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 in the box and click on Subscribe.
Metals & Manufacturing Outlook – Sep 2014
I. Cover Story: US NOW REALLY IN TOP GEAR, EUROPE DOWN AGAIN, CHINA TAKES ANOTHER BREATHER
II. North American Perspective
III. U.S. Forging Industry
IV. Manufacturing Talk Radio
VI. Asia Outlook
VII. South America
VIII. Economic Trends Across The Globe
IX. A Final Word
The economy continues to move forward and grow in both the manufacturing and non-manufacturing sectors in the U.S. GDP has recovered from recession levels, and job growth continues to be strong. While the majority of the economy dropped 4-7% during the Great Recession, manufacturing dropped over 20% and is approaching pre-recession levels of productivity, new orders, and capital investment.
With over 600,000 jobs available in the manufacturing sector alone, consider passing this newsletter on to anyone who may be looking for work. Manufacturers are looking for skill sets of all ages to fill the vacancies across America, and many of these jobs have been open for more than a year.
Europe continues to struggle, as does Canada. The national debt of European countries and Canada has forced each country’s government to move to an austerity budget, cutting costs and expenses to try to balance their budgets. It is only one of two difficult steps. The other is to raise taxes on the populace, although doing so now in those countries would further cripple whatever economic recovery they are trying to achieve.
Skirmishes in the Middle East and Russia’s bullying of Ukraine clearly depress economic activity, which grows best when countries and economies are stable. There is additional tension between China and India, as China grows as an economic power, although the days of offshoring jobs appears to be waning as parts, components and finished goods requiring a high degree of content or assembly quality move back to Made in the USA, called reshoring.
Keep an eye on Mexico, as that country works to stabilize their economy and become a “near-shoring” alternative to manufacturing in the USA.
And, tune in each week to Manufacturing Talk Radio, where solutions for manufacturing are discussed. You can read more about these topics in Section IV of Metals & Manufacturing Outlook. We hope you enjoy the read.
Cover Story: US NOW REALLY IN TOP GEAR, EUROPE DOWN AGAIN, CHINA TAKES ANOTHER BREATHER
The PMI figure from the Institute of Supply Management was at 59.0 percent in August, a reading 1.9 percent higher than July’s 57.1 percent. This represents manufacturing expansion for the 15th consecutive month.
The Bureau of Economic Analysis reports a revised figure for GDP growth in the second quarter of 2014 from 4.0 percent to 4.2 percent. There will be a third estimate in late September. This latest second-quarter figure is based on more complete source data than were originally available.
The US economy added 247,000 non-farm jobs in August, with notable gains being made in Business Services – 59,000 new jobs – and Manufacturing – 32,000 new jobs.
The Preliminary Markit PMI, at 58.0 for August, was 2.2 percentage points above the July reading of 55.8 percent, its highest figure since April 2010. Markit further reports that US factory activity was up at its fastest pace in over four years in August.
Dun and Bradstreet’s US Business Health Index was up by 5.0 percent year-on-year in August. The D and B Small Business Index was up 0.5 points in August.
D and B’s US jobs health, with 247,000 non-farm jobs added in August, shows increases in jobs in Manufacturing, Construction, Retail, Business Services and Trade, Transport and Utilities. Only Real estate was down.
World crude steel production for the 65 reporting countries for the month of July 2014 was 137 Mt, up 1.7 percent on July 2013.
US crude steel production, for July 2014, at 7.6 Mt, is up 2.3 percent year-on-year.
The World Steel Association sees a continuing recovery in steel demand and expects global steel consumption to increase by 3.1 percent in 2014 and by 3.3 percent in 2015.
Primary Global Aluminum Consumption in 2013 was at 50.2 million tonnes, of which 7.2 million tonnes was consumed in Europe, 5.5 million tonnes in North America, 23.2 million tonnes in China, 10.1 million tonnes in the Rest of Asia and 4.2 million tonnes in the rest of the world. Primary aluminum is mostly produced in Asia (43%), Europe (24%) and North America (22%.) The average North American automobile contained some 75 lbs of aluminum in 1975 and now contains 350 lbs.
Arcelor Mittal, the world’s largest steelmaker, has come out with a new range of Advanced High Strength Steels (AHSS) called Fortiform. These steels, developed in North America and Europe, will allow weight savings in automobile manufacture, of an additional 20 percent over those already established by previous AHSS produced by Arcelor Mittal.
Here are the latest estimates for US car sales in August :
|Company||Aug 2014||YTD Change|
The Seasonally Annualized Adjusted Rate is now running at around 16.5 million units for the year, as opposed to July’s figure that was close to 17 million units.
II. North American Perspective
The Institute of Supply Management PMI figure registered 59.0 percent in August, 1.9 percentage points higher than the July figure of 57.1 percent, representing expansion in manufacturing for the 15th consecutive month. This is the highest PMI reading since March 2011, when the PMI registered 59.1 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 August (55.0 percent) equates to a 3.9 percent increase in real gross domestic product (GDP) on an annualized basis. The August PMI, if similarly annualized, corresponds to a 5.2 percent annual real GDP increase.
Seventeen of the 18 reporting industries reported growth in August, including Fabricated Metal Products, Paper Products, Petroleum and Coal Products, Chemical Products, Primary Metals, Transportation Equipment and Machinery. Only Textile Mills showed a contraction in August.
Comments on the month range from cautious, guarded to downright optimistic. A quote from the Transportation Equipment industry says that overall business conditions are flat, that world issues are having a bad effect on business and that customers are cutting back on spending. The Food, Beverage and Tobacco Industry says business is looking good for food manufacture, and that the prices of packaging materials are staying in check.
The Fabricated Metal Products industry reports a growth in business in the commercial building field. The Computer and Electronic Products industry points to very strong activity in the energy sector that shows no signs of decreasing in the near future. Geopolitics remains a concern for the Chemical Products industry, but demand is relatively healthy. The Machinery industry reports strong demand and better business than last year, whereas the Primary Metals industry reports the strongest month in years, solid business and the word Awesome!
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 66.7 percent, was up 3.3 percentage points from July’s 63.4 percent, representing growth in new orders for the 15th consecutive month. This is the highest reading since April 2004, when the index registered 67.1 percent. Fourteen industries reported growth in August, including Petroleum and Coal Products, Fabricated Metal Products, Paper Products, Transportation Equipment, Chemical Products, Primary Metals and Machinery. Wood Products and Textile Mills reported a decrease in new orders in August.
2.The ISM Production Index was at 64.5 percent in August, up 3.3 percentage points from July’s 61.2 percent figure. The August reading means growth in production for the sixth consecutive month, and the highest reading since May 2010 when the index was at 64.6 percent. Growth was noted in 15 industries, including Wood Products, Primary Metals, Paper Products, Fabricated Metal Products, Petroleum and Coal Products, Chemical Products, Transportation Equipment and Machinery. The only industries showing a decline in August were Textile Mills and Electrical Equipment, Appliances and Components.
3.The ISM Employment Index for August, at 58.1 percent, is very slightly down from July’s reading of 58.2 percent, representing an increase in employment for the 14th consecutive month.
Growth in employment in August was reported in fourteen industries, including Wood Products, Fabricated Metal Products, Petroleum and Coal Products, Chemical Products, Transportation Equipment and Machinery. Decreases in employment in August were noted in Paper Products and Primary Metals.
4. The ISM Supplier Deliveries Index – to manufacturing organizations – slowed in August at a slightly slower rate relative to July as the Supplier Deliveries Index registered 53.9 percent, or 0.2 percentage points below July’s 54.1 percent reading. A reading below 50 percent represents faster deliveries, above 50 percent means slower deliveries. Slower supplier deliveries were noted in eleven industries in August, including Fabricated Metal Products, Petroleum and Coal Products, Primary Metals, Transportation Equipment, Machinery and Chemical Products. The only industry reporting faster supplier deliveries in August is Textile Mills. Six industries reported no change in supplier deliveries.
5. The ISM Inventories Index, at 52.0 percent for August, is 3.5 percentage points higher than the 48.5 percent reading for July, indicating growth in raw materials inventories following one month of contraction.. Ten industries reported higher inventories in August, including Paper Products, Chemical Products and Transportation Equipment. Six industries reported lower inventories in August, including Petroleum and Coal Products, Fabricated Metal Products, Machinery 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 49.0 percent in August, 5.5 percentage points higher than July’s 43.5 reading, meaning customer inventories have been too low for 33 consecutive months – a reading less than 50 percent means customer inventories are too low. Four industries showed too high inventories in August, including Paper Products, Petroleum and Coal Products and Transportation Equipment. Seven industries showed too low inventories in August, including Primary Metals, Fabricated Metal Products, Machinery and Chemical Products. Seven industries reported no change in customers’ inventories in August compared to July.
2. The ISM Prices Index registered 58.0 percent in August, a 1.5 percent decrease on the July reading of 59.5 percent. In August 24 percent of respondents reported paying higher prices, 8 percent lower prices and 68 percent the same prices as in July. Nine industries reported paying higher prices in August, including Fabricated Metal Products, Machinery, Chemical Products and Transportation Equipment. The four industries paying lower prices were Wood Products, Textile Mills, Petroleum and Coal Products and Computer and Electronic Products.
Up in price in August were Aluminum and Aluminum Products, Stainless Steel and Stainless Steel Products, Hot-Rolled Steel, Electronic Components, Polypropylene and Propylene.
Down in price in August were Copper and Natural Gas
In short supply in August were Stainless Steel and Wood Pallets
3. The ISM Backlog of Orders Index was at 52.5 percent in August, a 3.0 percent increase on July’s 49.5 percent reading. This represents an increase in order backlogs following two months of contraction. Of the 87 percent of respondents reporting, 25 percent reported greater backlogs, 20 percent reduced backlogs and 55 percent reported no change from July. Eleven industries reported increased order backlogs in August, including Plastics and Rubber Products, Paper Products, Petroleum and Coal Products, Fabricated Metal Products and Transportation Equipment. Six industries reported a decrease in order backlogs including Wood Products, Machinery, Primary Metals and Chemical Products.
4. The ISM New Export Orders Index at 55.0 percent for August is 2.0 percentage points higher than July’s 53.0 percent reading. The month’s reading represents growth in exports for the 21st consecutive month. Eleven industries reported an increase in New Export Orders in August, including Petroleum and Coal Products, Plastics and Rubber Products, Fabricated Metal Products, Transportation Equipment, Chemical Products, Food, Beverage and Tobacco Products and Paper Products. The four industries reporting a decrease in New Export Orders in August included Wood Products, Primary Metals and Machinery.
5. The ISM Imports Index is at 56 percent in August, 4.0 percentage points higher than July’s 52.0 percent reading. This represents the 19th consecutive month of growth in imports. Twelve industries reported an increase in imports in August, including Primary Metals, Plastics and Rubber Products, Petroleum and Coal Products, Chemical Products, Transportation Equipment, Machinery and Fabricated Metal Products. The sole industry reporting a decrease in imports in August is Paper Products.
CANADA’s manufacturing PMI went from 54.3 percent in July to 54.8 in August. There has been a strong upturn in the performance of the Canadian manufacturing sector, with overall business conditions improving at the fastest pace since November 2013.
Growth in output and new orders both quickened in August, and job creation was at its strongest for 11 months.
Crude steel production in July in Canada was at 1.115Mt.
Canadians drove 171,560 new cars off the lots in August, some say an all-time record.
III. U.S. Forging Industry
Kobe Steel has a US joint venture, Kobe Aluminum Automotive products (KAAP), that recently upped its production capacity of forged aluminum products for suspension systems at its plant in Bowling Green Ky by 50 percent. The company began its $66 million expansion in the spring of 2013, and it was recently completed, taking the production capacity from 280,000 pieces per month to 420,000 pieces per month. This expansion, together with Kobe’s other facilities in Japan and China, gives the Kobe Steel Group a combined production capacity of 1 million pieces per month of forged aluminum suspension parts. KAAP is a joint venture of Kobe Steel, Mitsui & Co. Ltd. and Toyota Tsusho Corp.
QuesTek Innovations’ M54 steel has been approved for aircraft hook-shank production. This ‘super steel’ that was designed for improved strength, toughness, fatigue strength and resistance to stress corrosion cracking was approved for hook shanks for the T-45 aircraft after a development and testing period of only six years, a process that normally takes from 10-20 years. The navy chose the material in part because it gave twice the life of the steel currently used to manufacture the components. The navy has also approved the material for the manufacture of selected F/A-18 aircraft landing gear components.
IV. Manufacturing Talk Radio – Now a Weekly Live Radio Show
If you missed any of the previous shows, go to www.mfgtalkradio.com, or iTunes to listen to the discussion with Linda Dempsey about how manufacturers of all sizes can use the Ex-Im Bank (www.exim.gov) to help them sell their goods overseas. You should also listen to the August 12th show with Susan Widmer, Director, Northern NJ Export Assistance Center (www.export.gov) discussing Export Assistance from the U.S. Dept. of Commerce, and the July 29th show with Natalia Olson-Urtecho, Regional Administrator for the U.S. Small Business Administration (www.sba.gov) and how funding from the SBA can help you grow your business. Export assistance centers are located in several locations in all 50 states (http://export.gov/eac/index.asp). Listen to the shows to get tips on where to begin, and call one of the assistance centers near you for a free initial exploratory discussion. Another funding option was presented on August 19th with Tim Loughlin and Bill Gallagher of CapFlow Funding, who can get money for your business in as little as two weeks to improve your cashflow.
We would recommend that job seekers send a resume to our recent guest, www.QPSemployment.com, and any other temp-to-perm placement agency where the fee is employer-paid. QPS is seriously short of people to place into open job requests from employers that are still vacant. Many of these jobs have been open for more than a year. You can hear this discussion on our September 23rd show at www.mfgtalkradio.com.
Manufacturing Talk Radio is a powerful resource for you to hear insightful information about the economy and how to expand your business as this next economic boom unfolds. You will here from experts like Brad Holcomb of the Institute of Supply Management and Dan Meckstroth of MAPI talk about the most recent economic results and the most likely economic conditions in the months ahead.
Don’t miss the special broadcast on Thursday, October 2 at 1:00 p.m. with Ed Youdell, President and CEO of Fabricators and Manufacturers Association International, Mark Troppe, Acting Director of Program Development and Manager of Strategic Partnerships for the NIST Manufacturing Extension Partnership Program, and Ned Monroe, Senior Vice President of External Relations for the National Association of Manufacturers (NAM) talk about Manufacturing Day (www.mfgday.com) and all the exciting open houses at over 1,000 manufacturing facilities across the country beginning on October 3 and extending through the month. Many of these open houses are specifically aimed at attracting high school students and college students so they can see, first-hand, that manufacturing isn’t a dark, dirty and dangerous job but an exciting career filled with creativity and innovation.
You can also tune in at 1:00 p.m. next Tuesday, September 30th, to hear our next regularly scheduled broadcast.
Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) for August saw a further decline, as the figure came in at 50.7, down from July’s 51.8 percent, and a 13-month low. This is the fourteenth successive month of the recovery, a still struggling recovery. Ireland turned out to be the only bright spot on a rather cloudy horizon. Some PMI figures by country are:
Ireland 57.3 176-month high Austria 50.9 unchanged
Spain 52.8 4-month low Greece 50.1 3-month high
Netherlands 51.7 13-month low Italy 49.8 14-month low
Germany 51.4 11-month low France 46.9 15-month low
In the month of August, manufacturers in the Eurozone saw a slower increase in total orders and exports.
France is still the big worry, but Germany too dipped quite significantly in August. Recent forecasts are suggesting that things will start to improve in France in 2015.
In the EU, Germany produced 3.4 Mt of crude steel, in July, up 1.5 percent y-o-y, Italy 2.0 Mt, down 3.6 percent y-o-y, France 1.4 Mt, up 1.6 percent y-o-y and Spain 1.0 Mt, up 5.9 percent y-o-y. The UK produced 1.0Mt, down 4.4 percent y-o-y.
Passenger car sales were off slightly in August in Germany, falling 0.4 percent to 213,092 units year-on-year, but through August they were up y-o-y by 3 percent to 2.02 million. France, meanwhile, shows passenger car sales of 83,340 units, down 3 percent y-o-y, but up 2 percent over the first eight months of the year. Italy was down 0.2 percent in August y-o-y, but up 4 percent through the first eight months. Spain’s figures continue to be helped by a government subsidy of 2,000 euros for turning in an old car, showing a gain of 14 percent y-o-y to 45, 355 units, and a 16 percent gain through eight months to 583,663 units.
Italy seems to be in recession.
Meanwhile the UK saw a drop in its Markit PMI to 52.5 in August, its lowest reading since June 2013, and down from July’s 55.4 reading. Manufacturing activity is slowing, as is the rate at which order books are being filled. Car sales in the UK were a bright spot in August, posting a 9.5 percent increase over last year’s figures to 72,163 units. The ongoing increase in sales, now in its 30th month, is thought to be due to cheap finance and the desire for more fuel-efficient models.
VI. Asia Outlook
Crude steel production in ChinaCrude steel production for the month of July saw China producing 68.3 Mt, up 1.5 percent y-o-y, Japan 9.3 Mt, unchanged y-o-y, India 7.0 Mt, up 1.7 percent y-o-y and South Korea 5.9 Mt, up 6.2 percent y-o-y.
The HSBC China manufacturing PMI slipped to a three-month low in August, ending at 50.2 percent, down from July’s 51.7 figure, coincident with reduced foreign and domestic demand. Output, employment, new orders, delivery time and raw materials inventory indices were all off, with the labor market showing the most weakness. Bets are that China will further loosen fiscal and monetary policies to re-stoke the manufacturing fire.
In Japan, the Markit manufacturing PMI is at 52.2 for August, up from July’s 50.5 reading, and the fastest expansion since March. The economy shrank 6.8 percent in the second quarter of this year, its biggest drop since the March 2011 earthquake, suggesting that the April tax hike may be doing more damage than expected.
Total vehicle sales in Japan decreased in August year-on-year by 9.1 percent, from 366,754 units in August 2013 to 333,471 units in August 2014. The year-to-date figures are 3,799,540 for 2014, and 3,550,507 for 2013, a y-o-y increase of 7.0 percent.
India’s manufacturing (HSBC) PMI in August, at 52.4 percent was slightly lower than July’s 53.0 figure. This still represents an improvement in operating conditions in India’s manufacturing activity. Output at India’s manufacturing companies rose for a tenth straight month in August and at the second highest rate since February 2013. New orders were up in August for the tenth successive month.
VII. South America
The seasonally adjusted HSBC and Markit Brazil PMI was at 50.2 percent in August, up from July’s 49.1 percent figure. Business conditions in Brazil’s manufacturing sector improved for the first time since March, with increases in both output and purchasing activity.
VIII. THE MANUFACTURING SCENE: Economic Trends Across The Globe
It is reported that gains in manufacturing boosted US economic expansion in August, led by increases in orders for plastics and metals, that powered the US economy past what has been of late a slowdown in most of the rest of the world. The value of US manufacturing, adjusted for inflation, is at record levels, as high as it’s ever been, whereas the percentage of people working in manufacturing has gone from about 25 percent in 1970 to around 12 percent today. Companies are still crying out for skilled and highly-skilled workers, and are likely to be doing so for years to come.
Manufacturing in the US employs 17.4 million people whose average annual salary, including benefits, is $77,500. It contributes $2.03 trillion to the US economy. It is the fifth choice of seven as a career for 18 to 24 year olds.
In August 2012 the President set in motion the groundwork for plans to help revitalize American manufacturing through development of innovative technologies and processes. This led to the setting up of so-called Manufacturing Innovation Institutes, public-private hubs comprised of industry leaders, universities and the federal government working together to advance manufacturing. The funding comes from initial government investment over five years that must be matched or exceeded by corporate and educational partners. The plan took off and today there are numerous manufacturing hubs across the US.
Spending on construction is increasing, up by 1.8 percent in July, the highest increase since May 2012, led by more work on factories and power facilities. Auto sales are at record levels and more investment is being poured into new plants and equipment.
In spite of competition from Airbus, the US aircraft industry is taking on new orders at a great rate. There was a 10.5 percent increase in US factory production in July, due mostly to contracts for commercial aircraft. Durable goods orders jumped 22.6 percent in July.
All in all the outlook is good through this year and the next, but as always there will be those who will cry beware, who will say we never know what’s around the corner, Of course we don’t, but we can only do what we have to do to keep the economy on an even keel and growing.
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 + 4.2 (qtr) + 5.0 July + 2.0 July 6.2 July
Canada + 3.1 (qtr) + 5.7 June + 2.1 July 7.0 July
China + 8.2 (qtr) + 9.0 July + 2.3 July 4.1 Q2
Japan – 6.8 (qtr) – 0.9 July + 3.4 July 3.8 July
Britain + 3.4 (qtr) + 1.2 June + 1.6 July 6.4 May
Euro area + 0.2 (qtr) nil June + 0.3 Aug 11.5 July
France – 0.1 (qtr) – 0.4 June + 0.5 July 10.3 July
Germany – 0.6 (qtr) – 0.4 June + 0.8 Aug 6.7 Aug
Spain + 2.3 (qtr) + 2.9 June – 0.5 Aug 24.5 July
India + 3.1 (qtr) + 3.4 June + 8.0 July 8.8 2013
Brazil – 2.4 (qtr) – 3.5 July + 6.5 July 4.9 Apr
Argentina – 3.2 (qtr) – 0.7 July 7.5 Q2
Mexico + 4.2 (qtr) + 2.0 June + 4.1 July 5.2 July
IX. A Final Word
This month we can report that the US economy is putting those of the rest of the world in its shadow. Things have eased off in China, the UK and, once again, in Europe. There is recovery throughout the global manufacturing sector, but it’s all rather stop and start. There again, this is no time for panic, and things are forecast to pick up again on a global level at the back end of this year, beginning of the next.
At time of writing GALLUP came out with its US Weekly Economic Confidence Index for the first week of September which is ‘in the doldrums’ at –17.
As mentioned here last month, there is still concern about the shortage of skilled workers in the US, hence a need for further training programs.
Let’s say optimism for the fourth straight month.
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