Manufacturing Outlook June 2022 by Manufacturing Outlook

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IS A RECESSION NEAR?

PAGE 24

FEATURE STORY: UNDERTAKING ACQUISITIONS REQUIRES EVALUATION OF B2B ECOMMERCE WITH LEGACY TECHNOLOGY

ASIA OUTLOOK PAGE 30

METALS OUTLOOK PAGE 34

PAGE 10

PAGE 12

THE CASS INDEX REPORT PAGE 14

AFRICA OUTLOOK PAGE 38

AUTOMOTIVE OUTLOOK PAGE 44

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COLOMBIA: POISED FOR INDUSTRIAL GROWTH

MAY ISM PMI: 56.1%

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Manufacturing Outlook / June 2022

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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 Production Manager LINDA HOPLER Advertising ADVERTISE@MFGTALKRADIO.COM

PUBLISHER’S STATEMENT

Some Things Improve, Some Not So Much

6 MANUFACTURING OUTLOOK

GLOBAL PMI OUTLOOK

Global Steel Prices “Unstable” by Royce Lowe

Global Manufacturing Expanding by Norbert Ore

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

10 FEATURE STORY: UNDERTAKING ACQUISITIONS REQUIRES EVALUATION OF B2B ECOMMERCE WITH LEGACY TECHNOLOGY by TR Cutler

12 COLOMBIA: POISED FOR INDUSTRIAL GROWTH by TR Cutler

14 CASS INDEX LOGISTICS REPORT

34 METALS OUTLOOK Metals’ Roller Coaster Ride by Royce Lowe

36 INNOVATION OUTLOOK Leading The Digital Revolution Transforming U.S. Manufacturing

38 AFRICA OUTLOOK

Africa: A Continuous Business Paradigm Shift by TR Cutler

ISM MANUFACTURING REPORT ON BUSINESS

40 AEROSPACE OUTLOOK

It’s China’s Skies by Royce Lowe

COVER STORY: IS A RECESSION NEAR?

by Tim Grady

24 NORTH AMERICA OUTLOOK

Recession, Inflation, and Rates – OH MY! by Chris Kuehl

26 © 2022 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 Clearer Signposts, Creative Policymaking, and Rising Military Tensions by Christine Casati

Cass Transportation Systems

The Manufacturing PMI is 56.1%

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EUROZONE OUTLOOK Expansion Softening in Europe by Chris Anderson

ENERGY OUTLOOK Big Oil’s Dilemma by Jocelyn Bright

44 AUTOMOTIVE OUTLOOK The Pickup Race by Lawrence Makagnon

46 CYBER SECURITY OUTLOOK Play Our Way Smarter – What is Gamification? by Ken Fanger

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48 ISSUES OUTLOOK Speed Up of 3D Printing by Royce Lowe

PUBLISHERS STATEMENT

I’d Rather Say There Isn’t Than There Is On a sunny day, there are often clouds in the sky that are described in a variety of ways: mostly cloudy (the Debbie downer), partly cloudy (the pessimist), partly sunny (the optimist), mostly sunny (the Pollyanna). These days, there is a lot of talk about “The ‘R’ Word” – Recession – our cover story that is also touched on in the North America Outlook section and a few others. I’d rather say there isn’t than there is a recession looming in 2022. Each month, on Manufacturing Talk Radio, we speak with the Committee Chairs for the ISM’s Report on Business® series for manufacturing and services, Tim Fiore and Anthony Nieves, respectively. We also chat with Dr, Chris Kuehl, a well-respected economist who follows the myriad of indicators often – and closely. Collectively, a recession in 2022 seems to be unlikely, but, as Dr. Kuehl often says – “unless”. It’s that ‘unless’ we all worry about. We see almost everything up in price and inflation hitting a 40-year high. Historically, many of these indicators, especially in concert with one another, have been followed by a recession. But 2022 is weird because we are coming out of a pandemic where spending was held back. After all, people couldn’t go out. Oh, they still spent online, and remarkably so, but the current expansion is still pent-up demand-driven. While there are some clouds in the sky, most people are feeling the sunshine on their faces as they get out and about. Most of the clouds are viewed as puffy and pleasant, not dark and foreboding. So far, the general attitude of the consumer is also pleasant, even amongst some of the dark clouds of ugly social and political discourse. But the consumer is still spending, and manufacturers are still struggling to catch up to demand. At the moment, it doesn’t look like rain. You can comfortably leave your economic umbrella at home. It is difficult not to talk about the possible downside, though. It seems there are so many dark elements on the horizon – not overhead, but not out of sight, either. It is unsettling. Some seem to drift harmlessly away, while others seem to drift closer. We all prefer the sunshine of economic expansion. But our job is to look out into the near future and discuss those dark elements on the horizon when they are there. Many of our writers have contributed their comments in this issue about both the sun and the clouds, and the Manufacturing Outlook seems to be more positive than negative for 2022, and even into 2023. Unless – the Fed overreacts, just as they failed to understand the seriousness of the ‘transitory’ inflation. Or, the war in the Ukraine amplifies in intensity, bleeds over to other countries, or goes nuclear. Or monkeypox becomes a new epidemic or pandemic problem. Or – well, there are any number of variables, although this time it feels ‘different’. We can’t quite put a finger on it – it’s just a feeling. However, enjoy the sunny economic expansion. We are in the 24th month of a cycle that typically lasts 36 months, and could go longer if the supply chain problems that we have begin to abate, and prices level off. Declining prices would be nice, but until the economy turns that is an unlikely scenario – unless energy prices and perhaps prices at the pump ease. That would chase a few clouds away. 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.

Manufacturing Outlook / June 2022

MANUFACTURING OUTLOOK

JUNE 2022

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI SEES SLIGHT RISE, AS DOES CHINA’S. NORTH AMERICA HOLDING UP. SUPPLY CHAIN DISRUPTION STILL A MAJOR PROBLEM. NEW CAR SALES DOWN WORLDWIDE. GLOBAL STEEL PRICES “UNSTABLE.” By: Royce Lowe The month of May saw the creation of 390,000 confirmed jobs, above the 328,000 predicted by Dow Jones. The unemployment rate remained at 3.6 percent (U-3 which measures people actively seeking employment in the previous two weeks; U-6 is more than twice that and includes part-time employed, marginally employed, and disaffected unemployed). Leisure and Hospitality created 84,000 jobs; Professional and Business Services 75,000; Transportation and warehousing 47,000; Construction 36,000. Manufacturing added 18,000 jobs. Total employment is

Manufacturing Outlook / June 2022

still 440,000 jobs below the preCovid level.

figure rolled up to 57.0 in May from 59.2 in April.

The Bureau of Economic Analysis says the U.S. real Gross Domestic Product (GDP) decreased at an annual rate of 1.4 percent in the first quarter of 2022, according to the “advance” estimate. In the fourth quarter of 2021, GDP increased 6.9 percent. S&P Global’s remarks on U.S. manufacturing for May show the manufacturing upturn slowing from cooling demand, surging costs, and material shortages, with production and new orders increasing at slower rates. The PMI

Cost inflation was up at its fastest since November 2021’s series peak. Confidence was at its lowest since October 2020. May saw an improvement in operating conditions, but the rate of growth eased to its softest since January, as expansions in production, new orders, and stocks of purchases dwindled. Overall demand, however, remained strong, with firms hiring more workers to take care of backlogs. Selling prices were up to near-record levels. continued

MANUFACTURING OUTLOOK Export orders rose during May at the slowest rate for four months. There were concerns regarding the impact of inflation that dampened customer expectations. Employment numbers were up at a faster pace in May, including filling of longheld vacancies. Supplier delivery problems continued to aggravate production efforts. Global crude steel production was down by 5.1 percent year-overyear in April for the 64 reporting countries – which represent 98 percent of world crude steel production – to 162.7 million tons (MT). U.S. crude steel production for April was 6.9 MT, down 3.9 percent year-over-year. In April, China produced 92.8 MT, down 5.2 % year-over-year; India 10.1 MT, up 6.2 %; Japan 7.5 MT, down 4.4%; Russia (estimated) 6.4 MT, up 0.6%; South Korea 5.5 MT, down 4.1%; Germany 3.3 MT, down 1.1%, and Brazil 2.9 MT, down 4.0%. The EU (27 countries) produced 12.3 MT. In the first quarter of 2022, hot-rolled, cold-rolled, and hot dip galvanized imports to the EU were down 25, 10, and 40% respectively. Primary global aluminum production in April was reported at 5.599 million tons, with production in China, at 3.290 million tons, representing 59 percent of the world total. Production was 500,000 tons in GCC; 377,000 tons in the rest of Asia; 244,000 tons in Western and Central Europe; 315,000 tons in North America, and 333,000 tons in Russia and Eastern Europe. According to J.D. Power, total new light vehicle sales for the U.S.

for May 2022, including retail and non-retail transactions, are projected to reach 1,188,100 units, an 18.0% decrease from May 2021. Comparing the same sales volume without adjusting for the number of selling days translates to a decrease of 24.3% from 2021. The seasonally adjusted annualized rate (SAAR) for total new-vehicle sales is expected to be 13.6 million units, down 3.3 million units from 2021. The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and S & P Global in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – rose very slightly from April’s 52.2 to 52.4 in May. Production fell for the second month running, with the continuing downturn in China. Inflation stayed high. International trade volumes were down, as new export orders fell at the quickest rate since July 2020. There were lower production volumes, there was lackluster demand, supply chain disruptions, inflation, the Russia-Ukraine war, and the downturn in Chinese manufacturing. (The global manufacturing index, including China, was at 49.7 in May; the same index without China, was at 52.7.) New orders rose at quicker rates in the consumer and investment goods sectors but fell slightly in the intermediate sector. Manufacturing employment was up for the 19th month running. THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes

in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good up to the present day, but 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, regarding a given quarter or month. The figures for GDP represent the percent change on the previous quarter, or annual rate. The consumer price increases represent year-over-year changes. The percentage for unemployment figures are for the month as noted. CANADA saw buying activity expand at a record rate in May, with rates of input and output price inflation easing to three-month lows. Operating conditions in Canada’s manufacturing sector improved in May amid stronger expansions in production, new orders, and employment. There was sustained demand growth leading to firms upping their buying activity, and a coincident build-up of capacity pressures. The PMI for May, at 56.8, was up from April’s 56.2. There was stronger demand, particularly for consumer goods, and higher demand from the U.S. market. Despite efforts to up production, and the strongest employment increase for 17 months, capacity pressures continued to emerge. There was a significant increase in the rate of backlog accumulation. Firms had insufficient capacity to deal with the surge in new orders. Supplier performance deteriorated once again, with port congestions, material scarcity, and lockdowns in China all leading to delivery delays. Canada’s light vehicle sales for May were down 8.5 percent yearover-year, due to ongoing supply challenges. Sales were estimated at 140,725 vehicles. The SAAR for 2022 is 1.36 million vehicles. continued

Manufacturing Outlook / June 2022

MANUFACTURING OUTLOOK MEXICO saw its PMI above the critical 50.0 threshold for the first time in 31 months at 50.6 in May, up from 49.3 in April. Total domestic sales fell further, but the good news for Mexico involved international trade, where some companies reported the fastest expansion in new export orders since February 2019, with a resultant increase in employment. There was again a sharp rise in input costs, a negative impact from supply chain problems.n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / June 2022

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FEATURE STORY

Undertaking Acquisitions Requires Evaluation of B2B eCommerce with Legacy Technology By: Thomas R. Cutler

There are many reasons for the velocity and frequency of mergers and acquisitions within the industrial complex. The most obvious rationale is to grow market share. Topline revenue growth is only achieved through organic sales or from acquiring competitors. While logical, there are frequently missteps when blending organizations which can spell disaster. Culturally, there may not be a great fit, but with care and diligence, those pitfalls can be managed. The expectation of continuous revenue streams from a blended organization creates potential landmines unless the technology includes a well thought out evaluation for B2B eCommerce integration. (In some cases, the company being acquired may not have a digital presence

at all.) The decision to acquire a company must be made based on financial considerations since the industrial sector is increasingly digitized.

and acquired company must have a seamless experience. The customer is less interested in the acquisition than the ease and familiarity with which orders may be processed.”

Unifying All Systems Makes Acquired Organizations Operate As One

Utilizing Scalable, Flexible, And Customizable Solutions

A short-term strategy of eliminating smaller competitors is not sustainable. Creating a unified system is the task of experienced technology consultants. Failing to find the right tools or executing the unification correctly will prove problematic. According to Yoav Kutner, co-founder of OroCommerce, “The customers from the acquiring

Technology becomes vital when creating an interface allowing the new parent company to blend and merge all pricing, purchasing, and delivery considerations without disrupting the customer experience. Dynamic user interfaces maintain the prior buying experience, permitting a smooth and seamless transition. Too often, market analysts are looking at the efficacy of the blended organization rather than the required operational functionality and execution. continued

Manufacturing Outlook / June 2022

FEATURE STORY Customer Needs Are Clear They Do Not Like Changes Customers would prefer to continue using the systems they are accustomed to using. Because many companies intend to continue acquiring competitors, the technology consultative process is not a onetime situation. Every time a new company is acquired, the iterative process must ensure the customers’ experience remains positive and engaging. Steps for Efficient M&A B2B eCommerce Technology Integration 1 - Review legacy technology 2-F ind the source of truth for product data, customer data, and pricing data 3-F ind the system robust and flexible enough to consolidate and sync all information

4 - Integrate through middleware to minimize future spending 5 - Proceed with acquiring more companies and connecting them to this system Other Considerations For Increased Industrial Acquisitions The obvious rationale for buying a competitor is to acquire their customers. Other considerations are currently driving the acquisition trend. Supply chain disruptions may be better handled by the company acquired, offering a diversified supply chain. Acquiring companies’ supply chain distribution process can spell the same kind of trouble referenced earlier. Various methods of different distribution models are utilized to create best-practice policies and rules. Kutner believes, “Very few technologies can successfully support M&A growth. Some fundamental things are usually lacking such as having both customers, pricing, and product data all in one system (CRM + Commerce). Frequently, the ability to support multiple organizations under one platform (and one license) is not accomplished with cost-efficiency.” More Than Just A Webshop A good B2B eCommerce platform can be so much more than just a

webshop. The complexities of B2B trade are the foundation of technology; it advances M&A activity a long way while demolishing boundaries. Consolidating systems without disrupting customer experiences, even improving them, is the required course for long-term growth. Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 24th 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. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including African manufacturing, Colombian manufacturing, Gen Z workforce, and Food & Beverage manufacturing/logistics. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / June 2022

MANUFACTURING TIDBITS

Colombia: Poised for Industrial Growth By: Thomas R. Cutler

Overview of Colombia Colombia’s population was 50.3 million in 2021, up from 40.4 million in 2000. The total population will reach 53.1 million by 2030. The share of those 0-14 years of age was 40.6% of the total in 1980 but had fallen to 23.2% by 2020 (still high by regional standards). The share of those over 65 years represented 8.3% of the total population in 2018 and it will rise to 12.8% by 2030. The U.S-Colombia Trade Promotion Agreement (CTPA) started a decade ago. It is a comprehensive trade agreement that eliminates tariffs and other barriers to goods and services. Although over 80% of U.S. exports of consumer and industrial products to Colombia have become duty-free, the CTPA provided a duty-free tariff-

rate-quota (TRQ) on certain goods that operate under a first-come/first-serve basis, except for rice and poultry, which are subject to auctions managed by Export Trading Companies (ETC). Colombia is pro-actively accessing other markets and has signed Free Trade Agreements (FTAs) with various countries and trade blocs, such as Canada, the South American Common Market (MERCOSUR), the European Union, Israel, Panama, South Korea, Costa Rica, and a larger trade bloc, the Pacific Alliance, which includes Mexico, Peru, and Chile.

limitations. The success of Americanstyle restaurants provides an avenue for introducing U.S. recipes and food ingredients into the Colombian diet. The growing lower and middleincome population, especially youth and working women, are stimulating new consumer trends and growth in processed foods. Market opportunities for health foods and organic products are expanding given growing obesity trends and support for healthy living campaigns. U.S. food suppliers and manufacturers have a positive reputation for food safety, availability, quality, and delivery.

Advantages for U.S. Exporters While there are always challenges, the advantages far outweigh the

Transportation is costly but with a multi-billion dollar investment in infrastructure over the next decade continued

Manufacturing Outlook / June 2022

MANUFACTURING TIDBITS that restriction will diminish rapidly. Consumer-oriented products account for 23% of U.S. food and agricultural exports to Colombia. This now makes Colombia the second-largest export market for consumer food products in South America, after that of Chile. Products manufactured in the U.S and sold to Colombia include processed and prepared dairy products, food preparation ingredients, fats and oils, cat and dog food, non-alcoholic beverages, chocolate, and other confectionery. Online Commerce Continues To Be Popular In Colombia In the last 10 years, Colombian consumers’ tastes and preferences have changed as they seek to try new products and demand higher quality and product innovation. The growth trajectory for Colombia is extraordinary! The ability for the country to manufacture products and ship on time to the USA makes it an ideal partner and poised to manage the labor shortages that will plague the USA for the rest of this decade. To accommodate this growth, Rafael Atehortua is heading up a new division of the Manufacturing Media Consortium. TR Cutler: What types of Colombian manufacturers are most seeking growth in the USA? Rafael: Many Colombian jewelers, clothing designers, and fashion companies are widely known and respected. We know that when they are seen in the media, particularly the B2B media (not just end-user consumer publications), they are taken more seriously.

solutions such as lean manufacturing, lean Six Sigma, Theory of Constraints, and more. Since employee engagement is reasonably easy to accomplish in Colombia, thanks to a willing workforce, focusing on best practices is the trend most obvious throughout the country. TR Cutler: How do you think media coverage will impact the perception of Colombian manufacturing over the next decade?

TR Cutler: Many of these companies are headed by Colombian businesswomen correct? Rafael: Yes, Colombian women have taken their design acumen and combined it with brilliant business leadership. We know that tapping into the US market is the new and most logical marketing outreach for these powerful women. TR Cutler: What are some of the biggest misconceptions that you believe Americans have about Colombia? Rafael: First and foremost, some Americans are not yet aware of how close, accessible, and progressive Colombian industry has become. Just three hours from Miami, we know that products can be made in Colombia at a much lower cost and the wages are much more affordable. There is no such thing as the great resignation in Colombia. People want to work and can actually be plant floor leaders, distribution coordinators, and accomplish production using the best practices. TR Cutler: Beyond fashion and jewelry what other trends have you spotted among Colombian manufacturers? Rafael: Perhaps most surprising to some American companies is the wide adoption of principled manufacturing

Rafael: There is no doubt that myths and misconceptions must be refuted in the media. Whether social media, print media, or podcasts, we need to ensure that Colombian manufacturers, industry thought leaders, and value propositions are presented in the best possible light. This is the education component that can only happen with a spotlight and microphone on our country and industrial leadership. Author Profile:

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 24th 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. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including Colombian manufacturing and Food & Beverage manufacturing/logistics. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / June 2022

CASS INDEX OUTLOOK

Cass Transportation Index Report by CASS INFORMATION SYSTEMS, INC.

Cass Freight Index - Shipments The shipments component of the Cass Freight Index® rose 5.4% m/m in May (up 4.0% SA), more than recovering the 2.6% decline in April. On a tough comparison, the y/y decline worsened to 2.7%, as expected, but the result was 1% ahead of the ACT Research estimate. We don’t typically look beyond 2-year stacks, bit since comparisons to 2020 have little meaning, the shipments component of the Cass Freight Index was up 0.6% on a 3-year stack vs -1.8% last month. These are similar to the conditions of the 2019 downturn.

Manufacturing Outlook / June 2022

The effects of lockdowns in China are still ahead and are likely to be muted for a number of reasons. After a nearly two-year cycle of surging freight volumes, two key drivers of growth for the freight cycle–goods consumption and inventory restocking–are faltering. Normal seasonality from here would have the shipments component back up 2% y/y in June and flat to up 1% for 2022. The news from the retail sector and in the oil markets suggest that’s probably optimistic, but at this point, it’s a pretty stable environment. No major downturn.

Freight Expenditures The expenditures component of the Cass Freight Index, which measures the total amount spent on freight, fell 4.9% m/m in May with shipments up 5.4% and rates down 9.8%. The m/m noise on rates is largely mix, with more LTL and less TL in the data set, and on a y/y basis expenditures were up 28% y/y, versus a 31% increase in April. On a seasonally adjusted basis, expenditures fell 5.9% m/m, with shipments up 4.0% m/m and rates down 9.5%. This index rose 38% in 2021, after

continued

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

CASS INDEX OUTLOOK a 7% decline in 2020 and no change in 2019. Tougher comparisons in the coming months will naturally slow these y/y increases, particularly next month. With a normal 0.5% m/m increase, the y/y change would slow to 15% from 28% in May. And simply using normal seasonality from here, the increase in 2022 will be about 19% after a 30% increase in the first half. Inferred Freight Rates The freight rates embedded in the two components of the Cass Freight Index still rose 31% y/y in May, in line with April, despite a 9.8% m/m decline. Comps, what can we say? Cass Inferred Freight Rates® fell 9.5% m/m on a seasonally adjusted basis in May. It’s tempting to see this as a sign that freight costs have peaked, and on a y/y basis that is true, as inferred rates will slow all the way to 13% y/y in June on normal seasonality. Supply/demand fundamentals have certainly turned looser this year, so it wouldn’t be an unreasonable conclusion. However, as noted above, the drop was largely due to mix, and with fuel prices still adding upward pressure, the descent is not straightforward. These rates are representative of the industry’s mix of contract and spot rates, but the 15% y/y decline in rates ex-fuel in the more real-time spot markets in early-June portends a downcycle on the horizon. Significant risks, such as new COVID variants, remain and equipment capacity remains limited and could tighten further if the Russia/Ukraine war or China lockdowns worsen the chip shortage. But 2022 has featured a big improvement in driver availability, and a flattening of freight demand.

This is a deflationary combination, though it will take several months to filter from the spot market into contract rates.

With the large declines in spot rates coming just ahead of the big spring contract season, the lead time between spot and contract may be compressed somewhat.

There have been tentative signs of recovering intermodal network fluidity as chassis production continues to accelerate and brisk hiring continues. Intermodal volumes continue to underperform the shipments component of the Cass Freight Index, though to a lesser degree as the latter has softened in recent months. Rail network congestion continues to add to Cass Inferred Freight Rates via excess miles in the freight network, but this effect is set to reverse as intermodal volumes are uniquely poised to grow y/y in 2H’22. After rising 23% in 2021, the normal season pattern from here would suggest an 18% increase in 2022 inferred rates. Cass Inferred Freight Rates are a simple calculation of the Cass Freight Index data, expenditures divided by shipments, producing a data set that explains the overall movement in cost per shipment. 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® rose 13.2% y/y in May to 168.6 after rising 14.1% y/y in April. While truckload rates have had an extraordinary cycle, the key leading indicators have fallen sharply over the past few months, which we expect to limit further upside in the Cass Truckload Linehaul Index and change its trajectory in the coming months.

Excess miles, rising fuel surcharges, and accessorial fees are all factors included in the inferred rate series, but not the Cass Truckload Linehaul Index. The true increase in freight cost, depending on how these factors shake out, is somewhere between the 14% y/y increase in the Cass Truckload Linehaul Index and the 31% y/y increase in the inferred rate. Depending on the mode, we estimate fuel costs alone are currently adding roughly 10% to the cost of freight on a y/y basis, clearly the largest part of the difference. Freight Expectations Growing evidence of weaker goods consumption, rising services substitution, and rebuilt inventories, with some categories now overstocked, was perhaps the most impactful news in freight this month. Just as the freight plateau is being reinforced, trucking employment rose the most on record with 27,300 new jobs added in the past two months. The nearly 5% y/y growth rate in the BLS Truck Transportation Employment data series, along with the elevated ACT Driver Availability Index, show a very different market balance than just six months ago. Now that the pendulum has begun to swing, “how bad?” and “how long?” have become some of the most crucial questions. The ACT Freight Forecast report provides monthly, quarterly, and annual predictions for the TL, LTL, and intermodal markets, including capacity, volumes, and rates. The report provides monthly updates of forecasts for the shipments component of the Cass Freight Index and the Cass Truckload Linehaul Index through 2024, as well as DAT spot rates by trailer type, including and excluding fuel surcharges. n

Manufacturing Outlook / June 2022

ISM REPORT OUTLOOK

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

ISM PMI at 56.1% for May 2022 Released June 1st ISM PMI for the past 5 years

MAY 2022 56.1%

Expanding Contracting

continued

Manufacturing Outlook / June 2022

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in May, with the overall economy achieving a 24th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The May Manufacturing PMI® registered 56.1 percent. The New Orders Index registered 55.1 percent, up 1.6 percentage points compared to the April reading of 53.5 percent. The Production Index reading of 54.2 percent is a 0.6-percentage point increase compared to April’s figure of 53.6 percent. The Prices Index registered 82.2 percent, down 2.4 percentage points compared to the April figure of 84.6 percent. Overseas partners’ disruptions are beginning to impact U.S. manufacturing, creating a nearterm headwind for factory output growth. Ten percent of panelists’ general comments expressed difficulty obtaining material from their Asian partners, which will impact reliable deliveries in the summer months. Fifteen manufacturing industries reported growth in May, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Nonmetallic Mineral Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Paper Products; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Miscellaneous Manufacturing‡; Primary Metals; and Electrical Equipment, Appliances & Components. 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 56.1% ®

PMI

Manufacturing grew in May, as the Manu2020 2021 2022 facturing PMI® registered 56.1 percent, 0.7 percentage point higher than the April reading of 50% = Manufacturing 56.1% Economy Breakeven 55.4 percent. The Manufacturing PMI® continLine ued to indicate solid sector expansion and U.S. economic growth in May. Four of the five 48.7% = Overall subindexes that directly factor into the ManufacEconomy Breakeven Line turing PMI® were in growth territory. All of the six biggest manufacturing industries — Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Transportation Equipment; Petroleum & Coal Products; and Chemical Products — registered moderate-to-strong growth in May.

Manufacturing at a Glance INDEX

May Index

Apr Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

56.1

55.4

+0.7

Growing

Faster

New Orders

55.1

53.5

+1.6

Growing

Faster

Production

54.2

53.6

+0.6

Growing

Faster

Employment

49.6

50.9

-1.3

Contracting

From Growing

Supplier Deliveries

65.7

67.2

-1.5

Slowing

Slower

Inventories

55.9

51.6

+4.3

Growing

Faster

Customers’ Inventories

32.7

37.1

-4.4

Too Low

Faster

Prices

82.2

84.6

-2.4

Increasing

Slower

Backlog of Orders

58.7

56.0

+2.7

Growing

Faster

New Export Orders

52.9

52.7

+0.2

Growing

Faster

Imports

48.7

51.4

-2.7

Contracting

From Growing

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 and Paint (6); Aluminum* (24); Aluminum Extrusions; Aluminum Products (5); Caustic Soda (3); Copper (5); Corrugate (4); Corrugated Packaging (19); Crude Oil; Diesel Fuel (17); Electrical Components (18); Electronic Components (18); Electronic Controls; Energy (3); Epoxy (2); Fiber Optic Cable; Freight (19); Hydraulic Components; Labor — Temporary (13); Lumber (6); Natural Gas (11); Packaging Supplies (18); Paper (3); Petrochemical Based Products*; Petroleum Based Products; Plastic Resins (5); Polyethylene; Polypropylene (3); Polypropylene Containers; Resin Based Products (2); Rubber Based Products (10); Semiconductors; Solvents (4); Steel* (22); Steel — Fabricated and Machined Components; Steel — Stainless (19); Steel Bars; Steel Castings; Steel Products (21); and Wheat. Commodities Down in Price: Aluminum*; Petrochemical Based Products*; Steel*; Steel — Scrap; and Steel — Hot Rolled. Note: To view the full report, visit the ISM ® Report On Business ® website at ismrob.org

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 / June 2022

continued

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI® New Orders (Manufacturing) 2020

May 2022 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders

2022

2021

ISM’s New Orders Index registered 55.1 percent. Of the 18 manufacturing industries, 11 reported growth in new orders in May, in the following order: Apparel, Leather & Allied Products; Computer & Electronic Products; Primary Metals; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Machinery; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Chemical Products; Transportation Equipment; and Fabricated Metal Products.

55.1%

52.9% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2020

Production

2022

2021

54.2%

52.4% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 54.2 percent. The eight industries reporting growth in production during the month of May — listed in order — are: Apparel, Leather & Allied Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Paper Products; Food, Beverage & Tobacco Products; Machinery; Transportation Equipment; and Chemical Products.

Employment (Manufacturing) 2020

2021

Employment

2022

ISM’s Employment Index registered 49.6 percent. Of 18 manufacturing industries, eight industries reported employment growth in May, in the following order: Apparel, Leather & Allied Products; Printing & Related Support Activities; Machinery; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Transportation Equipment; Fabricated Metal Products; and Chemical Products.

49.6% 50.5% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2020

2021

2022 80

65.7%

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in May, as the Supplier Deliveries Index registered 65.7 percent. Of 18 manufacturing industries, 15 reported slower supplier deliveries in May, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Primary Metals; Machinery; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Textile Mills; Transportation Equipment; Fabricated Metal Products; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Chemical Products; and Furniture & Related Products.

Inventories (Manufacturing) 2020

2021

2022

55.9%

44.4% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Inventories The Inventories Index registered 55.9 percent. The 14 industries reporting higher inventories in May — in the following order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Textile Mills; Computer & Electronic Products; Nonmetallic Mineral Products; Wood Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Transportation Equipment; Machinery; Fabricated Metal Products; Plastics & Rubber Products; and Chemical Products.

Manufacturing (products such as medical equipment and

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

continued

Manufacturing Outlook / June 2022

ISM REPORT OUTLOOK

ISM Report On Business ®

Manufacturing PMI®

May 2022 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2020

2021

2022

32.7%

Customers’ Inventories ISM’s Customers’ Inventories Index registered 32.7 percent. Only Apparel, Leather & Allied Products reported customers’ inventories as too high in May. The 14 industries reporting customers’ inventories as too low during May — listed in order — are: Textile Mills; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Computer & Electronic Products; Furniture & Related Products; Plastics & Rubber Products; Paper Products; Miscellaneous Manufacturing‡; Chemical Products; Machinery; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.

Prices (Manufacturing) 2020

2021

2022

82.2%

52.6% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2020

2021

2022

58.7%

Prices The ISM Prices Index registered 82.2 percent. In May, 17 of 18 industries reported paying increased prices for raw materials, in the following order: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Textile Mills; Chemical Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Paper Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Petroleum & Coal Products; Primary Metals; Plastics & Rubber Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 58.7 percent. Ten industries reported growth in order backlogs in May, in the following order: Textile Mills; Computer & Electronic Products; Machinery; Transportation Equipment; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Miscellaneous Manufacturing‡.

New Export Orders (Manufacturing) 2020

2021

2022

52.9%

New Export Orders ISM’s New Export Orders Index registered 52.9 percent. The seven industries reporting growth in new export orders in May — in the following order — are: Apparel, Leather & Allied Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Transportation Equipment; Chemical Products; and Machinery.

Imports (Manufacturing) 2020

2021

2022

48.7%

‡Miscellaneous

Imports ISM’s Imports Index registered 48.7 percent in May. The two industries reporting growth in imports in May are: Food, Beverage & Tobacco Products; and Computer & Electronic Products. Nine industries — in the following order — reported lower volumes of imports in May: Paper Products; Wood Products; Primary Metals; Fabricated Metal Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Miscellaneous Manufacturing‡; Chemical Products; and Machinery. n

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / June 2022

COVER STORY: IS A RECESSION NEAR?

IS A RECESSION NEAR? By: Tim Grady

Manufacturing Outlook / June 2022

COVER STORY: IS A RECESSION NEAR? What’s Up? There is a swirl of factors rising into an economic tornado that could tear apart the current expansion. The good news is that the in-thetrench economic indicators, like the JP Morgan and ISM Purchasing Manager’s Indexes, are holding above 50 – the dividing line between expansion and contraction – and remain fairly strong. In fact, the ISM Manufacturing Report on Business® has shown some of the highest consistent readings above 50 month-over-month in the current expansionary cycle than at any time in the last 40 or 50 years. The projection by the ISM is that manufacturing has another 12 to 18 months of expansion in this cycle. But headwinds have been building. Raw Materials - Input prices have been rising rapidly monthover-month, and some inputs are caught up in geopolitical conflicts exacerbating shortages, especially of grains and seed oils. There is frequent talk about a food shortage or food crisis developing in various areas of the world, making countries nervous about exporting their food ingredients. Commodities up in price include adhesives and paint, aluminum, aluminum extrusions, aluminum products, caustic soda, copper, corrugate, corrugated packaging, crude oil, diesel fuel, electrical components, electronic controls, energy, epoxy, fiber optic cable, freight, hydraulic components, labor, lumber, natural gas, packaging supplies, paper, petrochemical-based products, petroleum-based products, plastic resins, polyethylene, polypropylene, polypropylene containers, resin-based products, rubber-based products,

semiconductors, solvents, stainless steel, steel fabrications and machined components, steel bar, steel castings, steel products, and wheat – whew! Then we hit commodities in short supply, which, of course, increases demand and drives up the price. Energy Costs – For many manufacturers, fuel is the largest cost item, and it is being driven upwards by U.S. green policies and the war in Ukraine. The price per barrel of oil has stayed above $100 and will likely remain there throughout 2022. If geopolitical conditions worsen, the price per barrel may break the previous record that was above $140 for Brent crude. This, in turn, drives up the cost of diesel, regular gasoline, and jet fuel, putting pressure on everything that moves by sea, rail, truck, bus, car, or plane. The cost to convert to electricity is ultimately paid for by the consumer and it will be decades before enough electricity-generating systems are

in place to offset oil – just in the U.S. For its needs, China burns 4,319,921,826,000 MMcf, nearly 6 times as much coal as the U.S. Coal will continue to be burned to heat water to drive steam turbines for the next 100 years, or until proven reserves are all consumed (est. at 133 years at current consumption rates). Transportation - The cost of shipping containers rose 5-fold during the pandemic but eased slightly, and the Shanghai port in China, the busiest in the world, is beginning to get back to business after a 9-week shutdown. However, many container ships were taken offline during the pandemic due to crew shortages. In addition, ports across the world were also unable to fully staff their container yard operations. This has created congestion throughout the system that will take months to unwind – but not in time for new orders for the year-end holidays to hit the system. continued

Manufacturing Outlook / June 2022

COVER STORY: IS A RECESSION NEAR? price increases depriving businesses of purchasing power is often a dangerous double whammy. The Fed, hoping for a ‘soft landing’ is raising the Fed Funds rate somewhat aggressively. If the demand for 10year U.S. Treasury bonds exceeds the demand for 2-year bonds, creating a yield curve inversion, it historically has signaled a recession. Inflation remains at a 40-year high, overrunning all recent wage gains. The Self-Fulling Prophecy

The full containers piling up in ports are moved by truck and rail, and the empties are returned, but the shortage of trucks and drivers, both short and long haul, leaves more containers to move than equipment to move them. Warehouses and distribution centers have added to the congestion by regulating when a truck can arrive at a facility to offload. Wait times of several hours are not uncommon – if the driver will wait at all. And trucks turned away have to eventually deliver, so the system will remain clogged everywhere from end to end well into 2023. Labor – Unemployment, using the U-6 rate, is 6.6%, down from 10.10% one year ago (U-6 is all unemployed, marginally attached, and part-time for economic reasons individuals as a percent of the civilian labor force plus all marginally attached workers). Although labor exists, younger individuals are resisting traditional work while employees who worked from home during the pandemic are resisting going back to the office. Each month, some 4 million Americans switch jobs (measured as ‘quits’). Both healthcare costs

and the demand for higher wages are driving part of the inflation equation. This is exacerbated by the cost to develop or accommodate the nextgeneration workforce, whether it is X, Y, or Z, who look at the work environment for its quality of life benefits and opportunity to make a difference rather than being a cog in the machine. Presently, there are more than 11 million job openings in the U.S. that will likely either remain unfilled or eliminated through automation driven by the resistance of labor to work and wage costs. The $15 per hour minimum wage mandate was sufficient for many fast-food operators to cost-justify automation and run 24/7/365. Those entry-level skill-building jobs will not return, and the more automation that is used, the more it will likely decline in Capex cost, which will accelerate further implementation in business and industry. Fed Rates - Government intervention rarely manages overheated conditions well, often overreacting with too much, too late. Raising interest rates in the face of historically high

Quite frequently, recessions are self-fulfilling prophecies. If enough people talk about it, then people will begin to react as if it is here and move to conserve cash, collect on accounts, reduce trade credit, decrease inventories, and lessen labor. However, some of the traditional conditions of pre-recession periods of the past do not exist in the present post-Covid world. There is no glut of labor to cut. Raw material inventories are at historical lows. Backlogs for many are at historic highs, and credit and collections have been in good shape. This is an odd mix of economic conditions, but a recession may be triggered by geopolitical events or federal government policy that overwhelms or worsens other headwinds. This is the more likely scenario, especially if the Fed gets too aggressive with rate hikes to tamp down inflation and turns a soft-landing recession into a hard crash – which a few prognosticators are already predicting. So, the more overheated the conversation becomes, the more likely that consumers, businesses, manufacturers, the Fed, and government at all levels will overreact. continued

Manufacturing Outlook / June 2022

COVER STORY: IS A RECESSION NEAR? Eyes Wide Open What to Watch This Time: New Orders – New Orders are the demand driver of this current economy. They have been exceptionally strong during this expansion creating record backlogs. If New Orders become unsteady, soften, or dramatically decline, then backlogs will begin to burn off and both labor needs and raw material demands will recede. It is worth investing 25 minutes on the first business day of each month to listen to the Manufacturing Talk Radio podcast with Tim Fiore, Committee Chair for the ISM’s Manufacturing Report on Business® to get the most recent update. Collections – watch them like a hawk; if payments begin to

slip into the 60 and 90 days past due categories, dark clouds may be forming across business sectors. Consumer Sentiment – if consumer spending begins to falter month-overmonth, New Orders will begin to soften or could suddenly tank. Fed Rates – unfortunately, the Fed tends to close the barn door after the horses are gone. Finally, no one can spend their way out of a recession, but the government can spend our way into one. Too much money in the system at a time of high inflation coupled with Fed rate increases could trip the tipping point of a great expansion. Consumer Confidence – so far, even in the face of high inflation, consumer confidence has remained fairly steady. However, counting on the pent-up savings to further fuel this expansion may be a bad bet since some of those dollars are for the Baby Boomers’ retirement.

How soft or hard that landing might be cannot be determined, but downturns usually last 12-18 months; nasty ones go longer. So, is a recession near? The indicators say no, at least through 2022 unless something untoward happens geopolitically. Q1 of 2023 is probably 60/40 against a recession. Q2 may be 50/50. We will revisit this in the fall of 2022 to see where the indicators are then. If the war in the Ukraine gets resolved, then this expansion could chug more merrily along well into 2023. If it gets worse where oil, natural gas, and food ingredients are severely impacted, then hunker down. Author profile: Tim Grady is Editor-inChief of Manufacturing Outlook, and co-host of Manufacturing Talk Radio. You can reach him at timgrady@ mfgtalkradio.com. n

THE FLAGSHIP REPORTS The Flagship Reports with Dr. Chris Kuehl is both an “Officer of the Watch” briefing of economic conditions and an Executive Briefing on specific situations impacting those conditions. Written and presented by the officers of Armada Corporate Intelligence, Dr. Kuehl lightens up the mood of sometimes distressful geoeconomic news with a bit of humor. This monthly podcast includes information from the Flagship Reports issued 3 times and week, and AISI, the Armada Strategic Intelligence System, a tool for durable goods manufacturers that dives deep into the sector each month to provide more than 95% accurate near-term forecasts.

Manufacturing Outlook / June 2022

NORTH AMERICA OUTLOOK

JUNE 2022

NORTH AMERICA OUTLOOK by Chris Kuehl United States Recession, Inflation, and Rates – OH MY! As a good Kansas lad, I can’t resist the occasional Wizard of Oz reference, and this one seems somewhat apt. The media has been alive with doom and gloom, economists and analysts filling the airwaves with dire forecasts. How real are these? Should we be jumping off the ledge? There is certainly a great deal to contend with and these challenges are real enough, but there are also solid indicators and promises

of better days ahead (assuming some solutions emerge to the current collection of stressors). A few points of clarification as we listen to the latest commentary. Are we facing imminent recession? No. Recession is two straight quarters of negative growth. The last quarter of 2021 featured rapid growth of 6.9% but the first quarter of 2022 saw a decline of 1.4%. If the second-quarter numbers are also down the recession

call can be made. The revised firstquarter numbers will be released soon. Are we facing stagflation? No. To be in a stagflation situation, the economy has to be facing both double-digit inflation AND doubledigit unemployment. Inflation is at 6.1% according to the Personal Consumption Expenditure data and the PCE, which is what the Fed looks at. The more volatile Consumer Price Index is at 8.5%. The unemployment rate is at 3.6% and that is close to continued

Manufacturing Outlook / June 2022

NORTH AMERICA OUTLOOK are close to 6.0% and that is a major leap from the 1.5% level struck in 2020. Mexico As the U.S. goes, so goes Mexico. This has long been the case and nothing in the last few years has changed that situation. The Mexican economy managed a bit of growth in the first quarter – growing by 0.9%. Nearly all of this gain can be attributed to the demand for commodities (oil and food). record lows. The quit rate is as high as it has been in decades. There is no sign of impending stagflation. Will the Fed react to high inflation numbers and jack rates up? Not likely. The Fed has repeatedly reminded people that inflation is being driven by factors out of their control – energy prices and the supply chain breakdown. They will hike rates but still insist that these will be between 2.5% and 3.5% by year’s end – certainly higher than they have been but not near record levels. Meanwhile, the industrial numbers are still trending positively. The Purchasing Managers’ Index is still solidly in expansion territory with a reading of 55.4 for May (although it was down from the 57.1 noted the month before). Capacity utilization is still not in the “normal” range between 80% and 85% but it is closer than it has been at 78.9. The latest data from Armada’s Strategic Intelligence System shows a small dip in the industrial outlook but the curve is still at a three-year peak Canada The Canadian economy is surging and commodity growth is the driver. The first-quarter gains were impressive - 5.6%. The nation’s GDP gained by 1.1% in February and that beat the estimate of 0.8%. The flash estimate for March showed another

0.5% gain and that marks the ninth month in a row for growth. The motivation for these gains will come as no shock to anyone who has been following events globally. The energy crisis and the food crisis have made Canada’s commodity-based economy surge and this trend is likely to extend through the remainder of the year. While this is good news on one level, it also creates a problem for the Bank of Canada. While the U.S. is arguably hitting a downturn, the Canadian economy is on the edge of overheating and that has prompted a discussion of significantly higher interest rates to cool things down. This means taking rates out of the neutral zone (2.0% to 3.0%) for a quarter or two and maybe longer. With per barrel oil prices expected to stay above $100 for some time, the impact on the Canadian economy will be positive but almost too positive. The manufacturing sector is not enjoying this surge as much. Their costs are rising as logistics become more expensive and commodities rise. Those that are focused on the energy sector or food production are doing well enough but automotive has taken a major hit (just like in the U.S.). The unemployment rate has fallen again to a new low of 5.2%. Inflation rates

The other three key sectors of the Mexican economy are moribund. The level of remittances from the U.S. have been declining for years as pressure remains on immigration. The tourism business crashed during the pandemic and has shown little recovery since. Manufacturing was competing with oil as the main driver for the system but this is tightly connected to the U.S. and has not been growing as fast as would be preferred. Much of Mexican manufacturing is geared toward the struggling U.S. automotive sector. The policies of AMLO (Andres Manuel Lopez Obrador) continue to inhibit the recovery. Covid still rages in Mexico and cooperation with the U.S. is at a minimum. A recent high-level conference was supposed to bring the U.S. and Latin states together to work on trade issues but Mexico refused to engage unless the U.S. invited Cuba, Venezuela, and Nicaragua to participate. The U.S. refused and AMLO backed out. The official unemployment rate is 4.7% but most analysts assert that the real rate is close to three times that high at between 15% and 20%. The inflation rate stands at around 7.8% and has been getting worse. It is a far cry from the inflation record of 179% set in 1988. n Chris Kuehl

Manufacturing Outlook / June 2022

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE Expansion Softening in Europe

by Chris Anderson S&P Global Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), fell back from 55.5 in April to 54.6 in May, an 18-month low. Manufacturing orders fell for the first time in almost two years as inflation continues. There was a weaker improvement in the health of the Euro manufacturing sector, and an accompanying fall in business confidence among the lowest seen in the past two years amid concerns regarding the outlook for prices, supply chains and demand. Manufacturers added to their stocks of purchases at the quickest pace in three months during May. Demand fell in May, amid high selling prices. New export orders also decreased at the sharpest pace for nearly two years. Western Europe’s new vehicle registrations are down for the tenth month in a row, in April, again due to a supply chain crisis, and inflation is discouraging buyers. Sales were down 20% to 830,447 in April. The forecast for the year is at less than 10 million vehicles. THE UK saw a slowdown in growth

Manufacturing Outlook / June 2022

in May as production, new orders, and employment rose at weaker rates. Production growth was at a sevenmonth low. The consumer goods sector was hit by weaker consumer demand. Input cost and output price inflation remained high. Rates of expansion in production, new orders, and employment all fell. There was weaker growth in domestic demand, lower export sales, disruption from supply chains, increasing cost pressures and the war in Ukraine. The PMI for May, at 54.6, was down from April’s 55.8. New orders fell in both the consumer and intermediate goods sectors, the former closely linked to the current cost-of-living crisis. May saw new export orders fall for the 8th time in the past 9 months, with companies attributing lower overseas orders to

Brexit difficulties, transportation delays, shipping disruptions, and the war in Ukraine. Input cost inflation was still high in May, but easing from April. Chemicals, energy, food, freight, fuels, gas, metals, oil, plastics, polymers, timber, and transportation were all reported as up in price. Sales prices were increased accordingly. Employment was up for the 17th consecutive month. The outlook for 12-months production is positive, but confidence is down to a 17-month low, due to a possible recession, rising cost pressures, the war in Ukraine, and stretched world supply Chris Anderson, chains. n Staff Writer

GLOBAL PMI OUTLOOK

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

GLOBAL MANUFACTURING EXPANDING, STILL WEAKENING MAY 2022 BUSINESS SURVEY INSIGHTS According to our scatterplot of 18 surveys, seven economies recorded Expanding-Strengthening; an additional nine reported ExpandingWeakening; two (both China) reported Contracting-Strengthening, and zero saw Contracting-Weakening. In May, China rebounded, however both surveys remain in contraction territory. Mexico broke out of

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

contraction territory for the first time in 26 months, and the U.S. ISM Manufacturing figure rose despite expectations of a decline.

of $170 brl. Oil and $6 gal. Gas. We still have a long way to go to re-supply the basic industries such as food, energy, and chemicals.

Confidence appears to be building on the side of some positive recovery in most supply chains, as indicated by the ISM survey and the results from our proprietary SLIM Survey just 2 weeks ago. There remain opportunities for improvement, and it is certainly not smooth sailing from here on out. Help wanted signs still dominate many major thoroughfares. Energy prices appear to have taken off again, with budding diesel shortages, projections

Given the current PMI readings from around the globe, we see continuing expansion with numerous readings in the low to mid 50s, particularly in manufacturing. It has taken quite an effort to sew the patchwork of products and relationships that make the wheels keep turning. We don’t expect a perfect recovery out of an imperfect business cycle. However, we are seeing signs of sustainable business activity.

continued Manufacturing Outlook / June 2022

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ The U.S. Manufacturing sector has performed extraordinarily well posting 24 consecutive months in expansion territory with the PMI averaging 58.8 percent during that period. In spite of strong negative forces, the manufacturing sector continues to grow at an aggressive pace. Last month we noted that New Orders, Backlog of Orders, and Production weakened at least four percentage points. This month, Inventories (55.9, +4.3) was the only Index gaining significant strength. Manufacturing supply chains are still struggling with factory closures. The continuing lockdown in Shanghai has affected everything from ports to parts for businesses and their customers globally. This, as well as commodity shocks, have previously sent global supply chains into another tailspin. Metals, chemicals, agricultural, energy, and electronics appear to be among the groups hardest-hit. These five PMI components plus the remaining indexes in the series are trending lower, and we expect that will continue during the balance of the year. According to the press release, “The past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for May (56.1 percent) corresponds to a 2.6-percent increase in real gross domestic product (GDP) on an annualized basis.”

crime, and supply shortages that directly affect the consumer.

for manufacturers as they see no end in sight for the increases.

Customers’ Inventories: The index for raw materials, components, and finished goods fell to 32.7 (-4.4). This is “too low” for the 68th consecutive month and the index has been under 40 percent for the past 22 months. This is an indication that buyers are still struggling to keep plants synchronized with their supply chains. It appears that priorities for 2022 will continue to be unraveling inventory issues in many supply chains.

Seventeen manufacturing industries reported growth in May in the following order: Apparel; Printing; Machinery; Nonmetallic Mineral; Computer & Electronic; Food, Beverage; Transportation Equipment; Paper, Petroleum & Coal; Plastics &; Rubber; Fabricated Metal; Chemicals; Miscellaneous Manufacturing; Primary Metals; and Electrical Equipment, Appliances &amp; Components. The only industry reporting a decrease in May compared to April is Furniture.

Prices: The Manufacturing Prices Index (82.2, -2.4) fell slightly during May. Prices top the list of concerns

Drivers: While the overall PMI still lies at a satisfactory level, the overall trend is slowing. New Orders Minus Inventories: This key spread fell to -0.8 (from 1.9), signaling New Orders are burning and inventories are improving. We like to see New Orders typically outpace Inventories by an average of 6-8 points. The complexity of the survey results make it difficult to forecast, with limiting factors such as oil prices, Ukraine war, lack of border control, Chinese lockdown, rising

Manufacturing Outlook / June 2022

continued

GLOBAL PMI OUTLOOK

Manufacturing Outlook / June 2022

ASIA OUTLOOK

JUNE 2022

ASIA OUTLOOK by Christine Casati

CLEARER SIGNPOSTS, CREATIVE POLICYMAKING, AND RISING MILITARY TENSIONS There seems to be more awareness and a reckoning of sorts among government officials, especially in the U.S., China, and Japan (the world’s top three economies by GDP) about how their policies to achieve one specific goal may have negatively impacted their entire economies; albeit, in totally different ways. We are seeing new signs of creative thinking and bolder actions in Asia to address new global economic realities amid ongoing pandemic disruption and geopolitical conflict. The good news is that these efforts should

have a positive impact on global manufacturing. The bad news is that Western economics may be falling out of favor. And instead of the decoupling of economies, we may see the decoupling of western-oriented economic values. Witness the current resurgence in the study of “socialist political economy with Chinese characteristics” (Tom Hancock, Bloomberg Markets). And the new Japanese Prime Minister Kishida called for a “new form of capitalism” (5/31). Not to mention India, which does whatever it wants.

CHINA In China, policies are primarily driven from the top down, unlike in the U.S. where market forces prevail and decisions about things like federal stimulus, although agreed to by a consensus among federal authorities, are passed down to beneficiaries who can use the funds as they see fit (e.g. agencies, states, enterprises, families, individuals), so economic outcomes are less predictable. In China, there are rarely choices over implementing policies. And the Chinese have specific continued

Manufacturing Outlook / June 2022

ASIA OUTLOOK outcomes in mind, which generally have turned out the way their central planners expected ... UNTIL COVID. The near-total shutdown of Shanghai’s economic activity, including surrounding areas feeding its ports for two months, and President Xi’s ongoing Zero Covid policy have had an adverse domino effect on domestic spending and more broadly the world economy which relies heavily on China as its greatest manufacturing hub, which contributed to supply chain chaos. On another front, China’s probe of technology companies has drastically impacted their stock values and led some to delist, sell off subsidiaries and change their branding, reducing taxable revenue. China’s 2020-21 intervention in the property markets has led to a collapse in real estate values, stalled or mothballed projects, and bankruptcy for some of its largest players, while overseas bondholders

have snapped up collateral assets. And finally, the absence of policymaking in metals trading may have led to some desperate and potentially fraudulent actions by some metals suppliers which are now being investigated. Inventories of aluminum in Jiangsu and Guangdong Provinces against which traders lent huge amounts of money on the Shanghai Futures Exchange may be far smaller and worth far less than the lenders were told, spooking the markets. The investigation is ongoing and new oversight policies will no doubt emerge (Bloomberg). New Policies: China has done a “rethink” as economic growth has slowed drastically. On June 1st, China announced it would extend credit of $120 billion in infrastructure projects to fight unemployment and support industry. Also, to counteract the damage of their recent policies (without admitting any), the Chinese

Premier Li Keqiang convened an unprecedented Zoom video call on May 25 with 100,000 officials and economists at all levels in attendance to issue some stark warnings: record low growth, shrinking budgets and no recovery in May, announcing there would be more stimulus measures to come (sources through Chinese newspapers and local social media). On May 31st, The State Council issued a “Policy Measure Package to Stabilize the Economy”, one day after the city of Shanghai issued a set of 50 policy measures, all designed to boost economic support for businesses (tax relief, fee reductions, and various subsidies). They have promised to ease year-long restrictions on technology companies, which they had feared were becoming more like huge banks, and support property markets. President Xi himself has helped pave the way to help the most indebted developer, China Evergrande Group, whose entire $22.7 billion in continued

continued Manufacturing Outlook / June 2022

ASIA OUTLOOK

offshore debt is in default, to convert it into new bonds to be paid over 7-10 years in installments to overseas bondholders, allowing it to survive (under discussion with bondholders in May). Overall, the warning to officials is that now is a critical time for determining year-end economic results, predicted by Western banks to be at least 2% lower than the government’s original target of 5.5%. All officials have been ordered to help reverse the downturn. China’s inflation remains low, in the 2% range, and is projected to be slightly lower by year-end (Trading Economics). One policy that has not changed: ongoing censorship surrounding Covid. Residents of Shanghai are not permitted to use the word “shutdown”…only to refer to preventive health restrictions. President Xi may be shielded for all time from the stigma of creating economic chaos if the word “shutdown” is allowed to disappear from all accounts of the pandemic response. He is facing re-election for an unprecedented third 5-year term in September. JAPAN In Japan, there is new leadership and some completely new economic policies to stimulate the economy.

And Japan has achieved an 81% full vaccination rate. In late November 2021, newly-elected Prime Minister Kishida announced a stimulus package of $490 billion USD, the largest in Japanese history, representing 10% of Japan’s economy. He does not care if it causes temporary inflation pressures. Inflation historically remains very low, sometimes hovering in negative territory impacted by exchange rates, yet currently remains close to the Bank of Japan’s decades-old core target of 2%. It is only recently that they’ve achieved this, coming in at 2.1% in April, up from March’s 0.8%. Annual inflation in 2019 was .48%, lower than 2018 which was 0.98 %. Economists do not expect demandpush inflation to take hold after economic reopening earlier this year, only a moderate rise in consumer prices. Growth in core machinery orders was higher than expected in March (7.6%), but due to the Ukraine crisis and ongoing Covid-19 slowdowns in China, factory orders are not expected to grow much this year. U.S. Trade Issues in Asia In the U.S., on the other hand, no matter how creative our policymaking is, we won’t come close to the low inflation rates found in Asia anytime soon. The Biden

Administration’s decision to maintain tariffs on a huge range of products from China while at the same time deepening sanctions against its adversaries has aggravated already existing inflationary pressures on energy costs, manufacturing costs, and domestic consumer prices, contributing to inflation not experienced for decades. Although he has eliminated tariffs on some metals from Japan and Europe, more needs to be done. Spot commodity prices have risen 36% by early June of this year (according to Bloomberg Commodity Spot Index which tracks prices for 23 raw materials). The U.S. is scrambling to find ways outside the typical policymaking arenas to “land the plane” so to speak to achieve lower inflation rates, requiring specific solutions to specific problems, while keeping some cards in our pocket to help with trade relations. Following is an example. CLIMATE CHANGE: The Case of Solar Panels from Southeast Asia The issue of Chinese solar panel trade tactics is well-known. The Commerce Department has been conducting a “quasi-legal” tariff investigation centering on whether Chinese solar manufacturers have been circumventing U.S. tariffs by producing and exporting their solar panel parts through 4 countries: Cambodia, Thailand, Malaysia, and Vietnam. Consequently, the U.S. domestic industry is at a standstill awaiting the outcome, cutting solar installation forecasts by over 40% amid pricing uncertainty for utilities and installers dependent on imported panels. The uncertainty has also created challenges for federal and state policymakers, budget forecasters, and utilities charged with helping achieve “zero-emissions power generation by 2035”. To inject some certainty and get the industry moving here, the Biden administration has announced a twopronged approach welcomed by the solar industry. Solar panels will be allowed to be imported through these 4 countries for two years without continued

Manufacturing Outlook / June 2022

ASIA OUTLOOK tariffs and without the potential for retroactive tariffs (allowed under The Tariff Act). At the same time, Biden is invoking the Defense Production Act which will greatly expand domestic solar panel manufacturing and other clean energy supply chain products. Although our domestic production has grown exponentially since tariffs were enacted years ago, the U.S. has nowhere near the capacity required for solar clean energy goals to be met within 13 years. If the above measures are implemented, solar panel production will triple by 2024, and imports from Asia could be greatly reduced (NPR). Trade and Security Tensions in Asia As U.S. manufacturers and investors reassess their manufacturing footprint in Asia, there will be winners and losers in the reshaping of the global supply chain network. Next month we will focus on how the United States is jockeying for influence in the Indo-Pacific (Biden’s proposals) and who is winning in terms of

economic initiatives (examples: Taiwan, Vietnam, South Korea, and Indonesia). Additional focus will be on the increasing security tensions in the region influenced by China’s aggressive flyovers of Taiwan’s defense zone, their buzzing of Canadian jets nearby North Korea, their attempts to influence 10 Pacific Island nations, and South Korean/US missile launches in response to North Korea’s. Note on Hong Kong: The number of new Covid positive cases has risen again in early June to a six-week high, tied to increased activities in bars. It is unclear what the government response will be under John Lee’s new leadership. China remains closed to most overseas travelers; North Korean borders continue to remain closed. Note on India: Gulf States (e.g. Saudi Arabia, Qatar, UAE, Kuwait, Oman, and Iran) have increasing clout over India which has been seeking

to enhance relationships with these countries. Over 65% percent of India’s crude oil imports come from the Middle East where over 8 million Indians reside, including 2.2 million in Saudi Arabia. Indian Prime Minister Modi is walking a tightrope trying to contain tension over religious rhetoric originating in India which has gone on for some time leading to a call by Muslim nations to boycott Indian products, potentially impacting total trade in the region. In the meantime, as global conflicts are reshaping energy relationships, India is still hedging its bets on lower-cost oil from Russia. Author profile: Christine is co-founder 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 / June 2022

METALS OUTLOOK

JUNE 2022

METALS OUTLOOK by Royce Lowe Metals’ Roller Coaster Ride Metals have had a topsy turvy ride in 2022 so far, and the year is far from over. Notwithstanding the price fluctuations we’ve seen with steel, those with non-ferrous metals have been equally marked and dramatic. Not too long ago, for example, we saw wild moves in the price of nickel, when the metal spiked at over $22 per pound in early March, to settle at $15 in April, back to around $13 in May. The metal is disrupting the stainless steel industry, where

over 50 percent of nickel is used in high-performance, heat-resistant alloys, and as a battery component in electric vehicles. Stainless producer Outokumpu’s alloy surcharge for grade 304 flat products was to soar to a record high of €3844 per ton, in May. That’s a surcharge of $1.84 per lb. This equates to a remarkable 44 percent increase, compared with the published alloy surcharge for March. The substantial rise is a result of the previous month’s

nickel volatility, plus inflated input costs for other raw materials. Some buyers reported receiving recent price offers for 304 cold-rolled sheet from local mills between 5000 and 5200 euros/ton ($2.40 - $2.50 per lb). European mills are also facing competition from suppliers in China and Taiwan, where European buyers report that they can buy type 304 cold-rolled coil at 4200 to 4600 euros per ton ($2.02 - $2.21 per lb) delivered, duty paid. The domestic steelmakers in Europe are in a quandary, so something has to continued

Manufacturing Outlook / June 2022

METALS OUTLOOK late April during U.S. Steel’s firstquarter earnings call. The company said it is seeing strong orders from the automotive, appliance, and construction industries, which will help the company extend record earnings for another quarter. This echoes the tone from Nucor Corp., Cleveland-Cliffs Inc., and Steel Dynamics, which were all optimistic after reporting strongerthan-expected demand after posting first-quarter results. U.S. Steel reported adjusted earnings of $3.05 per share, which topped analysts’ estimates. All this while ensuring a continuing flow of raw materials. give on the price of nickel and/or stainless steel. The increased nickel price will adversely affect margins for EV manufacturers, and may even lead to price increases, hence reducing demand for vehicles that are presently by no means within the grasp of most customers. The price of aluminum was recently down 20 percent from a March high. Its recent price was around $2,900 per ton. In mid-April, it was just under $3,200 per ton. The World Bank had forecast a price of $2,000 in 2021, with moderate growth to $2,050 in 2022, and $2,400 by 2035. The IMF was looking to $2,276 by 2026. These forecasts were way low, and the price of aluminum spiked four times to around $3,200 in 2021 alone. All to show that at times forecasts serve for nothing, and the only sure way to buy these metals is by constant vigilance on the market, and even that may not serve much. In the case of copper, it may be the slowdown in the Chinese construction industry, and the country’s ongoing battle with

It is certainly good to see this level of optimism from the four top U.S. steelmakers. Even so, under present geopolitical conditions, the future supply, demand, and pricing of metals is uncertain. In mid-May, it was reported that the U.S. mills were willing to negotiate on both hotrolled and galvanized coil products. Some buyers are looking for prices to continue to slide in what they call a bear market.

COVID-19, that has led to the slowing demand for the metal. The price of the metal has fallen to its lowest in over seven months, to below $9,000 per ton for the first time since October 2021. It is down 15 percent from March’s record. Zinc, a metal critical to the global automobile industry, has also taken a tumble in price of late, along with the price of galvanized steel coils. The metal saw its price fall by 18 percent in the month to mid-May. The price of steel has dropped, with the present price of hot-rolled coil in the U.S. around two-thirds of last September’s. But last September’s prices couldn’t last in any event. There are fears about U.S. monetary tightening. There are fears about offcolor European economics. There are fears about COVID-19 measures in China. But there is optimism in the U.S. steel industry, as witnessed by recent forecasts from U.S. Steel Corp. The company is predicting its “best” second quarter on growing steel demand from automakers to construction firms, Chief Executive Officer David Burritt told analysts in

There were further changes, all declines, in non-ferrous metal prices during May: Copper: from $4.44 to $4.28 per lb. Aluminum: from $1.48 to $1.36 per lb. Nickel: from $14.4 to $12.50 per lb. Zinc: from $ 1.90 to $1.78 per lb.

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

Manufacturing Outlook / June 2022

INNOVATION OUTLOOK

LEADING THE DIGITAL REVOLUTION TRANSFORMING U.S. MANUFACTURING MxD (The Digital Manufacturing Institute), a Manufacturing USA® institute, addresses the global competitiveness challenge U.S. manufacturers face from overseas competition by accelerating the development and adoption of digital technology across manufacturing operations to positively impact the way we work. 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 Digital manufacturing and related design technologies connect different parts of the manufacturing life-cycle through data. That information enables organizations to make smarter, more efficient decisions and improve production times. Manufacturing innovations are connected through a digital thread – from retrofitting legacy machines with advanced cybersecurity to the use of digital models and augmented reality for enhanced productivity. MxD provides factories with the digital tools and expertise needed to build things more efficiently, more quickly, and at less cost so that U.S. manufacturers can compete for business and jobs.

Approach to Innovation and Collaboration MxD brings together partners from universities, industry, startups, and government to solve technology advancement challenges in digital manufacturing that are too complex for any one organization to solve on its own. This is done through:

LEARN MORE

CONNECT WITH MxD Chicago, Illinois mxdusa.org

Shared R&D testbed: shared access to advanced manufacturing equipment, facilities, and technical expertise Future Factory: a physical and digital manufacturing shop leveraging data and cutting-edge manufacturing tools which is training partner organizations to understand and apply digital manufacturing technologies Technology roadmaps and projects focused on digital design, product development and systems engineering; cybersecurity in manufacturing; and agile, resilient supply chain Education and workforce training through online courses, Digital Days programs for students, and a Digital Manufacturing Jobs Taxonomy created in partnership with ManpowerGroup which identified 165 roles in manufacturing that will be created or transformed by the introduction of digital technology

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

continued Manufacturing Outlook / June 2022

INNOVATION OUTLOOK

COLLABORATIVE PROJECT EXAMPLES “We really like the ability to interact with university researchers and other industry partners to take on challenging questions about how we’re going to implement digital manufacturing going forward. If you look across the country, there are very few other places that we can go where we can really have like-minded thinking in some of the new, emerging technologies that are going to drive a competitive advantage.” – Craig Sutton, Manager, Advanced Manufacturing and Innovation Strategy, John Deere

CREATION OF THE DIGITAL CAPABILITY CENTER: MxD and McKinsey launched this mock production line to provide hands-on training in next-generation digital manufacturing technology. The center helps organizations benefit from new capabilities and produce new digital manufacturing innovations in operations, design, and productivity. One-day and multi-day workshops are designed for the positions and needs of company participants. Leaders from 50 partner organizations participated in trainings at the center in its first month of operation.

DIGITIZING LEGACY EQUIPMENT FOR EVEN THE SMALLEST MANUFACTURERS: Manufacturers seeking to digitize their operations often need to use data from expensive legacy manufacturing equipment in new, innovative processes without disrupting production, creating failure points, or voiding equipment warranties. This project, led by the University of Cincinnati with partners including Raytheon, is developing an open source system using computer-vision-enabled cameras to read legacy displays to produce data in the emerging industry-standard format. The software and hardware toolkit is projected to cost under $1,000 per machine.

CYBERSECURITY ASSESSMENT, TOOLS, AND SOLUTIONS: To help organizations understand the costs, capabilities, and effectiveness of DoD-required security measures for factory operations, the University of Illinois at Urbana-Champaign, Lockheed Martin, and multiple partners developed the Cyber Secure Dashboard. The dashboard guides organizations, especially small manufacturers, through the process of securing IT systems by providing step-by-step instructions, references, best practices, templates and tools. It provides guidance for adhering to the NIST cybersecurity framework, the DoDmandated control requirements of the NIST SP 800-171 r1, and the NIST SP 800-53r4 cybersecurity control standard.

“[MxD] is a great center of excellence where companies can come to see the digital thread in action. They can get hands-on experience with the technology and learn about technologies that are delivering solutions today and not four or five years out into the future.” – Paul Ryznar, Founder, President & CEO, Light Guide Systems Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov 3.4.19

Manufacturing Outlook / June 2022

AFRICA OUTLOOK

JUNE 2022

AFRICA OUTLOOK

by TR Cutler Africa: A Continuous Business Paradigm Shift Saying that a city in the United States is indicative of the whole country is absurd. The same is true with the too frequent pejorative of African manufacturing. Each country, region where applicable, is distinct for a myriad of reasons. Some countries have innumerable natural resources such as diamonds in Botswana, and iron ore, platinum, manganese, chromium, copper, uranium, silver, beryllium, and titanium in South Africa. The chasm between very

rich and very poor industrial countries on the African continent is immediately experienced upon arrival.

manufacturing, mining, food production, and a rapidly changing eCommerce modality impact the continent.

Unless one is fortunate enough to have a Savanna Lodge safari experience in the Sabi Sands (this journalist has had that great experience many times over the years), the eclectic nature of politics, religion, socialization, and culture provides a difficult task in capturing how

Last month, discussed some of the collateral damage that the war in Ukraine was having on African nations. Similarly, Manufacturing Outlook recently looked at the vast number of start-ups in Africa. Food Business News reported that Kerry continued

Manufacturing Outlook / June 2022

AFRICA OUTLOOK

opened the largest and most advanced taste manufacturing facility on the African continent. The new $40 million facility is located in KwaZulu-Natal, South Africa, and will produce sustainable nutrition solutions that will be consumed across the African continent. The new 107,000 square-foot facility is one of its most environmentally efficient manufacturing sites with numerous sustainability features, including low energy usage equipment, solar power generation to reduce consumption from the local grid, waste heat capture, and efficient water capture, reuse, and reduction.

In addition to the opening of the new facility, Kerry is expanding its Development and Application Center in Nairobi, Kenya. The facility in Nairobi supports the company’s customers in East Africa and enhances the development of sustainable food processing for the continent. Neil Ford reported in African Business that Morocco is making the most of its geographical position on the edge of Europe. Morocco’s economic success over many years had been built on lowcost manufacturing of food, textiles, and other lower-cost goods that benefited from trade deals with the European Union. Ford suggested the focus has switched to

higher value, higher tech sectors, such as pharmaceuticals, aerospace, and automotive sectors, with Moroccan companies working with international partners to build integrated supply chains. The Moroccan

up processing and manufacturing plants specifically to target European markets. Over the past decade, improvements in national infrastructure have complemented this geographical advantage. In particular, the new port of Tanger Med, with significant annual handling capacity, is now the biggest container port in Africa by far, larger than competitors on the other side of the Mediterranean Sea in Spain. The port has encouraged export-orientated businesses to set up operations in and around Tangier, while improved road and rail infrastructure within Morocco has made it easier for manufacturers across the country to make use of the facility. By 2040, the African continent will be the second most populous, second only to Asia. Each month, the very eclectic nature of African nations, trade arrangements, and natural resources will be examined as they portend to the future of the industrial sector.

Author Profile:

economy recovered strongly last year, achieving growth of 7.4%, in comparison with the 6.3% contraction recorded in 2020, largely as the result of strong growth in the manufacturing and agricultural sectors. Growth this year is likely to be a more modest 3.1%, according to Renaissance Capital, as the global economy remains weak in the face of the prolonged COVID-19 pandemic, the Russian invasion of Ukraine, and the associated effects on global demand and supply chains. The manufacturing sector accounts for 14% of GDP, slightly ahead of agriculture with 13%. Manufacturers have long been attracted to the country by its location, with lower labor costs encouraging companies to set

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 24th 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. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Cutler has established special divisions including Colombian manufacturing and Food & Beverage manufacturing/logistics. Cutler was recently named the Global Supply Chain journalist of the year for the second time in a row. Over 5200 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / June 2022

AEROSPACE OUTLOOK

JUNE 2022

AEROSPACE OUTLOOK by Royce Lowe It’s China’s Skies Not too long after the announcement of its encouraging sales for the first quarter of 2022, comes news that Boeing Co’s biggest Chinese customer has taken more than 100 of its 737 Max jets from its near-term fleet plans, citing uncertainty over deliveries. China Southern Airlines Co’s chairman said at a recent investor briefing that the aircraft would be excluded from deliveries through 2024. China Southern expects to take delivery of 78 aircraft in total in that period, down from 181 in a previous forecast in March. This is a real turnaround for China Southern, which had outlined plans to rapidly expand its 737 Max fleet, saying in its annual report in March that 39 were due to arrive this year, increasing to a total of 103 deliveries through 2024. This is the uncertainty of a key market for Boeing as it looks to cash

in on the over 300 Max that were built but never delivered due to the global grounding due to two unfortunate crashes. While the latest published fleet plan doesn’t include any Max, it doesn’t preclude China Southern from eventually taking deliveries, either. “We communicate regularly with all of our customers. Our delivery commitments and customer expectations have not changed,” Boeing said. None of China’s stateowned carriers have said if or when they might resume taking the Max once it is officially back in service. Brian West, Boeing’s CFO, told a recent Goldman Sachs conference, “There was great progress with the local team, the Chinese customers, the Chinese regulators. They were clicking along, checking all the boxes, and then Covid hit with different protocols and

restrictions. We assume that when they can get back and focus on this, they will pick right up where we left off,” with deliveries eventually following, he added. China Southern, China’s largest airline, forecast in 2019 it would be operating 523 jets from Boeing’s narrow body family by this year, most of which would have been Max aircraft. At the end of 2021, the airline had a fleet of 399 Boeing narrow bodies, according to its latest annual report, plus 334 Airbus A320 series narrow bodies. China is slowly moving toward allowing the Max to fly in its airspace again, which it is already permitted to do in most other major markets. Covid-19 outbreaks and a strict lockdown in Shanghai and other parts of the country haven’t helped this along. Nor have these factors helped with demand for air travel. Boeing was already struggling continued

Manufacturing Outlook / June 2022

AEROSPACE OUTLOOK with orders from its biggest overseas market, due to worsening relations between Washington and Beijing. Since 2020, Boeing’s direct China deliveries have collapsed to single digits from a high of 192 in 2018 before the Max grounding. Boeing had previously predicted deliveries to Chinese airlines would resume by the end of March. China re-certified the Max to fly in December, but only a handful of airlines have carried out test flights, the final step to its return to commercial service. China Eastern Airlines Corp., recently said it had arranged 10.5 billion yuan ($1.5 billion) to finance the purchase of 38 planes between 2022 and 2024 from Boeing, Airbus, and Commercial Aircraft Corp. of China Ltd. There were no 737 Max in this plan, even though the airline said in its 2020 annual report that it planned to introduce 46 Max jets from 2023. The C919 jet developed by the Commercial Aircraft Corp. of China Ltd. went through a three-hour test flight in early May, ahead of its upcoming delivery to its first customer. The narrow body plane was priced at $99 million, according to a filing this week by Shanghai-based China Eastern

Airline Corp., which has signed a deal to buy five of the jets. The price of the C919 is just a couple of million below that of the 737 Max and the Airbus A320. This whole scenario brings up some rather interesting points about the U.S. aviation industry and its Chinese customers. On the one hand, Chinese airlines cannot operate without Boeing (and Airbus) aircraft, but there again, China will want to see how far it can go with its C919 program - which is not fully proven as yet. The C919 is, of course, highly dependent upon Western technology and suppliers. So maybe China just wants to make Boeing sweat a little, before both sides negotiate things back to some kind of normality. After all, why should China cite uncertainty over deliveries when Boeing has all those planes in inventory? Or maybe it’s just a ruse, as China waits for its passenger numbers to get back to some kind of normal. Boeing recently took orders from the Airline Group IAG, which owns BA, Iberia, Aer Lingus, Vueling and LEVEL, for 50 737 Max aircraft to be delivered between 2023 and 2027, with options for a further 100 aircraft. There

are 25 firm orders for the Max10, still undergoing certification, and another 25 firm for the 737 Max8-200, and aircraft targeted at low-cost carriers, created primarily for Ryanair. This order was the second vote of confidence in as many weeks, after Lufthansa reaffirmed its commitment to the Boeing 777X program. Flight data from the black boxes from the Boeing plane that crashed in China in late March are tending to suggest interference by a flight-crew member in the cockpit or by someone who may have forced entry into the cockpit, according to those ubiquitous “people familiar with the matter.” Chinese investigators have found nothing to suggest mechanical problems that may have contributed to the crash. The investigation is ongoing, under the auspices of both American and Chinese personnel.

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

Manufacturing Outlook / June 2022

ENERGY OUTLOOK

JUNE 2022

ENERGY OUTLOOK

Big Oil’s Dilemma by Jocelyn Bright If you hold shares in Big Oil these days, get set for a windfall. With the world hostage to Russian oil and gas, Big Oil is pulling in historic amounts of cash that it’s not investing in new production to help displace said Russian oil and gas. Rather it’s rewarding shareholders and setting the world up for an even tighter energy market in coming years. Bloomberg recently did an informative, interesting analysis of the situation. Food for thought.

impetus for higher production, but not this time. The five major companies have kept a tight rein on their capital expenditure budgets and pledged that this will continue in the future, even as oil prices have closed above $100 a barrel on all but five days since Russia invaded Ukraine in February. Wells naturally decline in production every year and large projects take five or more years to come online, hence any expansion lag now will delay new production even more.

The West’s five biggest oil companies, Shell Plc, TotalEnergies SE, BP Plc, Exxon Mobil Corp., and Chevron Corp. together earned $36.6 billion over and above their spending in the first quarter, the second-highest quarterly free cash flow on record. Normally, when oil booms, it’s an

The last time crude was consistently over $100 a barrel, in 2013, Big Oil’s combined capital expenditure was $158.7 billion, almost double what the companies are currently spending, according to data compiled by Bloomberg. BP won’t budge on its $14 billion to $15 billion spending plans

for the year, nor Shell - despite record profits - on its $23 billion to $27 billion range. There are clear reasons why Big Oil is choosing not to spend more. Chief among them are climate concerns and uncertainty over future oil demand. Years of pressure from investors, politicians, and climate activists came to a head in the past two years when all the major oil companies pledged some form of net-zero target by mid-century. BP and Shell actively talked about moving away from oil and gas over the long term. All are under more pressure to improve returns that shrank over the past decade due to increased costs and low prices. It’s thought that beefing up new fossil projects at present could see near-term returns risk, according to one analyst. Climate change, continued

Manufacturing Outlook / June 2022

ENERGY OUTLOOK technology developments like electric cars, and government policy on emissions are major risks today when deciding whether to invest billions in a new project. Investment in the upstream oil and gas sector fell 30% in 2020, while last year’s figure of $341 billion was 23% below pre-pandemic levels, according to the International Energy Forum. The Secretary-General of the IEF states, “Two years in a row of large and abrupt underinvestment in oil and gas development is a recipe for higher prices and volatility later this decade.” This is not good news for consumers around the world, where billions of people are in a cost-of-living crisis caused in large part by high energy costs. In the U.S., President Joe Biden has implored oil companies to reinvest profits from surging oil prices into more production to help ease the shortages caused by Russia’s war against Ukraine. Some U.S. and

European politicians have called for a windfall tax on companies’ profits to help ease the burden on consumers.

not fall significantly for some time to come.

It’s not that companies aren’t investing at all, but they will opt for low-risk, high-return projects, such as shale or expanding offshore fields near existing operations. Exxon and Chevron, for instance, are spending aggressively to grow production in the U.S.’s Permian Basin, the world’s largest shale oil region, with planned growth rates of 25% and 15%, respectively. BP is boosting investment in U.S. shale, but the company won’t be able to ramp up Permian production until it finishes building two large gathering systems at the end of the year. The bottom line for the moment is that there are no plans to increase oil production, hence no plans to help countless consumers pay their energy bills. The way things are in the world today, and with the present mindset of Big Oil’s bosses, the price of a barrel of oil will

If we back up a bit, we’ll recall that for some little while now the cry has been going out for less oil and less fossil fuels. They’re bad for the environment. All the major auto companies are spending billions on electric cars and batteries, and some major western cities will outlaw certain fossil fuels in the near future. So we might think the big, bad oil guys are good guys. Even the U.S. president is asking for more oil, but as a replacement for Russia’s. The problem is that nobody knows how long the (war) situation will last, and hence, in reality, how much extra oil might be needed. But if we do end up needing extra oil, we might need to ask where it will come from. For the oil companies it’s a damned if you do, damned if you don’t Jocelyn Bright, situation. n Staff Writer

Manufacturing Outlook / June 2022

AUTOMOTIVE OUTLOOK

JUNE 2022

AUTOMOTIVE OUTLOOK by Lawrence Makagnon The Pickup Race As the whole automotive world now knows, Ford has brought out an electric version of its best-selling F-150 pickup. It’s called the F-150 Lightning, a good name; sounds a bit like a racehorse, swift and smooth . WARDSAUTO recently did a pretty extensive test on this vehicle, in which they detailed just about everything the would-be owner of this pickup would wish to know. Range, horsepower, torque, towing capacity, (huge front) trunk size, they’re all in there, as is the fact that the vehicle can power a home during an outage, and bring power to a job site or a campsite. So it’s good for family recreational activities too.

There are around 200,000 potential, maybe impatient, buyers on a waiting list for the Lightning, of whom 50 percent are new to trucks, 70 percent new to Ford. Speaks volumes. And how quiet it is on the highway, with perhaps just a little tire and wind noise penetrating the silence. It can negotiate boulders and tough climbs, and can swish through water, all on a hot day. Thanks to a re-designed independent rear suspension. The ride and handling are superb. Ford helps BEV owners to find available charging outlets through the FordPass Power My Trip mapping system. The Ford BlueOval Charge Network provides over 20,500 charging locations and

over 70,000 outlets, including 7,300 fast chargers. With a 150-kW rate available through Electrify America DC chargers, the Lightning can charge up from 15 percent to 80 percent in 41 minutes, according to Ford. Ford is increasing capacity to meet the demand for the Lightning and expects to reach an annual production rate of 150,000 units in 2023 at its Rouge Electric Vehicle Center in Dearborn. The company’s main competition in the field might be said to come from Rivian, whose R1T pickup, brought out a few months ago, was the first battery-powered electric pickup to hit the U.S. market, beating Ford, Tesla, and GM. But Rivian, backed continued

Manufacturing Outlook / June 2022

AUTOMOTIVE OUTLOOK by, and a supplier to, Amazon, is running out of chips, and being a newcomer to the business has no clout to increase its supply. Rivian has a further problem, in that it is in dispute with a key seat supplier that could interrupt its delivery van contract with Amazon. Rivian alleged in a lawsuit that the Commercial Vehicle Group Inc., an auto parts manufacturer, threatened to halt the supply of seats unless Rivian agreed to pay something like twice the agreed price, for what are basically seats. Amazon, one of Rivian’s biggest investors, has ordered 100,000 electric delivery vans, the first 10,000 of which are due by the end of this year. So Rivian’s contract with Amazon may rest on a court case. It should be noted that Rivian’s starting price for the R1T is a hefty $80,000, whereas the F150 starts at around $42,000. Meanwhile, VW’s CEO, Herbert Diess, wants to increase his company’s

penetration of the North American market, by steering it to become “more American.” With this in mind, he is looking to a revival of SCOUT, a dormant off-road vehicle that VW picked up when it bought the truck manufacturer NAVISTAR last year. In other words, he wants to compete in the U.S. pickup and SUV business, but with an American sticker. And to let EV come-lately manufacturers like Rivian know that VW is there. What is SCOUT? Where did it come from? It turns out it competed with Ford Bronco and Land Rover and Jeep models in the two decades before the business ceased production in 1980. But will the model fly today, the way it did with the Boomers? Maybe this is all too late, particularly since production is not scheduled to start before 2026. Diess wants to try something even the Japanese didn’t succeed in doing. To give credit where it’s due when it comes to huge pickups à la F150, America rules. Despite all going against him, VW’s CEO wants to

invest $1 billion in the project and is open to outside investment. He may eventually take it public. Bloomberg quotes Diess; “This is just so attractive and such a precious brand and such an attractive segment that I said wow, we should do that.” With all that’s going on in the auto industry and all the new models particularly EVs - on the roads and drawing boards, this may turn out to be a risky proposition. Rivian, the last company to get into the sector, is presently finding the business a tough row to hoe, and will surely bear its fangs if and when it sees VW coming. We’ll see. Oh, and let’s not forget the Hummer in there, together with its $110,000 price Lawrence Makagon, tag. n Staff Writer

Manufacturing Outlook / June 2022

CYBER SECURITY OUTLOOK

JUNE 2022

CYBER SECURITY OUTLOOK

By Ken Fanger, MBA, CMMC-RP, President, On Technology Partners

Play Our Way Smarter – What is Gamification?

A new term raging through the learning world is gamification. What does this mean and how could it have major effects on your business? Let’s start the journey by looking at the traditional way most of us have learned things in the past. For many of us, learning starts in a classroom by sitting and listening to a person sharing vast amounts of knowledge. Often, it’s nothing more than an information dump with the hopes that people retain as much of that information as possible. The biggest problem with this is that most people have a hard time retaining information. Training is rarely turned directly into action for most people and so the information is lost. For example, I had a client that had a

Manufacturing Outlook / June 2022

new phone system scheduled to be deployed. The training on the phone system took place as scheduled, but due to unexpected issues, it wasn’t until two months later that the phone system was deployed. Not a single person remembered how to perform transfers or even set up their mailboxes. The training needed to be completely redone because it had not become a part of their daily routine, so people forgot what they learned. How would gamification have made this better? To answer this question, let’s look at how gamification works. Gamification starts by making learning fun and engaging, just like the video games your mother always told you to stop playing. First, let’s look at the Gartner definition of gamification: “the

use of game mechanics and experience design to digitally engage and motivate people to achieve their goals.” This leads to the first question: What are game mechanics? Game mechanics are those elements that keep you playing a game. This could be trying to reach a given point total, beating a given level, or even a competition, like trying to beat your friends or co-workers. There could be any number of other reasons why you find yourself not being able to put down that Clash of Clans or other addictive phone game (you know who you are). Gamification can also be seen in a person needing to pull that slot machine lever one more time. As humans, we need to strive for something greater, and gamification uses this human power to learn and grow. continued

CYBER SECURITY OUTLOOK Gamification helps us learn in a way that is more in tune with how we live. For a person to be good at a task, they need to perform it repeatedly. However, learning an action is often removed from actually performing the desired action. Think about how many times you’ve attended trainings that were actually hands-on. Pretty rare, huh? With gamification, the person is continuously learning. This gamification can be done on a daily basis in short bursts so that it’s always reinforcing the learning experience. Because it’s also fun, the learning part can suddenly be forgotten in the moment as that participant is “playing.” I know I don’t enjoy learning nearly as much as I enjoy playing! Children play to learn, so why not adults? Why should kids get to have all the fun?

display a rowing game. With each part that people made at their stations, their little rowboat moved farther down the stream, but their rowboat wasn’t alone. In addition to that station’s rowboat, there were other rowboats from different stations that were also rowing down the stream, based on the production of the respective stations.

Here’s a gamification example for those in manufacturing: A manufacturer recently had the control screens on the shop floor equipment built out to

Gamification is a growing term in many industries that basically comes down to making what we learn and do more fun and engaging.

At the end of the day, each station in the plant could see how much farther their boat rowed relative to the other stations. This built a friendly competition between each station of the plant for who won the coveted title for Best Rower of the Week and Best Rower of the Day. The manufacturing plant simultaneously increased their production as well as employee engagement and job satisfaction.

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. n

Manufacturing Outlook / June 2022

ISSUES OUTLOOK

JUNE 2022

ISSUES OUTLOOK

by Royce Lowe

Speed Up of 3D Printing The process of 3D printing, or additive manufacturing, has been with us for quite some time now and has made steady, if not spectacular, progress over the last three decades. The process reportedly saw an increase of over 17 percent in 2021 in printing services and machinery, to around $15 billion. But its star has shone less brightly of late, lost in the mist of missing chips, raw material shortages, high prices, and shipping disruptions. The process is used for routine production in plastics and metals to produce intricate parts for jet engines, robots, and automobiles. Additive manufacturing struggles to compete in cost and speed with

such traditional processes as injection molding and metal stamping. Hence its use for low-volume, high-value parts, where for some items the extra time and expense can be worth it in certain cases. The process involves making parts layer by layer, so complicated internal structures can be more easily incorporated into a design. Shapes can be optimized for strength and lightness, saving materials. There is, of course, no material loss involved with 3D printing, as there is with say, machining losses in conventional manufacturing processes. A new form of the process aims to combine the advantages of additive manufacturing with the speed and cost of

conventional manufacturing. The origin of this process, named Area Printing, dates back to 2009, to Stanford University, and a recently qualified Mechanical Engineer named James DeMuth. Mr. Demuth was given the challenge of using a highly specialized grade of steel to manufacture a 12-meter wide fusion chamber containing many complex features. He considered using a form of 3D printing called Laser Powder Bed Fusion (L-PBF) for the job. This process employs a laser beam to weld together particles on a thin bed of powdered metal, to form the required shape of the objects’ first layer. More powder is added and a second layer continued

Manufacturing Outlook / June 2022

ISSUES OUTLOOK is welded on top of the first. And so on, to completion. But there is a problem, as with most other forms of 3D printing, namely that the faster the process, the lower the resolution, which governs the level of detail that can be printed. This means that some large components with fine details can take days, even months, to print. Producing the chamber looked like a very, very long job. L-PBF was clearly not the process for this job. This got Mr. DeMuth and a group of colleagues pondering on how to speed up the process without adversely affecting quality. Further research led to the use of a device called an optically addressed light valve, which had been developed at the American Department of Energy’s National Laboratory, where DeMuth had studied. This allows a pulsed infrared laser, with its beam shaped to have a square cross-section, to be patterned with a high-resolution image. This works a little like a photographic negative, where the image can block

or pass light, reading millions of tiny laser spots, much like the pixels that make up a digital image. When projected onto a bed of powder, this patterned laser light can weld a complete area in one pass. In 2015, Mr. DeMuth cofounded Seurat Technologies, to commercialize the technology. The firm, based in Massachusetts, is named after Georges Seurat, a post-impressionist French artist who started a painting style called pointillism that builds pictures up from dots. GM, VW, Siemens Energy, and Denso, a large Japanese components company, have partnered with Seurat to explore the use of its prototype area-printing machine. This prototype produces a series of small, patternable squares - on which a pattern may be etched - on the powder bed whose size depends on the material. Aluminum requires 15mm squares, titanium 13mm, steel 10mm. One at a time, these squares may seem small, but 40 of them can be printed adjacent to each other every second, thus ensuring

quick coverage of a large area. With the equivalent of 2.4 million pixels projected in each square, the machine can print layers just 25 microns (millionth of a meter) thick at a rate of 3kg (6.6 lbs) per hour. This is ten times faster than a typical L-PBF machine, resolution for resolution. Production versions of the area printer are now being built, and forecasts are that they will be ten times faster again than the prototype. Mr. DeMuth says that area printing will be competitive with conventional production processes such as machining, stamping, and casting. He says that by 2030 it will be possible to produce cutlery cheaper than by stamping. Additive manufacturing will likely progress in both technique and applications. It will find its niches and will enlarge upon them. It can only improve. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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