Manufacturing Outlook for April 2021 by Manufacturing Outlook

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MARCH ISM PMI: 64.7%

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Manufacturing Outlook / March 2021

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Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

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TABLE OF CONTENTS

5 PUBLISHER’S STATEMENT A word from our publisher

6 MANUFACTURING OUTLOOK A look at manufacturing around the globe

8 COVER STORY: SEMICONDUCTOR SHORTAGES SEES SYSTEMIC SCARCITY by Royce Lowe

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

12 WAGE GAP FOR WOMEN IMPROVING, BUT STILL A LONG WAY TO GO by T.R. Cutler

25 ASIA OUTLOOK China, Japan and India

26 EUROZONE OUTLOOK A look at Europe

27 GLOBAL PMI OUTLOOK by Norbert Ore

34 THE CREDIT MANAGER’S OUTLOOK by Dr. Chris Kuehl

38 METALS OUTLOOK The cost, making and treating of metals

WOMEN IN MANUFACTURING ASSOCIATION ANNOUNCED 2021 BOARD OF DIRECTORS

The aerospace industry

From Women in Manufacturing

16 TRANSFORMING THE MANUFACTURING HIRING PROCESS by Patrick O’Rahilly

AEROSPACE OUTLOOK

42 ENERGY OUTLOOK Energy and the environment

Auto industry news

ISM MANUFACTURING REPORT ON BUSINESS

Issues around the globe

AUTOMOTIVE OUTLOOK

ISSUES OUTLOOK

NORTH AMERICA OUTLOOK Manufacturing in the US, Canada & Mexico

24 SOUTH AMERICA OUTLOOK Brazil in the spotlight

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PUBLISHERS STATEMENT Publisher’s Statement

The Manufacturing Economy is BOOMING – Can Employment Keep Up? Despite the tragedies caused by Covid in 2020 and 2021, the manufacturing recovery is booming. The ISM Purchasing Manager’s Index number and the Services Index number are both hitting new highs. Every sector is showing growth, some a bit slower than others, but all boats are rising in this high tide. As always, there are bumps in the road. The semiconductor chip shortage, our Cover Story, will create difficulties in many manufacturing sectors. Automotive is getting all the press at present, but computers, equipment and electronics in all kinds of manufactured goods will be impacted. And, as with any shortage, the price of the scarce items will be increased as manufacturers play catch-up with demand and build new capacity. Overall, according to the Prices section in the ISM’s Manufacturing Report on Business® in this issue, prices are moving rapidly upward. However, 2021 has every indication of being a very strong year for economic growth, with some GDP estimates as high as 10 percentage points over last year, but the Atlanta Fed at 6% for 2021. These are recovery numbers, as the economy continues to come back from the shutdown a year ago. However, employment remains nettlesome. There is an argument to be made that immigration, legal or otherwise, is necessary for our country to grow. Since 1950, the U.S. birth rate has declined from 4 babies per female to 2 today. Some think tanks are calling it the Baby Bust and it’s impact will likely come in 15 to 20 years when there are fewer people to enter the workforce. However, immigration is not a quick solution – most of the people crossing the southern U.S. border come from countries where the primary language is Spanish and the educational system is weak. That means it will be a generation or two before immigrant children can assimilate into the English-speaking society and become educated enough to be effectively skilled in modern manufacturing or the services sector – but the skills gap problem is now. So, keep an eye on automation and robots. It will create new jobs that are even more high-tech and require a more advanced skill set for employees to attain. The usual low-skilled jobs that immigrants go into at first will not be widely available in the 21st Century. These repetitive, routine, predictable activities are where robots and automation are most effective, and they represent a significant number of jobs in Manufacturing and the Service sectors. Manufacturing has changed millions of jobs from manual to automated, and like 1900’s agriculture that required 40% of the U.S. workforce to feed America but now requires only 2%, those jobs will not return. “The civilian labor force was 62 million in 1950 and grew to 141 million in 2000, an increase of nearly 79 million, or an annual growth rate of 1.6 percent per year, between 1950 and 2000. It is projected that the labor force will reach 192 million in 2050, an increase of 51 million, or a growth rate of 0.6 percent annually, between 2000 and 2050.” - Bureau of Labor Statistics, Office of Occupational Statistics and Employment Projections. It is clear that high-skilled jobs will expand, low-skilled jobs will decrease, population increases have slowed, and upskilling immigrant children for highskilled jobs is at least a decade away from being a solution. Nettlesome indeed! Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. Manufacturing Outlook / March 2021

MANUFACTURING OUTLOOK

APRIL 2021

MANUFACTURING OUTLOOK

GLOBAL MANUFACTURING STRAINING AT THE LEASH, AS SUPPLY CHAINS STILL SLOW AND EXPENSIVE AND GLOBAL STEEL PRICES REACHING RECORD HIGHS. INTERNATIONAL TRADE PICKING UP, AS IS EMPLOYMENT.

by ROYCE LOWE There were 916,000 jobs created in March, and the unemployment rate fell to 6.0 percent. Manufacturing accounted for 53,000 new jobs, its biggest gain since last September. Construction gained 110,000 jobs. The ISM PMI figure for U.S. manufacturing rose from 60.8 in February to 64.7 in March. The overall economy returned to a tenth month of expansion. IHS Markit’s remarks on U.S. manufacturing for March show their PMI figure at 59.1, the second-highest on record, up from February’s 58.6. Production growth softened in March amid material shortages, and an unprecedented deterioration in vendor performance. Costs and charges rose at

Manufacturing Outlook / March 2021

historically elevated rates. New orders rose at their steepest since June 2014, but production was, as noted, held back by supply shortages. Transportation delays, supplier shortages, COVID-19 restrictions and logistical difficulties all served to soften manufacturing performance. Expectations for the next twelve months strengthened in March, with the degree of confidence the second highest in six years.

MANUFACTURING OUTLOOK GLOBAL CRUDE STEEL PRODUCTION WAS UP BY 4.1 PERCENT YEAR-OVER-YEAR IN THE MONTH OF FEBRUARY for the 64 reporting countries – which represent 99 percent of world crude steel production – to 150.2 million tons (MT.) U.S. crude steel production for February was 6.3 MT, down 10.9 percent year-over-year. Steel production data for many individual countries are no longer freely available. We will report for the major steel-producing countries. In February, China produced 80.3 MT, up 10.9 percent year-over-year; India 9.1 MT, down 3.1 percent; Japan 7.5 MT, down 5.6 percent; Russia 5.7 MT, down 1.3 percent; South Korea 5.5 MT, up 1.2 percent; Germany 3.1 MT, down 10.4 percent, and Brazil 2.8 MT, up 3.8 percent. The EU (27) produced 11.9 MT, down 7.1 percent. Primary Global Aluminum Production in February was reported at 5.203 million tons, with production in China, at 3.017 million tons, representing 58 percent of world total. Production was 454,000 tons in GCC; 339,000 tons in the rest of Asia; 259,000 tons in Western Europe; 308,000 tons in North America and 319,000 tons in Eastern and Central Europe. U.S. light vehicle sales for March were, not surprisingly, significantly up from a year ago. According to Forbes, who are quoting J.D. Power and LMC Automotive, almost 1.5 million cars and trucks will (have been) sold in March 2021, up 44 percent year-over-year, and some 5 percent down from the 2019 figure. Predictions for the first quarter are sales of 3.7 million, up 8 percent year-overyear. The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was up from 53.9 in February to 55.0 in March, a tenyear high. There was solid growth across the consumer, intermediate and investment goods sectors.

Manufacturing production rose, new orders expanded, at the quickest rates over the past decade. International trade flow also gained pace, with growth of new export orders the steepest since January 2018. Again, there were supply-chain disruptions, raw materials shortages, increasing backlogs. Employment was up for the fifth consecutive month in March, and to the greatest extent since November 2018. THE ECONOMIST magazine, in its latest weekly report on world economies highlights changes in Gross Domestic Product (GDP), 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 consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. Manufacturing Outlook / March 2021

COVER STORY

SEMICONDUCTOR SHORTAGES SEES SYSTEMIC SCARCITY

by ROYCE LOWE There’s a chip shortage, a global shortage, the kind

work under contract, take orders for delivery at pre-

of chips often known as semiconductors, electronic

specified time intervals - in many cases “just-in-time”

components of varying sizes and shapes and capacities.

- and ship them to the companies that manufacture the

Little silicon wafers that can hold up to 60 billion

stuff that keeps our world going. The industry, like most,

transistors on them. These chips make today’s world go

is cyclical, and there are gluts and shortages from time

‘round. They’re found in cars, electrical grids, vacuum

to time. The problem was magnified by the COVID-19

cleaners, fridges, computers, video games, space

pandemic.

shuttles, water treatment plants; in fact, in just about anything that plugs in nowadays.

The pandemic, COVID-19, changed our world. Workers stuck at home rushed to stock up on whatever they

In a normal world, which we haven’t known for the

needed, or thought they needed. Personal-computer

past 14 months or so, most of us take these chips for

sales rose by 11% last year, the highest growth in a

granted. Maybe many of us don’t give them a second

decade, data-center demand spiked as people moved

thought, maybe a lot of us don’t even know they exist.

to video-calling, video-streaming and video gaming.

In this same normal world, companies called foundries

Car industry sales forecasts were slashed during the

just churn these components out by the billions. They

first lockdowns, then boosted again as vaccines were

Manufacturing Outlook / March 2021

COVER STORY developed. Other events have compounded the problem. Microsoft and Sony launched a pair of new video-game consoles, placing bumper orders with big chipmakers. With the soaring price of cryptocurrencies, “miners” have been willing to pay inflated prices to get their hands on certain kinds of chips useful for minting new digital coins. What we have is a global shortage of chips, whose roots lie in the early weeks of the pandemic when auto plants worldwide abruptly shut down amid widespread stayat-home orders. Auto sales fell by almost half between February and April. As a result, car companies and their parts suppliers drastically cut their semiconductor purchases. At the same time, demand for computers and other electronics soared as consumers tried to adjust to their new work-from-home lifestyles by grabbing up monitors, laptops and entertainment devices. So manufacturers of those items stepped up their chip purchases. Hence semiconductor manufacturers weren’t getting orders from auto manufacturers but they were getting orders from other industries, so they started to reallocate production. All these devices include a ton of chips, not just the central processor which can cost tens or hundreds of dollars, but also less expensive little chips for controlling display, managing power, or operating a 5G modem. The shortage has brought to light a structural change in the semiconductor industry. Many of the top semiconductor companies are now “fabless,” which means that they only design the chips and the technology in them; they do not fabricate them. Other companies, known as foundries, are largely contracted to actually make the chips. At the turn of the century, there were about 30 companies that actually made chips, but the three biggest companies are Intel in the U.S., Taiwan Semiconductor Manufacturing Company (TSMC) in

Taiwan, and Samsung Electronics in South Korea. It turns out that these three companies were already making chips as fast as they could, which meant if a customer cut back orders in the early days of the pandemic, they had to get back in line. Global Foundries, headquartered in Santa Clara, CA, reports frantic calls from major auto companies at the end of 2020, all wanting to become the company’s best friend. The Texas cold snap knocked out two NXP semiconductor plants in Austin, and they were out for a month. NXP says the Texas grid collapse will cost it $100 million. Carmakers aren’t directly competing with high-tech companies for the same chip supply because car chips usually come from older manufacturing technologies. Car companies take their time updating their components because lengthy internal audit processes are required to ensure safety and durability. Switching to more modern chips would improve supply but would be costlier. Cars now include scores of tiny chips, many of which perform functions like power management. They also use a lot of key chips known as microcontrollers, which control traditional automotive tasks like power steering, or are the brain at the heart of an infotainment system. For example, the 38 microcontrollers in an Audi Q7 come from eight companies, highlighting the

Manufacturing Outlook / March 2021

COVER STORY resolve the chip shortage for automakers. The pandemic isn’t solely responsible for the chip crisis. Late last year, the U.S. placed restrictions on Semiconductor Manufacturing International (SMIC), China’s biggest foundry, preventing it from obtaining advanced chip manufacturing gear, and making it much harder to sell its finished products to companies with U.S. ties. Customers needed to shift their orders to competitors like TSMC, adding to the pressure on that company’s production demand. SMIC acknowledged that the U.S. move prevented it from using its full capacity, thus taking away the opportunity afforded by the chip shortage. So we can effectively say that the two major reasons for the chip shortage were the pandemic and the U.S. action to complexity of auto supply chains. TSMC manufactures

prevent Chinese chip production for companies with

70 percent of all auto microcontrollers, so any capacity

U.S. ties.

problem at the company has ripple effects through the entire auto industry. In fact, when it comes to chips for

The industry consensus is that the chip shortage will

cars, Taiwan is the place to go.

be with us for at least the first half of the year, which means that nobody can really say when it will be fixed.

Cars need to get all their chips in a row, so to speak,

It has been variously estimated that the chip shortage

and if even the smallest one is missing from a car, that

will be responsible for global auto production of

car cannot be sold, although Ford is building the F150

between 1.5 and 5 million units less than originally

without some computerized components and holding

planned. Alongside this, the Semiconductor Industry

them until chips become available. It may well be that

Association forecasts global chip sales will increase

the automakers will more than likely need to spend

by 8.4 percent in 2021 from 2020’s $433 billion total.

more on chips to ensure the required supply.

Demand for chips is increasing. Where is the supply to

The foundries are aware of the issue. TSMC, which is seen as the most advanced and important foundry, said that it was trying to help the auto companies, and that it would spend as much as $28 billion this year to increase its capacity. TSMC said in January that while it was working at full capacity to satisfy demand from every sector, it was reallocating its capacity to satisfy the worldwide automotive industry. President Biden’s top economic adviser, Brian Deese, thanked Taiwan’s economics minister, Wang Mei-Hui, for her efforts to

Manufacturing Outlook / March 2021

come from? Intel, America’s premier chip maker, dominated the $400 billion industry for decades by making the best designs in its own cutting edge factories, but the company missed deadlines for new production technology, while most other chipmakers looked to foundry specialists to make their designs. Intel’s factories now trail TSMC and Samsung which make chips for big Intel customers including Amazon and Apple.

COVER STORY Intel recently made an announcement to the effect

has been set for start of production by either company.

that it will spend $20 billion on two new semiconductor

Until that time, supply will be tight, the short-term

factories in Chandler, Arizona. They will employ 3,000

future uncertain.

people in high-tech manufacturing jobs. The company will also form a semiconductor manufacturing business,

It will, there is no doubt, be survival of the fittest.

Intel Foundry Services, to serve the growing demand

The smaller customers in the chip game will struggle

for computer chips, with plans for more factories

through, hoping for the earliest possible resolution of

elsewhere in the U.S. and Europe. This business will be

the shortage, while the Apples and the Samsungs will

Intel’s challenge to Samsung and TSMC, the two present

doubtless find a place at the front of the queue.

leaders in chip production.

Finally, we might wonder how the world became so chip-dependent on two companies in Asia.

The Arizona factories will develop 3,000 permanent high-tech, high-wage jobs; 15,000 new local long-term jobs and 3,000 temporary construction jobs. Intel’s move, combined with TSMC’s planned $28 billion investment will serve, with time, to significantly increase global chip production. It should be noted that no date

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / March 2021

MANUFACTURING TIDBITS

WAGE GAP FOR WOMEN IMPROVING, BUT STILL A LONG WAY TO GO

by THOMAS R. CUTLER Jobs in science, technology, engineering, and math (STEM) are projected to rise 8% by 2029, according to the U.S. Bureau of Labor Statistics (BLS). While women working in STEM jobs have higher median earnings than women in non-STEM roles, there is still a wage gap to overcome to catch up to men in STEM professions. That gap is narrowing. Women in computer, engineering, and science occupations — or tech jobs, for the purposes of a recent study — in Cape Coral, FL and Winston-Salem, NC make more than men on average, according to a MagnifyMoney analysis of U.S. Census Bureau data. • Women in tech jobs in the Cape Coral, FL metro area earn 3% more on average than men in the same occupation. Women’s median tech earnings there average $48,691, compared with $47,102 for men. • Winston-Salem, NC is the only other metro where women in tech earn more on average than men in tech. Women in tech there earn $70,525, or 2% more than men at $68,994.

Manufacturing Outlook / March 2021

• Women in Provo, UT face the largest gender tech wage gap — by far. Women in the occupation there earn an average of $43,412, only 54% that of men’s tech earnings — $80,391. Portland, OR and Ogden, UT tie for the second-worst gender wage gap for women in tech, at 61% that of men. • The median earnings among the five metros with the smallest gap for women in technology is $63,686, 31% more than the $48,546 for the five metros with the biggest gap. Top 100 Metro Rankings: Best metros for women in tech Gender pay parity varies widely by employer, no matter the location. Researchers sought to find places where it appears more tech employers might be prioritizing fair pay. Southern states dominate top 10 metros for women in tech Full Ranking: Metros with the smallest wage gap for women in tech

MANUFACTURING TIDBITS Overall, women in tech seeking salaries close to or on par with men in the same industry might be best served in the South. Southern states contributed seven of the top 10 metros where women’s median salaries in tech come closest to or exceeded men’s wages. These Southern metros offer women on average 96% of the income earned by men. Go West, young man — but maybe not young woman Though most of the metros we examined show women’s income falls short of men in the tech industry, some places have a much wider gap to close. Provo, UT lands at the bottom of rankings, where women in tech only make 54% of men’s income on average. Full Ranking: Metros with the biggest wage gap for women in tech MagnifyMoney content director Ismat Mangla said, “If women can succeed — and attain pay parity with men — in a place that’s less expensive to live in, all the better. That means that women can save money, put more toward investing and making their nest eggs grow, and help build the culture and community that doesn’t have a huge national spotlight yet.”

Since women in tech are generally ahead of women in other industries when it comes to income, they might be better positioned to push for institutional change. By 2029 more than one-third of all manufacturers under $50M in revenue will be owned and led by women. This will ensure that more women are hired and paid equitable wages as well as encourage legislative protection against unfair pay practices. Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 22nd year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. More than 4800 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com

Manufacturing Outlook / March 2021

MANUFACTURING TIDBITS

Women in Manufacturing Association Announced 2021 Board of Directors from WOMEN IN MANUFACTURING The Women in Manufacturing Association (WiM) announced the election of 22 members to its 2021 Board of Directors, who began their terms this month. WiM is the only national association specifically dedicated to supporting, promoting, and inspiring women who have chosen a career in the manufacturing sector. The board is led by Chair Misti Rice, Executive Director of Government Affairs, Magna International, Troy, MI. Additional WiM board officers are Vice Chair Virginia Harn, Principal, CliftonLarsonAllen (CLA), Minneapolis, MN; and Treasurer Lynn Kier, Vice President Corporate Communications, Diebold Nixdorf, Charlotte, NC. First-term members of the 2021 WiM board are: Cynthia Bolt, Senior Vice President and GM, Manufacturing, Automotive and Energy, Salesforce, Villanova, PA Tami Hedgren, Manufacturing Lead - Large Tractors & Combines, John Deere, Moline, IL Shameka Lewis, Associate Manager Global EHS, Mattel, Fort Worth, TX Rachael Sampson, Senior Vice President, Director, Key4Women, KeyBank, Cleveland, OH

Manufacturing Outlook / March 2021

Danielle Schneider, Applications Engineer, Pridgeon & Clay, Grand Rapids, MI Lisa Skidmore, Senior Director, Advanced Quality Engineering, GE Appliances, a Haier Company, Louisville, KY Carrie Uhl, Chief Procurement Officer, GE Healthcare, Waukesha, WI Amy Volz, Global Director, Brand Strategy, Trane Technologies, Davidson, NC Jeff White, Partner and Manufacturing Law Industry Group Chair, Robinson & Cole LLP, Hartford, CT Devon Winter, Senior Vice President, Director, F.W. Winter Inc. & Co., Camden, NJ Ronda Wright, Regional Director Supply Excellence, Mars Inc., Atlanta, GA “On behalf of the entire WiM organization, I am excited to welcome the newest members of the WiM Board of Directors,” said WiM President Allison Grealis. “WiM’s board includes outstanding leaders from some of our nation’s most prestigious manufacturing companies. Now, more than ever before, it is important to support and engage the women leaders and their male allies who will lead our industry during this time of economic recovery and into the future.”

MANUFACTURING TIDBITS Additional board members who are continuing their service include: Jai Aja, Enterprise Customer Success Manager, Rockwell Automation, Norristown, PA Karen Bazela, Vice President of Speed Services, Southwire Company, Carrollton, GA Jessica Kinman, Aerospace & Defense Industry Solution Experience Sr Manager, Dassault Systems, Mukilteo, WA Tammy LeBlanc, Chief Financial Officer - North America, ISRA Vision Systems, INC, Atlanta, GA Cara Madzy, Vice President Operations, Coatings Americas, BASF, Southfield, MI Sandra McNeil, General Manager, Amazon.com Services, Inc., Seattle, WA Valerie Salera, PMO Leader, AQE, Ingersoll Rand, Davidson, NC Adrienne Temple, VP of Training Programs, South Carolina Manufacturing Extension Partnership, Columbia, SC

Grealis also thanked outgoing members of the WiM board for their exceptional service to the industry: Veronica Braker, Archer Daniels Midland; Leah Curry, Toyota Motor Manufacturing Indiana, Inc.; Bill Good, GE Appliances, a Haier Company; Amy Meyer, Kohler Co.; Karen Norheim, American Crane Equipment Corp.; Zoi Romanchuk, Slick Automated Solutions, Inc.; Caitlin Sickles, Bracewell LLP; Steve Speich, John Deere; and Lisa Yankie, Dentsply Sirona. The Women in Manufacturing Association is a 6,000+ member national association dedicated to supporting, promoting, and inspiring women who have chosen a career in the manufacturing industry. It encourages the engagement of women who want to share perspectives, gain cutting-edge manufacturing information, improve leadership and communication skills, participate in sponsoring programs and network with industry peers. WiM is the only national association specifically dedicated to supporting women in the manufacturing sector with year-round programming and a national directory for women in the industry.

Manufacturing Outlook / March 2021

MANUFACTURING TIDBITS

Transforming the Manufacturing Hiring Process

By Patrick O’Rahilly As the manufacturing industry is poised for rapid growth over the next 24 months, hiring the best workers once again becomes the top challenge. As the workforce is vaccinated and reshoring the supply chain becomes a clarion call for industry, finding the right people with the right skills forces plant managers, operations managers, and HR managers to find new and innovative recruiting strategies. FactoryFix is an online platform that matches vetted manufacturing workers with companies seeking specific skill sets. This platform sets a new standard in how small to mid-sized manufacturers hire talent across the U.S. This is not simply a version of other online job boards or recruiting services. FactoryFix is actively growing its unique talent pool of manufacturing professionals, technicians, and experienced labor. This is accomplished by providing additional value to manufacturers beyond simply suggesting candidates. Providing a personalized career coaching experience for manufacturing personnel enhances and coordinates optimal professional development.

Manufacturing Outlook / March 2021

The platform is quickly becoming an invaluable recruiting tool for executives within the manufacturing sector. The technological advancements accelerate speed-to-interview and hire; this translates to a lower cost per hire and access to a vast network of qualified candidates. The post-COVID manufacturing hiring paradigm Unlike overall equipment effectiveness (OEE), which measures the degree to which equipment is utilized and output maximized, the number one constraint in the post-COVID paradigm is hiring qualified workers. Today’s factories are operating at an average of 76% capacity utilization, linked directly to staffing issues. Job openings occur daily and without cultivating a pipeline of qualified and skilled workers lost productivity and throughput will result. Unfilled positions generate terrible OEE data as machines go idle. The U.S. factory capacity utilization rates are evidence that the traditional means of hiring for these in-demand industrial positions are not up to market requirements.

MANUFACTURING TIDBITS Some of the most needed industrial positions in 2021

• Automation Engineers • Automation Technicians • CAD Designers • CNC Operators • CNC Machinists • Controls Engineers • Electrical Engineers • Forklift Operators • General Laborers • Industrial Electricians • Injection Mold Operators • Machine Builders • Maintenance Electricians • Manual Machinists • Material Handlers • Mold Makers • Panel Builders • Press Operators • Production Supervisors • Quality Inspectors • Robot Programmers • Test Engineers • Tool & Die Makers • Welders

• 50% cost savings in manufacturing hires. •F illing positions 4x faster than traditional hiring methods. • Offering 10x more qualified candidates. In keeping with the central lean manufacturing principle of eliminating waste, few hiring solutions offer quantifiable success rates when matching top talent to positions with the appropriate skill sets. Traditional hiring solutions are highly inaccurate and dump dozens of illsuited candidates on the desks of overworked HR professionals. Only through a robust platform that identifies the exact talent needed for every role on every plant floor in America can hiring efficiency be measured and maximized. A universe of manufacturing job candidates

Logo Usage Our logo stands for our values and brand personality. The look is modern, bright, and has meaning. It takes its shape from hex nuts as a nod to the industry we serve. The mark is divided into two sides representing skilled workers and manufacturers. The “f” is us connecting them.

Access to the best manufacturing candidates Brandword

Brandmark

With nearly 200,000 manufacturing workers 32px 16px 48px within the network, companies utilize an annual subscription model. Small and mid-sized manufacturers are guaranteed qualified workers Brandword in black Brandmark in black for any position available, from automation engineers and CAD designers to maintenance electricians and press operators. Brandword in white

Innovative hiring technology leads to…

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The pool of potential workers must be wide and deep to create the perfect fit. Accessible through an annual subscription, FactoryFix guarantees a total number of hires per year. Recently, a new service was introduced: a 3-directional chat service named TalentText. TalentText is an SMS messaging feature that connects applicants with managers via a text conversation, helping managers to engage directly, ease conversation flow, and ensure candidates actually show up to interviews. It allows a connection with candidates five times faster with straightforward, comfortable, and immediate access to messages via mobile devices.

Author Profile Patrick O’Rahilly is a manufacturing professional and serial entrepreneur who has extensive experience within the industrial business sector. His first company, which Tesla acquired, provided customized integration services of industrial robots and automation equipment. He is now the CEO & Founder of FactoryFix.com. Manufacturing Outlook / March 2021

ISM REPORT OUTLOOK

THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS

BREAKING NEWS

ISM PMI at 64.7% for March ISM PMI for the past 5 years

Manufacturing Outlook / March 2021

MARCH 2021 64.7%

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in March, with the overall economy notching a 10th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The March Manufacturing PMI® registered 64.7 percent. The New Orders Index registered 68 percent, up 3.2 percentage points from the February reading of 64.8 percent. The Production Index registered 68.1 percent, an increase of 4.9 percentage points compared to the February reading of 63.2 percent. The Backlog of Orders Index registered 67.5 percent, 3.5 percentage points above the February reading of 64 percent. The Employment Index registered 59.6 percent, 5.2 percentage points higher than the February reading of 54.4 percent. The Supplier Deliveries Index registered 76.6 percent, up 4.6 percentage points from the February figure of 72 percent. The Inventories Index registered 50.8 percent, 1.1 percentage points higher than the February reading of 49.7 percent. Of the 18 manufacturing industries, 17 reported growth in March, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Printing & Related Support Activities; and Petroleum & Coal Products. ISM ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Timothy R. Fiore, CPSM, C.P.M.,

Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

MANUFACTURING

PMI at 64.7% ®

PMI

Manufacturing grew in March, as the Manu2019 facturing PMI® registered 64.7 percent, 3.9 percentage points higher than the February reading of 60.8 percent. This is the highest reading since December 1983 (69.9 percent); prior to that, the Manufacturing PMI® regis50% = Manufacturing Economy tered 66 percent in November 1983. A Breakeven Line reading above 50 percent indicates that the 43.1% = Overall Economy Breakeven Line manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

2020

64.7%

2021

Manufacturing at a Glance INDEX

Mar Index

Feb Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

64.7

60.8

+3.9

Growing

Faster

New Orders

68.0

64.8

+3.2

Growing

Faster

Production

68.1

63.2

+4.9

Growing

Faster

Employment

59.6

54.4

+5.2

Growing

Faster

4 61

Supplier Deliveries

76.6

72.0

+4.6

Slowing

Faster

Inventories

50.8

49.7

+1.1

Growing

From Contracting

Customers’ Inventories

29.9

32.5

-2.6

Too Low

Faster

54**

Prices

85.6

86.0

-0.4

Increasing

Slower

Backlog of Orders

67.5

64.0

+3.5

Growing

Faster

New Export Orders

54.5

57.2

-2.7

Growing

Slower

Imports

56.7

56.1

+0.6

Growing

Faster

Overall Economy

Growing

Faster

Manufacturing Sector

Growing

Faster

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes. **Correction made to consecutive months from previous report.

Commodities Reported

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

Commodities Up in Price: Acetone (2); Acrylonitrile Butadiene Styrene (ABS) Plastic (3); Adhesives; Aluminum (10); Aluminum Extrusions (2); Brass Products; Copper (10); Copper Products; Corn; Corrugate (6); Corrugated Boxes (5); Crude Oil (4); Diesel (3); Electrical Components (4); Electronic Components (4); Epoxy Resins; Ethylene; Freight (5); Foam Products; High-Density Polyethylene (HDPE) (3); Isocyanate; Labor — Temporary; Light Emitting Diode (LED) Displays; Lumber (9); Medium-Density Fiberboard (MDF); Nylon Fiber (3); Ocean Freight (4); Oil-Derived Products (2); Packaging Supplies (4); Paper Products (4); Petroleum-Based Products; Phosphates; Plastic Resins (7); Plasticizers; Polyethylene (2); Polypropylene (9); Polyvinyl Chloride (PVC) (6); Propylene (3); Resin-Based Products (2); Rubber Products (2); Semiconductors (2); Solvents — Other (2); Soybean Products (6); Steel (8); Steel — Carbon (4); Steel — Cold Rolled (7); Steel — Galvanized; Steel — Hot Rolled (7); Steel — Scrap (4); Steel — Stainless (5); Steel Products (7); Styrene; Surfactants; Wire Products; Wood — Pallets (4); and Vinyl Acetate Monomer. Note: To view the full list, visit the ISM website at ismworld.org.

ISMWORLD.ORG Manufacturing Outlook / March 2021

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI® New Orders (Manufacturing) 2019

March 2021 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

2020

New Orders

2021

ISM’s New Orders Index registered 68 percent. Of the 18 manufacturing industries, the 15 that reported growth in new orders in March — in the following order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Textile Mills; Paper Products; Nonmetallic Mineral Products; Furniture & Related Products; Machinery; Fabricated Metal Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Primary Metals; Transportation Equipment; Chemical Products; Plastics & Rubber Products; and Miscellaneous Manufacturing‡.

68%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021

68.1%

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 68.1 percent. The 14 industries reporting growth in production during the month of March — listed in order — are: Textile Mills; Electrical Equipment, Appliances & Components; Petroleum & Coal Products; Machinery; Computer & Electronic Products; Primary Metals; Food, Beverage & Tobacco Products; Fabricated Metal Products; Furniture & Related Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; and Plastics & Rubber Products.

Employment (Manufacturing) 2019

2020

Employment

2021

59.6%

50.6% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021

76.6%

Inventories (Manufacturing) 2019

2020

2021

50.8% 44.5% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / March 2021

ISM’s Employment Index registered 59.6 percent. Of the 18 manufacturing industries, the 14 industries to report employment growth in March — in the following order — are: Electrical Equipment, Appliances & Components; Textile Mills; Primary Metals; Machinery; Printing & Related Support Activities; Computer & Electronic Products; Nonmetallic Mineral Products; Fabricated Metal Products; Paper Products; Furniture & Related Products; Transportation Equipment; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Chemical Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in March, as the Supplier Deliveries Index registered 76.6 percent. Of the 18 industries, 17 reported slower supplier deliveries in March, listed in the following order: Apparel, Leather & Allied Products; Wood Products; Plastics & Rubber Products; Machinery; Textile Mills; Electrical Equipment, Appliances & Components; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing‡; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Printing & Related Support Activities; and Primary Metals.

Inventories The Inventories Index registered 50.8 percent in March, 1.1 percentage points higher than the 49.7 percent reported for February. The eight industries reporting higher inventories in March — listed in order — are: Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Textile Mills; Computer & Electronic Products; Furniture & Related Products; Food, Beverage & Tobacco Products; Primary Metals; and Plastics & Rubber Products.

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI

March 2021 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2019

2020

2021

ISM’s Customers’ Inventories Index registered 29.9 percent in March, 2.6 percentage points lower than the 32.5 percent reported for February. None of the 18 industries reported higher customers’ inventories in March. The 15 industries reporting customers’ inventories as too low during March — listed in order — are: Wood Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Transportation Equipment; Computer & Electronic Products; Paper Products; Textile Mills; Plastics & Rubber Products; Furniture & Related Products; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

29.9% Prices (Manufacturing) 2019

2020

2021

85.6%

Backlog of Orders (Manufacturing) 2020

2021

67.5%

New Export Orders (Manufacturing) 2019

2020

Prices The ISM Prices Index registered 85.6 percent. All 18 industries reported paying increased prices for raw materials in March, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Wood Products; Machinery; Miscellaneous Manufacturing‡; Fabricated Metal Products; Nonmetallic Mineral Products; Primary Metals; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Printing & Related Support Activities; Textile Mills; Transportation Equipment; Paper Products; and Petroleum & Coal Products.

52.7% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

2019

Customers’ Inventories

2021

Backlog of Orders ISM’s Backlog of Orders Index registered 67.5 percent in March, a 3.5-percentage point increase compared to the 64 percent reported in February, indicating order backlogs expanded for the ninth consecutive month. The 15 industries reporting growth in order backlogs in March, in the following order, are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Paper Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Plastics & Rubber Products; Computer & Electronic Products; Primary Metals; Chemical Products; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

New Export Orders ISM’s New Export Orders Index registered 54.5 percent in March, down 2.7 percentage points compared to the February reading of 57.2 percent. The eight industries reporting growth in new export orders in March — in the following order — are: Printing & Related Support Activities; Fabricated Metal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Machinery; Miscellaneous Manufacturing‡; and Chemical Products.

54.5%

Imports (Manufacturing) 2019

2020

2021

56.7%

‡Miscellaneous

Imports ISM’s Imports Index registered 56.7 percent in March, an increase of 0.6 percentage point compared to the 56.1 percent reported for February. The 11 industries reporting growth in imports in March — in the following order — are: Wood Products; Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Textile Mills; Food, Beverage & Tobacco Products; Computer & Electronic Products; Chemical Products; Machinery; Transportation Equipment; and Fabricated Metal Products.

Manufacturing (products such as medical equipment and

supplies, jewelry, sporting goods, toys and office supplies).

Manufacturing Outlook / March 2021

NORTH AMERICAN OUTLOOK

APRIL 2021

NORTH AMERICAN OUTLOOK by AMELIA ROY

The Institute of Supply Management PMI figure rose from 60.8 in February to 64.7 in March. New orders, production and employment are growing; supplier deliveries are slowing at a faster rate; backlogs are growing; raw materials inventories are growing; customer inventories are too low; prices are increasing, and exports and imports are growing. Of the 18 manufacturing industries, 17 reported growth in March, in the following order: Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; and Petroleum & Coal Products. No industries reported contraction in March. Comments from the industry are pointing to a

Manufacturing Outlook / March 2021

universal need to obtain sufficient supplies, on time, at a reasonable price. There were problems due to the Texas storm. Hiring of qualified labor is a concern, through the supply chain to the final end user. Commodities Up in Price Acetone (2); Acrylonitrile Butadiene Styrene (ABS) Plastic (3); Adhesives; Aluminum (10); Aluminum Extrusions (2); Brass Products; Copper (10); Copper Products; Corn; Corrugate (6); Corrugated Boxes (5); Crude Oil (4); Diesel (3); Electrical Components (4); Electronic Components (4); Epoxy Resins; Ethylene; Freight (5); Foam Products; HighDensity Polyethylene (HDPE) (3); Isocyanate; Labor — Temporary; Light Emitting Diode (LED) Displays; Lumber (9); Medium-Density Fiberboard (MDF); Nylon Fiber (3); Ocean Freight (4); OilDerived Products (2); Packaging Supplies (4); Paper Products (4); Petroleum-Based Products; Phosphates; Plastic Resins (7); Plasticizers; Polyethylene (2); Polypropylene (9); Polyvinyl Chloride (PVC) (6); Propylene (3); Resin-Based Products (2); Rubber Products (2); Semiconductors (2); Solvents — Other (2); Soybean Products (6); Steel (8); Steel — Carbon (4); Steel — Cold Rolled

NORTH AMERICAN OUTLOOK (7); Steel — Galvanized; Steel — Hot Rolled (7); Steel — Scrap (4); Steel — Stainless (5); Steel Products (7); Styrene; Surfactants; Wire Products; Wood — Pallets (4); and Vinyl Acetate Monomer. Commodities Down in Price None Commodities in Short Supply Adhesives; Corrugated Boxes (5); Electrical Components (6); Electronic Components (4); Epoxy Resins; Fiberboard; Foam Products; Freight; Light Emitting Diode (LED) Displays; Lumber; Personal Protective Equipment (PPE) — Gloves (13); Plasticizers; Polyols; Polypropylene (2); Polyvinyl Chloride (PVC); Plastic Resins — Other; Plastic Products (2); Semiconductors (4); Solvents; Steel (4); Steel — Carbon; Steel — Hot Rolled (5); Steel — Stainless; Steel Products (2); Vinyl Acetate Monomer; and Wood Products. CANADA’s PMI hit a survey-record high in March, with strong increases in production, new orders and purchases. Supplier delivery times lengthened

to the second-greatest degree on record. Input price inflation built amid material shortages. Employment increased and there was a strong rise in backlogs, the second fastest on record. The PMI for March, at 58.5, the highest in over ten years’ data collection, was up from February’s 54.8. Although job creation was up, manufacturing companies were unable to keep up with rising work loads at the end of the quarter. There is an upbeat sentiment re the next 12 month’s production. The Canadian Government recently announced a $CA 10 billion infrastructure project, concentrating mainly on the agricultural industry and the fight against climate change. MEXICO reported no change to its unfortunate circumstances, with sharp reductions in production and new orders, and continuing shedding of jobs. Their PMI for February, at 44.2, was up on January’s 43.0. In spite of all, business optimism strengthened, due to roll-out of COVID vaccines. Amelia Roy, Staff Writer

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Manufacturing Outlook / March 2021

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA by JEANNE-MARIE LOWRIE

BRAZIL’s new orders, production and employment are back in contraction, and business confidence is weaker. Supplier delivery times are still long, and inflationary pressures are intensifying, hence, the PMI for March is still above the 50 mark, at 52.8, a nine-month low, down from 58.4 in February. There is still optimism in Brazil, but the country is suffering from a further spike in COVID-19 and its associated fall in demand, together with political disruption. Embraer, Brazil’s flagship aircraft manufacturer, is looking to expand its share of the Chinese market. The company is at the forefront of the manufacture of small passenger jets called regional jets, but has competition from Airbus,

Manufacturing Outlook / March 2021

which took over the regional jet business of Bombardier in 2018. COMAC, the China Commercial Aircraft Corporation is in the business, but has only 42 aircraft in service in China, versus Embraer’s 96. The Chinese commercial passenger jet fleet of 3,739 is, of course, dominated by Boeing and Airbus. Embraer supplies a plane that is the ideal size for inter-city service in China, has a 51-year track record, and supplies production, services and customer training. With China’s determination to advance its own aerospace industry, Embraer has a battle on Jeanne-Marie Lowrie, its hands. Staff Writer

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by CHRIS ANDERSON

CHINA saw its PMI down to a nine-month low in February, with a slower increase in production and new orders for the third consecutive month. New export orders were down for the second month running. Raw material shortages and transport problems led to lengthening supplier delivery times. There is still optimism for the next 12 months production increase. The PMI fell back from 51.5 in January to 50.9 in February. The month saw the slowest rate of improvement since the current recovery began last May. New export business was down for the second month in a row, and there was a slight drop in employment in February. China’s total vehicle sales for January were up 29.5 percent year-over-year, at 2.503 million, although there were five fewer sales days in January 2020. There were sales of 179,000 NEVs, of which Tesla sold 15,484. The Chinese economy grew only 2.3 percent in 2020. It is aiming for a 6 percent growth in 2021. New export orders were up for the first time in four months, particularly from China, and there was a softer fall in employment levels.

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JAPAN’s manufacturing sector showed an improvement for the first time since April 2019, with a modest increase in new orders and production. Input prices were up at the fastest rate in two years, on the back of supply-chain disruption and raw material prices. The PMI increased from 49.8 in January to 51.4 in February. The positive sentiment regarding the coming 12 months was the strongest since July 2017.

Chris Anderson, Staff Writer

INDIA saw increased demand, and continuing strong growth in new orders and production in February. Input inventories increased at a record pace, and cost inflation was at a 32-month high. There was some increase in selling prices. The PMI fell very slightly from 57.7 in January to 57.5 in February.

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Manufacturing Outlook / March 2021

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE by CHRIS ANDERSON

IHS Markit’s Eurozone Manufacturing Composite

that were especially strong in the intermediate and

Purchasing Managers’ Index (PMI), rose significantly

investment sectors. Increased new orders led to

from 57.9 in February to 62.5 in March.

increased backlogs, hence increase in employment. West European car sales fell 21.3 percent for the month of February. The UK PMI rose to a 121-month high of 58.9 in March, from 55.1 in February. Business optimism was at a 7-year high in March. There were supplychain disruptions and inflationary pressures, together with improved growth in production, new orders, and employment, and

The month of March saw record increases in

longer supplier lead times.

production, new orders, exports and purchasing

There was strong growth in

activity. There were unprecedented supply-chain

the consumer, intermediate

disruptions, leading to the sharpest increases in

and investment goods sectors,

input costs for a decade. Consumer, intermediate and investment goods sectors all showed gains,

Manufacturing Outlook / March 2021

and both improved domestic Chris Anderson, Staff Writer

and export demand.

GLOBAL PMI OUTLOOK

PMI OUTLOOK GlobalGLOBAL Survey Insights Tue. Apr. 6, 2021

Strategas Securities, LLC Norbert Ore (404) 488-7380 Erica Halie Comp, CBE (646) 292-7951

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS

nore@strategasrp.com ecomp@strategasrp.com

EMPLOYMENT, OUTPUT, GROWTH MARCH 2021 BUSINESS SURVEY INSIGHTS

Even under the best of circumstances, global supply chains are challenged continually to adapt to changing conditions. We would have to say this past year required a special level of commitment by buyers and sellers to keep products supplied and operations running. Who would have anticipated the blockage of the Suez Canal? And we had the marking of the 10th anniversary of the Fukushima tsunami – an epic event that required supply chain specialists to work across the globe searching for new suppliers and products. And what about re-openings – whether it is a favorite restaurant, children back in school, or just getting outside and walking along a familiar path. And all of this is to say that we see the light in this month’s data. Manufacturing shows 17 of 18 industries growing while Services indicates 18 out of 18 growing.

Thirteen of the eighteen PMIs that we closely follow printed 55 percent and hgher in March – indicating expansion and strength indicating solid expansion and growth. While weakness exists in a few instances – Greece, Mexico, Services – there is reason to believe that new orders and production will remain strong in manufacturing and the global situation will remain positive. The leaders in February were U.S. Mfg (60.8), Germany (60.7), and Taiwan (60.4). February’s results continue to suggest global manufacturers are poised for growth well into 2021.

PLEASE DO NOT REDISTRIBUTE Please see Appendix for Important Disclosures. Manufacturing Outlook / March 2021

GLOBAL PMI OUTLOOK 04/06/21

EMPLOYMENT, OUTPUT, GROWTH

Emerging Markets

Developed Markets

Global Manufacturing Summary

Americas Canada United States Europe Austria Denmark France Germany Ireland Italy Netherlands Norway Spain Switzerland United Kingdom Pacific Australia Japan New Zealand Singapore Americas Brazil Mexico Europe Czech Republic Greece Hungary Poland Russia Asia China (CLFP) China (Caixin) India Indonesia Korea Malaysia Philippines Taiwan (Markit) Thailand

Period

Most Recent Data Current Reading Prior Reading

Current Reading vs. 6 Mo Avg. 12 Mo Avg.

Mar-21 Mar-21

58.5 64.7

54.8 60.8

2.4 4.5

6.6 9.4

Mar-21 Feb-21 Mar-21 Mar-21 Mar-21 Mar-21 Mar-21 Feb-21 Mar-21 Mar-21 Mar-21

63.4 40.8 59.3 66.6 57.1 59.8 64.7 56.1 56.9 66.3 58.9

58.3 42.1 56.1 60.7 52.0 56.9 59.6 52.5 52.9 61.3 55.1

7.6 -7.3 6.1 6.8 3.7 4.8 7.0 3.0 4.8 7.7 3.0

12.7 -8.0 9.6 13.7 6.6 8.8 12.6 6.6 8.2 13.8 7.1

Mar-21 Mar-21 Feb-21 Mar-21

59.9 52.7 53.4 50.8

58.8 51.4 58.0 50.5

3.6 2.4 0.0 0.2

8.6 5.9 4.0 1.3

Mar-21 Mar-21

52.8 45.6

58.4 44.2

-7.2 1.8

-3.3 4.1

Mar-21 Mar-21 Mar-21 Mar-21 Mar-21

58.0 51.8 48.7 54.3 51.1

56.5 49.4 49.0 53.4 51.5

2.3 3.6 -2.0 2.1 1.7

7.9 5.4 0.5 5.4 4.3

Mar-21 Mar-21 Mar-21 Mar-21 Mar-21 Mar-21 Mar-21 Mar-21 Mar-21

51.9 50.6 55.4 53.2 55.3 49.9 52.2 60.8 48.8

50.6 50.9 57.5 50.9 55.3 47.7 52.5 60.4 47.2

0.4 -1.8 -1.6 2.2 1.9 1.2 1.4 2.0 -0.7

0.6 -1.5 5.2 7.7 6.0 2.5 4.5 7.4 1.8

Manufacturing Outlook / March 2021

GLOBAL PMI OUTLOOK

04/06/21

ISM U.S. Manufacturing PMI™ While all is not perfect in the manufacturing sector, it is still showing great resilience while managing to beat expectations. Survey respondents’ concerns are shifting from availability of both imported and domestically produced raw materials and components to price-cost inflation. Q1-2021 ended with the March PMI™ posting the highest reading since the start of the new millennium. According to the ISM release, the past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for March (64.7) corresponds to a 6.2-percent increase in real gross domestic product (GDP) on an annualized basis. While manufacturers face supply and demand issues, March also brought winter storms that played havoc with supply chain operations.

Drivers: The indexes for New Orders (68.0, +3.2) and Production (68.1, +4.9) improved significantly during March as the overall expectation is for a continuation of significant expansion reaching well into 2021. There seemed to be a shift of sentiment in the comments as supply chain managers appear to be more concerned about persistent supply chain shortages which make it difficult to meet production demands as opposed to output growth. Additionally, they expect Supplier Deliveries (76.6, +4.6) to remain extended. The biggest challenge is rebuilding depleted Inventories (50.8, +1.1) in supply chains, particularly in those where intermediate components play a large role. Employment (59.6, +5.2) on a national level is still lagging. Labor shortages due to skill and technology requirements in addition to COVID-19 persist. Manufacturing Outlook / March 2021

PLEASE DO NOT REDISTRIBUTE

GLOBAL PMI OUTLOOK

04/06/21

New Orders Minus Inventories: This key measure rose to (17.2, +2.1) indicating New Orders continued to expand faster than Inventories in March. Compared to the average gap (+4.8) since 2011, inventory availability is becoming a greater issue. Customers’ Inventories: Customers’ Inventories (29.9, -2.6) for raw materials, components, and finished goods were “too low” for the 54th consecutive month. The index has been under 40 percent for the past eight months. 15 industries reported customers’ inventories as too low during March: Wood Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; Transportation Equipment; Computer & Electronic Products; Paper Products; Textile Mills; Plastics & Rubber Products; Furniture & Related Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products. Prices: The Manufacturing ISM® Prices Index rose slightly (85.6, -0.4), indicating input prices increased for the tenth consecutive month. This is the index’s highest reading since July 2008 when it registered 88.5 percent. Longer lead-times as indicated by the Supplier Deliveries Index support higher prices so the price issue will be of concern until some of the bottlenecks are resolved. Commodities Up in Price: Acetone (2); Acrylonitrile Butadiene Styrene (ABS) Plastic (3); Adhesives; Aluminum (10); Aluminum Extrusions (2); Brass Products; Copper (10); Copper Products; Corn; Corrugate (6); Corrugated Boxes (5); Crude Oil (4); Diesel (3); Electrical Components (4); Electronic Components (4); Epoxy Resins; Ethylene; Freight (5); Foam Products; High-Density Polyethylene (HDPE) (3); Isocyanate; Labor — Temporary; Light Emitting Diode (LED) Displays; Lumber (9); Medium-Density Fiberboard (MDF); Nylon Fiber (3); Ocean Freight (4); Oil-Derived Products (2); Packaging Supplies (4); Paper Products (4); Petroleum-Based Products; Phosphates; Plastic Resins (7); Plasticizers; Polyethylene (2); Polypropylene (9); Polyvinyl Chloride (PVC) (6); Propylene (3); Resin-Based Products (2); Rubber Products (2); Semiconductors (2); Solvents — Other (2); Soybean Products (6); Steel (8); Steel — Carbon (4); Steel — Cold Rolled (7); Steel — Galvanized; Steel — Hot Rolled (7); Steel — Scrap (4); Steel — Stainless (5); Steel Products (7); Styrene; Surfactants; Wire Products; Wood — Pallets (4); and Vinyl Acetate Monomer. Commodities Down in Price: None. Commodities in Short Supply: Adhesives; Corrugated Boxes (5); Electrical Components (6); Electronic Components (4); Epoxy Resins; Fiberboard; Foam Products; Freight; Light Emitting Diode (LED) Displays; Lumber; Personal Protective Equipment (PPE) — Gloves (13); Plasticizers; Polyols; Polypropylene (2); Polyvinyl Chloride (PVC); Plastic Resins — Other; Plastic Products (2); Semiconductors (4); Solvents; Steel (4); Steel — Carbon; Steel — Hot Rolled (5); Steel — Stainless; Steel Products (2); Vinyl Acetate Monomer; and Wood Products. Note: The number of consecutive months the commodity is listed is indicated after each item. 30

Manufacturing Outlook / March 2021

PLEASE DO NOT REDISTRIBUTE

GLOBAL PMI OUTLOOK

04/06/21

Sectoral Breakdown: Of the 18 manufacturing industries, 17 reported growth in March: Textile Mills; Electrical Equipment, Appliances & Components; Machinery; Computer & Electronic Products; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Plastics & Rubber Products; Paper Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Printing & Related Support Activities; and Petroleum & Coal Products. No industries reported contraction in March. ISM Mfg PMI (SA) New Orders (SA) Production (SA) Employment (SA) Supplier Deliveries (SA) Inventories (SA) New Orders - Inv Customers' Inventories (NSA) Prices (NSA) Backlogs (NSA) New Export Orders (NSA) Imports (NSA)

12/31/2020 60.5 67.5 64.7 51.7 67.7 51.0 16.5 37.9 77.6 59.1 57.5 54.6

1/31/2021 58.7 61.1 60.7 52.6 68.2 50.8 10.3 33.1 82.1 59.7 54.9 56.9

2/28/2021 60.8 64.8 63.2 54.4 72.0 49.7 15.1 32.5 86.0 64.0 57.2 56.2

3/31/2021 64.7 68.0 68.1 59.6 76.6 50.8 17.2 29.9 85.6 67.5 54.5 56.7

ISM U.S. Services PMI™ (formerly ISM Non-Manufacturing PMI)

While the ISM U.S. Services Employment Index (57.2, +4.5) gained momentum in March there is still much to recover as it averaged a meager 44.1 for the last three quarters of 2020. The Covid-19 virus, winter storms, and reluctance to re-open government, schools, and businesses have played the biggest role in delaying an all-out expansion in the sector. Services provide the backbone of U.S. employment growth and that has been slowed to a near halt. However, we are starting to come out of the malaise and the worst is behind us as Q1-2021 results show an average index reading of 55 percent. According to the ISM press release, a Services PMI® above 49.2 percent, over time, generally indicates an expansion of the overall economy. “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for March (63.7 percent) corresponds to a 5.1-percent increase in real gross domestic product (GDP) on an annualized basis.”

Manufacturing Outlook / March 2021 PLEASE DO NOT REDISTRIBUTE

GLOBAL PMI OUTLOOK

04/06/21

Drivers: In March, the momentum really swung as the PMI (63.7, +8.4) racked up huge gains. The momentum came from Business Activity (69.4, +13.9) and New Orders (67.2, +15.3). Prices: The Prices Index (74.0, +2.2) reflects pricing power favoring sellers. This raises concerns about inflation in material and/or labor costs as businesses try to recover traditional margins. In this type of recovery, we often see companies forward buying and placing orders with multiple suppliers as a natural hedge against higher prices. Commodities Up in Price: Chemicals; Construction Materials; Construction Services; Copper Products (2); Diesel (4); Electrical Components (2); Exam Gloves (6); Food & Beverage; Freight (4); Fuel (3); Gasoline (4); Gasoline-Related Products; Labor (4); Labor — Construction; Labor — Temporary (3); Lumber (3); Oriented Strand Board (OSB) (4); Packaging Materials; PaintRelated Products; Personal Protective Equipment (PPE)* (14); PPE — Gloves (6); Poly Products; Polyvinyl Chloride (PVC) Products (7); Resin Products (3); Steel (7); Steel Conduit; Steel Products (3); Steel — Rolled; Trucking Services; and Wood Products (2). Commodities Down in Price: Personal Protective Equipment (PPE)* (2). Commodities in Short Supply: Construction Contractors (6); Exam Gloves (2); Gloves (4); Integrated Circuits; Labor (4); Labor — Construction (3); Labor — Temporary (3); Needles & Syringes (4); Nitrile Gloves (10); Personal Protective Equipment (PPE) (14); Pipette; Polyvinyl Chloride (PVC) Products (2); Semiconductors; Sharps Disposal Containers; Surgical Gowns; and Steel Products (4). Note: Parentheses indicate the number of consecutive months the commodity is listed. Asterisk indicates both up and down in price.

Sectoral Breakdown: All of the 18 services industries reported growth in March: Arts, Entertainment & Recreation; Wholesale Trade; Mining; Management of Companies & Support Services; Construction; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Real Estate, Rental & Leasing; Transportation & 32

Manufacturing Outlook / March 2021

PLEASE DO NOT REDISTRIBUTE

GLOBAL PMI OUTLOOK

04/06/21

Warehousing; Public Administration; Finance & Insurance; Utilities; Health Care & Social Assistance; Professional, Scientific & Technical Services; Information; Retail Trade; Educational Services; and Other Services. ISM NMfg PMI (SA) Business Activity (SA) New Orders Employment (SA) Supplier Deliveries (SA) Prices (SA) Inventory Change (NSA) Inventory Sentiment (NSA) Backlogs (NSA) New Export Orders (NSA) Imports (NSA)

12/31/2020 57.7 60.5 58.6 48.7 62.8 64.4 58.2 47.7 48.7 57.3 51.8

1/31/2021 58.7 59.9 61.8 55.2 57.8 64.2 49.2 49.7 50.9 47.0 53.5

PLEASE DO NOT REDISTRIBUTE

2/28/2021 55.3 55.5 51.9 52.7 60.8 71.8 58.9 54.3 55.2 57.6 50.5

3/31/2021 63.7 69.4 67.2 57.2 61.0 74.0 54.0 52.7 50.2 55.5 50.7

Manufacturing Outlook / March 2021

CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK by DR. CHRISTOPHER KUEHL MANAGING DIRECTOR OF ARMADA CORPORATE INTELLIGENCE THIS REPORT REPRINTED COURTESY OF THE NATIONAL ASSOCIATION OF CREDIT MANAGERS (NACM.ORG) WHERE MORE IN-DEPTH INFORMATION CAN BE FOUND.

Combined Sectors This month’s report is liable to cost membership in the “dismal science” club. It is normally the task of the economist to find the dark cloud that surrounds the silver lining but this month the numbers are looking far better than anybody had expected to see and not just with the Credit Managers’ Index. At the start of the year there was some cautious optimism regarding the pace of recovery this year due to the arrival of the vaccine and the potential for the relaxation of the lockdown protocols. But then the pace of the distribution slowed and it was not clear when there would be another stimulus or what it would look like. What a difference a few weeks can make. The latest assessment from the Atlanta Fed holds that first quarter GDP numbers could be as high as 10% and many are suggesting that annual growth will be in the vicinity of 6.5% and perhaps higher. The stimulus cash has much to do with the consumer surge but the advance of the vaccine has picked up speed as well and that has triggered expectation of the lockdown’s end. In the January CMI there had been a surge of enthusiasm that was captured by the favorable factors and then these same readings dipped a little in February’s issue. Now that March data is here these factors are tracking back towards the levels seen at the start of the year. The combined index jumped back to 59.3 after having slipped a bit to 57.5. In January it stood at 59.7. The index of favorable factors also recovered some lost ground but not all of it. It went from 65.3 in February to

Manufacturing Outlook / March 2021

67.7 in March (was at 69.7 in January). The index of unfavorable factors not only recovered lost ground from February but gained on January with a reading of 53.8 as compared to 53.0 in January and 52.2 last month. This is the highest reading seen in well over two years and this points to some better months ahead as well. The details in the sub-categories are likewise instructive. The sales numbers have been very high for several months in a row – above 70 in three of the last four with January hitting the high point at 75.9. This is especially good news as it appears that credit managers are not getting soft on credit requirements just to appease the salesforce. The data on new credit applications has been sliding a little over the last few months but remains solidly in the 60s. It is now at 63.9 and was at 65.5 in February and 67.8 in January. There has been a slight slowdown in credit demand but overall, the numbers are still good. The dollar collection numbers jumped back into the 60s with a reading of 64.5 compared to the previous month’s reading of 59.2. The amount of credit extended also shifted back into high gear with a 68.4 reading as compared to 66.8 in February. This surge in activity is interesting as it means that credit requests are larger than they have been. The most interesting improvements have been seen in the unfavorable categories. The rejections of credit applications improved from 51.5 to 52.0 and that is as high as has been seen since March

CREDIT MANAGER’S OUTLOOK

of 2020 – just before the pandemic hit. The data for accounts placed for collection jumped back to 55.1 from 51.6 and that takes this reading back to November of last year when it was over 56.0. There was a small trend down in the disputes category as it went from 51.0 to 50.6. The important point at this stage is that the number stayed above 50 –

barely but above 50. There was a very significant improvement in the dollar amount beyond terms as the reading this month was 57.0 as opposed to February’s 52.0. This was not quite at the level seen in January but it still shows that there is an attempt underway to get caught up on credit. The dollar amount of customer deductions remained Manufacturing Outlook / March 2021

CREDIT MANAGER’S OUTLOOK very close to what it had been the previous month with a reading of 52.2 compared to 52.8. The filings for bankruptcies also remained close to what it had been but was on the improving side of this with a reading of 55.7 compared to 54.5 in February and 52.3 in January. The truly encouraging news is that there have now been five straight months of “50 plus” in the unfavorable categories. Not one of the readings has been in the contraction zone since October of last year. This bodes very well for future economic growth readings. Manufacturing Sector The sectors that have been performing well through the bulk of the last several months have been in manufacturing. This has been explained in part by the fact consumers have been unable to spend as they usually do on services. Prior to the pandemic lockdown the average consumer spent about 65% of their disposable income on services and the higher the income the more spent on services as opposed to things. The upper 25% of income earners spent close to 80% on services. When that was no longer possible the spending switched to goods and that has been positive for many manufacturers.

Manufacturing Outlook / March 2021

The combined score was very close to what it has been the last few months. It is sitting at 59.2 and was at 58.5 in February, 60.0 in January. The manufacturing sector has been consistent through much of the last year – as compared to the volatility in the service sector. The index of favorable factors remained very close to last month as well – going from 67.7 to 67.1 The index of unfavorable factors improved quite a bit – moving from 52.4 to 54.0, a level not seen since last November. This is probably the best of patterns – consistent as far as the good news is concerned and some improvement in what can be the negative factors. The details reinforce these assumptions. The sales numbers came back up from 71.1 to 72.7 but the better news is that these readings have been above 70 for four straight months now. The new credit applications data drooped a little from 66.9 to 62.3 but the important consideration is that these readings remain in the 60s. The dollar collections numbers improved from 63.8 to 65.5 and the amount of credit extended moved down slightly from 69.1 to 67.8. The key takeaway from this data is that all these numbers are above 60 and that is

CREDIT MANAGER’S OUTLOOK

clearly very solid progress and well into expansion territory. The unfavorable data is where there was some real progress noted. The data on rejections of credit applications improved from 51.1 to 53.8. This is even better news than it would appear as this is coming at the same time that there have been fewer applications for credit and that translates into a situation where the more creditworthy are the ones that have been requesting additional credit. The accounts placed for collection also showed solid improvement from a reading of 52.0 to one of 56.3. The disputes category moved down a little but hung on to the expansion zone by a thread with a reading of 50.4 compared to 51.8 the month prior. The dollar amount beyond terms category improved significantly from 53.3 to 57.2 but there was a small decline noted as far as dollar amount of customer deductions as the reading went from 52.0 to 50.8 – again holding on to the expansion zone by a thin margin. The filings for bankruptcies continued to improve with a reading of 55.6 compared to 54.4 in February. The important development is that there have been five straight months of readings in the expansion zone and that has not been the case in several years.

Author profile

Dr. Christopher Kuehl (PhD) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance, Credit and International Business. He prepares NACM’s monthly Credit Managers Index. He is the Economic Analyst for the Fabricators and Manufacturers Association and writes their biweekly publication, Fabrinomics, which details the impact of economic trends on the manufacturer. Chris is the chief editor for the Business Intelligence Briefs, distributed all over the world by business organizations and he is one of the primary writers (with Keith Prather) for the Executive Intelligence Briefs. He also makes close to a hundred presentations each year to business and industry associations in the US and overseas. He is on the Board of the Business Information Industry Association in Hong Kong and serves as a resource for the media and for many trade publications. Chris has a doctorate in Political Economics and advanced degrees in Soviet Studies and Asian Studies and was a professor of international economics and finance for over 15 years prior to starting Armada. Manufacturing Outlook / March 2021

METALS OUTLOOK

MARCH 2021

METALS OUTLOOK by ROYCE LOWE

STEEL CELEBRATIONS A demand that today’s supply just won’t satisfy continues to plague the global steel industry. Hot-rolled coil in the U.S. reached $1340 per ton in early April, $767 in S.E. Asia and 850 euros per ton in Europe. Cold-rolled and hot dip galvanized approached $1530 per ton. These figures represent increases of $100 per ton in the U.S. in the past month. End users have no choice but to pay the price, whereas service centers may gamble, at least for a while, on the price falling, soon. Nucor and U.S. Steel Corp. are making hay while the proverbial sun shines, with Nucor expecting record earnings in the first quarter of 2021, more than doubling its earnings in the fourth quarter of 2020. U.S. Steel Corp meanwhile is forecasting net earnings of $265 million for the first quarter of 2021, compared with $49 million in the fourth quarter of 2020. “Healthy flat-rolled customer demand across most end-markets and the flow-through of higher steel prices are resulting in substantially higher results from our flat-rolled and U.S. Steel Europe segments and our newly formed ‘mini mill’ segment, which

Manufacturing Outlook / March 2021

will showcase the performance of Big River Steel,” Burritt said. “Solid market fundamentals, low steel supply chain inventories, continued consumer-driven demand, and pent-up infrastructure demand has us increasingly bullish.” Capacity utilization has not yet reached 80 percent, and some mills are looking to scheduled maintenance shutdowns, which will certainly tighten the supply situation further. Buyers are speculating that the hotrolled price in the U.S. will reach $1500 per ton. Even that may not be the end of it. Prices in China, which were in stagnation prior to the New Year Holiday there, rebounded strongly after their holiday. This puts more pressure on global prices, as witnessed by those in the U.S. and Europe. Stainless steel prices have also risen, despite an almost 20 percent drop in the price of nickel during the month of March. There is also talk of steel output cuts in China. Nucor recently announced it has signed a second virtual power purchase agreement, or VPPA, for renewable energy in Texas, to further reduce the

METALS OUTLOOK company’s climate footprint. Nucor signed a 10-year VPPA with Denmark’s Ørsted Onshore North America for 100 megawatts from the power supplier’s Western Trail wind farm in North Texas. This is the second VPPA deal for Nucor, and follows a 15-year agreement concluded in November 2020 with EDF Renewables North America for 250 MW of new solar energy in Texas. Together, these two projects have the potential to supply renewable power to the regional electric grid 24 hours a day, Nucor said. “As an electric arc furnace (EAF) steelmaker and North America’s largest recycler, Nucor is already among the cleanest and most sustainable steel producers in the world,” Nucor CEO Leon Topalian said in a statement. “This agreement will enable us to further reduce our climate footprint beyond our operations.” Ørsted’s WTW project is currently under construction and is expected to be in service later this year, Nucor said. The WTW project is designed to continue to perform well during particularly severe weather, such as that recently experienced in Texas. Nucor operates a steel plate mill in Longview, Texas, and a long bar facility in Jewett, Texas. The company also has a Nucor Building Systems location and a Vulcraft steel joist plant in the state.

Despite their name, rare-earth metals are everywhere. They are essential to technologies from batteries and wind turbines to laser-guided missiles. This presents a problem for the West since China dominates rare-earth metal supply chains. China’s leader in the 1980s, Deng Xiaoping, recognized their value, and likened their importance to China to that of oil to the Middle East. By 2010 the country was responsible for about 95% of the mining of rare earths, controlling mines across the world. Faced with this uncomfortable dependence and increasing demand, the West is belatedly stepping up its game. Rare earths are crucial to clean-energy technologies needed to combat climate change, a further reason for action. America, Australia, Canada and the European Union have all taken steps to encourage secure supply chains. But China remains at least a decade ahead, and although government intervention may encourage innovation, it will take some time to close the gap. Non-ferrous metal data show aluminum up over the past month from $0.99 per pound to $1.01; copper down from $4.20 per pound to $4.00; nickel down from $8.50 to $7.20 , and zinc virtually unchanged at $1.27 per pound. Pricing across all metals will remain volatile in 2021. Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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Manufacturing Outlook / March 2021

AEROSPACE OUTLOOK

APRIL 2021

AEROSPACE OUTLOOK by ROYCE LOWE

BOEING’S BETTER DAYS… It seems that whenever the word Boeing has been mentioned in the last many months, it has been to report on its trials and tribulations; the company has seen two catastrophic crashes, hundreds of 737 Maxes grounded, cries from some of its employees for its putting shareholders before quality, hence safety, and never to be forgotten, its absolute scolding by the Federal Aviation Administration. Its 737 Max was grounded for many months and its orders slipped away. Most of its woes occurred during the pandemic, in a way fortunate for the company. The Airline industry has suffered along with Boeing. Orders are thin on the ground. No-one

Manufacturing Outlook / March 2021

knows when people will be able to safely fly again, at least in great numbers. The 737 Max aircraft had to be certified and re-certified in North America, South America, and Europe. If any good is to come out of all that Boeing went through, it is that the company will not dare make such a mess of its affairs again. Things at the moment are running just a little smoother for the airline industry, and more people have taken it upon themselves to fly. This may be part of the reason that Southwest Airlines just placed an order for 100 of the smaller version of the 737 Max, or it may not. Southwest flirted with Airbus during the very long grounding of

AEROSPACE OUTLOOK

the Max, before reverting to the half-century relationship between Southwest and Boeing. The Southwest order most certainly helped with the huge inventory of undelivered Max aircraft. Southwest will no doubt get a good deal, as they’ll be adding 169 Max 7 and 8 models over the next five years, for an outlay of just $5.1 billion, or $30.2 million per plane, whose appraisal is around $46 million. Boeing recently delivered a small number of 787s, the model that was recently subjected to very intricate inspection. Boeing has upped its inspection intensity since having its fingers rapped on numerous occasions by the FAA. We will likely hear more of the company’s quality control procedures. Boeing’s fortunes will go along with those of others in the flying business, when it’s really safe for lots of people to take to the skies again. Taxi, Taxi Rolls-Royce has decided to become involved in the manufacture of an air taxi. Rolls-Royce Electrical will design the electric-propulsion system architecture for the Vertical Aerospace VA-X4, including 100kW-class lift and push units, power distribution, and monitoring system.

Rolls-Royce will develop and supply an electrical system to power the VA-X4 all-electric vertical take-off and landing vehicle being developed by Vertical Aerospace, a British developer. The eVTOL is scheduled to be certified by 2024 and in commercial service shortly thereafter, carrying up to four passengers at speeds over 200 mph. Rolls considers its involvement in urban-air mobility (UAM) to be a key collaboration, and it will assign about 150 engineers based in the U.K., the U.S., Germany and Hungary to work with the Vertical Aerospace team on developing the aircraft. The VA-X4 was introduced in August 2020 as a new concept from Vertical Aerospace, which previously had developed several VTOL or “air taxi” concepts. The aircraft is designed to be 13 meters long with a 15-meter wingspan, incorporating a distributed propulsion system, fly-by-wire flight control systems, and powered by lithium-ion batteries. Vertical Aerospace says the goal is to make flying this eVTOL cheaper than helicopter flights. We’ll see.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook. Manufacturing Outlook / March 2021

ENERGY OUTLOOK

MARCH 2021

ENERGY OUTLOOK by JOCELYN BRIGHT

WINDS OVER AMERICA In its quest to reduce carbon emissions, the Biden Administration is taking a very serious look at wind power, particularly off-shore, with a view to boosting it significantly by 2030. This will involve construction of projects at sea capable of generating enough electricity to power over 10 million homes. The U.S. is second only to China in onshore wind power capacity, which is neither as reliable nor as efficient as offshore, but a lot cheaper to build. It lags behind China, Germany, the U.K., and other countries in taking advantage of the stronger, more prolonged gusts at sea. Despite the federal push to get projects off the ground, so far there’s

Manufacturing Outlook / March 2021

just one offshore wind farm in the U.S.: a small, 30-megawatt facility in state waters near Block Island, R.I., that went online in 2016. A $2.8 billion Vineyard Wind LLC project near Massachusetts is awaiting a final decision in April. Approval of this project alone would double wind generation in U.S. waters by 2030. Vineyard Wind is a joint venture between Avanprid Inc. in the U.S. and Copenhagen Infrastructure Partners in Denmark. Like all suggested projects, this one has passed through a review headed by the Interior Department’s Bureau of Ocean Energy Management. It is expected to pass, but the review also spooked the budding U.S. offshore wind industry, which has long struggled in the shadow of Cape Wind, a previous high-profile failure.

ENERGY OUTLOOK That project was the big hope of American clean energy, but it collapsed in 2017, after a 16-year battle with the likes of the Kennedy family and billionaire industrialist Bill Koch over its location in the Nantucket Sound, just 5 miles from shore. Since then the opposition has only gotten more sophisticated, as would-be wind power developers must now debate with everyone from fishermen to the military over use of coastal waters. The Vineyard project would be the first major offshore wind farm in federal waters. It would ship power to Massachusetts and have enough capacity to supply some 400,000 homes. It is expected to go into service in late 2023 and would be the first of several large wind farms planned off the East Coast, with Massachusetts, New York, Maine and New Jersey counting on power from offshore renewable projects, helping them meet their clean-energy targets. Federal regulators have taken steps to advance the sale of offshore wind farm rights in Atlantic waters south of Long Island. This is all in line with the administration’s work on a new U.S. carbonreduction pledge. The target, to deploy 30 gigawatts of offshore wind power generation capacity in nine years, would require installation of thousands of turbines capable of generating hundreds of times more power than the two small existing installations in state and federal waters today. To do this would require pacifying project developers, environmentalists, organized labor and fishermen. Plus, of course, the owners of mansions whose view might be spoiled by the distant sight of rotating turbines. A project of this magnitude would potentially attract over $12 billion in annual capital investment and would support 44,000 workers to install turbines along U.S. coasts. National Climate Adviser Gina McCarthy says this would be a way not just to start offshore wind development , but domestic manufacturing to supply it, in the form of massive turbines, steel and concrete and special ships for installation.

There may be new investment on the Texas coast, where regulations are looser, construction costs lower. The Interior Department’s Bureau of Ocean Energy Management is looking to sell wind development rights in N.Y. Bight, a shallow stretch of Atlantic between Long Island and New Jersey. N.Y. Bight could fit enough turbines to power all of N.Y. City but it is also home to some of the world’s richest scallop beds. Although the Interior Department has sold the rights to develop wind farms up and down the U.S. East Coast -- and states have committed to buying the renewable power they generate -- so far just two have been built: the small, 30-megawatt facility near Block Island, and a 12-megawatt project constructed in federal waters near Virginia that started generating power last September. The importance of these projects cannot be overstated. Apart from helping to clean up the atmosphere, they will contribute in no small measure to the overall U.S. infrastructure scenario, and will create jobs both through the production of turbines, installation ships, steel and concrete and a host of ancillaries. Jocelyn Bright, Staff Writer Quite a project! Manufacturing Outlook / March 2021

AUTOMOTIVE OUTLOOK

APRIL 2021

AUTOMOTIVE OUTLOOK by LAWRENCE MAKAGON

WHITHER MEXICO’S AUTO INDUSTRY? We keep saying the internal combustion engine is on its way out; not yet, but all the major automotive companies are getting ready for it and telling us how many electric vehicles they’ll be producing and when. All except Mexico that is. With its industrial ties to the U.S. and Canada, and its natural supplies of alternate energy, Mexico should be hopping on the green energy bandwagon, but its government doesn’t seem to want to do that. The auto industry is, to put it mildly, an important Mexican industrial component. Ford, GM, Nissan, VW, Toyota and others are firmly installed in Mexico, and produce some 4 million vehicles per year, making the country the world’s sixth biggest producer. With auto manufacturers come parts manufacturers, following in the wake of their favorite clients. Mexico developed its own suppliers too, brake and suspension, chassis, powertrain, as well as smaller shops that produce smaller components. The auto sector is Mexico’s biggest export market, bringing in $100 billion annually.

Manufacturing Outlook / March 2021

Mexico could show all its strengths on the new EV scene. Ford will assemble its electric Mustang in Mexico, which will show Mexico what can be done. Mexico’s auto plants dominate in engines and transmissions that, in the future, will be obsolete. Its parts industry will shrink as new cars require far fewer of them. Mexico could theoretically find a comfortable place in the green revolution. It might, in fact, become a big maker of electric batteries and fuel cells, but at the moment it isn’t joining the race to get involved in these new technologies. Mexico had an energy reform program in 2013, opening the sector to private investment, with some $26 billion flowing into solar and wind and hydro. As many operations came on-line, renewable output doubled and consumer electricity prices fell. The road ahead looked good. There are no financial incentives in Mexico to buy an EV. The country is doing next to nothing to build a national network of charging stations; instead, it is looking to gasoline self-sufficiency.

AUTOMOTIVE OUTLOOK

And coal: Mexico’s president Andrés Manuel López Obrador is reverting to coal, and intends to buy 2 million tons of thermal coal from small producers. The populist president has promoted a vision of energy sovereignty, in which state-run bodies - the oil company Pemex and the Federal Electricity Commission (CFE) - pump petroleum and generate electricity. Private players, which have heavily invested in clean energy, are relegated to a secondary role in López Obrador’s vision - while emissions and climate commitments are an afterthought. Mexico could still participate in the technologies available, and join the electric vehicle-battery-renewables wave. This would require a government commitment, but it will get none from this president. If Mexico does nothing, it will not augur well for its manufacturing sector. It will miss out on the global shift to electric vehicles and the working infrastructure required to support it. And it will be alone in USMCA in the fight to clean up the climate. But perhaps the automotive companies operating in Mexico, knowing full well that there will be production of gasoline powered cars for some time to come, will use Mexico for production of the majority of their ICE vehicles.

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Electric Bond For those of you who have seen a James Bond movie - and who hasn’t you’ll know he drives an Aston Martin. This ex-flagship of luxury sports vehicles is now largely owned by Mercedes-Benz and by a Canadian billionaire named Lawrence Stroll. The company went public in 2018, lost money in 2019 (when the Chinese weren’t buying,) and really lost money in 2020. It is still suffering from the non-showing of the latest Bond film. Starting in 2025, the company will Lawrence Makagon, build electric SUVs in Wales, sports cars in England. Staff Writer Manufacturing Outlook / March 2021

ISSUES OUTLOOK

APRIL 2021

ISSUES OUTLOOK by ROYCE LOWE

Manufacturing Outlook / March 2021

ISSUES OUTLOOK JOE’S BUILDING BLOCKS The last man to sit in the President’s chair promised, in 2016, to spend a trillion dollars on America’s roads, railways and “many, many bridges that are in danger of falling.” Federal spending on infrastructure was at the lowest level in six decades, and the need for investment was as pressing as he claimed. It seemed plausible that a non-ideological Republican, with a love of grand projects and debt, could be the man to get it done. This all turned into the “infrastructure week” joke, or something that the Trump administration

To give some idea of what needs doing, these

rolled out from time to time. By contrast, Joe

are the grades the ASCE gave to the various

Biden’s recent speech was somewhat different,

categories: Aviation = D+; Bridges = C; Dams = D;

more constructive, and came with a plan. He

Drinking water = C-; Energy = C-; Hazardous waste

wants to spend an additional $2.3 trillion plus, on infrastructure, both hard and soft, over the next eight years. He’s looking to fix 20,000 miles of road, strip lead piping from drinking water sources, and install 500,000 charging outlets for electric cars. He would spend $400 billion on the care industry, and $180 billion on research and development in low-carbon technologies. The administration claims it will pay for all this, unprecedented in recent decades, by hiking corporation taxes. All this would be in addition to the nearly $2 trillion of COVID relief he recently approved. Every four years the ASCE - the American Society of Civil Engineers - grades and reports on the

= D+; Inland waterways = D+; Levees = D; Ports = B-; Public parks = D+; Rail = B; Roads = D; Schools = D+; Solid waste = C+; Stormwater = D; Transit = D-; Wastewater = D+. The ASCE rates B as OK; C as something needs attention, and D as poor and denotes risk of failure. The grading of D for roads is based on the awful state of the nation’s highways and local roads. ASCE estimates some 40 percent of the roads are in poor condition; this costs drivers time and fuel money - for waiting. This more or less describes the condition of U.S. infrastructure. The ASCE suggests that what is needed to put all categories of infrastructure to a B rating is an investment of $2.59 trillion over

country’s infrastructure. In 2017, it gave a D+

a period of 10 years. The Society recommends

grade, in 2021, a C-; in fact for the first time in

committed spending and calls upon elected

20 years the U.S. scored a passing grade. This

leaders and private groups to practice asset

reflects the fact that state and local authorities are

management. Future projects need long-term

actually beginning to invest much-needed funds in

thinking, and a cost analysis needs to consider a

a wide range of infrastructure.

project’s entire life. Manufacturing Outlook / March 2021

ISSUES OUTLOOK Joe Biden’s idea is to pay for his infrastructure project by raising the corporate tax rate from 21 percent to 28 percent. He will doubtless have opposition. What he plans to do with his $2.3 trillion looks, on the surface, quite impressive. His plan is to spend $620 billion on transportation, of which $115 billion for bridges, highways and roads, $85 billion for public transportation, $80 billion for AMTrak. He’ll put in 500,000 EV charging stations by 2030. There will be a $50 billion ask for semi-conductor manufacturing, $100 billion for

Projects of the magnitude envisaged will require endless quantities of steel, concrete, piping, and other materials. When asked whether the U.S. steel industry was ready for such requirements, Nucor’s CEO, Leon Topalian, replied with an unequivocal yes. There is little doubt that this project, reminiscent of FDR’s back in the thirties, will put a lot of Americans to work, be good for its industries, and will save the average citizen time and cost of repairs necessitated by hitting holes in roads.

workforce development programs, and another $100 billion for a more resilient electrical grid. Lead pipes will be replaced at a cost of $45 billion, and $100 billion will go to refurbishment of public schools. A further $100 billion will go to highspeed broadband.

Manufacturing Outlook / March 2021

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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