaluating this additive manufacturing process., either to prototype new products, to conduct other innovation projects or for actual production. The HBR says no company can afford to ignore this technology.

The global 3D Printing industry was up by 25.9 percent in 2015 to just over $5 billion. Not much to get excited about for the moment, but watch this space. Some 278,000 desktop 3D printers were sold in 2015, compared to 160,000 in 2014; 80,000 in 2013; and 30,000 in 2012. Sounds like another Moore’s law.

A little bit of 3D Printing was recently used to reply to a publicized challenge by GE Aviation, to reduce the weight of an aircraft bracket while maintaining the strength to primarily support the weight of a cowling with the engine in service. The project was taken up by software developer Frustum and by 3D Systems on-demand parts service, Quickparts.

GE’s original design was modified by Frustum so that all design criteria were met, and together with Quickparts’ 3D Printing skills and the use of a titanium alloy, the part was ready for service with a 70 percent weight loss. Small weight losses on a number of parts add up to large economic gains in aviation.

In U.S. automotive industry news, Ford is to spend $1.6 billion to build a new small-car plant in Mexico. Construction will start this summer and 2,800 jobs will be generated by 2020. Ford has plants in the U.S, China and Germany, with Mexico in fourth place: Mexico serves customers in the U.S, Canada, China and many countries in Latin America, plus South Korea.

In the past five years Ford has invested $10.2 billion in the U.S., $2.7 billion in Spain, $2.4 billion in Germany and, with Chinese partners, $4.8 billion in China.

FCA is to cut a shift and indefinitely lay off 1,300 workers at its Sterling Heights plant that produces the Chrysler 200. The model has seen sales drop of late in favor of pickups and SUVs. The changes are scheduled for early July. 

GM’s Chevy Bolt EV, according to GM engineers, will exceed the original stated 200 mile range. The $35,000 car will go on sale later this year, about a year before Tesla’s Model 3, claims for which are that it will have a range of 215 miles. But don’t be surprised if that 215 figure goes up. 

GE is plotting a strategy for its oil and gas business in Iran as the U.S. eases sanctions. The company wants to take part in the bonanza that is Iran’s untapped 157.8 billion barrels of oil, more than four times the U.S. endowment. Iran also has large natural gas reserves.

On a non-fossil-fuel front U.S. solar growth will more than double in 2016. Solar Energy Industries Association predicts that sunlight will generate up to 3.5 percent of the country’s energy within four years, up from one percent today. Solar will add 16 gigawatts of panels in the U.S. in 2016, up from 7.3 gigawatts inn 2015.

Alcoa renames. The company’s upstream operations, the mining of bauxite, refining of alumina and smelting of aluminum will retain the Alcoa name. The downstream operations, the manufacture of car and aircraft parts and other high-performance products, will be renamed Arconic.

Both Boeing and Airbus see a tripling of the Latin American demand for passenger jets by 2035.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI went into growth territory in March, following a long period in contraction. This was a positive end to the first quarter, with production and new orders returning to growth positions. The PMI rose to 51.5 in March from February’s 49.4 reading.

There was a stronger export demand, with new export orders increasing at the joint-fastest rate since November 2014. It is expected that the weak Canadian dollar and a good U.S. economy will contribute to further export growth. Ontario is still Canada’s major driving force, but March saw improvements everywhere except in B.C. and Alberta.

Metropolitan Toronto has been named as the sixth area globally in tech start-ups and the second in North America behind Silicon Valley. The University of Waterloo has been named the Stanford of the North.

Canada produced 1.07 Mt of crude steel in February, up 17.3 percent y-o-y. Canadians bought 175,142 vehicles in March, up 9.3 percent y-o-y and a record for the month. The total included 113,413 light trucks. Ford sales were up 23.7 percent, GM up 16.5 percent and FCA up 3.2 percent.

In March, MEXICO saw its fastest rise in new orders for twelve months. The manufacturing PMI rose slightly to 53.2, its highest since May 2015. There were stronger rates of production and new order growth, with employment up, though at a slower rate than in February. Mexico produced 1.33 Mt of crude steel in February, down 10.3 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

ampco logo

Ampco-Pittsburgh Corp., a manufacturer of forged and cast engineered products, completed its acquisition of Åkers AB (excluding its operations in France and Belgium) and certain of its affiliated companies (Åkers Group). This transaction means the forged and cast roll businesses of Union Electric Steel Corp., a wholly owned operating subsidiary of Ampco, and Åkers Group will now do business under the brand name Union Electric Åkers. The deal, first reported by FORGE in December 2015, sees Ampco acquire Åkers Sweden AB of Sweden; National Roll Co. of Avonmore, Pa.; Shanxi Åkers TISCO Roll Co. Ltd. of Taiyuan, Shanxi, China (of which Åkers Group is a 60% joint-venture partner); Åkers Valji Ravne of Slovenia; and Vertical Seal Co. of Pleasantville, Pa.

McInnes Rolled Rings completed an $8 million, 25,000-square-foot expansion to its manufacturing facility in Erie, Pa. The addition expands its heat-treat size capabilities by providing the ability to quench and temper forgings up to 144 inches in diameter. With separate high-agitation water and polymer quench tanks, the new state-of-the-art bay will significantly expand the company’s daily tonnage capacity and ensure fast delivery times. McInnes contracted with Can-Eng Furnaces International to design and install the most advanced technology to process a large-diameter product.

Alcoa has been awarded a five-year contract from the U.S. Army worth up to $50 million for R&D projects focused on developing innovative, light weight solutions for ground combat vehicles. The company’s first project funded under the contract is an initiative to advance Alcoa-developed aluminum weld-wire alloys, which have been proven to increase the strength of welded joints as well as improve corrosion resistance of those welded joints on combat vehicles. Other R&D efforts will address various technologies associated with light weight such as aluminum forming technology, fastening and joining, modeling and simulation, material development and fabrication, energy conservation, and coating and corrosion technology.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Presented live each Tuesday at 1:00 p.m. ET at www.mfgtalkradio.com and stored as a podcast that listeners can hear or download at their convenience, show hosts Tim Grady and Lew Weiss present the latest trends, breaking news, economic conditions and new technology in manufacturing.

On Tuesday, April 5, Brad Holcomb, committee chair is the ISM’s Manufacturing Report on Business® reviewed the March report in depth, followed by Dr. Chris Kuehl, noted economist for FMA took us on a trip around the global economies.

On Tuesday, April 12, America’s Money Answer’s Man and author of 14 books joined the show to discuss ways that manufacturers, and individuals, can put money to work for them in passive income strategies, as well as other secrets to financial matters in manufacturing. This is an excellent show for C-suite haunts.

Coming up are shows on America’s hidden slave labor pool operating quietly under the radar that steals jobs from small and midsize enterprises, and the $15 an hour minimum wage that will turn into lots of jobs – for robotics!

While $15 an hour sounds good in politics and on the nightly news, it’s a disaster in the real world where technology will displace many low wage workers in repetitive tasks without taking a vacation, any kind of leave, and work 24/7/365 with only occasional maintenance and a programming tweak here and there. Need a little more ketchup or an extra pickle on that burger? Order in advance on your phone and head to the pick-up counter where a robot has completed and delivered your order. Welcome to 2016 – and don’t miss this show!

V. EUROZONE

by Royce Lowe

erozone mfg

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for March, at 51.6, was slightly up from February’s 51.2 reading, for the second-weakest increase in over a year. Manufacturing grew by just 0.2 percent in the first quarter. Both Germany and France are in stagnation, with France slipping below the 50 mark for the first time since August 2015.

On the brighter side, Ireland (particularly), Spain, Italy, The Netherlands and Austria showed good growth.

PMI High/low
Ireland 54.9 (54.3) 8-month high
Netherlands 53.6 (51.7) 5-month high
Italy 53.5 (52.2) 3-month high
Spain 53.4 (55.4) 3-month low)
Austria 52.8 (51.9) 5-month high
Germany 50.7 (50.5) 2-month high
France 49.6 (50.2) 7-month low
Greece 49.0 (48.4) 2-month high

Siemens will cut 2,500 jobs in its industrial division, but will create 25,000 jobs worldwide ‘in each of the coming years’ as it focuses on becoming a ‘digital industrial company.’ What will it need? Workers with a STEM education in high school and a degree in at least a two-year college. Same is becoming true all around the world.

Daimler, the world’s largest truck maker, has designed a long-haul truck for China with its joint-venture partner Beiqi Foton Motor Co. The plan is confidential but the truck will go on sale ‘in a few years.’ This is part of Daimler’s plan to increase its global truck sales by 40 percent by the end of the decade.

bmw 760iMeanwhile, in the ‘how fast do you really want to go?’ category, BMW rolled out a new model M760i at the recent N.Y. International Auto Show, complete with a modified 6.6 liter V-12 engine from a Rolls Royce Wraith. The car will move from zero to 62 m.p.h. in 3.7 seconds and has a top speed of 155 mph. All complete with an aluminum block, iron-coated aluminum pistons and forged connecting rods and crankshaft.

Mercedes, never much out of the news, announced its highest ever monthly sales with passenger car deliveries up 8.4 percent in March, thanks to a 26.6 percent increase in sales in China – to offset a 6 percent drop in the U.S. Mercedes sold 198,921 cars in March and 483,487 vehicles in the first quarter. SUV sales were up 44.4 percent.

In March, new passenger car sales were flat in Germany, with sales of 323,000 vehicles; up 7.5 percent in France with sales of 211,264 units; up 17.6 percent in Italy with sales of 191,156 units and down 0.8 percent in Spain with sales of 111, 450 units.

Crude steel production in Germany in February was at 3.36Mt, down 4.3 percent y-o-y; in Italy 1.93Mt, down 2.1 percent y-o-y; in France 1.32Mt, up 2.6 percent y-o-y and in Spain 1.09Mt, down 8.9 percent y-o-y.

Russia’s crude steel production for February was at 5.67Mt, down 2.7 percent y-o-y, Ukraine’s was 1.97Mt, up 24.1 percent y-o-y.

The UK manufacturing sector did not have a very good first quarter, and is not expected to make a significant contribution to the country’s GDP figures.

The PMI for March was very slightly up, at 51.0, from February’s 50.8 reading. Production rose at a pace unchanged from February’s 7-month low, and there were job losses for the third consecutive month. There were poor levels of new orders, both domestic and export, and backlogs fell for the 25th month.

tata motorsMeanwhile there is a very large question concerning the survival of Britain’s steel industry, which is mostly owned by India’s Tata. There have been job losses and mothballings of late, but no major decision has been taken as yet regarding the future status of the various plants around the UK. The biggest problem is at Port Talbot in Wales, where over 4,000 jobs are in jeopardy.

The UK produced 0.60Mt of crude steel in February, down 37.9 percent y-o-y.

The JP Morgan Global Manufacturing PMI – a composite index produced by JPMorgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – crept back up to 50.5 from February’s 50.0 reading. Manufacturing growth was near a three-year low in the first quarter, with only mild growth at best.

Having said all this, the production index went from 50.3 to 51.2, the new orders from 50.4 to 51.2, new exports from 49.4 to 49.6 and employment was steady at 49.5. These upward moves point to possible improvements going into the second quarter.

There were job losses in China, Germany, the UK, France, South Korea, Brazil, Russia and Vietnam.

The global machine tool business is forecast to undergo a 5.5 percent annual growth through 2019, driven particularly by increasing demand in China and other developing nations. The total market is estimated at $181 billion.

VI. ASIA OUTLOOK

by Royce Lowe

china oil

CHINA produced 58.52Mt of crude steel in February, down 4.0 percent   y-o-y; Japan 8.36Mt down 1.0 percent y-o-y; India 6.94Mt, down 3.6 percent y-o-y and South Korea 5.30Mt, up 5.0 percent y-o-y. Taiwan produced 1.50Mt in February, down 15.6 percent y-o-y. 

The Caixin China manufacturing PMI for March rose to 49.7 percent from February’s 48.0 percent reading, a 13-month high. Operating conditions deteriorated at their slowest pace in 13 months. There was an expansion of the new order books and the first production increase in a year, but employment was stagnant. New export business fell for the fourth consecutive month, but overall production and new orders were over the 50 mark.

Wuhan Iron and Steel, one of China’s largest steelmakers, plans to cut its workforce from 80,000 to 30,000. And the Chinese government has a goal to cut the country’s steel capacity by up to 150,000 tonnes within five years.

China sold 1.38 million cars – sedans, SUVs and minivans in February – down 1.5 percent y-o-y. Ford and GM were both down 9 percent, Honda down 7.8 percent and Toyota up 6.3 percent in the month. China’s combined passenger and commercial vehicle sales surpassed 4 million units for January-February combined, up 4.6 percent y-o-y.

Operating conditions in JAPAN’s manufacturing sector deteriorated in March at the fastest rate in over three years. Production declined for the first time since April 2015 and new orders fell at the sharpest rate in over two years. International demand fell at the quickest rate since January 2013. The PMI for March was down from February’s 50.1 reading to 49.1 – its lowest reading in over three years, after falling from 52.3 to 50.1 between January and February.

Japanese car, truck and bus sales, for March 2016 are reported as off 3.2 percent y-o-y, at 404,813 units. Minicars, with a 660 cc max engine, sold 231,088 units, off 16.7 percent y-o-y.

The INDIAN manufacturing sector continued to show strength in March, with production up at a faster rate and new order growth at an eight-month high . The Nikkei PMI reading went from February’s 51.1 reading to 52.4, an eight-month high.

There is good demand on both the domestic and export fronts.

VII.  SOUTH AMERICA

by Royce Lowe

brazil oil

Brazil’s crude steel production for the month of February was 2.43Mt, an 8.7 percent y-o-y decrease. Brazil’s manufacturing performance looked slightly less ‘drastic’ in March, as contraction in production eased, thanks to more export orders, in fact the strongest expansion in new export orders in 6.1/2 years.

Production fell at the weakest pace since February 2015 and the downturn in new orders softened. Domestic demand continues to be weak. Employment decreased at one of its fastest rates in the history of this survey.

Brazil olympic siteOne bright spot for Brazil is that work on the Olympic site is 95 percent complete and is mostly staying within budget. A potential problem however is (a lack of) ticket sales

 

VIII. FEBRUARY 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore

The global economy continued to grow in March as 14 of the 18 (up from 9 in February) surveys we follow are advancing. The 14 growing combine for an average PMI of 53.0. This resurgence was led by Australia’s PMI at 58.1, its highest reading since April 2004, and its ninth month in the current cycle, signalling improvement in the global demand for raw materials.

Growth in the Eurozone PMI (51.6, +0.4) is now in its 33rd consecutive month as manufacturing continues its growth trend. Germany (50.7, +0.2) continued marginally positive and posted its 16th consecutive month of growth. The remaining seven Eurozone countries average 52.4 percent and were led by Ireland (54.9, +2.0) while France (49.6, -0.6) and Greece (49.0, +0.6) failed to grow. The UK (51.0, +0.2) registered its 36th consecutive month above the 50 mark. While employment is down for the third consecutive month, there is apparent strength in intermediate goods and a continuation of growth in the segment should help improve the picture for jobs.

China’s Official Report, the CFLP PMI (50.2, +1.2) provides an insight to marginal improvement with its best performance since June 2015 when it registered 50.2. The Caixin China General Manufacturing PMI (49.7, +1.7) and has now been below the midpoint for 12 consecutive months. As for North America, Canada (51.5, +2.1) reversed a seven-month trend of contraction and Mexico (53.2, +0.1) expanded at a pace above its six-month average of 52.8 percent.

scattergram

IX. THE MANUFACTURING SCENE: U.S. MANUFACTURING: WHERE’S IT AT?

by Norbert Ore

US Manufacturing

The U.S. manufacturing sector has been through rather rough times of late. New orders were down, so were production and employment. In the midst of all this there was talk of a ‘manufacturing recession’ which has since died off. Reshoring efforts weren’t bearing fruit the way they were supposed to, and from some quarters we heard that robots were going to take over the manufacturing business, and in pretty short order at that. And companies were quitting the U.S. to go to the UK or Ireland or some other place where they’d pay less corporate tax. The ISM PMI indices were under the fifty mark for a number of months, which is always good for a dose of pessimism.

reshoringThe bottom line is that the U.S. manufacturing sector is the world’s most competitive, with output per worker higher than in any other major manufacturing country. The labor costs per unit of output are lower than in Brazil, Canada and Germany and only slightly higher than in China. The industry has low energy costs, a flexible labor market and a stable regulatory framework. It lost jobs galore for years to China, and continues to lose them to this day, though at a markedly reduced rate, for example 150,000 jobs offshored in 2003, 50,000 in 2014. In 1980 there were 19 million manufacturing jobs in the U.S., in 2000 there were still just over 17 million. That’s when China really got its manufacturing business going; that’s when world steel production took off, again China driven. It is estimated that between 2000 and 2007, some 220,000 jobs per year were lost to offshoring.

The U.S came out of the great recession with 11.5 million manufacturing jobs in 2010, and since that time has replaced about 900,000 of them. The Reshoring Initiative says there are still some 3 to 4 million manufacturing jobs offshore. In the grand scheme of things, some jobs will stay offshore as the world becomes more and more of a global marketplace, and as consumer consumption in developing countries justifies keep some production close to the end user.

According to other sources there are myriad jobs in the U.S. that need filling, and in many cases no people to fill them. Skilled people are retiring and a lot of young people are shying away from manufacturing because they still think it’s a dark, dirty, dangerous and declining business. This is of course no longer the case, and the fact is exemplified by the case of Pratt and Whitney’s plant in North Berwick, Maine, where in April 2013 an apprenticeship program got underway whereby personnel were put through three plant areas such as machining, coatings and assembly, attending school during this time, and when the first class graduates in 2017 they will be certified in machine trades by the state of Maine and will have an associate degree from York County Community College. The plant was opened to counselors from local grade schools in the area, and they saw a high-tech, clean, modern facility that they were able to describe in full to future potential participants in the apprenticeship program.

A recent survey in the manufacturing sector asked which were the most difficult manufacturing jobs to fill. The answers, in decreasing order of difficulty to fill, are: Industrial Maintenance, Quality Specialist, Sales, CNC Operator/Machinist, Welder, Toolmaker, Manufacturing Engineer, Production Worker and Production Manager. In a further survey, 67 percent of respondents said they’d struggled to fill a position in the past year due to a lack of skilled candidates, and 78 percent said they were concerned about their aging workforce.

According to the Chinese American Chamber of Commerce, more U.S. companies are leaving China, with 25 percent either moved or planning to move capacity out of China. Half of these are moving to ‘developing Asia,’ where labor costs are significantly lower than in China, and 40 percent moving to the U.S., Canada or Mexico. 77 percent of 496 respondents to the survey said they felt ‘less welcome’ in China in 2015, versus 47 percent in 2014. The main issues seem to be labor costs, regulatory challenges and the threat of IP theft.

In 2015, the combined reshoring and Foreign Direct Investment added 67,000 domestic manufacturing jobs. Overall this trend was down 6 percent from 2014, due to the strong U.S. dollar, low oil prices and shipping rates and weaker economies in competitor manufacturing countries. Problems from offshore sources include lower quality, supply interruptions, high freight costs and delivery. Delivery is not at all helped of course by such mostly unforeseen occurrences as the 2014 west coast port labor disruptions.

The U.S., it is said, will overtake China as the global manufacturing powerhouse by the year 2020.

Having said all this, having sung the praises of the manufacturing sector of the world’s largest economy, there is still a major problem finding the men and women who are qualified to work in an industry that is more than unrecognizable from the one their parents worked in. Apprenticeship programs, as described above, are underway in many areas of the U.S., but even though the results of these programs are largely very positive, there just aren’t enough of them. Manufacturing companies just need to go the extra mile and get more eager people to work in this industry we call manufacturing. We used to always talk about machines being ‘manned’ but what about the fairer sex? Women who have been working in ‘middle-skill’ jobs such as packaging, cooking etc., could, with minimal training, move up into jobs such as machining and welding. This could lift many households out of poverty – women are the sole or primary earner in 40 percent of U.S. households.

The manufacturing wheel continues to turn but it requires constant lubrication

X. THE FINAL WORD

by Royce Lowe

For the most part, things look better.

road aheadGE’s foray into the Iranian ‘oil bonanza’ will be offset over the next few years by electric vehicles with a reasonable range and solar panels that will light up small cities.

We may see, by giving them some gentle academic nurturing, large numbers of young men and women deciding upon a career in manufacturing

 

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