Metals & Manufacturing Outlook Newsletter

Presented by All Metals & Forge Group

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Metals & Manufacturing Outlook – Aug 2014

II. North American Perspective
III. U.S. Forging Industry
IV. Manufacturing Talk Radio
V. Euro-Zone
VI. Asia Outlook
VII. South America
VIII. Economic Trends Across The Globe
IX. A Final Word

Publisher’s Statement

If you aren’t feeling the pick-up in the economy yet, check with your sales people and your marketing department. Unless you are making buggy whips, your business should be seeing new orders with the increase in demand in both the manufacturing and non-manufacturing sectors. Even the 2.9% dip in the first quarter, now revised for the second time to a 2.1% dip by retrospective government experts, seems like just an insignificant, winter-related blip on the radar screen.

Multiple sources of economic reporting are all saying the same thing: it’s a growing economy out there, although manufacturing is coming back from a 21% slide in 2008 as compared to an average 7% downturn for most other industries. ISM, MAPI, MarkIt PMI, Dunn and Bradstreet, and Gallup are all presenting positive reviews on the current state of the economy. While manufacturing is only about 12% of the nation’s economy, it still is the leading indicator of economic health, and those indicators are all pointing upward.

To hear more about activity in the marketplace, and specific solutions your business might use as a means to an end, tune in to each Tuesday from 1:00 p.m. to 2:00 p.m. EST. Over 100,000 listeners have picked up golden nuggets of information shared by industry guests across the entire spectrum of internal business activities including sales, marketing, operations, production, inventory, shipping, MRO and finance. In addition, tune in to hear where the economy seems to be heading for the balance of 2014 and into 2015 with an outlook towards 2016. It all appears to indicate that the next economic boom cycle is here.

Don’t miss it, and enjoy this issue of Metals & Manufacturing Outlook.

Tim Grady
Comments to Publisher:


The Bureau of Economic Analysis reports GDP in the US economy, based on presently available data and as an ‘advance’ estimate, increased in the second quarter of 2014 at an annual rate of 4.0 percent. The Bureau also reports a further revised GDP figure for the first quarter, stating that it didn’t drop by 2.9 percent, as reported here last month, rather by 2.1 percent. This latest first-quarter figure is based on more complete source data than were originally available.

The US economy added 235,000 non-farm jobs in July, on the heels of June’s addition of 244,000 jobs.

The PMI figure from the Institute of Supply Management was at 57.1 percent in July, a reading 1.8 percent higher than June’s 55.3 percent. This represents manufacturing expansion for the 14th consecutive month.

The Markit PMI, at 56.3 percent for July, was 1.0 percent below the June reading of 57.3 percent.

Dun and Bradstreet’s US Business Health Index was up by 4.6 percent year-on-year in July, effectively due to a lower risk of future business failure. The D and B Small Business Index was down 1.1 points in July.
D and B’s US jobs health, with 235,000 non-farm jobs added in July, shows increases in jobs in Manufacturing, Real Estate, Construction, Retail, Business Services and Trade, Transport and Utilities.

The MAPI Composite Business Outlook Index has increased as follows over the past year: June 2013 – 58, September 2013 – 66, December 2013 – 67, March 2014 – 69, June 2014 – 71.

The Gallup US Job Creation Index hit a six-year high in July, going to +28 from June’s +27 figure, and +21 a year ago.
World crude steel production for the 65 reporting countries for the first six months of 2014 was 821.3 Mt, up 2.5 percent on the same period last year. For the same period the EU28 showed an increase of 3.8 percent, Asia and North America an increase of 2.9 and 1.7 percent respectively, and South America a decrease of 1.0 percent. The capacity utilization ratio was 78.3 percent.

Crude steel production in the month of June was 137 Mt, up 3.1 percent on June 2013, with China producing 69.3 Mt, up 4.5 percent, Japan 9.1 Mt, down 1.7 percent, India 6.7 Mt, up 0.8 percent and South Korea 6.0 Mt, up 10.8 percent.

In the EU, Germany produced 3.6 Mt, up 0.6 percent, Italy 2.1 Mt, down 3.7 percent, France 1.4 Mt, up 1.6 percent and Spain 1.3 Mt, up 6.0 percent.

US crude steel production, for June 2014, at 7.2 Mt, is up 1.9 percent year-on-year.
Here are latest estimates for US car sales in July:

Company July 2014 YTD Change
General Motors 258,966 10.6%
Ford 212,714 10.2%
Toyota 217,314 12.4%
Chrysler 170,659 21.8%
Honda 144,701 2.3%
Hyundai/Kia 126,937 10.4%
Nissan 123,653 13.4%
Volkswagen/Audi 48,739 -0.9%
TOTAL 1,461,290

The Seasonally Annualized Adjusted rate is now running at around 16.5 million units for the year, as opposed to June’s figure that was close to 17 million units.

II. North American Perspective

na_forgingThe Institute of Supply Management PMI figure registered 57.1 percent in July, 1.8 percentage points higher than the June figure of 55.3 percent, representing expansion in manufacturing for the 14th consecutive month. This is the highest PMI reading since April 2011, when the PMI registered 58.9 percent.

Mr. Bradley Holcomb, chair of the Institute for Supply Management, states that the past relationship between PMI and the overall economy indicates that the average PMI from January through July (54.4 percent) equates to a 3.7 percent increase in real gross domestic product on an annualized basis. The July PMI, if similarly annualized, corresponds to a 4.6 percent annual real GDP increase.

Of the 18 industries reporting, 17 report growth in July, including Paper Products, Machinery, Chemical Products, Fabricated Metal Products, Petroleum and Coal Products, Primary Metals and Transportation Equipment. Only Wood Products showed a contraction in July.

There are mixed comments from the various sectors, with a Fabricated Metal Products respondent seeing ‘slow growth in business in a slow growing economy’ and a Transportation Equipment representative saying business is still very good and expected to sustain its strength through the year. A comment from the Chemical Products industry says Geopolitics is considered to be a considerable risk, as is the European market.

A Paper Products comment suggests that contractors are very busy and that it is difficult to get some of them, particularly electrical, to bid. An interesting comment from the Petroleum and Coal Products industry concerns salaries for what is referred to as engineering labor continuing to rise above general inflation due to market competition and shortages in certain specialty skills. From the Machinery sector we hear of many signs of strength in the economy.

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 July, at 63.4 percent, was up 4.5 percentage points from June’s 58.9 percent, representing growth in new orders for the 14th consecutive month. Thirteen industries reported growth in July, including Paper Products, Fabricated Metal Products, Chemical Products, Primary Metals, Machinery and Transportation Equipment. Wood Products and Nonmetallic Mineral Products reported a decrease in new orders in July.

2. The ISM Production Index was at 61.2 percent in July, up 1.2 percentage points from June’s 60 percent figure. The July reading means growth in production for the fifth consecutive month. Growth was noted in 16 industries, including Primary Metals, Machinery, Chemical Products, Paper Products, Petroleum and Coal Products, Fabricated Metal Products and Transportation Equipment. The only industry showing a decline in July was Computer and Electronic Products.

3. The ISM Employment Index for July, at 58.2 percent, is up 5.4 percentage points from June’s reading of 52.8 percent, representing an increase in employment for the 13th consecutive month. This is the highest employment reading since July 2011, when the index was at 60.3 percent.  Growth in employment in July was reported in thirteen industries, including Paper Products, Petroleum and Coal Products, Machinery, Fabricated Metal Products, Transportation Equipment and Chemical Products. Primary Metals showed a decrease in employment in July.

4. The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in July at a faster rate relative to June as the Supplier Deliveries Index registered 54.1 percent, or 2.2 percentage points higher than June’s 51.9 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Slower supplier deliveries were noted in ten industries in July, including Machinery, Fabricated Metal Products, Paper Products and Chemical Products. The only two industries reporting faster supplier deliveries in July are Primary Metals and Transportation Equipment.

5. The ISM Inventories Index, at 48.5 percent for July, is 4.5 percentage points lower than the 53 percent reading for June, indicating raw materials inventories are contracting for the first time since January 2014. The four industries reporting higher inventories in July include Chemical Products, whereas nine industries report lower inventories in July, including Fabricated Metal products, Machinery, Transportation Equipment and Primary metals.

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 43.5 percent in July, three percentage points lower than June’s 46.5 reading, meaning customer inventories have been too low for 31 consecutive months – a reading less than 50 percent means customer inventories are too low. Three industries showed too high inventories in June, including Paper Products. Thirteen industries showed too low inventories in July, including Fabricated Metal Products, Machinery, Primary Metals, Chemical products and Transportation Equipment.

2.The ISM Prices Index registered 59.5 percent in July, a 1.5 percent increase on the June reading of 58 percent. In July 26 percent of respondents reported paying higher prices, 7 percent lower prices and 67 percent the same prices as in June. Fourteen industries reported paying higher prices in July, including Petroleum and Coal Products, Fabricated Metal Products, Primary Metals, Machinery, Chemical Products, Transportation Equipment and Paper Products.

3. The ISM Backlog of Orders Index was at 49.5 percent in July, a 1.5 percent increase on June’s 48 percent reading. This represents contraction in order backlogs for the second consecutive month. Of the 86 percent of respondents reporting, 21 percent reported greater backlogs, 22 percent reduced backlogs and 57 percent reported no change from June. Six industries reported increased order backlogs in June, including Chemical Products, Paper Products and Fabricated Metal products. Nine industries reported a decrease in order backlogs including Primary Metals, Transportation Equipment and Machinery.

4. The ISM New Export Orders Index at 53.0 percent for July is 1.5 percentage points lower than June’s 54.5 percent reading. The month’s reading represents growth in exports for the 20th consecutive month. Eight industries reported an increase in New Export Orders, including Machinery, Paper Products, Fabricated Metal Products and Chemical Products. The five industries reporting a decrease in New Export Orders in July included Primary Metals and Transportation Equipment.

5. The ISM Imports Index is at 52 percent in July, 5.0 percentage points lower than June’s 57.0 percent reading. This represents the 18th consecutive month of growth in imports. Six industries reported an increase in imports in July, including Primary Metals, Chemical Products, Machinery, Fabricated Metal Products and Transportation Equipment. Four industries reported a decrease in imports in July, including Petroleum and Coal Products.

III. U.S. Forging Industry

North-AmericaAlcoa announced a 10-year, $1.1 billion agreement with Pratt & Whitney, a division of United Technologies Corp., for state-of-the-art jet-engine components, including the first-ever aluminum fan blade for jet engines, a forging developed for Pratt & Whitney’s PurePower engines. The part will be produced using an advanced aluminum alloy and a proprietary manufacturing process.

Alcoa is also developing a fan-blade forging using its most advanced aluminum-lithium alloy for the PurePower engines. Alcoa says this aluminum fan blade is lighter and gives better fuel efficiency. The company will also supply a range of other advanced product forms, including structural castings.

Carpenter Technology recently started up a new forging press, supplied by SMS Meer, at its plant in Athens, Ala. The plant includes remelting, forging and associated finishing and testing facilities. The press, the largest of its kind that SMS Meer has built to date, has an annual forging capacity of 50,000 tons. It has a press force of 22 MN for each of its four cylinders. The maximum feedstock diameter is 1,100 mm (43 inches) and the maximum billet weight 10,000 kg (11 tons).  Carpenter says the new forging machine will allow cost-effective production and provide flexibility to allow quick reaction to changes in demand.

IV. Manufacturing Talk Radio – Now a Weekly Live Radio Show

Manufacturing Talk RadioManufacturing Talk Radio ( continues to see a surge in listenership, with over 100,000 listeners hearing shows since the program launched 10 months ago. August shows covered the solid Purchasing Manager’s Index number, presented by Brad Holcomb, Chair of the ISM Manufacturing Business Survey Committee, export assistance from the Department of Commerce Export Assistance Center discussed by Susan Widmer, Director of the northern New Jersey office, information on three different lending solutions for businesses between $3 and $30 million in sales from Tim Loughlin and Bill Gallagher of CapFlow Funding, and how technology has advanced to allow one cloud-based suite of software to provide a single integrated solution for small and mid-sized enterprises as explained by Vijay Saha, Founder and CEO of Sererra Consulting Group and Ryan Evans, Director of Sales for the NetSuite software solution.

September shows will present information on Manufacturing Day (, a celebration of manufacturing in America (Sept 2), a discussion of manufacturing and economics in America with Daniel J. Meckstroth Ph.D who is vice president and chief economist as well as council director of the MAPI Purchasing Council, Linda Dempsey, Vice President of the National Association of Manufacturers making the NAM case for Congress to renew the Export-Import Bank, Scott A. Mayer, President and CEO of QPS Employment Group, one of the largest privately-held staffing and employment firms in the Midwest providing temporary, temp-to-hire and direct hire candidates in Wisconsin, Iowa, Illinois, Missouri and Kansas where some of the discussion will center around the 300,000 to 600,000 open jobs in manufacturing across this great country. Be sure to tune in at each Tuesday from 1:00 to 2:00 p.m. EST.

V. Euro-Zone

Forging CartMarkit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for July, saw another month, as in June, at 51.8 percent. This is the thirteenth successive month of the recovery, but a still struggling recovery. Ireland registered the sharpest rate of expansion, followed by Spain, where the rate of growth stayed close to June’s seven-year record. France and Greece reported deeper contractions, the worst for seven and nine months respectively.  Some PMI figures by country are:
Ireland          55.4    3-month high         Italy        51.9    8-month low
Spain            53.9    2-month low           Austria        50.9    2-month high
Netherlands    53.5    2-month high      Greece        48.7    9-month low
Germany        52.4    3-month high       France        47.8    7-month low

In the month of July, manufacturers in the Eurozone saw further gains in output, new orders and new exports, but at weaker rates of expansion than seen at the start of the year.
France is again the big worry. As the number two economy in the Eurozone, the discrepancy between its performance and that of Germany is both serious and alarming. It will take time for France to catch up, but the question is how much!

For the month of June 2014, Germany produced 3.6 Mt of crude steel, up 0.6 percent y-o-y; Italy 2.1 Mt, down 3.7 percent y-o-y; France 1.4 Mt, up 1.6 percent y-o-y; Spain 1.3 Mt, up 6.0 percent y-o-y.

Car sales bounced back in Germany in July, with the second-highest monthly gain this year, a 6.8 percent increase to 270,249 vehicles. To date this year sales are up 3 percent over last year to 1.81 million vehicles. France, meanwhile, shows sales figures of light vehicles down by 4.3 percent to 143,777.

Germany, as everyone now knows, won the World Cup.  Meanwhile British manufacturing growth in July was at the slowest rate in a year, something that hadn’t been forecast but was not unexpected in the short to medium term. The UK PMI for July was at 55.4, down from June’s 57.2 reading and the lowest level since July 2013.

VI. Asia Outlook

asia-mapCrude steel production in China in June was 69.3 Mt, up 3.1 percent on June 2013; Japan’s was 9.1 Mt, down 1.7 percent on June 2013, India’s was 6.7 Mt, up 0.8 percent on June 2013 with South Korea’s up 10.8 percent at 6.0 Mt.
The HSBC China manufacturing PMI climbed to an 18-month high in July, ending at 51.7 percent, an increase from June’s 50.7 figure. New export orders increased at the highest rate since November 2010, and job shedding eased in July. It is suggested that the Chinese Government has once again decided to make growth a top priority.

Overall vehicle sales in China cooled somewhat in June, but were still up 11.5 percent y-o-y. From January to June this year, passenger vehicle sales are up 11.2 percent to 9.63 million units.

Meanwhile, in Japan, the Markit manufacturing PMI is at 50.8 for July, down from June’s 51.5 reading. The PMI is increasing at a slower rate, manufacturers’ new orders grew for the second consecutive month and there was a rise in new exports for the first time in four months.

Total vehicle sales in Japan decreased year-on-year by 2.5 percent, which in view of the awaited impact of the aftermath of the new sales tax is considered a good result. July 2014 saw total vehicle sales of 460,260 compared to 472,108 in July 2013. The year-to-date figures are 3,466,066 for 2014, and 3,183 753 for 2013, or a y-o-y increase of 8.9 percent.

India’s manufacturing (HSBC) PMI in July, at 53.0 percent was up from June’s 51.5 figure, and represents a 17-month high in India’s manufacturing activity. A surge in production was backed by  new orders, both domestic and export. Optimism is reigning regarding GDP growth for the year, particularly following two years of growth below 5 percent.

VII. South America

south-americaBrazil’s crude steel production in May, at 2.9 MT, was down 4.3 percent year-on-year.
The seasonally adjusted HSBC and Markit Brazil PMI was at 49.1 percent in July, marginally up from June’s 48.7 percent figure.

The news out of South America is not too good these days. Argentina, for example, just defaulted for the eighth time in its history after it failed to make a payment due to bondholders who had exchanged defaulted debt from 2001 for restructured securities.

Brazil is in trouble too. Inflation stands at over 7 percent on items whose prices are not set by the government, and economists are slashing growth forecasts for 2014 to 1 percent or less. Manufacturing payrolls contracted in June for the third straight month, and for the first time in over five years. A Morgan Stanley spokesperson suggests that after three years of rather weak growth ‘industry has finally thrown in the towel.’ Capacity utilization has tumbled.

VIII. THE MANUFACTURING SCENE: Economic Trends Across The Globe

globeThe question has recently been asked, “are we in a manufacturing renaissance?’’ Jason Miller, the white house special assistant to the president for manufacturing policy, said at a recent Brookings Institute forum that “manufacturing punches above its weight. We’re in a period where something is happening.” There is no doubt that manufacturing has made progress in 2014, with 288,000 jobs being added in the manufacturing sector, bringing total jobs in the sector to 668,000. The US economy is presently on a roll, the unemployment rate is on its way to a full employment situation, second quarter growth is stronger that was envisaged, and cars and houses are selling like they haven’t done for years. All seems to be well. Even so, the renaissance may not be without its problems, and one of the biggest is a lack of skilled labor.

Jobs are being brought back from China, re-shoring it’s called, which in principle is a positive step. Manufacturing hubs are being set up across the US, another positive step. There is however a basic problem stalking all this, and that is a lack of skilled and highly-skilled personnel, call it labor, call it human capital, call it what you will, it still boils down to present workforces putting in too much overtime, longer cycle times, more downtime, quality problems, increased scrap and customer dissatisfaction. This is a blot on the manufacturing landscape that needs to be fixed.

A recent Accenture – Manufacturing Institute study suggests that manufacturers face reduced annual earnings of up to 11 percent because of the skills shortage, leading to the overtime, downtime etc. mentioned above. Findings show that 75 percent of US manufacturers report moderate or severe shortage of skilled workers, while 80 percent report moderate or severe shortages of highly-skilled workers. Manufacturers say that 80 percent of their workers fall into the skilled or highly-skilled categories. No company can expect skilled and highly-skilled workers to show up at their doors ready to start work, so it boils down to training, training, training. Apprenticeship is the word.  When we think apprenticeship, training, skilled and highly-skilled, we have to think Germany and we have to look at the German model.
The backbone of the world’s fourth-largest economy is considered to be the Mittelstand, Germany’s midsized manufacturers. These companies tend to be family-owned, located in small towns, and familiar only to the businesses that buy their specialized products. They are however enjoying a limelight recently, and are being visited by representatives of both South Korea and China, effectively to ‘see how it’s done.’ China, true to form, has bought a couple.

Youth unemployment, a major problem in industrialized countries for those aged 25 and under, is 7.8 percent in Germany, 22.1 percent in Sweden and 54 percent in Spain. Mittelstand firms inspire extraordinary loyalty in their workers, with only 2.7 percent of them leaving each year, compared with the 30 percent turnover at some big US companies. South Korea has set up German-style Meister schools to teach bright young people to master technical trades. Britain has been trying to learn from the German apprenticeship model since the late 19th century, with limited success.

The Mittelstander are reaching out too. They realize that it’s not always good to hide away, so they are busy learning from the world as the world learns from them. They are hiring foreigners to run their companies and are learning innovation in some instances from their customers. They realize that they have something efficient and profitable but also something that can be improved upon.
Perhaps there is something here that we can all learn from. It’s certainly not the first time we’ve heard of the German model and perhaps it’s time we picked it up,looked at it, and gave it a go.

Notwithstanding, the latest Global manufacturing recovery has been described in some circles as having the US and the UK on center stage, so things are ticking along nicely for the moment. Now is the time to start making sure they keep ticking along into the future.

The British Government has issued licenses for shale gas exploration and has invited bids for the right to extract shale gas. Over 40 percent of Britain is now open for exploration. To placate conservationists’ concerns, the government said firms would be allowed to frack in national parks, heritage sites and areas of outstanding beauty under ‘exceptional circumstances’ only.
The China Iron and Steel Association is taking a close look at the use of steel-frame buildings in the country. They presently represent less than 10 percent of all buildings in China, as opposed to, say, over 40 percent in the US. In 2012, 35 million tons of steel, or around 5 percent of the year’s steel output, went into steel-frame buildings. It is hoped to greatly improve on this figure in the future. The properties of asteel make it particularly suitable for buildings, particularly high-rise and long-span buildings.

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 change on the previous quarter, at an 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. Prod          Cons.Prices            Unemploy.
United States      + 2.4 (Q2)     + 4.3 June          + 2.1 June          6.1 June

Canada                 + 2.2 (Q1)     + 3.9 Apr          + 2.4 June          7.1 June

China                    + 7.5 (Q2)     + 9.2 June          + 2.3 June          4.1 Q2

Japan                   + 3.0 (Q1)     + 3.2 June          + 3.6 June          3.7 June

Britain               + 3.1 (Q2)      + 2.2 May          + 1.9 June          6.5 Apr

Euro area           + 0.9 (Q1)     + 0.5 May          + 0.5 June          11.6 May

France                + 0.7 (Q1)      – 3.7 May          + 0.5 June          10.1 May

Germany           + 2.3 (Q1)     + 1.2 May          + 0.8 June           6.7 June

Spain                    + 1.2 (Q2)    + 0.5  May          – 0.3 June          25.1 May

India                   + 4.6 (Q1)     + 4.7 May          + 7.3 June          8.8 2013

Brazil              + 1.9 (Q1)     – 3.1 May          + 6.5 June           4.9 Apr

Argentina        – 0.2 (Q1)     -4.9 May                       7.1 Q1

Mexico              + 1.8 (Q1)     + 1.6 May          + 3.8 June           4.8 June

IX. A Final Word

The Global Manufacturing Motor is moving ahead at a healthy rate at the moment, thanks mostly to the US, the UK and of course China. Europe is struggling through its recovery, with France’s performance still dragging all its indices down. South America is presently in a mess: no other word seems appropriate.

Manufacturers in the US must face up to the fact that they are running out of skilled workers, and that action on this front is urgently required. For the moment, however, things are good on the US manufacturing front.

World events will for the most part remain in the headlines, and The West has recently responded to events in Iraq. The consequences are not clear at the moment.
Let’s say optimism for the third straight month.


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