Manufacturing Outlook for December 2021 by Manufacturing Outlook

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HAPPY HOLIDAYS FROM EVERYONE AT MANUFACTURING OUTLOOK!

MANUFACTURERS PAY A PRICE AS AMERICANS LOST A RECORD $3.5BN TO CYBERCRIME IN 2021 YTD PAGE 12

FEATURE STORY: 2022 MANUFACTURING TRENDS: REACHING THE FUTURE OF WORK PAGE 14

THE CASS INDEX PAGE 20

THE GLOBAL PMI OUTLOOK PAGE 33

AEROSPACE OUTLOOK CYBER SECURITY OUTLOOK PAGE 52

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NOVEMBER ISM PMI:

61.1%

Released November 1st -The Full Executive Summary Report On Business - Page 28

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Manufacturing Outlook / December 2021

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TABLE OF CONTENTS Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON CHRISTINE CASATI KEN FANGER ROBIN FLEMING

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PUBLISHER’S STATEMENT

So Many Things Happening and/or In Flux

MANUFACTURING OUTLOOK Global PMI stays put

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

10 REVENUES FROM WAREHOUSE MANAGEMENT SYSTEMS TO EXCEED US$10 BILLION BY 2030L SECTOR by TR Cutler

12 MANUFACTURERS PAY A PRICE AS AMERICANS LOST A RECORD $3.5BN TO CYBERCRIME IN 2021 YTD

EUROZONE OUTLOOK by Chris Anderson

33 GLOBAL PMI OUTLOOK by Norbert Ore

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

40 METALS OUTLOOK

by TR Cutler

On Infrastructure and Other Things

FEATURE STORY: 2022 MANUFACTURING TRENDS: REACHING THE FUTURE OF WORK by Robin Fleming

16 COVER STORY: AFRICA OUTLOOK PREMIER

by TR CUTLER

20 CASS INDEX

Cass Transportation Systems

22 ISM MANUFACTURING REPORT ON BUSINESS PMI at 61.1%

26 © 2021 Jacket Media Co. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Manufacturing Outlook is a registered trademark of Jacket Media Co.

ASIA OUTLOOK by Christine Casati

NORTH AMERICA OUTLOOK by Amelia Roy

INNOVATION OUTLOOK Revolutionizing Additive Manufacturing to Change The Way We Make Almost Everything

46 AEROSPACE OUTLOOK The Plane Mart

48 ENERGY OUTLOOK The Nuclear Comeback

50 AUTOMOTIVE OUTLOOK Electrify, Electrify

52 CYBER SECURITY OUTLOOK What Did They Do to Cyber Maturity Model Certification?

54 ISSUES OUTLOOK Rare Earths; Where Are We?

Open call for...

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

PUBLISHERS STATEMENT Publisher’s Statement

Cyber Crime, DoD CMMC Cyber Security and More! This issue of Manufacturing Outlook is packed with powerful information to help the manufacturing sectors, from supply chain cyber crime to the DoD Levels of CMMC that were so strict it chases hundreds of DoD suppliers out of the supply chain. There is no doubt that all kinds of hardware, firmware, software, and liveware (humans) will be the cutting edge in 2022. Then it gets more exciting – we are launching a new section in Manufacturing Outlook called Africa Outlook. We are delighted to have leading industrial journalist Thomas R. Cutler, a frequent contributor to the Manufacturing Outlook monthly digital magazine, helm the content on the African manufacturing industrial trends. Cutler recently returned from Uganda, Egypt, and Botswana. He is travelling to South Africa and Namibia in January. His first hand, on the ground, reporting will be a valuable addition to the publication for our readers. For decades, Africa has been the ignored continent – a mixed bag of countries, socioeconomic strife, labor abuses, and political instability that made for less than ideal conditions to develop long-term business relationships. Countries in Africa now recognize that their future growth and development is tied to countries around the world, not just neighboring countries or internal struggles. We look forward to Mr. Cutler expanding on the manufacturing opportunities in Africa, as well as labor coming from Africa. Be sure to read the Asia Outlook section this month. Recently we added one of the top advisors on China to our writer pool, Ms. Christine Casati, who has worked in China and the U.S. to create business relationships between companies in both countries for several decades. She brings her comprehension of the multifaceted socioeconomic and geopolitical culture of China, as well as other countries in the region, to the pages and outlook of this section. This month, Ken Fanger, President of On Technology Partners, spearheads our Cyber Security Outlook section and provides an insightful and even ‘relieving’ article on CMMC, the U.S. Department of Defense’s Cyber Maturity Model Certification as it relates to NIST 800-171 and NIST 800-172. If you are a supplier to the DoD, especially as a small or mid-sized company, then this is a must-read. From the Credit Manager’s Index by Dr. Chris Kuehl, through the ISM’s Manufacturing Report on Business® to the CASS Transportation Index, Manufacturing Outlook provides forward-looking, forward-thinking content for the benefit of the U.S. manufacturing industry. You can get a free subscription to it at www.manufacturingoutlook.com so it will be automatically sent to your inbox the moment it is issued. You will find other insightful manufacturing information at www.jacketmediaco.com in the growing library of weekly and monthly podcast content posted there, and available on your favorite podcast listening platform including Google Play, Apple Podcasts, iHeartRadio, Spotify, YouTube (for our video episodes), Twitter, Facebook, and other listening apps. Have a Happy Holiday and a Better New Year! n Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast or any of our podcasts. FOLLOW US:

Manufacturing Outlook / December 2021

MANUFACTURING OUTLOOK

Manufacturing Outlook / December 2021

MANUFACTURING OUTLOOK

DECEMBER 2021

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI STAYS PUT. SUPPLY CHAIN DISRUPTION, RAW MATERIALS SCARCITY, AND SKILLED LABOR SHORTAGES ARE STILL MAJOR ISSUES. CHIP SHORTAGE HURTING AUTO SALES WORLDWIDE, BUT MAY BE EASING. STEEL PRICES SOFTENING GLOBALLY. by ROYCE LOWE November saw 210,000 jobs created, and the unemployment rate falling by 0.4 percent to 4.4 percent. There were notable job gains in professional and business services (91,000), transportation and warehousing (50,000), construction (31,000), and manufacturing (31,000). Manufacturing of Miscellaneous Durable Goods saw an increase of 10,000 jobs; Fabricated Metal Products was up 8,000 jobs; Machinery lost 8,000 jobs; Motor Vehicle and Parts lost 10,000 jobs. Manufacturing employment was down by 253,000 jobs since February 2020. The world is still living under the influence of high prices and slow deliveries of raw materials, and a continuing shortage of those darned little chips that seem to be needed everywhere. The result of all this is inflation that hasn’t been seen for quite a while, and a significant reduction in the number of cars rolling off production lines. The light vehicle sales rate in the U.S. as of late November is 13 million, versus 15.9 million in 2020.

of 2.1 percent in the third quarter of 2021, according to the Bureau’s “second” estimate. The real GDP increase in the second quarter of 2021 was 6.7 percent. The ISM PMI figure for U.S. manufacturing rose from 60.8 in October to 61.1 in November. The overall economy continued with the eighteenth month of expansion. IHS Markit’s remarks on U.S. manufacturing for November show their PMI figure easing very slightly from October’s 58.4 to November’s 58.3. This PMI was at an 11-month low, due to softer demand conditions and material shortages. Hence production growth was affected by a softer rise in new orders and by supply shortages. Job creation slowed due to a report of labor shortages.

Input costs were up at a record pace, and there were further nearrecord supply delays and a slowing of new orders to the softest extent so far this year. Longer lead times, supplier shortages, and higher energy prices all led to increased cost inflation. Firms tried to pass on greater costs to clients, but the pace of increases charged slowed to the softest in three months as customers pushed back against higher prices. The IHS Markit’s PMI figure was the lowest since December 2020, and it was in particular boosted by the further near-record lengthening of supplier lead times and increased inventory building. The upturn was held back by material shortages. Higher prices for metals, chemicals, and plastics, plus greater freight and transportation costs drove inflation.

The Bureau of Economic Analysis says the Real Gross Domestic Product increased at an annual rate

continued Manufacturing Outlook / December 2021

MANUFACTURING OUTLOOK Optimism improved but was linked to hopes that supply chain issues might ease in the coming months. GLOBAL CRUDE STEEL PRODUCTION WAS DOWN BY 10.6 PERCENT YEAR-OVERYEAR IN THE MONTH OF OCTOBER for the 64 reporting countries – which represent 99 percent of world crude steel production – to 145.7 million tons (MT). U.S. crude steel production for October was 7.5 MT, up 20.5 percent year-over-year. In October, China produced 71.6 MT, down 23.3 percent year-over-year; India 9.8 MT, up 2.4 percent; Japan 8.2 MT, up 14.3 percent; Russia (estimated) 6.1MT, up 0.5 percent; South Korea 5.8 MT, down 1.0 percent; Germany 3.7 MT, up 7.0 percent, and Brazil 3.2 MT, up 10.4 percent. The EU (27) produced 13.4MT, up 6.4 percent. Primary Global Aluminum Production in October was

reported at 5.689 million tons, with production in China, at 3.270 million tons, representing 58 percent of the world total. Production was 514,000 tons in GCC; 387,000 tons in the rest of Asia; 279,000 tons in Western and Central Europe; 318,000 tons in

North America and 352,000 tons in Russia and Eastern Europe. The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation

continued

Manufacturing Outlook / December 2021

MANUFACTURING OUTLOOK of Purchasing and Supply Management) – eased very slightly to 54.2 in November from October’s 54.3. The Global PMI has now shown improvements in business conditions for 17 consecutive months. All five PMI components are at levels associated with positive trends in operating performance. Production, new orders, employment, and stocks of purchases all continued to expand. Vendor delivery times also lengthened sharply, coincident with problems across global supply chains. Production rose for the 17th consecutive month, employment for the 13th. The outlook for the next 12 months is positive.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are mostly applicable to the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and regarding a given quarter or month. The figures for GDP represent the % change on the previous quarter. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted. n

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

MANUFACTURING TIDBITS

Revenues from Warehouse Management Systems to Exceed US$10 Billion by 2030 by TR Cutler

The first Warehouse Management System (WMS) article I authored was in 1999. The fundamental functionality has not changed; the velocity and necessity of adoption across the industrial universe have changed dramatically. The warehousing sector has been forced to ramp up its digitization efforts considering the increased order volume and growing omnichannel trends due to the e-commerce boom. Global investment in WMS platforms surged from US $2.3 billion in 2019 to over US $2.5 billion in 2020, indicat-

ing an 8% year-over-year growth. The biggest investment in WMS, unsurprisingly, has come from logistics service providers at over US $636 million last year. Investments in retail and food and beverages follow suit with US $509 million and US $483 million respectively. According to global technology intelligence firm ABI Research, worldwide WMS market revenues will have a Compounded Annual Growth Rate (CAGR) of over 23% from 2021 to 2030 and exceed US$10 billion in revenues by 2030.

Adhish Luitel, Industry Analyst, Supply Chain Management and Logistics at ABI Research shared, “Companies are starting to combine the value of multiple hardware and software solutions. Productivity technologies can achieve a far greater return on investment if combined correctly with other technologies. For example, by combining location tracking data with a voice solution, warehouses using a WMS can optimize workflows by minimizing distance traveled based on a worker’s whereabouts.” continued

Manufacturing Outlook / December 2021

MANUFACTURING TIDBITS While the basic functionality is consistent, there have been added innovations and compelling developments. Advancements in data collection and tracking allow more insights into warehousing operations, as well as boost predictive analytics. Operators now deploy Machine Learning (ML) algorithms that capture the data and give insights in real-time. The wider adoption of blockchain allows the supply chains to become more connected, accountable, and visible. Blockchain applications within WMS will fully streamline workflows and link them all together via encryption to ensure comprehensive security. Robotic Process Automation (RPA) is another exciting development. It combines the use of software, robotics, Artificial Intelligence (AI), and ML to create a much faster way of completing inventory management tasks like picking up or putting back items onto shelves. Luitel added, “There is also a need for warehouse operators to formulate a strong inventory management strategy. Inventory management is becoming an increasingly crucial pillar of supply chain management. Ensuring that workers can access the right technology to monitor inventory efficiently is important, but automated solutions for inventory management should also be explored.”

The inventory management platform brings great benefits for manufacturing operations. Adoption of WMS within manufacturing operations can support Just-In-Time (JIT) manufacturing. Visible stock management can enable the deployment of a lean inventory structure. This leads to shorter lead times for customers and helps create an optimal buffer of procured raw materials used in the production of goods, which can help manufacturers avoid costs surrounding overstocking or understocking. WMS deployment in manufacturing operations can also assist in the management of manufacturing orders. Bills of Materials (BOMs) can be integrated into WMS platforms which help automate tasks such as creating procurement or manufacturing orders. The WMS platform impacting manufacturers now comes equipped with dynamic KPI’s (key performance indicators) and variance report monitoring dashboards. Operators can leverage WMS platforms to assess KPIs such as

Receiving Cycle Time and Inventory Shrinkage. WMS 2022 and beyond will help manufacturers identify the bottlenecks and improve operational processes. Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com n

WMS and ABI Research expanded their findings for this report. The growing adoption of WMS platform in the manufacturing sector is a particularly promising development. US$433 million of WMS revenues came from the manufacturing sector last year. This number is set to grow to over US$3.2 billion by 2030, indicating a CAGR of nearly 25% and making it the fastest growing industry vertical. Thanks to connected platforms, manufacturing operations are no longer segregated from logistics. Manufacturing Outlook / December 2021

MANUFACTURING TIDBITS

Manufacturers Pay a Price as Americans Lost a Record $3.5bn to Cybercrime in 2021 YTD by TR Cutler

When consumers lose money to cybercrime, so do manufacturers. According to Atlas VPN extracted data from publicly available government sources, they found that US citizens lost $3.49 billion to cybercrime in the first three quarters of 2021. The damages translate to $12.78 million per day. The wave of cybercrime is

plowing throughout America with the biggest damages in history. American manufacturers are not adequately prepared, and customer distrust is evident.

• The FTC received 1.6 million fraud and identity theft complaints in 2021.

Reviewing the report in 2021, internet crime amounted to $1.58 billion more than damages in 2020.

• Americans lost $956 million to investment scams, representing a 277.87% growth YoY.

• The FTC has to deal with around 5,869 complaints every single day.

continued

Manufacturing Outlook / December 2021

MANUFACTURING TIDBITS Cybercriminals are using the buzz around cryptocurrencies, NFTs, and the metaverse to trick people into investing in bogus projects that disappear after raising a hefty sum of money. This is exacerbated in the manufacturing sector working to manage a deeply disrupted supply chain and turning to new procurement vendors and sources, many of whom have not been adequately vetted. Desperation for raw materials has led to foolish acquisition practices. Regarding monetary damages - the FTC does not resolve the allegations, but it does disseminate the information to over 3,000 law enforcement agencies across the United States for further investigation. These losses are a result of 1.6 million unique fraud and identity theft reports submitted to the Federal Trade Com-

mission, which translates to 5,869 complaints every single day. Most Damaging Types Of Cybercrime Unsurprisingly imposter scams are still at the top of the list. In 2020, imposter fraud swindled $838 million out of unsuspecting victims, while in 2021, damages jumped by 92.24% to $1.61 billion. Criminals pretend to be a wellknown brand to empty the pockets of victims. This directly harms the manufacturing brands’ reputation and stock price. The report noted online shopping scams tricked people into sending $295 million dollars directly into the pockets of cybercriminals. Until now these were consumer oriented buyers; the new victims are purchasing agents and small and midsized industrial manufacturers.

COVID at-home work exposes manufacturers to cybercriminals. There are ways to protect companies and individuals. Multi-factor authentication (2-FA) is an electronic authentication method in which a user is granted access to a website or application only after successfully presenting two or more pieces of evidence to an authentication mechanism. Companies must have a password manager, not re-use passwords, avoiding email attachments from unknown addresses, patching devices, and using a VPN on public Wi-Fi’s. These are the basics of online cybersecurity. Because COVID is not over, and will not be in the foreseeable future, more people continue to work from home and expose themselves and their industrial companies to these cybercriminals. Vigilance is mandated. Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com n

Manufacturing Outlook / December 2021

FEATURE STORY

2022 Manufacturing Trends: Reaching the Future of Work

By: Robin Fleming, Co-Founder & CEO of Anvl

As 2021 comes to an end, the manufacturing industry is looking forward and determining ways to overcome and navigate new industry challenges. One of the biggest focuses for the new year is reaching the future of work, which will push manufacturers to aggressively adopt digital technologies that increase worker productivity and bridge communication gaps. This can be accomplished in the coming year and beyond by investing in digital transformation, prioritizing data-driven business tools, and a concerted effort to address a generational skills gap. Adopting these strategies will be essential for manufacturing businesses to thrive and keep pace with economic demands in an increasingly competitive landscape.

Manufacturing Outlook / December 2021

Invest In Digital Transformation The industry continues to face the residual economic impacts of the pandemic. As a result, more manufacturers will continue to adopt an increasingly cost-conscious mindset that seeks to do more with less in the coming year. That’s why digital transformation will continue to be a critical priority, with many companies shifting spending toward tools like mobile Connected Worker applications that support increased agility and better risk management. Implementing mobile Connected Worker applications is imperative for those looking to invest more in tools that support digital transformation, especially at this pivotal point in industrial innovation. Mobile Connected Worker applications can save time

and resources, making workers more productive, as well as unlocking critical data with easy-to-use technology. They can also provide leading indicators that analyze data in real-time and support continuous improvements over time, unlike data trapped on paper and electronic forms. As McKinsey & Company notes, digital is no longer optional. Companies who are in the midst of or completing digital transformation will have the competitive advantage over those still on paper and with no digital transformation plans already in place. Investing in mobile Connected Worker applications that capture data in real-time gives businesses greater insight into productivity analytics to better track metrics and indicators. With these tools at their disposal, companies will be more resilient in the wake of tough times.

FEATURE STORY Address The Generational Skills Gap Preparing for the future of work can be key to resolving the ongoing lack of talent. The industry faces a critical skills gap, which has only been made worse by the pandemic. By 2030, the skills gap could lead to 2.1 million unfilled manufacturing jobs and a $1 trillion negative impact on the economy. Addressing this workplace shortage is necessary, or else the “Great Resignation,” or the widespread trend of workers leaving their jobs during the COVID-19 pandemic, will continue to impact the industry negatively. One of the biggest challenges for manufacturers today is attracting and retaining new talent, especially among Millennials and Gen-Z. The industry must make a concerted effort to address this skills gap and labor shortage, including the use of mobile Connected Worker applications.

According to a 2021 Recruiter Nation Report by Jobvite, one factor behind the Great Resignation is that workers now want their voices heard more than ever before. Organizations that prioritize worker productivity and enablement will emerge as leading employers and recruit the best talent. Mobile connected worker applications provide in-the-moment worker support and also capture actionable worker knowledge and feedback that enable continuous improvements. As a result, employers create a safer, more engaging work environment and increase overall efficiency and profitability. The Future Of Work Relies On A Connected Workforce Industry and market trends will continue to further catalyze organizational changes in 2022, which is why reaching the future of work is essential for manufacturing businesses to thrive. Companies that enable a Connected Workforce through data-driven mobile applications will be more resilient in the face of future challenges.

Robin Fleming is the co-founder of Anvl, an award winning software company helping companies unlock real-time data to improve product quality, safety and productivity. Anvl’s easy-to-use connected worker platform has collected over 11 million leading data points and routinely sees over 90% engagement from their user base. She is an entrepreneur and leader focused on developing innovative software technology solutions. Having previously served in leadership roles for brands such as Angie’s List (now ANGI Home Services) and Match.com, Robin is now applying her expertise to workplace innovation for the millions of “deskless” workers with connective mobile solutions. Robin serves as a member of the NSC Work to Zero Advisory Council, American Society of Safety Professionals (ASSP) Indiana, Automotive Industry Action Group (AIAG) and the American Society for Quality (ASQ). n

Manufacturing Outlook / December 2021

COVER STORY

Africa Outlook Premiere Wisdom: Seeing the African Industrial Opportunity by TR Cutler

continued Manufacturing Outlook / December 2021

COVER STORY North American investors are finally waking up to the opportunity of doing business with Africa. China and India figured this out years ago by investing in infrastructure, 5G, roads, and manufacturing facilities. One may ask why it has taken so long for American investors to see the 1.2 billion people on the African continent as an opportunity. Rather than speculating or making assumptions, there are certain realities which have come into clear focus due to COVID. The top two issues facing American manufacturers are supply chain and hiring challenges. The supply chain issues were heavily weighted in Asia where work stoppages created an untenable backlog of materials, shutting down automotive production lines earlier this summer. The bigger surprise was the fact that Americans are in a position to demand higher wages. It’s simple supply and demand economics. A few years ago, there were conversations about arriving at a $15 per hour minimum wage. Now double that hourly wage, there are still millions of workers short of fulfilling the need and demand for labor. Africa has millions of people ready, willing, and able to work. While it’s unfair to generalize an entire continent, and each country in Africa brings different skills, talents, and resources, the fact is that $1000 per month is a livable wage for many countries in Africa. The continent is at the early stages of e-commerce, logistics, distribution, and industrial growth. Some might see that as a limitation; wisdom requires seeing the opportunity.

China sees Africa as an expansion project of domain and power; part of China’s 100-year strategy. The same is true with Indian investors on the African continent. Other countries, like Egypt, are aligned with the Middle East and are establishing business models to leverage culture, language, and production. North American businesses, particularly in logistics and distribution, cannot buy distribution centers, warehouses, or large footprint manufacturing facilities in the United States. None is available.

Africa has land and people. Africans will have the most important buying power as they create a middle class over the next decade. Banking, infrastructure, and education are all poised to create lucrative and dynamic investment opportunities. Cultural considerations, including the continuing impact of colonialism, must be understood and respected. Some of the core competencies taken for granted in North America include Lean Manufacturing, Six Sigma,

Manufacturing Outlook / December 2021

continued

COVER STORY TIDBITS MANUFACTURING

Theory of Constraints, and Continuous Process Improvement. These services are at the cusp of extraordinary growth in countries like Uganda, Egypt, Botswana, and Rwanda. This author recently returned from Uganda, having had the pleasure of meeting Gilbert Atuhire. He is the Managing Director at Value Addition Microfinance Ltd. which provides micro loans to manufacturers. Atuhire is an attorney by training, however his ability to articulate the core values of Lean Six Sigma and continuous process improvement were abundantly clear. Atuhire’s company requires a Gemba walk and kaizen event to validate whether funding will resolve the anticipated constraint. His firm is the first to officially require this standard

Manufacturing Outlook / December 2021

best-practice. The Kampala, Uganda offices are centrally located which allows for direct access to industrial projects. Emmanuel Obua of Apogee Logistics is another example of progressive development in Eastern Africa. The five year old company provides integrated end-to-end logistics, clearing, and forwarding services in East Africa and beyond. In 2019, the company became fully licensed under Uganda Revenue Authority Customs Department. American Investors Are Looking To Make Uganda A Global Logistics Hub According to Obua, “With the Great Resignation in the USA, people don’t

want to work despite millions of job openings and limited available real estate for logistics, warehousing, distribution, and manufacturing facilities. Uganda has a significant workforce under 30 years of age who will be thrilled to make $1000 per month. Land for establishing logistics operations is at nearly 100% of capacity in the United States. Land is plentiful within a short distance of Entebbe airport in Uganda. With Uganda operating as a free market with few price controls, there are no restrictions on the sale and distribution of products once they are allowed in the country. Foreign companies (including US-based firms) are partnering with Ugandan businesses to manufacturer, package, and to distribute products globally.” continued

COVER STORY Reimagining Africa In The Era Of COVID COVID has shown countries throughout the African continent that dependency on tourism is dangerous. Americans who have travelled to Africa to witness the magnificent wildlife are facing new travel restrictions and challenges. Lodges that were booked years in advance are experiencing cancellations. Because COVID continues to be mercurial and challenging, the need to create manufacturing and logistics operations has never been more important. Too many are leaving their home country to work for minimal wages in Abu Dhabi or Dubai because employment opportunities are not available locally. The irony of millions

Author Profile:

of unfilled jobs in the USA versus millions of Africans ready to work is in stark contrast. Any American company or investor looking to set up operations in Europe, Asia, South America MUST STOP IMMEDIATELY and perform a critical analysis of Africa, which will demonstrate why Africa is uniquely positioned to provide the land and people for immediate growth and revenue growth well into the 2030’s. Over the next several years this column will be used to further delve into the trends, patterns, and extraordinary opportunities uniquely available on the continent of Africa.

New Jersey Manufacturers,

Do You Have... • Jobs that are difficult to fill with the right candidates? • Positions that have high turnover? • Occupations where a highlyskilled workforce is retiring soon?

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com n

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Manufacturing Outlook / December 2021

CASS INDEX OUTLOOK

Cass Transportation Index Report by CASS INFORMATION SYSTEMS, INC.

Cass Freight Index - Shipments The shipments component of the Cass Freight Index® was 4.5% higher than the year-ago level in November, accelerating from a 0.8% y/y increase in October. On a seasonally adjusted (SA) basis, the shipments index rebounded 2.6% m/m in November, after a 2.9% m/m increase in October, now more than recovering from the weatherimpacted September data. Freight volumes remain capacityconstrained, as shown by declining rail volumes and the ongoing backlog of containerships outside of U.S. ports. Although little progress has been made on the ocean as of yet, the pickup in our shipments index shows progress as the freight

Manufacturing Outlook / December 2021

industry works to de-bottleneck. One important example of this is recent easing in semiconductor shortages, as shown by improving automotive rail carloadings. If you are interested in where North American freight volumes are headed, ACT Research forecasts our shipments index (as well as our Truckload Linehaul Index) in its monthly report. Their forecast for this month was +4.2%, closely in line with the actualized +4.5%. Freight Expenditures The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, rose to a new record level of 4.275, up 44% y/y in November and 8.0% m/m.

On a seasonally adjusted basis, expenditures rose 10.2% m/m in November, mostly due to higher rates, and to a lesser degree from higher volumes. On a two-year stacked basis, the Cass expenditures index was up 52% in October, mostly explained by higher rates. The full-year increase in this index will be 37% in 2021 assuming normal seasonality in December, after a 7% decline in 2020 and no change in 2019. Tougher comparisons in the coming months will naturally slow these y/y increases, but again, just using normal seasonality from here, the increase in 2022 will still be 18%20% at this trend level.

continued This CASS INDEX has been posted with the permission of Cass Information Systems, Inc.

CASS INDEX OUTLOOK Inferred Freight Rates A simple calculation of the Cass Freight Index data (expenditures divided by shipments) produces a data set of inferred freight rates that explains the overall movement in cost per shipment. The freight rates embedded in the two components of the Cass Freight Index were 38% higher y/y in November, accelerated from the 36% y/y increase in October, despite a tougher comparison. The inferred rates rose 5.5% m/m on a seasonally adjusted basis in November in the fourth straight m/m increase. Significant excess miles are continuing in the freight network due to myriad supply chain disruptions in the shortage economy of 2021. Chassis production has improved significantly in the past two months, but the chassis fleet remains far from what is needed to address rail network congestion, so imports continue onto truckload, particularly off the West Coast, considerably raising the length of haul as trucking continues to take share from a snarled rail network. These excess miles are a significant part of the 38% y/y increase in inferred freight rates, because, as noted in the calculation above, these rates are on a per shipment basis, rather than a per mile basis. Higher fuel surcharges are part of the increases, as are modal mix, accessorial fees, and significantly longer lengths of haul due to intermodal service issues. These freight cost factors are not reflected in the Cass Truckload Linehaul Index, which is strictly the linehaul rate only.

For full-year 2021, Cass inferred freight rates are trending up about 23% from 2020 and are heading into 2022 up even more than that on a y/y basis. The data set is diversified among all modes, with truckload representing more than half of the dollars, followed by LTL, rail, parcel, and so on. Truckload Linehaul Index The Cass Truckload Linehaul Index®, which measures changes in linehaul rates, fell 1.5 points in November to 149.5 from 150.9 in October, down 0.9% m/m and up just 9.6% y/y, slower than the 12.2% increase in October. With upward pressure from strong freight demand and ongoing capacity tightness, this index is projected to continue trending higher. This data series trends below the 22% increase in public Q3 truckload fleet rates due to longer-haul highway mix resulting from rail service issues. Accessorials are also part of the difference, as those are excluded from the linehaul index, but much smaller than the mix effects from length of haul (LOH). As has been the case for at least the past six months, the longer-haul mix related to intermodal chassis shortages pushing more freight off the rails and into truckload markets, particularly from the West Coast to Midwest, is continuing to pressure these data. We estimate this reduced the Cass Truckload Linehaul Index significantly, and a mileage-neutral truckload rate is probably up about 20% y/y.

for critical components of trucking capacity – drivers and equipment – will continue to be key to the longerterm outlook. We see this changing the trajectory of the Cass Truckload Linehaul Index over the next year, but not quite yet. Freight Expectations The freight cycle has been on the upswing for about 18 months. Fundamentals remain positive, with a strong consumer balance sheet and significant additional need for restocking. It’s worth reminding our readers that in-depth analyses are available in the ACT Research Freight Forecast report, which includes sections on “The Classic Cycle of the U.S. Truckload Sector” and “Why Freight Cycles are Shorter than Economic Ones,” as well as new analysis of the chassis fleet. This month’s Freight Forecast focuses on how Omicron is likely to impact freight markets from both near- and long-term perspectives. In short, the report predicts very different freight markets this time next year. Green shoots suggesting an easing in the “everything shortage” are beginning to emerge, including lower air and ocean rates, better port productivity, reduced rail network congestion, improved driver hiring, and rising auto production rates.

The story is the same: freight demand is clearly still strong and persistent supply constraints are keeping upward pressure on rates. The gradual easing of supply constraints

Though the near-term direction of freight rates remains higher, cyclical forces like driver hiring and semiconductor wafer fab construction, which take time, are diligently progressing in the background and will dictate the trajectory of capacity, volume, and rate trends in 2022 and beyond. n

Manufacturing Outlook / December 2021

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 61.1% for November 2021 Released December 1

ISM PMI for the past 5 years

NOVEMBER 2021 61.1%

Expanding Contracting

continued

Manufacturing Outlook / December 2021

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in November, with the overall economy achieving an 18th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The November Manufacturing PMI® registered 61.1 percent. Manufacturing performed well for the 18th straight month, with demand and consumption registering month-over-month growth, in spite of continuing obstacles. Meeting demand remains a challenge, due to hiring difficulties and a clear cycle of labor turnover at all tiers. Panelists’ comments suggest month-overmonth improvement on hiring, offset by backfilling required to address employee turnover. Indications that supplier delivery rates are improving were supported by the Supplier Deliveries Index softening. Transportation networks, a harbinger of future supplier delivery performance, are still performing erratically. The 13 manufacturing industries reporting growth in November — in the following order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. ISM

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

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

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

MANUFACTURING

PMI at 61.1% ®

PMI

Manufacturing grew in November, as the Manu2019 2020 2021 facturing PMI® registered 61.1 percent, 0.3 61.1% percentage point higher than the October read® ing of 60.8 percent. The Manufacturing PMI continued to indicate strong sector expansion and U.S. economic growth in November. All five 50% = Manufacturing Economy subindexes that directly factor into the ManufacBreakeven Line turing PMI® were in growth territory. All of the six 43.1% = Overall Economy Breakeven Line biggest manufacturing industries expanded, in the following order: Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment.

Manufacturing at a Glance INDEX

Nov Index

Oct Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

61.1

60.8

+0.3

Growing

Faster

New Orders

61.5

59.8

+1.7

Growing

Faster

Production

61.5

59.3

+2.2

Growing

Faster

Employment

53.3

52.0

+1.3

Growing

Faster

Supplier Deliveries

72.2

75.6

-3.4

Slowing

Slower

Inventories

56.8

57.0

-0.2

Growing

Slower

Customers’ Inventories

25.1

31.7

-6.6

Too Low

Faster

Prices

82.4

85.7

-3.3

Increasing

Slower

Backlog of Orders

61.9

63.6

-1.7

Growing

Slower

New Export Orders

54.0

54.6

-0.6

Growing

Slower

Imports

52.6

49.1

+3.5

Growing

From Contracting

Overall Economy

Growing

Faster

Manufacturing Sector

Growing

Faster

*Number of months moving in current direction. Manufacturing ISM® Report On Business® data has been seasonally adjusted for the New Orders, Production, Employment and Inventories indexes.

Commodities Reported Commodities Up in Price: Adhesives (5); Aluminum* (18); Aluminum Products (8); Caustic Soda (6); Copper (3); Corrugate (14); Corrugated Packaging (13); Crude Oil (2); Diesel Fuel (11); Electrical Components (12); Electronic Components (12); Freight (13); Gasoline; Hydraulic Components; Labor — Temporary (7); Magnesium; Motors (2); Natural Gas (5); Nylon (2); Ocean Freight (12); Packaging Supplies (12); Paper (3); Plastic Containers (3); Plastic Resins* (15); Resin-Based Products (10); Rubber-Based Products (4); Semiconductors (10); Silicon; Silicone; Soy Products; Steel* (16); Steel — Cold Rolled (4); Steel — Hot Rolled* (15); Steel — Stainless (13); Steel Products (15); Surfactants; and Zinc. Commodities Down in Price: Aluminum*; Plastic Resins*; Polypropylene; Steel*; and Steel — Hot Rolled*. Note: To view the full list, visit the ISM® Report On Business ® website at ismrob.org Note: The number of consecutive months the commodity has been listed is indicated after each item. *Reported as both up and down in price.

ISMWORLD.ORG

Manufacturing Outlook / December 2021

continued

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI® New Orders (Manufacturing) 2019

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

2020

New Orders

2021

ISM’s New Orders Index registered 61.5 percent. Ten of 18 manufacturing industries reported growth in new orders in November, in the following order: Apparel, Leather & Allied Products; Plastics & Rubber Products; Furniture & Related Products; Machinery; Computer & Electronic Products; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Paper Products; and Chemical Products.

61.5%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021 70

61.5%

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 61.5 percent. The 11 industries reporting growth in production during the month of November — listed in order — are: Petroleum & Coal Products; Textile Mills; Furniture & Related Products; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Chemical Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Plastics & Rubber Products.

Employment (Manufacturing) 2019

2020

Employment

2021

53.3% 50.6% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021

72.2%

ISM’s Employment Index registered 53.3 percent. Of 18 manufacturing industries, the 10 industries reporting employment growth in November — in the following order — are: Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; and Miscellaneous Manufacturing‡.

Supplier Deliveries The Supplier Deliveries Index registered 72.2 percent. Sixteen of 18 industries reported slower supplier deliveries in November, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; Printing & Related Support Activities; Machinery; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Transportation Equipment; Petroleum & Coal Products; Textile Mills; and Plastics & Rubber Products.

Inventories (Manufacturing) 2019

2020

2021

56.8%

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

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / December 2021

Inventories The Inventories Index registered 56.8 percent. The 10 industries reporting higher inventories in November — in the following order — are: Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Machinery; Transportation Equipment; Chemical Products; and Fabricated Metal Products.

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI

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

Customer Inventories (Manufacturing) 2019

2020

Customers’ Inventories

2021

25.1%

ISM’s Customers’ Inventories Index registered 25.1 percent. No industries reported higher customers’ inventories in November. The 15 industries reporting customers’ inventories as too low during November — listed in order — are: Wood Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Machinery; Miscellaneous Manufacturing‡; Primary Metals; Paper Products; Furniture & Related Products; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Chemical Products; and Transportation Equipment.

Prices (Manufacturing) 2019

2020

Prices

2021

82.4%

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

Backlog of Orders (Manufacturing) 2019

2020

The ISM Prices Index registered 82.4 percent. In November, all 18 industries reported paying increased prices for raw materials, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Textile Mills; Wood Products; Furniture & Related Products; Paper Products; Miscellaneous Manufacturing‡; Transportation Equipment; Primary Metals; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Machinery; Fabricated Metal Products; Printing & Related Support Activities; and Plastics & Rubber Products.

Backlog of Orders

2021

61.9%

ISM’s Backlog of Orders Index registered 61.9 percent. The 13 industries reporting growth in order backlogs in November, in the following order, are: Apparel, Leather & Allied Products; Wood Products; Machinery; Paper Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; Chemical Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Transportation Equipment; and Plastics & Rubber Products.

New Export Orders (Manufacturing) 2019

2020

New Export Orders

2021

54%

ISM’s New Export Orders Index registered 54 percent. The nine industries reporting growth in new export orders in November — in the following order — are: Plastics & Rubber Products; Primary Metals; Miscellaneous Manufacturing‡; Machinery; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Transportation Equipment; and Computer & Electronic Products.

Imports (Manufacturing) 2019

2020

2021

52.6%

‡Miscellaneous

Imports ISM’s Imports Index registered 52.6 percent. The seven industries reporting growth in imports in November — in the following order — are: Textile Mills; Computer & Electronic Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Machinery; Fabricated Metal Products; and Chemical Products.

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / December 2021

NORTH AMERICA OUTLOOK

DECEMBER 2021

NORTH AMERICA OUTLOOK by Amelia Roy The Institute of Supply Management PMI figure rose slightly from 60.8 in October to 61.1 in November. New orders, employment, and production are growing, supplier deliveries are slowing at a slower rate; backlogs are growing; manufacturing inventories are growing; customer inventories are too low; prices are increasing, exports are growing, as are imports.

Manufacturing Outlook / December 2021

The ISM Report on Business® for Manufacturing indicates that, “All of the six biggest manufacturing industries — Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment, in that order — registered moderate to strong growth in November.”

The 13 manufacturing industries reporting growth in November — in the following order — are Apparel, Leather & Allied Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Machinery; Plastics & Rubber Products; Paper Products; Food, Beverage & Tobacco Products; continued

NORTH AMERICA OUTLOOK Labor — Temporary (7); Magnesium; Motors (2); Natural Gas (5); Nylon (2); Ocean Freight (12); Packaging Supplies (12); Paper (3); Plastic Containers (3); Plastic Resins* (15); Resin-Based Products (10); RubberBased Products (4); Semiconductors (10); Silicon; Silicone; Soy Products; Steel* (16); Steel — Cold Rolled (4); Steel — Hot Rolled* (15); Steel — Stainless (13); Steel Products (15); Surfactants; and Zinc. Commodities Gown In Price : Aluminum*; Plastic Resins*; Polypropylene; Steel*; and Steel — Hot Rolled*.

Miscellaneous Manufacturing; Chemical Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. The two industries reporting a decrease in November compared to October are Printing & Related Support Activities; and Primary Metals.” Comments from the manufacturing industry suggest that there is some slight softening in price and availability of key materials, but on this front things have not returned to “normal.” There is still a dearth of qualified workers. Commodities Up In Price: Adhesives (5); Aluminum* (18); Aluminum Products (8); Caustic Soda (6); Copper (3); Corrugate (14); Corrugated Packaging (13); Crude Oil (2); Diesel Fuel (11); Electrical Components (12); Electronic Components (12); Freight (13); Gasoline; Hydraulic Components;

Commodities In Short Supply : Aluminum; Aluminum Products; Corrugated Packaging (5); Electrical Components (14); Electronic Components (12); Fasteners; Freight (3); Glass Bottles; Hydraulic Components; Labor — Temporary (7); Magnesium; Ocean Freight (8); Ocean Freight Containers (2); Paper; Plastic Containers (3); Plastic Products (10); Plastic Resins — Other (9); Printed Circuit Board Assemblies (PCBAs) (4); Semiconductors (12); Silicone; Steel (12); and Steel Products (10). Note: The number of consecutive months the commodity is listed is indicated in parentheses after each item. *Indicates those commodities reported both up and down in price. CANADA saw a solid increase in production and new orders in November, with the backlog of work up at a survey-record pace. There were supply-chain issues and material shortages, along with increasing demand and higher transportation fees. The PMI for November eased

slightly from October’s 57.7 to 57.2. There has been growth in each month since July 2020 with the latest expansion among the strongest in eleven years of data collection. Greater demand from the U.S. and Asian markets saw a tenth monthly increase in exports. Average vendor lead times lengthened to the secondgreatest extent since the survey began in October 2010. Costs for raw materials and higher transportation, fuel, and energy costs led to a marked rate of input cost inflation. There were difficulties sourcing semiconductor chips, and there were higher prices for steel, rubber, aluminum, and electrical components. There was optimism regarding growth prospects for the next 12 months. DesRosiers Automotive Consultants says Canadian auto sales were down 13.9 percent in November from a year earlier as vehicle shortages caused by semiconductor supply issues continue to weigh on the industry. The consultancy estimates light vehicle sales totaled 110,448 for the month. The SAAR for November fell to 1.45 million. MEXICO saw lead times on inputs lengthen at a near-record pace in November, with production falling further. Mexico is suffering from low sales, elevated costs, cashflow issues, all leading to reduced production. Export orders dipped markedly. Employment was thus reduced. Business optimism weakened in November, with the pandemic, inflation, and ongoing shortages of raw materials being major reasons. Their PMI rose very slightly from October’s 49.3 to November’s 49.4. n Amelia Roy, Staff Writer

Manufacturing Outlook / December 2021

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA

Global Uncertainty and Expectations by Christine Casati CHINA saw production rise in November for the first time in four months as the disruption to production from power supply issues eased, but total new orders fell slightly. Thus, capacity pressures subsided as backlogs rose only slightly. Softer demand meant a further drop in employment. There were notable slowdowns in rates of both input cost and output charge

Manufacturing Outlook / December 2021

(selling price) inflation. The PMI for November was down from October’s 50.6 to 49.9. Firmer market conditions and improved energy supply had supported higher production, but subdued demand, rising costs, and limited power supply at some firms held back overall growth. Following a rapid rise in October, manufacturing

input costs rose only moderately in November, with the inflation rate at its lowest since October 2020. There is general confidence that production will rise over the next 12 months. China’s auto sales in October fell for a sixth consecutive month by 9.4 percent year-over-year to 2.33 million vehicles, due largely to a shortage of semiconductor chips. But NEVs continued

ASIA OUTLOOK increased by 135 percent to 383,000 units. JAPAN’s PMI rose from 53.2 in October to 54.5 in November. Japan saw production and new orders rise at the fastest rates for seven months with a sharp rise in costs, amid continuing supply chain disruption. November’s improvement in the manufacturing sector’s health was the strongest since January 2018, and the tenth consecutive month of overall growth. Production growth was held back slightly by difficulties sourcing and receiving raw materials. New export order growth, concentrated in S.E. Asia, hit a five-month high. Employment was up, and additional pressure on capacity and increased backlogs led to the fastest job creation since April 2019. INDIA saw the strongest increases in production and new orders since February. Inflationary pressures remain high. Companies upped input buying, leading to the secondquickest accumulation in stocks of purchases since data collection began some 17 years ago. There are still problems sourcing raw materials. There were signs of improvement in hiring activity, following three successive months of job shedding. The PMI for November, at 57.6, was up from October’s 55.9. The domestic market was the main source of sales growth. There are concerns about inflation that may dampen demand, hence lower production for the year ahead. While VIETNAM has been hard hit economically due to recurring lockdowns and shipping bottlenecks, making it difficult for manufacturers and exporters to keep their outsourcing promises, there is some

very good news on the horizon. The New Vietnam-China train, part of China’s plan to connect Southeast Asia through their “Belt and Road” Initiatives, has opened for business. This will relieve some of the pressure to ship exports by sea and open new avenues of income. This project was originally conceived in 2019 as a plan to refurbish the colonial-era railway linking the two countries. Other train links have been launched, such as China to Laos, also announced in December. Foreign Investments In China While fluctuating oil prices and inflation keep investors and forecasters scratching their heads in the West, with many seeking salvation through higher long-term bond yields, many foreign investors are pouring money into China. In our October issue, we noted that the Carlyle Group Inc. CEO advised that we are highly underinvested in China. He is not alone in this belief. Global tensions and local

restrictions on technology companies are not stopping major financial players such as Black Rock, Citibank, and Goldman Sachs from utilizing the relaxation of restrictions on investment and ownership shares of financial institutions (an outcome of the first trade agreement with China during the last administration) to expand their networks in China. We can expect a continued acceleration of this trend. Besides relaxing foreign investment regulations for some sectors, China has presented itself as a safe haven with its Zero Covid policies, although cases have risen over the past weeks. These strategies seem to be working. Foreign Direct Investment (FDI) inflows to China reached 268 billion USD last year and are expected to be even higher for 2021. Compare that to FDI inflows into the USA, which dropped last year from 261 billion to 156 billion. continued

Manufacturing Outlook / December 2021

ASIA OUTLOOK All the while, China has conducted a sweeping regulatory crackdown over the past year on major influential internet companies affecting the lives of nearly every consumer, (examples: Alibaba and Tencent), tightening rules on any Chinese technology company seeking foreign funding on international markets. The most glaring example is the ride-hailing tech giant DIDI being pressured by Beijing in late November to delist from the New York Exchange and relist on the Hong Kong exchange, after raising $4.4 Billion via an IPO five months ago. China’s DIDI Global has hired Goldman Sachs to see it through this process. It is believed that Beijing is pressuring DIDI because it moved forward with its IPO in New York after being asked to put it on hold while the government reviewed its data practices. DIDI has also been under investigation by the US government (along with 247 other Chinese companies listed on US exchanges with a combined capitalization of U.S. $2.1 trillion) for failures to follow US audit practices. As both Beijing and Washington are establishing new policy roadblocks, we can expect that DIDI won’t be the last to delist from the NYSE. Efforts To Stabilize The Economic Slowdown In China China has been conducting a great balancing act, successfully bringing down factory inflation and bolstering exports amid greater demand for Chinese goods, while trying to control appreciation of its currency amid foreign currency influx. It has many tools at its disposal. One of the tools Beijing is using is new banking policies. On the domestic side, it is pouring money into local banks (188 billion expected beginning December

Manufacturing Outlook / December 2021

15) to ease lending to smaller enterprises and loosen restrictions on banking reserves. On the foreign currency side, it is doing the opposite. It is reining in its central bank (PBOC – The People’s Bank of China) by requiring higher foreign currency reserves. China buys a lot of worldwide commodities and funds a lot of international projects in U.S. dollars which will continue for years to come. At the moment, China’s currency is having a much better year than the US dollar, trading at 6.34 yuan per dollar as of December 10. It has risen 2.4% in onshore trading and 2.8% in offshore trades so far this year against the USD. If it appreciates even more, it will make its exports more expensive but its global purchases and imports less expensive thereby curbing high inflation. Analysts at Standard Chartered Bank, Goldman Sachs, and Bannockburn Global Forex all agree that the strengthening of the yuan will continue into 2022. (CNN 12/10/21) On the property front, the easing of domestic credit may help the property markets somewhat. But it may be too little too late. Evergrande and Kaisa have both recently defaulted on U.S. dollar bond payments to the tune of $1.6 billion. (Kaisa was one of the first to default in 2015 then recovered.) Such failures to repay in the property sector are increasing amid a steep fall in home sales and a sell-off in the property bond markets. (WSJ 12/10/21) The Chinese government may have underestimated the negative global economic impact of not bailing out the top players

sooner. It is a long, complicated story and not all stakeholders have been transparent about their lending exposure. Evergrande has been struggling for months to raise capital to pay off $300 billion in debt. Its most recent default after the grace period puts it into “technical default” according to the Fitch rating agency. Several experts in the U.K. and Germany have stated that Evergrande’s recent letter to the Hang Seng Index in Hong Kong stating that it may not be able to repay investors has generated fears of a “global crash”, as $24 billion in international bonds could be lost. Evergrande’s collapse would send shockwaves throughout the financial system. The U.S financial system could be impacted, according to a spokesman at the Federal Reserve. But the greatest impact would be on the Chinese economy itself, causing other ripple effects globally. In response to the serious implications of the impending default, on December 6 the Chinese government sent a ‘working group’ to Guangzhou to oversee Evergrande’s risk management. If continued

ASIA OUTLOOK they determine that Evergrande is “too big to fail”, there may be massive interventions. How these would affect the Chinese economy overall is still unclear. Even more uncertain are the long-term disruptions and damage to the global financial system if nothing is done. New Tensions In The Region China has convinced Nicaragua to sever diplomatic relations with Taiwan. Recent meetings between the two governments have occurred in Tianjin, as China seeks ways to gain a stronghold outside of East Asia. Also in December, the U.S. convinced the United Arab Emirates to stop Chinese

construction of a port facility there which the U.S. believes will be turned into a military facility. And in the lead-up to the Winter Olympics in China, the U.S. has led the way in responding to reported human rights abuses including genocide against the Uighurs in Xinjiang by announcing a diplomatic boycott of the games, although athletes will still be allowed to compete. Australia, Canada, the U.K, Lithuania, and other nations have followed. Concurrently, both the Women’s Tennis Association and the International Tennis Federation have canceled all tennis tournaments in China until further notice due to the silencing of Peng Shuai, former No 1 doubles player, for reporting

sexual assault against a powerful former member of the Politburo, China’s supreme political committee. Stay tuned for more on China’s Belt and Road Initiatives in Asia as we take a deep dive in January’s Asia Outlook! Author profile: Christine is cofounder and President of China Human Resources Group, Inc, a management consulting firm based in Princeton NJ. She has provided U.S. companies with strategic development and project implementation services for projects in China since 1986. n

Manufacturing Outlook / December 2021

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by Chris Anderson IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), rose very slightly from October’s 58.3 to 58.4 in November. Firms in Europe are building safety buffers, as stock purchases rise at the strongest rate on record. Output price inflation hit a fresh record, as supplier performance deteriorated rapidly again. The UK PMI rose to 58.1 in November from 57.8 in October.

to the greatest extent in almost 20 years. Constraints are supplierrelated, and there are further growth slowdowns in the intermediate and investment goods sectors, with consumer goods producers recording an accelerated expansion. Note that all Purchasing Manager’s Index readings are above 50, some well above 50, indicating a strong and continuing economic expansion.

Production, new orders, and employment are all up in the Eurozone, and selling prices increased

The selling rate for cars in Western Europe plunged even lower in October to 9.0 million units per year,

in large part due to the ongoing semiconductor shortage. It may be that sales for 2021 may not even eclipse the result for 2020 (10.79 million units). Production growth increased slightly with a rise in domestic orders starts. New export orders fell for the third consecutive month. Manufacturing input prices were up at a 30-year survey record rate under intense supply-chain pressures. Production, new orders, employment, and stocks of purchases were all up, with supplier lead times lengthened. Capacity was stretched and backlogs increased to a near-record extent, leading to the quick increase in employment, although there were still many instances of a lack of skilled employees. Twothirds of firms felt positive about the next twelve Chris Anderson, Staff Writer months. n

Manufacturing Outlook / December 2021

GLOBAL PMI OUTLOOK

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

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

Demand Rising Base Broadens November 2021 Business Survey Insights Expectations for December are good given the potential carry over from New Orders and Output in October and November. According to our scatterplot, 15 of the 18 economies that we highlight are growing and most of them at a sustainable pace. Ten PMIs were in the Expanding-

Strengthening quadrant and Five PMIs were in the ExpandingWeakening quadrant. The U.S., Chicago, and Taiwan continue to exhibit significant strength with notable month over month performance. The clustering in the middle indicates global economies

share a lot of common characteristics and there are nine surveys above 55 this month, another positive for this month. Prices and Employment are still cause for concern as many countries still find it difficult to recruit workers.

continued Manufacturing Outlook / December 2021

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ In November, the U.S. Manufacturing PMI (61.1, +0.3) continued on trend and out performing most of its global trading partners. The table below exhibits the year-to-date strength for each of the PMI components. The YTD averages for the PMI components depict strong output, weak employment, and insufficient inventory replenishment across a broad spectrum of products. A PMI reading above 43.1 percent generally indicates an expansion of the overall economy. Therefore, the Manufacturing PMI in November indicated the overall economy grew for the 18th consecutive month following a contraction in April 2020. According to the ISM press release, “the past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for November (61.1 percent) corresponds to a 5.1-percent increase in real gross domestic product (GDP) on an annualized basis.” Activity could be stronger if supply chain disruptions were less severe (i.e. labor disincentives, component shortages, school closures, skill mismatches, high inflation).

50.0 as economically bullish, are still stretched. An encouraging indicator is the Inventories Index which has averaged 55.9 for the past four months and significantly better than the 49.8 average for the first 7 months of 2021. There is still a long way to go in terms of inventory replenishment, but the data is showing movement in the right direction. New Orders Minus Inventories: This key spread rose to +4.7 from +2.8, signaling New Orders are slowing and Inventories are growing. This is a move in the right direction as we like to see New Orders typically outpace Inventories by an average of 6-8 points. Supply chains are making some progress at replenishing inventories.

Customers’ Inventories: The index (25.1, -6.6) for raw materials, components, and finished goods was “too low” for the 62nd consecutive month. The index set a new low in July (25.0) and has been under 40 percent for the past 16 months. There were no industries reporting higher customers’ inventories in November. Prices: The Manufacturing Prices Index remains at a lofty level (82.4, -3.3) in November, but we find some encouragement in the Commodities. Down in price list: Aluminum*; Plastic Resins*; Polypropylene; Steel*; and Steel — Hot Rolled*. (* indicates reports of both increases and decreases in market pricing which we interpret indicates a turning point in the market).

Drivers: New Orders (61.5, +1.7), Production (61.5, +2.2), and Employment (53.3, +1.3) boosted Manufacturing activity in November, continuing the growth experienced so far this year. Supplier Deliveries (72.2, -3.4), a contrarian in that it signals slower delivery times above

continued

Manufacturing Outlook / December 2021

GLOBAL PMI OUTLOOK A Quick Word On Capacity Thirteen industries are still operating below their pre-pandemic capacity utilization levels in the U.S., contributing to output limitations. Looking at the relative importance, these thirteen groups comprise 64% of industrial production. n

Manufacturing Outlook / December 2021

CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

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

Combined Sectors To note that this has been a tumultuous year would be redundant. For the next several decades the years 2020 and 2021 will be treated as anomalies against which very little can be compared. There has never been a recession like the one in 2020 as there has never been one that was essentially caused by government edict. The economy itself was in good shape at the start of 2020 but the emerging threat of a global pandemic that would ultimately kill over 5 million (and still counting) forced radical actions. The emergence of the global economy in 2021 was equally unprecedented with a US growth rate in the second quarter that touched 9.5% for a time before settling back to 6.5%. All of this turmoil has been reflected in the data that has been collected by the CMI. This month has been no exception as it shows a slight reduction in activity that still remains robust.

The overall score for the month slipped from 58.0 to 57.4. Not a major shift but this marks the lowest reading for the last twelve months. The trends were much stronger a few months ago – prior to the latest surge in the virus. The index of favorable factors also slipped a little from 67.7 to 66.4 but this reading is still higher than it was in September. The favorable categories continue to be strong. The index of unfavorable factors seemed to show the most strain with a reading of 51.3 as compared to 51.5. These last two months have marked the lowest levels in the last twelve months and that is a trend nobody wants to see. The details as usual provide insights. The sales numbers slipped from 72.7 to 70.3 but this mark is still better than what was noted in June or August. The new credit applications numbers improved quite a bit from 64.6 to 65.4 but this can sometimes be misleading as the rejections of

credit applications can sometimes offset that good news. This month the rejections data showed an improvement (from 52.1 to 53.2) and that suggests that the new applications are legitimate. The dollar collections numbers fell fairly hard – from 63.4 to 60.4 but the index remains comfortably in the 60s. The amount of credit extended also fell a little – from 70.0 to 69.6. It has been noted by many credit managers that businesses are not engaged in as much inventory accumulation as was the case earlier. That overbuying seemed connected to the supply chain issues. The data on rejections was referenced above. There was also some movement as far as accounts placed for collection as this month the reading was 52.1 as compared to last month’s 51.5. The data for the last few months has been consistent but these numbers have been much lower than was the case earlier this continued

Manufacturing Outlook / December 2021

CREDIT MANAGER’S OUTLOOK summer and that suggests there are some strains showing up more consistently. The disputes category remains in the 40s but improved a little from 48.5 to 49.0. Over the last five months the readings have been in the contraction zone four times. The dollar amount beyond terms data

slipped into contraction territory with a reading of 49.1 as compared to last month’s 50.9. The dollar amount of customer deductions stayed in contraction territory and dug the hole a little deeper with a reading of 48.5 as contrasted with the 49.5 in October. The filings for bankruptcies

remained fairly stable with a mark of 56.0. In October it was at 56.8. As recently as September all the categories in the unfavorable index were in expansion territory and now there are three that have fallen into contraction and that has not been the case in over a year.

continued Manufacturing Outlook / December 2021

CREDIT MANAGER’S OUTLOOK Manufacturing Sector The manufacturing sector has been at the forefront of the economy throughout the last two years – in a good and a bad way. In 2020 it was the manufacturers that managed to prosper to some degree as the consumer was cut off from their usual service purchasing. The recovery in 2021 strained the manufacturer in a variety of ways. They struggled to keep pace with demand and were slammed hard by the supply chain breakdowns and these shortages continue to affect what the coming year will look like. The combined score for manufacturing fell to 56.9 and that is the lowest reading registered in the last twelve months. The index of favorable factors also fell but not as dramatically as the reading was at 66.6 compared to 67.0 the month before and was still higher than was noted in September. The damage was more obvious when examining the index of unfavorable factors as this month’s reading was 50.4 and dangerously close to slipping into contraction. The numbers have not been this low in the last year.

The data in the favorable categories remain very solid. The sales reading jumped back to 72.3 from the 71.8 noted in October. The new credit applications data also improved from 62.7 to 63.0. The dollar collections numbers trailed off a bit from 63.5 to 62.7 but remain firmly planted in the 60s. The amount of credit extended slid back to more familiar levels with a reading of 68.4 as compared to the 70.0 notched in October. The manufacturers have been reacting to the supply chain breakdown and the threat of future inflation with additional inventory purchases as a kind of hedge. That has resulted in a surge in demand for credit. Now they have to hope that future demand justifies these inventories. The rejections of credit applications improved and that is a very good sign given that new applications are up. If there had been an increase in these applications at the same time that rejections were up it would suggest that too many of the applicants were not qualified.

The accounts placed for collection remained very close to levels in October. This month the number was 53.8 and last month it was at 53.7. The disputes category skidded even deeper into contraction with a 46.3 reading compared to 47.5 in October. This is a little worrisome as it suggests that many companies are struggling and looking for some kind of adjustment. The dollar amount beyond terms reading tumbled into the contraction zone with a 48.3 score as compared to 50.4 the month before. These numbers have been bouncing in and out of contraction territory for months – (three times in the last six months). The dollar amount of customer deductions dug an even deeper hole as it went from 48.2 to 45.0. There was even a little dip in the filings for bankruptcies as this month it was 55.6 and in October it hit 56.5. The long and the short of it is that manufacturing has started to show strains from the combination of supply chain crisis, inflation, labor shortage and the erosion of some consumer demand.

continued

Manufacturing Outlook / December 2021

CREDIT MANAGER’S OUTLOOK

n 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.

Manufacturing Outlook / December 2021

METALS OUTLOOK

DECEMBER 2021

METALS OUTLOOK

by Royce Lowe On Infrastructure and Other Things Roads, highways, bridges, mass transit, ports, energy, hospitals, communications, broadband, and airports are probably the majority of the areas that will profit from the recently signed infrastructure bill. As will those companies in the steel, aluminum, copper, and other nonferrous metals businesses; plus those, of course, in the cement business. Over a trillion dollars will be available for roads, bridges, highways, etc. and this equates to a lot of steel and nonferrous metals. It also equates to an awful lot of expensive steel, at least at today’s

prices, which, although tending to fall in the last little while, still represent a great premium over where prices were just over a year ago. Some relief on the price front will come from a recent agreement between the EU and the U.S., whereby “limited volumes” of EU steel and aluminum will be allowed to enter the U.S. tariff-free, in other words, a quota system which will translate to some 3.3 million tons of steel per annum from the EU being allowed a tariff-free ride into the U.S. effective January 1 next year. Along with this, 18,000 metric tons of primary aluminum and 366,000 metric tons of semi-finished aluminum will be allowed tariff-free. Shipments will, of course, be strictly

monitored to prevent non-EU steel from being “passed off” as EU steel. Negotiations will begin early next year with Japan, which is still paying the 25 percent steel tariff. Input from manufacturing business groups began to pour in immediately following Biden’s signing of the bill, mostly positive. Jay Timmons, CEO of the National Association of Manufacturers, called the new law “a model for future legislation” that achieved many of NAM’s stated infrastructure goals without raising taxes on manufacturers. “For manufacturers, this is a victory years in the making,” said Timmons in an association statement. continued

Manufacturing Outlook / December 2021

METALS OUTLOOK ton. The price in Europe, much lower, recently eased from 1020 euros per ton to around 950 euros per ton.

Kevin Dempsey, CEO of the American Iron and Steel Institute, specifically praised the infrastructure act for its “strong focus” on U.S.made goods, including U.S.-made steel, which Dempsey notes in his statement, echoing a recent statement by Nucor CEO Leon Topalian, “is cleaner and more sustainable than steel made in the other leading steel-producing countries.” What Dempsey means by cleaner and more sustainable, and to which other leading steel-producing countries he is referring, are not mentioned. At a recent Manufacturing and Technology Show, Lourenco Goncalves, the very outspoken CEO of Cleveland Cliffs, spoke of his company’s blast furnaces as being the “lowest CO2-intensive in the industry.” It is certain that the relatively small amount of steel made monthly in the U.S. will only go so far to satisfy the demands that will come from the ongoing implementation of the infrastructure bill. The tight steel supply situation we have seen for

the past year or so, together with the tariffs, sent the price of steel to highs never seen. The question is whether the domestic mills, eager to overflow their coffers to make up for all those barren years, will cooperate (or be made to) to keep the cost of the infrastructure project to a reasonable level. This shortfall will surely apply to aluminum and other nonferrous metals. NEMA, the National Electrical Manufacturers Association, also lauded the bill, mentioning improvements to the grid and the EV charging infrastructure, but noted: “its promise will only be realized if our manufacturing, supply chain, and regulatory systems can meet the coming demand.” There has been significant movement in the price of U.S. hot-rolled coil in the past month, with a decrease from $1890 per ton in early November to $1740 per ton in early December. The price of cold-rolled just started to slide from a maximum of around $2200 per ton to around $2050 per

According to MEPS, the stainless steel industry meanwhile is being cautiously optimistic regarding the demand for the material in 2022. Purchasing is restricted by credit limits and cash flow problems, and with stainless steel prices more than doubling in the past twelve months, buyers can only buy half the tonnage they would have bought before with the same credit. Mills providing offers are now accepting orders for April/June delivery. Deliveries are poor, and there are reports of steelmakers postponing orders previously scheduled for December shipment into the new year, amid overbooked rolling programs. The supply shortage of stainless coils in Europe continues to drive up the price; the price of type 304 coldrolled coils booked in November, ranged from 1750-1920 euros per ton. The price of nickel continues to rise, and nickel extra increases of 121 euros per ton will become effective in December. There was relatively little movement in the prices of non-ferrous metals in the past month. The price of aluminum, both started and ended November at $1.20 per lb. Copper moved from $4.40 per lb. in late October to $4.35 in late November. Nickel moved up from $8.80 per lb in late October to $9.20 in late November. Zinc went from $1.52 per lb. in late October to $1.50 per lb in late November. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / December 2021

INNOVATION OUTLOOK

REVOLUTIONIZING ADDITIVE MANUFACTURING TO CHANGE THE WAY WE MAKE ALMOST EVERYTHING America Makes, a Manufacturing USA® institute, develops and expands U.S. capabilities in additive manufacturing and 3D printing. The institute is creating U.S.-based sources of world-class equipment and support, a robust domestic supply chain of high quality materials and services, and a highly skilled U.S. workforce to capitalize on the capabilities and advantages of additive manufacturing and 3D printing. Manufacturing USA, a public-private partnership with 14 manufacturing institutes across the nation, connects companies, academic institutes, non-profits, and local, state, and federal entities to solve industry-relevant advanced manufacturing challenges in new technology areas with the goals of enhancing industrial competitiveness and economic growth and strengthening national security.

Technology Focus Area Additive manufacturing uses layering of materials to create lighter, stronger three-dimensional parts and systems. 3D printing is perhaps the most well-known technology of additive manufacturing, yet many others exist. Additive manufacturing: reduces automotive part count from thousands to hundreds; increases flexibility in design options that meet consumer specifications; improves product performance, reduces costs, and shortens lead times. In medicine, the technology enables breakthroughs in patient-specific treatments, medications and drugs, personalized joint and cranial implants, implanted tracheal supports to treat birth defects, and custom-fitted hearing aids.

Approach to Innovation and Collaboration

LEARN MORE

CONNECT WITH AMERICA MAKES Youngstown, Ohio 330-622-4299 americamakes.us

America Makes brings together partners in industry, government, and academia to explore solutions to challenges that can be achieved through additive manufacturing and 3D printing. This is done through initiatives such as: America Makes Digital Storefront, an online platform for accessing information, data, and intellectual capital assets Technology roadmaps defining industry needs Curated concepts for public-private partnership projects focusing on design, process, material, value chain, and an additive manufacturing genome examining material property Workforce training through education in 3D printing materials, technologies, and products

Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

continued Manufacturing Outlook / December 2021

INNOVATION OUTLOOK

COLLABORATIVE PROJECT EXAMPLES “While we are on the cutting edge of many developments in 3D printing, it takes collaborations to help propel complex technologies into viable commercial applications. We’re proud to connect with other leading thinkers in this space through America Makes.” – Sarah Webster, Global Marketing Director, EnvisionTEC

SUSTAINMENT FOR LEGACY AIRCRAFT: U.S. Air Force legacy aircraft are on average 27 years old and require critical parts that are out of production. This project focuses on emerging technology analyses, demo projects, and development for Air Force stage gate reviews to demonstrate how advanced manufacturing technologies can let the Air Force replace critically damaged or obsolete components on-demand, rapidly fabricate needed shop tools, and address workforce education gaps in manufacturing that are critical to U.S. national defense. The team includes dozens of project partners working under the direction of the University of Dayton Research Institute, the U.S. Departments of Defense and Energy, National Science Foundation, and industry leaders including Boeing, Raytheon, and Lockheed Martin. ACHIEVING CONSISTENT QUALITY IN ADDITIVE MANUFACTURING: The need to develop better measurement techniques for additive manufacturing has limited the technology’s use in performance-critical parts and made quality requirements difficult to achieve. This project—a partnership between the National Institute of Standards and Technology (NIST), University of Louisville, and Concurrent Technologies Corporation—used in-situ process monitoring, non-destructive evaluation, and layerwise quality certification to achieve broader application of additive manufacturing through certification standards, post-build inspection and verification, and deployment of sensors and techniques that can be adapted to any industrial additive manufacturing process.

INTEGRATING TECHNOLOGIES TO IMPROVE MANUFACTURING EFFICIENCY: America Makes led a team to design and assemble a new Multi3D system, which reduced cost and reduced space requirements by more than 50 percent. The Multi3D system has a five-axis motion platform for additive manufacturing, subtractive manufacturing, and foil/ wire embedding, demonstrating the capability to design and manufacture multifunctional components within a single enclosed unit. Project partners included the University of Texas—El Paso, Northrop Grumman, Lockheed Martin, Stranepresse, AST2, and Draper Laboratory.

“America Makes has been pivotal in creating an integrated community involving machine builders, materials developers, designers, and most importantly, a broad collection of firms pushing the boundaries of manufacturing in all its forms.” – James McGuffin-Cawley, Associate Dean of Research, Case Western Reserve University Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

Manufacturing Outlook / December 2021

AEROSPACE OUTLOOK

DECEMBER 2021

AEROSPACE OUTLOOK by Royce Lowe The Plane Mart It’s been a tough couple of years for the aerospace industry, for both manufacturers and users. It’s not over yet. But the big news for the U.S. aerospace industry is that, at the time of this writing, the Civil Aviation Administration of China (CAAC) announced that Boeing’s 737 Max jets may resume flights in China by the end of this year or by early 2022. Given the number of 737s in inventory, this news must surely have elicited a huge sigh of relief at Boeing, from CEO Calhoun on down. This will take some of the pressure off Boeing, and set them free to get back into competition with Airbus. There’s a race on between the two big jetliner manufacturers to see which one delivers the most planes and takes the most orders. We all know that Boeing has had a pretty rough time of late with its 737 Max problem, and with ongoing defects on its 787 Dreamliner. And of course, the market for planes hasn’t

Manufacturing Outlook / December 2021

been the greatest for the past couple of years. The month of November saw the first Airshow, in Dubai, since the start of the pandemic. This same Airshow saw FlyDubai, the low-cost version of Emirates, talking to both Boeing and Airbus about their next order. FlyDubai was previously loyal to Boeing but scrapped 65 orders for the 737 Max following the crashes. Negotiations are preliminary, but no deal will be announced until “all is right.” The airline will take delivery of 33 737 Max planes from June through to the end of next year while retiring 10 or 12 older 737 models. Airbus signed a 255-plane deal with Indigo Partners, worth over $33 billion at list price, and is looking to increase production of the A320 series to up to 75 per month. India’s Akasa, a new low-cost airline, placed an order for 72 737 Max, for almost $9 billion at list

price. Boeing has 370 737 Max planes in inventory, and CEO Calhoun says it will take two years to sell them all. Boeing has reached an agreement with the 157 families -from 35 nationalities - of the victims of the 737 Max crash in Ethiopia. Boeing admitted responsibility for the crash. There are still reported problems with the 787 Dreamliner, which are playing havoc with deliveries and causing anger among customers awaiting said deliveries. Now, some members of the U.S. House Transportation and Infrastructure Committee are seeking a new review of the Federal Aviation Administration’s oversight of the 787 program. They are looking to determine “whether the FAA’s existing inspection program is sufficient to identify production issues, including whether FAA has enough inspectors, whether FAA performs enough inspections, and whether FAA has appropriate processes in place to identify production issues.” continued

AEROSPACE OUTLOOK Boeing has again slowed production of the Dreamliner while attempting to resolve several structural and material defects found during the past two years in the aircraft’s wing, fuselage, and tail sections. People “familiar with the subject,” say there are 20 quality issues involved. There are presently over 100 787s stuck at Boeing, with no fixed date on their delivery. German suppliers are backing plans by Airbus to increase jet production, but warn that growing labor shortages are the chief risk to the industry’s growth. Airbus is committed to its target of increasing production of the A320 jet series by some 50 percent to 65 per month by the summer of 2023. Airbus logged over 400 tentative or firm new orders at the recent Dubai Airshow. Volker Thum, Managing Director of the German Aerospace Association BDLI, said only a few supporters still had doubts about the targeted 65 A320s per month, not much above its pre-pandemic output of 60. But engine makers balk at a 70-75 production rate, fearing it might harm the repair

business for older jets, while some small suppliers are worried that the higher production rate would only be short-lived, leaving them with bills for new, unused machinery. Hiring new workers to meet the new targets is a real challenge, amid widespread labor shortages. The main concern is to find skilled personnel, and also, vital to Germany’s largely family-owned small suppliers, are actual contracts, rather than provisional targets. Airbus, Boeing, GE Aviation, and Rolls Royce have all conducted trials with Sustainable Aviation Fuel (SAF) in efforts to reduce commercial aviation’s carbon emissions. The latest company to conduct trials with SAF will be Brazil’s Embraer, together with its engine supplier Pratt and Whitney. The two will collaborate on tests for 100 percent SAF in an E195-E2 aircraft powered by a P and W geared turbofan engine. SAF is produced from waste oils derived from such biological sources as cooking oils, other non-palm waste oils from plants, agricultural residue, or non-fossil CO2, plus waste such as packaging, paper, textiles,

and food waste. Commercial aircraft are currently certified to operate on a maximum of 50 percent SAF blended with conventional jet fuel, although there are commitments to increase the amount of SAF. Gillaume Faury, the CEO of Airbus, says his company will have developed a hydrogen-powered jet by 2035. China is developing a powerful nuclear reactor for its Moon and Mars missions, according to researchers involved in the project. The reactor can generate one megawatt of electric power, 100 times more powerful than a similar device NASA plans to put on the surface of the moon by 2030. A long road ahead, a little at a time. n

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

Manufacturing Outlook / December 2021

ENERGY OUTLOOK

DECEMBER 2021

ENERGY OUTLOOK The Nuclear Comeback by Jocelyn Bright For the past few years, things have moved swiftly in the electrical energy business, due in some part to the increased overall awareness of the necessity to do something about global warming. We’ve been through solar, and wind, and hydro, and it is evident that every major economy is putting up its hand and is willing to join in the fight. There is one major power source that hasn’t had really good press of late, and that’s nuclear energy. The world still shudders at the mention of Chernobyl, Three Mile Island, and Fukushima Dai-ichi, at what was and what could have been. Strong

advances have been made in the solar and wind areas, but even these super available sources are not always “on” and are at the mercy of the whims of mother nature. Nuclear is always “on.” The U.S. has a nuclear power plant in Diablo Canyon, some 200 miles north of Los Angeles. This is California’s one remaining nuclear power plant, and it provides almost 9 percent of the state’s electricity generation or 15 percent of its production of clean energy. Despite the climate goals of California and the U.S. as a whole, the plant is set to close down by 2025. Since coming online in 1985 there have been no incidents at the plant,

but it is situated near several major fault lines, and this has caused concern among inhabitants in the area that an earthquake could bring about a nuclear disaster. There again, America’s Nuclear Regulatory Commission (NRC) mandated utilities to evaluate their plants for floods and seismic risks following the Fukushima Daiichi meltdown in Japan in 2011, and Diablo Canyon was found to be safe. Pacific Gas & Electric, California’s largest utility that operates Diablo Canyon, proposed its closure in 2018, an action that was supported by environmental and labor groups, and approved by the California Public Utilities Commission. The argument continued

Manufacturing Outlook / December 2021

ENERGY OUTLOOK was reduced demand for nuclear power because of the surging development and use of renewables. Droughts, hence reservoirs drying up, have limited the supply of hydroelectric power, with just 11 percent of California’s power coming from hydro in 2020 or 44 percent below 2019’s. The heatwave in 2020 led to demand for electricity exceeding supply, and PG&E was caught off balance trying to meet the demand. Along with plans to try to close Diablo Canyon, research is being carried out to explain why it shouldn’t be closed. This showed that keeping the plant going through 2035 would cut emissions, improve the reliability of the grid, and save California $2.6 billion. Many parties want to stay with the Diablo Canyon reactors, but some are against it for political and other reasons. Big disadvantages

meantime, the U.S., France, and Japan have reduced their interest in nuclear power.

of nuclear energy are the cost of building new plants and the time required to construct and bring them online. Academics are all for going further into nuclear, as is the Biden administration. The first of Diablo’s reactors will lose its license in 2024, and the consensus among Academics is a hope that “the Golden State will come to its senses before then.” Diablo Canyon is a relatively small part of the U.S. nuclear capacity, which is on its way to becoming a small part of the global capacity, as witnessed by China’s recently announced plans for its own nuclear industry. The country plans to build at least 150 reactors in the next 15 years, or more than the rest of the world has built in the last 35. This could cost up to $440 billion, and as early as the middle of this decade China could surpass the U.S. as the world’s largest generator of nuclear power. In the

According to the chairman of the China General Nuclear Power Corporation, China is looking to put in place 200 gigawatts by 2035, or enough to power more than a dozen cities the size of Beijing. China’s experience gained through the construction of these plants will put it in a good position to build 30 overseas reactors that could earn Chinese firms $145 billion by 2030 through its Belt and Road initiative. It has, for example, built five reactors in Pakistan since 1993. China says its nuclear plans could prevent about 1.5 billion tons of annual carbon emissions, more than that generated by the U.K., Spain, France, and Germany combined. These are figures to warm the hearts of those in favor of nuclear power. But the U.S., India, and Europe are unlikely to let the Chinese into their power supplies. CGN (China General Nuclear Power Corporation) was blacklisted by the U.S. in 2019, allegedly for stealing military technology. The UK is looking to exclude China from its new Sizewell reactor development. China’s goal is to replace nearly all its 2,990 coal-fired generators with clean energy by 2060. Wind and solar will be dominant, with nuclear power, more expensive but more reliable, a close third, according to research from Tsinghua University. China has 46 reactors planned or under construction, compared with two for the U.S. Other countries would have continued

Manufacturing Outlook / December 2021

ENERGY OUTLOOK in Georgia at the Vogtle plant - where two additional reactor units are under construction - the experience in factories has not been good. The factory that built the modules for the Georgia plant built them incorrectly for years. They welded them incorrectly, thus they had to be re-welded at the reactor site. That factory led in large part to the bankruptcy of Westinghouse.

a tough time affording even a small part of China’s investments, with 70 percent of reactor costs covered by loans from state-backed banks, which of course offer low rates that make a huge difference in power costs. China doesn’t disclose its exact costs, but analysts including BloombergNEF and the World Nuclear Association estimate China can build plants for $2500-3000 per kilowatt, or around a third of recent projects in France and the U.S. There will doubtless be much debate and negotiation on the nuclear scene in the U.S., but research will continue into SMRs, or Small Modular Reactors, and Russia’s Akademik Lomonosov, the world’s first floating nuclear power plant that began commercial operation in May 2020, is producing energy from two 35 MW(e) SMRs. Other SMRs are under construction or in the licensing stage in Argentina, Canada, China, Russia, South Korea, and the United States of America.

Allison Macfarlane is a past chair of the U.S. Nuclear Regulatory Commission and is presently a professor and the director of the School of Public Policy and Global Affairs at the University of British Columbia. Macfarlane describes herself as neither a proponent nor a detractor of nuclear power, but as an analyst who prefers to give a “measured analytical response” to questions on the subject of nuclear energy. She recently shared her views with Al Jazeera about nations building more nuclear power plants to combat the climate crisis. Macfarlane says that almost 19 percent of power in the U.S. is nuclear power and that the next 10-20 years will not have a big impact on the reduction of carbon emissions because new plants can’t be built fast enough. These are huge projects, and quality control and program management must be at a level not found in a lot of other industries. If new reactor designs constructed in factories are considered, such as the ones under construction

There are some new reactor designs, but some are 70 years old. Many designs exist only on paper, or as small-scale models. The way the engineering process works is that something is designed – these days, it’s computer-assisted – and then there’s a scale model. The building of the scale model highlights the faults in the computer design, and so these need to be fixed. Next is the full-scale design, and after scaling up again, there will be things that were wrong in the scale model, and they will need to be fixed. Thus, for many of these designs, we’re still at the computer-model stage, and we haven’t done the other steps, and these take years. A lot of money is needed to get to the full-scale model. The capital costs of plant construction are extremely high. We’re probably up to at least $14bn a plant for the Vogtle plants in Georgia, for a thousand gigawatts generation capacity. They’re not just really expensive to build, but they take an awfully long time to build. So there’s the cost of the capital of building the plant, plus the cost of the interest on the capital. There are claims made about the small modular reactors that they’ll be cheaper, but nobody’s ever built one, and nobody’s established the supply chains to build continued

Manufacturing Outlook / December 2021

ENERGY OUTLOOK It’s urgent, and nuclear power will be part of the equation if we are serious. It means a lot of money, and somebody has to pay for it.

them and to operate them. So we don’t know the bottom line on what they will cost. Bill Gates founded a company called TerraPower, which according to a recent announcement will build a nuclear reactor (an SMR) at the site of a closing coal plant in Wyoming. The federal government will subsidize this project to the tune of $80 million. Macfarlane’s last words in the interview heard her wondering whether there’s the will, globally, to move away from fossil fuels as seriously and as quickly as we need to.

From nuclear to hydro: we reported not too long ago on a 25-year contract between Hydro-Québec and the state of New York for the supply of 1,250 megawatts of electricity, starting in 2025. This is Hydro-Québec’s largest export contract, and although no revenue projections have been published, Québec’s Premier, François Legault, says it will be worth $20 billion.

Construction of the line will begin in the spring of 2023 and will start southeast of Montreal, where a 56 km (34.5 miles) underground stretch will lead to a 1.6 km (1 mile) underwater segment where the Richelieu River meets Lake Champlain, then a further 545 kms (335 miles) to New York City. Once in service, this will be a partnership between HydroQuébec and the Mohawk Council of Kahnawake, which will see economic spinoffs over 40 years, Jocelyn Bright, the utility said. n Staff Writer

**Thanks to The Economist, Bloomberg and Al Jazeera for much of the content of this article.

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Manufacturing Outlook / December 2021

AUTOMOTIVE OUTLOOK

DECEMBER 2021

AUTOMOTIVE OUTLOOK by Lawrence Makagnon Electrify, Electrify Rivian, the relatively new EV startup whose recent IPO put its value above both Ford and GM, and for a few days above Volkswagen, looks like it might make it down that rocky road to automotive stardom. Its founder, R.J. Scaringe, who The Economist recently described as a millennial carmaker, came out of MIT with a Ph.D. in automotive mechanical engineering, telling his professors he was going to start his own car

company. They probably figured he wouldn’t. Non-believers may think the company overvalued, particularly since it had delivered a mere 156 pickups by the end of October, But Mr. Scaringe now has both the fortune and the green technology to pass onto his future generations. Scaringe felt guilty about the emissions from internal combustion engines, so he turned to EVs and in

2009, the year Ford and GM went bankrupt, he launched what would become Rivian - from River and Indian. According to Scaringe, the startup had “no money, no team, no technology, no suppliers, no brand and no production infrastructure.” A couple of years saw him forgetting an initial focus on sports cars and veering to pickups and SUVs. The initial plan was a joint development with Ford, and although Ford is still continued

Manufacturing Outlook / December 2021

AUTOMOTIVE OUTLOOK

an investor, and has its EV models on the market, so it pulled away from Rivian. For almost the first decade, the company kept a low profile, and Scaringe spent the time lining up capital and manufacturing capacity before unveiling the first two models at the 2018 Los Angeles Auto Show, following which the company signed a big order for delivery vans from Amazon. There are now great expectations for Rivian and its founder. Over 50,000 customers have put down deposits for Rivian’s EVs; the next big challenge will be producing them. GM’s latest milestone in its EV ventures was an order for 5,400 EV410s from Merchant Fleet, a fleet-management company that had already ordered 12,600 EV600s. The EV410 is BrightDrop’s second model, its first, the EV600, will soon be introduced by Federal Express. GM announced earlier

this year a conversion of some $800 million of the Canadian Automotive Manufacturing Inc. (CAMI) plant in Ingersoll, Ontario, from the assembly of the Chevrolet Equinox SUV to the production of electric vehicles. BloombergNEF-BNEF-Bloomberg New Energy Finance reports that GM is to install 40,000 public EV chargers across the U.S. and Canada through its dealers. They will be available for use by all EV drivers, not just those who buy a GM model. The move is a part of GM’s plan to invest $750 million into expanding public charging options as EV sales increase. BNEF further adds that there are 113,000 public chargers in North America and about 1.5 million battery electric vehicles have been registered in the U.S. and Canada combined since the start of 2011. Nissan Motor Co. will invest 2 trillion yen ($17.6 billion) over the next five years to electrify more of its lineup and will focus on battery-powered

cars for its long-term growth. The company will introduce 23 new models by 2030, 15 of which will be new electric vehicles. Nissan will aim for more than half its sales to be EVs by then. Nissan was an early leader in the EV field, releasing the world’s first mass-produced EV, the Leaf, in 2010. The model is still one of the world’s top sellers, though it has recently fallen quite a way behind Tesla’s models. Nissan has a new electrification strategy called Nissan Ambition 2030. The company plans to electrify more than 75% of sales in Europe, 55% in Japan, and 40% in China by fiscal 2026. It plans to have 40% of sales in the U.S. electric in fiscal 2030. In the long term, it intends to spend 20 billion yen on charging infrastructure for Lawrence Makagon, electric cars. n Staff Writer

Manufacturing Outlook / December 2021

CYBER SECURITY OUTLOOK

DECEMBER 2021

CYBER SECURITY OUTLOOK

What Did They Do to Cyber Maturity Model Certification?

By Ken Fanger

Over the past two years, there has been a chill running through the manufacturing world: The new and dreaded CMMC (Cyber Maturity Model Certification) standard from the Department of Defense. This security standard was developed as a way to protect the critical supply chain network for the Department of Defense (DOD). Promoted as an easy and intuitive method of securing the Defense Industrial Base (DIB), it has quick-

Manufacturing Outlook / December 2021

ly become clear it is anything but easy and intuitive. The complex and demanding CMMC standard began having a chilling effect on the DIB, as well as all the small manufacturers that support the DOD. Why was CMMC 1.0 such a problem? Its primary issue was its complexity and onerous implementation. The original concept with CMMC 1.0 was that every company would be audited every 3 years, and if you failed the audit, you would lose – or many never

even get – DOD contracts. There were five levels of certification ranging from Level 1 with 17 practices to Level 5 with 171 practices. From the very beginning, we were told that Levels 2 and 4 would never be used and that they were just “transition levels.” Unfortunately, there was little guidance on exactly what “transition levels” were, but it appeared they were intended to help ease the transition and burden going from Level 1 with only 17 practices to a Level 3 continued

CYBER SECURITY OUTLOOK mates of around $5,000 per employee, and the audit alone could cost you between $30,000 and $100,000 every three years. The cost expectations were beyond the ability of most small businesses to cover.

with 130 practices. From the start, there was major confusion as to what certification level a company needed to obtain. It was stated that if you had Federal Contract Information (FCI), you needed to have Level 1 Certification; and if you had Controlled Unclassified Information (CUI), you need to have Level 3 Certification – or possibly Level 5. It was never clear what exactly was needed to reach that higher level of certification requirement. The FCI was easy to understand: Any federal contract had FCI, so you knew that you needed to reach Level 1 at a minimum. Then it became murky. Do I need Level 3? Do I have CUI? How do I know? Most of our small clients were not sure if they had CUI, and if so, what they needed to do next. For most, the major hurdle was the cost. The Operations Manager for a midsize manufacturer recently shared: “I was looking at the cost to become CMMC certified and looking at the size of the DOD contracts that we had. It just didn’t make sense. It was going to cost us way more to do what they wanted than what we made in profit on the contract. We were just going to close that part of the business.” This is a true concern for many of our clients. In fact, I had suggested to many small manufacturers that they should consider getting out of the DOD business, as it was just not cost-effective for them. What were these estimated costs that were so shocking? There were esti-

Other Concerns Another area of concern was the requirement that you had to have everything in place on day one. They were not going to allow a roadmap to compliance, or what was called a Plan of Action, Milestones (PoAM). So, if your company was 90% complete in meeting the requirements, you would still fail. It proved to be a massive burden for a small business. There was also the problem of capacity. It was expected that there would be hundreds of Certified Third-Party Assessor Organizations (C3PAO) to handle the thousands of companies that would need to be certified. That never materialized. Instead, there were only a small number of C3PAO, and there was a real fear that companies that were awaiting certification could take years to be approved. The Result? This led to the greatest danger to the DOD: a reduction of supply chain companies and a threat to the diversity of support for the defense industry. The DOD heard the concerns of small manufacturers and realized that they were going to lose much of their production base. In response, about six months ago, the DOD went behind closed doors and made changes to the entire CMMC standard. The Changes: 1. T hey moved from 5 certification levels to 3 2. T hey made Level 1 and some of Level 3 self-assessments 3. The remaining Level 3 requirements would be assessed by C3PAO 4. They made Level 5 government assessments 5. They returned the limited ability to

have PoAMs. If you are not currently meeting the requirements, you can continue to advance in them while still obtaining contracts. 6. T hey have also reduced the requirements of the levels to be only NIST 800-171 or 172, instead of being the NIST (National Institute of Standards and Technology) requirement plus additional requirements

a. This resulted in only having 110 requirements instead of 130.

They have now opened the plan for public review and have paused the deployment of CMMC requirements in contracts until the review is completed. As a CMMC-Registered Practitioner, I feel this move will make it more obtainable for small manufacturers to be part of the DOD supply chain and not price them out of the market. If you would like assistance with CMMC or cyber security deployment, please contact us at https://ontechnologypartners.com/contact/. n Author profile: Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on compliance and security, including working on the SCADA control system for the Cleveland Power Grid. Mr. Fanger works with each client to identify their unique needs, and develops a customized approach to meeting those needs in the most efficient and cost-effective ways, ensuring client success.

Manufacturing Outlook / December 2021

ISSUES OUTLOOK

DECEMBER 2021

ISSUES OUTLOOK

by Royce Lowe

Rare Earths; Where Are We? China produces some 60 percent of the world’s crude steel, and around the same percentage of its primary aluminum. It’s aspiring to surpass these figures in the mining and production of that group of elements called rare earths. We’ve all heard the term rare earth, and we all know their strategic importance, from the manufacture of permanent magnets to wind turbine parts. They are an irreplaceable part of smartphones and fighter jets alike. The Wall Street Journal reports that China has approved the creation of one of the world’s largest rareearth companies to maintain its dominance in the global supply chain of these strategic metals amid deepening tensions with the U.S., according to people familiar

Manufacturing Outlook / December 2021

with the matter. The new firm will go under the name of China Rare Earth Group. It will be based in resource-rich Jiangxi province in southern China, according to the “people familiar” with it. The new entity would be created by merging rare-earth assets from some state firms, including China Minmetals Corp., Aluminum Corp. of China Ltd. , and Ganzhou Rare Earth Group Co. One of “the people” suggested that the combination of these three groups would serve to further strengthen Beijing’s pricing power and avoid infighting among Chinese firms. It would use this clout to undercut Western efforts to dominate critical technologies.

There is no doubt that China dominates the rare-earth industry, with some analysts saying that it controls 70 percent of the mining and 90 percent of the refining process. A White House reports says that China controls 55 percent of the mining and 85 percent of the refining process. No one in government or representing the three founding companies would comment on the situation. The rare earths, a group of 17 elements, are valued for their magnetic and conductive properties. They are used in the manufacture of a range of crucial technologies, used in electric vehicles, smartphone touch screens, and missile-defense systems. China effectively holds the reins when it comes to influencing these technologies. continued

ISSUES OUTLOOK rare earths as well as tungsten and molybdenum. Washington said these restrictions had driven up the prices of the metals.

Washington, quite naturally, is concerned that China could use its control of the rare-earth industry for strategic purposes. This past February saw the U.S. Department of Defense sign a technology investment agreement with Australia’s Lynas Rare Earths Ltd., which the Pentagon called “the largest rare earth element mining and processing company outside of China.” Under the terms of this agreement, Lynas will establish a light rare-earth processing facility in Texas.

For over a decade, Beijing has sought to consolidate mining, production, trading, and export of rare-earth materials under a smaller number of state-run enterprises. It also set production and export quotas and in 2014 consolidated the country’s rareearth companies into six entities. The 2014 consolidation followed a WTO ruling in favor of the U.S., wherein China had breached global trade policy rules by imposing export restrictions on various forms of

China’s Global Times wrote earlier this year that there is no intention to use rare earths as a countermeasure against any country, though it added that it remains an option when “foreign companies hurt China’s interests.” Regardless of what is said or what is written, there is no doubt that the U.S. needs to act, and collaborate, to fix this situation. The critical nature of both reserves and production of these elements can be best appreciated by the following data from a recent U.S. Geological Survey’s 2021 report, wherein are detailed the figures for reserves and mine production of the leading countries. There is much to be done. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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