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?


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.

Lewis A. Weiss


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)

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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.


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.


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


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.





55.4 (53.0)

8-month high


54.3 (54.2)

6-month high


53.2 (53.3)

4-month low



11-month low


52.3 (53.2)

3-month low 


51.2 (50.6)

2-month high


50.0 (51.4)

5-month low


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.


by Royce Lowe

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.


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.


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.


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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