Manufacturing Outlook for December 2020

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FROM INDUSTRY 1.0 TO THE COVID DISRUPTION AND INDUSTRY 5.0 PAGE 10

MANUFACTURING OUTLOOK PAGE 6

ALL EYES ON GEORGIA: GEORGIA RANKS #1 AS ALL EYES WATCH THE OUTCOME OF TWO IMPORTANT SENATE RACES PAGE 16

THE CASS TRANSPORTATION INDEX PAGE 8

MANUFACTURING SEGMENTATION REQUIRES INDUSTRY EXPERTISE FOR INNOVATIVE CONTENT CREATION PAGE 16

MANUFACTURING TIDBITS PAGES 14 - 18

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NOVEMBER ISM PMI: 57.5%

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COVID DRIVES REMOTE WORK WITH B2B

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Manufacturing Outlook / December 2020

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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 ROSEMARY COATES 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

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27

PUBLISHER’S STATEMENT

ASIA OUTLOOK

A word from our publisher

China, Japan and India

6 MANUFACTURING OUTLOOK A look at manufacturing around the globe

28 EUROZONE OUTLOOK A look at Europe

8 THE CASS TRANSPORTATION INDEX

by Cass Informations Systems Inc.

GLOBAL PMI OUTLOOK

by Norbert Ore

10 COVER STORY: MAJOR SHIFTS IN MANUFACTURING: FROM INDUSTRY 1.0 TO THE COVID DISRUPTION AND INDUSTRY 5.0

by Tim Grady

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

SEGMENTATION REQUIRES 14 MANUFACTURING INDUSTRY EXPERTISE FOR INNOVATIVE CONTENT CREATION

by Thomas R. Cutler

16 SUB-COVER STORY: ALL EYES ON GEORGIA: GEORGIA RANKS #1 AS ALL EYES WATCH THE OUTCOME OF TWO IMPORTANT SENATE RACES. by Thomas R. Cutler

18 ESSENTIAL MANUFACTURING STARTS 20

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WITH FOOD

by Thomas R. Cutler

ISM MANUFACTURING REPORT ON BUSINESS

21 NORTH AMERICAN OUTLOOK

30 THE CREDIT MANAGER’S OUTLOOK

by Dr. Chris Kuehl

34 METALS OUTLOOK The cost, making and treating of metals

36 AEROSPACE OUTLOOK The aerospace industry

38 ENERGY OUTLOOK Energy and the environment

40 AUTOMOTIVE OUTLOOK Auto industry news

42 ISSUES OUTLOOK Issues around the globe

Manufacturing in the US, Canada & Mexico

26 SOUTH AMERICA OUTLOOK Brazil in the spotlight

Open call for...

Contributing Writers for new and existing content. Let’s start a conversation – Contact us at info@jacketmedia.com or visit mfgtalkradio.com/writer for more information.

PUBLISHERS STATEMENT Publisher’s Statement

Light at the End of the Tunnel There is no doubt that 2020 has been a tumultuous year. The presidential election results are still up in the air and may end up in Congress as provisioned in the U.S. Constitution. Manufacturing has been disrupted in ways no one imagined as 2019 came to a close. Daily life is anything but the normal we experienced prior to the pandemic. And our psyche’s are taking a collective beating – not just in the U.S. but worldwide.

However, there is light at the end of this ugly tunnel. At some point before January 20th, the presidential election will be resolved. And now, as we close 2020, two vaccines are being ramped in the U.S. to fight COVID. Other vaccines and therapies are on their way in the U.S. and from pharmaceutical laboratories and academic research facilities around the world. It is unlikely that COVID will die on its own, but at least humans can be inoculated so their risk of catching it is reduced by 95%.

As that rolls out more widely nationally and internationally, we may be able to move back towards what we know as normal, although we expect that it will be 2022 before we feel ‘safe’ again from this contagion. And quietly in the background, responding to this global need, is manufacturing and its vast supply chain. And while most manufacturing kept operating in 2020, many businesses did not. As the human toll continues to climb in the U.S., there are an equal number of business fatalities.

The loss of a business means the loss of jobs. Skill sets once useful may not be useful at all, and widespread retraining for work within businesses will become common place. What may be less common is leased office space. Estimates are that 22% of workers will never return to their cubicles or other positions and remain working from home. Companies are faced with excess leased space, and all the fixed assets that fill that square footage. As leases are renewed, it is likely the square footage will be reduce, and the market may become flooded with used fixed assets. For businesses that don’t survive, now currently greater than 250,000 there will be a fire sale on furniture, fixtures and equipment; even customer lists and other digital or intangible assets will be on the block.

The COVID culture shockwaves impacting people, places and things will continue to cause untold disruption to what we do, how we do it, when we do it, and bigger questions of why we do it that way. Communications has been fundamentally shifted from face-to-face to Facetime, Zoom, and other online discussion tools.

Demand for air travel may not recover for half a decade or longer. Hotel and motel room bookings will underperform until guests are convinced they will be safe. Every business and industry will feel the impact.

This time, manufacturing will be in the forefront of the changes because they were able to continue to operate during the pandemic. They are already approaching the end of the tunnel from alterations made to continue production in 2020. And as long as manufacturing continues to grow and expand, the economy will do the same.

Thus, our manufacturing outlook is upbeat and positive as we publish this issue of Manufacturing Outlook. Enjoy!

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 / December 2020

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MANUFACTURING OUTLOOK

DECEMBER 2020

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI STILL ON THE UP IN NOVEMBER. CHINA RELENTLESS. STEEL MARKET TIGHT AND EXPENSIVE. RAW MATERIALS IN SHORT SUPPLY. U.S. LABOR MARKET TIGHT.

by ROYCE LOWE The Bureau of Labor Statistics jobs report for November shows a gain of 245,000 non-farm payroll jobs, with the unemployment rate edging down to 6.7 percent.

There were significant gains in Transportation and Warehousing (145,000), but 123,000 below February, and Professional and Business Services (60,000), but 1.1 million below February. Construction added 27,000 jobs, but is 279,000 below February. The total number of unemployed trended down to 10.7 million, still 4.9 million more than in February. Manufacturing gained 27,000 jobs in November, of which 15,000 in motor vehicles and parts and 5,000 in plastic and rubber products, but there are still 599,000 fewer jobs in manufacturing than there were in February.

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Manufacturing Outlook / December 2020

The Bureau of Economic Analysis recently released its ‘second’ estimate for the annual rate of Real GDP growth in the third quarter of 2020, putting it at 33.1 percent. The figure for the second quarter of 2020 was minus 31.4 percent.

The ISM PMI figure for U.S. manufacturing rolled up to to 57.5 in November, and the manufacturing economy showed great strength. The overall economy returned to a seventh month of expansion. IHS Markit’s remarks on U.S. manufacturing for November show the best improvement in operating conditions since September 2014. Production and new orders were up at marked growth rates, and business confidence was

MANUFACTURING OUTLOOK

at its best since February 2015. There was stronger demand on both domestic and export fronts. The industry saw very serious supply-chain delays and raw material shortages, with marked input price increases and selling prices up at the fastest rate in two years. November’s PMI, at 56.7, was up from October’s 53.2.

GLOBAL STEEL PRODUCTION WAS UP BY 7.0 PERCENT YEAR-OVER-YEAR IN THE MONTH OF OCTOBER for the 64 reporting countries – which represent 99 percent of world crude steel production – to 161,890 MT. The YTD figure is down 2.0 percent.

Hot-rolled coil in the U.S. is pushing $850 per ton in early December. It was just under $450 per ton in early August. Cold-rolled coil, with galvanized at similar levels, is pushing $1,000 per ton, up from just over $600 per ton in early August. Canadian prices are showing similar trends. European hot-rolled coil went from just over 400 euros per ton in early August to just over 570 euros per ton in early December.

Primary Global Aluminum Production in October was reported at 5.592 million tons, with production in China, at 3.230 million tons, representing 58 percent of world total. Production was 490,000 tons in GCC; 350,000 tons in the rest of Asia; 280,000 tons in Western Europe; 334,000 tons in North America and 351,000 tons in Eastern and Central Europe.

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) – rose from 53.0 in October to 53.7 in November, a 33-month high. Global manufacturing grew at one of the fastest rates in almost a decade.

International trade volumes increased again, and employment was up for the first time in almost a year. Business optimism is at an almost six-year high.

There was continuing solid growth in the consumer, intermediate and investment goods categories, with expansion in intermediate goods at an almost tenyear high.

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. The 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 / December 2020

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CASS INDEX OUTLOOK

DECEMBER 2020

CASS TRANSPORTATION INDEX REPORT

by CASS INFORMATION SYSTEMS, INC.

The shipments component of the Cass Freight Index® accelerated to 2.7% y/y growth in November 2020, after turning positive in October for the first time in almost two years.

The acceleration was more than explained by an easier prior year comparison, as the Cass Shipments Index fell 2.2% in November from the October level. Seasonally adjusted (SA), the m/m decline was a narrower 1.0%. This small sequential pullback followed five consecutive months of strong recovery averaging 5.0% sequential improvement (SA), and is likely due to the worsening pandemic numbers impacting the trajectory of the recovery in November.

One of the factors supporting the recovery in the shipments index in recent months is the less-thantruckload (LTL) sector, where tonnage accelerated to 6% y/y growth in November, from a 5% y/y increase in October. After declining in 20 of the 22 months through August, recovery is under way in LTL with three straight months of accelerating growth.

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Manufacturing Outlook / December 2020

Cass Freight Index - Expenditures The expenditures component of the Cass Freight Index accelerated to 5.7% y/y growth in November from 3.1% y/y growth in October. On a sequential basis, despite slightly lower shipments in November compared to October, expenditures rose 2.9% (5.1% on a seasonally adjusted basis).

This reflects a pickup in rate inflation as the effects of record truckload spot rates gradually broaden out into contract rates. Coming into the end of 2020, expenditures are testing the highs posted in late 2018/early 2019.

Freight Rates A simple calculation of the Cass Freight Index data can give us an “implied freight rates” data set that explains the overall movement in rates.

The freight rates embedded in the Cass Freight

CASS INDEX OUTLOOK

Index (determined by dividing expenditures by shipments) accelerated to a 3.0% y/y increase in November from a 0.6% y/y increase in October.

This data is diversified among all modes, with truckload representing more than half of the dollars, followed by rail, LTL, parcel, and so on.

Based in part on spot trends, implied freight rates are likely to accelerate in 2021.

Truckload Linehaul Index In November, the Cass Truckload Linehaul IndexÂŽ inflected to a 0.6% y/y increase (the first increase in 15 months) and improved from a 2.7% y/y decline in October. On a m/m basis, the index rose 1.4% in November, resuming the uptrend which started in August but paused in October. Our sense is contract rates are accelerating, as also shown in the implied 3.0% y/y growth rate in the Cass Freight Index noted above, and we expect the Cass Truckload Linehaul Index to continue to improve in the coming months.

Freight Expectations Although the recovery in shipments stalled a bit in November, we feel that, based on low inventory levels at U.S. retailers and the continuing strength in intermodal volumes on the North American railroad network, freight trends look set to continue to move higher in the near term.

While near-term risks from the pandemic remain elevated, recently begun vaccinations will reduce these risks in the coming months.

The economists at ACT Research, a leading publisher of freight market data and forecasts

and a Cass partner, expect strong 3.9% U.S. GDP growth in 2021 as the economy recovers, and though we expect that recovery to be more service-oriented than freight-oriented, the freight cycle also has a number of growth tailwinds following a nearly two-year freight downturn.

As shown in the table below, North American rail volumes have declined y/y for seven straight quarters and are on track to turn positive in Q4 as a new cycle begins.

Vaccine Logistics?

We think that while the rest of the world will have a myriad of challenges with vaccine logistics, the U.S. has ample capacity for vaccine shipments, for example, with our fleet of about 427,000 refrigerated van trailers. The package carriers are best positioned to deliver the vaccines with their air and ground networks, and we would expect the overall impact on the Cass Shipments Index in 2021 from vaccine shipments to be minor. There are much better reasons to expect strong growth in freight in 2021, not least the economic boost that will accompany the vaccines.

Manufacturing Outlook / December 2020

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MAJOR SHIFTS IN MANUFACTURING: COVER STORY

FROM INDUSTRY 1.0 TO THE COVID DISRUPTION AND INDUSTRY 5.0

by Tim Grady

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Manufacturing Outlook / December 2020

COVER STORY Time compression is a term widely used when measuring the millennium, centuries, decades or years between major event shifts, essentially, event horizons or a point from which there is no return.

Time compression in manufacturing has varied between 1900 and 2020 with the integration of man, machines, power sources, and technology. For the definition of a machine in this article, this writer uses, “A machine is a mechanical structure that uses power to apply forces and control movement to perform an intended action.” Wikipedia Industry 1.0 – Around the turn of the 20th Century, the world was using a production model developed in the early 1900’s for producing goods from a factory floor with a multitude of workers performing segmented tasks in a linear process flow. A major shift in this production model occurred at the Ford Motor Company where the moving assembly line was introduced which displaced workers and introduced the timed sequence of linear production to keep the assembly line moving for efficiency and output. Water and steam power were the energy sources of the day.

This remained the model of efficiency until the first ‘Age of Machines’ that gave rise to Industry 2.0 around 1950. Time lapse of Industry 1.0 – about 50 years, although machines were around for much longer prior to mid-century 1900, such as the first mechanical weaving loom introduced around 1784.

Industry 2.0 – The availability of electricity in cities and development of machines that could run on electrical power began a transformation to automation, where controllable, powerful machines could be used in factories that would result in predictable, repetitive processes, to form and shape parts consistently and in larger volume. Most machines were manually controlled by workers using levers, switches and control wheels to manage fabrication and increase output as the model of efficiency. Behind the scenes, at the largest industrial plants, seats of academia, and government research centers, scientists and researchers were working on a technology that would yet again transform manufacturing – the mainframe computer, built by IBM. At the time, the head of IBM, Tom Watson, thought the world market for the computer might be about five machines. Time lapse of Industry 2.0 – about 20 years, although some businesses to this day operate with this technology.

Industry 3.0 – Around 1970, mainframe computers became more commonplace and the competitive edge in large-scale manufacturing. Crunching punch cards with COBOL and FORTRAN computer

languages to create efficiency and speed in repetitive manufacturing processes began a transformation of machines for production line throughput and consistency. The mainframe had now evolved, and a new technology was borne the prior decade, that of miniaturization to create a computer capable of fitting in the command module of a space craft to send men into space, land them on the moon, and bring them back safely again. That miniaturization resulted in the birth of a new device capable of coming out of the frigid, climate-controlled computer room and onto the desktop – the desktop computer, which would take another decade to gain a foothold in manufacturing, although predominantly on the business side rather than the production side.

Industry 3.0 was the new age of Information Technology and the Programmable Logic Control system in manufacturing. Machines could now control machines at manufacturing plants across the country. This technology, along with the growth in use of the desktop computer, also known as the personal computer, or PC, would power manufacturing until the early 1990’s, when a new technology was released by the U.S. government and the Defense Advanced Research Projects Agency to the public: The Internet. Time Lapse of Industry 3.0 with the mainframe, while still used today – about 15 years; although the second part of Industry 3.0 that shifted its focus to the PC began in earnest around 1985 and continues to this day.

Industry 4.0 – Most place the birth of Industry 4.0 around 2011 when a consortium of business, political, industry and academic leaders introduced the term “Industrie 4.0” under an initiative to enhance German competitiveness in the manufacturing industry. Industry 4.0 encompasses the way goods are produced using smart technologies and best practices. Fundamentally, Manufacturing Outlook / December 2020

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COVER STORY

it is the metamorphosis of the PC into smart phones, tablets, WiFi, and application programming interfaces, with machines and human use of them into an inquiring philosophy of how to do things better, perhaps faster, and maybe cheaper.

Wireless communications allowed devices more movement within the factory and warehouses, such as automating forklifts to place goods into storage and later move pallets off storage shelves onto floor robotic carts that could then deliver the material where needed around the plant to interwoven machines being managed by a worker using an iPad. Big data allowed best utilization to become discoverable and predictable, as well as improving preventative maintenance to maximize up time.

The moving assembly line of the 1930’s filled with workers became the automated assembly line of big robots in the 1980’s and then robots, cobots and humans working within a decade of the turn of the century. The paper-based supply and management systems morphed into software-controlled inputs and outputs from the raw material supplier to the factory floor worker and on through shipping to the end customer or distributor. Spreadsheet production methods became integrated ERP systems from raw material inputs to invoice of goods produced and shipped.

Mountains of paper reports from spreadsheet programs became digital information emailed to

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Manufacturing Outlook / December 2020

the manager’s desktop screen or tablet, where production corrections could be made within moments from the PC, iPad, handheld device or mobile phone. Manual parts movement from machine-to-machine became automated carts that moved parts one direction and waste another direction, observed and analyzed by humans to minimize movement conflicts and maximize time and space efficiency.

By 2020, manufacturing was booming. For the first time in decades, manufacturing employment was rising – at a time when most were convinced that robots and automation would reduce the number of jobs fulfilled by humans. Then Industry 4.0 experienced a time-shock: a pandemic! Time Lapse of Industry 4.0 – just 8 years.

Then Came COVID For years, scientists warned of the ‘next pandemic’, a cataclysmic event that could affect humans across a continent or around the world. No one knew what it would be, other than it likely would be a virus or a super-bug bacteria. Whether it was carelessly handled in a lab or occurred naturally, or some nefarious scenario in between, no one in 2019 would have predicted a virus that would shut down human productivity around the world.

Travel between countries stopped. All forms of business and social interaction where shutdown

COVER STORY except essential businesses – largely, those in manufacturing although some odd ones continued, like liquor stores. For a few months, business and industry simply stopped.

Unless – you were in manufacturing. For the most part, manufacturers kept making things, especially if any of their parts or assemblies contributed to the fight to eradicate the virus. Research labs in Big Pharma continued to operate, and most of all,

hospitals, clinics, and health care workers became front line troops against the onslaught of a virus when no one understood its impact on the human body, or how to treat it. At the time COVID-19 broke out, there were few anti-viral treatments in existence, and no vaccines for this specific viral strain.

The world is fortunate that COVID struck in 2019 – at a time when manufacturing was in full swing into Industry 4.0, giving the industry the ability to rapidly ramp up and even convert production to life-saving devices and ways to combat the outbreak. The capability of manufacturers, academia, health care, Big Pharma, and governments to communicate rapidly and share written, audio, and video information instantly, as well as analyze statistical data to determine what means would be effective in this sudden health care war was at the fingertips of bright minds around the world.

The Pfizer and Moderna vaccines, developed, tested and being dispersed in less than 10 months is a direct result of the interconnectedness of all the companies, agencies, and people involved in the front line fight against COVID-19. Never before in the history of the world was a virus discovered and a vaccine devised, produced and distributed (presently underway) in one year and one week,

from the initial leaked reports out of China around November 30th of 2019 to the approval of vaccines by the FDA in December of 2020. Vaccines in other countries may even have been developed and distributed earlier, such as in China, Russia and the UK. Industry 5.0 Industry 5.0 – The COVID 2019 Effect: Industry 5.0 is being birthed out of the global tragedy of COVID. While more than 100 million people will likely be infected, the real number may never be known because many people were not in a location to get tested, and more than 2% of those will probably lose their fight to survive it, COVID has thrown Industry 4.0 into hyperdrive. The technologies available to manufacturers who were ‘considering’ it are now must haves to manage both day-to-day activities and to immediately adapt to the potential unforeseen shockwaves capable of blasting apart what was once ‘normal’.

Staff members forced to work from home, machines and processes unable to be run, production hitting an immediate hard stop, and throughput, output, shipping and billing forced into blackout is not an acceptable outcome for business continuity. Major physical plant changes will take place, and have taken place on the factory floors across the world. The business side of manufacturing and even many service businesses will likely reduce office space, having been forced to discover that work-at-home is, in fact, possible, productive, and profitable.

In 2021, manufacturing will need to rethink when they can implant modern software, upgrade and update people skills, processes, technology, fixed assets, and what CapEx will be necessary to position their business for the ‘new normal’ with the possibility of an unexpected, unpredictable shockwave impacting every aspect of their operations. This is Industry 5.0 – it is 4.0 on steroids – Time Lapse: likely 2-3 years during which time manufacturing must become fully ramped up with a solid business continuity plan the accounts for the conceivable and even the inconceivable.

Fortunately, it looks like 2021 will be a strong manufacturing year, which means revenues should be up to support the needed investment in Industry 5.0.

Tim Grady is a business advisor, writer, author, and public speaker, including his work on Manufacturing Talk Radio.

He may be reached at timgrady@ mfgtalkradio.com Manufacturing Outlook / December 2020

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MANUFACTURING TIDBITS

Manufacturing Segmentation Requires Industry Expertise for Innovative Content Creation

by T.R. CUTLER

Content creation is not a tactic. It is sharing industry expertise by thought leaders and manufacturing journalists. More than 8000 editors, staff reporters, economists, and freelancers worldwide are members of the Manufacturing Media Consortium. From smaller B2B industry trade publications to function-specific media, such as Quality Digest, increments in activity are vastly less important than increments in sales results.

Recently a small manufacturing software supplier expressed disappointment that only thirty people downloaded gated content from an email drip campaign. When digging deeper, it was discovered that within 90 days more than half of those that downloaded content purchased the SaaS solution.

More is not better‌.better meaningful content that generates business is best.

Reaching critical mass Somewhere between massive media coverage, PR velocity, and social media outreach is the interface with sales staff. Recently the marketing research division of TR Cutler surveyed 90 small manufacturers (<$5M in annual revenue) and learned than less than 10% of sales teams used

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Manufacturing Outlook / December 2020

published content to prospects after a call. Few used their LinkedIn accounts and even fewer shared which elements in a drip campaign were best received.

The ability to demonstrate industry expertise is central to a successful industrial marketing strategy.

The vision and relentless execution required by small and middle market companies must exceed the larger better-funded competitors.

Smaller manufacturers are more agile and disruptive As the most published freelance industrial journalist worldwide for the past 22 years, there is ample evidence that small manufacturers can be agile and disruptive. Quick messaging shifts are possible and even required. It is precisely how leadership and differentiators are established.

Because editors are slammed with hundreds of press releases each day, they tend to ignore and simply delete story pitch ideas. Having direct access and relationships to these editors allows an audience and consideration rarely afforded to smaller firms.

MANUFACTURING TIDBITS Larger companies spend $250K per year with PRNewswire or BusinessWire issuing national PR missives, whether truly newsworthy or not.

invitations to contribute editorial content, discussion panelists, and keynote speaking opportunities.

Centers of excellence in industrial content Traditional content creation is too often regurgitation of website content. Boring! Client case studies are far more interesting to write about and read. Examining the very nature of pain points is a relatable exercise for the reader.

Not for everyone Content marketing is tough. A commitment of time, consistency, and velocity creates critical mass.

Manufacturing firms, particularly since COVID, have embraced fundamental content marketing and online thought leadership. This need not be a six-figure effort, but typically $50K for the <$20M manufacturer is common. Not every manufacturer wants to be the voice of their industry; for those companies, incremental YoY sales revenue improvement is sufficient. For those who see the value in leadership, innovative content creation is money and time well spent.

People love extolling the notion of â&#x20AC;&#x153;vendor agnosticâ&#x20AC;? content. Somewhere in the middle allows vendors to share their value proposition without some advertorial puff piece. Real world examples share how clients were facing challenges, the options or solutions considered, followed with a precise explanation of the higher-level branding message.

Too often manufacturers think their solutions are geared to operations managers, plant managers, or engineering staff. Yet in nearly all cases the roles of QA/QC, HR, purchasing, and finance should also be considered.

Industry experts Increasingly company leaders want their brand highlighted. Not just the company or product, but their leadership status. Having cultivated more than a thousand such editorial leaders, manufacturing must never underestimate the role of a high-profile, thoughtful, and respected industry expertise. Such pioneers receive

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 21st 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 4600 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com.

Manufacturing Outlook / December 2020

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MANUFACTURING TIDBITS

All Eyes on

Georgia Georgia ranks #1 as all eyes watch the outcome of two important Senate races.

by T.R. CUTLER

With the January 5th two senate races runoff election just a few weeks away, all eyes are on Georgia. The outcome is important and may portend other trends in manufacturing throughout the next four years.

There are some interesting manufacturing trends occurring in Georgia worth watching.

TEKLAS, a Turkey-based advanced research and development, manufacturing company and supplier of electric vehicle parts, will invest $6.5 million in opening their first North American facility and headquarters in Calhoun, Georgia. The project is expected to create 120 jobs in Gordon County. The 200,000-square-foot facility and headquarters will include assembly lines to serve the most prominent original equipment manufacturers (OEMs) in the industry with the start of its operations in the spring of 2021.

“Headquartered in Turkey, and with locations in Bulgaria, Serbia, Mexico, and China, along with sales offices in Germany and France, we are very excited to open a new plant in Calhoun, Georgia,” said Regional Director for Teklas Arcan Ergur. “Our Calhoun, Georgia location will help us be closer to our main customers.”

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Manufacturing Outlook / December 2020

Ken’s Foods, a privately-held food manufacturing company, will invest $103 million to expand manufacturing and distribution operations at Midland Industrial Park in Henry County, Georgia.

The project will include new production lines and building upgrades to its manufacturing facility, along with the relocation of its support facility operations to a 343,625-square-foot space in Midland Industrial Park. This expansion will create 70 additional jobs, including positions in food processing, manufacturing, and distribution, along with careers in management and supervision.

“For 25 years, we’ve grown together, and we’re proud to extend our partnership with Henry County and the State of Georgia,” said Bob Merchant, COO for Ken’s Foods, Inc. “When you’re able to expand operations in an area that provides a hardworking, can-do base of talent and couple that with the favorable business environment the State of Georgia has developed, you dive right in.”

Marine and power sports company Outdoor Network (ODN) will invest nearly $22 million in two projects in Albany, Georgia. The company’s new advanced manufacturing facility and expansion of

MAANUFACTURING TIDBITS their distribution center headquarters is expected to create 92 jobs. Outdoor Network’s distribution center, located at 1601 South Slappey Blvd., will be 230,000-square-feet once fully completed. This new advanced distribution facility will deliver 52 additional jobs to the area. The manufacturing facility for 125- to 200-horsepower diesel outboard engines will create 40 new jobs.

Georgia Ranks #1 in Area Development’s Top States for Doing Business Steve Kaelble, Staff Editor, Area Development reported, “It would be easy to look at current economic statistics and conclude that we may as well remove words such as “business growth” and “expansion” from our collective vocabularies for the time being. On a macro level, the economy is anything but healthy, thanks to the coronavirus. And yet there are plenty of individual businesses that continue to expand or relocate to desirable places.”

Kaelble added, “What we learned is that, even amid the earth-shattering change the current pandemic

has wrought, there are important things that have not changed. States across the South continue to have their ducks in a row when it comes to making themselves attractive to businesses. They remain well-prepared for creating positive business headlines — they’re doing so now and will continue to do so as the economy regains its liveliness.”

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 21st 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 regardingthe manufacturing sector. More than 4600 industry leaders follow Cutler on Twitter daily at @ThomasRCutler.

Contact Cutler at trcutler@trcutlerinc.com.

Manufacturing Outlook / December 2020

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MANUFACTURING TIDBITS

ESSENTIAL MANUFACTURING

STARTS WITH FOOD

by T.R. CUTLER

No one doubts that food is essential. Food manufacturing, production, processing, and logistics are booming. Online consumer demand for food delivery during COVID has driven a dramatic increase in the food sector, but the sheer velocity of new and expanding food plants in the past several months portends huge growth in 2021 and beyond.

The size, geography, and scope of these projects indicate where 2021 food manufacturing is headed starting with Goya Foods which announced an $80 million expansion of its manufacturing and distribution facility in Brookshire, Texas.

Mission Foods plans to build a new tortilla manufacturing facility in Plainfield, Indiana. The 511,000-sq.-ft. leased facility will create 544 jobs, begin operations in 2021 and be fully operational in 2024.

Mount Franklin Foods opened its 220,000-sq.ft. candy manufacturing facility in San Jeronimo, Chihuahua, Mexico, across the U.S. border from Santa Teresa, New Mexico, and the company’s headquarters in El Paso, Texas.

Farmer Jon’s Popcorn plans a manufacturing facility in Lakeland, Florida, refurbishing a 7,300-sq.-ft. structure.

McCain Foods’ $300 million French fry expansion in Othello, Washington, resumed construction in early October after a pause due to COVID-19 restrictions.

Hershey Co. will invest $135 million to expand its candy manufacturing operation by 90,000 sq. ft. in Stuart’s Draft, Virginia.

Snacks are popular for home delivery in 2021 General Mills will invest $37 million to upgrade its cereal and fruit snacks production facility in Cedar Rapids, Iowa.

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Manufacturing Outlook / December 2020

Frito-Lay will spend $200 million to add a second line to make Baked Cheetos Puffs in Perry, Georgia.

Lowcountry Kettle, maker of kettle chips, is expanding its Charleston, South Carolina, operation this summer, creating 24 jobs.

Kraft-Heinz Investing on Direct-to-Consumer Savory Snacks Kraft-Heinz’s recent deal to conduct research on fermented ingredients with APC Microbiome allows the company to take up new, novel flavors and formulations that are likely to appeal to experimental consumers. It is smart for the company to outsource parts of its business model in this way, as it allows Kraft-Heinz to focus on improving its supply chain, which was disrupted by COVID-19, as well as work on direct-to-consumer (DTC) channels, says GlobalData, a leading data and analytics company.

MANUFACTURING TIDBITS Jim Toy, Consumer Analyst at GlobalData, commented, “This move by Kraft-Heinz means less time will be wasted on internally-led and potentially dead-end research. Furthermore, by focusing on new innovations and sales strategies such as cleanlabel ingredient formulations and DTC channels, Kraft-Heinz will receive a much-needed competitive boost.”

With so many countries finding themselves back under lockdown conditions, consumers are bulkbuying savory snacks and condiments as they would with essential items such as water and bread.

The company’s forecasts reveal that the global savory snacks market is expected to rise from $156.3bn in 2020 to $183.8bn by 2023 - although growth will be slightly slower than initial pre-COVID predictions due to continued economic pressure that has lowered consumer confidence.

As a result of many foodservice chains shutting their doors, Kraft-Heinz is now looking to sell more products through business-to-business and DTC (direct-to-consumer) channels, as opposed to business-to-consumer. Although large divisions such as healthcare and public services will still require mass orders, the travel, tourism and restaurant sectors will be left out from Kraft-Heinz’s focus. Moreover, new products will be focused towards at-home consumption.

Beverage manufacturing growth very strong for 2021 Bang Energy will invest $145 million to open its first Southeastern sports drink facility in Lithia Springs, Georgia, creating 600 jobs.

SVC Manufacturing, a PepsiCo subsidiary that makes Gatorade, will invest $30 million to expand and upgrade its production facility in Osceola, Fla. Stella & Chewy’s will start construction on a 139,000-sq.-ft. expansion of its production facility and offices in Oak Creek, Wisconsin, nearly doubling its size.

West Fork Whiskey Company plans to invest $10 million to expand its Westfield, Indiana, facility, creating 52 jobs by the end of 2024.

Ball Corp. is building a new aluminum can beverage packaging plant in Pittston, Pennsylvania, to start production in mid-2021, creating 230 jobs.

The Boston Beer Co. remodeled and expanded its Cincinnati facility, creating more than 100 jobs.

Plant-based on the uptick in 2021, yet meat plants continue to grow as well Kellogg’s is investing $43 million to expand its Morningstar Farms plant-based facility in Zanesville, Ohio, with upgrades and capacity expansion.

Bell & Evans began construction on a 411,500-sq.ft., organic-certified chicken harvesting facility in Fredericksburg, Pennsylvania. The $330 million

facility will double production capacity and be operational in late 2021.

Johnsonville (sausage maker) is refurbishing a 200,000-sq.-ft. facility in Sheboygan, Wisconsin, to increase production; the new facility is expected to begin operations in 2022.

Cajun Traditions Food Processors is investing nearly $3 million to build a new meat processing and packaging facility in Church Point, Louisiana.

Tyson Foods is expanding its sandwich processing facility in Amherst, Ohio, having invested $20 million to increase lines and capacity.

Porter Road Butcher Meat Co. plans to relocate and expand its operations to Princeton, Kentucky, by the end of 2020, picking up 35,000 sq. ft. of space in two buildings.

Petfood also essential Nestlé Purina PetCare is investing $450 million to build a new manufacturing complex and distribution hub in Eden, North Carolina.

Petsource by Scoular opened its new $50 million freeze-dried pet food ingredient manufacturing facility in Seward, Nebraska.

CBD fast track for 2021 manufacturing Shyne Labs began a hemp processing/CBD extraction operation after spending $9 million to build a new 12,400-sq.-ft. facility in Scottsville, Kentucky. More than a dozen new CBD-based manufacturing plants are expected in 2021.

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 21st 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 4700 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com.

Manufacturing Outlook / December 2020

19

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 57.5% for November ISM PMI for the past 5 years

NOVEMBER 2020 57.5%

20

Manufacturing Outlook / December 2020

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in November, with the overall economy notching a seventh consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The November Manufacturing PMI® registered 57.5 percent.

Manufacturing performed well for the sixth straight month, with demand, consumption and inputs registering growth, but at slower rates compared to October. Labor market difficulties, both current and anticipated, at panelists’ companies and their suppliers will continue to dampen the manufacturing economy until the coronavirus (COVID-19) crisis ends. Among the six biggest manufacturing industries, five (Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products) registered solid growth in November.

Of the 18 manufacturing industries, 16 reported growth in November, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Chemical Products; Machinery; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing‡; Transportation Equipment; Furniture & Related Products; and Food, Beverage & Tobacco Products. ISM

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

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

MANUFACTURING

PMI at 57.5% ®

PMI

Manufacturing grew in November, as the 2018 2019 2020 Manufacturing PMI® registered 57.5 percent, 57.5% 1.8 percentage points lower than the October reading of 59.3 percent. The Manufacturing PMI® signaled a continued rebuilding of 50% = Manufacturing Economy economic activity in November, with four of Breakeven Line 42.8% = Overall Economy five contributing subindexes in moderate to Breakeven Line strong growth territory. Employment disappointed by returning to contraction. The New Orders and Production indexes continued at strong expansion levels. The Supplier Deliveries Index continued to reflect suppliers’ difficulties in maintaining delivery rates due to factory labor safety issues and transportation challenges. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

Manufacturing at a Glance INDEX

Nov Index

Oct Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

57.5

59.3

-1.8

Growing

Slower

6 6

New Orders

65.1

67.9

-2.8

Growing

Slower

Production

60.8

63.0

-2.2

Growing

Slower

6

Employment

48.4

53.2

-4.8

Contracting

From Growing

1 13

Supplier Deliveries

61.7

60.5

+1.2

Slowing

Faster

Inventories

51.2

51.9

-0.7

Growing

Slower

2

Customers’ Inventories

36.3

36.7

-0.4

Too Low

Faster

50

Prices

65.4

65.5

-0.1

Increasing

Slower

6

Backlog of Orders

56.9

55.7

+1.2

Growing

Faster

5

New Export Orders

57.8

55.7

+2.1

Growing

Faster

5

Imports

55.1

58.1

-3.0

Growing

Slower

5

Overall Economy

Growing

Slower

7

Manufacturing Sector

Growing

Slower

6

*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.

Commodities Reported ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

14

ISMWORLD.ORG

Commodities Up in Price: Acetone; Aluminum (6); Aluminum Products (2); Ammonia; Brass Products; Copper (6); Corrugate (2); Corrugate Boxes; Freight; Lumber (5); Natural Gas; Plastic Resins (3); Plywood Products; Polyethylene Resins (2); Polyurethane Foam; Polypropylene (5); Polyvinyl Chloride (2); Precious Metals (5); Propylene Glycol; Rubber Products; Soybean Products (2); Steel (4); Steel — Cold Rolled (3); Steel — Hot Rolled (3); Steel — Stainless; Steel Products (3); and Zinc Products.

Commodities Down in Price: Caustic Soda (2).

Commodities in Short Supply: Aluminum Products (2); Corrugate Boxes; Disinfectant and Cleaning Supplies; Electrical Components (2); Personal Protective Equipment (PPE) — Gloves (9); PPE — Masks; Steel — Hot Rolled; and Steel Products (2).

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

Manufacturing Outlook / December 2020

21

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI® New Orders (Manufacturing) 2018

2019

November 2020 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

20

New Orders

2020

ISM’s New Orders Index registered 65.1 percent. Of the 18 manufacturing industries, the 15 that reported growth in new orders in November — in the following order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Paper Products; Nonmetallic Mineral Products; Chemical Products; Machinery; Computer & Electronic Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Primary Metals; and Transportation Equipment.

65.1%

52.5% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2018

2019

Production

2020

60.8%70

51.7% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 60.8 percent. The 14 industries reporting growth in production during the month of November — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Paper Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Primary Metals; Plastics & Rubber Products; Nonmetallic Mineral Products; Machinery; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products.

Employment (Manufacturing) 2018

2019

Employment

2020

ISM’s Employment Index registered 48.4 percent. Of the 18 manufacturing industries, the eight industries to report employment growth in November — in the following order — are: Wood Products; Textile Mills; Nonmetallic Mineral Products; Primary Metals; Electrical Equipment, Appliances & Components; Machinery; Fabricated Metal Products; and Chemical Products.

48.4% 50.8% = B.L.S. Mfg. Employment Breakeven Line

20

Supplier Deliveries (Manufacturing) 53.1% 2018

2019

2020 80

61.7%

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in November, as the Supplier Deliveries Index registered 61.7 percent. Sixteen industries reported slower supplier deliveries in November, listed in the following order: Furniture & Related Products; Wood Products; Plastics & Rubber Products; Textile Mills; Fabricated Metal Products; Paper Products; Computer & Electronic Products; Printing & Related Support Activities; Primary Metals; Miscellaneous Manufacturing‡; Machinery; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Chemical Products; and Transportation Equipment.

Inventories (Manufacturing) 2018

2019

2020

51.2% 44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

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Manufacturing Outlook / December 2020

Inventories The Inventories Index registered 51.2 percent. The five industries reporting higher inventories in November are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; and Chemical Products.

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI®

November 2020 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2018

2019

Customers’ Inventories

2020

ISM’s Customers’ Inventories Index registered 36.3 percent in November, 0.4 percentage point lower than the 36.7 percent reported for October, indicating that customers’ inventory levels were considered too low. Of the 18 industries, the only one reporting higher customers’ inventories in November is Apparel, Leather & Allied Products.

36.3%

Prices (Manufacturing) 2018

2019

Prices

2020

65.4%

52.5% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2018

2019

The ISM Prices Index registered 65.4 percent. The 17 industries reporting paying increased prices for raw materials in November — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Wood Products; Paper Products; Fabricated Metal Products; Primary Metals; Plastics & Rubber Products; Machinery; Furniture & Related Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Nonmetallic Mineral Products; and Computer & Electronic Products.

Backlog of Orders

2020

56.9%

ISM’s Backlog of Orders Index registered 56.9 percent. The 12 industries reporting growth in order backlogs in November, in the following order, are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Wood Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Computer & Electronic Products; and Plastics & Rubber Products.

New Export Orders (Manufacturing) 2018

2019

New Export Orders

2020

57.8%

ISM’s New Export Orders Index registered 57.8 percent. The 10 industries reporting growth in new export orders in November — in the following order — are: Nonmetallic Mineral Products; Wood Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; and Machinery.

Imports (Manufacturing) 2018

2019

2020

55.1%

‡Miscellaneous

Imports ISM’s Imports Index registered 55.1 percent. The 11 industries reporting growth in imports in November — in the following order — are: Paper Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Machinery; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing‡; and Chemical Products.

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / December 2020

23

NORTH AMERICAN OUTLOOK

DECEMBER 2020

NORTH AMERICAN OUTLOOK

by AMELIA ROY

The Institute of Supply Management PMI figure rolled up to 57.5 in November, 7.5 points above 50, the point that delineates growth from contraction.

New orders and production are growing; employment is contracting; 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, 16 reported growth in November, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Chemical Products; Machinery; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing; Transportation Equipment; Furniture & Related Products; and Food, Beverage & Tobacco Products.

The two industries reporting contraction in November are: Printing & Related Support Activities; and Petroleum & Coal Products.

U.S. crude steel production for October was 6.143 MT, down 15.3 percent year-over-year.

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Manufacturing Outlook / December 2020

“Among the six biggest manufacturing industries, five (Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products) registered solid growth in November.

Comments from the industry are generally very optimistic, but there is concern regarding labor shortages due to the Covid pandemic that is causing employment contraction. Labor is simply not available as it was pre-pandemic.

Commodities Up in Price Acetone; Aluminum (6); Aluminum Products (2); Ammonia; Brass Products; Copper (6); Corrugate (2); Corrugate Boxes; Freight; Lumber (5); Natural Gas; Plastic Resins (3); Plywood Products; Polyethylene Resins (2); Polyurethane Foam; Polypropylene (5); Polyvinyl Chloride (2); Precious Metals (5); Propylene Glycol; Rubber Products; Soybean Products (2); Steel (4); Steel — Cold Rolled (3); Steel — Hot Rolled (3); Steel — Stainless; Steel Products (3); and Zinc Products.

Commodities Down in Price Caustic soda (2)

NORTH AMERICAN OUTLOOK Commodities in Short Supply Aluminum Products (2); Corrugate Boxes; Disinfectant and Cleaning Supplies; Electrical Components (2); Personal Protective Equipment (PPE) — Gloves (9); PPE — Masks; Steel — Hot Rolled; and Steel Products (2).

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

U.S. LIGHT VEHICLE SALES Information is sparse regarding November vehicle sales in the U.S. This year there were fewer selling days in November than in 2019. New car sales for the month dipped with fewer selling days, but the recovery continues. Here are listed November sales for the major companies that published results:

CANADA saw a further strong increase in production, new orders, and purchasing activity in November, and employment up for the fifth straight month. In spite of increased employment, there was a struggle to keep up with workloads.

There were higher raw material prices, and an accompanying strong increase in selling prices.

November’s PMI at 55.8 was slightly up from October’s 55.5.

There is a positive sentiment regarding future production. Canadian light vehicle sales, for those (Asian) suppliers who gave figures for November, were down 8 percent year-over-year. YTD sales were down 20.5 percent for those companies.

Canada produced 0.850 MT of crude steel in October, down 17.5 percent year-over-year.

MEXICO’s woes continue. There were faster reductions in new orders, exports, input buying and production.

Selling prices and employment are down. The PMI for November was at 43.7, up from October’s 43.6 Business pessimism is the order of the day. Mexico produced 1.470 MT of crude steel in October, up Amelia Roy, Staff Writer 1.1 percent year-over-year.

Manufacturing Outlook / December 2020

25

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by JEANNE-MARIE LOWRIE

BRAZIL saw cost inflation at a new record, with material shortages and currency depreciation. Strong growth was sustained in new orders and production, and there were again record-breaking increases in new export orders. There was broad-based growth in consumer, intermediate and investment goods and a strong increase in employment. The PMI slipped from 66.7 in October to 64.0 in November. Brazilâ&#x20AC;&#x2122;s crude steel production for the month of October was 2.784 MT, an increase year-over-year of 3.5 percent.

26

Manufacturing Outlook / December 2020

Jeanne-Marie Lowrie, Staff Writer

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by CHRIS ANDERSON

Chinese manufacturers saw the strongest improvement in operating conditions for a decade in November, with growth in production and new orders up to ten-year highs. Employment saw its fastest increase since May 2011. Firms raised purchasing activity to its steepest rate since January 2011, and increased inventories of pre-and postproduction goods. Raw material costs, particularly of metals, were up. The November PMI, at 54.9, was up on October’s 53.6. The business outlook for the next 12 months is positive.

Chinese vehicle sales, including trucks and buses, were up 12.5 percent year-over-year in October to 2.6 million units, according to the Chinese Association of Automobile manufacturers. Sales for the first10 months are still 4.7 percent down on year-earlier figures.

October was the third best month ever for plug-ins, which saw a 120 percent year-over-year increase to 147,285 units, or 7 percent of the car market. Of these, 82 percent were all electric. Total passenger plug-in car sales for the first ten months of the year are reported as 839,758 units, or 5.4 percent of the market.

CHINA produced 92.202 MT of crude steel in October, up 12.7 percent year-over-year; Japan 7.200 MT, down 11.7 percent year-over-year; India 9.058 MT, down 0.9 percent year-over-year and South Korea 5.859 MT, down 1.8 percent year-overyear. Taiwan produced 1.605 MT in October, down 3.1 percent.

JAPAN’s PMI rose a little nearer to the 50 mark, to 49.0 in November, from October’s 48.7, the highest since August 2019. Both production and new orders fell at softer rates. There is still business optimism re future production.

INDIA’s manufacturing PMI slipped to a three-month low of 56.3 in November from 58.9 in October, as growth lost momentum in November, but the PMI was still consistent with a sharp rate of expansion. There was a strong rate of increase in consumer goods. Employment fell as companies observed social distancing guidelines. Higher prices were paid for chemicals, metals, plastics and textiles.

Chris Anderson, Staff Writer

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Manufacturing Outlook / December 2020

27

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by CHRIS ANDERSON

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), fell back slightly from 54.8 in October to 53.8 in November, amid slower, but still strong gains in production and new orders. There were continuing job losses but improving confidence. The intermediate and investment goods sectors continued to expand at strong monthly rates, but in contrast consumer goods producers registered a modest deterioration in operating conditions for the first time in six months. New export orders rose at the slowest rate since August, but growth remained solid. Business confidence was at its best in 2 1/2 years.

Car sales in Western Europe were down 6.3 percent year-over-year in October. The forecast for sales in Western Europe for the year 2020 is 10.58 million units, versus 14.29 million units sold in 2019. The sales forecast for 2021 is 12.45 million units.

Crude steel production in Germany in October was at 3.417 MT, up 3.1 percent year-over-year; in Italy 2.119 MT, down 4.6 percent year-over-year; in France 1.065 MT, down 9.9 percent year-over-year and in Spain 1.113 MT, down 7.7 percent year-overyear. Russia’s crude steel production for October was at 6.050 MT, up 4.3 percent year-over-year; Ukraine’s was 1.653 MT, up 5.9 percent year-overyear.

IHS Markit’s PMI for the UK was up from 53.7 in October to 55.6 in November, a 35-month high.

Manufacturing sector growth improved, with intermediate and investment goods strongly up and consumer goods in contraction for the second straight month. The November upturn showed stronger growth rates in production and new orders.

The upcoming end to the Brexit transition period led to rising input purchases, raw material stockpiling and stronger gains in new export business as EU clients advanced orders. There were higher levels of input purchases and increased pressure on supply-chains that were already strained. Job losses continued for the tenth consecutive month. Input cost inflation was at a twoyear high in November, with average selling prices upped to the greatest extent in the year so far. The UK produced 0.565 MT of crude steel in October, down 7.4 percent year-overyear.

Chris Anderson, Staff Writer

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Manufacturing Outlook / December 2020

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS The global recovery continues to strengthen as 16 of the 18 surveys that we follow printed a combined PMI of 55.9 (-0.7) percent. The leaders in manufacturing in November were Brazil and Taiwan, both registering a PMI above 60 percent. Surveys from China and Taiwan show accelerating growth with an average PMI of 56.1. Only Japan (49.0) and Mexico (43.7) were in contraction territory (i.e. below 50 percent), continuing to underperform their peers. November data reveals global economies poised for growth in 2021. inventory replenishment will be broad-based and spill over into 2021.

Prices: The Prices Index (65.4, -0.1) reflects broad-based inflation in raw material prices and component prices.

Commodities Up in Price: Acetone; Aluminum (6); Aluminum Products (2); Ammonia; Brass Products; Copper (6); Corrugate (2); Corrugate Boxes; Freight; Lumber (5); Natural Gas; Plastic Resins (3); Plywood Products; Polyethylene Resins (2); Polyurethane Foam; Polypropylene (5); Polyvinyl Chloride (2); Precious Metals (5); Propylene Glycol; Rubber Products; Soybean Products (2); Steel (4); Steel — Cold Rolled (3); Steel — Hot Rolled (3); Steel — Stainless; Steel Products (3); and Zinc Products.

Commodities Down in Price: Caustic Soda (2).

Commodities in Short Supply: Aluminum Products (2); Corrugate Boxes; Disinfectant and Cleaning Supplies; Electrical Components (2); Personal Protective Equipment (PPE) — Gloves (9); PPE — Masks; Steel — Hot Rolled; and Steel Products (2).

Note: Parentheses indicate the number of consecutive months the commodity is listed. Asterisk indicates both up and down in price.

Sectoral Breakdown: Of eighteen manufacturing industries, sixteen reported growth in November: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Textile Mills; Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Plastics & Rubber Products; Primary Metals; Chemical Products; Machinery; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing; Transportation Equipment; Furniture & Related Products; and Food, Beverage & Tobacco Products. Two industries reported contraction in November: Printing & Related Support Activities; and Petroleum & Coal Products.

Norbert Ore, Director, Head Of Industrial Surveys, Strategas Research Partners

Manufacturing Outlook / December 2020

29

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 Given that we have not witnessed much that could be considered normal for a while, it is hard to determine when there might be an outbreak of “normal” circumstances but the data this month appears to be as close as we have gotten in the last several months. The favorable numbers have fallen a little from the extraordinary highs seen last month while the unfavorable data seems to have stabilized a bit. This settling down in the data comes against a very unsettled background, however. The second or third wave of the pandemic has been ravaging communities all over the U.S. and has reintroduced restrictions and lockdowns at precisely the worst time imaginable for industries that had just started to see some progress. The retailers had hoped to see a decent holiday season and now that is in doubt while the service sector is set to crash again. The optimism that seems to be manifesting in this month’s CMI is an indication that credit managers are looking ahead – as they always do.

The expectation is that real progress on reversing the virus impact is now only a month or two away as vaccines are rolling out rapidly.

The combined score for the CMI is 57.9 this month and while that is not as robust as it was the previous month, it is a respectable number and the second highest reading for the year. The combined score for the favorable numbers also dipped a little but that decline was from the stunning reading of 68.0 notched in October. This month the reading is 64.4 and the second highest reading of the year. The index of unfavorable factors improved a little this month, hitting 53.5 and notching the best position seen this year – up from the 51.9 registered in October.

30

Manufacturing Outlook / December 2020

Over the last few months, it has been the favorable numbers that have made the strongest comeback and that has reflected the fact certain segments of the economy bounced back quickly after the spring shutdown. There has been a surge in sectors as diverse as housing, transportation, and retail as people have adapted and shifted with the pandemic restrictions. Meanwhile the service sector has been crushed. The sales numbers last month hit record levels with a 74.2 reading and this month there was a return to earth with a reading of 66.5 – which is obviously still quite high. The new credit applications slipped a bit but still stayed firmly in the mid-60s with a score of 63.9. The dollar collections data did a similar readjustment and went from 64.6 to 62.6. The amount of credit extended followed the same pattern as it dropped from 68.0 to 64.8.

The bottom line is that all these favorable numbers are still firmly in the 60s and that constitutes rapid growth.

Stability is the name of the game when looking at the unfavorable factors. The rejections of credit applications barely shifted at all as the reading went from 51.4 to 51.5. Given that there was a slight reduction in the number of new applications this is a solid number. The accounts placed for collection improved dramatically and this is perhaps the best news in this data. A month ago, the reading was at 49.5 and is now sitting at 56.2. There are fewer accounts in trouble and that is very encouraging news. The disputes reading slipped a little but remained in the expansion zone with a reading of 50.6 as compared to 51.0 in October. The dollar amount beyond terms data remained very stable and with a very solid reading of 58.1 as compared

CREDIT MANAGERâ&#x20AC;&#x2122;S OUTLOOK

Manufacturing Outlook / December 2020

31

CREDIT MANAGER’S OUTLOOK to 58.0 the month prior. The desire is to stay current with credit and companies are working hard to maintain that relationship. This is another signal that business is growing more confident about the future. The dollar amount of customer deductions also stayed stable but with a slight improvement from 51.0 to 51.7. There was a solid improvement for the filings for bankruptcy readings as it climbed from 50.7 to 53.0. The entire collection of unfavorable readings stayed above the 50 line and comfortably in the expansion zone this month and that is the first time this has happened since February of this year – prior to the pandemic crisis emerging in March.

Manufacturing Sector Manufacturing has managed to escape a certain amount of the economic carnage that came with the pandemic. In some ways the shifts in consumer activity was a benefit to some manufacturers as people tended to emphasize buying things overpaying for services. The challenge now is that retail has started to sag a little and at exactly the

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Manufacturing Outlook / December 2020

wrong time of the year. There is also the ongoing challenge of a disrupted global supply chain.

The combined score for manufacturing as a whole was very nearly the same as it was the month before with a reading of 58.6 as compared to 58.8.

The index of favorable factors slipped a bit but remained firmly in the 60s with a reading of 64.3 as compared to 67.9 last month. This still leaves this month’s reading as the second strongest in the past year. The index of unfavorable factors improved a bit and moved deeper into the 50s with a reading of 54.8 as compared to 52.6 in October.

Last month the sales data soared to astonishing levels and this month there was a return to reality but the data was still very strong with a reading of 69.9 – second only to the 75.3 notched the month prior. The new credit applications data remained very stable with a reading of 62.4 as contrasted with last month’s 62.0. The dollar collections numbers dipped a little but stayed high with a 62.3 compared to 65.0 in October. The amount of credit extended

CREDIT MANAGER’S OUTLOOK

fell sharply from the 69.4 noted in October but still remained in the 60s with a reading of 62.6. There seems to have been a little slowdown in terms of requesting credit within the manufacturing sector but that is often the case this time of year.

The rejections of credit applications stayed very close to last month’s level with a reading of 52.5 compared to 52.8 in October. The accounts placed for collection showed a stunning improvement and that signals a major change in the status of many manufacturing accounts. It was at 51.4 and now sits at 63.0. This is a very definite indication that many companies seem to be regaining their economic footing. The disputes reading fell a little and slipped into contraction territory with a reading of 49.8 after a 51.6 in the previous month. The dollar amount beyond terms also showed some stability as this month the reading was 58.9 and last month it was at 58.4. These consistently high numbers show that creditors are trying to remain current and that is very often a signal they are preparing for a good growth period in the future. They want to make sure they have the access to credit they believe they will need. The dollar amount of customer deductions also remained stable with a reading of 51.0 as compared to the 50.5 noted last month. The filings for bankruptcies jumped from 51.2 to 53.7 and that is a promising sign as these readings have not been this solid since the start of the year.

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 bi-weekly 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.

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33

METALS OUTLOOK

DECEMBER 2020

METALS OUTLOOK SPECIAL STEEL FOR YOUR CAR FORD has a revitalized Bronco, which is the first vehicle to use a grade of steel designated 980 Gl, Extragal, which is made at AM/ NS Calvert in Alabama, and is presently available only in North America. This grade of steel is one of a family of â&#x20AC;&#x2DC;Fortiformâ&#x20AC;&#x2122; steels developed by ArcelorMittal, and is a UHSS (ultra high strength steel), even stronger than the AHSS (advanced high strength steels) that have been around for quite a few years. Fortiform 980 Gl, in addition to its higher strength, has formability equivalent to that of AHSS steels. The 980 represents the lower limit of the tensile strength of the steel in MegaPascals, or 67,000 p.s.i.

34

Manufacturing Outlook / December 2020

by ROYCE LOWE

Ford and ArcelorMittal worked together very closely on the development of this steel. Ford was looking for weight reduction along with formability and weldability.

Lightweight steel sections on the Bronco see weight reductions of up to 20 percent. Ford was effectively looking for an overall weight reduction of 10 percent. Arcelor Mittal offers two other, even stronger, Fortiform steels, namely the 1050 and 1180 grades.

METALS OUTLOOK AM/NS Calvert in Alabama was originally developed

by Thyssen Krupp, and acquired by ArcelorMittal and Nippon Steel Corporation as a joint venture in 2014.

The complex is said to house one of the world’s most advanced finishing facilities, which along with tightlycontrolled chemistry, is surely instrumental in the mill’s production of a sophisticated range of highstrength automotive steels.

Slabs for the hot strip mill are presently sourced from Brazil, but next on the agenda for AM/NS is the installation of a new electric arc furnace, together with the necessary metallurgical finishing operations that go along with it, to be ready in the fall of 2022. The furnace will produce 1.5 million tons per year of grades of steel for the more important end-user markets, which, in this case, will be largely automotive, and will extend to oil country and construction goods. The USMCA trade deal specifies that future steel supply chains for the automotive market will be required to use more steel that is made in North America.

Nucor, meanwhile, recently announced it had called on Italy’s Danieli for installation of an EAF and plate/ Steckel mill in Brandenburg, Kentucky, for production of 1.2 million tons per annum of coil and plate products, particularly API grades and high-hardness, wear-resistant grades. The first plate is expected to be rolled in 2022.

This complex will be capable of production of both plate and coil; plate from 3/16” to 14” thick up to 165 “ wide, and coil from 3/16” to 1” thick up to 125’’ wide.

The mill will supply 97 percent of the plate products used in the U.S. market.

As noted above, the market for flat-rolled coil, hotrolled, cold-rolled and galvanized, has tightened considerably of late, as reflected in the mills’ asking prices. There are also fears of a stainless steel supply shortage in the U.S., coupled with cautious optimism regarding the market. Buyers are being cautious, suppliers are looking to price increases.

Non-ferrous metal data show price increases in the four metals we follow, with aluminum up from $0.830 per lb in early November to $0.90 in early December, and from $0.70 to $0.90 over the past six months; copper up from $3.04 to $3.38, and from $2.50 to $3.38 over past six months; nickel up from $6.90 to $7.40, and from $5.70 to $7.40 over six months; zinc up from $1.14 to $1.26 and from $0.90 to $1.26 over six months.

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

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Manufacturing Outlook / December 2020

35

AEROSPACE OUTLOOK

DECEMBER 2020

AEROSPACE OUTLOOK

by ROYCE LOWE

THE 737 MAX IS BACK Regulators in the U.S., Europe and Brazil have endorsed software revisions and new pilot training, and the 737 Max has been approved for commercial return as soon as mid-December, according to “people familiar with the matter” who must remain anonymous, since this is all confidential information. It will be either United or American to make the first flight. American recently flew a bunch of reporters around in one of its Max planes.

Brazil’s Gol Luihas Inteligentes SA said it will fly the Max on December 10, some two weeks before American. There will shortly be flights out of Mexico and Panama.

Boeing is working hard to generate a positive image following the very bad publicity over its response to the accidents. Related losses rose to $20 billion. Key customers are rallying around the Max. Southwest Airlines is showing interest in expanding its orders, and United intends to take delivery of eight planes this month. Boeing has some 450 Max planes in its inventory which it is in a hurry to be rid of. Ryanair, Europe’s largest lowcost airline, recently placed an order for 75 planes.

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Manufacturing Outlook / December 2020

Boeing will thus go back to production of the Max. The month of January will give us a good idea of the performance of the plane in commercial service, and the passengers’ reactions to it. It will be a goodly while before production and sales begin to flow at Boeing; production on its 787 model, at 14 per month pre-pandemic, and 777 model, at 5 per month pre-pandemic, will be cut to 6 and 2 respectively in 2021.

To some extent, Boeing’s problems, and those of the industry in general, will have a long-term effect not only on the aircraft assemblers -Airbus has its own problems - but also on suppliers to the aircraft manufacturers, and in turn on suppliers to the suppliers. In its first long-term forecast since the pandemic threw a wrench into air travel, Boeing predicted that global planemakers will deliver 18,350 commercial aircraft, up to the end of the decade, or 11 percent fewer than they predicted a year ago.

Airbus is not looking for air traffic to recover to pre-COVID levels before 2023 at best, maybe 2025.

Boeing cut its 20-year forecast for wide-body deliveries 10 percent since last year, from 8,340 to 7,480.

AEROSPACE OUTLOOK Boeing and Airbus are both looking to increase market share in China, but they also face competition from the state-owned planemaker Commercial Aircraft Corporation of China (COMAC). COMAC has been delivering its regional ARJ21 to customers throughout the pandemic, and its narrow-body C919, still in the flight-testing phase, is expected to obtain an airworthiness certificate from China’s air regulator in 2021.

Along with Boeing’s reduction in the forecast for global air travel, it raised its forecast for China’s aircraft demand for the next twenty years, making the country a bright spot in the aviation market.

China’s growing middle class tends to a 5.5 percent per annum passenger volume growth. Commercial aircraft and aviation services for China for the next 20 years will amount to $3.1 trillion. Boeing expects a demand of 6,450 single-aisle aircraft, and 1,590 wide-body.

Following SpaceX’s recent successful shot to the International Space Station, Thomas Jones, a former NASA space shuttle pilot, is predicting space tourism is a mere ten years away. Time to think about buying your tickets.

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

Manufacturing Outlook / December 2020

37

ENERGY OUTLOOK

DECEMBER 2020

ENERGY OUTLOOK

by JOCELYN BRIGHT

FAST, FAST TRAINS In North America, in normal times, we know all about planes and automobiles. Because we put so much money into criss-crossing our countries with highways and bridges, fitted with toll booths and the ever-present service center, we feel attached to our automobiles. When we need to get to the middle or the other side of the country, we take a flight, quick and relatively easy. We think less about taking a train, at least for a fairly long distance, because the service isn’t there and it may just seem to take forever. But we’re talking big countries here, big with a capital B. We use an awful lot of fuel getting around these huge countries, particularly in normal times.

There’s little doubt that we’re becoming more conscious of climate change, of what we’re doing to our planet. We’re using more renewable energy, when politicians and power companies, will let us.

We’re aiming for electric cars in a big way. We don’t do too much on trains.

It’s not thus in many other parts of the world.

Europe has fast, comfortable trains, and good service, but Europe is relatively small. We don’t count Britain in here; their train service is just coming out of the nineteenth century.

Doubtless there are some train lines in North America that are fast enough and comfortable

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Manufacturing Outlook / December 2020

enough to allow us to sit back and be glad we took them. But they are few and far between, and for families, much more expensive than travel by the family car.

In 1964, Japan started construction of a railway system they called the Shinkansen, that came to be known as the bullet train. Since that time, Japan has been the world leader in railway technology, and its citizens use it to both get around their country and to go out in the evening to a concert. These trains have no problem doing 200 m.p.h.

Today Japan finds itself competing with its neighbor and erstwhile enemy China to go past the bullet train to what is called Maglev, or magnetic levitation. Japan sees this as a potential export opportunity; China also. Maglev trains use powerful magnets to glide along; in fact, 4 inches over charged tracks at super fast speeds, made possible by the lack of friction. The aim is ultra fast intercity links, and export to what has been valued at a $2 trillion market.

Short distance, experimental maglev trains are already operating, but the two Asian countries are looking to develop what would be the world’s first long-distance, inter-city lines. This isn’t for tomorrow. The Central Japan Railway Company (JRC) has a $86 billion maglev project that is

ENERGY OUTLOOK expected to connect Tokyo and Osaka by 2037. China has a $15 billion on again-off again project that will run from Shanghai to the eastern port city of Ningbo, forecast for completion in 2035. The reason for the high cost of the Japanese project is the excavation required through mountainous country.

Japan has long been the top supplier to global fast-rail projects. Over the past ten years, China outbid Japan on Indonesia’s first high-speed railway from Jakarta. Japan was eventually asked to rejoin the project after long delays were experienced. China appreciates Japan’s know-how and experience, takes it on board and pushes itself to perform accordingly.

The two countries are vying to be the best.

JRC runs tests on a 43 km line southwest of Tokyo, where its trains have routinely clocked speeds in excess of 500 km/h. JRC is looking to export its technology to the U.S., working with partners on the groundwork for a maglev line from Washington DC to New York. The cost will be $10 billion for the first leg, DC to Baltimore, alone. If constructed, the train would cut the travel time between hubs to one hour from the current three, according to JRC, making it faster than flying.

The Japanese Government is offering several billion dollars for the U.S. East Coast project, and JRC says it wouldn’t charge licensing fees for the technology. Authorities are fully supporting this project, because of its importance for the future export of Japan’s railway systems.

Some analysts are questioning whether maglev technology is a viable export without government support. Construction costs associated with maglev trains can run to two or three times those of regular highspeed rail lines because of the types of power and substations required, according to a Bloomberg Intelligence Asia analyst. And the energy to supply the energy has to come from somewhere.

The Chinese state-owned short-distance maglev that connects Shanghai Pudong International Airport to the city, that started in 2002, has struggled to turn a profit, losing more than 1 billion yuan in its early years. The viability of some of Japan’s bullet train lines has also been questioned during the pandemic. It may be that COVID may permanently alter the need for business travel between major centers.

These projects are all very cost sensitive, and whether or not there is a ‘race’ between China and Japan, the cost of a project is more important than who gets to finish it first. Is there hope that some day a maglev line, even a bullet-train type line, might at some point see the light of day in North America? And wouldn’t the airlines scream if commuters could go downtown to downtown quicker, (even at the same price) than a plane ?

There again, DC to New York would be largely business travel, but much more comfortable; no cab to the airport, no hassle at the airport, just an easy downtown to downtown trip. Sounds idyllic, like days of old.

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Both China and Japan are looking for dominance in high-speed rail. There will be some countries or areas of countries ready to welcome them.

But this technology comes with heavy energy requirements, and it will serve in part to clean up the climate. It won’t be cheap, will require lots of electrical energy, and certainly won’t be available for a good while.

Jocelyn Bright, Staff Writer

The push to “save the planet” will use wind and sun and batteries for electric cars and storage batteries, in fact, anything that will steer us away from fossil fuels. The Japanese-Chinese dream of super-fast travel by rail may turn out to be part of the equation. We’ll see.

Manufacturing Outlook / December 2020

39

AUTOMOTIVE OUTLOOK

DECEMBER 2020

AUTOMOTIVE OUTLOOK

by LAWRENCE MAKAGON

EVS ON THE UP

Automotive news these days continues to tend to electric vehicles (EVs) and who is making them, when new models will be coming out, and just as importantly, in what quantities. The latest news from the worldâ&#x20AC;&#x2122;s (supposedly) most reliable sources is that in 2022 there will be 500 EV models available globally.

Further forecasts show EVs share of total sales at 2.7 percent in 2020; 10 percent in 2025; 28 percent in 2030, and 58 percent in 2040. Thatâ&#x20AC;&#x2122;s quite a stride. The size of the global EV fleet will go from 8.5 million in 2020 to 116 million in 2030. Plug-in hybrids will still be around for the next ten years, before pure EVs take over completely.

The extent of what is happening in this industry requires that we talk numbers, how many, and when. For example, the consensus says that from 450,000 EV sales in 2015 to 2.1 million in 2019, there will be a drop in 2020, then a rise as battery prices fall, energy density improves, and more charging infrastructure is built. The sales forecast is for 1.7 million in 2020, 8.5 million in 2025, 26 million in 2030, and 54 million in 2040.

China has the largest share of global EV sales, with a forecast of 54 percent in 2025, 49 percent in 2030 and 33 percent in 2040, as it looks to reduce energy imports, clean up air quality, build its domestic auto industry, and attract manufacturing investment.

We need to ask the basis for these forecasts.

There is little doubt that there will be a significant upswing in electric vehicle sales, but the effect will be contingent on how successful the automobile manufacturers are in bringing down the price. If we listen to Elon Musk - and many do - the price of Teslas will start coming down in the near future.

Better batteries, more powerful batteries, smaller, lighter batteries.

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Manufacturing Outlook / December 2020

Toronto, meanwhile, has the largest fleet of electric buses in North America, with the arrival of a third new electric bus model. In November 2017, the Toronto Transit Commission board approved the procurement of 30 all-electric vehicles, and in June 2018 it approved 30 more. The buses are supplied by three manufacturers, BYD Canada, New Flyer Industries Inc. and Proterra Inc. Honda has been authorized by the Japanese Government to sell level 3 autonomous vehicles, a world first for this level of automation, which does

AUTOMOTIVE OUTLOOK not require the driver to monitor the environment.

Honda will launch such a vehicle in Japanese markets before March 31, 2021. The system enables the vehicle to drive autonomously in busy urban or highway conditions.

The National Highway Traffic Safety Administration recognizes six levels of autonomy in vehicles, from 0 to 5, with 0 referring to vehicles with no autonomy at all. Vehicles at level 5 would be theoretically capable of performing “all driving functions under all conditions,” and may even not have a steering wheel. Level 3 cars, while capable of fully taking over all driving functions, still require a driver to intervene if the driving system deems it necessary. The automotive world will surely be watching with great interest.

GM is hiring 3,000 engineers, developers, programmers, and IT experts to help it along its way in the development of Electric and Autonomous vehicle programs. Ford recently rolled out its latest EV, an electric version of its E-Transit commercial van. Ford says the vehicle

Lawrence Makagon, Staff Writer

is the first all-electric cargo van from a full-line automaker in North America. It will be assembled in Ford’s Kansas City assembly plants and will be available in late 2021, at a price under $45,000 and a range of 126 miles.

Manufacturing Outlook / December 2020

41

ISSUES OUTLOOK

DECEMBER 2020

ISSUES OUTLOOK

ANOTHER FREE-TRADE AGREEMENT The 15 Asian countries that on Sunday signed the Regional Comprehensive Economic Partnership in a virtual ceremony hosted from Hanoi broke some records. RCEP is the worldâ&#x20AC;&#x2122;s largest multilateral trade agreement, covering about 30% of the worldâ&#x20AC;&#x2122;s population, trade, and GDP - even though a 16th putative member, India, withdrew a year ago. It joins up free-trade agreements between the ten-member Association of South-East Asian Nations and other Asia-Pacific countries: Australia, China, Japan, New Zealand and South Korea. Its terms are unambitious, constituting no dramatic liberalization of regional trade. But, mid-pandemic, RCEP is a boost to the global economy, as well as to the standing of ASEAN.

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Manufacturing Outlook / December 2020

by ROYCE LOWE

ISSUES OUTLOOK The big winner is China. It can present itself as committed to trade liberalization at a time when America is still pursuing a trade war and seems relatively disengaged from the region. China, meanwhile, is expanding its economic, political and strategic influence across Asia. The free-trade agreement was nearly a decade in the making.

Vietnam’s Prime Minister said the completion of negotiations was a strong message affirming ASEAN’s role in supporting the multilateral trade system, and that the agreement would contribute to “developing supply chains that have been disrupted due to the pandemic, as well as supporting economic recovery.” The agreement will help developing nations through the postpandemic period, and will open the door to better export opportunities.

Expert opinion is that whether or not RCEP changes regional dynamics in China’s favour depends on the U.S. response. The agreement

underscores how U.S. President Trump’s 2017 decision to withdraw from the 11-nation TransPacific Partnership (TPP) diminished America’s ability to offer a counter-balance to China’s regional economic influence. Joe Biden will need to pick up the challenge, and how his team will approach trade deals and whether it will try to enter the TPP are still unknown.

With the UK in the final days up to leaving the European Union, and trying to hammer out a Brexit agreement, if such an agreement can and will be hammered out, Canada and the UK signed an interim trade deal on November 21 that gives the two countries “more time to negotiate future trading rules as the British government prepares the country for business life outside the European Union.” The interim agreement allows current trade rules to remain in effect while negotiators work on a new bilateral agreement. These rules govern $27 billion in trade between the two countries, or about 1.5 percent of the UK’s total trade in goods and services in 2019.

Manufacturing Outlook / December 2020

43

ISSUES OUTLOOK Canadian Prime Minister Justin Trudeau said, “Now we get to continue to work on a bespoke agreement, a comprehensive agreement, over the coming years that will really maximize our trade opportunities and boost things for everyone.” The agreement will be subject to final legal checks before it is formally signed.

The agreement additionally “extends the elimination of tariffs on 98 percent of goods traded between the two countries, and sets the stage for negotiations toward a permanent and more ambitious deal in the new year.” Without a new agreement, trade between the UK and Canada could be hampered by “tariffs and increased paperwork” once the UK leaves the European Union.

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Manufacturing Outlook / December 2020

Brexit negotiations are getting down to the wire.

If no deal is done before December 31, Britain will leave the EU, regardless. Joe Biden says that if Britain makes no deal with the EU there will be no U.S.-UK trade deal. Tense times ahead.

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

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