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Metals & MFG Outlook March 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 Subscribe at the bottom of the page.


Metals & MFG Outlook – March 2016

I. Cover Story: A TOUGH ROW TO HOE?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO

V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. CREDIT MANAGERS INDEX
IX. THE MANUFACTURING SCENE
X. THE FINAL WORD

PUBLISHER’S STATEMENT

The reports of the poor condition of the manufacturing sector have been greatly exaggerated, and its size relative to the overall economy has been greatly underestimated and understated. See Manufacturing Scene later in this newsletter.

The government’s measure of the size of the manufacturing sector begins with and ends with the shop floor. If you are the C-suite of a large industrial, you are counted in a separate standard industry classification (SIC) code related to the services sector – even though you work for a manufacturer, especially if that manufacturer makes goods and also provides services.

So, the relative health of the industry is masked in government calculations, much like most things the government counts and the way they count them are screwy. The SIC codes were devised in the 1930’s and it appears that the group of codes used to calculate the manufacturing sector are the same group of codes used to calculate its’ size relative to the overall economy then and now. Thus, manufacturing is calculated as 12% of the overall economy by the U.S. government.

Industry associations and consultants calculate that it is as much as 33% of the U.S. economy when you count employees from the C-suite all the way through to the loading dock.

Then there is the multiplier effect where one dollar in manufacturing creates another somewhere else in the overall economy. The government estimates that ratio to be $1:$1.4 while industry analysts calculate it to be as much as $1:$3.4, which is a startling difference.

If you need proof of the larger numbers, consider this – manufacturing has led the U.S. economy out of every recession since 1940. Manufacturing begins hiring 6 to 9 months before goods can be made available to consumers, and consumers are 70% of the purchasers of goods in the U.S.; business and government purchasing accounts for the remaining 30%. Manufacturing employment is a leading indicator for both economic expansion and economic contraction because they are working orders that take 6 to 9 months to produce. If their order books aren’t full months into the future, then employment will be curtailed.

Look around you. We doubt you are living in a house, driving a car, wearing clothes, using eating utensils at a table, carrying devices, sitting at a desk on a chair in a building, using machines manufactured by the services sector. No slight to the services sector, but you are surrounded by manufactured goods. So how could it possibly be that manufacturing is only 12% of the U.S. economy with a multiplier effect of only 1:1.4? It just doesn’t make sense, unless you happen to measure it using a formula that hasn’t been updated since World War II.

In this issue, as in every issue, you will read about the Purchasing Manager’s Index number that is calculated by the Institute for Supply Management and released around 10 a.m. on the first business day of each month, and a number that the government anxiously awaits because it is a reliable indicator, and has been for decades, of the health of the manufacturing sector.

Yes, the number has been just below 50 for several months. No, that is not an indicator that the manufacturing sector is in recession. No, the manufacturing sector is not teetering on the edge of recession. Yes, the non-manufacturing indicator has been softer the last two months, but it is above 50, and there are signs of strength in both the recent reports.

We trust you will enjoy our synopsis of several of the organizations that report of the manufacturing sector. It isn’t doom and gloom. At the moment, the manufacturing sector is burning off excess inventory and signs of growth are now showing up as spring approaches and things begin to bloom.

Sincerely,
Lewis A. Weiss
Publisher

I. COVER STORY: A TOUGH ROW TO HOE

by Royce Lowe

It all seems to be a bit of a struggle these days in the global manufacturing sector. To use a football analogy, we might liken it to grinding out the yards on a muddy field. And that’s where things are reasonably good. Elsewhere, as in Latin America, the situation could be described as somewhere between dire and catastrophic.

The U.S. manufacturing economy showed encouraging signs in February as a number of the major indices were starting to push the PMI back over the 50 mark. Europe is pulling up no trees at all these days, neither is China. But we feel things will get better there.

Crude steel production is down seven percent on the year, aluminum production is stable with prices threatening to rise, and there has been a slight 3 percent increase in the price of some grades of iron ore. Meanwhile, the U.S. is slapping huge anti-dumping duties on a wide range of (mostly Chinese) steel products.

Regardless of all and any bad economic news, people in the U.S., Canada and Europe are buying new cars and light trucks like there’s no proverbial tomorrow. Not to speak of China, where an ordinary sales month sees two and a half million vehicles leaving the showrooms.

The PMI figure from the Institute of Supply Management moved up from January’s 48.2 percent to 49.5 percent in February, representing contraction in manufacturing for the fifth consecutive month although there was growth in the overall economy for the 81st consecutive month. There are several strong positives in the ISM report summarized in Section II below.

The Markit PMI for the U.S. manufacturing sector moved down from January’s 52.4 percent, to 51.3 percent in February. Markit, in a somewhat gloomy report, speaks of the weakest rise in manufacturing output since October 2013. Production volumes rose at the slowest pace for 28 months, and job growth to a five-month low. Clients delayed spending decisions in February amid caution about the business outlook. There was a weak demand from energy sector clients.

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.

amtlogoAccording to the Association for Manufacturing Technology, the U.S. Manufacturing Technology Orders report (USMTO) for December 2015, the most recent month for which data was available which includes both machine tool orders and manufacturing technology orders, showed that order values grew 20.4% compared to the prior month, according to AMT – The Association For Manufacturing Technology. For all of 2015, the year’s total orders were down 17.4% compared to 2014. While the month-to-month gain seemingly indicates an upturn for the manufacturing technology market, it is important to note that the average November-to-December gain since 2010 has been 22.4% – meaning that the end of 2015 came in slightly below average.  This data is a reliable leading economic indicator as manufacturing industries invest capital in metalworking equipment and technology to increase capacity and improve productivity.

The Bureau of Economic Analysis came out with its ‘second’ estimate, based on more complete source data, for the annual rate of Real GDP growth in the fourth quarter of 2015, placing it at 1.0 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.

The Dun and Bradstreet Economic Health Index for February estimates that 193,000 new non-farm jobs were added to U.S. payrolls in the month, with gains in all sectors, but “in much muted numbers compared to last month” in the manufacturing sector.

The D and B Small Business Health Index (SBHI) fell 0.8 points in the month of February, a fourth consecutive monthly slide. Only construction looks healthy. The SBHI measures small business performance through payment patterns and credit use.

GALLUP’s U.S. Economic Confidence Index averaged -13 in February, within the narrow range of -14 to -11. The job creation index ended February at +30.

World crude steel production for the 66 reporting countries for the month of January 2016 was 127.72Mt, down 7.1 percent from the January 2015 figure of 137.52Mt. Capacity utilization for January 2016 was at 66 percent, slightly up from December 2015’s 65.2 figure, but down from January 2015’s figure of 71 percent.

U.S. crude steel production for January 2016 was 6.62Mt, down 8.8 percent from the January 2015 figure of 7.21Mt.

Aluminum rollsPrimary Global Aluminum Production in January 2016 was 4.726 million tonnes. Of this total, 2.480 million tonnes, over 52 percent, was produced in China. The Gulf Corporation Council (GCC) produced 430,000 tonnes, North America 368,000 tonnes, Western Europe 321,000 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 February 2016.

The ‘Big Eight’ February ’16 February ’15 YTD % change
General Motors 227825 231378 -1.5
Ford 216045 179673 20.2
Toyota 187954 180467 4.1
FCA 179837 160250 12.2
Honda 118985 105466 12.8
Nissan 130911 118436 10.5
Hyundai/Kia 102746 96535 6.4
VW 22321 25710 -13.2
Total new cars and light trucks 1344225 1257619  6.9 

CARS                  LIGHT TRUCKS  TOTAL

 

FEB   2015      573,633                683,986                         1,257,619

 

FEB   2016      572,398                771,827                         1,148,057

 

                       -0.2%                  +12.8%                        + 6.9%

 

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at least the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, 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 Unemploy-ment
United States +0.7 (qtr) -0.7 (Jan) +1.4 (Jan) 4.9 (Jan)
Canada +2.3 (qtr) – 3.3 (Nov) +2.0 (Jan) 7.2 (Jan)
China +6.6 (qtr) +5.9 (Dec) +1.8 (Jan) 4.1 (Qtr 4)
Japan -1.4 (qtr) -1.9 (Dec) +0.2 (Dec) 3.3 (Dec)
Britain +2.0 (qtr) -0.3 (Dec) +0.3 (Jan) 5.1 (Nov)
Euro Area +1.1 (qtr) -1.3 (Dec) +0.4 (Jan) 10.4 (Dec)
France +1.0 (qtr) -0.7 (Dec) +0.2 (Jan) 10.2 (Dec)
Germany +1.1 (qtr) -2.3 (Dec) +0.5 (Jan) 6.2 (Jan)
Spain +3.2 (qtr) +2.9 (Dec) -0.3 (Jan) 20.8 (Dec)
India + 4.4 (qtr) – 1.3 (Dec) + 5.7(Jan) 4.9 (2013)
Brazil – 6.7 (qtr) -11.9 (Dec) + 10.7 (Jan) 6.9 (Dec)
Taiwan + 2.2 (qtr) – 5.8 (Dec) + 0.8 (Jan) 3.9 (Jan)
Mexico +2.2 (qtr) Nil (Dec) +2.6(Jan) 4.4(Dec) 

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II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 49.5 percent in February, up, significantly it may be said, from January’s 48.2 reading, representing the fifth consecutive month of mild contraction in manufacturing and growth in the overall economy for the 81st consecutive month. Of the 18 manufacturing industries, nine industries are reporting growth in February, in order: Textile Mills; Wood Products; Furniture & Related Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Chemical Products; Primary Metals; and Paper Products. The seven industries reporting contraction in February, listed in order, are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Computer & Electronic Products; Printing & Related Support Activities; Transportation Equipment; Plastics & Rubber Products; and Fabricated Metal Products.

silver background painted to US flagFood, Beverage & Tobacco Products respondents say that things are still a bit sluggish. Fabricated Metal Products personnel say that business seems to be getting better, as witnessed by a healthy 2016 backlog. Chemical Products respondents say that U.S. business demand is solid but that international demand is soft. Computer & Electronic Product respondents say Mobility spend is up. Transportation Equipment personnel say that airlines are still ordering planes and spare parts for plane galleys. Miscellaneous Manufacturing personnel say they are not being impacted by ‘global economic volatility’ or oil prices and that business is strong and growth projections remain the same. Petroleum & Coal Products report that low oil prices and reduced activity continue to affect their business. Wood Products say the market is starting to trend up with spring coming. Machinery reports a very strong product demand, good material availability and depressed commodity prices. Furniture & Related Products respondents report a stronger-than-expected order book.

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 February, at 5 percent, was unchanged from January’s figure, representing growth in new orders for the second consecutive month. The twelve industries reporting growth in new orders in February, listed in order, are: Textile Mills; Wood Products; Furniture & Related Products; Machinery; Plastics & Rubber Products; Petroleum & Coal Products; Non-metallic Mineral Products; Miscellaneous Manufacturing; Primary Metals; Transportation Equipment; Chemical Products; and Fabricated Metal Products. The four industries reporting a decrease in new orders during February are: Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.
  2. The ISM Production Index is at 52.8 percent in February, up 2.6 percentage points from January’s 50.2 percent reading, representing growth in production for the second consecutive month. Ten industries reported growth in production during the month of February, namely, listed in order, Textile Mills; Wood Products; Miscellaneous Manufacturing; Furniture & Related Products; Plastics & Rubber Products; Primary Metals; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; and Fabricated Metal Products. The five industries reporting a decrease in production during February are: Apparel, Leather & Allied Products; Non-metallic Mineral Products; Paper Products; Transportation Equipment; and Computer & Electronic Products.
  1. The ISM Employment Index for February registered a reading of 48.5 percent, an increase of 2.6 percentage points on January’s 45.9 reading, representing a third consecutive month of less hiring in the Employment Index. Six of the 18 manufacturing industries reported employment growth in February, in order, Textile Mills; Furniture & Related Products; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; and Primary Metals. Eight industries reported a decrease in employment in February, namely, listed in order: Petroleum & Coal Products; Apparel, Leather & Allied Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Plastics & Rubber Products; Machinery; and Chemical Products.
  1. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was faster in February than in January, as the Supplier Deliveries Index registered 49.7 percent, 0.3 percentage points lower than January’s 50.0 reading. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. Five industries reported slower deliveries in February, namely Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Fabricated Metal Products. The six industries reporting faster supplier deliveries during February, in order, are: Primary Metals; Petroleum & Coal Products; Computer & Electronic Products; Plastics & Rubber Products; Miscellaneous Manufacturing; and Transportation Equipment. Seven industries reported no change in supplier deliveries in February compared to January.
  1. The ISM Inventories Index, at 45.0 percent for February, is 1.5 percentage points higher than January’s 43.5 percent reading, indicating a contraction of raw materials inventories in February for the eighth consecutive month. Six industries reported higher inventories in February, namely: Wood Products; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The nine industries reporting lower inventories in February, listed in order, are: Plastics & Rubber Products; Petroleum & Coal Products; Machinery; Printing & Related Support Activities; Fabricated Metal Products; Furniture & Related Products; Primary Metals; Computer & Electronic 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 47.0 percent in February, 4.5 percentage points below January’s reading of 51.5 percent, meaning that customers’ inventories are considered to be too low after six consecutive months of being considered too high. Three manufacturing industries   reporting customer inventories as being too high in February are Apparel, Leather & Allied Products; Furniture & Related Products; and Fabricated Metal Products. The eight industries reporting customers’ inventories as too   low during February, listed in order, are: Primary Metals; Textile Mills; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery. Seven industries reported no change in February compared to January.
  1. The ISM Prices Index registered 38.5 percent in February, which is 5 percentage points higher than January’s 33.5 percent reading, indicating a decrease in raw material prices for the 16th consecutive month. In February 9 percent of respondents reported paying higher prices, 32 percent lower and 59 percent the same prices as in January. Of the 18 manufacturing industries, only Fabricated Metal Products reported paying increased prices for its raw materials in February. The 15 industries reporting paying lower prices during the month of February, listed in order, are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Textile Mills; Chemical Products; Non-metallic Mineral Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Machinery; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Primary Metals; Miscellaneous Manufacturing; Transportation Equipment; and Computer & Electronic Products.

Up in Price in February were: Aluminum*; Polypropylene; Stainless Steel*; Steel (2) * and Steel – Hot Rolled*

Down in Price in February were: Aluminum* (15); Aluminum Products; Copper (4); Copper-Based Products; Corrugated Boxes; Diesel (3); Gasoline (3); Natural Gas; Nickel (8); Oil (3); Oil-Based Products; PET Resin; Propylene; Stainless Steel* (16); Steel* (8) Steel – Hot Rolled (5); and Steel Products.

In Short Supply in February: None (4)

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 48.5 percent in February, 5.5 percentage points up on the January reading of 43.0 percent, representing the ninth consecutive month in contraction of order backlogs. Of the 86 percent of respondents who measure their backlogs, 19 percent reported greater backlogs, 22 percent smaller backlogs and 59 percent no change from January. Five industries reported an increase in order backlogs in February, namely: Textile Mills; Furniture & Related Products; Machinery; Transportation Equipment; and Fabricated Metal Products. The six industries reporting a decrease in order backlogs during February, listed in order, are: Apparel, Leather & Allied Products; Paper Products; Food, Beverage & Tobacco Products; Chemical Products; Electrical Equipment, Appliances & Components; and Computer & Electronic Products. Seven industries reported no change in order backlogs in February compared to January.
  1. The ISM New Export Orders Index was at 46.5 percent for February, 0.5 percentage points down on January’s reading. This represents contraction in new export orders for the second consecutive month. The five industries reporting growth in new export orders in February, listed in order, are: Primary Metals; Printing & Related Support Activities; Miscellaneous Manufacturing; Machinery; and Fabricated Metal Products. The seven industries reporting a decrease in new export orders during February, listed in order, are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Paper Products; Computer & Electronic Products; Plastics & Rubber Products; and Transportation Equipment. Six industries reported no change in export orders in February compared to January.
  1. The ISM Imports Index, is at 49.0 percent in February, or 2.0 percentage points lower than January’s 51.0 reading, representing contraction in imports. This represents growth in imports following three consecutive months of contraction. Four industries reported growth in imports during the month of February, namely, listed in order : Miscellaneous Manufacturing; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products. The seven industries reporting a decrease in imports during February, listed in order, are: Paper Products; Apparel, Leather & Allied Products; Non-metallic Mineral Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; and Machinery. Six industries reported no change in imports in February compared to January.

It was announced in late February that new orders for long-lived manufactured goods rose by 4.9 percent in January to $ 237.5 billion, with the main contribution coming from the civil aviation sector, essentially from Boeing as new aircraft orders rose by 54.2 percent. But even without transportation items, durable goods orders still rose by 1.8 percent in January, which more than compensated for the falls in November and December. This is the best pick up since December 2014. Orders for machinery and computers were up by more than 6 percent.

BOEING is making moves to speak to Iranian carriers about their future needs. A special license will be required by Boeing to complete any sales, but the process seems to be being held up by Federal Government feet dragging. Meanwhile Airbus, with fewer restrictions, has an order for $27 billion from Iran.

MOSHE VARDI, the Director of the Institute for Information at Rice University in Texas, says the time is nigh when machines will be able to outperform humans at almost any task. In other words, he questions what humans will do. There are over 200,000 industrial robots in the country, with numbers increasing, and we have self-driving cars and trucks, autonomous drones for surveillance, fully automatic trading systems, house robots etc………all the way to an inexhaustive list.

Meanwhile Mercedes Benz (see under Eurozone) recently announced a switch to fewer, smaller robots, and Google admitted ‘some responsibility’ when its’ self-driving Lexus SUV was in a 2 m.p.h. (albeit none too serious) collision with a bus.

GENERAL MOTORS joined TOYOTA at the top of the J.D. Power Dependability Rankings on all models except Cadillac.

After taking $121 million from a federal tax credit program, United Technologies of Indiana is sending 2,100 jobs to Mexico. Cardone of Philadelphia, a manufacturer of brake calipers, is sending 1,336 workers south and Dematic of Grand Rapids MI will send 300. It looks like the average wage of $3 per hour in Mexico is sometimes just too hard to resist.

IT’S ELECTRIC CAR TIME……….it is said that in the next few years Tesla, Chevrolet and Nissan plan to sell long-range electric cars in the $30,000 range. It is said, with battery prices recently down by 35 percent, that the 2020s will be the decade of the electric car and that by 2022 electric vehicles will cost the same as their internal-combustion counterparts. It is said that by 2040 electric vehicles will account for 35 percent of all new vehicle sales and that they will cost on average less than $22,000 in today’s dollars. It is said.

Leadership Guru Sydney Finkelstein has a book out called Superbosses: How Exceptional Leaders Nurture Talent to Achieve Market Domination. A very good read, it is said, that stresses the importance of Unusual Intelligence, Extreme Flexibility and Creativity.

RBC_Royal_BankCANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw a very slight increase from January’s 49.3 reading to 49.4 in February, the highest reading since August 2015, on the back of the slowest deterioration in manufacturing conditions for six months. Production levels dropped only slightly in February, and new export orders were up for the fourth consecutive month. Ontario, as usual, was out front with an accelerated upturn, with the steepest deterioration in manufacturing in Alberta and B.C. There were job losses in Alberta, B.C. and Québec.

Canada produced 1.05 Mt of crude steel in January, down 1.2 percent y-o-y.

Light vehicle sales in Canada were up 9.1 percent y-o-y in February, at 119,201 vehicles, a February sales record.

Canada’s Bombardier will build 45 CS300 twin-engine jets for Air Canada, an order that includes options for up to 30 more of the all-new narrow-body aircraft. The order will be worth $C 3.8 billion ($2.76 billion). Meanwhile Justin Trudeau, Canada’s Prime Minister, is considering further aid for the struggling Bombardier, following Québec’s recent help.

The province of Québec, already a big player in global primary aluminum production – thanks to its huge supply of electricity from James Bay – is looking to double its production by 2025. Québec is the world’s fourth largest producer of aluminum at 2.7 million tons per year, most of which is exported. The output is worth $C 7 billion per year and supports over 30,000 jobs in over 1,500 companies.

In February, MEXICO saw its strongest improvement in manufacturing business conditions since May 2015. February saw production growth rebounds helped by the strongest new orders increase since April 2015. There was a solid increase in both new export sales and employment. The February PMI is at 53.1, up from January’s 52.2 reading and the highest recorded since May 2015.

Mexico produced 1.49 Mt of crude steel in January, down 9.0 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

Alcoa has signed a long-term deal that will amount to over $1.5 billion with GE Aviation, for jet engine components. Alcoa will supply advanced nickel-based super alloy, titanium and aluminum components for a broad range of GE engine programs. Alcoa’s advanced-manufacturing capabilities will produce       parts at several facilities, including those in Indiana, Michigan, Virginia, New       Jersey, Texas and Connecticut, as well as at plants in France and Canada.

Timken Steel has developed a new process for the manufacture of high-        pressure tubing (HPT) for use in the production of low-density polyethylene (LDPE). In Canton, Ohio, Timken Steel’s SBQ is forge-rolled and heat treated; it is then sent to Timken Steel Material Services in Houston for boring and honing. The company says that HPT that took more than a year to produce now takes a matter of months. Smaller lot sizes are also available.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Tune in at mfgtalkradio.com for live shows each Tuesday afternoon at 1:00 p.m. Eastern time for breaking news, economic trends in the manufacturing industry and the latest developments in technology and manufacturing developments.

In March, Tim Grady and Lew Weiss were joined by Senior International Correspondent for Corporate Compliance and Industry Ethics, Dr. Adrianna Sanford, to discuss the Apple vs FBI stand-off. The FBI may have recently found a way to break Apple’s IOS-9 security and extract information off the San Bernadino Shooter’s phone, but the debate with major technology companies about privacy for its customers in the U.S. and around the world isn’t over yet. Microsoft versus the U.S. Justice Department is still outstanding, and the Apple vs FBI situation may not be over.

On March 7, listeners heard from Drew Greenblatt, Chairman of The National Alliance for Jobs and Innovation (NAJI.org) and Rob McKenna, partner at Orrick, Herrington and Sutcliffe, LLP, co-chair of its Public Policy Group, former Washington State Attorney General talk about how companies can protect their intellectual property and go after IP thieves or abusers – even if they are overseas, using the Attorney General in the home state. Surprised? So were we! Listen to the show to find out how to pursue IP infractions or theft – without the cost of hiring an attorney or risking counter claims. The information on this show alone is worth a year’s pay!

You’ve heard the nonsense talk about a manufacturing recession – listen to Cliff Waldman, Director of Economic Studies at the Manufacturer’s Alliance for Productivity and Innovation Foundation discuss MAPI’s latest economic forecast, plus important research on productivity in manufacturing for the foreseeable future. This is definitely worth an hour of your time as you drive to work or drive home. You can find the podcast at http://mfgtalkradio.com/category/radio-shows/

Then listen to Rosemary Coates, Executive Director of the Reshoring Institute, as she maps out the next evolutionary step in the manufacturing continuum and shares with us the Institute’s commitment to educating the next generation of manufacturers in this process. If you have production overseas, learn how you can bring it back to America with the help of the Reshoring Institute, at https://reshoringinstitute.org

Visit www.mfgtalkradio.com to read the latest industry news – some of the coolest things made in manufacturing from nano to macho!

V. EUROZONE

by Royce Lowe
eurozoneMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for

(PMI) for February, at 51.2, was down to a twelve-month low from January’s 52.3 reading, on the back of slower growth in production, new orders, export business and employment. France and Germany are hovering close to stagnation, and although seven of the eight countries surveyed showed growth, only Austria was up on January.

  PMI High/low
Spain 54.1 (55.4) 2-month low
Ireland 52.9 (54.3) 24-month low
Italy 52.2 (53.2) 12-month low
Austria 51.9 (51.2) 4-month high
Netherlands 51.7 (52.5) 18-month low
Germany 50.5 (52.3) 15-month low
France 50.2 (50.0) 2-month high
Greece 48.4 (50.0) 3-month low

Siemens is to help Iran modernize its energy sector. It has been agreed that MAPNA (an Iranian group of energy companies) will acquire technological knowhow to manufacture Siemens gas turbines in Iran and that the parties will cooperate to deliver more than twenty gas turbines and associated generators over the next decade.

Meanwhile Daimler, the world’s largest truck maker, has woken up to the fact that ‘when the west left Iran’ China wasn’t long in taking over as the primary truck supplier. At the time Daimler was supplying 40,000 trucks per year to Iran. The German company is making new overtures.

Germany’s business climate index fell to a 14-month low after retreating for three consecutive months. 

‘Robots can’t deal with the degree of individualization and the many variants that we have today.’ Thus Markus Schaefer, Mercedes’s head of production: ‘We’re saving money and safeguarding our future by employing more people.’ This is all about Mercedes’s Sindelfingen plant, its biggest, possibly an unlikely place to question automation’s benefits. This is a place where steel is chewed up at the rate of 1,500 tons per day, to make 400,000 vehicles per year. Mercedes are not thinking of doing away with robots, merely using smaller, more flexible ones that will operate in conjunction with human workers. BMW and VW are reportedly taking a similar route.

VW’s ex CEO apparently missed reading some important information in his weekend mail back in 2014, because there was too much of it – mail that is. Meanwhile not much good news comes out of the world’s second-largest automotive company, except that we all know it will survive without paying its real dues.

West European car sales were up 14 percent in February, with Germany up 12 percent y-o-y to 250,302 units (VW up 4.3 percent); France up 13.0 percent to 166,741 (VW down 1.9 percent); Italy up 27 percent to 172,241 and Spain, still benefitting from a scrappage program that has been extended to mid-year, up 13 percent to 97,650 units.

Crude steel production in Germany in January was at 3.60Mt, down 2.0 percent y-o-y; in Italy 1.80Mt, down 5.3 percent y-o-y; in France 1.15Mt, down 11.9 percent y-o-y and in Spain 1.15Mt, down 9.5 percent y-o-y.

Russia’s crude steel production for January was at 5.55Mt, down 10.6 percent y-o-y, Ukraine’s was 1.94Mt, up 3.6 percent y-o-y.

The UK witnessed its manufacturing PMI at a 34-month low in February, falling from 52.9 in January to 50.8. Production growth slowed significantly in the consumer and investment goods sectors. New export orders were down for the second month in February, with weaker orders from Brazil, mainland Europe, Russia and the U.S.

A referendum has been called for June 23 in the UK to decide whether or not Britain should stay in the European Union. Coincident with this, bosses of some of Britain’s largest and best-known firms signed a letter published in The Times newspaper, saying an exit from the EU would deter investment in the UK. London’s blustery mayor, Boris Johnson, is pro-exit.

The UK produced 0.66Mt of crude steel in January, down 38.4 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) – was in what might be termed stagnation in February, with the reading at 50.0, a 39-month low. This is down from January’s 50.9 level. All major indices, production, new orders, employment and new exports were down on January’s readings. The downturn in emerging nations was at its fastest since September 2015.

Production growth slowed in the U.S., the Eurozone, Japan, the UK and India, and production volumes were down in China, Taiwan, Indonesia, Malaysia,         Brazil and Canada.

If you are actually reading this in detail, send an email to starbucks@steelforge.com and we’ll send the first 10 emails we receive a $10 Starbucks® gift card.

New export orders were down in the U.S., China, Japan, Taiwan and the UK    and up in the Eurozone, India, Malaysia, Vietnam and Brazil. Employment      was down for the first time since September 2015, ending a four-month sequence of modest job creation, with losses mostly observed in emerging nations, with cuts reported by China, Brazil, India, Russia, Malaysia and Indonesia. Employment was also down in the UK and Canada, but up in the      U.S., the Eurozone and Japan.

VI. ASIA OUTLOOK

by Royce Lowe

CHINA produced 64.37Mt of crude steel in January, down 7.8 percent y-o-y; Japan 8.77Mt down 2.8 percent y-o-y; India 7.42Mt, down 1.2 percent y-o-y and South Korea 5.67Mt, down 4.5 percent y-o-y. Taiwan produced 1.60Mt in January, down 19.5 percent y-o-y.

The Caixin China manufacturing PMI for February was down to 48.0 percent from January’s 48.4., its lowest level for five months. The month was marked by a continued deterioration in operating conditions for Chinese manufacturers. Both production and new orders declined at slightly faster rates than in January, and there was the quickest reduction in staffing levels since January 2009. Operating conditions have now worsened every month for the past year, but the deterioration rate has remained modest overall. Financial stimulus is awaited in the not-too-distant future in China.

Total vehicle sales in January in China were at 2,500,570 units, down from December 2015’s 2,785,500 units. The January figure is about the same as that of November 2015, but significantly higher than that of October 2015. GM sold 245,690 units in China in February, down 9.3 percent y-o-y, versus a 7.3 percent y-o-y increase in January.

Operating conditions in JAPAN’s manufacturing sector improved in February at the slowest rate since June 2015. Production growth slowed and new orders fell, while employment rose at slower rates. The PMI for February was down from January’s 52.3 reading to 50.1. New export orders dropped for the first time in five months due to reduced volume with China. Japanese car sales, for February 2016 are reported as off 4.6 percent y-o-y.

The INDIAN manufacturing sector showed the strongest upturn in new orders in February since September 2015, with production up at a slower pace. In fact new orders, exports and production were all up in the month, with employment basically unchanged. The Nikkei PMI reading was unchanged from January’s 51.1 reading. Consumer and intermediate goods were the best performers, with some contraction in both production and new orders in the investment goods sector.

In line with his Make in India campaign, Prime Minister Modi says Foreign Direct Investment is up 48 percent since he took power in May 2014. But bureaucracy, complex regulations and poor infrastructure are still preventing India from getting on the road to its full potential.

VII.  SOUTH AMERICA

by Royce Lowe

bazil-badBrazil’s crude steel production for the month of December 2015 was 2.45Mt, a 17.9 percent y-o-y decrease. Brazil’s manufacturing performance is on its way down again, with manufacturing employment falling at its second-fastest pace in almost seven years.   There was a further drop in new orders with production contracting at an accelerated rate. Inflation on raw materials is at a record high. February’s PMI, at 44.5, down from January’s 47.4 reading, represents the 13th consecutive month of deterioration in operating conditions. The depreciating real brought in new export orders, on a three-month upward trend in February, but at a modest overall pace.

VIII. FEBRUARY 2016 BUSINESS SURVEY INSIGHTS

by Norbert Ore
The global economy continued to grow in February as 9 of the 17 surveys that we follow are growing. The nine that are growing have an average PMI of 52.1. On a negative note, the JP Morgan Chase Global PMI (50.0, -0.9) failed to grow for the first time since November 2012 when the index printed 49.6. Growth in the Eurozone PMI (51.2, -1.1) is now in its 32nd consecutive month as manufacturing continues its growth trend when compared to other major regions. Germany (50.5, -1.8) remained positive and posted its 15th consecutive month of growth.

The remaining seven Eurozone countries averaged 51.6 percent and were led by Spain (54.2, -1.3) while Greece (48.4, -1.6) was the only EZ country that failed to grow. The UK (50.8, -2.1) registered its 35th consecutive month above the 50 mark. The slowing is showing most in the consumer and durable goods segments. China’s Official Report, the CFLP PMI (49.0, -0.4) continues a slow contraction. More value may be found in the Caixin China General Manufacturing PMI (48.4, -0.4) which registered a rate of contraction equal to the 12-month average. The story of slow contraction in the Caixin Index still seems more believable.

ISM PMI chart

As for North America, Canada (49.4, +0.1) failed to grow for the seventh consecutive month as the rate of decline slowed. Mexico (53.1, +0.9) expanded at a pace slightly above its six-month average of 52.6. The ISM PMI™

PMI Scattergram

According to the Strategas Leading Indicator of Manufacturing report, manufacturing is trying to stabilize; new orders improved and supplier deliveries remain faster, which means suppliers can presently keep up with the lower demand for raw materials.

New Orders – In responding to the mid-month SLIM Survey, the panel indicates February new orders will grow, but at a slower rate compared to January. Specifically, 36 percent indicate new orders are better, 29 percent indicate they are worse, and 35 percent report they are the same. The seasonally adjusted diffusion index is 51.9 percent, -9.3 percentage points lower than the January reading of 61.2. The February new orders reading suggests our panel is seeing new orders growing for the third month in a row.

Supplier Deliveries – February supplier deliveries remain faster and are now below the 50 percent level for seven consecutive months. The diffusion index reads 40.3 percent, which 0.7 percentage points higher than the January reading. In responding to the survey, 6 percent of the survey respondents report slower supplier deliveries, 24 percent report faster supplier deliveries, and 70 percent indicate they are the same. The manufacturing sector continues to struggle on the delivery front.

IX. THE MANUFACTURING SCENE : MANUFACTURING’S REAL IMPACT

by Royce Lowe

Manufacturers Alliance for Productivity and Innovation (MAPI) has recently looked into the impact of manufacturing on the U.S. economy. There are two measures commonly used by the government to measure manufacturing’s overall impact on society. It is suggested that the impact is being seriously underestimated. 

The first is the proportion of GDP for which manufacturing accounts, the second the multiplier effect that measures the impact on other industries from an increase in economic activity by a specific industry. Officially, according to national statistics, manufacturing’s proportion of GDP – its annual value-added divided by the value of all goods and services produced in the country – is about 11 percent. The U.S. Department of Commerce says the total requirement manufacturing multiplier is approximately 1.4.

MAPI says that both these figures significantly understate manufacturing’s impact, and to a great extent. It is suggested we should intuitively know this, since we are surrounded by and reliant upon a myriad of manufactured goods in all actions and aspects of our lives. So judging from the sheer volume of ‘stuff’ around us, how could manufacturing represent such a relatively small percentage of the economy.

This is all wrong. New MAPI research, using analysis of national input – output tables for Interindustry Forecasting (Inforum) at the University of Maryland, shows manufacturing’s total value chain actually accounts for about one third of the U.S. GDP, namely three times the impact suggested by narrow official data. In addition, the manufacturing multiplier is 3.6, almost three times as high as the simplistic estimates. In other words, every $1.00 of manufacturing value-added generates $3.60 of value-added elsewhere across the U.S. economy.

There are a number of factors that render the government’s estimates misleading, one being that input into manufacturing-related activities, such as corporate management, R&D and logistics operations are not included when they are located away from the actual manufacturing location. They should be counted.

Government measures capture only the creation of upstream value, including processing of raw materials and intermediate inputs and the production process. The stream is actually much broader and includes associated activities in both the upstream supply chain and the downstream sales chain of manufactured goods sold to final demand.

We can go even further. Final demand goods are those destined for an end user, either exports or goods sold to households, businesses or government. The data for such goods do not include intermediate inputs for nonmanufacturing supply chains, such as gypsum and cement going to the construction supply chain or chemical fertiliser used in the agricultural supply chain. Addition of these data gives a more accurate picture, since but for the production of all these manufactured goods, no value would be generated in manufacturing’s upstream supply chain and downstream sales chain or in the supply chains of other sectors.

We might first consider the upstream activities associated with manufactured goods for final demand: these include the value of all intermediate inputs purchased for use in production, including raw materials and process inputs and services. For example, car manufacturers need steel (and other metals and materials) to make cars, and the steel and metal manufacturers need ore and coal and other agents, all of which need to be transported from place to place. The value-added of all intermediate inputs upstream of the factory that go into manufactured goods destined for final demand is $3.1 trillion.

Then the goods move downstream from the factory through the sales chain, and value must be added for transportation, wholesaling and retailing of the goods. More value again is generated in related services such as rental, leasing, insurance, professional services, maintenance and repair. The value of all these downstream activities combined with the producers’ value, plus the value from manufactured imports, makes up the manufactured goods sales chain. MAPI estimates that downstream added value on manufactured goods for final demand totals $3.6 trillion.

So upstream plus downstream equals $6.7 trillion. Goods designated for non-manufacturing supply chains add $510 billion in value-added to manufacturing’s total. Or a total impact on the economy of 32 percent. Something for a government to get its teeth into!

X. THE FINAL WORD

by Royce Lowe

The figures tell us that the sum of all global manufacturing indices equates to   stagnation. There are signs of stirring in certain quarters, not the least of which are in the U.S., where the strength of the manufacturing economy , fragile and vulnerable as it may often appear, will awaken to better things in the not-too-distant future.

 

 

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Metals & MFG Outlook February 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 Subscribe at the bottom of the page.


I. Cover Story: WHERE TO NOW?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. CREDIT MANAGERS INDEX
IX. THE MANUFACTURING SCENE
X. THE FINAL WORD

PUBLISHER’S STATEMENT

There has been an ugly rumor trying to surface its head that manufacturing is in recession. It was born out of the ISM’s Purchasing Manager’s Index being below 50 for 4 straight months. The bottom line – manufacturing is not in recession. According to Brad Holcomb, Chair of the ISM committee’s Manufacturing Report on Business®, “That report is nonsense.  We are nowhere close to that.  Those kinds of headlines are ill-informed.”

On January 15th, the Manufacturer’s Alliance for Productivity and Innovation released their Industrial Production Report where Dan Meckstroth, Ph.D., vice president and chief economist at the MAPI Foundation stated, “The December industrial production report should allay fears that the manufacturing sector is in recession. Manufacturing production expanded at a 3.2% annual rate in the third quarter of 2015 and at a 0.5% annual rate in the fourth quarter. Yes, there is a slowdown, but manufacturing is not in a recession.”

Nonetheless, a few media outlets are trying to talk the country into a recession by putting out reports that make people nervous, which tends to cause people to hold off on investment spending and the risk is the talk becomes a self-fulfilling prophesy.

So, we are here to convey that manufacturing is not in recession. Various forecasts predict continuous growth in GDP for 2016, 2017 and 2018. MAPI’s forecast is that manufacturing production will increase 2.6% in 2016, 3.0% in 2017, and 2.8% in 2018. The overall economic growth forecast for GDP is about the same, which includes all the industries in the services and manufacturing sectors. With the economic recovery from the Great Recession having gotten legs in 2010, then 2018 would be an 8-year economic expansion, after which all bets are off. Expansions longer than 8 years have been uncommon in the U.S., there being only two since 1945, Feb. 1961 – Dec. 1969 and Mar. 1991 – Mar. 2001.

In other news, we are pleased, as is the National Association of Manufacturer’s, with the Supreme Court’s stay on the EPS’s Clean Power Plan, or CPP, that would have adversely impacted manufacturers who consume 1/3 of U.S. energy. These kinds of overreaching regulations drive up power plant costs which, in turn, drive up energy prices for consumers and businesses without increasing manufacturing productivity. Manufacturers must recoup those costs which can only be done by raising prices and holding employment levels flat, or more likely, reducing employment to counter balance the crushing cost of energy price increases.

The CPP would likely have driven more coal producers and coal fired plants out of business even with a 2-year adoption curve, further crippling an industry under huge pressure to clean up its act. Yes, coal has probably outlived its useful lifespan, but killer blow legislation in a fragile economic recovery is just insensitive timing. So the CPP will now work its way through the courts and progressive coal will adapt to a future where other energy sources will support the nation’s economy and its manufacturing base.

And, if it’s not the CPP from government, it’s the TPP creating angst. Read below to get the latest on the economy, the Trans-Pacific Partnership, and other economic news. Let us know if you enjoyed the read.

Sincerely,
Lewis A. Weiss
Publisher

I. COVER STORY: WHERE TO NOW?

by Royce Lowe

MazeIt’s a maze these days, this road through the global manufacturing sector. There is no doubt that the U.S. economy, whose manufacturing sector has been in contraction for the past four months, seems, on the whole, to be propping up most of those of the rest of the world. Add to this the fact that China’s switch from an export to a consumer economy is far from done, and the overall mix of facts and figures turns out to be a nightmare for those who spend their days ‘forecasting.’ Not that it wasn’t ever thus, to a large extent, but at this time things seem just a little bit more confusing. The ISM PMI for January, rose a mere 0.2 percentage points from December’s seasonally adjusted reading, but at least it didn’t drop, and it might be said that conditions seem to be in place for a further improvement in February.

And while all this is going on, we hear more and more about the number of manufacturing jobs that need to be filled and how they might be. We hear of on-the-job training, courses in community colleges and apprenticeships; the phrase ‘skills gap’ crops up frequently. Things are being done, but at the pace that has been set it will be a long time before a sufficient supply of skilled workers is available.

Trans Pacific PartnershipThe Trans Pacific Partnership (TPP) deal has just been signed in Auckland by Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, U.S. and Vietnam. The aim is to slash tarifs and trade barriers for about 40 percent of the global economy. The member states still have two years to get home approval before the deal becomes legally binding. There will be much disapproval and protest, and as a matter of course there will be those factions in the U.S. and elsewhere intent on destroying the treaty. China is not, for the moment, on board, but is studying a 6,000 page document. A U.S. economist and Nobel laureate, Joseph Stiglitz, thinks it’s about the worst pact he’s ever seen.

The PMI figure from the Institute of Supply Management moved up very slightly from a (seasonally adjusted) 48.0 percent in December to 48.2 percent in January, representing contraction in manufacturing for the fourth consecutive month. There was growth in the overall economy for the 80th consecutive month.

The Markit PMI for the U.S. manufacturing sector moved up from December’s 51.2 percent, a 38-month low, to 52.4 percent in January. Markit refers to a slight rebound in U.S. manufacturing business conditions at the start of 2016. Production and new orders expanded at a faster rate, although export orders increased only marginally. Job creation eased in January. Manufacturers are being cautious with their hiring and with their inventories. The strong dollar and the energy sector are certainly not helping matters.

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.

BEA logoThe Bureau of Economic Analysis came out with its ‘advance’ estimate for the annual rate of Real GDP growth in the fourth quarter of 2015, placing it at 0.7 percent. The figure for the third quarter 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. The ‘second’ estimate for the fourth quarter, based on more complete data, will be released on February 26.

The Dun and Bradstreet Economic Health Index for January states that           an estimated 206,000 new non-farm jobs were added to U.S. payrolls in the month, with gains in Trade, Transportation and Utilities, Retail, Construction,   Manufacturing and Business Services, and losses in Real Estate. According to D and B the Small Business Health Index fell 0.7 points in the month of January.

GALLUP’s U.S. Economic Confidence Index went through January at -11. The job creation index averaged +30 through January, slightly down from its recent high of +32.

World crude steel production for the 66 reporting countries for the month of December 2015 was 126.72Mt, down 5.7 percent from the December 2014 figure of 134.36Mt. Production for the whole of 2015, at 1,599.5 Mt was down 2.9 percent on 2014’s 1,646.7 Mt. 

U.S. crude steel production, for December 2015 was 6.03Mt, down 16.3 percent from the December 2014 figure of 7.21Mt.

Primary Global Aluminum Production in December 2015 was 4.777 million tonnes. Of this total, 2.531 million tonnes, 53 percent, was produced in China. The Gulf Corporation Council (GCC) produced 434,000 tonnes, North America 371,000 tonnes, Western Europe 321,000 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 eight’ for January 2016.

The ‘Big Eight’ January ’16 January ’15 YTD % change
General Motors 203745 202786 0.5
Ford 172478 177441 -2.8
Toyota 161283 169194 -4.7
FCA 152376 141655 7.6
Honda 100497 102184 -1.7
Nissan 105734 104107 1.6
Hyundai/Kia 83316 82804 1
VW 20079 23504 -14.6
Total new   cars and light trucks 1148057 1151123  -0.3

 

                        CARS                  LIGHT TRUCKS             TOTAL

 

JAN   2015       529,696                621,427                         1,151,123

 

JAN   2016       486,245                661,812                         1,148,057

 

                        -8.2%                  +6.5%                          -0.3%

economist logoTHE 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 +2.0 (qtr) -1.8 (Dec) +0.7 (Dec) 5.0 (Dec)
Canada +2.3 (qtr) – 4.0 (Oct) +1.6 (Dec) 7.1 (Dec)
China +6.6 (qtr) +5.9 (Dec) +1.6 (Dec) 4.1 (Qtr 3)
Japan +1.0 (qtr) +1.7 (Nov) +0.3 (Nov) 3.3 (Nov)
Britain +1.8 (qtr) +1.0 (Nov) +0.2 (Dec) 5.1 (Oct)
Euro Area +1.2 (qtr) +1.1 (Nov) +0.2 (Dec) 10.5 (Nov)
France +1.0 (qtr) +2.8 (Nov) +0.2 (Dec) 10.1 (Nov)
Germany +1.3 (qtr) nil (Nov) +0.3 (Dec) 6.3 (Dec)
Spain +3.2 (qtr) + 5.8 (Nov) nil (Dec) 21.4 (Nov)
India + 11.9 (qtr) – 3.2 (Nov) + 5.6(Dec) 4.9 (2013)
Brazil – 6.7 (qtr) -12.4 (Nov) + 10.7 (Dec) 7.5 (Nov)
Taiwan – 1.2 (qtr) – 6.2 (Dec) + 0.1 (Dec) 3.9 (Dec)
Mexico +3.0 (qtr) + 0.1(Nov) +2.1(Dec) 4.4(Dec)

FF Journal Magazine

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II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 48.2 percent in January, very slightly up from December’s (seasonally adjusted) 48.0 reading, representing the fourth consecutive month of contraction in manufacturing and growth in the overall economy for the 80th consecutive month. Of the 18 manufacturing industries, eight industries are reporting growth in January, in order :Textile Mills; Wood Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Furniture & Related Products; Computer & Electronic Products; Machinery; and Electrical Equipment, Appliances & Components. The 10 industries reporting contraction in January, listed in order, are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Transportation Equipment; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; and Chemical Products.

Food, Beverage & Tobacco Products respondents say that much worldwide macroeconomic uncertainty is affecting their business and that business confidence seems low. Fabricated Metal Products personnel say that things are a bit slower but they are staying busy. Chemical Products respondents say that business this month is better than last month and better than this period last year. Reduced oil and basic chemical prices are providing favorable margin comparisons. Computer & Electronic Product respondents say there is a huge rollout in wireless in 2016 across all markets and that they should be very, very busy. Transportation Equipment personnel say business is still strong but slowing. Miscellaneous Manufacturing reports that medical device business continues to be strong. Plastics & Rubber Products say that overall demand is higher than expected for the post-holiday season. Petroleum & Coal Products report that the oil and gas sector continues to be challenged by low oil and gas prices. They further state that there is a risk of suppliers filing for bankruptcy and reducing their workforce. Their own company workforce is also declining. Primary Metals say they are starting the year with strong orders while Wood Products say the start of the year was sluggish.

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 January, at 5 percent, was up 2.7 percentage points on December’s seasonally adjusted 48.8 percent reading, indicating growth in new orders following two months of contraction. The eight industries reporting growth in new orders in January, listed in order, are: Wood Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Primary Metals; Machinery; Computer & Electronic Products; and Chemical Products. The seven industries reporting a decrease in new orders during January, listed in order, are: Apparel, Leather & Allied Products; Paper Products; Transportation Equipment; Nonmetallic Mineral Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Fabricated Metal Products.
  2. The ISM Production Index is at 50.2 percent in January, up 0.3 percentage points from December’s seasonally adjusted 49.9 percent reading, representing growth in production following two consecutive months of contraction. Six industries reported growth in production during the month of January, namely, listed in order, Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Computer & Electronic Products; Miscellaneous Manufacturing; and Machinery. The eight industries reporting a decrease in production during January, listed in order, are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Paper Products; Food, Beverage & Tobacco Products; and Chemical Products.
  3. The ISM Employment Index for January, at 45.9 percent, is down 2.1 percentage points on January’s seasonally adjusted 48.0 reading, representing a second consecutive month of contraction in the Employment Index. Four of the 18 manufacturing industries reported employment growth in January, in order, Printing & Related Support Activities; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery. The 10 industries reporting a decrease in employment in January, listed in order, are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Chemical Products; Primary Metals; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Transportation Equipment; Computer & Electronic Products; and Fabricated Metal Products.
  4. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was effectively unchanged in January, as the Supplier Deliveries Index registered 50.0 percent, 0.2 percentage points higher than December’s seasonally adjucted 49.8 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 January are: Paper Products; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Computer & Electronic Products. The seven industries reporting faster supplier deliveries during January, listed in order, are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Miscellaneous Manufacturing; Fabricated Metal Products; and Transportation Equipment. Six industries reported no change in supplier deliveries in January compared to December.
  5. The ISM Inventories Index, at 43.5 percent for January, is unchanged from December’s 43.5 percent reading, indicating a contraction of raw materials inventories in January for the seventh consecutive month. There are two industries reporting higher inventories in January, namely: Computer & Electronic Products; and Miscellaneous Manufacturing. The 11 industries reporting lower inventories in January, listed in order, are: Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; Furniture & Related Products; Machinery; Fabricated Metal Products; Paper Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.

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 51.5 percent in              January, the same reading as in December, meaning that customers’        inventories are considered to be too high for the sixth consecutive month. Seven manufacturing industries reported customers’ inventories as being too high during the month of January, namely, listed in order: Paper Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The six industries reporting customers’ inventories as too low during January, listed in order, are: Textile Mills; Primary Metals; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; and Transportation Equipment.

2.The ISM Prices Index registered 33.5 percent in January, the same reading as December, indicating a decrease in raw material prices for the 15th consecutive month. In January 5 percent of respondents reported paying higher prices, 38 percent lower and 57 percent the same prices as in December. Of the 18 manufacturing industries, no industry reported paying increased prices for their raw materials in January. The 15 industries reporting paying lower prices during the month of January, listed in order, are: Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Apparel, Leather & Allied Products; Textile Mills; Machinery; Paper Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Computer & Electronic Products.

Up in Price in January were: Natural Gas and Steel *

Down in Price in January were: Aluminum (14); Copper (3) Crude Oil (2);             Diesel (2); Gasoline (2); HDPE Resin (2); Nickel (7); Oil (2); Resin Based         Products; Stainless Steel (15); Steel * (7) Steel — Cold Rolled (4); Steel — Hot Rolled (4); Stainless Steel (14); and Steel Products.

 In Short Supply in January: none

Note: The number of consecutive months the commodity is listed is                 indicated after each item. * reported both up and down in price.

3.The ISM Backlog of Orders Index was at 43.0 percent in January, 2.0 percentage points up on the December reading of 41.0 percent, representing the eighth consecutive month in contraction of order backlogs. Of the 88 percent of respondents who measure their backlogs, 17 percent reported greater backlogs, 31 percent smaller backlogs and 52 percent no change from December. Four industries reported an increase in order backlogs in January, namely: Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Furniture & Related Products; and Primary Metals. The 12 industries reporting a decrease in order backlogs during January, listed in order, are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; and Machinery.

  1. The ISM New Export Orders Index was at 47.0 percent for January, 4.0 percentage points down on December’s reading. This represents a return to contraction in new export orders following one month of growth. The four industries reporting growth in new export orders in January, listed in order, are: Wood Products; Furniture & Related Products; Primary Metals; and Chemical Products. The nine industries reporting a decrease in new export orders during January, listed in order, are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Computer & Electronic Products; and Fabricated Metal Products.
  2. The ISM Imports Index, is at 51.0 percent in January, or 5.5 percentage points higher than December’s 45.5 reading. This represents growth in imports following three consecutive months of contraction. Eight industries reported growth in imports during the month of January, namely, listed in order : Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Primary Metals; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Machinery; and Transportation Equipment. The six industries reporting a decrease in imports during January, listed in order, are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Fabricated Metal Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Chemical Products.

skills gapThe skills gap, and what is being done about it, is very much in manufacturing news these days. Recently, 82 percent of manufacturers surveyed by The Manufacturing Institute and Deloitte reported as moderate or serious the shortage of skilled workers. Over the next decade there is a likely need for 3.5 million jobs to be filled, with 2 million going unfilled because of the skills gap. Baby boomers are retiring and taking their skills with them. Over 75 percent of manufacturers say the skills shortage has negatively impacted their ability to expand and 69 percent expect the shortage in skilled production to continue. Many existing workers are unqualified to keep up with advances in the manufacturing sector, and there is a need for employer input, in-house training, local training facilities such as community colleges: without all this there is a risk of further skills mismatch.

It is reported that programs combining on-the-job learning with mentorship and classroom education fell 40 percent between 2003 and 2013.

The Advanced Manufacturing Partnership 2.0, backed by the White House is a step in the right direction. Alcoa, Dow Chemical and Siemens U.S.A. have formed a coalition for development of apprenticeship models leading to The Employer’s Playbook for Building an Apprenticeship Program, launched by the Manufacturing Institute and free online.

The National Institute for Metalworking Skills (NIMS) involved in the maintenance, troubleshooting and improvement of complex machines and automation systems is becoming increasingly important for the automotive, aerospace, rail, shipbuilding and heavy truck and off-road vehicle manufacturers. It is reported that demand for workers in such operations has increased by 118 percent from 2011 to 2015 in Indiana, Kentucky, Michigan, Ohio and Tennessee. NIMS recently issued 21,420 credentials to individuals seeking job-related certification, up 20 percent on 2014.

Women in manufacturingWomen in Manufacturing, a national trade group, along with Case Western University in Cleveland, recently announced the creation of a Leadership Laboratory for Women in Manufacturing. This program will provide executive education and training to its members in medium- to high-level management roles in manufacturing careers. The GE Foundation is funding scholarships for women in small to mid-size manufacturing companies.

GE has won a contract worth almost $1 billion from the Saudi Electricity Company to build and supply a power plant in Northern Saudi Arabia. The 1,390 MWatt plant will also have solar technology and will be capable of supplying the equivalent power required to supply over 500,000 Saudi homes. The contract involves supply of four advanced gas turbines, one of which will be built in Saudi, three in the U.S.

Meanwhile it’s been decreed that for years Harley-Davidson has been manufacturing motor cycles that are too reliable, resulting in inflated prices for used models and reduced sales for new ones.

boeingBOEING’s outlook for 2016 sent its shares down eight percent. It’s forecasting deliveries of 740/745 aircraft, down from 2015’s record 762. The company booked 768 orders for jets in 2015, worth $112.4 billion.

In the latest of a series of supply programs, Alcoa recently signed a $ 1.5 billion deal with G.E. Aviation for supply of investment-cast jet engine parts in nickel-base, titanium and aluminum alloys.

GM’s 2015 sales were up eight percent to 3.1 million vehicles. The company has upped its 2016 earnings per share forecast from $5.00/5.50 to $5.25/5.75. GM remains bullish on China in the long term.  

As its troubled customers put off equipment purchases, Caterpillar is following through on the cost-cutting the company announced last fall. From late September through January 1, the manufacturer of heavy mining and construction equipment reduced its global workforce by 5,000 people, most of them in salaried positions. 1,100 people were laid off in Illinois and around 1,200 in Peoria took voluntary retirement. On September 24 last year, Caterpillar said it would eliminate up to 10,000 jobs to reduce annual costs by $1.5 billion.

BRC CanadaCANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw slower declines in production, new orders and employment in the month of January. There was a solid rebound in export sales, mostly to the U.S., but the weaker loonie is of course coincident with an increase in manufacturing costs.

The PMI showed signs of stabilizing in January, as it increased from December’s 47.5 reading to 49.3.

Canada produced 1.05 Mt of crude steel in December, down 4.9 percent y-o-y.

Despite two fewer selling days, light vehicle sales in Canada were up 9.6 percent y-o-y, with the increase, to 108,533 vehicles, due entirely to sales of light trucks (a category that includes pickups, minivans, crossovers and SUVs.) Passenger car sales actually fell slightly.

Canada’s Bombardier has orders for more than 540 of its Q400 turboprop aircraft from Ryukyu Air Commuter Ltd. of Okinawa, an Island Hopper. First deliveries of this cargo-combi aircraft, to be built in Toronto, are imminent.

mexico steelMEXICO saw its January PMI fall slightly from December’s 52.4 percent to 52.2 percent. In January, Mexico saw its weakest improvement in overall business conditions since September 2015, with a slight increase in production and employment, but with new orders up at the fastest pace for nine months.

Global economic uncertainty, coupled with attempts to bring down inventory, led to a subdued rise in production at the start of 2016.

New orders and exports look good, as does the automotive manufacturing sector, so overall the outlook for Mexico’s manufacturing sector is positive. Mexico produced 1.42 Mt of crude steel last December, down 6.9 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

Otto Fuchs

Germany’s Otto Fuchs ordered a hydraulic closed-die forging press from the SMS group in an effort to expand its portfolio of extra-large, premium-grade forgings. The pit-mounted press, designed for hot and cold forging and a press force of 54,000 tons, will produce extra-large forgings in nickel- and titanium-based alloys for commercial aerospace contracts, including Boeing and Airbus. Otto Fuchs will install the equipment at its U.S. subsidiary, Los Angeles-based Weber Metals, by the end of 2017. The press will also feature a 6,000 x 3,000 mm (236 x 118 inches) die clamping area and a stroke of 2,000 mm (79 inches). The press will handle 350 tonne castings.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk Radio is pleased to announce the addition of Dr. Chris Kuehl, Managing Director of Armada Corporate Intelligence and FMA economist as a regular contributor on the radio show. Along with Brad Holcomb, committee chair of ISM’s Manufacturing Report on Business® who presents the Purchasing Managers Index (PMI) readings each month, Dr. Kuehl will discuss the Credit Manager’s Index, an economic indicator of how companies are paying their bills, which tells us how well they are being paid by their customers. These reports are leading indicators of where the economy is headed in the near-term.

On Tuesday, January 12, Manufacturing Talk Radio tackled the how the skills gap is being addressed with apprenticeship programs, presented by Joerg Klisch, VP of Operations for MTU America, a product brand of Rolls-Royce Powers Systems, along with Ray Vacarri, Director of the NJ Advanced Manufacturing Talent Network, Ian Trammell, Executive Director of MechaForce and Michael Marchetti, Manager of Dream It Do It.

One January 19, Drew Greenblatt, CEO of steel fabricator Marlin Steel, and Harry Moser, Founder and President of The Reshoring Initiative discussed how advanced robotics in the U.S. is making manufacturing more attractive and productive here than overseas, bring more U.S. jobs back home.

One January 26, Senior Correspondent Norbert Ore discussed the 18 Global Business Surveys and how countries around the world are faring in this global economic recovery, followed by Celeste Catano, Senior Global Strategist at Kewill and Amy Magnus, Director of Customs Affairs and Compliance at Deringer who pointed out that ACE, the Automated Commercial Environment being implemented by the Department of Homeland Security for digital submission of all import and export paperwork was not ready for prime time, especially the February 27 deadline date. [This date has since been postponed].

We encourage readers to listen to these shows now stored as podcasts at www.mfgtalkradio.com.

V. EUROZONE

by Royce Lowe
eurozoneMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for January, at 52.3, was down on December’s 53.2 reading, as manufacturing growth slowed at the start of 2016, as witnessed by slowdowns in production, new orders and new export orders. But higher increases in employment and backlogs suggest the upturn should be sustained in the coming months. Employment rose for the 17th consecutive month.

 

PMI

High/low

Spain

55.4 (53.0)

8-month high

Ireland

54.3 (54.2)

6-month high

Italy

53.2 (53.3)

4-month low

Netherlands

52.5(53.4)

11-month low

Germany

52.3 (53.2)

3-month low 

Austria

51.2 (50.6)

2-month high

France

50.0 (51.4)

5-month low

Greece

50.0 (50.2)

2-month low

Germany, represented by  Volkswagen, Siemens and Bosch  are looking at $ 9 billion worth of projects in Cuba.  

Union des ForgeronsFrance’s Union des Forgerons has ordered an open-die forging press and a ring-rolling mill from Siempelkamp. The equipment will be part of a new ring-rolling line at the company’s plant in Méréville, France, to expand its product line of parts in nickel-based alloys, titanium and other aerospace alloys. The forging press is designed as a combination open-die and ring-blanking press. In addition to blanks for ring manufacture, the company will produce conventional open-die forgings with a weight up to 10 tonnes. Installation of the press will start in October 2016, that of the ring-rolling mill some three months later. Full production is scheduled to begin in 2017.

Norsk Titanium’s (Nti) Rapid Plasma Deposition (RPD) Technology has been used by Premium Aerotech, a subsidiary of Airbus, to produce structural components for the A350 XWB wide-body aircraft, in Ti64 (Ti-6Al-4V), the most commonly used titanium alloy for industrial applications.

Premium Aerotech, with four plants in Germany and one in Romania, is a tier-one Airbus supplier of titanium and carbon fiber composite structural parts. This is the first step in a joint qualification program for the additive manufacturing of aircraft components. Parts have been finish machined with excellent results.  There are plans to transfer this technology to a plant in Plattsburgh, NY. 

Recent visits to France and Italy by Iranian president Hassan Rohani look likely to culminate in projects worth $ 18.5 billion from Italy, the sale of 114 planes from Airbus, and the return to Iran in 2017, of Peugeot, with 200,000 cars per year. Iran was Peugeot’s biggest market outside France before the 2012 exit. Total, a French refiner, hints at an interest in Iranian crude. 

Renault, meanwhile, is recalling about 16,000 diesel vehicles following a French Government commission saying the company had failed pollution tests. 

Germany’s new car registrations were up 3.0 percent y-o-y in January to 217,677 units; France up 3.5 percent to 137,788; Italy up 17 percent to 155,157 and Spain, still benefitting from a scrappage program that has been extended to mid-year, up 12 percent to 76,395 units. 

Crude steel production in Germany in December  2015 was at 2.99Mt, down 9.0 percent y-o-y; in Italy 1.50Mt, up 2.1 percent y-o-y; in France 0.98Mt, down 13.8 percent y-o-y and in Spain 0.95Mt, up 3.0 percent y-o-y.  Russia’s crude steel production for December 2015 was at 5.95Mt, down 9.7  percent y-o-y, Ukraine’s was 1.90Mt, unchanged y-o-y. 

UK FlagThe UK witnessed an acceleration in manufacturing growth at the start of 2016 as the PMI figure rose to 52.9, a three-month high.  There was improved domestic demand, with production and new orders up but new export orders fell back into decline. The consumer and investment goods sectors were the main drivers, with large-sized manufacturers especially active.  There was a moderate fall in staffing, the fastest for three years.  The UK produced 0.61Mt of crude steel in December, down 51.5 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) – was slightly up in January to 50.9 from an adjusted 50.7 in December.  

growthThe developed markets showed growth for the 33rd consecutive month, whereas the Emerging Market PMI was in contraction for the tenth consecutive month.  Global manufacturing production was up for the 39th consecutive month in January, but the rate of expansion was unchanged from December’s three-month low. There were increased levels of new orders, despite a soft trend in new export order growth.  Production rose at the consumer and investment goods producers, but was stagnant in the intermediate goods sector. 

There was a further modest growth in global manufacturing employment, the fourth in aa many months, with growth registered in the U.S., the euro area, Japan, India, Taiwan, Turkey and Malaysia, with losses in China, the UK, Russia, Brazil and South Korea.

VI. ASIA OUTLOOK

by Royce Lowe
china

CHINA produced 64.37Mt of crude steel in December 2015, down 5.2 percenty-o-y; Japan 8.59Mt down 4.6 percent y-o-y; India 7.29Mt, down 2.5 percent y-o-y and South Korea 5.90Mt, up 2.1 percent y-o-y. Taiwan produced 1.65Mt in December, down 20.0 percent y-o-y.

The Caixin China manufacturing PMI for January was very slightly up to 48.4 percent from December’s 48.2.  There was a modest deterioration in operating conditions in January, with both production and employment declining at faster rates than in December. Total new orders fell at the weakest rate in seven months, despite a faster decline in new export orders. The ‘relatively weak’ market conditions led to production cuts and further decline in Chinese manufacturing employment. Backlogs increased for the ninth consecutive month in January, but only modestly.

china-car-mfgChina’s automobile industry, a few facts: In 2015, 23.85 million new cars were registered in China, taking car ownership to 172 million. Of 136 million small cars, over 91 percent are privately owned. For every 100 households there are 31 private cars, but in big cities this figure may be over 60.   Forty cities have over a million cars, and in eleven cites, including Beijing, Shanghai, Shenzhen and Tianjin there are over two million. There are over 280 million licensed drivers in China.

Volvo, which doesn’t make that much news anymore, and is now owned by China’s Geely Group, reports sales of 503,107 cars in 2015, a record, and 8 percent over 2014. The company says it will now go and take on Audi, BMW, Jaguar and Mercedes-Benz.

China’s Haier Group bought GE’s appliance business for $5.4 billion. China has become the champion of Renewable Energy, investing $111 billion in 2015, up 17 percent on 2014, from a world total of $329 billion invested in 2015, adding a record 121 gigawatts. Half the world’s investment in renewables came from emerging markets. The U.S. and Europe, between them, invested just a little more than China.

indonesia-bullet-trainChina won a fierce bidding war with Japan for the contract to build Indonesia’s bullet train. The project, worth $5.6 billion, recently broke ground at a tea plantation: it will link Jakarta and Bandung, 100 miles apart, at a speed up to 220 m.p.h. The line is to be completed in 2018 and operational by 2019. It is reported that one in four U.S. companies active in China has moved some operations out of the country, or is planning to, as ‘conditions worsen.’ Many felt ‘less welcome’ in the country in 2015, citing rising labor costs and restricted internet access. And last, but perhaps not least, China is talking of cutting 100 to150 million tons of steelmaking capacity over an undesignated period of time. This would reportedly do away with about 400,000 jobs.

JAPAN’s manufacturing sector saw a solid improvement in operating conditions in January, with a strong increase in production and an increase in employment. The PMI was down very slightly from December’s 52.6 reading to 52.3 for January, the joint-strongest reading in almost two years. All three sectors; consumer, intermediate and investment goods, reported production growth. There was a stronger international demand from Europe and Southeast Asia.

Japanese car sales, at 382,876 units, were down 4.6 percent y-o-y in January, the 13th month of decline, as sluggish demand for minicars continued. Sales of minicars, with a 660cc maximum engine size, fell 11.6 percent to 145,215 units, most likely as a result of last year’s increase in the minicar ownership tax. Sales of other cars were up a very slight 0.2 percent at 237,661 units.

And TOYOTA took the prize for the world’s biggest auto producer, with 2015 global sales of 10.15 million. It was followed by, guess who, Volkswagen at 9.93 million and GM at 9.8 million.

In INDIA, the manufacturing sector returned to growth at the start of 2016, and the Nikkei PMI reading rose to a four-month high of 51.1 from December’s 49.1 reading. Production and new orders were up in January from December’s ‘flood-related’ problems and there was a strengthening in new export orders. The improvement was mostly driven by the consumer goods sector.

FORD MOTOR CO. is leaving Japan, where it had 0.1 percent of the auto market, and Indonesia, where it had 0.6 percent. It will close all dealerships and import no more cars.

VII.  SOUTH AMERICA

by Royce Lowe

Brazil’s crude steel production for the month of December 2015 was 2.46Mt, a 6.2 percent y-o-y decrease. Brazil’s manufacturing performance, as measured by PMI figures, shows a downturn that is easing further at the beginning of 2016. The PMI rose to an eleven-month high of 47.4 from December’s 45.6 reading. Production and new orders fell at slower rates. New export business increased for the second consecutive month in January. In no way is it likely that Brazil is on its way out of the woods. Apart from all the other problems alluded to in this column over the past months, Brazil is to host the world’s two most important sporting events in the next few years.

VIII. CREDIT MANAGER’S INDEX

by Dr. Chris Kuehl
CHRIS KUEHLThere has been considerable difference of opinion as far as the status of manufacturing in the US. One hears from one analyst asserting that manufacturing is in full-on recession already and another is asserting the year looks pretty promising. It reminds one of the parable of the blind men and the elephant with each describing only what they can feel in front of them. Those that have looked at manufacturing as connected to the energy sector are justifiably depressed but those that are in automotive are feeling pretty good about the coming year. In general, the CMI report is more upbeat than has been the case in the recent past.

The combined CMI score for manufacturing has improved as it has increased from 51.6 to 52.3. This is not spectacular by any stretch but is now higher than at any time since last October. The data for the favorable factors showed a nice jump from 54.1 to 56.2 and that takes it back to levels seen last October. The combined index for the unfavorable factors remained unchanged – just like the overall CMI unfavorable index. The reading has remained at 49.9 – about as close as it can get to expansion without actually getting there

IX. THE MANUFACTURING SCENE : Manufacturing’s New Materials and Methods

by Royce Lowe
We read and hear a lot these days about material gluts, too much of this metal, too much of that, too much world steel capacity; just too much material floating around waiting to be dumped somewhere.

Then we hear about material ‘wars,’ particularly about the replacement of steel by aluminum in cars, how the weight of aluminum in each car is forecast to rise in the next couple of decades, that of steel to drop.

steel barLatest world steel figures tell us that production of crude steel in 2015 was down 2.9 percent on 2014’s figure, in fact just under 50 million tonnes less than in 2014. What these figures don’t tell us is that people have been, still are, looking to develop steels that are stronger (AHSS, Advanced High-Strength Steels) and just as formable, if not more so, than the steels that were used just a decade ago. All this of course is to produce a more fuel-efficient vehicle. But at an annual global production of around 90 million cars, and steel accounting for some 60 percent of the weight of each, with estimated weight savings of around 20 percent we’re taking a few tonnes out of annual steel consumption right there.

The fact that stronger, tougher, more formable steel is a fait accompli these days means that less steel could be used for myriad applications, not least of which might be an overhaul, for example, of the U.S. infrastructure. And what would that do to the annual steel consumption figures?

Steel’s replacement by aluminum is an ongoing process. Aluminum has a density about one third that of steel, so where strength and formability – and of course cost – fit the bill, then aluminum will take its merited place.

We’re becoming increasingly aware of materials and manufacturing methods that not too long ago were in many cases unheard of. The aerospace and automotive industries have recently ‘discovered’ carbon-fiber composites, and these days carbon fiber makes up about half the weight of aircraft such as the Boeing 787 Dreamliner or the Airbus A380 and A350.

bmw-i8BMW has been making bodies from carbon fiber for its i3 and i8 hybrid and electric vehicles in Leipzig since 2013. The structures are reputedly stronger than steel and around 50 percent lighter. There are no welds, screws, rivets or bolts involved, but lots of robots. The factory is almost as quiet as the car might be at 90 m.p.h. Since the carbon fiber provides the vehicle with its strength, the outer panels are mainly decorative and made from plastic. It is forecast that by the mid-2020s carbon fiber will be widely used in car making.

There is an ongoing revolution in the development of manufacturing materials, driven by research scientists around the world, and by software giants such as Autodesk’s Carl Bass. And with manufacturing methods. Additive manufacturing, or 3D printing, has taken up a lot of newsprint of late, and its possibilities never fail to fascinate. At Oak Ridge National Laboratory in Tennessee, researchers have an automated system known as BAAM (Big Area Additive Manufacturing) that was pieced together in partnership with machine tool company Cincinnati Inc. In one experiment it made most of the body and frame for an electric replica of a Shelby Cobra. The printed parts that went into the vehicle were built up using a mixture of 80 percent polymer and 20 percent carbon fiber and weighed a mere 227 kg (500 lbs). It took just six weeks for the team to design, print and assemble the car.

There seems to be little doubt that the millions of man-hours poured into research and development will result in large-scale applications of some of the resulting alternate materials and manufacturing methods. On the other hand, we don’t know which materials and methods and we don’t know when. Some materials and methods, as witnessed by successes at Boeing, Airbus and BMW, seem to be here to stay.

But the era of alloys of steel and aluminum is here for a long time to come, and research into the melting and rolling and forging and annealing of these very versatile alloys will continue for that same time. Who knows, there may be another steel or aluminum alloy ten years down the road that we haven’t heard of today.

So a marriage of traditional and new materials and methods is the order of the day, and will likely and efficiently remain so for the foreseeable future.

X. THE FINAL WORD

final wordby Royce Lowe

These are challenging times for global manufacturing industries, and the coming months will not be easy. Confusion curbed and cautious optimism are the watch words.

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Metals & MFG Outlook Newsletter for January 2016

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 Subscribe at the bottom of the page.


I. Cover Story: Winter Chill
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE GLOBAL SUMMARY
IX. CREDIT MANAGERS INDEX
X. THE MANUFACTURING SCENE
XI. THE FINAL WORD

PUBLISHER’S STATEMENT

Happy New Year! 2016 is here, and for manufacturing the forecasts would predict an almost boring year with slight gains or shortfalls in industry segments but nothing spectacular in either direction for anyone. Of course, that could change.

China seems to be having real growing pains in their shift to a consumer driven economy. Their stock markets have been wild rides so far, and their currency is being used to buffer the pitches and yaws, or perhaps yin and yang. As the World Bank presses for more accurate economic data, China’s GDP projections falter, sinking from the heyday of double digit growth just a few years ago to ranges hovering around 6.5% with flux of 2% in either direction possible.

Those shifts have unsettled world markets, including the U.S. Will China ebb or flow? Like boats in the harbor, world stock markets and economic projections seem to rise or fall on the China tide at present. Projections in the U.S. for GDP between 2 and 3 percent could easily soften without the added irritation of some action by ISIS or Al Qaida. Keep in perspective regarding terrorists that there have always been some group of malcontents who wish to upset the order of things. The only question is the tools they might have at hand to do so.

The EU has shown some signs of economic recovery, which usually means a healthier manufacturing sector. Even Greece saw favorable economic expansion in December.

Of course this election year in the U.S. should help economic growth although it is a rather bizarre combination of characters. Imagine a country where the top job could be filled by: a bombastic capitalist, an ardent socialist, a former Secretary of State being investigated by the FBI, or one of a slew of questionably qualified politicians all vying for the most powerful position in the world. Did you just get a sick feeling in the pit of your stomach given those choices?

In 2015, during all the presidential debates, the word manufacturing came up less than five times and usually in passing. Yes, there are serious issues to face: a ballooning national debt, annoying terrorists, unaffordable health care for many it was supposed to help, and two parties bent on agreeing on little so the other guy doesn’t get a win in their column. At the same time, the national mood is like constant heartburn. We’re sick of the way the country is being run, and we wonder if electing anyone will actually change it.

The unpredictability of it all has manufacturing experiencing irritable bowel syndrome daily. Large, long-term capital investment is almost non-existent, with the only spark being small and short dollars flowing into technology projects to squeeze out productivity gains from existing people, plants and equipment. And the foundation of manufacturing stills has cracks that haven’t been filled in since the Great Recession, even with all the employment gains.

So hold on to your hats because there are significant headwinds as manufacturing moves into 2016. More details are included in the pages that follow, and updates are being posted at mfgtalkradio.com. Tune in!

Sincerely,

Lewis A Weiss, Publisher

I. COVER STORY: Wind Chill

by Royce Lowe

So far already this month, we’ve seen two ‘panicky’ days on China’s stock market, plus the news that the ISM PMI figure for the month of December 2015 crept a little lower, to 48.2 percent, ironically from the same level to the same level as the PMI in China.

Last month we spoke of manufacturing being presently digital, dynamic, diversified and demanding. There is no doubt that it is all these things, but for the time being the manufacturing industry seems to have caught a bit of a chill and is in need of a spring awakening, although December did see good news come out of Europe and Japan.

Together with all this news we can report a tremendous year for automobile sales in the U.S., Europe and the UK, with ever increasing optimism for a good 2016 for new vehicle sales in China.

The House and Senate have approved a 5-year, $350 billion transportation infrastructure bill to address the nation’s deteriorating roads and bridges. Nothing is mentioned of the water supplies nor of the electrical grid, both of which are in urgent need of work. It is estimated that about a quarter, 146,663 of 604,474 bridges in the U.S. are either structurally deficient or functionally obsolete. In short, the $350 billion is not nearly enough.

The PMI figure from the Institute of Supply Management fell from 48.6 percent in November to 48.2 percent in December, representing contraction for the second consecutive month. There was growth in the overall economy for the 79th consecutive month, although it comes from the non-manufacturing sector.

The Markit PMI for the U.S. manufacturing sector fell from November’s 52.8 figure to 51.2 in December, its lowest level since October 2012. U.S. manufacturers recorded the weakest improvement in business conditions since October 2012. A lack of growth in new orders was what dragged the index down, and Markit stated that the strong dollar is stalling growth in new export orders – contrary to an improvement in the ISM New Export Orders Index. Markit further stated that the strong dollar is helping importers, and that the lifting of the interest rate may hit consumer spending. However, ISM’s Imports Index suggests a contraction in imports for the third consecutive 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 third quarter of 2015, placing it at 2.0 percent. The figure for the second quarter was 3.9 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. Basically, it is car sales pumping up the GDP, but little else.

The Dun and Bradstreet Economic Health Index for December stated that 197,000 new non-farm jobs were added to U.S. payrolls in the month, with gains in all sectors except Manufacturing. According to D and B, the Small Business Health Index fell 1.8 points in the month of December. D and B say their Overall Business Health Index rose by 0.3 percent month-on-month, to reach its highest level since the Index was first conceived in December 2010. D&B’s Index measures data from both the manufacturing and service sectors.

GALLUP’s U.S. Economic Confidence Index went through December at -11. The job creation index averaged +30 through December, slightly down from its recent high of +32.

World crude steel production for the 66 reporting countries for the month of   November 2015 was 126.83Mt, down 5.8 percent from the November 2014 figure of 134.55Mt.

U.S. crude steel production, for November 2015 was 6.09Mt, down 15.6 percent from the November 2014 figure of 7.22Mt.

Primary Global Aluminum Production in November 2015 was 4.862 million tonnes. Of this total, 2.683 million tonnes, or just over 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 420,000 tonnes, North America 369,000 tonnes.

Here are the latest figures for U.S. new car and light truck sales for ‘the big eight’ for December 2015.

The ‘Big Eight’ December ’15 December ’14 YTD % change
General Motors 290230 274483 5.7
Ford 237606 219369 8.3
Toyota 238350 215057 10.8
FCA 213665 189410 12.8
Honda 150893 137281 9.9
Nissan 139300 117318 18.7
Hyundai/Kia 117749 110094 6.9
VW 30956 34058 -9.1
Total new cars and light trucks 1643289 1507339  9

 

                    CARS                  LIGHT TRUCKS  TOTAL

 

DEC 2014    678,154                829,185                         1,507,339

 

DEC 2015    656,261                987,028                         1,643,289

 

                    -3.2%                  +19.0%                        +9.0%

 

The totals for the years 2015 and 2014:

 

                    CARS                  LIGHT TRUCKS  TOTAL

 

2014             7,918,601             8,603,399                      16,522,000

 

2015             7,7409,12             9,729,587                      17,470,499

 

                    -2.2%                  13.1%                          5.7%

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 least 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 +2.0 (qtr) -1.2 (Nov) +0.5 (Nov) 5.0 (Nov)
Canada +2.3 (qtr) – 4.0 (Oct) +1.4 (Nov) 7.1 (Nov)
China +7.4 (qtr) +6.2 (Nov) +1.5 (Nov) 4.1 (Qtr 3)
Japan +1.0 (qtr) +1.6 (Nov) +0.3 (Nov) 3.3 (Nov)
Britain +1.8 (qtr) +1.7 (Oct) +0.1 (Nov) 5.2 (Sept)
Euro Area +1.2 (qtr) +1.9 (Oct) +0.2 (Nov) 10.7 (Oct)
France +1.0 (qtr) +3.6 (Oct) nil (Nov) 10.8 (Oct)
Germany +1.3 (qtr) +0.2 (Oct) +0.4 (Nov) 6.3 (Nov)
Spain +3.2 (qtr) -0.3 (Oct) -0.3 (Nov) 21.6 (Oct)
India + 11.9 (qtr) +9.8 (Oct) + 5.4(Nov) 4.9 (2013)
Brazil – 6.7 (qtr) -11.3 (Oct) + 10.5 (Nov) 7.5 (Nov)
Taiwan – 1.2 (qtr) – 4.9 (Nov) + 0.5 (Nov) 3.8 (Nov)
Mexico +3.0 (qtr) + 0.5(Oct) +2.2(Nov) 4.1(Nov)

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II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 48.2 percent in December, down 0.4 percentage points from November’s 48.6 reading, representing the second consecutive month of contraction in manufacturing but growth in the overall economy for the 79th consecutive month, bolstered by the services sector. Of the 18 manufacturing industries, six are reporting growth in December in the following order: Printing & Related Support Activities; Textile Mills; Paper Products; Miscellaneous Manufacturing; Chemical Products; and Food, Beverage & Tobacco Products. The 10 industries reporting contraction in December — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Primary Metals; Fabricated Metal Products; Transportation Equipment; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Wood Products; and Nonmetallic Mineral Products.

Food, Beverage & Tobacco Products respondents say their customers are tightening inventories for the year end, thus impacting sales and shipments. Fabricated Metal Products personnel say business is slow due to oil prices. Chemical Products respondents say month-on-month sales were down but that profitability was up. Computer & Electronic Product respondents say December revenues are flat compared to November’s. Textile Mills say they are targeting reduced raw materials inventories by year end. Transportation Equipment personnel say deflation in many commodities is helping with product savings and that sales are strong with a backlog. Miscellaneous Manufacturing reports that medical device business continues to be strong, both in the U.S. and abroad, while Apparel, Leather & Allied Products report that sales have dropped and continue to be soft, resulting in reduced employment. Plastics & Rubber Products say business is going well, with low fuel prices keeping full-size SUV and truck sales at high volumes.

Finally, Petroleum & Coal Products are saying that low oil prices are negatively impacting oil and gas exploration activities. They state that low oil prices are generally positive for the petrochemical industry.

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 December, at 49.2 percent, was up 0.3 percentage points on November’s 48.9 percent reading, indicating contraction in new orders for the second consecutive month. The seven industries reporting growth in new orders in December — listed in order — are: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Petroleum & Coal Products; Primary Metals; Paper Products; and Chemical Products. The 11 industries reporting a decrease in new orders during December — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Machinery; and Food, Beverage & Tobacco Products.
  2. The ISM Production Index is at 49.8 percent in December, up 0.6 percentage points from November’s 49.2 percent reading, representing contraction in production for the second consecutive month. Seven industries reported growth in production during the month of December — listed in order — Printing & Related Support Activities; Textile Mills; Miscellaneous Manufacturing; Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; and Chemical Products. The nine industries reporting a decrease in production during December — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Primary Metals; and Fabricated Metal Products.
  3. The ISM Employment Index for December, at 48.1percent, is down 3.2 percentage points on November’s 51.3 reading, representing a return to contraction in the Employment Index following one month of growth. It is noteworthy that November’s reading represented a 3.7 percent increase on October’s, whereas December’s reading represents a 3.2 percent decrease on November’s. Seven of the 18 manufacturing industries reported employment growth in December— in order — Textile Mills; Printing & Related Support Activities; Paper Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Chemical Products; and Miscellaneous Manufacturing. Nine industries reported a decrease in employment in December — listed in order — Apparel, Leather & Allied Products; Petroleum & Coal Products; Primary Metals; Computer & Electronic Products; Transportation Equipment; Fabricated Metal Products; Plastics & Rubber Products; Machinery; and Food, Beverage & Tobacco Products.

Editors Note: Keep a watchful eye on Employment. Thought to be a lagging indicator, it is actually a leading indicator. Employment in manufacturing is closely tied to production of new orders and backlog (existing orders). If new orders remain in contraction, then production will burn off backlog. As they look forward 6 to 9 months, manufacturers will cease hiring and begin to reduce head count because there is insufficient new orders or backlog to support current employment levels.

  1. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was slower in December as the Supplier Deliveries Index registered 50.3 percent, which is 0.3 percentage points lower than the 50.6 percent reported in November. This is the fifth month of slower supplier deliveries, following two consecutive months of faster supplier deliveries. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. The three industries reporting slower supplier deliveries in December are: Food, Beverage & Tobacco Products; Transportation Equipment; and Electrical Equipment, Appliances & Components. The five industries reporting faster supplier deliveries during December are: Plastics & Rubber Products; Machinery; Chemical Products; Fabricated Metal Products; and Computer & Electronic Products. Ten industries reported no change in supplier deliveries in December compared to November.
  2. The ISM Inventories Index, at 43.5 percent for December, is 0.5 percentage points above November’s 43.0 percent reading, indicating a contraction of raw materials inventories in December for the sixth consecutive month. The five industries reporting higher inventories in December are: Petroleum & Coal Products; Furniture & Related Products; Plastics & Rubber Products; Computer & Electronic Products; and Chemical Products. The eight industries reporting lower inventories in December — listed in order — are: Primary Metals; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Machinery; Fabricated Metal Products; Miscellaneous Manufacturing; Paper Products; and Transportation Equipment.

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 51.5 percent in December, 1.0 percentage points higher than November’s 50.5 reading, meaning that customers’ inventories are considered to be too high for the fifth consecutive month. The seven manufacturing industries reporting customers’ inventories as being too high during the month of December — listed in order — are: Wood Products; Nonmetallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; Transportation Equipment; Computer & Electronic Products; and Food, Beverage & Tobacco Products. The four industries reporting customers’ inventories as too low during December are: Petroleum & Coal Products; Miscellaneous Manufacturing; Machinery; and Chemical Products. Six industries reported no change in customer inventories in December compared to November.
  2. The ISM Prices Index registered 33.5 percent in December, 2.0 percentage points lower than in November, indicating a decrease in raw material prices for the 14th consecutive month. In December 4 percent of respondents reported paying higher prices, 37 percent lower and 59 percent the same prices as in November. Of the 18 manufacturing industries, no industry reported paying increased prices for their raw materials in December. The 13 industries reporting paying lower prices during the month of December — listed in order — are: Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Apparel, Leather & Allied Products; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Plastics & Rubber Products; and Computer & Electronic Products.

Up in Price in December were: Dairy. Down in Price in November were: Aluminum (13); Brass; Copper (2); Copper Products; Crude Oil; Diesel; Gasoline; HDPE Resin; Nickel (6); Oil; Petrochemicals; Polyethlene Resin; Steel (6); Steel — #1 Busheling Scrap (3); Steel — Cold Rolled (3); Steel — Hot Rolled (3); Stainless Steel (14); and Steel Products. In Short Supply in November: 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 41.0 percent in December, 2.0 percentage points lower than November’s reading of 43.0 percent. Of the 88 percent of respondents who measure their backlogs, 12 percent reported greater backlogs, 30 percent smaller backlogs and 58 percent no change from November. Four industries reporting an increase in order backlogs in December: Textile Mills; Printing & Related Support Activities; Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components. The 13 industries reporting a decrease in order backlogs during December — listed in order — are: Primary Metals; Wood Products; Apparel, Leather & Allied Products; Fabricated Metal Products; Transportation Equipment; Plastics & Rubber Products; Paper Products; Computer & Electronic Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Machinery; and Chemical Products.
  2. The ISM New Export Orders Index was at 51.0 percent for December, 3.5 percentage points higher than November’s reading. This represents a return to growth in new export orders following six consecutive months of contraction. The eight industries reporting growth in new export orders in December — listed in order — are: Textile Mills; Printing & Related Support Activities; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Paper Products. The four industries reporting a decrease in new export orders during December are: Transportation Equipment; Computer & Electronic Products; Plastics & Rubber Products; and Primary Metals. Six industries reported no change in new export orders in December compared to November.
  3. The ISM Imports Index, is at 45.5 percent in December, or 3.5 percentage points lower than November’s 49.0 reading. This represents contraction in imports for the third consecutive month. Only two industries reported growth in imports during the month of December: Plastics & Rubber Products; and Computer & Electronic Products. The 11 industries reporting a decrease in imports during December — listed in order — are: Primary Metals; Apparel, Leather & Allied Products; Fabricated Metal Products; Miscellaneous Manufacturing; Furniture & Related Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Food, Beverage & Tobacco Products; Machinery; Chemical Products; and Nonmetallic Mineral Products.

World merchandise trade is up just 1 percent through the end of 2015. But, U.S. businesses are bullish on trade over the next six months, citing new trade pacts and momentum in the U.S. economy. According to the latest findings from the U.S. HSBC Global Connections Trade Forecast, 77 percent of U.S. business leaders expect trade volumes to increase in the short-term, with 30 percent seeing Asia as the best market for trade growth – down from 49 percent six months ago – 21 percent Europe – up from 13 percent, and 13 percent latin America. U.S. exports to China are forecast to increase by 9 percent per annum in the decade to 2030, by the end of which period China will surpass Mexico as the second largest market for U.S. exports, Canada of course being number one. Machinery and Transport Equipment will play the biggest role in long-term growth, accounting for almost 45 percent of the projected increase up to 2013, with chemicals accounting for 13 percent.

Reshoring is said to be increasing with large manufacturers. The Boston Consulting Group says manufacturers producing for the domestic market are increasingly more likely to add capacity in the U.S. than in any other country. Of companies expecting to increase capacity over the next five years, 31 percent say they will do it in the U.S., 20 percent in China: two years ago 30 percent said China, 26 percent the U.S.

News on the aerospace front sees GE Aviation working towards engine certification for its GE9X engines which were specifically designed for Boeing’s 777 -8X/9X aircraft. Certification is expected in 2018 for this engine, for which GE Aviation has received orders for 700 units since 2013. Lockheed Martin ends its year with a contract for 43 C-130J cargo aircraft of various shapes and breeds for the U.S. Government, all part of a $5.3 bn multiyear contract.

And Alcoa, never much out of the news these days, has just pulled in $2.5 bn in long-term supply contracts for Boeing. This will involve supply of multi-material forged fastening systems for each of Boeing’s aircraft programs. This represents Alcoa’s largest ever fastener deal. Alcoa will also supply ‘ready-to-install’ titanium seat-track assemblies for the three variations of Boeing’s 787 Dreamliner series. A further contract will see Alcoa Fastening Systems and Rings supply titanium, stainless steel, alloy steel, aluminum and nickel-based super alloy fastening systems for Boeing aircraft.

U.S. Lawmakers are to extend tax credits for solar and wind power projects for another five years. This will add an extra 20 gigawatts of solar power, more than every panel ever installed in the U.S. prior to 2015. Wind power will add another 19 gigawatts over five years, and combined these extensions will spur more than $73 bn of investment and will supply enough electricity to power 8 million U.S. homes.

Faraday Future, another electric car company, says it will build a $1 bn auto manufacturing plant in North Las Vegas. The plant will be 3 million sq.ft., create 4,500 jobs and be backed by a Chinese entrepreneur. Tesla’s deliveries meanwhile rang alarm bells on Wall Street and its shares dropped almost 8 percent, apparently because it didn’t surpass its delivery predictions, merely met them. It forecast 17,000-19,000 deliveries in the fourth quarter and delivered 17,400; it forecast 50,000-52,000 for the full year and delivered 50,580.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw its fifth consecutive month below the 50 mark, with December’s 47.5 percent a significant drop from November’s 48.6 figure. New orders and production fell with the latest deterioration in overall conditions the worst since October 2010, when data collection on this survey began. Companies are lowering inventories, discounting prices and, for the sixth consecutive month, cutting back on staff.

It appears that Canada will confirm its recession at the end of January with two consecutive quarters of negative GDP. A recession is a normal part of the business cycle. What is odd is that Canada usually mirrors U.S. business cycles, which is why a recession in Canada is also of concern. There was a slight improvement in export orders, both from the U.S. and further afield, probably due to the weak loonie (the one dollar Canadian coin that bears an image of a loon on its obverse).

However, exports were not enough to offset what is ‘happening at home.’ Again it is Alberta and BC who are suffering the most, who are in fact responsible for Canada’s below-par performance. Ontario continues to buck the Canadian trend, recording a sustained rise in manufacturing output.

Canada produced 0.91Mt of crude steel in November, down 5.3 percent y-o-y. Preliminary figures suggest another record year for new vehicle sales in Canada, with a total 1.898 mn vehicles being driven off the lots. FCC saw a sales increase of 1.1 percent to 293,061 vehicles, Ford’s figures declined 4.6 percent to 278,437 and GM recorded a 5.4 percent increase to 263,335 vehicles. Sales of light trucks – which include SUVs, minivans and pickup trucks – were up 8.8 percent, cars down 6.3 percent.

MEXICO saw its December PMI fall slightly from November’s 53.0 reading to 52.4 percent. Manufacturing conditions improved in December but at the slowest pace for three months. There was a solid increase in new order volumes, with the rate of growth in production back to a three-month low. Employment rose at the slowest pace since June. All in all, there is an air of optimism around the Mexican manufacturing scene.

Mexico’s domestic auto sales are headed for a record this year, with almost 120,000 units having been sold in the year’s first 11 months, for an almost 20 percent y-o-y gain. Even VW is doing well, with a 10 percent sales gain through November (Mexico has been producing VWs since 1967). As we know, Mexico is big in the automotive business, and improved domestic sales are icing on their cake. Mexico produced 1.31 Mt of crude steel in November 2015, down 9.5 percent y-o-y.

In Short Supply in November: None
  1. The ISM Backlog of Orders Index was at 43.0 percent in November, 0.5 percentage point up on October’s reading of 42.5 percent. Of the 89 percent of respondents who measure their backlogs, 15 percent reported greater backlogs, 29 percent smaller backlogs and 56 percent no change from October. The only industry reporting an increase in order backlogs in November is Textile Mills. The 12 industries reporting a decrease in order backlogs during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Plastics & Rubber Products; Transportation Equipment; and Fabricated Metal Products.
  2. The ISM New Export Orders Index was at 47.5 percent for November, the same reading as for October. This is the sixth consecutive month of decrease in new export orders. The five industries reporting growth in new export orders in November are: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The eight industries reporting a decrease in new export orders during November — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Non-metallic Mineral Products.
  3. The ISM Imports Index, is at 49 percent in November, or 2.0 percentage points higher than October’s 47.0 reading. This represents contraction in imports for the second consecutive month. The seven industries reporting growth in imports during the month of November — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; and Fabricated Metal Products. The six industries reporting a decrease in imports during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery.

The MAPI foundation recently brought out reports forecasting, for the next three years, an inflation-adjusted GDP expansion of 2.0 percent in 2016, 2.7 for 2017 and 2.5 in 2018. Manufacturing production is expected to overtake 2015’s growth rate of 1.8 percent, with 2.6 percent in 2016, 3.0 in 2017 and 2.8 in 2018.

Cutting tool consumption by U.S. Manufacturers was at $170.8 million in September, down 1.3 percent from August and down 11.7 percent from September 2014.

Kansas City, Missouri has seen 11 suppliers to Ford and GM set up shop in the area, providing 1,795 jobs that pay $74.1 million, taking up over 2.2 million ft2 of industrial real estate. The area is the second-largest auto hub in the U.S. and is lauded for the quality of its workforces and of its educational institutions. Ford produces its F-150 and its Transit full-size van in the area, which is home to some of the world’s largest auto-supply companies.

News on the aerospace front again sees Boeing picking up contracts around the world. TAP, Portugal’s flagship, is in for 53 long and medium-haul neo-jets with a catalog value of $8.5 billion. Boeing will supply India’s Jet Airways, the country’s second-largest airline, with 25 new 737 MAX8 aircraft, with options for 50 more. The price tag for these fuel-efficient carriers is in the order of $8 billion. Boeing forecasts a demand for some 3,000 jets worth $350 billion by 2034 in Latin America and the Caribbean.

GE Aviation, for its part, picked up a maintenance contract from Emirates for its fleet of 150 Boeing 777s. The MRO on the GE9X engines for 12 years is worth $16 billion.

And Pratt & Whitney’s new PW 1900G Pure Power Geared Turbofan (GTF) engines went on their first test flight at the Mirabel Flight Test Center near Montreal. The engines are for Brazil’s Embraer for its E2 jet series.

General Motors will, after all, sell Chinese-made SUVs in the U.S. The Buick Envision, made in China, will join the Encore, built in South Korea and the Enclave, built in Michigan, in the U.S. Market.

The automotive news wouldn’t be complete these days without mention of Tesla, who recently announced a third-quarter loss of $230 million on revenues of $937 million. But news of progress with upcoming models was sufficient to send their share price up 9 percent. In the third quarter they produced 13,091 vehicles and delivered 11,603. They estimate total production for 2015 of 50 to 52,000 vehicles, with global orders for the S model increasing, over 50 percent of which are sold to China. It’s not all good news though: all model S cars sold since 2012 will be recalled for a security problem with front seatbelts which failed to fasten correctly. No accidents have been reported.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw its fourth consecutive month below the 50 mark, with November’s 48.6 percent reading up from October’s 48.0 figure. November saw a slightly slower downturn in overall business conditions than the low seen in October. There was a moderation in manufacturing production cuts in November, with the latest decrease in output the least marked for three months.

New business levels decreased at a sharper pace than in October, and there were continuing efforts to adjust employment levels and inventories. There was a slight improvement in new export sales in November. Ontario put in the best performance in the month, and showed the fastest rise in export sales since March 2011. Alberta and British Columbia were again ‘in trouble.’

Overall manufacturing employment fell for the fifth consecutive month. Canada produced 1.03Mt of crude steel in October, down 7.7 percent y-o-y. Again, in spite of a slow economy, Canadians bought 145,426 new vehicles in November, up 4.7 percent y-o-y. This represents the highest November sales on record, along with an annual figure estimated to reach 1.94 million units.

Quebec put its second cash injection in a month into manufacturer Bombardier. The company gave up a stake in its rail unit for the funding to get its C-series jetliner flying. The Caisse de depot et placement du Quebec (CDPQ), which is Canada’s second-largest pension fund, will put $1.5 bn into Bombardier in exchange for a 30 percent stake in its rail subsidiary Bombardier Transport.   Bombardier Transport would be spun off into a separate entity registered in Britain, with its headquarters remaining in Berlin. The Bombardier rail unit employs 39,700 people worldwide and has, according to the company, a $30 bn order backlog.

MEXICO’s PMI for November was at 53.0, unchanged from October’s 53.0 reading.  Production and New Orders picked up in November and growth accelerated to its fastest since April. New export orders were up only slightly. Mexico’s manufacturing sector remains on track to put in a good performance for the rest of the year. Mexico produced 1.75 Mt of crude steel in October 2015, up 8.0 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

FORGING MAGAZINE has recently published their 2016 Business Outlook Survey, involving respondents whose operations perform all major types of forging, from open- and closed-die forging to impact extrusion, as well as ring rolling. The scale of their production activities during 2015 shows a range of shipments, from less than $1 million/year (25.5% of respondents) to over $100 million in shipments (14.5%.)

The survey went further than shipments, taking into consideration what might be termed capacity utilization. Just 19.6% of respondents indicated their operations having been active at 80-100% of installed capacity; 43.5% of all respondents indicated their operations having been active at less than 70% of capacity.

In line with these data, the 2016 Business Outlook Survey respondents are almost evenly split in their assessment of their current business conditions: 33.3% of all respondents are confident their 2015 shipment volumes will rise over the 2014 record, 30.3% indicated their shipment totals will be down year-on-year; and 36.4% stated they expect results that are “about the same” as 2014.   For comparison, the Forging Industry Association reported the industry’s total 2014 shipments rose 10.8% in value from 2013, to $11,918.8 million.

No single metal or alloy is singled out in the positive evaluations of respondents’ assessments of 2015 shipments, but impression-die forgers appear most confident that their 2015 shipments will improve on last year’s results. Among the major production classes, ring rollers appear least confident about their 2015 results.

Taking the same approach to the 2016 prospects, we can detect a slight bias toward the positive outlook (49.2%) over the “about the same” crowd (41.5%). Aluminum forgers (61.1%) and impression-die forgers (62.5%) are the most likely to expect rising shipments in 2016. In general, the differences between those predicting increased shipments in 2016 and those predicting shipments to remain steady with 2015, are distributed fairly evenly across the various metal and alloy categories.

IV. MANUFACTURING TALK RADIO

by Tim Grady

In December, two leading voices from WeiserMazars LLP, Partner Vince Paolucci and Senior Tax Associate Gianluca Carrabs, unpacked the benefits of the Section 179 Tax Deduction before the end-of-year deadline for filing closed the door on deductions. At the time of airing on the 1st, the deduction still was in limbo in Congress making it nearly impossible for any company to use. However, it has since been made permanent in the $1.1 trillion spending bill passed by Congress on December 18, 2015. WeiserMazars LLP is a client-centered, full-service accounting, tax and advisory firm with over 100 partners and 700 professionals in ten U.S. offices.

PrintWeiserMazars is the independent U.S. member firm of Mazars Group – a prominent international accounting, audit, tax and advisory services organization with nearly 15,000 professionals in more than 70 countries.  For more information on Section 179 or other related topics, please contact Vincent Paolucci via email at Vincent.Paolucci@WeiserMazars.com or via phone at 516.282.7267.

Also on December 1st, Brad Holcomb, chair of the ISM’s Manufacturing Report on Business® committee, explained the detail within the report. On December 8, Tony Nieves, chair of the ISM’s Non- Manufacturing Report on Business® committee, joined Brad on the show to present the ISM’s annual forecast for 2016, which is fairly positive.

With us on December 15th was Daniel J. Meckstroth, Ph.D., Vice President and Chief Economist for MAPI Foundation, the research affiliate of the Manufacturers Alliance for Productivity and Innovation, and Bruce McDuffee, Executive Director of the Manufacturing Marketing Institute.  Dan discussed the latest MAPI quarterly economic forecast for manufacturing sectors. Hear the podcast on how the next three months could roll out and what the key takeaways are for manufacturers in the U.S. and around the globe. Then at 1:30pm we discussed why marketing matters for manufacturers with Bruce McDuffee.  How can manufacturers effectively address the unique challenges they face?  Learn about strategies, tactics and skills that will move your marketing efforts from cost to value, enabling engagement with your customers at every stage of the buying cycle.

On Tuesday, December 23, Senior Correspondent Norbert Ore, Director and Head of Industry Surveys for Strategas Research Partners provided insight into the 18 global business surveys he follows on PMI indices around the world. The Adam Clark, Chief Strategy Officer of Tangible Solutions discussed how additive manufacturing, often called 3D printing, is fundamentally changing the design, production and distribution of goods in the 4th Industrial Revolution.

Finally, on December 30, talk show co-hosts Lew Weiss and Tim Grady reviewed the stories of 2015: what was hot, what was not, and where things look to be going in 2016. All of these shows can be heard at www.mfgtalkradio.com

V. EUROZONE

by Royce Lowe
eurozone

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for December was 53.2, its highest since April 2014, thus ending the year on a high note. The month saw increases in rates of growth of production, new orders and new export orders. The average PMI for the year’s final quarter, at 52.8, was the best growth showing since the first quarter of 2014, and an average for 2015 as a whole better than those for the previous three years. Even Greece was back on track, above the 50 mark, and France posted a 21-month high. This is an improvement, but Eurozone manufacturing is still some 9 percent below its pre-crisis peak.

PMI High/low
Italy 55.6 (54.9) 57-month high
Ireland 54.2 (53.3) 5-month high
Netherlands 53.4 (53.5) 3-month low
Germany 53.2 (52.9) 4-month high
Spain 53.0 (53.1) 2-month low
France 51.4 (50.6) 21-month high
Austria 50.6 (51.4) 4-month low
Greece 50.2 (48.1) 19-month high

VW – That’s it then…now we’re looking at a small group of culpable engineers, dating back to 2005. The Group’s sales, including all 12 brands, were down 2.2 percent in November. Bentley Group sales were up 20.6 percent.

Siemens, apparently not at all deterred by China’s economic slowdown, will open a R&D Innovation Center in that country, and its 300 future employees will develop new ‘digitalization solutions’ for both Chinese and international markets.

Airbus aimed to deliver its first A320neo aircraft by year end. This is the model that boasts a 15 percent fuel saving.

Germany is looking to set a new record for exports in 2016. The weak euro, it estimates, will set it on its way to a rise in exports to 1.191 trillion euros ($1.3 trillion.) Germany’s new car registrations were up 7.7 percent y-o-y in December to 247,000 units; France up 13 percent to 183,726; Italy up 19 percent to 103,395 and Spain, still benefitting from a scrappage program that has been extended to mid-year, up 21 percent to 88,609 units.

Crude steel production in Germany in November 2015 was at 3.48Mt, down 3.1 percent y-o-y; in Italy 1.86Mt unchanged y-o-y; in France 1.18Mt, down 14.7 percent y-o-y and in Spain 1.21Mt, down 3.0 percent y-o-y.

Russia’s crude steel production for November 2015 was at 5.71Mt, down 3.1 percent y-o-y, Ukraine’s was 1.88Mt, up 3 percent y-o-y.

Production and new order growth slowed further as The UK’s PMI figure dropped to 51.9 in December from November’s 52.5 reading. The UK produced 0.668Mt of crude steel in November, down 33 percent y-o-y. They seem to have stopped making steel in the UK.  The UK saw registration of 2.63 new vehicles in 2015. This is up around 6 percent on 2014 and is the fourth consecutive year of growth. December 2015 registrations are thought to be the highest on record.

The year 2015 overall was below that of 2014, with the average indices for production, new orders and employment below those achieved in 2014. The consumer goods sector was again the engine of production and new order growth, with employment rising for the 30th time in the past 32 months. There was an increase in demand from the U.S., Singapore, China and Europe.

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) – was down in December to 50.9 from 51.2 in November. The global manufacturing sector saw a disappointing end to the year, with rates of expansion in production and new orders both slowing in December. The average PMI in 2015 was less than those seen in both of the preceding two years. A weaker expansion at investment and intermediate goods producers was partly offset by a slight increase at the consumer goods level. There was a continuation of the downturn in emerging markets manufacturing, with indices for China, India, Brazil, Russia, Indonesia and Malaysia all in contraction. On the plus side, global manufacturing employment rose for the third straight month, with job creation noted at consumer and intermediate goods producers.

VI. ASIA OUTLOOK

by Royce Lowe
china

CHINA produced 63.32Mt of crude steel in November 2015, down 1.6 percent   y-o-y; Japan 8.75Mt down 4.7 percent y-o-y; India 7.14Mt, unchanged y-o-y and South Korea 5.89Mt, unchanged y-o-y. Taiwan produced 1.62Mt in November, down 23.0 percent y-o-y.

The Caixin China manufacturing PMI for December, seasonally adjusted, was down slightly to 48.2 percent from November’s 48.6. Production declined for the seventh time in the past eight months, amidst a further fall in new orders. Business conditions have deteriorated in China for the past ten months, but the latest was ‘modest overall.’ Relatively weak market conditions and reduced client demand prompted firms to cut production.

Chinese y-o-y vehicle sales growth is forecast to hit 3 percent for this full year, with a higher increase expected in 2016. November saw sales of 2.51 mn vehicles, 12.9 percent up on October, with an eleven-month total of 21.79 mn, representing a 3.3 percent y-o-y increase.

China General Nuclear Power Corporation (CGNPC, or CGN) will invest €1.6 bn ($1.7 bn) in the French firm Inovia Concept Développement (ICD), a company in the business of developing photovoltaic panels for solar power, to produce a minimum of 1 gigawatt over 5 years.

JAPAN’s manufacturing sector saw a continuation of the improvement noted in the month of November, with significant upturns in the rate of increase of new orders and production. Employment was also up, at a faster rate than the 2015 average. All data indicate a sustained marked improvement in operating conditions at Japanese manufacturers.

The Nikkei manufacturing PMI was unchanged from November’s 52.6, the highest reading in 20 months. This is the strongest quarterly average (52.5) since the first quarter of 2014 (55.3). Growth in new orders was attributed to new product launches and advertising campaigns. Consumer and investment goods sectors showed marked growth in new orders. Exports were up for the third consecutive month due, some companies say, to increased business with Taiwan and Southeast Asian countries.

Japanese car sales for the year 2015 were down 9.3 percent y-o-y, due mostly to reduced sales of their ‘mini-cars,’ cars with a 600 cc engine.

Japan has sold a ‘bullet train’ to India, along with a loan for $8 bn. The train will run from Mumbai to Ahmedabad, will cost $15 billion in total, and will cut the journey time from 8 hours to 2 hours. Last year India finally got a train to do 100 m.p.h., about half the speed the Japanese train will do.

It may be interesting to note here that the world speed record for a steam locomotive is still held by ‘Mallard’ in England – they gave trains names in those days – which hit 125.88 m. p. h. (202.58 k.p.h.) back in July 1938, taking the title away from Germany.

In INDIA, the Nikkei PMI reading fell from 50.3 in November to 49.1 in December. This reading represents a PMI below 50 for the first time since October 2013, the date since which new orders last contracted. Consumer goods new orders and production rose, but there was a fall in intermediate and investment goods sectors.

Total manufacturing fell in December after increasing for 25 consecutive months, with the rate of contraction the most severe in almost seven years. Incessant rain and flooding in Chennai have been named as major factors in the manufacturing decline. In spite of all this, additional workers were hired in December, based on expectations of improved near-term domestic demand.

India’s Bharat Forge has signed a long-term agreement with Rolls-Royce whereby the forge will supply critical, high quality forged and machined parts for certain Rolls-Royce engines. Bharat Forge has undergone the necessary stringent quality and process approvals.

Amway, a behemoth U.S. Corporation, in the beauty, personal care and home care business, is to open a plant in India, which will immediately create 500 direct jobs and 1,000 indirect jobs. All products then sold in India will have been manufactured in India. Amway already has plants in China and Vietnam.

UN Secretary General Banki – Moon recently chaired a summit of the Global Geothermal Alliance Initiative, attended by 36 countries, where it was deemed that by 2030 there will be a six-fold increase in supply of geothermal energy, which is presently increasing at 3-4 percent per year and generating 12 gigawatts annually. There is a potential of 100 gigawatts. The process involves drilling into hot rock and using the heated water to generate electricity. ‘Thermal hotspots’ have so far been found in Africa, SE Asia and Latin America.

VII.  SOUTH AMERICA

by Royce Lowe

Brazil’s crude steel production for the month of October 2015 was 2.55Mt, a 4.5 percent y-o-y decrease. Brazil’s manufacturing performance deteriorated further in December, with production and new orders down for the 11th consecutive month. In spite of a slight increase in the PMI to 45.6, December production and new orders fell at rates that although slower than those of November were nonetheless significant. Employment fell along with all this. The only bright spot was a modest increase in new export orders.

It seems that Brazil has problems with much more than its manufacturing sector, including a very unhappy, and some say very incompetent, president.

Embraer Commercial Aviation of Brazil begins deliveries of its $1.1 billion contract to China’s Tianjin Airlines, delivering the first two of its 20E195 jets of its order for 20 20E195 and 20E 190 aircraft.

VIII. GLOBAL PMIs SUGGEST SLUGGISH GLOBAL GROWTH

by Norbert Ore

The December 2015 business survey insights show that global growth slipped slightly in December, but still remained positive overall. Of the 18 global surveys, nine are growing and nine are declining. The nine that are growing combine for an average PMI of 52.4, while the nine in decline average 47.4 percent.

The JP Morgan Chase Global PMI (50.9, -0.3) which combines reports from 24 countries tells a similar story. Overall, the Eurozone edged higher (53.2, +0.4) and is growing for the 30th consecutive month, the strongest reading since April 2014. Eurozone manufacturing has strengthened as the U.S. has weakened and the stronger USD has helped their recovery.

Germany (53.2, +0.3) continued positive with its 13th consecutive month of growth. The remaining seven Eurozone countries average 52.6 percent and were again led by Italy (55.6, +0.7) and Ireland (54.2, +0.9). Note: This paragraph usually starts “With the exception of Greece, the Eurozone is growing,” however, this month Greece (50.2, +2.1) made it to the topside of the mid-point signaling that they have hit a bottom and eked out a small amount of growth.

The UK (51.9, -0.6) registered its 33rd consecutive month above the 50 mark. While the rate of expansion slowed, the UK manufacturing sector continues to benefit from the demand for consumer goods.

As for North America, Canada (47.5, -1.1) failed to grow for the fifth consecutive month. Mexico (52.4, -0.6) expanded at a pace slightly below its six month average of 52.6.

The official data for China, the CFLP PMI (49.7, +0.1) continues to offer insight to a lack of change as it averaged 49.9 percent for the year. However, the Caixin China General Manufacturing PMI (48.3, -0.3) registered a rate of contraction slightly below 48.7 percent that is the average for the year. One indicates no relative change and the other indicates a slow decline – the latter of the two seems more plausible. (Note: The Caixin China General Manufacturing PMI was formerly the HSBC survey).

IX. CREDIT MANAGER’S INDEX

by Chris Kuehl

Dr. Chris Kuehl

This has not been the greatest start to a year – regardless of what happens from this point 2016 will be seen as a year that began with a lot of angst over everything from the price of oil to the state of the Chinese economy. It I a good idea to take a slightly longer look and consider what we knew as 2015 came to a close. As the year came to an end there were two ways the Credit Managers’ Index could go – there was always the distinct possibility it would trend in the same negative direction it showed in November and then there was the opportunity to show some positive movement. There was no expectation of dramatic movement in either direction. The latest numbers are a little better than November’s and the bulk of the change seems to be due to the retail sector and its response to the consumer.

The overall CMI score eased upward ever so slightly from 52.6 to 52.8; for all intents and purposes a flat reading. The good news is that the numbers did not dip as some had expected. The other good news is that most of the stability was in the unfavorable categories and that is slightly more encouraging as far as the future is concerned. The favorable index went down a bit – from 57.7 to 56.6 but overall the favorable categories remain comfortably in the middle 50s and clearly in expansion territory. The unfavorable index emerged from the contraction zone as it went from 49.2 to 50.3. Granted this is a razor thin margin and no reason for wild celebration but the reading this month is still better than it has been since August.

There may have been some good news in the overall CMI but that good news was not shared in the manufacturing sector. The overall score deteriorated from 52.3 to 51.6 – hanging on to the expansion zone by the thinnest of margins. The big changes were in the favorable sectors as the overall score fell from 56.8 to 54.1. There was also some movement in the unfavorable sector but not all that dramatic as it went from 49.4 to 49.9. That is a very slight improvement and essentially flat but at least it is not still trending down any further than it was.

The news that has been emerging thus far this year has not been all that encouraging as the Purchasing Managers’ Index has now trended in the contraction zone for two months in a row. The biggest concerns involve the collapse of the energy sector and the slowdown in export volume.

  X. THE MANUFACTURING SCENE : CROSSING BRIDGES

by Royce Lowe

Cast iron has been traced to China in the 5th century BC, when examination of the microstructure of artifacts proved that such was the case. We started using it in the West in the 15th century, and in fact Henry VIII was the first to declare its use for armaments.

Cast iron as such is a very brittle material, and it wasn’t until 1943 that an American by the name of Keith Millis invented what came to be known as ductile iron or nodular iron. He and two colleagues were awarded a patent in 1949, for the production of ductile iron by magnesium treatment.

‘Normal’ cast iron contains graphite flakes and is extremely brittle, reading about 0.5 percent on the elongation scale. Ductile iron contains spheroidal graphite and reads about 20 percent elongation. Apart from cooking utensils, cast iron was used for bridges in the eighteenth and nineteenth centuries in England, several of which met rather disastrous ends due to overloading and subsequent collapse. This article will not be a dissertation on the properties of cast iron, rather it will be the story of two bridges.

The first one, now a historical monument, was built in Shropshire in England over the River Severn and was opened in 1781. It was the world’s first cast iron arch bridge and at the time this fact was greatly celebrated. The bridge had a span of about 100 feet and some 385 tonnes of cast iron were used in its construction. The bridge served its purpose for some time, allowing transport of iron-making materials over the Severn gorge, with occasional changes in maximum allowable loads and toll rates. But cracks appeared, as they were wont to do when graphite flakes were involved, and after closing the bridge to vehicular traffic in 1934 and subsequently collecting tolls from pedestrians for a few years, the bridge was finally closed to any kind of traffic in 1950. Repairs were carried out and the bridge was the subject of many TV documentaries and, with the advent of digital photography, a delight to the general public.

If we fast forward a few decades we get to hear about a manufacturing technique called 3D Printing, or Additive Manufacturing. The process involves the formation of successive layers of material under computer control to create a three-dimensional object. Most of us are relatively new to this, and it seems to have been around for only a few years. It actually started, in a small but sophisticated way, in 1985, in Japan, and was quickly taken up in North America. Thanks to numerous individuals and teams spending countless hours on the processes, we have arrived at a stage where additive manufacturing is taking a more and more advanced place in the whole manufacturing scene. It is not, not yet in any event, at the point where it will replace what we have come to know as mass production, or at the present time, just normal ‘subtractive’ manufacturing.

You might imagine the volumes that have already been ‘written’ on 3D printing, and the forecasts for its use between today and say, 2020. (If you google 3D printing you get 82 million results in 0.50 seconds.) We’ll need to wait and see, but one thing is for sure: 3D Printing is here to stay. Witness a project underway in the Netherlands, where a Dutch start-up, MX3D, has unveiled plans to build the world’s first 3D-printed bridge across an Amsterdam canal, a technique that could become standard on future construction sites.

The company plans to print a (pedestrian) bridge over water in the centre of Amsterdam, involving the use of robotic arm printers ‘walking’ across the canal as it slides along the bridge’s edges, essentially printing its own support structure out of thin air as it moves along. Specially-designed robotic arms will heat the metal to 1,500ºC (2,700ºF) to painstakingly weld the structure drop-by-drop, using a computer program to plot the sophisticated design. The underlying principle is quoted as being ‘very simple’ by Joris Laarman, the bridge’s designer. It involves connection of an advanced welding machine to an industrial robot arm.

“We now use our own intelligent software to operate these machines so they can print very complex metal shapes which can differ each time,” Laarman said of the project, which also involves the Heijmans construction company and Autodesk software.

So there we have it……from the industrial revolution era of Iron Bridge, with its heat and dirt and smoke, to the bridge over the Amsterdam canal, planned to be made by a printing process that will deposit successive steel nodules: like the Iron Bridge, a testimony to man’s mastery of technology

XI. THE FINAL WORD

final wordby Royce Lowe

What can be said following all that has gone before in the past month or so? There seems, on the face of it, to be none too much room for optimism, but optimistic we must be. We have been in worse places before and come through them; we have to hope that our basic ingenuity will bring us through them again.

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Metals & MFG Outlook Newsletter for December 2015

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 Subscribe at the bottom of the page.


I. Cover Story: Now what?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE GLOBAL SUMMARY
IX. CREDIT MANAGERS INDEX
X. THE MANUFACTURING SCENE
XI. THE FINAL WORD

PUBLISHER’S STATEMENT

Remember the boom times way back when? When you could hardly keep up with orders? When lead times were months instead of weeks or days? So do we, but we’re not writing about that yet. The prognosis from most quarters is favorable and no one is talking recession except media desperate for attention.

However – our government continues to pound manufacturing with new taxes and new regulations. Exactly what do they expect to happen to jobs and consumer spending? At some point, the government may cause the very downturn in GDP they wish to avoid. Consumers don’t have endless buying power because wages are mostly stagnant, and their borrowing power in credit cards or home equity evaporated in 2008. The only wiggle room they have had are low gas prices at the pump. If those begin to rise, then consumer spending may weaken.

Additional new taxes and more new regulations may cause employment in 2016 to begin to retrench. This may be further accelerated by new technology implanted to perform mundane and repetitive jobs. Costs will be passed on to consumers because manufacturers cannot endlessly absorb them. And, manufacturers are still grappling with regulations from 2015 and 2014. Bottom line: the government isn’t helping.

Manufacturing Talk Radio will be covering the shifts in the industry each and every week with a watchful eye on these dynamics. Did you know that the recovery from every recession over the last 100 years has been led by a recovery in manufacturing? The services sector may be a larger percentage of GDP, but unless something is made and bought – nothing happens. And the coolest jobs with the latest technology in R&D and operations are going to be in manufacturing over the next decade. ‘Green’ isn’t just a discussion – it’s a better product or a way of winnowing out waste such as toxic waste, machining waste, packaging waste, time waste, energy waste and planet resources waste.

If you have been listening, you know that we report on the stories behind the sound bites. There is no ‘gotcha’ in our game. We believe all the men and women working in manufacturing or who are impacted by manufacturing deserve the details that make the headline a story. Look at what you drive, sleep on, eat with, drink from, dress in and recognize that our lives directly or indirectly depend on manufacturing.

So, as you read this issue of Metals & Manufacturing Outlook, we’d still like to hear from more of you. Send you comments to publisher@steelforge.com. Until then, enjoy the ebbs and flows of each of the following sections.

Sincerely,

Lewis A Weiss, Publisher

I. COVER STORY: NOW WHAT?

by Royce Lowe

Not many of us would have predicted a further fall in the ISM PMI figure for the U.S. manufacturing economy, but that’s exactly what we got. Apart from employment, all indices were down in the month of November and that might be the encouraging news: more people are being hired so better things must be around the corner? But new orders are down and so are backlogs. So what we’ll all need to do is just wait and see, and with Christmas coming up that’s maybe all a lot of us will want to do.

It’s interesting to note that Markit comments upon the resilience of manufacturing growth, good to hear in these somewhat uncertain times. Coincident with this is a moderate improvement in Europe, and the word from India that its economy will be ‘the one to watch’ for the next couple of years. Brazil is telling competitors in next year’s Olympics they’ll need to air condition their own dorms. So things aren’t getting much better in Brazil.

The PMI figure from the Institute of Supply Management fell from 50.1 to 48.6 percent in November, moving into contraction territory for the first time in 36 months. There was growth in the overall economy for the 78th consecutive month.

The Markit PMI for the U.S. manufacturing sector fell from October’s 54.1 figure to 52.8, a 25-month low, on the back of the weakest improvement in business conditions since October 2013, with production, new orders and employment all expanding at lower rates. New export orders fell for the first time since August this year.

Growth in production, at a seven-year high in October, moderated in November and backlogs of work decreased for the first time since November 2014. Through all this, while the pace of manufacturing growth appears to have slowed in November, it remains resilient – all the more noteworthy considering the dollar’s strength and the weakness in overseas markets.

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 ‘second’ estimate for the annual rate of Real GDP growth in the third quarter of 2015, placing it at 2.1 percent. The figure for the second quarter was 3.9 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.

The Dun and Bradstreet Economic Health Index for November stated that   214,000 new non-farm jobs were added to U.S. payrolls in the month, with gains in all sectors except Manufacturing. According to DNB the Small Business Health Index fell 1.1 points in the month of November.

DNB say their Overall Business Health Index fell by 0.2 percent month-on-month, the first drop in six months. DNB further state, ” despite this month-to-month drop active and open businesses remain near lowest level of risk compared to the prior five years.” In effect the latest data reflect an economy that is stronger than a year ago.

GALLUP’s U.S. Economic Confidence Index began the month of December at -12, whereas the Gallup Job Creation Index was showing a +31 figure.

World crude steel production for the 66 reporting countries for the month of   October 2015 was 133.64Mt, down 3.2 percent from the October 2014 figure.

U.S. crude steel production, for October 2015 was 6.74Mt, down 9.6 percent y-o-y.

Primary Global Aluminum Production in October 2015 was 4.908 million tonnes. Of this total, 2.675 million tonnes, almost 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 433,000 tonnes, North America 377,000 tonnes.

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

The ‘Big Eight’ November ’15 November ’14 YTD % change
General Motors 229296 225818 1.5
Ford 186889 186334 0.3
Toyota 189517 183346 3.4
FCA 172901 167704 3.1
Honda 115441 121814 -5.2
Nissan 107083 103118 3.8
Hyundai/Kia 105560 98608 7
VW 23882 31725 -24.7
Total new   cars and light trucks 1319913 1302043  1.4

 

                       CARS                  LIGHT TRUCKS             TOTAL 

NOV 2014       597557                 704486                          1302043

NOV 2015       546757                 773156                          1319913

                       -8.5%                    +9.7%                             +1.4%

Total YTD light vehicle sales are up 5.4 percent over 2014.

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 +2.1 (qtr) +0.3 (Oct) +0.2 (Oct) 5.0 (Oct)
Canada -0.5 (qtr) – 0.5 (Aug) +1.0 (Oct) 7.0 (Oct)
China +7.4 (qtr) +5.6 (Sept) +1.3 (Oct) 4.1 (Qtr 3)
Japan – 0.8 (qtr) -0.9 (Sept) -0.8 (Sept) 3.4 (Sept)
Britain +2.0 (qtr) +1.1 (Sept) -0.1 (Oct) 5.3 (Aug)
Euro Area +1.2 (qtr) +1.7 (Sept) +0.1 (Oct) 10.8 (Sept)
France +1.4 (qtr) +1.6 (Sept) +0.1 (Oct) 10.7 (Sept)
Germany +1.3 (qtr) +0.2 (Sept) +0.3 (Oct) 6.4 (Oct)
Spain +3.2 (qtr) +4.0 (Sept) -0.7 (Oct) 21.6 (Sept)
India + 6.6 (qtr) +3.6 (Sept) + 5.0(Oct) 4.9 (2013)
Brazil – 7.2 (qtr) -10.8 (Sept) + 9.9 (Oct) 7.9 (Oct)
Taiwan +0.2 (qtr) – 6.2 (Oct) + 0.3 (Oct) 3.8 (Oct)
Mexico +3.0 (qtr) + 1.7 (Sept) +2.5 (Oct) 4.2 (Sept)

FF Journal Magazine

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II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 48.6 percent in November, down 1.5 percentage points from October’s 50.1 reading, representing the first contraction in manufacturing for 36 months and growth in the overall economy for the 78th consecutive month. Of the eighteen manufacturing industries, five are reporting growth in November in the following order: Printing & Related Support Activities; Non-metallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment. The 10 industries reporting contraction in November — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; and Chemical Products.

Food, Beverage & Tobacco Products respondents say that month-over-month conditions are stable. Fabricated Metal Products personnel say automotive is still strong. Chemical Products respondents say they are still seeing deflation in raw materials. Computer & Electronic Product respondents say bookings and new orders are lower than expected. From the Machinery area we hear that the downturn in China and the European markets are negatively affecting their business. Transportation Equipment personnel say that business is still good.

Primary Metals are reporting that the strong dollar is hurting sales to China as they can buy in Europe. Miscellaneous Manufacturing reports that medical devices continue to be strong, while Furniture & Related Products state that incoming orders have leveled off from the summer.

Finally, Petroleum & Coal Products are saying that the oil and gas industry is accepting the present oil prices as a factor to be lived with for some time.

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 November, at 48.9 percent, was down 4.0 percentage points on October’s 52.9 percent reading, indicating contraction in new orders for the first time since November 2012, when the New Orders Index was at 49.5 percent. The five industries reporting growth in new orders in November are: Electrical Equipment, Appliances & Components; Non-metallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Primary Metals. The eight industries reporting a decrease in new orders during November — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Plastics & Rubber Products; Machinery; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; and Computer & Electronic Products.
  2. The ISM Production Index is at 49.2 percent in November, down 3.7 percentage points from October’s 52.9 percent reading, representing contraction in production for the first time since August 2012, when the Production Index registered 49.1 percent. The five industries reporting growth in production during the month of November are: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The seven industries reporting a decrease in production during November — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Primary Metals; Plastics & Rubber Products; Transportation Equipment; and Chemical Products. Six industries reported no change in November compared to October.
  3. The ISM Employment Index for November, at 51.3 percent, is up 3.7 percentage points on October’s 47.6 reading, representing a return to growth in the Employment Index following one month of contraction. Nine of the 18 manufacturing industries reported growth in November, namely, in order: Textile Mills; Printing & Related Support Activities; Paper Products; Non-metallic Mineral Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; and Miscellaneous Manufacturing. The five industries reporting a decrease in employment in November are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; and Computer & Electronic Products.
  4. The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was slower in November as the Supplier Deliveries Index registered 50.6 percent, which is 0.2 percentage points higher than the 50.4 percent reported in October. This is the fourth month of slower supplier deliveries, following two consecutive months of faster supplier deliveries. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries. The three industries reporting slower supplier deliveries in November are: Food, Beverage & Tobacco Products; Transportation Equipment; and Chemical Products. The eight industries reporting faster supplier deliveries during November — listed in order — are: Primary Metals; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing; Machinery; and Fabricated Metal Products. Seven industries reported no change in supplier deliveries in November compared to October.
  5. The ISM Inventories Index, at 43.0 percent for November, is 3.5 percentage points below October’s 46.5 percent reading, indicating a contraction of inventories in November for the fifth consecutive month. The three industries reporting higher inventories in November are: Non-metallic Mineral Products; Transportation Equipment; and Computer & Electronic Products. The 11 industries reporting lower inventories in November — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Machinery; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Chemical 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.

  1. The ISM Customers’ Inventories Index registered 50.5 percent in November, 0.5 percentage points lower than October’s 51.0 reading, meaning that customers’ inventories are considered to be too high for the fourth consecutive month. The seven manufacturing industries reporting customers’ inventories as being too high during the month of November — listed in order — are: Petroleum & Coal Products; Furniture & Related Products; Primary Metals; Chemical Products; Fabricated Metal Products; Transportation Equipment; and Machinery. The five industries reporting customers’ inventories as too low during November are: Plastics & Rubber Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; and Computer & Electronic Products.
  2. The ISM Prices Index registered 35.5 percent in November, 3.5 percentage points lower than in October, indicating a decrease in raw material prices for the 13th consecutive month. In November 1 percent of respondents reported paying higher prices, 30 percent lower and 69 percent the same prices as in October. Of the 18 manufacturing industries, no industry reported paying increased prices for their raw materials in November. The 14 industries reporting paying lower prices during the month of November — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; Petroleum & Coal Products; Fabricated Metal Products; Machinery; Primary Metals; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Chemical Products; Furniture & Related Products; Non-metallic Mineral Products; and Computer & Electronic Products.

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

Up in Price in November were: None

Down in Price in November were:

Aluminum (12); Copper; Nickel (5); Steel (5); Steel — #1 Busheling Scrap (2); Steel — Cold Rolled (2); Steel — Hot Rolled (2); Stainless Steel (13); and Styrene.

In Short Supply in November: None
  1. The ISM Backlog of Orders Index was at 43.0 percent in November, 0.5 percentage point up on October’s reading of 42.5 percent. Of the 89 percent of respondents who measure their backlogs, 15 percent reported greater backlogs, 29 percent smaller backlogs and 56 percent no change from October. The only industry reporting an increase in order backlogs in November is Textile Mills. The 12 industries reporting a decrease in order backlogs during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; Plastics & Rubber Products; Transportation Equipment; and Fabricated Metal Products.
  2. The ISM New Export Orders Index was at 47.5 percent for November, the same reading as for October. This is the sixth consecutive month of decrease in new export orders. The five industries reporting growth in new export orders in November are: Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; and Fabricated Metal Products. The eight industries reporting a decrease in new export orders during November — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Non-metallic Mineral Products.
  3. The ISM Imports Index, is at 49 percent in November, or 2.0 percentage points higher than October’s 47.0 reading. This represents contraction in imports for the second consecutive month. The seven industries reporting growth in imports during the month of November — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; and Fabricated Metal Products. The six industries reporting a decrease in imports during November — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery.

The MAPI foundation recently brought out reports forecasting, for the next three years, an inflation-adjusted GDP expansion of 2.0 percent in 2016, 2.7 for 2017 and 2.5 in 2018. Manufacturing production is expected to overtake 2015’s growth rate of 1.8 percent, with 2.6 percent in 2016, 3.0 in 2017 and 2.8 in 2018.

Cutting tool consumption by U.S. Manufacturers was at $170.8 million in September, down 1.3 percent from August and down 11.7 percent from September 2014.

Kansas City, Missouri has seen 11 suppliers to Ford and GM set up shop in the area, providing 1,795 jobs that pay $74.1 million, taking up over 2.2 million ft2 of industrial real estate. The area is the second-largest auto hub in the U.S. and is lauded for the quality of its workforces and of its educational institutions. Ford produces its F-150 and its Transit full-size van in the area, which is home to some of the world’s largest auto-supply companies.

News on the aerospace front again sees Boeing picking up contracts around the world. TAP, Portugal’s flagship, is in for 53 long and medium-haul neo-jets with a catalog value of $8.5 billion. Boeing will supply India’s Jet Airways, the country’s second-largest airline, with 25 new 737 MAX8 aircraft, with options for 50 more. The price tag for these fuel-efficient carriers is in the order of $8 billion. Boeing forecasts a demand for some 3,000 jets worth $350 billion by 2034 in Latin America and the Caribbean.

GE Aviation, for its part, picked up a maintenance contract from Emirates for its fleet of 150 Boeing 777s. The MRO on the GE9X engines for 12 years is worth $16 billion.

And Pratt & Whitney’s new PW 1900G Pure Power Geared Turbofan (GTF) engines went on their first test flight at the Mirabel Flight Test Center near Montreal. The engines are for Brazil’s Embraer for its E2 jet series.

General Motors will, after all, sell Chinese-made SUVs in the U.S. The Buick Envision, made in China, will join the Encore, built in South Korea and the Enclave, built in Michigan, in the U.S. Market.

The automotive news wouldn’t be complete these days without mention of Tesla, who recently announced a third-quarter loss of $230 million on revenues of $937 million. But news of progress with upcoming models was sufficient to send their share price up 9 percent. In the third quarter they produced 13,091 vehicles and delivered 11,603. They estimate total production for 2015 of 50 to 52,000 vehicles, with global orders for the S model increasing, over 50 percent of which are sold to China. It’s not all good news though: all model S cars sold since 2012 will be recalled for a security problem with front seatbelts which failed to fasten correctly. No accidents have been reported.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw its fourth consecutive month below the 50 mark, with November’s 48.6 percent reading up from October’s 48.0 figure. November saw a slightly slower downturn in overall business conditions than the low seen in October. There was a moderation in manufacturing production cuts in November, with the latest decrease in output the least marked for three months.

New business levels decreased at a sharper pace than in October, and there were continuing efforts to adjust employment levels and inventories. There was a slight improvement in new export sales in November. Ontario put in the best performance in the month, and showed the fastest rise in export sales since March 2011. Alberta and British Columbia were again ‘in trouble.’

Overall manufacturing employment fell for the fifth consecutive month. Canada produced 1.03Mt of crude steel in October, down 7.7 percent y-o-y. Again, in spite of a slow economy, Canadians bought 145,426 new vehicles in November, up 4.7 percent y-o-y. This represents the highest November sales on record, along with an annual figure estimated to reach 1.94 million units.

Quebec put its second cash injection in a month into manufacturer Bombardier. The company gave up a stake in its rail unit for the funding to get its C-series jetliner flying. The Caisse de depot et placement du Quebec (CDPQ), which is Canada’s second-largest pension fund, will put $1.5 bn into Bombardier in exchange for a 30 percent stake in its rail subsidiary Bombardier Transport.   Bombardier Transport would be spun off into a separate entity registered in Britain, with its headquarters remaining in Berlin. The Bombardier rail unit employs 39,700 people worldwide and has, according to the company, a $30 bn order backlog.

MEXICO’s PMI for November was at 53.0, unchanged from October’s 53.0 reading.  Production and New Orders picked up in November and growth accelerated to its fastest since April. New export orders were up only slightly. Mexico’s manufacturing sector remains on track to put in a good performance for the rest of the year. Mexico produced 1.75 Mt of crude steel in October 2015, up 8.0 percent y-o-y.

III.  U.S. FORGING INDUSTRY

by Royce Lowe

Alcoa will supply titanium for Lockheed Martin’s F35 Lightning II aircraft program. Alcoa becomes the titanium supplier for aircraft structures for all three F35 types, over nine years, 2016 to 2024, a $1.1 billion contract. The titanium plate and billet will be supplied by Alcoa’s recently acquired RTI company.

Metal Technology Inc (MTI), of Albany, Oregon, a forger, is collaborating with the NASA Johnson Space Center (JSC) on the next generation of rocket engines. Recognizing the potential of 3D printing in space hardware, MTI  has embraced the technology and is working on production of the first test components for customers they have served with traditional manufacturing techniques for over 30 years.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk Radio tackled several topics in November including the detail behind the ISM number of 48.6, which wasn’t all bad news, and the drivers the determine plant location or relocation presented by Deloitte on November 3.

Then it was off to FabTech 2015 at McCormick Place in Chicago, Illinois from November 8 -12 where more than 1800 exhibitors is the metal fabrication, sheet metal forming, welding, coatings and precision metalworking displayed the newest technology across 750,000 square feet in three halls on two levels. Wandering amongst millions of dollars of industrial machines makes it readily apparent that manufacturing touches almost every aspect of our lives.

Back in the studio on November 17th, our Senior Correspondent Norbert Ore unpacked the 18 global business surveys while MAPI’s Stephen Gold, president and CEO, explained the 5 megatrends driving the 21st century’s manufacturing revolution including The New Industrial Revolution, Aging Workers and Automation, Data and You, Global Supply Chains and Marketplace, and the Growth of New Megacities.

Finally, on November 24th, Manufacturing Talk Radio did a wrap up of the kinds of technology witnessed at the show. We look forward to FabTech in Las Vegas in 2016!

Over the course of more than 100 live shows on Manufacturing Talk Radio, the current of consciousness has remained consistent. Gone are the days of “Dark, Dirty, Dangerous and Declining”. Modern Manufacturing is Digital, Dynamic, Diversified and Demanding. From the Internet of Things to big data, manufacturing is a digital powerhouse of actionable information managed and measured by handheld devices from the factory floor to cloud servers, in a dynamic environment adapting to new with new – the new needs of tomorrow met by the new technology of today. It is a diversified lab and landscape examining every aspect of life on Earth, from the air we breathe to nearly everything we eat, smell, touch, see and hear ranging from nanotechnology and one atom thick graphene to monster machines moved by a mouse, a finger or sight alone. This demanding profession requires the best educated minds in the world using and honing critical thinking, collaborative communication, visionary exploration and logical (and sometimes illogical) problem solving skills to make things that don’t yet exist to fix or cure things that are a real mess, or that just make things better.

We hear of a STEM program, (Science, Technology, Engineering, Math) at Bosch Rexroth in S. Carolina, and of the Steelworker of the Future program being reborn by Arcelormittal. We hear of plants being set up with community college or even university level educational facilities or direct collaboration with every educational institutional from grade school through post-graduate research facilities. We hear the word apprentice being used more and more, and we think that more people are taking very seriously the very dire present and future need for very large numbers of skilled workers in manufacturing industries. It is becoming quite clear that if manufacturing wants skilled workers, they may have to develop those individuals with internal training and educational programs specific to their needs.

V. EUROZONE

by Royce Lowe
eurozone

Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for November was 52.8, up from October’s 52.3 reading. Growth in production and new orders was seen in all nations except Greece, and in fact was the highest for some eighteen months. Increases were also seen in new export orders and employment – this in its fifteenth consecutive month. Again, manufacturing performance is not pulling up many trees at the moment, but there is cautious optimism, coupled with probable stimulus action on the part of the ECB.

  PMI High/low
Italy 54.9 (54.1) 4-month high
Netherlands 53.5 (53.7) 2-month low
Ireland 53.3 (53.6) 21-month low
Spain 53.1 (51.3) 3-month high
Germany 52.9 (52.1) 3-month high
Austria 51.4 (53.0) 3-month low
France 50.6 (50.6) unchanged
Greece 48.1 (47.3) 8-month high

VW has found its whistle blowers. ‘Around 50’ came forward at the last minute prepared to testify. Revelations regarding NOx and carbon emissions – understated for 800,000 vehicles – have had an impact on car sales, with demand falling for the group’s 12 brands, including Porsche and Audi. Sales were down 25 percent in the U.S. in November to 23,882 vehicles, some 8,000 less than a year ago. 

Airbus sold 30 single-aisle A321 aircraft to Vietnam’s Vietjet airline. The deal was worth $3.6 billion, but Vietjet did not pay the catalog price.

VW saw its diesel brands lose 2 percent of their sales in Germany in November, but Germany’s new car registrations were up 8.9 percent y-o-y in the month to 272,377 units, with numbers to date for the year up 5.4 percent at 2.95 million units. France was up 11 percent to 150,339 units, Italy up 23 percent to 134,021 units and Spain up 25 percent to 81,650 units. Spain is still on its scrappage program, which it intends to extend. Sales of diesel cars in Germany were up 10 percent for a 49.7 percent market share, with gasoline cars up 6.6   percent for a 48.2 percent market share.

Crude steel production in Germany in October 2015 was at 3.64Mt, up 2.8 percent y-o-y; in Italy 1.87Mt down 9.1 percent y-o-y; in France 1.17Mt, down 21percent y-o-y and in Spain 1.25Mt, down 3.2 percent y-o-y.

Russia’s crude steel production for October was at 5.69Mt, down 2.2 percent y-o-y, Ukraine’s was 2.05Mt, up 12 percent y-o-y.

The UK’s manufacturing sector had another good month in November, with growth easing moderately from October’s very good month. The PMI figure eased from October’s 55.2 (originally reported as 55.5) to 52.7. Consumer goods led the way, with solid growth in investment goods and a sharp growth slowdown in intermediate goods. Manufacturing production expanded for the 32nd consecutive month in November. There were rising levels of new business. The U.K. produced 0.91Mt of crude steel in October, down 5.3 percent y-o-y.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.2 in November, effectively unchanged from October’s 51.3 reading (previously reported as 51.4.)

November continued what is reported as the subdued run of data for the global manufacturing sector through 2015 so far. The respective averages for the PMI sub-indices of production, new orders and new export orders are all around 1.0/1.5 points below the levels for 2014 as a whole.

North America and Europe continued to register good production expansion in November. Growth in the U.S. remained near October’s seven-month high, while the pace of increase in Mexico more than offset the ongoing, albeit slowing, downturn in Canada. Output growth in the Eurozone was at its fastest pace in some eighteen months. Production rose at its fastest pace in twenty months in Japan, but apart from India all other Asian countries showed lackluster performances. Employment was up in the U.S., Japan, Germany, Taiwan and South Korea, but down in China, the UK, France and Brazil.

VI. ASIA OUTLOOK

by Royce Lowe
china

CHINA produced 66.12Mt of crude steel in October 2015, down 3.2 percent y-o-y; Japan 9.0Mt down 4.0 percent y-o-y; India 7.50Mt, up 4.9 percent y-o-y and South Korea 5.83Mt, down 5.8 percent y-o-y. Taiwan produced 1.71Mt in October, down 17.4 percent y-o-y.

The Caixin China manufacturing PMI for November, seasonally adjusted, was up slightly to 48.6 percent from October’s 48.3. Production stabilized in November, ending six months of reduction. There was a decline in new orders similar to that seen in October, despite a pick up in new export orders growth. In fact new export work rose at the fastest rate in over a year. Inventories declined.

Chinese vehicle sales were up 13.3 percent in October following a tax cut, to the fastest pace in 10 months. Sedans, SUVs and multipurpose vehicles combined to a total of 1.94 million for the month, with SUV sales up 61 percent to 622,000 units. Chinese carmakers boosted their share of sales by 2.1 percent.

China completes the production of a C919 168-seat passenger plane, which will make its maiden voyage in 2016. The plane was built by the Commercial Aircraft Corporation of China (COMAC), with engines by CFM International, a joint venture of GE and France’s Safran. There are orders for 517 planes, mostly domestic, but no service is expected before 2019.

China has signed a $15 billion nuclear reactor contract with Argentina’s Nucleoelectrica, its fourth and fifth reactors. One will use Canadian heavy-water technology, the other China’s locally developed Hualong One Reactor.

China’s Geely, which owns Volvo and Manganese Bronze (the maker of London’s iconic black taxis) is aiming to produce 90 percent hybrid and electric cars by 2020: mostly hybrids, 35 percent electric.

JAPAN’s manufacturing sector saw a significant improvement in the month of November, with both production and new orders up markedly, the former at the fastest rate since March 2014. The Nikkei manufacturing PMI was up from October’s 52.4 to 52.6, the highest reading in 20 months. Along with increases in new orders and production, employment was up with the rate of job creation on a par with October’s 18-month record.

Japanese car sales for November were down 6.6 percent y-o-y. Improved passenger car sales were offset by weakness in mini-vehicle sales – cars with a maximum engine size of 660cc. Total sales were 388,817 units, 149,002 mini-vehicles, 239,815 ‘normal’ vehicles.

The Japanese government will be in competition with France’s DCNS and Germany’s TKMS on a $36 billion contract to supply new generation submarines for Australia. All three bidders are promising to build large parts of the contract in Australia.

In INDIA, the Nikkei PMI reading eased a little further back to 50.3 in November from October’s 50.7 reading. This reading is a 25-month low. The health of India’s manufacturing economy improved for the 25th month, but at the slowest rate over this period. The latest PMI data show slower increases in new orders and production. Unemployment was basically unchanged in the month of November.

India’s economy grew 7.4 percent y-o-y in the third quarter, including 7 percent or greater in manufacturing, financial, insurance and trade and transport, following steady 7.5 and 7.0 percent growth in the year’s first and second quarters. India feels they will set the pace in global growth for the next two or three years, following China’s stint for two decades plus.

India is about to spend a lot of money on its railroads, $137 billion over the next five years. The system, which may be the world’s densest, is surely in need of repair, and will be a significant factor in India’s push to modernize its infrastructure. GE has a $2.6 billion contract to develop and supply Indian Railways with 1,000 diesel locomotives over an eleven year period. GE will invest $200 million to build a factory and maintenance sheds. This will be the company’s largest deal in India in its 100-year history. France’s Alstom picked up a $3 billion contract to modernize India’s ‘colonial-era’ train network, which will involve supply of 800 electric locomotives and construction of a factory in the eastern state of Bihar.

VII.  SOUTH AMERICA

by Royce Lowe

BRAZIL IS STILL IN THE DOLDRUMS, the country’s manufacturing downturn shows no sign of abating and in November the PMI falls to an 80-month low of 43.8, from October’s 44.1 reading. Brazil’s crude steel production for the month of October 2015 was 2.98Mt, a 2.3 percent y-o-y decrease.

There is a weak underlying demand which is triggering serious decreases in production and unemployment figures. In fact, workforce numbers fell at the quickest pace since April 2009. The weak currency appears to be having no helpful effect on export orders.

On another note, it seems Olympic athletes will have to pay for air conditioning in their dorms during the 2016 games. Water cleanliness will not meet the standards agreed upon when Brazil was awarded the Olympic games, and athletes practicing in those waters have already gotten sick from effluent in the ocean. It is highly likely that the performance of competitors will be diminished, skewing the results of true competition. On top of all of this, the people are looking to impeach the President of Brazil.

VIII.  GLOBAL GROWTH STILL POSITIVE

by Royce Lowe

Global growth slipped slightly in November, but still remained positive overall. Of the 18 surveys that we follow, 10 are growing and 8 are declining. The 10 that are growing combine for an average PMI of 52.3, while the 8 in decline average 47.3 percent. The JP Morgan Chase Global PMI (51.2, -0.2) which combines reports from 24 countries tells a similar story.

With the exception of Greece (48.1, +0.8), the Eurozone (52.8, +0.6) is growing. Though Greece is contracting, the rate has slowed for five consecutive months. Considering their recent problems, the rate of contraction has lessened significantly as it posted a reading of 30.2 in July. Germany (52.9, -0.8) continued positive as it has strung together twelve consecutive months above the mid-point. The remaining six Eurozone countries average 52.8 percent and were again led by Italy (54.9, +0.8), Netherlands (53.5, -0.2), and Ireland (53.3, -0.3).

The UK (52.7, -2.5) registered its 32nd consecutive month above the 50 mark. While the rate of expansion slowed, the UK manufacturing sector continues to benefit from consumer spending and exports.

As for North America, Canada (48.6, +0.5) failed to grow for the month, and for the year, as it has averaged 49.5 since January; if there is a bright spot in the Canadian economy, it is export orders being fueled by the weaker looney. Mexico (53.0, unch) expanded at a pace slightly above its five month average of 52.7.

The official data for China, the CFLP PMI (49.6, -0.2) continues to offer insight to a lack of change as it averages 50.0 percent for the year. However, the Caixin China General Manufacturing PMI (48.6, +0.3) registered a rate of contraction slightly below 48.8 percent which is the average for this year.
November Scattergram

IX. CREDIT MANAGER’S INDEX

by Norbert Ore

Dr. Chris Kuehl

This month, Metals & Manufacturing Outlook is pleased to introduce Dr. Chris Kuehl, noted economist for the FMA and the National Association for Credit Management. Dr. Kuehl has been a featured guest on Manufacturing Talk Radio and we welcome his monthly input on this additional key economic indicator. If you have heard him speak, you know that Dr. Kuehl uses metaphorical or anecdotal humor to convey the topic at hand.

There are many things one could say about the latest data from the Credit Managers’ Index but this is a family publication and those words are not appropriate. Last month we were teased with an improved index performance and there was a faint hope that improvement would be seen in November since this was the start of the holiday spending season. Now that faint hope is that much fainter. The data was not a disaster as the numbers are still above the contraction zone but they fell back to what they were the month before.

The Credit Manager’s Index is from the National Association for Credit Management and is modeled after the Purchasing Managers’ Index that you are all familiar with. It uses the same scale so that anything under 50 is contraction and numbers over 50 equal expansion. It asks credit managers what they are seeing in terms of positive things like sales and their ability to collect on their debt as well as negatives like the number of accounts submitted for collection or bankruptcies or slow pays.

The overall combined CMI score (both manufacturing and service sector) slipped from 53.9 to 52.6 and that is lower than it was in September when it hit 52.9. This is the lowest reading in the past year and that is not what had been expected although if one looks at some of the other data sets on the economy they have all been struggling of late. The latest PMI numbers are now in contraction territory with a reading of 48.6. There was misery to share with both the favorable (factors like sales and applications for credit) and unfavorable (factors like bankruptcies and collection action) categories showing decline. The more worrisome of the two is the unfavorable factors as the combined score is now in the contraction zone with a reading of 49.2 – back to what it was in June of this year. The favorable factors also slipped with a reading that went from 59.4 to 57.7 and the same as was seen in September. It looks as if that little October bump was an anomaly and not a trend that could be counted upon.

  X. THE FINAL WORD

by Royce Lowe

It used to be that manufacturers made things, put them on the market, added a bit of after-sales service – depending on the state of the economy – collected their money, and started all over again, sometimes making the same old stuff, sometimes using a new technique called innovation. Those who made the best ‘things’ did the best.

Today we have the ‘Internet of Things’ and products are leaving the workplace packed with sensors and connected to the Internet. This is altering manufacturing and the way people need to think about it. There is a shift from products to services, and it is estimated by one source that the number of products connected wirelessly, excluding smartphones and computers, will rise from the present 5 billion to 21 billion by 2020.

What are we talking here?  Well, windscreen wipers whose movement helps produce real-time weather reports, tennis racquets equipped with sensors that might fix your serve or your forehand, and machines that can order a new spare part as required. Then there are the platforms, software foundations that services and applications can be built on, without which your smartphone would be no more than a piece of plastic. Amazon will quickly tell you which books they think you’re interested in buying. The concept is new in manufacturing, where manufacturers are used to taking materials from their suppliers and turning them into things they can convince customers they want or need.

Germany – where manufacturing accounts for 22 percent of GDP against 12 percent in the U.S. – seems to have taken the idea seriously, and in 2011 it launched ‘Industrie 4.0’, a government initiative to promote the computerization of manufacturing. A good example of the use of the technology is Trumpf, a maker of industrial equipment, which has set up a software platform that collects data from machines both it and its competitors build, to effect smoother production processes.

The data, with certain privacy restrictions, will be open to everybody and will allow collaboration between competitors, viz the recent purchase of a digital mapping company by BMW, Audi and Daimler. The information and technology involved in the ‘Internet of Things’ is everyday fodder for IT companies, but relatively new ground for manufacturers. But it speaks volumes about the need for, and the advantages of, cooperation between the two fields.

XI. THE FINAL WORD

by Royce Lowe

Confusion cubed. But still room for cautious optimism.

Happy holidays and a happy, prosperous new (leap) year.

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METALS & MANUFACTURING OUTLOOK OCT 2015

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 Subscribe at the bottom of the page.


I. Cover Story: THE MIGHTY HAVE FALLEN, BUT HOW FAR?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE GLOBAL SUMMARY
IX. THE MANUFACTURING SCENE
X. THE FINAL WORD

PUBLISHER’S STATEMENT

If you haven’t been following this newsletter, it is time to pay close attention, especially on Monday, November 2 just after 10:00 a.m. when the Manufacturing Report of Business® comes out for October 2015, and on Tuesday, November 3 when Brad Holcomb, chair of the Institute for Supply Management’s committee for this report joins the hosts of Manufacturing Talk Radio (mfgtalkradio.com) to discuss the most recent results.  In addition, this newsletter covers 18 business surveys with Senior Correspondent, Norbert Ore, and the scattergram showing what’s growing and what’s not so hot.

Overall, the economic world appears to be spinning slower with few countries boasting booming growth.  Each month, another economy seems to slip over the line into the ‘not growing’ realm as various market forces slow manufacturing output.  The bloom is off the China rose and a number of analysts are questioning the forecasts coming from their manufacturing sector.  While the world isn’t in economic collapse, we are hoping the current ‘soft patch’ isn’t quicksand.

The big question is the New Orders number.  We’ve heard it going both ways, but confirmation will come in the Manufacturing Report on Business® next week.  As readers may know, New Orders are a leading indicator because the production of those goods takes months to complete, so they are a glimpse of the economy 6 to 12 months out.  Manufacturers order raw materials and manage human resources based on upcoming production demand.

Also keep an eye on the ISM Non-Manufacturing Report on Business® prepared by the committee chaired by Tony Nieves.  The services sector is 80% of the U.S. economy, and a number above 55 continues to support employment in that sector as long as the manufacturing sector is running above 50 in the ISM report.

So, we are clearly at or very near an inflection point in the economy.  Please read the following newsletter information and stay tuned to mfgtalkradio.com in the coming weeks to learn if this really is a soft patch or a bad spot in the floor and our economic foot is about to go right through what appeared to be solid just moments before.

And we’ll also address the House reauthorization of the ExIm Bank in Section II – The North American Perspective below.

Lewis A. Weiss, Publisher
Tim Grady, Editor-in-Chief

I. COVER STORY: THE MIGHTY HAVE FALLEN, BUT HOW FAR?

by Royce Lowe

vwWhat does it take to push China’s troubles from number one spot in the news league? German engineering, that’s what.

By now you’ll have heard that Volkswagen (VW) duped the automotive world and millions of its customers, by putting software in their (diesel) cars that would get them through America’s stringent NOX (nitrogen oxide) emissions tests. Worldwide it’s said some 11 million cars are involved. Once the cars left the emissions testing laboratory, this software deactivated the emission controls and it was open season on the atmosphere as the cars emitted fumes at up to 40 times the permitted level. In ordinary, uncluttered language, VW had been cheating, seriously cheating. They’ve come out and admitted the crime.  One study suggests that nitrogen oxide emissions cause 58,000 deaths a year in the U.S. alone.

VW had wanted to become the world’s biggest automobile company. To do this, by overtaking Toyota, it had to conquer the U.S. market, and it wanted to do it with diesel models, ‘clean’ diesels in fact. Just over one percent of vehicles on U.S. roads are diesel, compared with around 50 percent in Europe. What’s come to light has certainly put paid to these plans. The stock market reacted as it would; the CEO, Martin Winterkorn resigned, and VW are setting aside billions to cover the inevitable upcoming claims. They won’t get off nearly as lightly as GM did recently with a $900mn settlement for the ignition-switch defect that killed at least 24 people and injured 275.

VW were apparently warned about all this back in 2007. It’s been going on that long. Mr. Winterkorn is an engineer who was in fact responsible for R&D, so he should have known about all this.  This is a story that will go on, as other car companies become more and more involved. There is an unending source of media fodder here, so no company is safe. Claims are being made that other companies are spewing out even more nasty stuff than are VW.

Who’s laughing? Tesla, that’s who; Elon Musk, with his electric car that goes from 0 to 60 in no time at all.

VW are very well connected politically and will surely come through this, albeit at a huge cost in time and money. They sent a board member to be interviewed on one of the BBC’s highly respected TV programs. His name is Olaf Lies.

China is still in relative doldrums, but the U.S. and the Eurozone., made up of 8 countries are keeping their heads above water, as are Japan and India.  The World Bank is cutting its forecast for growth in China’s economy to 6.9 percent in 2015, 6.7 percent in 2016, from earlier forecasts of 7.1 and 7 percent respectively.

For the U.S., the PMI figure from the Institute of Supply Management was at 50.2 percent in September, 0.9 percentage points down on August’s 51.1 figure, representing manufacturing expansion for the 33rd consecutive month and growth in the overall economy for the 76th consecutive month.

The Markit PMI for the US manufacturing sector increased very slightly to 53.1 in September from August’s 22-month low of 53.0.   The U.S. manufacturing sector went through another month of relatively subdued growth in September. Production and new orders expanded at a slower rate than seen earlier in 2015. This contributed to a marked slowdown in job creation. A slowdown in employment growth since August was the main negative influence on the PMI reading.

There is a reason for the ongoing difference between the ISM and Markit PMIs. The five ISM components are equally weighted –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 second quarter of 2015, placing it at 3.9 percent, a slight increase on its ‘second’ estimate of 3.7 percent. The corresponding figure for the first quarter of 2015 was 0.6 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.

The Dun and Bradstreet Economic Health Index for September showed that    194,000 new non-farm jobs were added to U.S. payrolls in the month, with   Business Services leading the pack and some losses in Manufacturing. According to D and B the Small Business Health Index continued on a sluggish course.  D and B says their Business Health Index recorded an all-time high since its inception in December 2010. It will be noted that this index takes account of service industries.

GALLUP’s U.S. Economic Confidence Index rose to -13 at the end of     September, whereas the Gallup Job Creation Index for the month stayed at the record high figure of +32.

World crude steel production for the 65 reporting countries for the month of   August 2015 was 132Mt, down 3.1 percent from the August 2014 figure.

U.S. crude steel production for August 2015 was 6.999Mt, down 9.8 percent y-o-y.

Primary Global Aluminum Production in August 2015 was 4.95 million tonnes. Of this total, 2.734 million tonnes, over 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 433,000 tonnes, North America 377,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for September 2015. A bumper month.

The ‘Big Eight’ September ’15 September ’14 YTD % change
General Motors 251310 223437 12.5
Ford 221269 179518 23.3
FCA 189567 166530 13.8
Toyota 194399 167279 16.2
Honda 133750 118223 13.1
Nissan 121782 102955 18.3
Hyundai/Kia 113835  96638 17.8
VW 26141 25996 0.6
Total new  cars and light trucks 1442460 1246006 15.8

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.

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA.

GDP Indl Prodn Cons prices Unemployt
United States +2.4 (2015) +0.9 (Aug)  +0.2 (Aug) 5.1 (Aug)
Canada +1.4 (2015) – 2.7 (June) +1.3 (Aug) 7.0 (Aug)
China +6.9 (2015) +6.1(Aug) +2.0 (Aug) 4.0 (Qtr 2)
Japan +0.8 (2015)  nil (July) + 0.3 (July) 3.3 (July)
Britain +2.5 (2015) +0.8 (July)  nil (Aug) 5.5 (June)
Euro Area +1.4 (2015) +1.9 (July) + 0.1 (Aug) 10.9 (July)
France +1.1 (2015) -0.8 (July)  nil (Aug) 10.4 (July)
Germany +1.7 (2015) +0.4 (July) + 0.2(Aug) 6.4 (Aug)
Spain +3.0 (2015) +5.9 (July) -0.4 (Aug) 22.2 (July)
India + 7.5 (2015) +4.2 (July) + 3.7(Aug) 4.9 (2013)
Brazil – 1.9 (2015) – 9.0 (July) + 9.5 (Aug) 7.5 (July)
Taiwan +3.4 (2015) – 5.5 (Aug) – 0.4(Aug) 3.7 (Aug)
Mexico + 2.5 (2015) + 0.7 (July) +2.6 (Aug) 4.3 (July)

MEANWHILE, THE IMF has told CHINA to improve its economic data. The IMF finds China’s 7 percent growth figure high.  The 188 member nations of IMF are required to provide reliable economic data.

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe

A globe and cash close up

A globe and cash close up

The Institute of Supply Management PMI figure registered 50.2 percent in September, 0.9 percentage points below August’s reading of 51.1, representing expansion in manufacturing for the 33rd consecutive month and growth in the overall economy for the 76th consecutive month. Seven of the eighteen industries reported growth in September, in order, Printing & Related Support Activities; Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Paper Products; and Nonmetallic Mineral Products. Eleven industries reported contraction in September. They are, listed in order: Primary Metals; Apparel, Leather & Allied Products; Petroleum & Coal Products; Wood Products; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Fabricated Metal Products; Plastics & Rubber Products; Transportation Equipment; and Chemical Products.

Comments on the month: Food, Beverage & Tobacco Products respondents voice concern re Avian Flu for poultry once bird migration begins. Fabricated Metal Products personnel are concerned about the China downturn and its influence on consumer confidence. Chemical Products respondents say North American business is steady, but that international business is set for a downturn. Computer and Electronic Product respondents say the high dollar value is affecting global procurement costs. Furniture and Related Products respondents say that business is picking up. Petroleum and Coal Products personnel say that low crude and gas prices are adversely affecting revenues and profits. Primary Metals respondents continue to feel the impact of the oil and gas market slowdown, and report that aerospace demand is lower than expected.

Electrical Equipment, Appliances and Components respondents see a slow improvement in sales and profit, with no consistent up or down trends seen. Nonmetallic Mineral Products personnel say customers are slow to place orders.

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 September, at 50.1 percent, was down by 1.6 percentage points from August’s 51.7 percent reading, representing growth in new orders for the 34th consecutive month, but at a slower rate than in August. Seven industries reported growth in new orders in September. They are, in order: Printing & Related Support Activities; Textile Mills; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Chemical Products; and Miscellaneous Manufacturing. Nine industries reported a decrease in new orders in September, namely Apparel, Leather & Allied Products; Primary Metals; Wood Products; Transportation Equipment; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.
    • 2 The ISM Production Index is at 51.8 percent in September, down 1.8 percentage points from August’s 53.6 percent reading, representing growth in production for the 37th consecutive month. The nine industries reporting growth in production during the month of September are, listed in order: Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Food Beverage & Tobacco Products; Miscellaneous Manufacturing; Paper Products; Plastics & Rubber Products; Chemical Products; and Fabricated Metal Products. The seven industries reporting a decrease in production during September are: Primary Metals; Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Machinery; Transportation Equipment; and Computer & Electronic Products.
    • 3 The ISM Employment Index for September, at 50.5 percent, is down 0.7 percentage points on August’s 51.2 reading, representing growth in employment for the fifth consecutive month. Eight industries reported employment growth in the following order: Printing & Related Support Activities; Furniture & Related Products; Paper Products; Nonmetallic Mineral Products; Machinery; Food, Beverage & Tobacco Products; Transportation Equipment; and Miscellaneous Manufacturing. The nine industries reporting a decrease in employment in September, listed in order are: Wood Products; Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; Primary Metals; Plastics & Rubber Products; and Chemical Products.
    • 4 The ISM Supplier Deliveries Index indicates that the delivery performance of suppliers to manufacturing organizations was slower in September as the Supplier Deliveries Index registered 50.2 percent, which is 0.5 percentage points lower than the 50.7 percent reported in August. This is the second month of slower deliveries, following two consecutive months of faster supplier deliveries. 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 September are:        Textile Mills; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Primary Metals; and Miscellaneous Manufacturing. The six industries reporting faster supplier deliveries during September are: Petroleum & Coal Products; Paper Products; Chemical Products; Machinery; Transportation Equipment; and Fabricated Metal Products. Seven industries reported no change in supplier deliveries in September compared to August.

    • 5 The ISM Inventories Index, at 48.5 percent for September, is the same reading as for August, indicating that raw material inventories are contracting in September for the third consecutive month. The six industries reporting higher inventories in September, listed in order are: Textile Mills; Apparel, Leather & Allied Products; Transportation Equipment; Paper Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. The nine industries reporting lower inventories in September, listed in order are: Plastics & Rubber Products; Primary Metals; Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; Computer & Electrical Products; and Chemical 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

    • 1 The ISM Customers’ Inventories Index registered 54.5 percent in September, 1.5 percentage points higher than August’s 53.0 reading, meaning that customers’ inventories are considered to be too high for the second consecutive month.  The nine manufacturing industries reporting customers’ inventories as being too high during the month of September, listed in order are: Primary Metals; Furniture & Related Products; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; and Transportation Equipment. The two industries reporting customers’ inventories as too low during September are: Apparel, Leather & Allied Products, and Plastics & Rubber Products. Six industries reported no changes in customers’ inventories in September compared to August.
    • 2 The ISM Prices Index registered 38.0 percent in September, 1.0 percentage points lower than in August, indicating a decrease in raw material prices for the 11th consecutive month. In September 6 percent of respondents reported paying higher prices, 30 percent lower and 64 percent the same prices as in August. Of the 18 manufacturing industries, no industries are reporting paying increased prices for their raw materials in August. The 14 industries reporting paying lower prices during the month of September, listed in order are: Textile Mills; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Chemical Products; Transportation Equipment; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Furniture & Related Products; Nonmetallic Mineral Products; Machinery; Computer & Electronic Products; and Fabricated Metal Products.

Up in Price in September were: Aluminum * and Steel*

Down in Price in September were:

Aluminum (10)*; Copper (3); Corn; HDPE Resin (2); Nickel (3); Oil
(2); Plastic Products (2); Resin; Stainless Steel (11);  Steel (3).

In Short Supply in September:

None

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

*Reported as both up and down in price

    • 3 The ISM Backlog of Orders Index was at 41.5 percent in September, 5.0 percentage points lower than the August reading of 46.5 percent. Of the 88 percent of respondents who measure their backlogs, 13 percent reported greater backlogs, 30 percent smaller backlogs and 57 percent no change from August. The only industry to report increased order backlogs in September is Furniture & Related Products. Sixteen industries reported a decrease in order backlogs in September, namely, in order: Primary Metals; Apparel, Leather & Allied Products; Textile Mills; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; Wood Products; Transportation Equipment; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Fabricated Metal Products; Chemical Products; and Food, Beverage & Tobacco Products.
    • 4 The ISM New Export Orders Index was at 46.5 percent for September, the same reading as for August. This is the fourth consecutive month of decrease in new export orders. Five industries reported growth in new export orders in September, namely Furniture & Related Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; and Fabricated Metal Products. Eleven industries reported a decrease in new export orders in September, namely, in order Wood Products; Petroleum and Coal Products; Paper Products; Apparel, Leather & Allied Products; Primary Metals; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products.
    • 5 The ISM Imports Index, is at 50.5 percent in September, or 1 percentage point lower than August’s 51.5 reading. This represents the 32nd consecutive month of growth in imports. Six industries reported growth in imports during the month of September, namely, in order: Textile Mills; Furniture & Related Products; Plastics & Rubber Products; Machinery; Computer & Electronic Products; and Chemical Products. The six industries reporting a decrease in imports during September are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Transportation Equipment.

The U.S. aluminium giant, Alcoa, is splitting into two companies, one   to do business in upstream mining and smelting, the other to concentrate on the manufacture of aluminum products to supply such industries as aerospace and automotive. The price of aluminum has fallen by 40 percent over the past four years, by 25 percent in the past 12 months alone.

Meanwhile Alcoa is working with Danieli, an Italian mill equipment manufacturer, on what it calls Micromill Technology. This technology is designed to convert molten aluminum into coil in 20 minutes, a process that traditionally takes 20 days. The ensuing product will be more formable and much stronger than today’s automotive aluminum, and at least 30 percent lighter than high-strength steel. Ford is projecting use of this material on its 2016 F-150 truck, and of even more on its 2017 models. The Micromill Technology will be taken around the world.

U.S. machine tool orders fell 11.8 percent in July from June, and 11.1 percent y-o-y. YTD orders, at $2.48bn were down 8.7 percent from the seven months for  2014.

On the U.S. Aerospace front, Boeing is planning a factory in China, after a 300-plane order and a Chinese market that is projected to need, over the next 19 years, 6,000 new aircraft worth almost $ 1 trillion. The factory will be built in Zhoushan in Zhejiang province.   Final assembly of Boeing’s first 737 max is underway.  Alcoa and Pratt and Whitney are partnering on a jet engine fan blade made from a very new aluminum – lithium alloy.  Boeing rolled out its first 747 on September 30 1968: it just completed its 1,527th.  Each 747 contains 66,000 kilos of aluminum and alloys.

GE is responding to the EXIM saga by seeking alternative financing and by transferring production to Canada and Europe.  The company announced that 350 jobs would move from Waukesha, Wisconsin to a brand new ‘brilliant factory’ in Canada, for the production of gas engines. There will be extra support from Canada’s Export Development Canada (EDC) for this project. GE is currently bidding on projects worth $11bn that require export financing. The company has further signed an agreement with UK Export Finance (UKEF) in export credit financing for both confirmed and potential orders that will result in up to 1,000 UK jobs.

The U.S. House of Representatives recently voted 313-118 to reauthorize the ExIm Bank after using a discharge petition to force it out of the committee chaired by Rep. Hensarling (R., Texas) where it had been held up because not enough committee members were in favour of reauthorization and opposing Republicans fell in love with the phrase ‘Crony Capitalism’ to signify that the bank helped mostly large OEM’s like Boeing and GE.  What they completely failed to acknowledge is that the big OEM’s use hundreds of smaller companies for component part manufacturing and without the big contract the little guys take the hit.  Now the reauthorization moves to the Senate where Republican Party Chairman Mitch McConnell is not inclined to bring it to a vote unless it is attached to other legislation like the highway bill.

[Editor’s note]: So, if you get the sickening feeling in the pit of your stomach that politics is more about political party and almost nothing about We, the People, you would be right.  Whatever party holds the majority wants to make themselves look good, the other party look bad, and the American people are merely victims of the political gamesmanship.  By the way, the discharge petition isn’t something new – it was created just over 100 years ago.  Guess things haven’t improved much, huh?

Financing has also been agreed with Coface, the French export agency, to execute a series of power plant projects worth around $11bn. The operation is in Belfort, France at a ‘unique center of excellence’ where production of 50-Hz heavy-duty gas turbines will draw manufacturing business and around 400 jobs from Greenville SC, Schenectady NY and Bangor Me.

Mercedes is conducting a $1.3bn upgrade to its Tuscaloosa, Ala plant that will add 300 jobs. The upgrade is to allow SUV production in what has been termed a fully digitalized, smart factory, which will produce up to 300,000 units annually.

The U.S. branch of France’s Alstom is due to win a big piece of Amtrak’s $2.5bn next-generation high-speed rail project that will serve the northeast corridor. Alstom already employs some 1,000 people in Hornell, NY state and this project will bring a further 750 jobs.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI saw its second consecutive month below the 50 mark. September’s 48.6 percent reading, down from August’s 49.4 figure, was in fact the lowest reading recorded in the survey’s five-year history.   Weaker overall demand resulted in lower production, new orders and employment figures, and work backlogs reduced at the fastest pace since April. In spite of a weak dollar, export sales are stagnating.  Steep drops in production and new orders were noted in Alberta and British Columbia, with solid growth maintained in Ontario. There was job creation in Ontario, with lower employment elsewhere.

Canada produced 1.10Mt of crude steel in August, effectively unchanged  y-o-y.  In spite of all this, Canadian auto sales increased 3.7 percent y-o-y in September, with light vehicle sales of 174,337 units. Ford, Fiat Chrysler, GM, Toyota Canada and Honda Canada all saw increased sales.

SNC-Lavalin, a Montreal consulting engineering company, will be part of a consortium, LINEOV, made up of Algoé, Transamo and itself, to fulfil a contract for the Société du Grand Paris (SGP). This contract will involve the construction and project management of line 18 that will link Orly airport with Versailles. Completion of the overall project is scheduled in two parts, one for 2024, one for 2030. The contract will involve 10 stations in a network of 200 kilometers and 68 stations.

Mexico’s PMI for September was at 52.1, down slightly from August’s 52.4 reading. This is the lowest reading for three months. Production growth was the second-lowest for almost two years, with new order growth also slowing on the back of lower export figures, and employment growing at a slower rate than in August.

The lower exchange rate against the U.S. dollar is leading to higher imported raw material prices. But overall, things are looking quite good at the moment in the Mexican manufacturing sector.  Mexico produced 1.52 Mt of crude steel in August 2015, down 7.1 percent y-o-y.

III.  U.S. FORGING INDUSTRY: ALCOA’S NEW PROCESS

by Royce Lowe

Alcoa is putting $60mn into expanding its R&D facilities outside Pittsburgh. Alcoa’s trademarked, recently introduced Ampliforge process will be pioneered here. The process combines advanced materials, designs and both additive and traditional manufacturing processes. It involves 3-D printing a nearly complete part, then finishing with a traditional process. Better toughness and strength than those obtained through 3-D printing alone are claimed.

Air Industries of Long island NY, an aerospace precision parts specialist, agreed to buy ‘certain assets’ from an unnamed source that are used to produce landing gear and landing gear components for Black Hawk and Chinook helicopters. This is the company’s path to new business with OEMs and after-market manufacturers.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Hosts Lew Weiss and Tim Grady are conducting more interviews about the state of the economy, beginning with Mr. Brad Holcomb, chair of the Institute for Supply Management’s Manufacturing Report on Business® kicking off the first show each month.  Later in the month, Norbert Ore, Senior Correspondent for Business Surveys Globally, provided his analysis of the 18 surveys he follows on economies around the world.

Other topics tackled in September were the Baby Boomer’s decision of what to do with their business – sell, merge, or shut it down, the growing positive impact of Women in Manufacturing who now only represent 25% of that workforce when they represent 50% of the general population, MAPI’s quarterly manufacturing economic outlook and all the events of Manufacturing Day.

The October shows again hosted Brad Holcomb and Norbert Ore on the economy, along with shows on several untapped talent pools within the U.S. population that manufacturers should not overlook, along with the reauthorization of the ExIm Bank in the House of Representatives.

We encourage listeners to go to www.mfgtalkradio.com to hear any of these shows that are stored as podcasts.

V. EUROZONE

by Royce Lowe
eurozoneMarkit’s eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for September was 52.0, a five-month low, and slightly down from August’s 52.3 reading. The manufacturing sector showed steady progress at the end of the third quarter with both production and new orders showing modest expansion.

The average PMI for the third quarter, at 52.3, was unchanged from that of    the second quarter.  Manufacturing production was up for the 27th consecutive month in September as companies scaled up production in response to new incoming orders and further backlog accumulation.

New export orders were up again in September for the 27th consecutive month and there was job creation for the 13th straight month.  In short, the Eurozone manufacturing sector is showing only very steady growth, and is likely to contribute only a minimum boost to the economy in the third quarter.

PMI High/low
Ireland 53.8 (53.9) 2-month high
Netherlands 53.0 (53.9) 6-month low
Italy 52.7 (53.8) 7-month low
Austria 52.5 (50.5) 19-month high
Germany 52.3 (53.3) 2-month low
Spain 51.7 (53.2) 21-month low
France 50.6 (48.3) 3-month high
Greece 43.3 (39.1) 3-month high

Airbus has chosen Rolls Royce to supply Trent 700 engines for five new Beluga XL air transport aircraft. This is a $700mn contract, including long-term engine service.  Airbus is opening its first U.S. production plant in Mobile, Alabama, in a $600mn project that will provide 1,000 jobs. This will help Airbus cut costs: at $7.25 per hour Alabama has one of the lowest minimum wages in the U.S., strikes are rare and employment benefits are 30 percent lower than in Europe. The project was three years in the making, and since announcing its plans for this plant Airbus has seen its share of the U.S. market double from 20 percent to 40 percent. The Mobile plant will assemble single-aisle A319, A320 and A321 aircraft starting in 2017, and will also move onto the A320 Neo, a new, more fuel-efficient version. Plans are for four aircraft per month, with a future capability of eight per month.

New passenger car registrations in Germany were up 4.6 percent in September to 272,479 units, with 2.4 million cars being sold in the first nine months, up 5.5 percent y-o-y. Similar figures for France were up 9.1 percent to 164,774 units and up 6.3 percent to 1.4 million units; for Italy up 17 percent to 130,071 units and up 15 percent to 1.2 million units; and for Spain up 23 percent to 69,826 units and up 22 percent to 784,000 units.

Crude steel production in Germany in August 2015 was at 3.43Mt, up 10.6 percent y-o-y; in Italy 1.0Mt up 1 percent y-o-y; in France 1.04Mt, down 1.4 percent y-o-y and in Spain 1.0Mt, down 2.3 percent y-o-y.

Russia’s crude steel production for August was at 6.05Mt, down 3.2 percent y-o-y, Ukraine’s was 1.92Mt, up 8.6 percent y-o-y.

The UK’s manufacturing performance remained sluggish, in spite of the strength of the consumer goods sector. The PMI was steady at 51.5 percent in September, the same reading as August.  The level of new export business rose very slightly, but this was cold comfort as performance in the intermediate goods segment led to a fall in employment, in fact there were manufacturing job losses for the first time since April 2013.

The pace of growth seen in quarters two and three this year was weaker than that seen earlier in the past two-and-a-half years.   The U.K. produced 0.93Mt of crude steel in August, down 16 percent y-o-y.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 50.6 in September, very slightly down from August’s 50.7 reading and at its lowest level since July 2013.

Global manufacturing showed tepid growth at the end of the third quarter, with falling rates of expansion in production and new orders. The U.S. and Europe contributed positively to global manufacturing growth in September, and all nations in the EU covered by PMI surveys, with the exception of Greece, reported expansions – even France, which returned to growth after two months of contraction.  Greece has voted again and Prime Minister Alexis Tsipras has been returned to power.

Asia remained weak, with China’s PMI slipping to a six-and-a-half-year low of 47.2. Along with this were contractions in South Korea, Taiwan, Indonesia, Vietnam and Malaysia. Japan and India were more positive, but expansion rates slowed slightly.

Export orders were up in the U.S., the Eurozone, the UK and Mexico, while overall global manufacturing employment dropped for the first time since 2013.  In spite of employment being up in the U.S., the Eurozone, Eastern Europe, Taiwan, Turkey, Vietnam and Malaysia, there were job losses in Japan, China, India, South Korea and the UK.

[Editor’s Note]: Keep an eye on the job numbers.  In manufacturing, shifts in economic currents happen much more quickly than in the non-manufacturing sector, so if job gains begin to turn into negative employment numbers, 2016 may not see 2% GDP growth.  So, job losses become a leading indicator in the manufacturing sector, not a lagging one.

VI. ASIA OUTLOOK

by Royce Lowe
chinaChina produced 66.94Mt of crude steel in August 2015. down 3.5 percent y-o-y; Japan 8.8Mt down 5.9 percent y-o-y; India 7.66Mt, up 2.7 percent y-o-y and  South Korea 5.92Mt, up 4.8 percent y-o-y. Taiwan produced 1.85Mt in August, down 5.7 percent y-o-y.

The Caixin China manufacturing PMI for September fell very slightly from August’s 47.3 reading to 47.2, representing seven months below the 50 mark, during which time the overall health of the Chinese manufacturing economy has suffered a little more each month.  Production and employment dropped at the fastest rate in six-and-a-half years and total new work dropped at the quickest rate in 3 years, in part due to a heavier fall in new export orders.

There isn’t much good news from the automotive sector either, where passenger car sales in August were down 3.4 percent to 1.42 million vehicles, following a 6.6 percent drop in July and a 3.4 percent drop in June. Combined sales of passenger cars and commercial vehicles dropped 3 percent to about 1.66 million vehicles. Automotive associations and manufacturers are busy adjusting their forecast figures for the balance of the year.

In Japan, the Nikkei manufacturing PMI went from August’s 51.7 – which was a seven-month high – to 51.0 in September. There was a slower expansion in the manufacturing sector and exports declined for the first time in 15 months. Employment was down.

Growth was at its weakest rate in the current five-month expansion sequence, and new export orders were down at the fastest rate in over two-and-a-half years.

In India, the Nikkei PMI reading eased further from August’s 52.1 reading to 51.2 in September, a seven-month low.  There were slower increases in new orders and production, triggering a reduction in employment. There was a softer pace of export business expansion.

PMI data suggest that the Indian manufacturing sector will provide a better contribution to GDP in the third quarter than it did in the second.  Meanwhile, Prime Minister Modi took a trip to Silicon Valley to meet with Apple, Facebook, Google and Tesla. He seems to want the whole world to invest in India.

Several U.S. companies have been very successful in India. Abbott, Chicago-based, recently built a manufacturing facility in Jhagadia, Gujarat. They are in the nutrition business and in 2014 had 14,000 employees in India, for $1.09bn sales. Its products are based on the nation’s nutritional needs.

GE  has ten factories in India, including a new one in Pune. Its business is diverse and ranges from aviation and turbo machinery to wind turbines and diesel locomotives. Half its production goes to global factories, half to India.  Cummins manufactures its engines, generators and turbochargers for global export.

It’s said that the CEOs running Microsoft, Google and Adobe were all born in India.

VII.  SOUTH AMERICA

by Royce Lowe
south-americaBrazil’s crude steel production for the month of August 2015 was 2.8Mt, a 5.4 percent y-o-y decrease.  The manufacturing PMI in Brazil in September recovered slightly to 47.0 from August’s 45.8 figure, but things are still not good in Brazil’s manufacturing sector, and a few more months of better stuff are required before we even start to think of the word recovery.

Brazil was downgraded by Standard and Poors for corruption, inflation, loss of commodities markets and price drops in these same markets.  Brazil’s jet builder, Embraer, is looking at the Chinese commercial aircraft market – as is every other aircraft manufacturer – and sees an excellent opportunity in the 70-130 seat segment of the business.

There is little that is remarkable about the economic growth in other countries in South America, largely because they are small economies that do not move the global economic needle.

VIII.  THE MANUFACTURING SCENE : WHERE’S YOUR CAR GOING NOW?

by Royce Lowe
steelforge-energyiStock_000009620449_LargeThe automotive business is said to be, after, ironically enough, the oil and gas business, the second largest business in the world. There are, for example, about one billion cars currently in use on the world’s roads, and approximately 165,000 new vehicles are produced every day.

The industry has always run on oil, and for years the world has known that the combustion of petroleum products in automobiles and other vehicles is not good for the planet and it’s not good for human health. So for quite some time now the scientific community has been trying to find ways to use petroleum products more efficiently, i.e. to reduce gas consumption, but particularly to find alternate sources of energy to propel these vehicles.

The recent Volkswagen scandal, which is spreading to other companies, has brought to light the fact that even though diesel vehicles can be very economical on fuel (and thus emit relatively little carbon dioxide) this is often at the cost of increased nitrogen oxide (NOX) emissions. In Europe, testing methods are more lax, and NOX emissions standards more lenient, than in North America. This seems to be the crux of the problem.

More stringent standards in Europe might not even allow diesel cars on the road. Certain countries have in fact talked about banning them. There is still room to improve the good old gas motor, and to further develop cleaner cars that run on methane, hydrogen and electricity, or are hybrids.

Along with efforts to render motors cleaner and more efficient is ongoing  research that results in stronger, tougher steels and other metals and materials that will allow the use of thinner materials, hence lighter, more fuel-efficient vehicles. To illustrate this, ArcelorMittal, the world’s largest steelmaker, says that over 50 percent of the steels in today’s new cars didn’t exist ten years ago, and that vehicles using AHSS (advanced high-strength steels) weigh up to 39 percent less than those that were made with conventional steels.

The average car, so it is said, has more than 30,000 parts. It is made up of 57 percent steel – 44 percent flat products, 13 percent long; 22 percent plastic, glass and other products; 8 percent iron; 4 percent various metals, copper, zinc and 9 percent aluminum. A large percentage of the flat-rolled steel will be galvanized.

Aluminum is putting its hat in the ring to increase even further the part it plays in an automobile. The amount of aluminum in the average North American vehicle has increased markedly over the past couple of decades and is projected to continue to do so.

As mentioned elsewhere in this issue, Alcoa is working on a Micromill Technology project with Danieli that will result in stronger, more formable materials, twice as formable and 30 percent lighter, it is claimed, than high-strength steels. Where this will lead we won’t know for a goodly time.

At least one small French car, the Renault Twingo, which is rear-engined, has a plastic hood and fenders.

The new kid on the block though is Tesla’s Elon Musk, a South African who wants to change the way we think about cars. He recently unveiled his Model X SUV, it’s electric by the way, by stating – and this could become part of the language – ‘This 4 x 4 goes so fast it’s wrong.’  The X does from 0 to 60 in 3.2 seconds, has a range of 250 miles (400 kilometers) on a single charge, and has a price tag of $130,000, a little rich for most people. It is cheaper though than the Porsche Cayenne Turbo S, which costs $157,000 and takes a whole 3.8 seconds to go from 0 to 60.

There is a Model S sedan that costs $70,000.  Tesla plans to sell 50-55,000 cars this year, and 500,000 by 2020. A Model 3 is planned in two years, with a price tag around $35,000.  Hopefully, Telsa won’t suffer the same fate as the Tucker, a car full of modern improvements in its day but crushed by competitive and political forces beyond its control.

Before the VW mess, BMW, VW, Audi and Daimler were all gunning for Tesla, with Audi up front with what it called a Tesla Killer, with an expected range of 300 miles (almost 500 kilometers).

At 500,000 units a year we’re talking a very small percentage of the market, but it’s a start. The diesel problem, and it certainly seems to be that, will likely open up a whole vista of new ways to propel these cars we love so much. Who knows, we might even get real clean diesel.

IX. GLOBAL SUMMARY

by Norbert Ore

Global growth remains positive for September 2015 in business surveys. The global business surveys measure change from month to month and have historically provided the earliest look at economic performance.  Of the 18 surveys that we follow, 10 are growing and 8 are declining. The 10 that are growing have an average PMI of 52.0, while the 8 in decline average 46.9 percent. Based on the JP Morgan Global PMI (50.6, -0.1), the rate of change globally is at best meager.

With the rate of contraction slowing in Greece (43.3, +4.2), the rest of the Eurozone (52.0, -0.3) continues to grow. Germany (52.3, -1.0) is growing for the tenth consecutive month. The remaining six Eurozone countries average 52.4 percent and were again led by Ireland (53.8, +0.2), Netherlands (53.0, -0.9), and Italy (52.7, -1.0). The UK (51.5, -0.1) registered its 30th consecutive month above the 50 mark.

Once again, consumer goods for domestic production and consumption are apparently the strength of the economy as opposed to the export market that is struggling due to the strength of the pound.

As for North America, Canada (48.6, -0.8) failed to grow for the month and for the year as it has averaged 49.7 since January. Mexico (52.1, -0.3) saw new export sales slowing as the strong USD results in higher imported raw material prices.

And then there is China, the official data shows the pace of manufacturing to be similar to August as the CFLP PMI (49.8, +0.12 shows minimal change. However, the Caixin China General Manufacturing PMI (47.2, -0.1) registered continuing contraction. The Caixin seems to be more sensitive to change.

The following scattergram summaries where various economies stand in relation to growth or retrenchment.

scattergram

  X. THE FINAL WORD

by Royce Lowe
We consumers are ever at the mercy of those who supply us. What just  happened in the car industry will affect some of us for quite some time, but it is more than likely that good will come out of it. Those who are guilty should be rooted out, not just the companies but also the individuals.

Never a dull moment, is there?

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Metals & Manufacturing Outlook Sep 2015

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 Subscribe at the bottom of the page.


I. Cover Story: NOT TOO MUCH TO CHEER ABOUT…OR IS THERE?
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE GLOBAL SUMMARY
IX. THE MANUFACTURING SCENE
X. THE FINAL WORD

PUBLISHER’S STATEMENT

Regardless of which PMI report you look at, or all of them together, three things are clear:  1) manufacturing for 2015 isn’t in a boom cycle as many had predicted, 2) manufacturing in 2015 for the balance of the year is expected to remain above 50 in the U.S., but not by much, and 3) the new normal GDP will be in the low 2’s for the next two years unless something ugly happens that would drive it lower.

GDP growth of 3-4% in the previous 30 years, before the 2008 Great Recession, was driven by deficit spending at every level: consumer (credit cards, home equity loans), town, city, county state and federal (bonds, T-Bills, muni’s and other debt instruments).  Everyone borrowed against a brighter, rosier future that did not blossom, and now those chickens are coming home to roost in 2008.

Today, consumer credit is maxed out.  Banks are risk adverse and fewer bonds can be sold at low interest rates to fund more deficit spending or debt service.  China, Russia and other large consumers of U.S. Treasury instruments are no longer in an economic place where they can buy, or even want to buy more U.S. debt unless the rate of return is increased, which makes U.S. borrowing to drive its deficit spending for unfunded obligations more expensive to service tomorrow.

Manufacturing growth has slowed, although there is still measurable investment in construction of manufacturing plants.  That should translate into machinery to put into those plants and increased production and output, unless they bet wrong, which would then mean shiny new shuttered buildings.

The government, including federal, state, county, city, and town, are going to want to tax more to both clean up their debt mess and have more money to spend on new things we probably don’t need.  The real solution for governments is to cut spending in up cycles, even modest ones like 2015-2016-2017, and balance their books.  Otherwise, they will tax consumers and businesses more, which can only be made up by consumers cutting their lifestyles and businesses either raises prices or pink slipping employees, or more likely, both.  And as prices rise, demand falls.  As of this writing, raw material, commodity and feed stock prices for goods used by manufacturers are falling, but so are new orders.  Lower prices are not stimulating demand by manufacturers, and inventories or finished goods are dramatically up, which means buyers aren’t buying at a fast enough rate – at the moment.  But which way is this headed?

The real problem is this: all this unsettling news causes everyone, from you and me to corporate titans through small business owners to become cautious, wary and even withdrawn.  Consumers take their chips off the table to wait and see, which means less buying.  Inventories then build, new orders fall, and less goods need to manufactured.  That isn’t a brighter, rosier picture.  Even as analysts look at the underlying fundamentals and under the recession rock, nothing seems to point to the economy coming off the tracks.  It just seems that the grade is a long and winding uphill road where the economy has slowed down to navigate the turns and perhaps catch a glimpse of the scenery ahead.  And there is just nothing definitive up there, nothing driving it one way or the other.

At this juncture, our best guess is for a slower economic ride through recovery in manufacturing, which is still not at pre-Great Recession levels.  If unemployment remains low, taxes aren’t increased, population growth remains steady, and wages begin to rise, then GDP could be is the 2.0-2.5 range for 2016 and 2017.  And that is as much of an optimistic outlook as we can discern for this month’s Metals & Manufacturing Outlook at this moment.  However, it could all change by next week or next month.  But honestly, wait and see is maddening.

Lewis A. Weiss, Publisher

Tim Grady, Editor-in-Chief

P.S.  Join us for NJ Manufacturing Week: Talent Driving Prosperity Kickoff on September 28 at New Jersey Institute of Technology in Newark, NJ.
The kick-off focuses on supporting NJ manufacturers through the training of youth and adults for the growing number of technology driven jobs in manufacturing.

Keynote speakers, Manufacturing Talk Radio Hosts, Lewis Weiss and Tim Grady will deliver their speech on “Solutions to the Skills Gap in Manufacturing.”
Catherine Starghill, Executive Director, Workforce Operations & Business Services with the NJ Department of Labor & Workforce Development, will present the NJ Manufacturing Week Proclamation.
JoAnn Mitchell, Senior Project Leader, Sandvik Coromant, will speak on “Developing our Youth for Careers in Manufacturing.” Other speakers and expert manufacturers, educators and public officials will describe
Statewide supporting educational programs such as:  Dream It. Do It., MechaForce and 2016 NJ Makers Day.

Register for this event. 

I.  COVER STORY:  NOT TOO MUCH TO CHEER ABOUT…….OR IS THERE?

By Royce Lowe

In a world that’s never short of bad news, we certainly had a plateful in the month of August.

China hadn’t been really doing what China does best for some time. China is used to making lots of goods and selling and shipping them as well as reporting growth rates over 7 percent year after year. Things hadn’t been going too well on the production and export front for months, which was probably part of the reason that on August 11 China’s central bank devalued the yuan. The currency markets reacted and the stock markets along with them. On August 24 there was market chaos in Asia that found its way to Europe and then America.  Then Tim Cook, Apple’s CEO, spoke to reassure the world that he felt China was an unprecedented opportunity over the long term, and abracadabra, the $66 billion loss on Apple’s shares was recouped and markets – including the Dow Jones Blue Chip (index) that had opened down 1,000 points – rebounded. Shanghai was down 40 percent at one point. Things have not been the same since; they wobbled, and they may continue to do so for some time. It is very much a time of wait and see who does what, why and when. Or who does nothing. So wait and see we will.

The news isn’t all bad. China hasn’t stopped consuming, nor is it likely to. The country consumes 54% of the world’s aluminum, 50% of its nickel, 48% of its copper, 46% of its zinc and tin, 45% of its steel, 40% of its lead and 31% of its cotton. Oh, and 30% of its rice. It may be that a lot of producers are crying that China isn’t buying what it did, when in fact they may be overproducing. There has been an awful lot of iron ore floating around the world of late.

The PMI figure from the Institute of Supply Management was at 51.1 percent in August, 1.6 percentage points down on July’s 52.7 figure, representing manufacturing expansion for the 32nd consecutive month and growth in the overall economy for the 75th consecutive month.

The Markit PMI for the US manufacturing sector fell back to a 22-month low of 53.0 in August, from July’s 53.8 figure. There was a ‘slight loss of momentum’ across the sector with slower rates of growth in production, new orders and employment seen in August. There is also a suggestion of tighter inventory policies in the light of ‘global economic uncertainty.’  But overall, new order volumes are up at a solid pace, albeit at a lower rate of expansion than in July. There was job creation across the manufacturing sector in August, with manufacturers stating that new product launches and ongoing expansion plans had encouraged them to boost employment.  The strong dollar still seems to be hurting new export business.

The Bureau of Economic Analysis came out with its ‘second’ estimate for the annual rate of Real GDP growth in the second quarter of 2015, placing it at 3.7 percent, a significant increase on its ‘advance’ estimate of 2.3 percent. The corresponding figure for the first quarter of 2015 was 0.6 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.  Corporate profits from current production were up $47.5 billion in the second quarter of the year, compared with a drop of $123 billion for the first quarter.

The Dun and Bradstreet Economic Health Index for August showed that 206,000 new non-farm jobs were added to U.S. payrolls in the month. The Business Services segment continued to lead, with solid support from Trade, Transportation and Utilities, but the pace in these two sectors was a little slower than of late. Retail and Construction however showed a more robust performance. The Small Business Health Index lost a little ground from last month, showing a 0.1 percent fall.  To quote D and B : ‘Overall U.S. Business health shows a significant upturn in August as the Business Health Index hits its all-time high for the first time this year.’

GALLUP’s U.S. Economic Confidence Index dropped to -17 at the end of August, whereas the Gallup Job Creation Index for the month stayed at the record high figure of +32.

World crude steel production for the 65 reporting countries for  the month of July 2015 was 133Mt, down 3.8 percent from the July 2014 figure. The capacity utilization ratio, at 68.4 percent, was down 4.2 percent y-o-y, and down 3.8 percent on June 2015.

U.S. crude steel production, for July 2015 was 6.99Mt, down 9.1percent y-o-y.

Primary Global Aluminum Production in July 2015 was 4.92 million tonnes. Of this total, 2.724 million tonnes, over 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 431,000 tonnes and  North America 373,000 tonnes.

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

The ‘Big Eight’ August ’15 August ’14 YTD % change
General Motors 270480 272423 -0.7
Ford 233880 221373 5.6
FCA 198209 195017 1.6
Toyota 224381 246100 -8.8
Honda 155491 167038 -6.9
Nissan 133351 134388 -0.8
Hyundai/Kia 130909 124670 5
VW 32332 35181 -8.1
Total new  cars and light trucks 1577407 1586015 -0.5

* There was one fewer selling day in August 2015 than in August 2014.

FORD has moved production of its F-650/F-750 medium-duty trucks from Mexico to Ohio.

GM has selected American Axle and Manufacturing as its supplier for axles and driveshafts for its ‘next generation full-size truck program.’

Meanwhile the new Tesla electric car got the best ever vehicle rating from Consumer Reports, 100/100, for its energy efficiency, safety and performance. Its $125,000 price tag may be too much for most people, but in 2018 the company plans to bring out a compact sedan starting at $35,000.  Tesla plans to invest $1.5 billion this year to increase production capacity,  to build a large factory for batteries and to expand its network of charging stations.

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 +2.4 (2015) +1.3 (July) +0.2 (July) 5.3 (July)
Canada +1.5 (2015) – 4.1 (May) +1.3 (July) 6.8 (July)
China +7.0 (qtr) +6.0(July) +1.6 (July) 4.0 (Qtr 2)
Japan +0.9 (2015) +1.5 (June) + 0.4 (June) 3.4 (June)
Britain +2.8 (qtr) +2.1 (May) + 0.1 (July) 5.6 (May)
Euro Area +1.3 (qtr) +1.2 (June) + 0.2 (July) 11.1 (June)
France nil (qtr) +0.6 (June) + 0.2 (July) 10.2 (June)
Germany +1.8(qtr) +0.6 (June) + 0.2(July) 6.4 (July)
Spain +4.1 (qtr) +7.4 (June) + 0.1 (July) 22.5 (June)
India + 11.0 (qtr) +3.8 (June) + 3.8(July) 4.9 (2013)
Brazil – 0.6 (qtr) – 3.2 (June) + 9.6 (July) 7.5 (July)
Taiwan – 6.6 (qtr) – 3.0 (July) – 0.7(July) 3.7 (July)
Mexico + 2.0 (qtr) + 1.4 (June)+ 2.7 (July) 4.4 (June)

II.  NORTH AMERICAN PERSPECTIVE

by Royce Lowe

The Institute of Supply Management PMI figure registered 51.1 percent in August, 1.6 percentage points below July’s reading of 52.7, representing expansion in manufacturing for the 32nd  consecutive month and growth in the overall economy for the 75th consecutive month. Ten of the eighteen industries reported growth in August, in order,  Textile Mills; Furniture & Related Products; Paper Products; Non-metallic Mineral Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Fabricated Metal Products; Plastics & Rubber Products; and Machinery. The six industries reporting contraction in August — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Computer & Electronic Products; and Transportation Equipment.

Comments on the month from Food, Beverage & Tobacco Products  respondents say falling crude oil prices are helping resin-based purchases and also helping with fuel surcharges for inbound products. Fabricated Metal Products personnel say that commercial construction is good for business. Chemical Products respondents say growth is modest but they are optimistic for the balance of the year as they have a minimum of overseas exposure. Computer and Electronic Product respondents say foreign exchange is a challenge, especially in Europe, but they are upbeat about the balance of the year. Miscellaneous Manufacturing respondents say lower metal prices are good for their business. Paper Products respondents say they are ‘oversold.’ Machinery personnel say automotive companies are investing heavily in equipment upgrades. Furniture and Related Products respondents say that business conditions continue to be strong but that they are struggling to find labor. Wood Products respondents say business is steady but competitive, margins are tight and China is lackluster.

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 August, at 51.7 perccnt, was down by 4.8 percentage points from July’s 56.5 percent reading, representing growth in new orders for the 33rd consecutive month, but at a slower rate than in July. The seven industries reporting growth in new orders in August — listed in order — are: Textile Mills; Plastics & Rubber Products; Paper Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Computer & Electronic Products. The seven industries reporting a decrease in new orders during August — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Machinery; and Fabricated Metal Products.
  2. The ISM Production Index, is at 53.6 percent in August, down 2.4 percentage points from July’s 56.0 percent reading,  representing growth in production for the 36th consecutive month. The eight industries reporting growth in production during the month of August — listed in order — are: Textile Mills; Plastics & Rubber Products; Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; and Chemical Products. The five industries reporting a decrease in production during August are: Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; and Transportation Equipment.
  3. The ISM Employment Index for August, at 51.2 percent, is down 1.5 percentage points on July’s 52.7 reading. Six industries reported employment growth in the following order: Nonmetallic Mineral Products; Paper Products; Fabricated Metal Products; Machinery; Chemical Products; and Food, Beverage & Tobacco Products. The eight industries reporting a decrease in employment in August — listed in order — are: Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Primary Metals; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Transportation Equipment.
  4. The ISM Supplier Deliveries Index –  The delivery performance of suppliers to manufacturing organizations was slower in August as the Supplier Deliveries Index registered 50.7 percent, which is 1.8 percentage points higher than the 48.9 percent reported in July. This follows two months of faster supplier deliveries. 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 August are: Furniture & Related Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Machinery; and Transportation Equipment. The five industries reporting faster supplier deliveries during August are: Petroleum & Coal Products; Plastics & Rubber Products; Paper Products; Computer & Electronic Products; and Chemical Products. Eight industries reported no change in supplier deliveries in August compared to July.
  5. The ISM Inventories Index, at 48.5 percent for August, is 1.0 percentage points lower than the 49.5 percent reading for July. This indicates that raw material inventories are contracting for the second consecutive month. The six industries reporting higher inventories in August — listed in order — are: Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; and Computer & Electronic Products. The seven industries reporting lower inventories in August — listed in order — are: Apparel, Leather & Allied Products; Primary Metals; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; and Chemical 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

  1. The ISM Customers’ Inventories Index, registered 53.0 percent in August, 9.0 percentage points higher than July’s 44.0 reading, meaning that customers’ inventories are considered to be too high, a situation which has not obtained since March 2009, when the Customers’ Inventories Index registered 54 percent.    The eight manufacturing industries reporting customers’ inventories as being too high during the month of August — listed in order — are: Fabricated Metal Products; Furniture & Related Products; Primary Metals; Food, Beverage & Tobacco Products; Computer & Electronic Products; Machinery; Transportation Equipment; and Miscellaneous Manufacturing. The three industries reporting customers’ inventories as too low during August are: Paper Products; Chemical Products; and Nonmetallic Mineral Products.
  2. The ISM Prices Index registered 39.0 percent in August, 5.0 percentage points lower than in July, indicating a decrease in raw material prices for the 10th consecutive month. In August 6 percent of respondents reported paying higher prices, 28 percent lower and 66 percent the same prices as in July. Of the 18 manufacturing industries, no industries are reporting paying increased prices for their raw materials in August. The 14 industries reporting paying lower prices during the month of August — listed in order — are: Primary Metals; Petroleum & Coal Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Machinery; Paper Products; Food, Beverage & Tobacco Products; and Transportation Equipment.Up in Price in August were:Plastic Products *

    * Reported as both up and down in price

    Down in Price in August were:

    Aluminum (9); Copper (2); Crude Oil; Diesel Fuel; HDPE Resin; Nickel    (2); Oil; Plastic Products*; Plastic Resins; Scrap metal; Stainless Steel (10); Steel (2); Steel Cold- Rolled (3).

    In Short Supply in August:

    None

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

  3. The ISM Backlog of Orders Index was at 46.5 percent in August, 4.0 percentage points higher than the July reading of 42.5 percent, indicating a contraction in order backlogs for the third consecutive month, but at a slower rate than in July. Of the 86 percent of respondents who measure their backlogs, 17 percent reported greater backlogs, 24 percent smaller backlogs and 59 percent no change from July. The five industries reporting increased order backlogs in August are: Textile Mills; Paper Products; Miscellaneous Manufacturing; Computer & Electronic Products; and Chemical Products. The nine industries reporting a decrease in order backlogs during August — listed in order — are: Wood Products; Apparel, Leather & Allied Products; Primary Metals; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Machinery; Food, Beverage & Tobacco Products; and Nonmetallic Mineral Products.
  4.   The ISM New Export Orders Index was at 46.5 percent for August, down 1.5 percentage points from July’s 48.0 reading, indicating effectively the third consecutive month of decrease in new export orders. The five industries reporting growth in new export orders in August are: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Computer & Electronic Products; and Paper Products. The seven industries reporting a decrease in new export orders during August — listed in order — are: Primary Metals; Furniture & Related Products; Apparel, Leather & Allied Products; Chemical Products; Machinery; Fabricated Metal Products; and Transportation Equipment. Six industries reported no change in new export orders in August compared to July.
  5.   The ISM Imports Index, is at 51.5 percent in August, or 0.5 percentage points lower than July’s 52.0 reading. This represents the 31st consecutive month of growth in imports. The seven industries reporting growth in imports during the month of August — listed in order — are: Primary Metals; Transportation Equipment; Furniture & Related Products; Plastics & Rubber Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products. The four industries reporting a decrease in imports during August are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; and Machinery. Six industries reported no change in imports in August compared to July.

The U.S. Is filing anti-dumping legislation against seven nations, Australia, Brazil, South Korea, the Netherlands, the U.K., Japan and Turkey, on the grounds that they are causing injury to the domestic steel industry. In 2014, South Korea shipped almost $680 million worth of flat-rolled steel to the U.S.

U.S. machine shops and other manufacturers consumed $188.7 million of cutting tools in the month of June, nine percent up on May but one percent down on June 2014. This is considered to be a good barometer of manufacturing activity.

A record 14,232 robots, worth $840 million, were ordered by North American robotics companies in the first half of 2015, worth 7 percent more in revenues than in the same period in 2014. There were big gains in the coating/dispensing and materials handling sectors, according to the Robotics Industries Association.

On the U.S. Aerospace front, Boeing is selling and leasing fifteen 787 Dreamliners to Israel’s El Al airline. Boeing also sees a 20-year demand from India of 1,740 aircraft, mostly narrow-body planes for low-cost and regional airlines.  Boeing will be called upon, as will Airbus, to eventually supply some 300 new aircraft to Iran on the back of the nuclear deal, to replace its aging fleet. This will start with an order for 80 to 90 new aircraft.

And Walmart is planning to increase U.S. purchases by $50 billion annually by 2023, resulting in an extra 300,000 U.S. manufacturing jobs.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI  was at 49.4 percent in August, down from July’s 50.8 figure, the lowest reading since May and below 50 for the first time in three months, August saw a downturn in the Canadian manufacturing sector, although overall deterioration was only marginal. There was a decline in production for the first time in four months and employment decreased at the joint-fastest rate since October 2010.

Alberta and British Columbia both saw sharp, accelerated downturns, while Ontario and Quebec continued to show overall manufacturing sector growth. Employment cuts were most prevalent in Alberta and British Columbia.

Canada produced 1.06Mt of crude steel in July, down 5.0 percent y-o-y.

Bombardier’s new CS100 narrow-body jet has passed 80 percent of the flight test hours required to gain certification for commercial service and is on schedule for its commercial debut in the first half of 2016.

China Railway Corporation booked a $351 million order with a JV company Bombardier Sifang (Qingdao) Transportation. This is for supply of a series of train-sets with eight cars each for expanding China’s high-speed rail network.

Canam-Ponts (Canam-Bridges), a division of The Canam Group Inc. of St, Georges, Quebec recently signed a contract worth $225 million to supply the steel superstructure for the approaches to the new Champlain Bridge in Montreal. This is the biggest contract obtained by the Canam Group. The Champlain bridge links the Island of Montreal to its south shore.

Canadian auto sales increased 2 percent y-o-y in August, with sales over 175,000 units for the fifth consecutive month and sales increases for the 29th consecutive month.

Mexico’s PMI for August was at 52.4, down from July’s 52.9 reading. Overall there was less momentum, with production growth slowing for the third time in the past four months, but export orders showed the second-fastest increase since April 2012. Employment picked up in August to its strongest level in seven months, suggesting that manufacturers remain optimistic about the longer term outlook.

Mexico produced 1.58 Mt of crude steel in July 2015, up 2.4 percent y-o-y.

Mexico leads manufacturing growth in Latin America. Its auto sector expanded output 11.1 percent in the January to April period. Brazil, Argentina and Mexico account for over 80 percent of the manufacturing output in Latin America, whose growth is forecast at – 0.9 percent in 2015 and +1.9 percent in 2016. Mexico’s performance is offset by those of Argentina and Brazil, both of whom are in recession.

III. U.S. FORGING INDUSTRY: FORGING SALES UP

by Royce Lowe

forging-metalThe Forging Industry Association (FIA) recently released figures showing  total 2014 shipments of impression-die, open-die and seamless rolled ring forgings in the U.S., Canada and Mexico. Shipments for the year total just short of $12 billion, up 10.8 percent on 2013, and the highest total in the past decade.

Custom impression-die forgings were up 12 percent to $8.19 billion, with 30 percent going to automotive, 21 percent to commercial aerospace applications

Custom open-die forgings were up 12.35 percent to $2.07 billion, with oil and gas exploration machinery and equipment taking 30.3 percent of production, and defense – military aerospace, military heavy vehicles, ordnance/guided missiles, and naval nuclear applications – taking a further 13.7 percent of production.

Custom seamless rolled rings were up 3.45 percent to $1.66 billion, with commercial aerospace taking 45.4 percent of production and oil and gas machinery and equipment taking 13.3 percent of production.

Meanwhile Warren Buffet paid some $37 billion for Precision Castparts, a manufacturer of parts for the aerospace industry, and in turn the owner of Specialty Metals, the inventor and developer of the Inconel and Incoloy groups of high-nickel alloys that are used extensively in the aerospace and chemical processing industries. Precision Castparts made a net profit of $1.53 billion on sales of $10 billion in its last fiscal exercise.

IV. MANUFACTURING TALK RADIO

by Tim Grady

Manufacturing Talk RadioOn August 4th, Brad Holcomb, Committee Chair of the Institute for Supply Management’s Manufacturing Report on Business put into context the ISM’s Purchasing Managers Index number for July 2015.  In the second half of the show, Prof. Adriana Sanford provided insights as to why, although the substantial majority of the provisions of the Dodd-Frank Act apply to public companies, many small and mid-sized companies are also implementing similar controls because their investors or executives demand it.

Small and medium-sized businesses must appreciate the closer scrutiny that will be brought on by whistle-blowers, particularly regarding FCPA matters. Whether you are on the manufacturing floor, a supply chain professional, in receiving, or a corporate executive, doing the right thing is the right thing to do.

On Tuesday, Aug. 11, John Disharoon, Director of Market Access for Caterpillar’s Cat Reman and Dr. Nabil Nasr, Associate Provost for Academic Affairs and Director of The Golisano Institute for Sustainability, discussed remanufacturing’s role in the circular economy with co-hosts Tim Grady and Lew Weiss.  Increasingly, remanufacturing operations hold significant roles in sustainability initiatives.  Listen in as two leading voices in remanufacturing bring you up speed on the intricate elements and challenges of the remanufacturing process today, and hear all about the R&D for tomorrow that will insure manufacturers keep non-renewable resources in circulation and costs down long after the original product would have hit the landfill.

On Tuesday, August 18, Gardner Carrick, Vice President of Strategic Initiatives for The Manufacturing Institute, Mario Hernandez, President of the San Antonio Economic Development Foundation, and Gale Tenen Spak, Prime Contact, ManufactureNJ Talent Network and the Associate VP for Continuing and Professional Education at New Jersey Institute of Technology discussed how the industry is preserving its brain-trust of seasoned workers, recruiting and retaining fresh minds that are inspired by exciting innovation and re-training the workforce caught in transition to close the skills gap.

Allison Grealis, President of Women in Manufacturing and Karen Norheim, Executive Vice President of American Crane discussed the evolution of women in manufacturing and the business case for creating, and maintaining, a strong presence of women leaders in the industry today in the first of our two-part series on Women in Manufacturing on August 25.  The case for women in manufacturing has never been stronger to fill tomorrow’s jobs today.

V.  EUROZONE

by Royce Lowe

euroMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for August, at 52.3, was effectively the same as July’s 52.4 reading, which in turn was virtually unchanged from June’s 52.5 reading.

There was further expansion of the Eurozone manufacturing sector as witnessed by continuing growth in Germany, Italy, Spain, Netherlands, Austria and Ireland that was offset somewhat by contractions in France and Greece.

There were reports of strong gains in production and new orders with rates of increase up to their quickest pace for 16 months. Demand improved in both domestic and export markets and employment was up at its quickest pace for four years.

PMI High/low
Netherlands 53.9 (56.0) 5-month low
Italy 53.8 (55.3) 4-month low
Ireland 53.8 (56.7) 18-month low
Germany 53.3 (51.8) 16-month high
Spain 53.2 (53.6) 10-month low
Austria 50.5 (52.4) 3-month low
France 48.3 (49.6) 4-month low
Greece 39.1 (30.2) 2-month high

Airbus is undertaking manufacture of 213 feet (65 meter) long carbon-fiber-reinforced polymer (CFRP) wing structures for its A350-1000 wide-body commercial aircraft, in Wales. This is forecast to allow reduced fuel consumption, extended range and increased carrying capacity.

Passenger car sales were up in August by 6.2 percent in Germany, 9.7 percent in France, 23 percent in Spain and 11 percent in Italy.

For the sixth time in eight years, Greece will vote again on September 20 or 27, following the August 20 resignation of its Prime Minister Alexis Tsipras, who is seeking a new mandate.

Crude steel production in Germany in July 2015 was at 3.6Mt, up 4.7 percent y-o-y; in Italy 1.9Mt down 11.6 percent y-o-y; in France 1.4Mt, down 1.4 percent y-o-y and in Spain 1.0Mt, down 1.0 percent y-o-y.

Russia’s crude steel production for June was at  6.04Mt, down 2.8 percent y-o-y, Ukraine’s was 1.87Mt, down 24.1 percent y-o-y.

The UK’s manufacturing performance remained sluggish, in spite of the strength of the consumer goods sector. Investment and intermediate goods remain weak. The PMI eased down to 51.5 percent in August from July’s 51.9 reading.  The level of new export business dropped for the fifth consecutive month, and there was a reduction in employment in some larger companies.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 50.7 in August, down slightly from July’s 51.0 reading. The rate of production expansion was the slowest since August 2013.

The Czech Republic, Italy, Spain and Germany showed the fastest rates of production expansion in August, with the U.S. contributing significantly despite its growth easing back to a 19-month low. This was all offset by contraction in China, France, Taiwan, South Korea, Indonesia, Malaysia, Russia, Greece and Brazil.

Employment was up in the U.S., the Eurozone, Japan, Mexico, Taiwan and Vietnam, but down in China, the U.K., France, Canada, South Korea, Russia, Brazil, Austria and Greece.

VI.  ASIA OUTLOOK

by Royce Lowe

asia-economyChina produced 66Mt of crude steel in July 2015. down 4.6 percent y-o-y; Japan 8.8Mt down 4.9 percent y-o-y; India 7.7Mt, up 1.2 percent y-o-y and  South Korea 6.1Mt, up 1.7 percent y-o-y. Taiwan produced 1.85Mt in July, down 2.8 percent y-o-y.

The Caixin China manufacturing PMI for August fell slightly further from July’s 47.8 reading to 47.3, representing six months below the 50 mark. This was all on the back of lots of bad news for the Chinese manufacturing sector, which saw the quickest drop in operating conditions for over six years in August. Total new orders, both domestic and export, fell at quicker rates than in July, and production showed its most marked contraction since November 2011. Weaker customer demand led to the first rise in finished goods stocks in six months.

August was the second successive month with a fall in total new orders and a rate of contraction at a 17-month record. New export business was down at its steepest rate in over two years. Chinese manufacturers reduced workforce numbers in August for the 22nd consecutive month, with the actual rate of job shedding increasing since July to a pace similar to June’s 76-month record.

Caixin’s Chief (Chinese) Economist suggests that macroeconomic regulations and controls must continue and fresh reform measures introduced.

Passenger and commercial vehicle sales fell by 7.1 percent in China in July, for the second consecutive month. The China Association of Automobile Manufacturers (C.A.A.M.) said that passenger car sales were down to 1.27 million units after falling by 3.4 percent in June.  But the news from certain quarters is that this is all just a blip and that pent-up demand will send customers back to the showrooms in the not-too-distant future.

G.M., BMW and Volkswagen are expressing concern, saying  that reduced Chinese sales are hurting them. The situation is not helped by government curbs on car ownership, brought in to reduce congestion and pollution in some of China’s bigger cities.

In Japan, the Nikkei manufacturing PMI went from July’s 51.2 reading to 51.7 in August, a seven-month high. This was all thanks to a solid growth in new orders, production and employment. All three sectors, investment, intermediate and consumer goods showed improvement. Some respondents said they had actually been obliged to dip into inventories of finished goods to fill new orders.

Japan returned to nuclear power, four years after the earthquake, the tsunami and Fukushima, with tighter safety rules.  Japan and China are in competition to build a bullet train for Indonesia. Japan seemed to have won the contract until China came in with a bid.  The outcome is yet to be decided.

In India, the Nikkei PMI reading eased slightly from July’s 52.7, a six-month high, to 52.3 in August, amid solid, albeit slower, increases in both production and new orders.   Stocks of finished goods contracted at the sharpest pace in over ten years – when data were first collected – and some respondents commented that orders were being filled from inventory. Employment was effectively unchanged.  Consumer goods were stronger than investment and intermediate goods in terms of growth of production and new orders.

India’s economy grew at 7 percent in the second quarter of 2015, lower than the forecast 7.4 percent. Manufacturing and service industries came in at over 7 percent, whereas agriculture and mining scored less than 7 percent. Prime Minister Modi was obliged to abandon land reforms aimed at speeding up stalled multi-billion-dollar infrastructure and other development projects because of protests from farmers.

Meanwhile Taiwan’s Foxconn, an Apple manufacturer, is to invest $5 billion in a new plant in India, to help service the estimated 952 million mobile connections there.

VII.  SOUTH AMERICA – BRAZIL

by Royce Lowe

Brazil’s crude steel production for the month of July 2015 was 2.9Mt, a 3.1 percent y-o-y decrease.  The  manufacturing PMI in Brazil in August was down to 45.8 from July’s 47.2 figure, the lowest since September 2011.  Employment fell in August at the fastest pace in over six years and new orders contracted at the fastest rate in almost four years.  There is really no good news on the manufacturing scene in Brazil.

VIII.  GLOBAL SUMMARY

by Norbert Ore

GLOBAL GROWTH STILL POSITIVE AUGUST 2015 BUSINESS SURVEY INSIGHTS

The global business surveys measure change from month to month and have historically provided the earliest look at economic performance on both a macro and micro basis. Of the 18 surveys that we follow, 11 are growing and 7 are declining. The 11 that are growing have an average PMI of 52.8, while the 7 in decline average 47.5 percent. Interestingly, but probably irrelevant, is those in decline are doing so at a rate that resembles the reciprocal of those that are growing. Fortunately, the number growing exceeds the number in decline. Based on the JP Morgan Chase Global PMI (50.7, -0.3), the rate of change globally is at best slight.

SEPTNEWSLET - Times

Figure 1: Used with Permission from Strategas Research Partners

Sources:  Strategas Research Partners, Institute for Supply Management, markiteconomics.com

With France (48.3, -1.3) and Greece (39.1, +8.9) in extended decline, the rest of the Eurozone (52.3, -0.1) continues to grow. Germany (53.3, +1.5) is growing for the ninth consecutive month and posted its highest reading since April 2014. The remaining five Eurozone countries average 53 percent and were again led by Netherlands (53.9, -2.1), Italy (53.8, -1.5) and Spain (53.3, -0.3).

In the UK, (51.5, -0.4) the rate of growth decelerated slightly as the UK PMI registered its 29th consecutive month above the 50 mark. Consumer goods for domestic production and consumption are apparently the strength of the economy as opposed to the export market, which is struggling due to the strength of the pound sterling.

As for North America, Canada (49.4, -1.4) failed to grow for the month and for the year as it has averaged 49.9 since January. Mexico (52.4, -0.5) saw new export sales continue to expand at a robust pace that was only slightly less than the 50-month high registered in July.

Looking for clarity from China (which never seems to exist), the official data shows the pace of manufacturing to be similar to July as the CFLP PMI (49.7, -0.3) shows minimal change. However, the Caixin China General Manufacturing PMI (47.3, -0.5) registered significant contraction.

(Note: The Caixin China General Manufacturing PMI was formerly the HSBC survey).

  IX.  THE MANUFACTURING SCENE : U.S. MANUFACTURING FIGURES, FOOD FOR THOUGHT?

By Royce Lowe

The Bureau of Labor Statistics (BLS) says that the U.S. supported 12.3 million manufacturing jobs in July, up almost 160,000 jobs from the same time last year, but still two million less than a decade ago.  Of this total, approximately 1.7 million jobs were in Transportation, 1.5 million in Fabricated Metal Products, 1.2 million in Machinery, 1.1 million in Computers and Electronic Products and 400,000 in Primary Metals.

At the same time we hear of 600,000 jobs being available in manufacturing, and constant cries from manufacturers for unskilled, semi-skilled and skilled labor.  We hear further that a Washington D.C. think tank has warned that U.S. manufacturing is not as strong as recently portrayed by a congressional report.

In a March 2015 report “ U.S. Manufacturing in International Perspective,” the Congressional Research Service (CRS) suggested that the U.S. ‘has performed well in manufacturing compared to other high-income economies’ when viewed over the period 1990 to 2013.  The Information Technology and Innovation Foundation (ITIF) said that the CRS report ‘paints a rosier picture of U.S. Manufacturing than is actually warranted’ and said that U.S. Manufacturing had in fact ‘barely recovered from the Great Recession.’

The ITIF report criticized several aspects of the CRS analysis: Manufacturing job loss, says ITIF, is higher than quoted by CRS, charging that the report used ‘unofficial data and a truncated analysis period’ to support a 12 percent loss of manufacturing jobs between 2005 and 2013, whereas ITIF, using Bureau of Economic Analysis data from 2000 to 2013, found U.S. manufacturing employment actually declined by 30.9 percent.

U.S. Manufacturing output: ITIF says the CRS report compares ‘raw U.S. manufacturing output to other nations and concludes that nothing is amiss,’ but when compared as a percentage of GDP, the U.S. performance was ‘stagnant at best.’  ITIF adds that data used in the CRS report were probably overstated and that ‘U.S. output probably decreased.’

Signs of growth in U.S. Manufacturing: the CRS report says there are encouraging signs for domestic manufacturing, such as strong manufacturing Research and Development (R&D), healthy Foreign Direct Investment (FDI) and a high percentage of domestic manufacturing.  ITIF, however, says ‘when controlling for industrial composition, the results are much less favorable for R&D.’

ITIF further notes that Washington still needs to take action to strengthen manufacturing, such as a reduction of the effective corporate tax rate, a boosting of investment incentives – including for R&D – and better enforcement of global trade rules. There is also a need for manufacturing innovation and workforce development.

So what are we to conclude from these statements, some of which it appears are erroneous? Is it true that all these years after the end of the Great Recession little progress has been made in the U.S. Manufacturing sector?  We think not and we think that there is enough demand out there in the U.S. and the rest of the big wide world that manufacturing will continue its onward growth, sometimes slowly, sometimes a little quicker, but ever onward. And as we have stated in previous issues, significant progress is continually being made in both the production and employment sectors of the U.S. manufacturing sector.

X.  THE FINAL WORD

by Royce Lowe

There has been market chaos in the past few weeks, and there has been none-too-good news from the Chinese manufacturing sector for several months. Times are temporarily uncertain, as they often are. Calm will return, but we can’t rule out further temporary disruptions from whatever quarter.

We are very much wait and see.

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Metals Manufacturing Outlook Aug 2015

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 Subscribe at the bottom of the page.


I. Cover Story: THE GREEK MESS GETS MESSIER
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE GLOBAL SUMMARY
IX. THE MANUFACTURING SCENE
X. THE FINAL WORD


Publisher’s Statement

In this issue, we are pleased to introduce Norbert Ore, a noted supply management leader whose career has focused on value creation in global supply chains. In addition to his supply chain work he has found time to become a successful entrepreneur, a spokesperson for a prestigious economic report, an advocate for small businesses, and a sought after speaker.

Mr. Ore is Director, Head of Industry Surveys for Strategas Research Partners, a macro research firm specializing in economics, policy research, and technical analysis. Norbert will also be on Manufacturing Talk Radio as Senior Correspondent on Global Business Surveys and Analysis.

He is an acknowledged expert in purchasing and supply management having attained the status of Certified Professional in Supply Management (CPSM) and Certified Purchasing Manager (C.P.M.). He also holds a FINRA Series 7 professional qualification.  Additionally, he is a winner of the prestigious J. Shipman Gold Medal, which is presented annually by the Institute for Supply Management (ISM) for leadership and service in the field.

Norbert is best known for his work with ISM’s Manufacturing Business Survey Committee.  For 15 years, he served as chair of the committee, a position which gave him responsibility for compiling, writing, and releasing the ISM Report on Business®, the monthly economic report recognized as a leading indicator of the U.S. economy. He holds an undergraduate degree in business and a master’s in organizational management.

A new feature this month is called a scattergram, a tool for assessment of the global economy in one chart.  This is a unique way to display the composite index from 18 global business surveys relative to expansion-contraction and the degree of acceleration-deceleration month over month. The chart is provided courtesy of Strategas Research Partners, a macro economic research firm specializing in economics, policy research, and technical analysis.  It can be found in Section VIII. Global Summary.   In addition to the chart, we will include the global summary by Mr. Ore.

Mr. Ore joins Mr. Royce Lowe, our Senior Contributing Writer who helped relaunch this newsletter which was expanded from MetalsWatch® into Metals and Manufacturing Outlook® and is distributed to over 60,000 recipients worldwide. Born near Sheffield, England, Mr. Lowe is a qualified metallurgical engineer and (French to English) translator, who worked for many years in metallurgy, sales and purchasing in the steel industry in both Canada and the UK. He has written numerous articles on the steel industry’s history, metallurgy and marketing, and is known as the Man of Steel for his depth of knowledge in metallurgy.  Royce lives in Languedoc Roussillon where he writes for this newsletter.

We hope you enjoy this issue of Metals and Manufacturing Outlook as All Metals & Forge Group presents a look at manufacturing around the world.

Lewis A. Weiss, Publisher
Tim Grady, Editor-in-Chief

 I. COVER STORY: THE GREEK MESS GETS MESSIER

by Royce Lowe

Global Business People Stock Exchange Finance City Concept

In the last little while we’ve seen Greek bank shares collapse, the worst Greek market sell-off in history, the Greek manufacturing output fall to its lowest ever recorded level, high unemployment and the IMF withholding support for a new bail-out deal. This crisis is far from over, although a new bailout is at hand. However, it is doubtful that Greece can service a debt load well more than its GDP, although Greece’s European creditors see no need for a debt write-off.

We’ve also seen the Eurozone manufacturing economy holding its own in spite of all this. The US manufacturing economy looked a little better in July, as did those of India and Japan. China’s  economy is in a downturn at the moment.

The PMI figure from the Institute of Supply Management was at 52.7 percent in July, 0.8 percentage points below June’s 53.5 figure, still representing manufacturing expansion for the 31st  consecutive month and growth in the overall economy for the 74th consecutive month.

On the back of the sharpest increase in production volumes for three months and new orders increasing at the fastest pace since March, the Markit PMI for the US manufacturing sector rose to 53.8 percent in July, from June’s 53.0 reading.  Job creation is up, but moderating, across the US manufacturing sector in July.

The strong dollar, on the other hand, is seen to be hurting new export business, while there is suggestion from some quarters that reshoring has also helped growth.

The Bureau of Economic Analysis came out with its ‘advance’ estimate for the annual rate of Real GDP growth in the second quarter of 2015, placing it at 2.3 percent. The second estimate will be released on August 27. A further revised figure for the first quarter put the annual rate of real GDP growth at 0.6 percent. This compares with the previous ‘final’ figure of minus 0.2 percent.

The Dun and Bradstreet Economic Health Index for July showed that 231,000 new non-farm jobs were added to US payrolls in the month. The Business Services segment continued to lead, with solid support from Trade, Transportation and Utilities.  Following three straight months of decline, the Small Business Health Index bounced back 2.1 percent in July.  Dun and Bradstreet note a continuing year on year decline in US business health, but a month-on-month improvement for the past two months.

GALLUP’s US Economic Confidence Index dropped to -12 at the end of July, whereas the Gallup Job Creation Index for the month of July stayed at the record high figure of +32.

World crude steel production for the 65 reporting countries for  the month of June 2015 was 136Mt, down 2.4 percent from the June 2014 figure. The capacity utilization ratio, at 72.2 percent, was down 3.5 percent y-o-y, and down 0.1 percent on May 2015.

US crude steel production, for June 2015 was 6.7Mt, down 8.5 percent y-o-y.

Primary Global Aluminum Production in June 2015 was 4.902 million tonnes. Of this total, 2.756 million tonnes, over 56 percent, was produced in China. The Gulf Corporation Council (GCC) produced 421,000 tonnes and  North America 368,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the Big Eight’ for July 2015:

The ‘Big Eight’ July ’15 July ’14 YTD % change
General Motors 272512 256180 6.4
Ford 222014 211467 5
FCA 174744 163860 6.6
Toyota 217181 215802 0.6
Honda 146324 135908 7.7
Nissan 130872 121452 7.8
Hyundai/Kia 127324 119320 6.7
VW 31300 30553 2.4
Total new  cars and light trucks 1511281 1435342 5.3

The SAAR – seasonally adjusted annualized rate – is around 17.5 million cars for the year.

General Motors plans a $5 billion investment in the manufacture of Chevrolets for emerging markets. The models are being co-developed by state-owned SAIC Motor in China, and will be manufactured and sold in China, Brazil, India, Mexico and other emerging markets, but not in mature ones.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at least the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, 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.

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA

GDP Indl Prodn Cons prices Unemployt
United States +2.3 (2015) +1.3 (June) +0.1 (June) 5.3 (June)
Canada +1.6 (2015) -2.1 (Apr) +1.0 (June) 6.8 (June)
China +7.0 (qtr) +6.8(June) +1.4 (June) 4.0 (Qtr 2)
Japan +3.9 (qtr) +2.0 (June) +0.5 (May) 3.3 (May)
Britain +2.8 (qtr) +2.1 (May) nil (June) 5.6 (Apr)
Euro Area +1.5 (qtr) +1.6 (May) +0.2 (June) 11.1 (May)
France +2.5 (qtr) +2.8 (May) +0.3 (June) 10.3 (May)
Germany +1.1(qtr) +2.2 (May) +0.3(June) 6.4 (June)
Spain +3.8 (qtr) +1.8 (May) +0.1 (June) 22.5 (May)
India + 11.0 (qtr) +2.7 (May) + 5.4(June) 4.9 (2013)
Brazil -0.6 (qtr) – 8.9 (May) + 8.9 (June) 6.9 (June)
Taiwan +2.7 (qtr) -1.4 (June) – 0.6(June) 3.8 (June)
Mexico + 1.6 (qtr) -0.9 (May) + 2.9 (June) 4.4 (June)

On the people front, a skills shortage is predicted for aircraft technicians, with Boeing predicting 609,000 aircraft maintenance technicians being required over the next twenty years, along with 558,000 pilots. It is estimated that some 38,000 new aircraft will be delivered in the next twenty years.

President Obama is keen to meet his goal to double the number of apprenticeships to 375,000 in the next 5 years. Along with this, 10 Swiss companies are planning new apprenticeship programs in the U.S., and seven others announced they will expand existing ones. The Swiss apprenticeships include paid training starting in high school leading to a degree, including a government partnering with educational institutions and continuing education. The U.S. programs are similar but will extend to older workers.

II. NORTH AMERICAN PERSPECTIVE

by Royce Lowe
The Institute of Supply Management PMI figure registered 52.7 percent in July, 0.8 percentage points below June’s reading of 53.5, representing expansion in manufacturing for the 31st  consecutive month and growth in the overall economy for the 74th consecutive month.  Eleven of the eighteen industries reported growth in July, in order,  Textile Mills; Paper Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Transportation Equipment; and Miscellaneous Manufacturing. Five industries reported contraction in July, namely: Wood Products; Primary Metals; Plastics & Rubber Products; Chemical Products; and Machinery.

Comments on the month from Food, Beverage & Tobacco Products respondents are continuing to express concern about the Avian flu outbreak, saying in fact that fears of it are killing exports.  Fabricated Metal Products personnel speak of a summer slowdown, but also state that global orders are holding up despite international uncertainties. Both Petroleum and Coal Products and Chemical Products respondents point to low oil prices having a negative impact on their industries. Computer and Electronic Product respondents spoke of July being slower than June, but of an optimism for the balance of the year. Miscellaneous Manufacturing respondents report stable conditions with little change from July and Paper Products respondents report an abundance of containerboard in global markets. Machinery personnel report inbound logistics as being almost back to normal, while Furniture and Related Products respondents say that business conditions continue to be strong.

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

  • The ISM New Orders Index for July, at 56.5 percent, was up by a slight 0.5 percentage points from June’s 56.0 percent reading, representing growth in new orders for the 32nd consecutive month. Ten industries reported growth in new orders in July, namely, in order, Textile Mills; Paper Products; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Chemical Products. Six industries reported a decrease in new orders during July, namely: Wood Products; Primary Metals; Machinery; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.
  • The ISM Production Index, is at 56.0 percent in July, an increase of 2.0 percentage points on June’s 54.0 percent reading, representing growth in production for the 35th consecutive month. Growth was noted in eight industries in July, in order, Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Chemical Products; and Machinery. Five industries reported a decrease in production in July, namely: Wood Products; Plastics & Rubber Products; Primary Metals; Transportation Equipment; and Computer & Electronic Products.
  • The ISM Employment Index for July, at 52.7 percent, is down 2.8 percentage points on June’s 55.5 reading. Growth was reported in ten industries, namely, in order,  Textile Mills; Printing & Related Support Activities; Paper Products; Electrical Equipment, Appliances & Components; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Transportation Equipment; Fabricated Metal Products; and Computer & Electronic Products. Five industries reported a decrease in employment in July, namely: Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Miscellaneous Manufacturing; and Chemical Products.
  • The ISM Supplier Deliveries Index – The delivery performance of suppliers to manufacturing organizations was faster in July as the Supplier Deliveries Index registered 48.9 percent, which is 0.1percentage points higher than the 48.8 percent reported in June. This is the second consecutive month supplier deliveries have been faster than the previous month. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.  Six industries reported slower supplier deliveries in July, namely: Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; Computer & Electronic Products; and Transportation Equipment. The four industries that reported faster supplier deliveries in July are: Nonmetallic Mineral Products; Paper Products; Chemical Products; and Machinery. Eight industries reported no change in supplier deliveries in July compared to June.
  • The ISM Inventories Index, at 49.5 percent for July, is 3.5 percentage points lower than the 53.0 percent reading for June. This indicates that raw material inventories are contracting following two consecutive months of growth. Six industries reported higher inventories in July, namely: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Furniture & Related Products; Transportation Equipment; and Computer & Electronic Products. Six industries reported lower inventories in July, Paper Products; Machinery; Miscellaneous Manufacturing; Chemical Products; Food, Beverage & Tobacco Products; and Primary Metals. Six industries reported no change in inventories in July compared to June.

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 44.0 percent in July, 4.5 percentage points lower than June’s 48.5 reading, meaning that customers’ inventories are considered to be too low, and lower than June’s.    Three manufacturing industries reported customers’ inventories as being too high in July, namely: Apparel, Leather & Allied Products; Plastics & Rubber Products; and Fabricated Metal Products. The eight industries reporting customers’ inventories as too low during July are: Paper Products; Machinery; Petroleum & Coal Products; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products. Six industries reported no change in customers’ inventories in July compared to June.
  1. The ISM Prices Index registered 44.0 percent in July, 5.5 percentage points lower than in June, indicating a decrease in raw material prices for the ninth consecutive month. In July, 9 percent of respondents reported paying higher prices, 21 percent reported paying lower prices and 70 percent reported paying the same prices as in June. Five industries reporting paying increased prices for their raw materials in July, namely: Apparel, Leather & Allied Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Paper Products. Nine industries reported paying lower prices during the month of July, namely: Electrical Equipment, Appliances & Components; Primary Metals; Textile Mills; Fabricated Metal Products; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; and Computer & Electronic Products.

Up in Price in July were:  None – a very unusual occurrence as noted by Mr. Brad Holcomb in his comments on Manufacturing Talk Radio aired live on August 4, 2015.

Down in Price in July were:  Aluminum (8); Brass, Copper, Nickel; Stainless Steel (9); Steel Cold- Rolled (2) and Hot-Rolled (9).

In Short Supply in June:  Eggs (2) Note: The number of consecutive months the commodity is listed is indicated  after each item.

  1. The ISM Backlog of Orders Index was at 42.5 percent in July, 4.5 percentage points lower than the June reading of 47 percent, indicating a contraction in order backlogs for the second consecutive month. Of the 87 percent of respondents who measure their order backlogs, 13 percent reported greater backlogs, 28 percent reported smaller backlogs, and 59 percent reported no change from June. Five industries reported increased order backlogs in July, namely: Textile Mills; Printing & Related Support Activities; Paper Products; Electrical Equipment, Appliances & Components; and Furniture & Related Products. The ten industries that reported a decrease in order backlogs during July are: Wood Products; Plastics & Rubber Products; Primary Metals; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Computer & Electronic Products; Chemical Products; Machinery; Food, Beverage & Tobacco Products; and Transportation Equipment.
  1. The ISM New Export Orders Index was at 48.0 percent for July, down 1.5 percentage points from June’s 49.5 reading, indicating effectively the second consecutive month of decrease in new export orders. The five industries reporting an increase in export orders in July are: Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Paper Products. The eight industries reporting a decrease in new export orders in July are: Wood Products; Primary Metals; Plastics & Rubber Products; Transportation Equipment; Machinery; Chemical Products; Computer & Electronic Products; and Nonmetallic Mineral Products.
  2.  The ISM Imports Index, is at 52.0 percent in July, or 1.5 percentage points lower than June’s 53.5 reading. This represents the 30th consecutive month of growth in imports. Eight industries reported an increase in imports in July, namely: Primary Metals; Textile Mills; Furniture & Related Products; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; Computer & Electronic Products; and Miscellaneous Manufacturing. Four industries reported a decrease in imports during July, namely Nonmetallic Mineral Products; Plastics & Rubber Products; Chemical Products; and Machinery.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI was at 50.8 percent in July, down slightly from June’s 51.3 figure. This does in fact represent a second month of improving business conditions, though at a very modest pace and even less than that achieved in June. It is suggested that the second half of the year will see an improvement, with a strengthening US economy and a weak Canadian dollar.

Marginal to modest increases in production and new orders kept the PMI over the 50 mark.  Overall employment was down in the month, and manufacturers are dealing cautiously with their inventory levels.  Ontario recorded the best overall manufacturing performance, with Ontario, followed by Quebec, recording the best employment increases.  Again Alberta and British Columbia came in with the least encouraging figures among Canada’s leading provinces.

Canada produced 1.03Mt of crude steel in June, down 3.1 percent y-o-y.  Canadian light vehicle sales in the month of July rose slightly from the year ago figure to 177,844 units, a new July sales record.

As part of a new program in Canada, ‘Factory of the Future,’ the National Research Council (NRC), will contribute $380 million to local manufacturers and will provide expertise and resources to get the program off the ground.

For more on Canada, see ‘The Manufacturing Scene‘ below.

Mexico saw its sharpest rise in new export orders in July since May 2011, with production growth picking up from June’s 11-month low. This was accompanied by a slight increase in employment. On the back of this, the PMI for July increased to 52.9 from June’s 11-month low figure of 52.0.

Mexico produced 1.56 Mt of crude steel in June 2015, down 0.3 percent y-o-y.  Mexico will shortly be welcoming another automotive manufacturing plant, when construction of a Daimler/Renault-Nissan plant gets underway in Aguascalientes in Central Mexico. The company, to be called COMPAS, Cooperation Manufacturing Plant Aguascalientes, will be a 50-50 Daimler/Nissan venture and $1 billion will be invested in it for the construction and operation of a manufacturing plant for premium compact vehicles. Infiniti models will be manufactured from 2017, Mercedes-Benz from 2018 and 3,600 jobs will be created by 2020.

For more on Mexico see ‘The Manufacturing Scene‘ below.

III.  U.S. FORGING INDUSTRY: ATI EXPANDING

by Royce Lowe

forging-metalAllegheny Technologies Incorporated (ATI) is planning a $ 70 million expansion of its nickel-based super alloy powder production capacity. This is in response to demand for specialty materials for jet engine parts.  These parts are mainly forgings and milled parts, but there is also an increasing demand for additive manufacturing materials, including parts for aerospace, medical, electrical energy and oil and gas markets.  The nickel-based super alloys are refined into powder forms that are subsequently electroslag melted and vacuum refined.

A significant portion of the materials to be produced from this expansion are to meet the requirements of existing long-term agreements with jet engine OEMs that run well into the next decade. The expansion will also position ATI as a leading supplier of advanced powders to the rapidly growing additive manufacturing industry.

IV.   MANUFACTURING TALK RADIO

by Tim Grady

mfg Manufacturing Talk Radio has added Mr. Norbert Ore, a Senior Correspondent for Global Supply Surveys and Analysis who will first appear on the September 15th air date.  Head of Industry Surveys at Strategas, and former chair of the ISM Report on Business, Mr. Ore will provide his insights on the 18 international Purchasing Managers Indices he follows.  His comments can be read in Section VIII below.

On July 7th, hosts Tim Grady and Lew Weiss discussed the June ISM Manufacturing Report on Business® with Brad Holcomb, Chair of the ISM’s committee on that document, and then discussed the Dublin emails case that has Microsoft caught between the laws of the E.U. and the U.S.  A negative outcome of this case could negatively impact every company in the U.S. Hear it at http://mfgtalkradio.com/category/prof-sanford/

On July 14th, Jim Lawton, Chief Product and Marketing Officer for Rethink Robotics was on the show discussing Baxter and Sawyer, two robots designed to work alongside employees to complete repetitive tasks.  Most startling was the cost of the robots at less than $50,000 fully configured.  Is repetitive blue collar work on its way out faster than people think?  You listen and decide at http://mfgtalkradio.com/industrial-robotics/

On July 21st, Dr. Daniel J. Meckstroth presented the latest MAPI quarterly economic forecast including economic indicators, employment trends, global competitiveness for U.S. Manufacturers, and other analyses from their in-depth report.  MAPI will present this material quarterly on Manufacturing Talk Radio and you can hear the July report at http://mfgtalkradio.com/us-industrial-outlook-report/

Then, on July 28th, Grady and Weiss discussed Green Manufacturing with Danny Mishek, Managing Director and Co-Owner of SelfEco, Kate Bachman, Editor at the Sustainable Manufacturer Network and David Podmayersky, Chief Sustainability Officer of EarthColor.  One of the interesting takeaways from this show was that “green makes green” which means that green technology and green products don’t degrade the bottom line and enhance the top line. Tune in at http://mfgtalkradio.com/green-manufacturing/

Manufacturing Talk Radio is expanding its communications universe by adding the Metals Outlook Newsletter to its media offerings, and will open up advertising in both the live talk radio show, its subsequent podcasts, and the newsletter, which will become Metals & Manufacturing Outlook, part of the voice of manufacturing globally.

Be sure to tune in to Manufacturing Talk Radio every Tuesday at 1:00 p.m. EST at www.mfgtalkradio.com.  You may also listen to previous shows on your PC or smartphone, or download them from iTunes® to your iPhone or iPad.

V. EUROZONE

by Royce Lowe

Global Finance Themed Cartography With Multi-Ethnic Business People On ItMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for July, at 52.4, was effectively the same as June’s 52.5 reading. There was in fact a solid expansion in the Eurozone, despite a very sharp decline to a record low level in Greece. Continued growth in Ireland, The Netherlands, Italy, Spain, Austria and Germany served to offset the Greek effect. France slipped back below 50, with production, new orders and employment all going into contraction.  But overall, production, new orders – both domestic and export – and employment registered improvement across consumer, intermediate and investment goods sectors.

PMI High/low
Ireland 56.7 (54.6)
Netherlands 56.0 (56.2) 2-month low
Italy 55.3 (54.1) 51-month high
Spain 53.6 (54.5) 9-month low
Austria 52.4 (51.2) 17-month high
Germany 51.8 (51.9) 2-month low
France 49.6 (50.7) 2-month low
Greece 30.2 (46.9) Record low

Ireland does not figure directly in the Markit Eurozone numbers, but the above PMI for Ireland is in fact from a reliable source.

Passenger car registrations in Europe were again good for the month of July, with Germany showing an increase of 7.4 percent to 290,196 units, and a seven-month total up 5.6 percent to 1.91 million units. French sales were up 2.3 percent to 147, 132 units, Italy’s up 15 percent to 131,489 units and Spain’s – still on a scrappage program – up 24 percent to 102,922 units.

Crude steel production in Germany in June 2015 was at 3.8Mt, up 5.8 percent y-o-y; in Italy 1.9Mt down 11.4 percent y-o-y; in France 1.4Mt, down 1.3 percent y-o-y and in Spain 1.3Mt, down 3.3 percent y-o-y.

Russia’s crude steel production for June was at  5.64Mt, down 7.5 percent y-o-y, Ukraine’s was 2.0Mt, down 21.8 percent y-o-y.

The UK saw its Markit PMI at 51.9 percent in July, slightly up from June’s 51.4 reading. The UK manufacturing sector is still effectively reliant upon domestic consumer goods demand, and both intermediate and investment goods sectors were in contraction in the month of July.  Manufacturing employment is up for the 27th consecutive month in July, which is good for backlogs and present orders, but the manufacturing sector is in a state of uncertainty and definitely dependent upon an upturn in demand from more than the consumer goods sector.

UK Car sales in the first six months of the year were up 7 percent to over 1.3 million vehicles. June saw a 12.9 percent y-o-y increase to 257,817 units. Some 15 percent of buyers chose a UK-manufactured vehicle.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.0 in July, unchanged from June, the joint-weakest reading in two years.

Manufacturing output rose for the 32nd consecutive month, with the strongest production expansion in the Czech Republic, the Netherlands, Italy and Poland. The US remained close to the top of the global manufacturing production growth league table, with its rate of expansion going to a three-month high.

In Asia there was solid expansion in Japan and India that was offset by contraction in China, Taiwan, South Korea, Indonesia and Malaysia.  Manufacturing employment rose for the 24th consecutive month in July, but the rate of jobs growth was marginal. Levels rose in the U.S., the Eurozone, Japan, the UK, Mexico, Taiwan, Turkey and Vietnam. There were declines in employment in Russia, Switzerland, China, India, South Korea, Indonesia, Brazil and Malaysia.

  VI ASIA OUTLOOK

by Royce Lowe

China produced 69Mt of crude steel in June 2015, down 0.8 percent y-o-y; Japan 8.6Mt down 7.0 percent y-o-y; India 7.4Mt, up 0.8 percent y-o-y and  South Korea 5.9Mt, down 3.6 percent y-o-y. Taiwan produced 1.44Mt in June, down 25.5 percent y-o-y.

The Caixin China manufacturing PMI for July fell from June’s 49.4 reading to 47.8, coincident with a downturn in Chinese manufacturing gathering steam at the beginning of the third quarter. Decreases in total new orders and new export orders led manufacturers to cut production at the fastest rate since November 2011. Hence there was more job shedding, and a decline in staff numbers for the 21st consecutive month.  Employment was down again in July, with the rate of job cuts faster than that seen since February 2009.  The rate of decline in new orders received by Chinese manufacturers was the quickest since March 2014.

The Chinese automobile industry fell year-on-year in June, with total vehicle sales down 2.31 percent to 1.80 million units; passenger car sales down 3.36 percent to 1.51 million units.  For the first six months of 2015, total vehicle output was up 2.64 percent to 12.10 million units, with passenger car output up 6.38 percent to 10.33 million units. From January through June this year, total vehicle sales were up 1.43 percent to 11.85 million units, while passenger car sales were up 4.80 percent to 10.10 million units. There is uncertainty about the balance of the automotive year, particularly in view of the recent drop in manufacturing performance in China.

Things look better in Japan, where the Nikkei manufacturing PMI went from June’s 50.1 reading to 51.2 in July, the highest reading in five months. Production increased at a faster pace with a return to new order growth. Production was up at the fastest pace since February and employment up at the quickest pace since December 2014.  Japanese new vehicle sales were down 11 percent in the first half of 2015 to 2.7 million units, according to the Japanese automobile Manufacturers Association.

In India, the Nikkei PMI reading increased from June’s 51.3 to 52.7 in July.  Manufacturing gained momentum in July, with increased production growth and a stronger rise in new orders for consumer, intermediate and investment goods.  Export orders expanded at the quickest rate since February.  Despite all the positive news, there has been no increase in employment, in fact some Indian manufacturers are still cutting jobs. There are fears in some quarters that this could result in future production backlogs.

India’s Prime Minister Modi recently announced plans for a 12-week job training course for 400 million Indians over the next seven years. He speaks of transforming the country into the world’s Human Resources Capital.

VII.  SOUTH AMERICA

by Royce Lowe

Asia EconomyBrazil’s crude steel production for the month of June 2015 was 2.8Mt, a 2.1 percent y-o-y increase.  The manufacturing PMI in Brazil, at 47.2 in July was slightly up on June’s   46.5 reading. Although this was the sixth consecutive month below 50, the reading was in fact a five-month high.

Operating conditions continued to deteriorate, albeit to a lesser extent than in June. New orders and production decreased for the sixth consecutive month in July, but the rates of contraction fell to the weakest since February.  New export orders showed signs of stabilizing. Employment numbers were reduced for the fifth consecutive month.

VIII.  GLOBAL SUMMARY

by Norbert Ore

The Ore Point of View on Global Business Surveys:  It seems the global economy has the potential to do more than it is doing based on the currency machinations and monetary easing taking place around the world.  But, potential means you haven’t done anything yet and that appears to be the case in July. As has been the case recently, many of the challenges – remember the “transitory” issues – of Q1 were mitigated during Q2 clearing the way for better performance in the second half. However, July doesn’t offer convincing evidence of a global step change in the second half. Of the 18 surveys that we follow, 13 are growing. Based on the JP Morgan Chase Global PMI (51.0, unch), the rate of change globally is meager.

It appears things hit bottom in Greece (30.2, -16.7) as manufacturing all but shut down during July. Hopefully, Greece can now work at getting production back to its historical position providing 0.4 percent of global GDP. The Eurozone Index (52.4, -0.1) remains somewhat encouraging as it is down only marginally against June when it posted its highest reading since April 2014. The Eurozone was again led by Netherlands (56.0, -0.2), Italy (55.3, +1.2) and Spain (53.6, -0.9), which continue to be the stalwarts. Germany (51.8, -0.1) grew for the eighth consecutive month, but the growth has been marginal as it averaged 51.6 for the period.

scattergram

Figure 1: Used with Permission from Strategas Research Partners

Sources:  Strategas Research Partners, Institute for Supply Management, markiteconomics.com

Among other major U.S. trading partners, the UK (51.9, +0.5) accelerated slightly as the PMI registered its 28th consecutive month above the 50 mark. Meanwhile, Brazil (47.2, +0.7) slightly outperformed its 6 month average reading of 46.9 percent – but, the struggle appears to have no end in sight.

And then there is China. This month the official data shows the pace of manufacturing to be the same as June as the CFLP PMI (50.0, -0.2) shows minimal change. However, the Caixin China General Manufacturing PMI (47.8, -1.6) registered the largest m-o-m change since posting a 2.4 percent increase in August 2013. By China standards -1.6 pp is a large decline.

The August 11 easing of exchange rate controls via loosening of its daily trading limits may be a short term negative as they once again look for the export economy to provide growth, but should in the long term be positive as the central planners advance their education in capitalism.  (Note: The Caixin China General Manufacturing PMI was formerly the HSBC PMI).

As for North America, Canada (50.8, -0.5) rose above the 50 mark for the second consecutive month and Mexico (52.9, +0.9) accelerated following a six-month trend of deceleration. Both are reliant upon the progress of the U.S. economy and the benefit of weaker currency.  The good news is that both can “draft” off of the U.S. economy and should continue to improve.

IX. THE MANUFACTURING SCENE: CANADA, MEXICO, THE US…AND THEN SOME

by Royce Lowe

We’ve all heard of NAFTA, the North American Free Trade Agreement, signed in 1994, that allows free movement of many goods and services through the borders of Canada, Mexico and the U.S. This is big. It links over 454 million people and produced, in 2010, US$17.2 trillion in goods and services.  Canada and Mexico are the U.S.’s first and third trading partners, representing over 30 percent of  total US exports.

We can put figures on this to show the effects of the agreement over the years: For example in 1993, Canada’s total exports were C$188 billion, of which C$151 billion went to the U.S. The following figures give an idea of the growth that has taken place in trade of goods between the three countries since the signing of NAFTA.

U.S. – Canada Exports ($Bn) Imports ($Bn)
1994 114 128
2000 178 231
2014 312 348
US – Mexico Exports ($Bn) Imports ($Bn)
1994 51 49
2000 111 136
2014 240 294

The only year that saw a decrease in trade was 2009.

Canada – Mexico Exports ($Bn) Imports ($Bn)
1994 app 1 app 4
2000 app 1.5 app 9.5
2012 app 6 app 31

U.S. manufacturing exports to NAFTA are up 258 percent and exports of computer and electrical products, furniture, paper and fabricated metals have all more than tripled since the agreement was signed in 1994.

Canada’s trade with Mexico, as a percentage of its total global trade, went from 1.3 percent in 1994 to 3.5 percent in 2010.

There are statistics upon statistics, facts upon facts, to describe the trade of goods in and out of NAFTA, and mention of a few of these is in order. In 2014 the US shipped US$1.6 trillion around the globe, up by 27 percent from 2010. The major items were machines, engines and pumps (13.5%), electronic equipment (10.6%), oil (9.7%), vehicles (8.4%) and aircraft, spacecraft (7.7%).

In the same year Canada shipped U.S.$475 billion around the globe, up by 23 percent from 2010, with the major item being oil (27%), followed by vehicles, machines, electronic equipment, wood, aircraft and aluminum.

Mexico shipped US$ 398 around the globe in 2014, a 33 percent increase on 2010, with the major items being vehicles (21.6%), electronic equipment (20%), machines, engines and pumps (15%) and oil (10.6%).

In the case of both Canada and Mexico, some 75-80 percent of exports went to the U.S.  The agreement ensures an ongoing exchange of quality goods, right next door so to speak, with highly-skilled labor forces.

But of course it can’t stop there. The world’s too big and too many countries want to trade with (too many) countries. Talks are going on right now that will in all probability culminate in a trade agreement even bigger than NAFTA. TPP, or the Trans-Pacific Partnership, will involve, in alphabetical order, Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.  Together these twelve countries count around a billion people and generate trade worth about 50 percent more than NAFTA. It’s most probable that each country has industries and products they’ll want to protect, for example Canada’s dairy farmers and Japan’s rice growers; negotiations will be tough and agreement, although most likely, is not certain.

The one country conspicuous by its absence is of course China, but odds are that it will end up wanting to join if and when agreement is reached.

Come what may, trade will go on, dumping or no dumping, tariffs or none. NAFTA is there for good, and with Mexico having over 40 trading partners and counting, things look good for that member of the agreement. Canada has a free trade deal with the EU, and in the works is a Transatlantic Trade and Investment Partnership (TTIP) between the U.S. and the EU. So it’s free trade all around, better for everybody?

X.  THE FINAL WORD

by Royce Lowe

A globe and cash close up

A globe and cash close up

Times are tumultuous but nowhere more so than in Greece at the moment. It’s anybody’s guess as to what will happen there, with so many people so involved. Resolution, if such is the word, of this situation, may throw up more questions than answers.

As for the rest of the world, it’s pretty much status quo right now, with hope for a good second half of the year.

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Metals & Manufacturing Outlook July 2015

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 Subscribe at the bottom of the page.


Metals & Manufacturing Outlook – July 2015

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


Publisher’s Statement

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

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

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

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

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

Sincerely,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA.

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

 

NORTH AMERICAN PERSPECTIVE

American flag and banknotes

American flag and banknotes

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

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

US-PMI-Chart

 

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

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

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

  • The ISM Inventories Index, at 53.0 percent for June, is 1.5 percentage points higher than the 51.5 percent reading for May. This indicates that raw material inventories are growing in June for the second consecutive month.  Ten industries reported higher inventories in June, namely Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Furniture & Related Products; Food, Beverage & Tobacco Products; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Primary Metals. The four industries reporting lower inventories in June are: Textile Mills; Nonmetallic Mineral Products; Paper Products; and Plastics & Rubber Products.

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

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

Aluminum*, HDPE Resin (2)

Down in Price in May were:

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

           In Short Supply in June:

Egg Powder and Eggs

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

* Aluminum reported as both up and down in price.

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

 

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

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

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

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

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

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

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

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

 

IV  MANUFACTURING TALK RADIO

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

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

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

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

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

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

 

V.  EUROZONE

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

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

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

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

 

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

 

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

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

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

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

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

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

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

 

VI  ASIA OUTLOOK

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

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

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

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

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

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

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

 

VII.   SOUTH AMERICA

South America geographical view

South America geographical view

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

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

 

VIII.  THE MANUFACTURING SCENE : MANUFACTURING AND PEOPLE

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

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

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

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

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

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

 

IX.  THE FINAL WORD

time

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

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Metals & MFG Outlook Newsletter June 2015

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 Subscribe at the bottom of the page.


I. Cover Story: U.S., EUROPE BOUNCING BACK
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE MANUFACTURING SCENE
IX. THE FINAL WORD


Publisher’s Statement

The current economy and reports coming out of industry associations and the government is what cautious optimism looks and feels like.

The economy (read: employers, mostly in the private sector) created 280,000 jobs in May and the unemployment rate went up – yes, up – from 5.4% to 5.5%.  While Walmart announced wage increases, and restaurants seem busy, consumers are still skittish and either saving or more likely paying down debt.

Low prices at the pump have abated with the national average for a gallon of gas now approaching $2.80 a gallon, so the oil dividend has moderated at the pump as we enter the summer driving season.  But mining and oil exploration are still in the doldrums, laying off workers used for exploration.  That has had a big ripple impact on the metals industry for several months because these big metal consumers aren’t consuming, just harvesting from what is already in the ground.

GDP projections are all over the board, from a tepid 1.9% for 2015 to over 4% for the last half of 2015 – a number not seen in over a decade.  We would be thrilled to see GDP at the top end of projections, but our money is on the bottom end of the scale – unless – consumer spending kicks in fairly soon.  But, wages have not kept up over the last decade either, particularly since the Great Recession.

We’re all ready for the boom times – wouldn’t that be exciting!  Right now, keep in close contact with your current customers and work hard to develop new ones.  Don’t bet that the status quo will tide you over.

When do we expect an economic pick-up?  It could be after the 2016 elections if a Republican enters the White House, although neither party has proven particularly effective at much of anything except running up a colossal national debt since 1999 and bickering for half a decade what to do about it.  That old can being kicked down the road is looking pretty shoddy, rusted, dented and beat up.

The answers are in customer relationships and the ebb and flow of the marketplace, not in or out of Washington D.C.  Shift your sales emphasis from waiting for the phones to ring to driving outbound calling like never before. If the economy does leap upward, you will have gained new ground.  If it stays stalled, you will be no worse off and you will have not wasted your time.

By the way, out of 60,000+ readers, we heard from just a handful and they were not happy campers.  Even as we prepare this newsletter with all the seemingly upward indicators, we wonder what we’re missing.  It just doesn’t feel right out there yet.

So, as you read this issue of Metals & Manufacturing Outlook, we’d still like to hear from more of you.  Send you comments, positive or pensive, to publisher@steelforge.com.  Until then, enjoy the ebbs and flows of each of the following sections.

Sincerely,

Lewis A Weiss

Publisher

 COVER STORY: U.S., EUROPE BOUNCING BACK

manufacturing The U.S. economy looks better in May than it did in April, with new orders and employment significantly on the up.  People are still rushing to buy new cars, and at a rate not seen for quite some time.

Europe had a relatively good month, certainly compared to what we’ve been used to seeing out of there. Even France is looking (a little) better, but not many sources are making much of a fuss about it for the present.

Over in Asia, Japan had a better May than April. India’s figures suggest good times for its manufacturing economy, but nobody seems to be hiring as there are doubts about sustainability. Prime Minister Modi will not be pleased about that; he has a lot of jobs to find.

Meanwhile, back at the China ranch, there was nothing sparkling about May’s performance, and we may as well get used to month-by-month changes in the Chinese manufacturing sector.

And Brazil? No improvement for the moment – and don’t expect much very soon.  It’s a real mess down there.

The Bureau of Economic Analysis came out with its ‘second’ estimate for the annual rate of Real GDP growth in the first quarter of 2015, placing it at minus 0.7 percent.  This has been put down, in large part, to higher imports, lower inventory investment, lower international property investment and weaker services spending. Coincident with this, residential investment was up from 1.3 to 3.0 percent and equipment investment from 0.1 to 2.7 percent.  The difficult weather in January, February and March plagued the Midwest and Northeast, while the West Coast port issues took a bite out of our economic engine, as predicted during several broadcasts of Manufacturing Talk Radio.

The PMI figure from the Institute of Supply Management was at 52.8 percent in May, 1.3 percentage points above April’s 51.5 figure, representing manufacturing expansion for the 29th  consecutive month and growth in the overall economy for the 72nd  consecutive month.

The Markit PMI for the U.S. manufacturing sector was at 54.0 percent in May, effectively unchanged from April’s 54.1 percent figure. Markit stated that new orders were increasing at the slowest rate since early 2014, but that employment was increasing at the fastest rate for six months.

The Dun and Bradstreet Economic Health Index for May showed that 211,000 new non-farm jobs were added to U.S. payrolls in the month. The business services segment continued to lead, with the construction sector showing an improvement. Small business health showed a drop of 0.4 percent.

D and B note a continuing year-on-year decline in the Business Health Index in May as it slipped 0.12 points from the April reading.

World crude steel production for the 65 reporting countries for the month of April 2015 was 135Mt, down 1.7 percent from the April 2014 figure. The capacity utilization ratio, at 72.5 percent, was down 3.2 percent y-o-y, and up 0.9 percent on March 2015.

U.S. crude steel production, for April 2015 was 6.5Mt, down 9.8 percent y-o-y as overall demand for steel remains slow despite a strong auto industry.

Primary Global Aluminum Production in April 2015 was 4.733 million tonnes. Of this total, 2.587 million tonnes, or almost 55 percent, was produced in China. The Gulf Corporation Council (GCC) produced 421,000 tonnes and North America 374,000 tonnes.

Here are the latest figures for U.S. new car and light truck sales for ‘the big eight’ for May 2015.

The ‘Big Eight’ May ’15 May ’14 YTD % change
General Motors 293097 284694 3
Ford 250086 253346 -1.3
Toyota 242579 243236 -0.3
FCA 198320 189650 4.6
Honda 154593 152603 1.3
Nissan 134779 135934 -0.8
Hyundai/Kia 126043 130994 -3.9
Volkswagen 34758 32163 8.1
Total new  cars and light trucks 1635090 1608693 1.6

The SAAR – seasonally adjusted annualized rate – is now at 17.8 million cars for the year.

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.

DATA FOR TAIWAN HAVE BEEN SUBSTITUTED FOR THOSE FOR ARGENTINA.

GDP Indl Prodn Cons prices Unemployt
United States +0.2 (qtr) +1.9 (Apr) -0.2 (Apr) 5.4 (Apr)
Canada +2.4 (qtr) +1.6 (Feb) +0.8 (Apr) 6.8 (Apr)
China +5.3 (qtr) +5.9 (Apr) +1.5 (Apr) 4.1 (Qtr 1)
Japan +2.4 (qtr) -1.7 (Mar) +2.3 (Mar) 3.4 (Mar)
Britain +1.2 (qtr) +0.6 (Mar) -0.1 (Apr) 5.5 (Feb)
Euro Area +1.6 (qtr) +1.8 (Mar) nil (Apr) 11.3 (Mar)
France +2.2 (qtr) + 1.3 (Mar) +0.1 (Apr) 10.6 (Mar)
Germany +1.1(qtr) -0.1(Mar) +0.5(Apr) 6.4 (Apr)
Spain +3.6 (qtr) +4.7 (Mar) – 0.6 (Apr) 23.0 (Mar)
India + 4.0 (qtr) +2.1 (Mar) + 4.9(Apr) 8.6 (2014)
Brazil + 1.3 (qtr) – 3.5 (Mar) + 8.2 (Apr) 6.4 (Apr)
Taiwan +2.7 (qtr) +1.1 (Apr) – 0.8 (Apr) 3.8 (Apr)
Mexico + 1.6 (qtr) + 1.7 (Mar) + 3.1 (Apr) 4.2 (Mar)

 NORTH AMERICAN PERSPECTIVE

North America USAThe Institute of Supply Management PMI figure registered 52.8 percent in May, 1.3 percentage points above April’s reading, representing expansion in manufacturing for the 29th consecutive month and growth in the overall economy for the 72nd consecutive month. Fourteen of the eighteen industries reported growth in May, in order,  Apparel, Leather & Allied Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Transportation Equipment; Printing & Related Support Activities; Fabricated Metal Products; Machinery; Miscellaneous Manufacturing; and Chemical Products. The two industries reporting contraction in May are: Textile Mills; and Computer & Electronic Products.

Comments on the month from the manufacturing sector are as follows: Food, Beverage & Tobacco Products state that the economy is showing signs of improvement; Fabricated Metal Products point to automotive still being strong, but steel prices down due to overcapacity; Transport Equipment says business is steady and employment is up; Chemical Products say there is a strong spring demand in agriculture; Computer & Electronic Products say the strong dollar is hurting both Asian and European business; Machinery states that the West Coast port issues have eased and incoming imports are flowing again; Wood Products say that oversupply is continuing to tighten profit margins; Plastics & Rubber Products say that chemical pricing has bottomed out and is slowly rising again; Apparel, Leather and Allied Products find that sales are starting to stabilize and improve on prior months; and Miscellaneous Manufacturing finds continuing market challenges related to the oil and gas industries.  

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

  • The ISM Employment Index for May, at 51.7 percent, is up 3.4 percentage points on April’s 48.3 reading. Growth was reported in fourteen industries, namely, in order,  Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Furniture & Related Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Plastics & Rubber Products; Primary Metals; Paper Products; Miscellaneous Manufacturing; Chemical Products; and Transportation Equipment. The only industry reporting a decrease in employment in May is Computer & Electronic Products.
  • The ISM New Orders Index for May, at 55.8 perccnt, was up by 2.3 percentage points from April’s 53.5 percent reading, representing growth in new orders for the 30th consecutive month. Eleven industries reported growth in new orders in May, in order, Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; and Chemical Products. The only industry reporting a decrease in new orders during May is Petroleum & Coal Products. Six industries reported no change in new orders in May compared to April.
  • The ISM Production Index, at 54.5 percent in May, was down by 1.5 percentage points on April’s 56.0 percent reading,  representing growth in production for the 33rd consecutive month. Growth was noted in eleven industries in May, in order, Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Primary Metals; Transportation Equipment; Machinery; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Fabricated Metal Products; and Chemical Products. The only industry reporting a decrease in production during May is Computer & Electronic Products. Six industries reported no change in production in May compared to April.
  • The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in May at a faster rate as the Supplier Deliveries Index registered 50.7 percent, or 0.6 percentage points higher than April’s 50.1 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Six industries reported slower supplier deliveries in May, namely, in order Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting faster supplier deliveries during May are: Machinery; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Primary Metals. Seven industries reported no change in supplier deliveries in May compared to April.
  • The ISM Inventories Index, at 51.5 percent for May, is 2.0 percentage points higher than the 49.5 percent reading for April. This indicates that inventories are growing in May following a month of contraction in April. Seven industries reported higher inventories in May, Electrical Equipment, Appliances & Components; Furniture & Related Products; Miscellaneous Manufacturing; Plastics & Rubber Products; Primary Metals; Chemical Products; and Computer & Electronic Products. The four industries reporting lower inventories in May are: Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. Seven industries reported no change in inventories in May compared to April.

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 45.5 percent in May, 1.5 percentage points higher than April’s 44.0 reading, meaning that customers’ inventories are considered to be too low, but higher than in April.Two manufacturing industries showed too high customers’ inventories in May, namely Fabricated Metal Products; and Paper Products. Ten industries reported too low customers’ inventories in May, namely, listed in order, Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing; Chemical Products; Computer & Electronic Products; and Food, Beverage & Tobacco Products.
  1. The ISM Prices Index registered 49.5 percent in May, 9.0 percentage points higher than in April, indicating a decrease in raw material prices for the seventh consecutive month. In May, 15 percent of respondents reported paying higher prices, 16 percent reported paying lower prices and 69 percent reported paying the same prices as in April. Five industries reported paying higher prices in May, namely, listed in order, Plastics & Rubber Products; Primary Metals; Computer & Electronic Products; Paper Products; and Miscellaneous Manufacturing. The seven industries reporting paying lower prices during the month of May, listed in order, are: Wood Products; Petroleum & Coal Products; Fabricated Metal Products; Furniture & Related Products; Machinery; Transportation Equipment; and Chemical Products. Six industries reported no change in prices in May compared to April.
Up in Price in May were:

Copper, Diesel Fuel, HDPE Resin and Nickel.

Down in Price in May were:

Aluminum (6); Corn, Scrap Steel (6); Stainless Steel (7); Steel (6);         and Steel  — Hot Rolled (7).

           In Short Supply in May: No commodities were in short supply in May

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

  1. The ISM Backlog of Orders Index was at 53.5 percent in May, 4 percentage points higher than the April reading of 49.5 percent, indicating growth in order backlogs following two consecutive months of contraction. Of the 88 percent of respondents reporting, 26 percent reported greater backlogs, 19 percent reduced backlogs and 55 percent reported no change from April. Nine industries reported increased order backlogs in May, namely, in order, Primary Metals; Textile Mills; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Paper Products; Food, Beverage & Tobacco Products; and Machinery. The five industries reporting a decrease in order backlogs in May are: Fabricated Metal Products; Plastics & Rubber Products; Chemical Products; Transportation Equipment; and Furniture & Related Products.
  1.  The ISM New Export Orders Index was at 50.0 percent for May. The month’s reading indicates that the volume of new export orders was unchanged from April. Seven industries reported an increase in new export orders in May, namely, in order:  Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; Fabricated Metal Products; and Transportation Equipment. The five industries reporting a decrease in new export orders during May are: Primary Metals; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; and Machinery. Six industries reported no change in new export orders in May compared to April.
  2.   The ISM Imports Index, at 55.0 percent in May, is 1.0 percentage points up on April’s 54.0 percent reading. This represents the 28th consecutive month of growth in imports. Ten industries reported an increase in imports in Amy, namely, in order: Textile Mills; Nonmetallic Mineral Products; Furniture & Related Products; Miscellaneous Manufacturing; Machinery; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Chemical Products; and Computer & Electronic Products. The only industry reporting a decrease in imports during May is Plastics & Rubber Products.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI  was at 49.8 percent in May, up slightly from April’s 49.0 reading. Manufacturing production was in fact up in May for the first time in four months.  The Canadian automotive sector, however, is on track for its best year ever, with May’s sales, at 193, 397 cars and light trucks, the highest monthly figure ever recorded. Canada’s crude steel output for April 2015 was 1.03Mt, up 3 percent y-o-y.

Mexico saw its manufacturing PMI for May fall slightly from April’s 53.8 percent reading to 53.3 percent. Export sales, mostly to the U.S. and South America, were close to the three-year high seen in April, but domestic demand is growing more slowly, representing the slowest overall improvement in business conditions since October 2014. At the same time the job creation rate is up slightly from April’s. Mexico produced 1.51 Mt of crude steel in April 2015, down 2.6 percent y-o-y.

III.  U.S. FORGING INDUSTRY:  AMERICAN FORGING – ADVANCED MANUFACTURING – FORGING EQUIPMENT.

Forging anvil As a follow up to a previous article on American Forging and Advanced manufacturing, this article will deal with the present state of the actual forging equipment, equipment that is both controlled and advanced.

In days of yore it was the operator who was King of the forge. He it was who used his judgment and experience to make adjustments to the forging process. He controlled the energy going into each hammer blow, knew when to hit it hard and when to be relatively gentle. He surely had very little idea about the properties or the grain flow he was imparting to the piece, and the operator who took over from his shift might have had his own, different way of making the same part.

Today computerized energy controls are available on hammers to help the operator control the actual forging process. Shift-to-shift variations are a thing of the past, and programmable hammers are repeatable to about 1 percent of the requested energy. Today we know what the forging process does to mechanical properties and microstructure, and to obtain these properties we design our forging equipment and its controls accordingly.

MANUFACTURING TALK RADIO

mfgtalkradio-mtrWe want to encourage all our listeners to complete our survey and tell us about your reaction to the show.  During May, Manufacturing Talk Radio broadcast four shows and introduced a Senior International Correspondent.

On May 5, Brad Holcomb, committee chair for the ISM’s Manufacturing Report on Business® presented the April Purchasing Manager’s Index number of 51.5 and the details behind the report where Manufacturing Talk Radio broadcast live from the 100th Anniversary Conference in Phoenix, Arizona.

There is a substantial depth of information in each section of the Manufacturing Report on Business®, some of which is covered in Section I of this newsletter.  Mr. Holcomb is also a contributing author, along with Mr. Bruce Zagaris, of Business Ethics: A Guide to Surviving Storms, Challenges and Ethical Risks, a book by Professor Adriana Sanford, a clinical associate professor in the Department of Management for ASU’s W. P. Carey School of Business. Specializing in law, international management, leadership, and business ethics for managers, Sanford also teaches in W. P. Carey’s Supply Chain Management department.  This show can be heard at mfgtalkradio.com.

Dr. Sanford is also ASU’s Lincoln Professor of Global Corporate Compliance and Ethics to 85,000 students (as well as staff, and faculty, and the broader local and global community). Sanford is an APB Speaker for American Program Bureau: A Global Speaker, Celebrity & Entertainment Agency, as well as a Senior International Correspondent for Corporate Compliance and Ethics for Manufacturing Talk Radio who will make regular appearances on the live radio show.  Her previous shows can be heard at http://mfgtalkradio.com/category/prof-sanford/.

On May 12, Manufacturing Talk Radio broadcast live from MetLife Stadium, home of the New York Giants and New Jersey Jets, at the CFO Innovation Conference hosted by CFOStudio. Lives shows and a panel discussion on The Evolution of Manufacturing: Machine to Machine Technologies, Predictive Analytics, and More moderated by Greg Libertiny, Senior Vice President, Finance and Business Operations for Theorem, with panelists  Michael Eldredge, Founder of American Sensor Technologies, John W. Kennedy, NJMEP Chief Executive Officer, Ned Mavrommatis, I.D. Systems Chief Financial Officer and Treasurer, and Rob Weingartz, Arrow Fastener Vice President of Finance.

The third segment of Manufacturing Talk Radio’s 5-part series on Aerospace Across North America was broadcast on May 19 with Steve Colantuoni, Vice President of Marketing for The Tecma Group of Companies, Aldo Rodriguez, Director at Noranco, Inc. in Mexico, and Gale Thompson, renown industry expert and retired Vice President of International Operations for The Offshore Group who discussed Mexico’s vibrant and growing aerospace industry, the return of maquiladoras and Mexico Shelter Manufacturing Partnerships. To learn more, listen to the show here.

Senior International Correspondent Adriana Sanford also contributed to a May 19 discussion about how the confluence of international law and data privacy can impact U.S. companies doing business overseas or sourcing overseas, and multinational corporations conducting business globally.  This special segment can be heard here.

On May 26, Susan Lavrakas, Consultant to the Aerospace Industries Association (AIA) on Workforce Issues, Kevin Wolfe, General Manager of Powill Manufacturing and Michael Chrobak, Executive Vice President of Lead Generation for TexasOne participated in Part 4, Aerospace in the Southwest of the Aerospace Across North America series with hosts Tim Grady and Lew Weiss.  That show can be heard here.

V. EUROZONE

european economyMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for May, at 52.2, was slightly up April’s 52.0 reading. There was growth in most nations, with Spain, the Netherlands, Ireland and Italy leading the way, and Germany and Austria showing modest expansion. Both France and Greece are still in contraction.

There was a modest accelaration in the expansion rate of the eurozone manufacturing sector. Manufacturing production expanded again in May, extending the current growth sequence to 23 months, and the rate of increase among the fastest seen in the past year. Trends in new orders and new export business both improved and output growth should be sustained in the coming months. Employment in the eurozone is up for the ninth consecutive month.

Production and new orders in Spain are rising at the quickest pace since 2007 and new export business showed its strongest gain in 15 years. Production and new orders in Italy are at their best in over four years. Solid job creation is taking place in Spain, the Netherlands, Italy and Ireland.

The downturn in production at French manufacturers went to 12 months in May, with decreases also in new orders and employment. There was a slight upturn in new export orders.

PMI High/low
Ireland 57.1 (55.8) 3-month high
Spain 55.8 (54.2) 97-month high
Netherlands 55.5 (54.0) 17-month high
Italy 54.8 (53.8) 49-month high
Germany 51.1 (52.1) 3-month low
Austria 50.3 (50.1) 9-month high
France 49.4 (48.0) 12-month high
Greece 48.0 (46.5) 1-month high

Crude steel production in Germany in April 2015 was at 3.6Mt, down 1.9 percent y-o-y; in Italy 1.9Mt down 8.5 percent y-o-y; in France 1.3Mt, down 9.9 percent y-o-y and in Spain 1.3Mt, up 6.4 percent y-o-y.

Russia’s crude steel production for April was at  6.1Mt, up 3.2 percent y-o-y, Ukraine’s was 1.9Mt, down 24.9 percent y-o-y.

There were two fewer sales days for automobiles in Western Europe in May, with new registrations in Germany at 256,400, down 6.7 percent y-o-y, but up 4.0 percent when adjusted for the days. Germany’s YTD registrations are up 3.6 percent to 1.3 million. France registered 143,059 cars in May 2015, down 4 percent y-o-y, but up 7.3 percent when adjusted. France’s YTD registrations are at 791,143 units, up 3.8 percent. Spain has resumed its government-backed scrappage  scheme, and in May registered 94,030 units, up 14 percent y-o-y. Under this scheme, owners who scrap their cars and buy a new one get 2,000 euros, half from the government, half from the car manufacturer. Spain’s YTD registartions are at 443,888 units, up 22 percent y-o-y.

The UK saw its Markit PMI at 52.0 percent in May, effectively the same as April’s figure. Manufacturing output was up, but based on a solid domestic demand for consumer goods, offsetting a rather dismal export performance. The current manufacturing expansion is now in its 27th month. New orders were up in May.

New car registrations are up 2.4 percent in May to 198,706 units, representing the 39th month of growth. YTD registrations are 1,119,072 units, a 5.7 percent y-o-y increase.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.2 in May, slightly up on April’s 21-month low figure of 51.0.. The rate of expansion in global manufacturing production speeded up slightly in May, based on a response to an improvement in new orders. The U.S. economy and those of a number of European countries were instrumental in this improvement, and Japan’s  production went into expansion following April’s decline.

VI   ASIA OUTLOOK

ChinaCrude steel production in Asia for April 2015 was at 92.457Mt, with China producing 68.9Mt, down 0.7 percent y-o-y; Japan 8.4Mt down 6.1 percent y-o-y; India 7.40Mt, up 2.1 percent y-o-y and  South Korea 5.80Mt, down 6.6 percent y-o-y. Taiwan produced 2.0Mt in April, up 8.0 percent y-o-y.

The HSBC China manufacturing PMI for May was up slightly to 49.2 from April’s reading of 48.9. The manufacturing output contracted for the first time in 2015 thus far, with total new business down for the third consecutive month. There is reduced overseas demand and new export work is down at the fastest rate since June 2013.

This is the third consecutive monthly deterioration in the health of China’s manufacturing sector, but the rate of deterioration remained only slight. Employment was down again in May, bringing the current sequence of job shedding to 19 months.

In April  2015, passenger vehicle sales in China gained (only) 6 percent to 1,565,588 units, and year-to-date sales gained 10 percent to 6,559,084 units. Just over 40 percent of sales are of locally-made models, with combined Japanese, German and U.S. models representing 50 percent of total sales.

In Japan, the Markit manufacturing PMI went from April’s 49.9 reading to 50.9 in May. There was an improvement in Japan’s manufacturing operating conditions, as witnessed by a resumption of growth in both production and new orders, following April’s contraction. Employment growth was sustained for the second straight month following a rise in customer demand, but new export order growth was weak.

All in all, there was improvement in the Japanese manufacturing sector.  Light passenger vehicle registrations in Japan for the first four months of the year, at 1,894,113 units were down 11.7 percent y-o-y.

India’s manufacturing (HSBC) PMI went from April’s 51.3 figure to 52.6 in May, a four-month high. The upturn gathered momentum in May, with production and new orders up at the fastest rate since January 2015. Manufacturing output is up for the 19th consecutive month, with consumer goods particularly strong, but there are also good results for capital and intermediate goods production. There is in fact improved demand from both the domestic and export markets.

In spite of the noted improvements, there has been no increase in employment. It seems that firms are not convinced that the upturn will be sustained.

VII.  SOUTH AMERICA

south-americaBrazil’s crude steel production for the month of April 2015 was 2.9Mt, a 4.4 percent y-o-y increase.  The  manufacturing PMI in Brazil dropped very slightly further from April’s 46.0 reading to 45.9 in May, the lowest reading since September 2011. There has been a deterioration for four consecutive months.

May saw a fall in new business, tough economic conditions, and the fourth consecutive monthly drop in new orders.  Brazil is suffering from high inflation. May saw the largest drop in employment for six years, and even a drop in exports (in spite of a devalued real.)

There may be a (Chinese) knight in shining armor coming to Brazil’s rescue: see below in The Manufacturing Scene.

VIII.  THE MANUFACTURING SCENE : THE INFORMATION GAME, OR WHO’S MAKING WHAT, WHERE, HOW MUCH, AT WHAT COST AND HOW MANY JOBS?

ManufacturingThere’s never been so much information disseminated about so much. From all corners of the globe come daily online bulletins about which company is putting up a factory in which corner of the planet to manufacture vacuum cleaners, kitchen sinks, forgings for myriad parts of an automobile, aluminum plants to make aluminum slabs, to make aluminum sheet, to bend and draw to put into trucks, 3D printing processes that are threatening to do almost anything and everything – hold it, they’re working on 4D printing already –  and about Mercedes making a car that will sell for a million dollars. The stream of information is endless, and what’s more it’s repeated again and again on website A through to website Z. And all the websites are falling over themselves to be the first to get you the information. But of course unless you’ve got nothing better to do than look for new information for the sake of looking for new information, then most of the stuff online will fly right past you. Here’s just a sample of some of the info that came through on just a few websites in the month of May:

  • Airbus and Boeing are both saying a lot about their new generation LEAP engines, how these engines will improve fuel efficiency, how many they will make before 2020, how many both Airbus and Boeing will need, etc. They told us everything except what the acronym stood for. They told us Toulouse was in France: where’s Philadelphia? A trip to Google tells us that LEAP stands for Leading Edge Avaiation Propulsion. What a comedown, such an ordinary turn of phrase.   Let’s face it, Airbus and Boeing are in an ongoing fight to be the biggest and the best.
  • Airbus recently came out and admitted an “assembly quality problem” was responsible for the crash of the A400M last month.
  • 3D Printing, additive manufacturing if you will, seems to be a panacea that will revolutionize not just manufacturing but life as we know it.  A recent French publication mentioned the manufacture of houses in China from recycled material for $5,000. Imagine what that would do to the world’s construction industries.
  • Manufacturing in the U.S. may not represent the percentage of GDP it did some decades ago, but it is still a very dominant world economic force. It has connections to services, suppliers, customers and governments, and even though many (low-knowledge) jobs have gone overseas, the U.S. keeps on generating innovation and innovative ways to do things. Companies and individuals must continue to be agile and flexible in gaining new skills, running experiments to improve methods and products and to move forward faster.
  • MAPI (Manufacturers’ Alliance for Productivity and Innovation) has regularly something to say about manufacturing and its place in the U.S. economy. They say the manufacturing outlook is still optimistic, but less than initially predicted. The collapse in oil prices, the strong dollar, excess inventory and a late 2014 surge in consumer spending (that depleted fuel savings) has prompted a changed forecast. Daniel J Meckstroth, PhD, MAPI’s chief economist, has lowered the group’s forecast for manufacturing growth from 3.7 percent down to 2.5 percent, compared to the 3.5 percent of 2014. The forecasts are now for growth rates of 2.5, 4.9 and 3.1 percent for 2015, 2016 and 2017 respectively.
  • MAPI suggests that modest big-ticket spending has resumed after a very weak first quarter. Industry sectors that coordinate with multiple supply chains such as primary and fabricated metals as well as machinery, all logged significant gains in April after ‘disquieting’ contractions in the early months of the year.
  • A Successful Apprentice Program is being conducted by  Siemens at its plant in Charlotte NC. The program is based on that used in Germany, and it sponsors about ten students each summer for six weeks training. Six or seven of these students go on to a full four-year apprenticeship program of 6,400 hours of on-the-job training and 1,600 hours of course work at a Community College.
  • Susan Helper – such an appropriate name – Chief Economist at the U.S. Department of Commerce, is to give manufacturing a priority and wants to ‘look after the little guys.’ It seems that 42 percent of the manufacturing supply chain is for companies with less than 500 employees. The word from Ms Helper is to pay the little guys what they’re worth to do the jobs they do so well.
  • ArcelorMittal, the world’s largest steelmaker, has opened a Memorandum of Understanding (MoU) with SAIL, the Steel Authority of India, to undertake the construction of an automotive steel producing unit under a joint venture agreement.
  • General Motors is to invest $1 billion in a Warren Technical Center, with the creation of 2,600 jobs, and a further $1.2 billion in its Fort Wayne truck plant.
  • Volvo plans to build its first U.S. plant in South Carolina, with first production in 2018, and a capacity of 100,000 cars per year. Long-term employment is estimated at 4,000. The company sold a record 466,000 vehicles in 2014.
  • China is set to do a lot of business with Brazil. Beijing will spend $1 billion plus on passenger jets from Brazil’s Embraer.  China will invest tens of billions of dollars in Brazil in energy, mining, aviation and the upgrading of dilapidated infrastructure. A further grand project involves China constructing a railroad over the Andes to the ports of Peru, thus avoiding the Panama Canal. China already has experience in this field, having built a railroad from Beijing to Lhasa, the capital of Tibet, which is to date the world’s highest railroad. Lhasa looms over 13,000 feet above sea level.
  • Brazil slipped from being the world’s fifth largest auto producer to the eighth, as sales plummeted and layoffs were announced in the industry.
  • Mexico is set to become an important automobile producer as General Motors, Ford, Toyota, Nissan, Mercedes and Audi invest a total of $11 billion in the industry. With this will come OEMs, Aerospace, Heat Treat shops and  Foundries and Forges. The number of vehicles produced in Mexico will increase by over 50 percent from 2014’s level to 5 million vehicles in 2022.
  • ABB, a large Swedish engineering company, will become the first automation company to open a robot manufacturing operation in the U.S., in Auburn Hills, MI. ABB has invested over $10 billion in the U.S. since 2010 on capital expenditure, acquisitions and local R&D. It has taken the local employment level from 11,500 to 26,300.
  • Meanwhile, Millenials are telling Managers….we need more training and development and position changes faster.

IX.  THE FINAL WORD

The rebound in both the U.S. and Europe looks real for the moment. There are always those who will want to talk down this recovery, so it has always been. The consensus seems to be that things have turned up, but that caution is in order.

The situation in China is a little more difficult to read, since we have less access to the hard data. China seems determined, however, to continue spreading its global influence, viz its recent forays into Brazil, a country desperately in need of help. Latest news is that Chinese hackers may have breached the records of four million former and current U.S. government employees. We might ask the question ‘What does China really want?’ Regardless, we can’t afford to ignore it.

The latest figures coming out of Asia suggest that India will, given time, become a manufacturing force. How much time will depend to a very large extent on the country pulling up its own socks.

GALLUP’s U.S. Economic Confidence Index averaged -7 for the month of May, down from -3 in April..  The Gallup Job Creation Index, just in, reached a new high of +32.

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Metals & MFG Outlook Newsletter May 2015

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 Subscribe at the bottom of the page.


I. Cover Story: U.S. ECONOMY STILL OUT FRONT
II. NORTH AMERICAN PERSPECTIVE
III. U.S. FORGING INDUSTRY
IV. MANUFACTURING TALK RADIO
V. EUROZONE
VI. ASIA OUTLOOK
VII. SOUTH AMERICA
VIII. THE MANUFACTURING SCENE
IX. THE FINAL WORD


Publisher’s Statement

Great Economy?  Wait a minute – Not So Fast.

We are looking for comments from our readers about the economy and how they are feeling about it.  We aren’t feeling warm and fuzzy – at all.

In the fall of 2014, prognosticators were proclaiming a 2015 GDP that would be in the three’s and might even hit a 4.0 or 4.1.  We weren’t so sure and we said so, especially on broadcasts of Manufacturing Talk Radio.  We thought the West Coast port nonsense was going to take a bite out of the economy.

By December, only a few people were paying attention.  By January, real pain was starting to set in, along with another blast of cold and snow in the Midwest and Northeast. By February, it was getting ugly, as we continued to drag the port slowdown through the mud, snow and ice.  By March, it looked like it might all get settled, but too late for Christmas, Valentine’s Day and Mardi Gras.  However, then the rank and file still needed to vote, which they did just this week (May 21st).

Although the rank and file approved the new agreement that pays three-year union members in Class A jobs over $150,000 annually and as much as $300,000 plus benefits and medical, U.S. companies, from large OEM’s to many small mom-and-pop agri-businesses loss hundreds of millions of dollars a week as goods for export spoiled on docks, and goods for import were stuck on ships bobbing around at sea during the dispute, while the federal government watched at a distance until a looming shutdown was imminent.  The full impact of this disgraceful debacle will be felt throughout 2015.

However, in April, the federal government came out with the first quarter GDP number; a dismal +0.2, which we contend is bogus. The number is really a negative number, but the government wants to soften the blow so they held back.  Can you guess what they cited as the reasons why: the Northeast snow and cold, and the West Coast port issues.  Folks, it’s been snowing each January in the Northeast for a few hundred years, so it’s not like it’s an “Oh, my gosh” thing.  Yes, they broke a few records, but do we now really believe that the U.S. GDP will finish 2015 in 3.0+ territory, or even 2.5 or better, now that we are 5 months into the year, the weather is great, and the economy isn’t! And, at the end of May, the 1st quarter GDP number will be revised, and everyone is already expecting something like -0.9.  Second quarter won’t be much better.  If it’s above 2.0 we’d be surprised.

We are now well into the second quarter, and no one is bragging. The forging and primary metals industry is slooowww.  New orders are down. Steel mill output from our survey of friends in the industry is down. That means products that use metal, such as light and heavy machinery, farm equipment, industrial equipment, oil field components and possibly even appliances, are in the same downturn.  Even distribution centers are running at below-normal inventory levels, and no one is in a rush to stock up.

So drop us a line – we mean it – let us know how your company is doing by sending a quick email to publisher@steelforge.com.  While this won’t be a scientific survey, if we get enough responses, we will post them at mfgtalkradio.com for your review.  No names or companies will be mentioned; only industries and comments.

So, as you read this issue of Metals & Manufacturing Outlook, give us your reaction.  Do you have bragging rights, or would you like one of our Metals & Manufacturing Outlook crying towels to wipe the sweat from your brow?

Sincerely,

Lewis A Weiss
Publisher

I.  COVER STORY:  U.S. ECONOMY STILL OUT FRONT

North America USA The U.S. economy might be said to be ‘holding its own’ this month, its underlying strength still placing it up top. The UK manufacturing economy slipped back in April, just in time to throw another spanner in the election works. The Brits went to the polls on May 7 and in a surprising outcome, the Conservatives gain a majority in Parliament.

Canada’s oil-producing provinces seem to be pulling the country down somewhat, but people are still out there setting sales records for new light vehicles.  Nonetheless, things are slow.

Europe may be said to be coming out of the doldrums, thanks to all countries except France and Greece. There’s still work to be done to straighten out what can only be called a mess in the Eurozone.

The two major Asian economies, China and Japan, are floundering a little, for how long we don’t know, and the GDP numbers of China may be puffed a bit.  India is doing none too badly.

Brazil seems to be settling in for a bad period, with no light at the end of any tunnel for the moment. The country’s manufacturing sector is not functioning at all well, to put it mildly.  Petrobras, the government owned and operated oil conglomerate is in a real mess with a corruption scandal from the top down, along with the government itself, especially at the top.  Over 200 suppliers to Petrobras are being examined for paying commissions ( think ‘kickbacks’) to win work, and the recipients of those kickbacks are in the crosshairs of the investigation.

The US Commerce Department reported Monday, May 4, that U.S. factory orders were up in March after seven straight months of decline, pushed higher by commercial and defense aircraft orders.

  1. New orders for manufactured goods were up by 2.1 percent in March to $476.5 billion after a 0.1 percent decline in February. Compared to a year ago, factory orders were down 4.8 percent in March.
  2. Transport equipment orders were up 13.5 percent, led by a 103 percent jump in defense aircraft and a 30.6 percent increase in commercial aircraft.
  3. Durable goods orders were up 4.4 percent to $241.2 billion.

The PMI figure from the Institute of Supply Management was at 51.5 percent in April, the same figure as in March, representing manufacturing expansion for the 28th consecutive month and growth in the overall economy for the 71st consecutive month.

The Markit PMI for the US manufacturing sector was at 54.1 percent in April, down from March’s 55.3 percent figure. Markit stated that US manufacturing showed the slowest output growth thus far this year, whereas March had seen the sharpest rise in production since September 2014 with new orders increasing at the fastest pace for five months. Production expanded in April at the slowest rate since December, coincident with a fall in new orders. New export business fell for the first time in five months. Markit stresses, however, the underlying strength of U.S. business conditions, with both order backlogs and employment rising in April.

The Bureau of Economic Analysis came out with its ‘advance’ estimate, based on current available data, for the annual rate of Real GDP growth in the first quarter of 2015, placing it at 0.2 percent. The ‘second’ estimate, based on more complete data, will be issued on May 29 2015.

The Dun and Bradstreet Economic Health Index for April showed that 208,000 new non-farm jobs were added to U.S. payrolls in the month, a much lower figure than March’s 262,000 jobs. The business services segment continued to lead, while employment was weak in manufacturing and construction during April. Small business health showed a slight drop of 0.25 percent.

D and B stated that this reflects ”a hesitant economy that could still see modest gains heading into the summer months.”

World crude steel production for the 65 reporting countries for the month of March 2015 was 138Mt, down 2.7 percent from the March 2014 figure. The capacity utilization ratio, at 71.6 percent, was down 4.0 percent y-o-y, and down 1.8 percent on February 2015.

U.S. crude steel production, for March 2015 was 6.6Mt, down 12.7 percent y-o-y.  Keep an eye on this leading indicator in the months ahead.

Primary Global Aluminum Production in March 2015 was 4.765 million tons. Of this total, 2.563 million tons, or almost 54 percent, was produced in China. The Gulf Corporation Council (GCC) produced 432,000 tons, North America 387,000 tons and Western Europe 308,000 tons.

Here are the latest figures for US new car and light truck sales for the Big Eight for April 2015. These figures are from the New York Times, which reports that 1.45 million vehicles were sold in April 2015, up 4.6 percent on the same month last year. The SAAR is now running at 16.5 million vehicles. Sales are powered by a continued rise in sales of pickup trucks and crossover SUVs.  It is reported that April is the 20th consecutive month that trucks and SUVs outsold cars in the United States.

The ‘Big Eight’ April ’15 April ’14 YTD % change
General Motors 269056 254066 5.9
Ford 221652 210296 5.4
Toyota 203329 199734 1.8
FCA 189027 178664 5.8
Honda 130068 132452 -1.8
Nissan 109848 103924 5.7
Hyundai/Kia 121291 119747 1.2
Volkswagen 47175 46708 1
Total new cars and light trucks 1454951 1390513 4.6

General Motors announced $783.5 million in plant expansions in Michigan, the same day that GM Canada announced the end of production of the Chevrolet Camaro at its assembly plant in Oshawa, Ontario.

NORTH AMERICAN PERSPECTIVE

North America on blue planet Earth isolated on black background. Elements of this image furnished by NASA.

North America on blue planet Earth isolated on black background. Elements of this image furnished by NASA.

 The Institute of Supply Management PMI figure registered 51.5 percent in April, the same figure as March’s reading, representing expansion in manufacturing for the 28th  consecutive month and growth in the overall economy for the 71st consecutive month. Fifteen of the eighteen industries reported growth in April, in order,  Nonmetallic Mineral Products; Plastics & Rubber Products; Wood Products; Printing & Related Support Activities; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Textile Mills; Electrical Equipment, Appliances & Components; Chemical Products; and Primary Metals. The two industries reporting contraction in April are: Apparel, Leather & Allied Products; and Computer & Electronic Products.

Some comments on the month from the manufacturing sector, notably from Machinery and Computer & Electronic Products, are still stressing the effects of the west coast port strike. Lower energy  prices are helping Food, Beverage & Tobacco Products. The Fabricated Metal Products sector is enjoying good times thanks to the continuing strength of the automotive industry, while Primary Metals respondents report that production and orders remain strong and steady. Transportation Equipment says that North American business is holding steady, but that global business is softening. Furniture and Related Products say they are having trouble finding both skilled and unskilled workers.

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 53.5 percent, was up by 1.7 percentage points from March’s 51.8 percent reading, representing growth in new orders for the 29th consecutive month. Eleven industries reported growth in new orders in April, in order, Wood Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Machinery; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Chemical Products. The three industries reporting a decrease in new orders in April are Computer & Electronic Products; Primary Metals; and Textile Mills.

2.The ISM Production Index, at 56.0 percent in April, was up by 2.2 percentage points on March’s 53.8 percent reading,  representing growth in production for the 32nd consecutive month. Growth was noted in thirteen industries, in order, Textile Mills; Plastics & Rubber Products; Nonmetallic Mineral Products; Paper Products; Printing & Related Support Activities; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Transportation Equipment; Miscellaneous Manufacturing; Furniture & Related Products; Machinery; and Primary Metals. The two industries reporting a decrease in production in April are Petroleum & Coal Products; and Computer & Electronic Products.

3. The ISM Employment Index for April, at 48.3 percent, is down 1.7 percentage points from March’s reading of 50.0 percent. This is the lowest reading for employment since September 2009, when the employment reading was at 47.8 percent. Growth was reported in eleven industries, namely,    Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Primary Metals. The three industries reporting a decrease in employment in April are Textile Mills; Computer & Electronic Products; and Chemical Products.

4. The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in April at a slower rate as the Supplier Deliveries Index registered 50.1 percent, or 0.4 percentage points lower than March’s 50.5 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Nine industries reported slower supplier deliveries in April, namely, in order Furniture & Related Products; Textile Mills; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Primary Metals; Paper Products; Chemical Products; and Plastics & Rubber Products. The three industries reporting faster supplier deliveries in April are Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. Six industries reported no change in supplier deliveries in April compared to March.

5. The ISM Inventories Index, at 49.5 percent for April, is 2.0 percentage points lower than the 51.5 percent reading for March.This indicates a contraction in raw materials inventories following three consecutive months of inventory growth. Seven industries reported higher inventories in April, namely Fabricated Metal Products; Plastics & Rubber Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery. Seven industries reported lower inventories in April, namely Apparel, Leather & Allied Products; Furniture & Related Products; Computer & Electronic Products; Chemical Products; Primary Metals; Paper Products; and Textile Mills.

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 44.0 percent in April, 1.5 percentage points lower than March’s 45.5 reading, meaning that customers’ inventories are considered to be too low, and lower than March’s. Three manufacturing industries showed too high customers’ inventories in April, namely Petroleum & Coal Products; Fabricated Metal Products; and Food, Beverage & Tobacco Products. Nine industries reported too low customers’ inventories in April, namely, listed in order, Transportation Equipment; Primary Metals; Electrical Equipment, Appliances & Components; Textile Mills; Plastics & Rubber Products; Chemical Products; Paper Products; Machinery; and Furniture & Related Products.

2. The ISM Prices Index registered 40.5 percent in April, 1.5 percentage points higher than in March, indicating a decrease in raw material prices for the sixth consecutive month. In April, 7 percent of respondents reported paying higher prices, 26 percent reported paying lower prices and 67 percent reported paying the same prices as in March. The only  industry that reported paying higher prices in April was Plastics and Rubber Products. Thirteen industries reported paying lower prices, namely Wood Products; Electrical Equipment, Appliances & Components; Apparel, Leather & Allied Products; Textile Mills; Fabricated Metal Products; Furniture & Related Products; Machinery; Primary Metals; Paper Products; Chemical Products; Transportation Equipment; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

Up in Price in April were:
Freight

Down in Price in April were:
Aluminum (5); Carbon Steel (4);  Nickel (4); Crude oil (4);     Plastic Resin (5); Scrap Steel (5); Stainless Steel (6); Steel (5);   Steel — Cold Rolled (2); and Steel  — Hot Rolled (6).

In Short Supply in April:

No commodities were in short supply in April

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

3. The ISM Backlog of Orders Index was at 49.5 percent in April, the same reading as March, representing a contraction in order backlogs for the second consecutive month. Of the 85 percent of respondents reporting, 25 percent reported greater backlogs, 26 percent reduced backlogs and 49 percent reported no change from March. Seven industries reported increased order backlogs in April, namely, in order, Wood Products; Furniture & Related Products; Machinery; Paper Products; Fabricated Metal Products; Transportation Equipment; and Primary Metals. The seven industries reporting a decrease in order backlogs in April, listed in order, are Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Miscellaneous Manufacturing; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Chemical Products.

4. The ISM New Export Orders Index at 51.5 percent for April is 4.0 percentage points up on March’s 47.5 percent reading. The month’s reading represents growth in export orders following three consecutive months of contraction. Nine industries reported an increase in New Export Orders in April, namely, in order, Textile Mills; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Machinery; Computer & Electronic Products; and Chemical Products. The five industries reporting a decrease in new export orders in April are Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Primary Metals; and Fabricated Metal Products.

5. The ISM Imports Index, at 54.0 percent in April, is 1.5 percentage points up on March’s 52.5 percent reading. This represents the 27th consecutive month of growth in imports. Eight industries reported an increase in imports in April, namely, in order, Machinery; Furniture & Related Products; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; and Computer & Electronic Products. The three industries reporting a decrease in imports in April are: Primary Metals; Electrical Equipment,  Appliances & Components; and Plastics & Rubber Products. Six industries reported no change in imports in April compared to March.

CANADA’S RBC (Royal Bank of Canada) Manufacturing PMI  was at 49.0 percent in April, virtually unchanged from March’s 48.9 reading. This represents the third consecutive month below the 50 reading. Production, new orders and employment were all down in the month of April, and the latest reduction in overall new orders is the fastest seen since the survey began in October 2010. Much of the trouble can be put at the door of Alberta and British Columbia, since apart from the energy weakness other regions are enjoying an improvement over the previous month.

The better weather seems to have won out over the gloomy economic outlook and low oil prices – which could see people in oil-producing provinces losing their jobs – as Canadians bought 189,072 cars and light trucks in the month of April, a 5.7 percent jump on last year’s April figure, and in fact, a record for the month.

Canada’s crude steel output for March 2015 was 1.065Mt, up 3 percent y-o-y.

Mexico saw its manufacturing PMI for April at the same 53.8 percent level as March. The manufacturing sector brought in a good performance, but at a somewhat slower momentum than at the beginning of the year. The month saw the best increase in export sales for three years.  Mexico produced 1.625 Mt of crude steel in March 2015, a 5 percent y-o-y decrease.


III. U.S. FORGING INDUSTRY

forging-metalAutomotive forgings have evolved at an astonishing rate during the last three to four decades in terms of process control, design sophistication and automation. In 1985, it was common to hot- or warm-forge drivetrain components with ample stock to machine the majority of the forged surface after a heat treatment. The forging process combined a mix of operators and pick-and-place (assembly-line) automation. Quality levels were maintained through machining, sorting, inspection and rework to very impressive dimensional controls in the 100-1,000 ppm defect range.

In 2015, things are somewhat different. Now automated forging lines are designed to forge components with net or near-net shape with significantly less forging stock and minimal machining. Controlled cooling of micro-alloyed steels, not available in the 1980’s, allows attainment of required mechanical properties. Today’s technology is used to control tooling and equipment and to analyze and control stiffness and deflection, resulting in stock and tolerances at less than 10 percent of those experienced in the past.

Today automotive forging lines are a sum of the experience of the past and the technology of the present. Quality and cost effectiveness both benefit. Advances continue, with the ultimate goal of forging net-shape parts with holes and splines and threads. Who knows?

IV. MANUFACTURING TALK RADIO

Manufacturing Talk Radio The live Internet radio broadcast and podcasts of Manufacturing Talk Radio are expanding, with more subject matter experts and industry thought leaders, including the addition of Dr. and Professor Adriana Sanford and the shows Senior International Correspondent for Corporate Compliance and Ethics.  Professor Sanford has just announced the publication of her new book with co-authors Bruce Zagaris and Brad Holcomb, entitled Business Ethics, a Guide to Surviving Business Storms, Challenges and Ethical Risks.  Dr. Sanford will be a regular contributor to the broadcast on comparative law between the U.S., Latin America, South America and Europe.

Brad Holcomb, Chair of the Manufacturing Report on Business® with the Institute for Supply Management presented the April report with a PMI of 51.5.  Some of the underlying indicators were somewhat weaker and reflected a soft March and early April.

On April 15th, Steve Justice, Director of Georgia’s Center of Innovation for Aerospace and  Amy Kohler Hudnall, Deputy Director joined the show to talk about the global aerospace industry and how entrepreneurial and educational partnerships are ensuring the Southeast remains a leader in aerospace.

On April 22nd, Greg Gorbach, Vice President of Information-Driven Manufacturing for the ARC Advisory Group, and two of the leading voices at General Electric, Jeremiah Stone, General Manager of Industrial Data Intelligence, and Jennifer Bennett, General Manager of Manufacturing Software, both with GE Intelligent Platforms, joined Manufacturing Talk Radio to discuss the technologies available now, the main elements inherent in any IoT (Internet of Things)system, and all the how’s and why’s that every small to mid-sized manufacturer needs to know to connect, monitor, optimize and then predict the performance of devices within their operations.

On April 29th, Sid Snitkin, Vice President and GM, Enterprise Advisory Services, ARC Advisory Group discussed “Cyber Security and Manufacturing” with Lew Weiss and Tim Grady.  This is ‘the’ topic for manufacturers around the world as more devices become connected in the Industrial Internet of Things, more data gets generated, and more potential fallibilities creep into digital interfaces that can allow hackers to shut down or overrun machinery, tamper with code or steal intellectual property.  Especially vulnerable are small and mid-sized manufacturers who are less likely to deem their information as appealing to nefarious outsiders.  And the new vulnerability are devices of employees, such as smart phones and tablets that would legitimately have access to systems but could be lost or easily stolen, creating an unfettered pathway in.

Visit mfgtalkradio.com to hear the podcasts of these shows or the live broadcasts in May, most of which are now stored as podcasts.

V. EUROZONE

european economy Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for April, at 52.0, was very slightly down from March’s 52.2 reading. There was growth in most nations, but both France and Greece are still in contraction. Growth of the eurozone manufacturing sector was maintained in April, with the rate of expansion only slightly less than March’s 10-month high.

Manufacturing production rose for the 22nd consecutive month in April, with new orders rising for the fifth consecutive month. Ireland and Spain remained top performers, with Italy and the Netherlands also doing well. All four of these countries reported solid increases in new orders and production. Germany reported further expansion, but the overall improvement rate slowed slightly over the month. France and Greece continue in contraction, with production in France falling at the fastest pace in four months.

Job creation was registered for the eighth consecutive month, with the pace of increase the highest since August 2011. PMIs for the major economies are shown, with the previous month’s figures in parentheses.

PMI High/low
Ireland 55.8 (56.8) 3-month low
Spain 54.2 (54.3) 2-month low
Netherlands 54.0 (52.5) 3-month high
Italy 53.8 (53.3) 12-month high
Germany 52.1 (52.8) 2-month low
Austria 50.1 (47.7) 8-month high
France 48.0 (48.8) 2-month low
Greece 46.5 (48.9) 22-month low

Crude steel production in Germany in March 2015 was at 3.9Mt, down 4.4 percent y-o-y; in Italy 2.1Mt down 9.8 percent y-o-y; in France 1.4Mt, up 3.0 percent y-o-y and in Spain 1.3Mt, up 3.3 percent y-o-y.

Russia’s crude steel production for March was at  6.0Mt, the same as March 2014, Ukraine’s was 1.7Mt, down 36 percent y-o-y.

Western European new car registrations continue to show good gains, with Germany’s up 6.3 percent y-o-y in April to 291,395 units, France’s up 2.3 percent to 170,768 units, Italy’s up 24.7 percent to 148,807 units and Spain’s, with the government’s scrappage program at an end, up 3.2 percent to 82,715 units.

The UK saw its Markit PMI move down to 51.9 percent in April from March’s 54.4 figure. Manufacturing growth slowed during the month as the intermediate goods sector fell back into contraction. The PMI figure is a seven-month low. The consumer goods sector is the real positive in UK manufacturing, but there is a marked slowing in the rate of expansion of UK manufacturing. Production rose at the slowest pace since November 2014, and both new orders and export work decreased. Manufacturing employment, however, increased for the 24th consecutive month, again suggesting, in view of the month’s negatives, that productivity in UK manufacturing leaves something to be desired.

The JP Morgan Global Manufacturing PMI – a composite index produced by JP Morgan and Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was at 51.0 in April, down from March’s 51.8 figure, and a 21-month low. This reflects the fact that there was no outstanding performance by any economy in the month of April, with the possible exception of the US economy. Most others gave somewhat dismal results.

VI. ASIA OUTLOOK

Asia OutlookCrude steel production in Asia for March 2015 was at 94.335Mt, with China producing 65.9Mt, down 1.2 percent y-o-y; Japan 9.3Mt down 4.5 percent y-o-y; India 7.95Mt, up 10 percent y-o-y and  South Korea 5.65Mt, down 11.8 percent y-o-y. Taiwan produced 1.965Mt in March, up 3.9 percent.

The HSBC China manufacturing PMI for April took a dip from March’s reading of 49.6 down to 48.9. Operating conditions in the manufacturing sector deteriorated further in April, with total new orders declining at the fastest pace for a year, while production levels stagnated. Domestic demand was down, and the increase in export orders was incremental only. Total new business was down for the second consecutive month and the rate of contraction since March is the strongest for a year.

In March 2015, passenger vehicle sales in China gained 12 percent, led by a demand for S.U.V.s and minivans. Sales of cars, S.U.V.s and multipurpose vehicles jumped to 1.78 million units, according to the China Passenger Car Association, which cited a 64 percent increase in sales of S.U.V.s, a 26 percent increase in minivan sales, and a 0.6 percent drop in sedan sales.

In Japan, the Markit manufacturing PMI is at 49.9 percent in April, slightly down from March’s 50.3 figure. There were drops in both production and new orders, and production contracted for the first time since July 2014. There were worsening operating conditions in Japanese manufacturing, and new export orders slowed to their weakest in the current ten-month sequence of expansion.

Japanese vehicle sales were at 695,411 units for March, down 11.2 percent from March 2014, but up 44.2 percent on February 2015. Sales for 2015 through March, at 1,578,880 units, are down 14.4 percent over the same period in 2014.

India’s manufacturing (HSBC) PMI dropped back from March’s 52.1 percent figure to 51.3 in April. Production and new orders have been rising for 18 months in India, but the rate slowed in April.

Employment was reported as down in April, which is not good news for the Indian government, which has promised, and needs, more manufacturing jobs. India’s Prime Minister Modi made a big push at Hannover’s Messe trade fair recently, inviting the world to come and Make it in India, the ‘it’ being just about anything that can be made. It is acknowledged, however, that India has to get its house, rather its infrastructure, in order, before the world will come knocking on its doors.

VII.  SOUTH AMERICA

south-americaBrazil’s crude steel production for the month of March 2015 was 2.8Mt, a 7.4 percent y-o-y decrease.  The  manufacturing PMI in Brazil dropped slightly further from March’s 46.2 reading to 46.0 in April, a 43- month low,  marking the fastest downturn in manufacturing production for six years.

The contraction in the production of new orders speeded up over the month, suggesting that there is little hope of a recovery in the second quarter of the year. There have been more job losses than seen in four years.

Meanwhile, the Petrobras scandal, involving corruption at Brazil’s state-controlled energy giant, has come to a head with the disclosure of the fact that graft cost the company $2.1 billion. Together with write downs and further operating losses, the company has bled much red ink. The clean-up of the company will see many (political) heads roll and efforts to appease investors and possible future partners.

VIII.  THE MANUFACTURING SCENE : THE STEEL BUSINESS: WHERE IT CAME FROM, WHERE IT’S GOING

steel pipesWhere would we be without steel? We wouldn’t drive, and there’d be no public transport either. We’d have difficulty finding ways to cook and clean, and freeze our food. The list of uses for steel is endless. The bottom line is we’d have no place to live.

We’re not going to talk about Henry Bessemer and the way he revolutionized the steel business back in the mid-nineteenth century, nor about the Chinese and the Indians and what they did with iron and carbon way back when, nor about that once extremely dirty, smoky, foggy city in the north of England called Sheffield, that in the mid-nineteenth century could very legitimately be called the world center of steel.

In the year 1900, the world produced around 50 million tons of steel, and the U.S. produced about 37 percent of that total. Global production in 1950 was around 200 million tons, and this increased to around 700 million tons by 1975, representing an average annual growth rate of some 6 percent between those two dates. From 1975 up to the year 2000 the annual growth rate in the industry was around 1 percent, such that global steel production in the year 2000 was hovering around the 800 million tons mark. Something happened around the year 2000 that meant that both the steel industry and the steel business would never be the same again. The something was called China, where an almost insatiable demand for infrastructure, durables and consumer goods meant an accompanying demand for the world’s number one alloy. In a few short years China’s steel production went through the proverbial roof and at the end of 2014 the country’s annual crude steel production was itself hovering around the 800 million tonnes mark, It was producing almost half the world’s steel.

Many wonderful and interesting things happened to the steel industry starting around 1950, not the least of which was oxygen steelmaking, which came out of Linz-Donawitz in Austria under the name of the LD process. This was in fact an upgrading of the Bessemer process, where air had been blown through molten steel leaving the 20 percent of oxygen in the air to take care of ridding the steel of its impurities, but unfortunately leaving lots of nitrogen in it, resulting in a hard, britttle product. The LD process used what was known as tonnage oxygen, a commodity unfortunately unavailable in Bessemer’s day. Oxygen steelmaking would revolutionize the industry, allowing large quantities of steel to be made in a relatively short time, much quicker than the Open Hearth process that was being used at the time.

Oxygen steelmaking was followed by the continuous casting process, allowing elaboration of a uniform, segregation-free product that did away with the necessity of cropping the tops and bottoms from ingots. This process had its world premiere in North America, at Allegheny Ludlum and at Atlas Steels in Welland, Ontario. Ladle metallurgy, or degassing and ‘cleaning’ steel in the ladle, continuous annealing, pickling, and coating – with zinc and aluminum – were other advances in the steelmaking process that are today common practice, as were forging presses that until not too long ago would have seemed like science fiction. The metallurgy of the steel itself, or as we should say, the steels, resulted in advances that allow production of advanced high strength steels that can be easily fabricated and welded and used in the automotive and other industries with very significant weight savings.

So where does all this steel go? What do we make from it, the billion and a half tons that comes spitting out of furnaces, through mills and more mills, onto boats and trains that take it halfway around the world? Well, let’s have a look.

In 2013, in the United States, 40 percent of the steel went into construction, 3 percent into national defense and homeland security, 4 percent into appliances, 4 percent into containers, 26 percent into automotive, 10 percent into energy, 10 percent into machinery and equipment and 3 percent into other applications.

On a global basis, we’re looking at 50 percent of steel being used in construction, 16 percent on transport (cars, trucks, aviation, shipbuilding and rail), 14 percent on machinery, 14 percent on metal products, and the remaining 6 percent on domestic appliances and electrical equipment.

Flat-rolled steel accounts for 46 percent of global production, long products – bars, wire rod, structurals and rails – for 46 percent, and pipes and tubes for the remaining 8 percent. Here of course we are referring to finished products: we should not forget all the forged products that are made (mostly) from semi-finished products such as billets.

In early 2015 we can look at an industry, and a business, that are  both fascinating and largely unpredictable, and it is here that we find ourselves at this time. The Chinese engine shows signs of losing some of its steam, at least for some time, with its real estate market in somewhat of a downspin, and other manufacturing sectors, such as automotive, showing some weakness.

The lack of domestic demand for Chinese steel means even more aggressive exporting on China’s part, with the main targets being the US and Europe. Anti-dumping actions were expected and have been filed en masse. This raises the question as to whither goest the steel business in the next couple of years. The two largest iron ore producers, Vale and Rio Tinto expect – for which read are banking on – China’s steel consumption to pick up for ten more years: they are even talking 2030, when (Rio Tinto) are forecasting one billion tons of crude steel production in China.

The World Steel Association, Worldsteel, forecast in the fall of 2014 that global apparent steel use would increase by 2 percent in 2015 to 1,594Mt. They may or may not be on track, or they may or may not have changed their forecast. There are and will be many forecasts as to how the steel business will fare this year, and next, and the ones after that. If you wish to hand over a little more than $8,000 you can purchase Metal Bulletin Research’s  forecast out to 2020, in which they give a state-by-state analysis of steel usage, even where to build your plant etc.

Or you can just wait and see what happens, and whatever that is it will be anything but boring.

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.
NOTE: Data for taiwan have been substituted for those of Argentina that was previously shown.

GDP Indl Prodn Cons prices Unemployt
United States +2.2 (qtr) +2.0 (Mar) -0.1 (Mar) 5.5 (Mar)
Canada +2.4 (qtr) +4.1 (Jan) +1.2 (Mar) 6.8 (Mar)
China +5.3 (qtr) +5.6 (Mar) +1.4 (Mar) 4.1 (Qtr 4)
Japan +1.5 (qtr) -2.0 (Feb) +2.2 (Feb) 3.5 (Feb)
Britain +2.5 (qtr) +0.1 (Feb) nil (Mar) 5.6 (Jan)
Euro Area +1.3 (qtr) +1.6 (Feb) -0.1 (Mar) 11.3 (Feb)
France +0.5 (qtr) + 0.6 (Feb) -0.1 (Mar) 10.6 (Feb)
Germany +2.8 (qtr) -0.3 (Feb) +0.3 (Mar) 6.4 (Mar)
Spain +2.7 (qtr) +1.1 (Feb) – 0.7 (Mar) 23.2 (Feb)
India + 4.0 (qtr) +5.0 (Feb) + 5.2(Mar) 8.6 (2014)
Brazil + 1.3 (qtr) – 9.1 (Jan) + 8.1 (Mar) 5.9 (Feb)
Taiwan +4.8 (qtr) +2.7 (Feb) – 0.6 (Mar) 3.8 (Mar)
Mexico + 2.7 (qtr) + 1.6 (Feb) + 3.1 (Mar) 4.5 (Feb)

 IX. FINAL COMMENTS

by Royce Lowe

Asia EconomyThings this month are the way things are this month. We get used to things changing from month to month, particularly as we are constantly bombarded by news that’s very good or very bad or somewhere in between. Whatever the news it’s never-ending, and some of it needs to be taken with the proverbial pinch of salt.
The bottom line is that the U.S. economy appears to be in good shape, and the consensus is that it has underlying strength. All the other major economies are going through varying degrees of ‘worry’. But at some point they’ll snap out of it.
GALLUP’s U.S. Economic Confidence Index dropped six points to -9 for the week ending May 3, its lowest since December and the largest week-to-week drop since last July. The Gallup Job Creation Index, just in, hot off the press, reached a new high of +31.
Cautiously optimistic. It’s mostly the China thing.

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