Manufacturing Outlook for May 2023

FEATURE STORY:

MANUFACTURING WORKERS ARE LOOKING FOR LEADERSHIP TO TAKE THESE 4

ACTIONS

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MANUFACTURING TIDBITS: SMALL SCALE MANUFACTURERS ARE KEY TO REVIVE DOWNTOWNS PAGE

ENERGY OUTLOOK

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GRAPHENE OUTLOOK: WHAT OBJECT HAS LENGTH, WIDTH, AND NO THICKNESS? PAGE 42

Moving Forward…

We’ve heard enough. Recession, recession, recession, yada, yada, yada…it’s like a Seinfeld routine. Let’s focus on the nearterm future. First quarter GDP came in at 1.1% growth. The U.S. GDP for 2022 was 425.46 trillion, so 1.1% growth is more than 250 billion dollars. The U.S. has averaged 3.13% growth year-over-year since 1948, despite the occasional recession.

“Current-dollar GDP increased 9.2%, or $2.15 trillion, in 2022 to a level of $25.46 trillion, compared with an increase of 10.7 % or $2.25 trillion, in 2021.” -- Bureau of Economic Analysis, U.S. Government.

Manufacturing purchasing is softer because manufacturers are burning off excess inventory purchased during the latest boom. This has caused a bit of a raw material demand slump. We expect that to continue in most sectors through the second quarter and into Q3 2023. By then, unless the economy has weakened considerably, manufacturers’ inventory levels will be too low, and purchasing demand will rise. Forecasts of GDP for 2023 range between 1.0 and 2.5% growth – hardly a recession.

The University of Michigan Consumer Sentiment Index unexpectedly rose to 63.5 in April of 2023 from 62.0 in March. Inflation is cooling but not yet down to 2% or less, as price increases soften in most sectors of both manufacturing and services. The consumer continues to buy because unemployment is at 3.5%, with few signs of a dramatic rise. Although major corporations are adjusting headcounts downward to respond to reorganizations, new efficiencies, or adverse market conditions in their sector, overall employment conditions remain solid. Manufacturing, in particular, continues to hang on to skilled employees who were difficult to find and expensive to train, and are more likely to weather the year than dramatically reduce headcount unless market demand were to retreat significantly.

Feeling better yet? Short of an awful “Black Swan” event, the U.S. economy continues to expand modestly but earnestly. And the reconfiguration of supply chains by astute supply chain managers and staff has removed much of the volatility from previous sourcing. We continue to see jobs and strategic industries returning to America, such as microprocessor chip manufacturing from design through production to domestic supply. Much of this capacity will come online in 2024.

We expect similar progress in solar panel research, development, and manufacturing in the U.S. China is the dominant supplier. Although it was hit with tariffs, it maneuvered around them by doing assembly in other Southeast Asian countries. Key to U.S. production will be innovations in panel components, and this month we introduce a new Outlook section in Manufacturing Outlook called Graphene Outlook. Spoiler Alert – that article is worth the read, so I’m not going to give anything away here.

Manufacturing Outlook continues to grow its subscriber base rapidly as the only industrial publication discussing forwardlooking, forward-thinking topics relevant to the manufacturing industry, from raw material suppliers to industrial buyers of assemblies and component parts, as well as consumers of retail goods. So, although the mainstream media makes its living from doom, gloom, and negative commentary, Manufacturing Outlook presents the upbeat side of a hope-filled future.

Be sure to subscribe at www.manufacturingoutlook.com. 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

GLOBAL PERFORMANCE MAINLY IMPROVING THROUGH SERVICES. INPUT PRICES AND SUPPLIER DELIVERIES ON ENCOURAGING TRENDS.

By: Royce Lowe

Data from ASIS, the Armada Strategic Intelligence System report, suggests that manufacturing industrial production will show a very slight overall contraction through 2023, whose second half will show a recovery after a similar contraction in the first half of the year. Primary metals are forecast to strengthen in 2023

with a stronger mid-year recovery followed by stabilization through the end of the year and into 2024. Inventories of the major non-ferrous metals are lower than for decades. If usage improves as thought, this will push prices higher than expected. A strong start to 2024 is anticipated. Fabricated metals will see a contraction in

2023’s first two quarters, followed by growth in Q3 and a final contraction to see out the year. Some weakening in early 2024 is likely.

The automotive sector is looking healthy, with good growth seen through 2023. Aerospace looks generally healthy through 2023 and 2024,

with good demand and, hopefully, a good supply chain. Computer and electronic products are looking better towards year-end. Electrical and Appliances will likely show contraction throughout 2023. The machinery sector will suffer a lack of demand through mid-2024.

The Global Steel Users PMI for March showed a marginal decrease in operating conditions across all monitored regions (U.S., Asia, and Europe). There was a second improvement in delivery times, and output price inflation was at a 29-month low. New orders fell in all three regions, as did export orders. Employment levels fell in March, for the first time since November 2022.

The March Global Aluminium Users PMI™ data signaled a sharp reversal in fortunes among aluminum-using manufacturers in March, as the boost provided by the reopening of the Chinese economy receded sharply. Global output and new orders fell back into contraction territory, albeit at marginal rates, while purchasing activity stagnated. As output and new orders fell, firms took the opportunity to work through backlogs at the quickest rate for 33 months. More positively, there was a sustained shortening in suppliers’ delivery times, which contributed to a further easing in average cost burdens. As such, the rate of input price inflation eased to the lowest for seven months, which allowed firms to raise selling prices at the softest rate since October 2020.

Global copper-using firms registered a sharp slowdown in new order growth during March. Growth wholly reflected a sustained yet slower

increase in Asia, while firms in both the U.S. and Europe saw incoming orders fall at a solid pace. Demand was partly offset by a renewed contraction in export orders that was the fastest for three months and driven by the first reduction in Asia since December. All three regions saw increases in employment in March, with the best performance coming from Europe.

Global demand for manufactured goods fell for the ninth month running, with the rate of contraction being the weakest during the sequence. International trade in goods fell for the 13th straight month. The service sector’s new export business rose at its quickest pace in over a year. The global composite PMI rose by 1.3 points to 53.4 in March, a nine-month high for the series. New orders and employment also strengthened. A wide disparity remains between the performance of the manufacturing and service sectors, with the latter moving ahead on its way to a sustained recovery while manufacturing remains relatively lackluster. The latest survey shows still-modest demand and rising inventories.

The Economist Intelligence Unit, in its Global Economic Outlook for 2023, forecasts a low risk of recession for 2023, with an economic rebound in the second half of 2023, continuing into 2024. There are those, too, who say a recession in the U.S. is either inevitable or is already here. If not, it will be by Q3 this year. Overall, the predictions call for no more than a mild recession.

Other predictions are saying the U.S. unemployment rate will be 6.5% to 7% by early 2024. Global growth

will be 2%, with stagnating growth in Europe and the U.S. Global growth of 2.5% is expected in 2024, with a rebound in the Eurozone and the U.S. and still high growth in China. China’s estimate of its own growth in 2023 is 5%, and The Economist’s is 5.7%. Both the U.S. and Europe are forecast to grow at 0.7% this year.

The global manufacturing economy is suffering from a lack of demand due in large part to a lack of consumer confidence or a downright inability to “consume.” The U.S. inflation figure for mid-April was 5.2%, down from February’s 6.0%, and probably largely due to a drop in oil prices. Interest rates will continue to rise until inflation is licked. The performance of the service sector is what is keeping the global economy’s head above water. The latest monthly manufacturing PMI figures show declines in Japan, China, the Eurozone, the U.K., and Canada. The U.S. climbed but is still in contraction. India is the anomaly, with its March PMI increasing from 55.3 to 56.4. Employment has stayed high in just about all regions, but unfortunately, this has gone along with a lack of skills in some cases.

Overall, a recession isn’t a foregone conclusion. It is more of an ‘if’ than a ‘when’, and even then, it is difficult to predict its depth and length.

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

Resilience and Evolution: A Summary of Deloitte’s 2023 Oil & Gas Industry Outlook

A shift is taking place in the oil and gas (O&G) industry as the world grapples with the urgency of transitioning to cleaner energy, macroeconomic uncertainties, and geopolitical tensions.

Deloitte’s 2023 Oil and Gas Industry Outlook provides an analysis of the industry’s performance and future trends according to insights from a survey of 100 U.S. industry executives and other senior leaders in five specific industry segments: exploration and production, oilfield services, midstream, petroleum refining and marketing, and integrated O&G and new energy companies.

The following is an Executive Summary of the Deloitte’s report presented by Manufacturing Outlook

The Oil & Gas Industry’s

Trilemma

The industry faces the challenge of having to achieve three simultaneous objectives:

1) Maintaining energy affordability for consumers while investing in new technology and compliance requirements;

2) Ensuring a reliable and uninterrupted supply of energy by continually exploring and extracting resources, maintaining robust infrastructure, and managing geopolitical risks;

3) The increasingly urgent need to transition to cleaner energy sources, which requires significant investment in renewable energy, carbon capture technologies, and other methods to reduce greenhouse gas emissions.

Maintaining Healthy Balance Sheets

The executives surveyed highlighted the industry’s fiscal prudence and strong balance sheets, which are the result of a disciplined approach to investments, an emphasis on shareholder returns, and the leveraging of operational efficiencies.

However, this cautious stance on investment, particularly in hydrocarbon-based resources, is creating supply-demand tension. The executives acknowledged this tension could lead to price spikes and supply shortages, underlining the industry’s ability to maintain energy supply stability in the transition to cleaner energy sources.

The Transition to Clean Energy

The oil and gas industry is respond-

ing to global climate concerns by increasing clean energy investments by an average of 12% annually since 2020, making significant investments in clean energy technologies; carbon capture, utilization, and storage (CCUS); and renewables. But while Europe and the U.S. are spearheading this transition with policies incentivizing these investments, it is not yet mirrored in actual capital allocation.

According to Deloitte’s survey, the oil and gas industry has significantly changed its policies and investment trends. Now, they see natural gas as a clean energy option, but only if they can reduce emissions.

The Role of Natural Gas

These developments have been accompanied by a rise in the production and certification of low-carbon nat-

ural gas and lower-carbon liquefied natural gas (LNG).

The Downstream Response to Shifting Energy Demands

In 2023, the industry will need to balance challenges against the urgency of energy security and climate goals.

Challenges include regulatory lag and current supply chain constraints that could hamper the deployment of necessary infrastructure and technologies. Furthermore, a massive grid expansion is required to handle the increase in electrification and renewable energy.

However, significant cash flows from record profits in 2022 provide some optimism.

High oil prices, robust demand, and low inventory levels drove petroleum product prices to record levels in the first half of 2022. Despite uncertainty in demand and volatile prices, refiners adjusted their strategies to include high-margin petroleum and chemical products and repurposed infrastructure for clean energy options such as renewable diesel.

Renewable diesel emerged as a prominent focus in the report, signaling the industry’s evolving priorities in the energy transition. Over half of the downstream executives (54%) identified renewable diesel as the low-carbon fuel with the most substantial growth prospects in the next three years.

Deloitte’s survey also indicated that the downstream sector maintains robust adaptability amid changing market dynamics. The ability to respond to price fluctuations is the primary concern for 42% of downstream executives. And over half of respondents (52%) predict healthier margins in the forthcoming year thanks to an anticipated demand resurgence for refined products and petrochemicals.

Industry executives are keenly aware of the urgency of the energy transition, with a significant majority (58%) of downstream executives committed to upscaling their investments in low-carbon fuels and circular economy solutions. This pivot aligns with stakeholder expectations for a reduced carbon footprint. However, 36% of executives name insufficient infrastructure as their primary challenge, while 29% highlight the lack of clear policy guidelines as a deterrent.

Recognizing these impediments, many in the industry are looking to

foster collaboration, with 40% of downstream executives considering partnering with external entities to hasten the transition.

Mergers and Acquisitions

In 2022, the industry experienced robust M&A activity, valued at $256 billion, a 60% increase compared to the previous year. This surge was primarily driven by consolidation in the upstream and midstream sectors.

Industry leaders predict this trend will continue, with 40% of executives surveyed indicating plans for potential M&A activities in the next year. They also cited the pursuit of operational efficiency (42%) and geographical expansion (40%) as the leading drivers for these activities.

The Oil & Gas Industry’s Resilience

Despite uncertainties, the O&G industry posted record profits in 2022, providing substantial cash flow to fund strategies in 2023. However,

regulatory lag, supply chain constraints, grid expansion, and macroeconomic headwinds could impede the industry’s energy transition.

On the positive side, significant federal funding has been allocated for hydrogen and Carbon Capture, Use, and Storage (CCUS) hubs. The development speed will depend on the permitting process and regulatory approvals.

Navigating the Path Forward

The Oil & Gas industry stands at a crucial juncture, grappling with competing demands of energy affordability, reliability, and sustainability.

Realizing these aspirations will require overcoming a range of hurdles, including infrastructure deficiencies, regulatory uncertainties, and supply chain constraints. The industry’s ability to navigate these challenges will be a defining factor in its ongoing evolution and role in the global energy future.

Author profile: Jessica Baron is a freelance writer covering the fields of science and technology. n

Manufacturing Workers are Looking for Leadership to Take These 4 Actions

By Kerrie Jordan, VP - Product Management, Data Platform at Epicor Software

I have spent over a decade working in the manufacturing space and am grateful to have the opportunity to speak with manufacturing leaders every day. In all my conversations with successful leaders, one theme always stands out: it’s about the team. The most successful companies in this industry have leaders who value their workers and are committed to improving their experience.

But what about their employees? The past few years have seen a transformation of reorientation to work in general as the power dynamic shifts to workers and their desires from their workplace. Even while facing numerous challenges – higher regulations, supply chain issues, increased consumer demand, and the overall state of the economy – the industry is strong and resilient, experiencing

promising growth as companies move to cloud-based operations and increase their use of technology.

So, in what ways are these changes impacting the worker experience?

For our recent report on the “Voice of the Essential Manufacturing Worker,” we surveyed 600 manufacturing workers to find out their engagement levels and what they require from their leaders. Manufacturing leaders should always be looking for ways to enhance their workers’ experience, increase their engagement, and give them the necessary tools to be successful.

Here are four ways to achieve that, based on manufacturing worker feedback.

Four Actions for Manufacturing Leaders

To create more engaged workers, more streamlined operations, and a more secure future for growth, manufacturing leaders should implement the following strategies:

1. Focus on data-first manufacturing

Modern manufacturing companies are leveraging Big Data, or the data collected across their organization, to improve operations and inform decision-makers. Using analytics to gain insights from the data about where operations are working and where they need improvement is an essential part of collecting that data. Using data-informed decisions to improve

and streamline processes like supply chain management, forecasting, and throughput can also help workers be more engaged and productive.

Technology can not only streamline operations but also allow workers to be more efficient, effective, and happier. Factory workers are looking for companies to incorporate technology into their operations and day-today tasks. According to our report, workers would be willing to take a 10% pay cut to go to a company that puts technology first. In other words, they want to work for a company that embraces technological advances and sees the value it can provide to improving manufacturing operations and their everyday work experience. With data, software, digital applications, as well as introducing automation in your processes, you can improve the worker experience and quality while reducing costs.

2. Make sustainability a priority

Sustainability in manufacturing is critical to the company’s future in various ways. Six out of ten respondents to our survey said they would take a pay cut to work for a more sustainable factory, similar to being technology-forward.

By adopting more sustainable practices, manufacturing companies can positively impact the environment and set themselves up for growth. A recent report from HP found that workers who see their company as an industry leader in sustainability are happier, feel more cared for, are more productive, and are avid advocates of their company.

3. Provide flexible work schedules and paid time off

Expectations around work have been

changing over the past few years as workers reevaluate what they want from their careers, work/life balance, and how they want to be appreciated by their employers. Respondents to our survey all came back to two things when asked what contributed to high morale, what could create a more engaging work environment, and what they’d look for in a new employer if they left: flexible work schedules and more paid time off.

This suggests that factory workers want more work/life balance yet must adhere to rigid scheduling and don’t get much time off, which can easily lead to burnout. Morale and engagement can improve with flexible scheduling, according to a report from Gartner, and those with flexible work hours feel they achieved greater productivity as well. Manufacturing leaders should reevaluate how to alleviate workloads and allow for flexible schedules and more paid time off.

4. Continue investing in upskilling

Manufacturing companies that want to improve their operations and be a modern leader in the industry should embrace technologies such as Big Data, robotics, AI, AR, 3D printing, and more. However, with new technology and advances come the need to know how to run them. Are manufacturing companies prioritizing ensuring that their workers have the right skills for the future?

According to our report, 80% of respondents say their company is making upskilling a priority and offering it in a number of different ways. Most offer on-site and on-thejob training, while many are giving access to online learning platforms where workers can take courses and gain certifications anywhere and at any time. Many note that their company covers costs for training

programs and courses. Companies that offer upskilling aren’t just ensuring that their workers know how to operate new technologies. They’re also training them for leadership roles and upward movement.

The impacts of upskilling are many. According to Gallup, 71% of upskilled workers said their overall job satisfaction has increased, 65% say their standard of living has increased, and 69% say their overall quality of life has improved.

Modernizing Manufacturing Today

Manufacturing leaders should always be looking for ways to improve their workers’ experience. According to workers themselves, manufacturing leaders should focus on increasing their technology adoption and sustainability efforts, making upskilling a priority, and offering more flexible work schedules and paid time off.

Ultimately, happy, engaged, and skilled workers can help any company weather challenges in their industry.

Author profile. Kerrie Jordan is an accomplished technology executive serving as Vice President, Product Management, Data Platform at Epicor Software. In this role, Kerrie is responsible for steering the strategic direction of Epicor’s cloud-based solutions, ensuring their continued delivery of high-value innovation, security, and customer performance. Based in Richmond, Virginia, she brings more than ten years of extensive experience in ERP, supply chain, eCommerce, cloud computing, and product development business solutions. She can be reached at kerrie. jordan@epicor.com n

Small Scale Manufacturers Are Key To Revive Downtowns

By Ilana Preuss

[Editor’s Note: Be sure to listen to Ilana’s interview on Manufacturing Talk Radio at www.mfgtalkradio. com]

Even before the Covid-19 pandemic, many cities and neighborhoods across America were suffering from economic stagnation. Today, we only need to drive through our local downtowns to see blocks of empty storefronts lining the streets. Rather than sparking an atmosphere of new opportunity, these images bring on a mood of despair and disappointment. We can change all that by bringing

small-scale manufacturers, the businesses that might be home-based or in a shared space situation today, to the brick-and-mortar world. But first, we need to understand why these storefronts are empty and what needs to be done to fill them.

Know The Economics.

While economics isn’t the only reason, it is the primary one. In some instances, the cost of renovating a storefront may outweigh the revenue from the market-based lease rate. If the property owner has significant income from other holdings, they may receive a tax benefit from taking

a loss on the empty storefront. Other vacancies might occur if an investment company is unwilling to rent a space for less than the advertised rate for fear of jeopardizing the underwriting by devaluing the space. There could even be the scenario of a guaranteed lease from a major national chain that will eagerly keep paying the rent on a closed store to prevent a competitor from moving in.

Learn The Logistics.

Sometimes vacancies are due to mismatches between the needs of owners, real estate developers, and prospective small businesses. If the

retail space is larger than what small businesses need, property owners may not be willing to subdivide it or can’t because of code restrictions. Another may be if landlords expect tenants to pay for renovations, and prospective tenants can’t afford to do that. There are also too many examples, especially in smaller towns, of a distant neglectful owner holding on to a vacant main street property in hopes of better days ahead.

Call to Small-Scale Manufacturers

Regardless of why there are vacancies, they have a negative impact on our downtowns and neighborhood centers, depressing surrounding property values, encouraging more neglect, and suppressing the growth of nearby small businesses. That is why small-scale manufacturers need to recognize this opportunity as a win-win and contact the local government and community leaders for assistance. Small-scale manufacturers are ideally suited as tenants who can attract, sell, and service customers during heavy foot traffic days while continuing their manufacturing for online and B2B sales during slower periods. Not only do these types of small businesses get increased revenue from sales by locals and visitors, but active storefronts benefit the entire community as they generate relevancy, purpose, vim and vigor for the entire town!

Show Up

Knowing what to do is different from knowing how to do it, but there are ways to positively and productively

build bridges toward change. Some cities have adopted vacant property tax ordinances, and smaller cities have made similar regulations for abandoned homes or buildings. But tax deterrents aren’t the only solutions which is why small-scale manufacturing business owners need to become involved with local government and community leadership to bring a purposeful voice to the message that when production and retail are combined, they provide fantastic experiential retail for all people walking by, build up the local economy, and create good-paying jobs for more residents - and that is how exciting communities are made!

Small-scale manufacturers need to become involved through online forums and community organizations to participate in the debate on taxes, real estate permitting, grant, and partnership opportunities. We need to be knowledgeable so we can ask for valuable tools and changes like flexible real estate arrangements to be combined with training and mentoring to advance the prospects of emerging businesses.

It is small-scale manufacturers who have the ability to revitalize our cities and towns and reverse the trend of empty storefronts. When “hardware, hot sauce, and handbags” fill downtown spaces across the country they will grow while reviving downtowns with vibrant economies creating great places for everyone who works, lives, or is visiting there.

Author profile: Ilana Preuss is Founder & CEO of Recast City, a nationally recognized consulting firm working with smallscale manufacturing business owners, real estate developers, foundations, city planning and economic development offices, improvement districts, and mayors. They have moved ideas to action by building great places with vibrant economies. Her book Recast Your City: How to Save Your Downtown with Small-Scale Manufacturing is a must-read for all people and organizations responsible for downtown reinvestment. She can be reached by email at ilana@recastcity.com, phone 240–472–2765 and on social media on LinkedIn and Twitter @IlanaPreussb. n

Economic activity in the manufacturing sector contracted in April for the sixth consecutive month following a 28-month period of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business® .

The April Manufacturing PMI® registered 47.1 percent. The New Orders Index remained in contraction territory at 45.7 percent, 1.4 percentage points higher than the figure of 44.3 percent recorded in March. The Production Index reading of 48.9 percent is a 1.1-percentage point increase compared to March’s figure of 47.8 percent. The Prices Index registered 53.2 percent, up 4 percentage points compared to the March figure of 49.2 percent. The Backlog of Orders Index registered 43.1 percent, 0.8 percentage point lower than the March reading of 43.9 percent. The Employment Index elevated into expansion territory, registering 50.2 percent, up 3.3 percentage points from March’s reading of 46.9 percent. The Supplier Deliveries Index figure of 44.6 percent is 0.2 percentage point lower than the 44.8 percent recorded in March; this is the index’s lowest reading since March 2009 (43.2 percent).

Of the six biggest manufacturing industries, two — Petroleum & Coal Products; and Transportation Equipment — registered growth in April. The five manufacturing industries that reported growth in April are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Fabricated Metal Products; and Transportation Equipment. ISM

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

PMI® at 47.1% MANUFACTURING

The U.S. manufacturing sector contracted in April, as the Manufacturing PMI® registered 47.1 percent, 0.8 percentage point higher than the reading of 46.3 percent recorded in March. This is the sixth month of contraction and continuation of a downward trend that began in June 2022. Of the five subindexes that directly factor into the Manufacturing PMI®, only one (Employment) is in growth territory. Of the six biggest manufacturing industries, two (Petroleum & Coal Products; and Transportation Equipment) registered growth in April.

Manufacturing at a Glance

Commodities Reported

Commodities Up in Price: Copper (5); Diesel; Electrical Components (6); Electronic Components (3); High Density Polyethylene (HDPE); Labor — Temporary; Plastic Resins* (2); Polypropylene (3); Steel (3); Steel — Carbon; Steel — Hot Rolled (2); Steel — Stainless (3); and Steel Products (4).

Commodities Down in Price: Aluminum; Corrugate (5); Corrugated Boxes (4); Epoxy; Freight (6); Methanol; Natural Gas (5); Ocean Freight (8); Plastic Resins* (11); Steel; and Wood Pallets.

Commodities in Short Supply: Electrical Components (31); Electronic Components (29); Labor — Temporary; Plastic Resins; and Semiconductors (29).

ISM® Report On Business®

New Orders

April 2023

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

ISM’s New Orders Index registered 45.7 percent. The eight manufacturing industries that reported growth in new orders in April — in the following order — are: Printing & Related Support Activities; Paper Products; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing‡; and Transportation Equipment.

The Production Index registered 48.9 percent. The 11 industries reporting growth in production during the month of April are, in order: Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; and Computer & Electronic Products.

Employment

ISM’s Employment Index registered 50.2 percent. Of 18 manufacturing industries, seven reported employment growth in April, in the following order: Apparel, Leather & Allied Products; Paper Products; Fabricated Metal Products; Transportation Equipment; Plastics & Rubber Products; Machinery; and Chemical Products.

Supplier Deliveries

The Supplier Deliveries Index registered 44.6 percent. Three of 18 manufacturing industries reported slower supplier deliveries in April: Textile Mills; Primary Metals; and Computer & Electronic Products.

Inventories

The Inventories Index registered 46.3 percent. Of 18 manufacturing industries, the five reporting higher inventories in April are: Printing & Related Support Activities; Textile Mills; Apparel, Leather & Allied Products; Petroleum & Coal Products; and Electrical Equipment, Appliances & Components.

ISM® Report On Business®

Customers’ Inventories

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

ISM’s Customers’ Inventories Index registered 51.3 percent. The seven industries reporting customers’ inventories as too high in April are, in order: Apparel, Leather & Allied Products; Paper Products; Computer & Electronic Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Plastics & Rubber Products.

Prices

The ISM Prices Index registered 53.2 percent. In April, nine industries — in the following order — reported paying increased prices for raw materials: Petroleum & Coal Products; Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Machinery; Transportation Equipment; Miscellaneous Manufacturing‡; Fabricated Metal Products; and Computer & Electronic Products.

Backlog of Orders

ISM’s Backlog of Orders Index registered 43.1 percent. Three industries reported growth in order backlogs in April: Printing & Related Support Activities; Textile Mills; and Paper Products.

New Export Orders

ISM’s New Export Orders Index registered 49.8 percent. Five industries reported growth in new export orders in April: Printing & Related Support Activities; Wood Products; Paper Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing‡

Imports

ISM’s Imports Index registered 49.9 percent. The six industries reporting an increase in import volumes in April — in the following order — are: Printing & Related Support Activities; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Primar y Metals.

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

NORTH AMERICA OUTLOOK

by Dr. Chris Kuehl

United States Outlook

The economic forecast has resembled one of those slasher movies where there is a threat around every corner, and clueless teens are dropping right and left. Each week seems to bring a new challenge, and the media continues to feed a never-ending desire for drama. The bank crisis was depicted as the end of modern civilization and the trigger for a return of the Great Depression. On closer examination, the issue was one of a few badly run banks paying for their sins. For those that want to trust in the data and avoid the hysterical commentary, it has been frustrating as there have been as many positive developments as there have been negative ones.

A report from the Brookings/Financial Times tracker asserts that economic conditions around the world are far better than they were expected to be. Growth is expected in the U.S.,

U.K., Eurozone, Japan, and China.

The consumer has been affected by inflation, to be sure, but they are still active – especially those in the upper 30% of income earners. The estimates for GDP growth have been bouncing around over the last few weeks. A month ago, the GDP Now estimates from the Atlanta Fed were 2.6% growth and then 3.2% but in the last week that number was ratcheted down to 1.7% and most recently to 1.5%. The decline has been attributed to a slower pace of consumer spending, and that has been blamed on some adjustments in the labor market. After nearly a year of hiking interest rates in an attempt to slow the economy, the Fed is starting to see some reaction in the labor market.

signs of upward movement. The other factors that affected growth include the bank fiasco, as investors froze for over a week and millions of dollars sloshed from bank to bank as depositors tried to figure out where they could locate a safe haven.

The longer-term estimates are more encouraging – especially for manufacturing. The ongoing disenchantment with China has continued to fuel reshoring efforts. The fastest growing segment of commercial construction has been manufacturing, as new facilities are needed to accommodate the shift from China and the growth in the use of robotics and technology. The inhibitions regarding reshoring remain as they have been – worker shortage and the need to find adequate transportation for both inbound and outbound activity. In the latest ASIS matrix, there are several industrial sectors that still show solid growth

There are fewer jobs on offer, although the number of open positions remains high. There are 9.9 million openings, but that is down from 10.9 million a month ago. The rate of joblessness remains very low but has shown some continued

– automotive and aerospace still lead the pack. Many of the other sectors still have a reasonable outlook for the coming year but see slower growth numbers than were evident in 2022.

The Armada Strategic Intelligence System is an examination of the industrial sector as defined by the Federal Reserve’s industrial production measure. We strip out the data on utilities and mining to isolate just the manufacturing sector. Most of the sectors are going through a similar period of adjustment. There was significant inventory build in the last year as companies tried to cope with a broken supply chain. This has saddled around 70% of businesses with excess inventory levels. Until that supply is gone, there will be little reordering. That cycle usually manifests this time of year, and now it is estimated that reorders will not resume until late summer or early fall.

For the U.S., the message is still confusing. There are as many reasons to be somewhat optimistic as there are reasons to retreat. Even the big analytical organizations are providing contradictory reports. The head of the World Bank has been preaching gloom and doom at the same time that her own organization has been proclaiming better progress than expected for the world economy.

Canadian Outlook

The outlook for the Canadian economy is as mixed as it has been for the U.S. The Bank of Canada has asserted that it is sticking to the 4.5% level with the interest rate, but there have been developments in the labor market that are testing that resolve. The rate of unemployment has remained very low at 5.0%, and there has been job growth for the last four months despite the hikes. More importantly, there has been continued wage growth and that undermines the efforts of the BoC. The drivers of the Canadian economy are still intact. Commodity demand has been solid and the manufacturing sector has mirrored what has been taking place in the U.S. The strongest sector for U.S. manufacturing has been automotive, and that is also the sector in Canada that is most closely linked to the U.S.

The analysis from the Royal Bank of Canada still holds that there will be a mild recession in the middle of the year. The rate hikes tend to have a lagging impact, and most of the response will be seen in second and third quarter. It has been noted that consumer sectors are already starting to lag – the housing sector is moribund (at least for single family) and the global manufacturing numbers have

been down. That affects demand for Canadian commodities as well as the manufactured goods that go into other assemblies.

Mexican Outlook

A few months ago, the Finance Ministry in Mexico asserted that 3.0% growth was likely in 2023. Most dismissed this claim as wishful thinking but now it looks far more accurate than those more pessimistic forecasts. The economy is on pace to grow at least that fast in the first quarter and is expected to pick up speed as the year progresses. In the fourth quarter of last year, the pace fell to 0.5%, and in Q3 it was at 0.9%. The 3.1% expansion in Q1 has been attributed to recovery in all four major economic sectors for the country. Manufacturing is the number one driver and has been boosted by record levels of foreign direct investment. The FDI pace is unprecedented, and 45% of it is brand new. This is mostly attributed to the shift in supply chain options from China. Companies that still need a low labor cost environment are finding opportunities in Mexico. Tourism is making a comeback as the pandemic threat starts to ease. Remittances from the Mexican workers in the U.S. continues to be a major source of national income, and the fourth pillar is oil production. The recent hike in the per barrel price will benefit Mexico.

Author profile: Dr. Christopher Kuehl (Ph.D.) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division –Finance, Credit and International Business. n

AFRICA OUTLOOK

by Royce Lowe

Africa’s Journey To Urbanville

In 1950, Africa’s population was some 227 million. Today, with an annual growth rate since then of some 2.5% to 3.0%, it’s at 1.46 billion. In 1950, the urban population was just over 13% of the total; in 2015, the latest year for which continent-wide data is available, half the African population were city dwellers. This share is forecast to rise to over 70% by 2050.

By bringing people and companies into close contact, cities make both more productive. And even though urbanization is enriching Africans, they could be benefiting more.

African cities do not grow efficiently. This applies to really big cities, such as Lagos and Kinshasa, and towns and smaller cities where most African urbanites live. Today there are more city-dwellers in Kenya than there were in all of Africa in 1950.

The growth of Africa’s cities has, in

general, been good for people. Wages in cities are about double what they are in the countryside, according to the OECD. Urbanites work 30% more hours per week than workers in the country. Today 50% of rural Africans live within 14km of a city, which means they can more easily access public and private services that cities offer.

Urbanization is good for Africa, but not as good as it could be. As cities get bigger, the economies of scale and attendant effects can lead to higher productivity. The World Bank, however, says African cities are “too crowded, too disconnected and too costly” to take full advantage of this. The inefficiency of African cities compounds the problem of cost. They are expensive. According to the World Bank, living costs such as food, housing, and transport are some 20 to 30% higher in African cities than in other developing nations. High wages

to offset these high living costs equals less competitive industries. “Nontradable” services or construction, rather than export-oriented sectors, are what is produced in African cities. A low adult literacy rate aggravates the transition to a more productive, industrialized economy.

These negative factors do not augur well for a continent that is home to almost 20% of the world’s population. Manufacturing, and a goodly amount of Foreign Direct Investment, are essential for poverty reduction, as witnessed by those countries strong in them. If Africa is to progress significantly, it needs both.

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

EUROZONE GLOBAL OUTLOOK

by Chris Anderson

Strength and Growth Continue

Quarter 2 of 2023 will likely see a continuing slowing in the overall manufacturing scenario in the Eurozone. Metals and Mining, Construction and Machinery and Equipment are markedly trailing. Automobiles and auto parts, and transportation are showing up well. Good growth is forecast for the services sector. There is an ongoing trend to lower input prices and to improvement in suppliers’ delivery times.

We await with interest the various PMI figures for the month of April. Here is a reminder of the results for March:

· Composite, 54.1 vs 52.0 February, 10-month high

· Services PMI, 55.6 vs 52.7 February, 10-month high

· Manufacturing output index, 49.9 vs 50.1 February, 2-month low

· Manufacturing PMI, 47.1 vs 48.5 February, 4-month low.

France and Germany both showed good performance on the services side, but Germany’s manufacturing performance was at an almost three-year low. Let it be said that

expectations in the manufacturing sector remain low at the present time.

· France, flash composite, 54.0 vs 51.7 February; 10-month high

· France flash services PMI, 55.5 vs 53.1 February; 10-month high

· France, flash manufacturing output index, 46.9 vs 45.0 February; 2-month high

· France, flash manufacturing PMI, 47.9 vs 50.5 January; 4-month low

· Germany, flash composite, 52.6 vs 50.7 February; 10-month high

· Germany, flash services PMI, 53.9 vs 50.9 February; 10-month high

· Germany, flash manufacturing output index; 50.1 vs 50.2 February, 2-month low

· Germany, flash manufacturing PMI, 44.4 vs 46.3 February, 34-month low.

The Eurozone, similar to other areas of the world, is seeing Services hold up and Manufacturing weaken.

Manufacturers in the 28 countries that make up the Eurozone, like their counterparts in the U.S., are reluctant to reduce headcount when

hiring has been difficult and training expensive. Unless there is a marked decline in new orders, manufacturers will weather the current economic conditions through Q2 and into Q3. By that time, there may be clearer indications of where the economy will trend in late 2023 and into 2024.

Manufacturers continue to burn off excess inventory purchased ‘just in case’ their supply chain continued to be inconsistent before switching back to just-in-time. As the pandemic disruptions fade into history, consumer demand will drive the next manufacturing upturn in the Eurozone. So far, consumer confidence is fair as things approach summer, so the outlook remains favorable but not necessarily strong.

APRIL 2023

ASIA OUTLOOK

by Christine Casati

THE CHALLENGE OF USCHINA TRADE RELATIONS: COUNTERING PREDATORY INFLUENCES WHILE MANAGING HEALTHY TRADE TIES

Is China’s economic growth, and all it implies for stable supply chains and global trade, incompatible with U.S economic leadership? Has Washington’s rhetoric around tariffs, sanctions, and advanced semiconductor

export controls triggered an unnecessary strategic showdown with China? Or were these actions too long in coming? Is economic decoupling really the right answer to guarantee our national security interests? Or should the goal be to “de-risk,” as E.U. Commission President Ursula von der Leyen puts it, not to “decouple”? Which companies or technology will the U.S. or China ban next? These are the current questions dominating global economic discussions.

Economic statecraft is never easy, but not doing the work can lead to peril. China’s recent strides in military development, defense manufacturing, A.I., and signal intelligence used for spying, not to mention medical supply chain shortages in the U.S. during the pandemic, make it imperative that the U.S. map out a blueprint for a healthy and comprehensive trade policy with China, without the war rhetoric, while countering predatory influences.

Tensions need to be defused by both sides. Otherwise, both manufacturers and consumers face ongoing uncertainty, which can result in damaging and costly decisions. At the same time, U.S. policymaking must not sabotage the profitable and mutually beneficial manufacturing investments of the U.S. and its allies in China nor make our citizens less welcome. Uncertainty and weaponizing trade policy may already have driven some multinationals, like Apple, Sony, and Adidas, to expansion elsewhere in Southeast Asia or India.

In its latest effort to define (redefine?) its economic approach toward China and to assuage its European allies who fear Washington may have grown too hawkish, the U.S. National Security Advisor Jake Sullivan, on April 27th, delivered a speech clarifying that the U.S. does not want to decouple from China. It wants to “de-risk and diversify its relationship.” While there is no doubt that the U.S. wants to reduce its reliance on China in vulnerable areas such as sourcing minerals critical to advanced manufacturing, solar energy, and electric vehicle batteries, among others, it does not want to call it “decoupling.” Janet Yellen, Secretary of the Treasury, made similar remarks in an earlier, more conciliatory speech.

Efforts to Counter China’s Influence

In line with China’s continued push to influence developing countries in Africa, the Middle East, and Latin America by peddling loans, investments, and diplomacy, the U.S. has launched new counter initiatives, including a U.S.-Africa Leaders Summit in Washington in December, where Biden committed $55 billion for Africa’s development over three years. In January, Janet Yellen conducted a ten-day trip to Africa and advanced plans to expand

partnerships on conservation, climate adaptation, and access to clean energy, while announcing President Biden’s pledge of $1 billion to lead climate resilience efforts. Other U.S. leaders have visited Africa, paving the way, including Secretary of State Blinken and Climate Czar John Kerry. More recently, Vice President Kamala Harris visited three African nations in key follow-up meetings. But the U.S. is getting a late start after China began investing billions in infrastructure development, including manpower, mostly after 2010.

At the same time, the U.S. is doubling down on countering China’s dangerous influences at home. We all know about shooting down the China spy balloon after it drifted over the U.S., analyzing the balloon’s military intelligence collection capabilities. Also, the April arrest on federal charges of Chinese individuals conducting unauthorized surveillance on Chinese U.S. residents via a secret police outpost in New York City has been in the news. According to the American Enterprise Institute, this is just the “tip of the iceberg.” (4/27). The Chinese Communist Party (CCP) runs over a hundred such secret outpost overseas

through national and local public security bureaus without the knowledge of their host countries. Their job is to help PRC citizens living abroad with renewing documents. Still, they also conduct unauthorized secret police operations to track down and deport dissidents, hack websites, commit telephone fraud, and stage protests against China’s perceived enemies.

The CCP also engages in stealthy soft power influence ops across the U.S. and has the ability, through apps like TikTok, to track keystrokes, use your phone as a surveillance device, and collect biometric data. They have also established language schools, cultural associations, local newspapers and TV programs to saturate communities with the regime‘s narratives. Both the White House and Congress have teams to investigate these pervasive activities. We also know through recently leaked documents that the U.S. is conducting extensive intelligence gathering on China’s weapons development and naval activity, including an intermediate-range ballistic missile hypersonic glide vehicle, which is suspected to be able to penetrate U.S. missile defense systems.

China’s Response: Greater Risks for Foreign Businesses in China

China is showing the world that it can push back against perceived efforts by nations led by the U.S. to counter its development. The current President Xi Jinping, now in his third term, has never trusted capitalist forces and has taken steps to exert more control over the operations of foreign firms, even while his Premier Li Qiang, a close ally, warmly welcomes foreign investors into the Chinese ‘family’. Recent incidents bely Xi’s intentions. Chinese authorities recently raided the Beijing office of Mintz Group, a U.S. due diligence firm, searching for information related to suspected theft of state secrets. In April, the Shanghai office of Bain & Co., a U.S. consulting firm, was also treated to a surprise visit by authorities to question staff. The U.S. chip maker Micron has been subjected to a cybersecurity review of its imports, threatening to ban Micron altogether on national security grounds.

Additionally, China recently expanded its espionage laws to include, among other things, allowing for the search of the luggage and electronic devices of anyone suspected of espionage. (WSJ 4/28) These actions smack of Russian practices. Perhaps

Xi has been emboldened by advice from his ‘friend’ President Putin to take such steps to push back at Western Powers. Unfortunately for China, these behaviors are resulting in greater perceived risk for foreign businesses in China, with more foreign investors souring on Chinese stocks.

Emerging U.S.-China Rivalry in Emerging Technologies

On the commercial side, Chinese companies have launched their own offensives to compete with the U.S. In April, Alibaba demonstrated its new software to compete with Microsoft’s ChatGPT, called Tongyi Qianwen, which will be embedded in its smart devices and workplace messaging platform DingTalk. Such platforms like ChatGPT and DingTalk are underpinned by what is called “generative A.I. technology” and cloud computing. Many Chinese tech companies are rushing to release their versions, according to Michelle Toh of CNN. Also in April, SenseTome, the widely-respected A.I. company, launched a new suite of services in its chatbot called “SenseChat.” In March, Baidu launched its own ChatGPT-style service using a chatbot called ERNIE.

The Commercial Downside for U.S. Allies of U.S. Security Campaigns against China

There are conflicts between U.S. efforts to slow down semiconductor manufacturing in China, for example, and the trading interests of its allies. To achieve effective decoupling and build self-reliance at home re-

quires support from key Asia-Pacific trading partners, such as Japan, South Korea, and Taiwan, who are also China’s major trading partners. These allies participated greatly in developing China’s “ Factory to the World” by relocating thousands of electronic components and assembly factories to China and training the labor force. So for the U.S. to decouple from China also involves decoupling from some of these China-based operations of our allies, as well.

Impact on South Korea

After the U.S. imposed export controls on trade in chips and related equipment to China, the U.S. issued waivers to Korean companies whose operations would have been deeply affected. This year, the U.S. threatens to let those waivers expire if South Korea doesn’t align with U.S. export controls. The President of South Korea, Yoon Suk Yoel, was recently hosted by the White House for a six-day state visit the week of April 24th. The main focus of the talks was reaching a security agreement, called the Washington Agreement, which allows continued Korean reliance on U.S. nuclear forces to provide a deterrent to North Korea’s threats, rather than South Korea developing its own nuclear arsenal. There was also significant U.S. trade pressure on S.K.’s semiconductor manufacturers, mainly Samsung and S.K. Hynix, not to fill any gap in supply to China if the U.S. chips company is excluded from Chinese markets on national security grounds. While Yoon is somewhat hawkish on China, he must consider the broader picture for S.K. commercial interests. China is, after all, S.K.’s largest trading partner by far.

The U.S. has many tools in its trade kit to pressure Seoul to do its bidding.

continued

The Inflation Reduction Act has made it very difficult for Korean carmakers Hyundai and Kia to become eligible for U.S. tax credits for E.V.s. Even though Hyundai has built its own car plant in Georgia, creating hundreds of jobs for U.S. citizens, it still assembles cars using a majority of parts manufactured in South Korea. So far, it has failed to qualify for E.V. subsidies for sales in the U.S. If U.S. officials want Seoul to comply with

its export restrictions on semiconductors to China at the expense of its own enterprises, they should perhaps think about paving the road a bit more in favor of South Korean sales here in the U.S. to gain their cooperation against China. We know they need us. But, coercion is bad for business.

Japan has acceded to U.S. demands. In response, they have decided to invest billions in their own semiconductor manufacturing equipment industry. But they face increasing retaliation from China for not selling their equipment to China. They have also decided to go against precedent set after World War II and start investing in their own defense. They have joined AUKUS, a security pact among Australia, the U.K., and the U.S. to promote security and stability in East Asia and the Indo-Pacific.

Putting our trade allies on the spot has generated a great deal of open but often uncomfortable dialogue when the U.S. increasingly asks for their support at the expense of their own industries. As Alan Beattie of the Financial Times puts it, “ Being a U.S. ally at a time when geopolitics is leaning heavily on trade policy certainly keeps you on your toes.”

Let’s hope we don’t step on China’s toes so much that they will all end up doing what we do.

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

AEROSPACE OUTLOOK

by Royce Lowe

Airbus Expands in China

Simple Flying reports that Airbus recently signed new cooperation agreements with its Chinese aviation industry partners. This partnership will next see an increase in capacity at Airbus’s Tianjin A320 final assembly line. There will further be a General Terms Agreement to allocate 160 aircraft to Chinese airlines and to increase the use of sustainable aviation fuels in regular flights.

Guillaume Faury, the CEO of Airbus, signed an agreement to increase the assembly capacity for its Airbus A320 family with a second line at its Tianjin site. The deal was made

during a recent state visit with the Tianjin Free Trade Zone Investment Company and Aviation Industry Corporation of China Ltd in the presence of Chinese President Xi Jinping and French President Emmanuel Macron. Airbus aims to produce, globally, 75 aircraft per month by the end of 2026. The original site in Tianjin, in operation since 2008, has assembled over 600 A320 aircraft since it began operations. It carries out cabin interior installation and fuselage painting. Airbus currently has four A320 final assembly sites worldwide, with four assembly lines in Hamburg

and others in Toulouse and Mobile, Alabama.

Airbus and the China National Aviation Fuel (CNAF) Group signed a Memorandum of Understanding to upgrade Chinese-European cooperation for Sustainable Aviation Fuels. The agreement covers the production, competitive application, and common standard formulation for fuel use. In September 2022, Airbus and CNAF contracted to support flights in China to operate with SAF. So far, some seventeen delivery flights and the first commercial flight have been facilitated by the two partners.

The aim of this new agreement is to optimize the SAF supply chain by using a mix of sources and improving SAF production to use 10% SAF by 2030.

Airbus CEO Guillaume Faury commented on the announcement, saying, “We are honored to continue our long-standing cooperation by supporting China’s civil aviation growth with our leading families of aircraft. It underpins the positive recovery momentum and prosperous outlook for the Chinese aviation market and the desire to grow sustainably with Airbus’ latest generation, eco-efficient aircraft. Airbus values its partnership with the Chinese aviation stakeholders, and we feel privileged to remain a partner of choice in shaping the future of civil aviation in China.”

Airbus also signed a General Terms of Agreement with the China Aviation Supplies Holding Company to firm up a purchase of 160 Airbus commercial aircraft. The agreement covers previously announced orders worth $17 billion. The deal includes 150 A320 aircraft and ten Airbus A350-900 widebody aircraft orders, reflecting Chinese carriers’ strong demand in all market segments.

China represents over 20% of the worldwide aircraft market. Airbus saw its first aircraft enter the Chinese market in 1985, nearly 40 years ago, when an A310 was first delivered to China Eastern Airlines. China’s air traffic is forecast to grow at a rate of 5.3% annually over the next 20 years,

significantly faster than the world average of 3.6%. This growth will lead to a demand for 8,420 passenger and freighter aircraft over the next twenty years.

We have previously mentioned China’s competing plane, the COMAC C919, which is effectively on the market. China is looking to have an annual production capacity of 150 C919s within the next five years. We will monitor the performance of the plane itself, together with progress in its production.

Boeing opened its first overseas plant, a completion and delivery center, in the middle of a trade war in 2018, some 90 miles from Shanghai. The plant does interior and exterior paintwork and other detail finishing work. The plant is a joint venture between Boeing and the Commercial Aircraft Corporation of China (COMAC).

The Outlook: The demand for commercial and fleet aircraft will remain strong through 2030 and help support component demand at subcontractors who serve aircraft manufacturing and maintenance. The industry has always had rises and falls depending on economic winds, but the long view is for strong growth over the next decade.

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

MAY 2023

ENERGY OUTLOOK

Keeping Down E.V. Energy Costs

by Royce Lowe

to reduce reliance on rare earths. Model 3 and Model Y powertrains have already reduced consumption of heavy rare earths by a quarter, and Tesla’s next drive unit will include a permanent magnet motor that doesn’t use any of the materials, according to Colin Campbell, VicePresident of Powertrain Engineering. The automaker is looking to keep driving down costs, stay away from environmental and health risks, and

reduce reliance on commodities that may be susceptible to wide price swings.

Tesla recently decided to tell the world that it wants to remove rare earths from future models. This caused quite a reaction, and shares of Chinese rare-earth miners were heavily sold off at the news. At the same time, it is hoped that the announcement will spur global efforts to come up with alternatives for electric car motors that currently rely on the materials. Other carmakers, including BMW, Toyota, and General Motors, have also sought continued

China has long had control of the rare earth supply chain. This has led to unpredictable prices. Rare earths are used in magnets in everything from phones to wind turbines and fighter aircraft, and the unpredictable prices have long been a problem for the auto and the clean-energy sectors. China accounts for around two-thirds of

mining and 85% of refining of the materials. The risks of relying on Beijing were highlighted in 2010 when prices spiked on China’s decision to cut exports and in 2019 and 2020 amid speculation that shipments might be limited again amid trade tensions with the U.S.

The lack of diversity in rare earth permanent magnet supply chains is “a key concern for the industry within the geopolitics of critical materials,” said Nils Backeberg, founder of Londonbased consultancy Project Blue. “Use of cheaper - though less performanceand efficiency-focused - technologies is likely to become more widespread.”

One potential alternative is ferrite magnets, a mix of iron and such materials as barium and strontium, which are more widely available and cheaper, according to William Roberts, a senior research analyst at Londonbased consultancy Rho Motion. G.M. has previously used these, and Japanbased Proterial said in December it had developed motors using ferrite magnets that performed as well as components using rare earths. Minneapolis-based Niron Magnetics,

which has partnered with Volvo Car, last year won a $17.5 million U.S. Energy Department grant to help scale up work on rare-earth free magnets that use iron nitride-based technology.

A team from the University of Cambridge and colleagues from Austria announced a new method to make tetrataenite, a possible replacement for rare-earth magnets, in a research paper published last year. It may be possible to produce tetrataenite, an iron-nickel alloy, at scale by adding phosphorus, the researchers found. Previously, making tetrataenite, whose magnetic properties approach those of rareearth magnets, in the laboratory, relied on impractical methods, they said. The researchers are hoping to work with major magnet manufacturers to determine whether tetrataenite might be suitable for highperformance magnets.

Ferrite magnets are the most likely candidate for Tesla’s innovation, according to research firm Adamas Intelligence, though the technology faces a challenge as it has traditionally come with a “significant weight or

efficiency penalty.” Existing rare earth-based motor systems also have a track record of efficiency, and demand for the materials in electric vehicles and renewable energy is forecast to surge. About $3.8 billion of magnet rare earth oxides were consumed in energy-transition-related applications in 2022, and the figure will reach more than $36 billion in 2035, Adamas forecasts.

The Outlook - As alternatives are developed by creative minds with unique approaches to problem materials or critical components, manufacturers in the U.S. (and other countries) will reduce or remove rare earths and other conflict components, defined as any element or component that is reliant upon a supply source subject to current or ongoing geopolitical, socioeconomic, strategic, or extreme cost volatility.

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

MATERIALS OUTLOOK

U.S. Tariffs on Russian Aluminum

by Royce Lowe

At the beginning of the year, nobody was sure whether the U.S. and its allies would levy sanctions against Russian aluminum over the ongoing war in Ukraine. Russia’s aluminum industry is a key part of its defense industrial base. It is also one of the world’s largest producers of the metal. The U.S. and its allies imposed several economic measures against Russia after it invaded Ukraine a year ago but did not target aluminum.

prices soaring. Hence the aluminum market was anxious about 2023.

In late February, their anxiety was answered when the U.S. announced the imposition of a 200% tariff on Russian aluminum. The 200% duty will further apply to aluminum imports from elsewhere, including Russian aluminum. The tariffs were part of a larger package of trade enforcement moves against Russian metals, minerals, and chemicals worth about $2.8 billion, announced on Russia’s invasion’s one-year anniversary. Tariffs usually lead to higher prices, but the impact of this latest action against Russian aluminum will not be as serious as it may have been. The tariffs were not as punitive as other

measures the White House considered, such as a total ban on imports of Russian aluminum and renewed sanctions on Rusal.

The tariffs are unlikely to tighten aluminum supplies in the U.S., as users have lessened their reliance on Russian aluminum since 2017. Russia, primarily through Rusal, accounted for some 11% of U.S. aluminum imports at that time. This share dipped to about 4% of import volume last year.

In 2018, the U.S. sanctioned United Co. Rusal, a major Russian aluminum producer, as a response to Russian aggression, including meddling in U.S. elections. This froze the bulk of the company’s exports, disrupted the aluminum market, and sent aluminum continued

Demand for the metal is playing a major role here, as prices of the metal on the London Metal Exchange, the international benchmark, have fallen about 30% from a year ago and remain under pressure.

Global prices have been unstable since the pandemic. They began a steady climb in mid-2020, as economies slowly reopened following pandemic lockdowns and improving industrial demand. The growth of electric vehicles and renewable energy has also increased demand.

In early 2022, commodity prices surged on supply concerns in the days and weeks leading up to Russia’s invasion of Ukraine. Prices continued rising after the start of the war as the U.S. and other western nations brought economic sanctions against Russia. The U.S. did not initially target Russian aluminum, but the sanctions and the war led to increases in many commodity prices. Aluminum prices soared more than 30% in the first quarter of 2022.

Since peaking in March 2022, prices have tumbled. As some key buyers shunned Russian supplies, aluminum inventories began growing. Meanwhile, China, the world’s largest aluminum producer, kept its smelters going and added to the oversupply.

According to the International Aluminum Institute, despite production cuts in Europe and the U.S. due to high energy costs, worldwide aluminum

production rose 2% last year, to 68.5 million tons.

Coincident with the rise in global production was worries about an economic slowdown, hence a weakened demand for the metal. There were problems with Europe’s energy crisis and inflation - rising interest rates causing recession fears. In addition, currency fluctuations have hurt aluminum prices. The Federal Reserve’s aggressive interest rate hikes to combat inflation have strengthened the U.S. dollar relative to other currencies. As metals are priced in dollars in international markets, the strong dollar makes aluminum more expensive for holders of other currencies.

Since there has been no significant improvement in economic conditions this year, the outlook for aluminum is not likely to improve. A 3%-5% drop in the metal price is expected early in Q2, because of an expected monthly rise in inventories at the London Metal Exchange. Further, the global manufacturing scenario, with the exception of India, is in contraction. There is a lack of demand.

Prices may rise if Europe follows the U.S. in imposing tariffs on Russian aluminum or even stops importing it. The E.U. is more dependent on Russia for its aluminum supplies than is the U.S., as Russia accounts for about 13% of the E.U.’s imports. Supplies are already tight in the E.U. after smelters in the region shut down production because of soaring energy prices. So the war in Ukraine and further trade actions by Western nations will continue to greatly affect the aluminum market.

Russian retaliation against the U.S. import tariff could well lead to Russia playing havoc with its nickel exports to the U.S., or some 11% of U.S. imports. Who knows where this could all lead?

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

Guiding Manufacturers Through Economic Turmoil

MAY 2023

AUTOMOTIVE OUTLOOK

by Lawrence Makagon Ford Fights

Back

Ford is predicting heavy losses for its electric vehicle business this year, forecasting they will grow to $3 billion as the company spends on new models and factories. This deficit matches its accumulated EV losses over the past two years. Ford is starting to report financial results by business unit rather than by region. It also restated its results for the last two years, showing its budding E.V. business lost $2.1 billion last year.

Chief Executive Officer Jim Farley is radically reorganizing the 120-yearold automaker by dividing it into three units — one for EVs, or Model e; another for internal combustion engine vehicles, or Ford Blue; and a third for commercial trucks and vans, Ford Pro. Ford is the number 2 seller of EVs in America on the strength of its F-150 Lightning plug-in pickup and the battery-powered Mustang Mach-E but is still miles behind

Tesla, which controls two-thirds of the U.S. EV market.

Farley’s aim is to eventually overtake Elon Musk’s company, which is the world’s most valuable automaker. This is the same promise G.M.’s Mary Barra made a couple of years ago. Ford is investing $50 billion to develop and build EVs through 2026, and its goal is to manufacture 2 million battery-powered vehicles

annually by then. EV losses will expand 43% this year as Ford spends heavily to develop a second generation of battery-powered models, with their attendant factories.

“There’s a lot of investment that’s going into Model e for the growth that we’ll be seeing,” according to CFO John Lawler. Ford reiterated its goal to reach an 8% EBIT margin (Earnings Before Interest and Taxes) on E.V.s by late 2026. Last year, electric vehicles generated a negative 40% margin, Lawler said. But he said that Ford’s EV business will be “approaching breakeven” on a contribution-margin basis by the end of this year, excluding research and development costs. Lawler said that the road to profitability will come from increased sales volume, more efficient designs, lower battery costs, and more competitive distribution and pricing. Ford’s EV losses last year were less than Deutsche Bank analyst Emmanuel Rosner expected. Rosner stated that Ford had likely generated operating losses of $6 billion for the Model e™ unit in 2022 when factoring in significant research and development costs.

Ford more than made up for EV losses with profits from traditional gasoline-fueled vehicles, such as the top-selling F-Series pickups and Bronco sport utility vehicles. According to the automaker’s restated results, the Ford Blue business had $6.8 billion in EBIT last year. This year, Ford projects its combustionengine vehicles to generate about $7 billion in earnings before interest and taxes, characterized as a “modest improvement.” Farley has been critical of the performance of Ford’s traditional operations and is targeting $2.5 billion in cost cuts this year.

This year, Ford’s commercial vehicle business is expected to nearly double

earnings before interest and taxes to almost $6 billion. Last year, Ford Pro had EBIT of $3.2 billion, up from $2.7 billion in 2021. Ford is launching a new transit van this year. Lawler notes an “incredible pent-up demand in the commercial business.”

The company reiterated its full-year guidance of $9 billion to $11 billion in adjusted EBIT. Shares have been under pressure after two consecutive quarters of disappointing earnings. Farley is counting on his companywide overhaul to reinvigorate and refocus Ford. “This is far more than an accounting exercise,” Lawler said. “After 120 years, we’ve essentially re-founded Ford.” In 2022 Ford sold 61,575 EVs, up 126% for the year. Ford has a tough row to hoe if it is to produce 2 million battery-powered vehicles annually by 2026.

At the other end of the scale, the EV startup Canoo is moving from R&D to focus more on manufacturing in 2023, hoping to cut operating expenses. The company is looking to produce 20,000 units and has an order book of $2.8 billion, including 4,500 delivery vans from Walmart. The company’s not making any money. Q4 of last year saw Canoo settle an SEC investigation into whether

former senior executives had misled investors, and the company will pay a $1.5 million fine as a result.

Despite the lows of the year, executives remained optimistic about the big picture. They delivered Canoo’s first light tactical vehicle (LTV) to the U.S. Army and entered a partnership with a Saudi Arabian distribution company. With the investigation wrapped up, its CEO said Canoo can now apply for government programs such as the “Department of Energy loan program and things of that nature.”

If Canoo’s LTV does its job, and Saudi Arabia can persuade Saudi Arabians to buy the product, this company might stand a chance.

The Outlook - EVs will continue to be a substantial investment to reach profitability. Beyond that, the key to EV success will be in recycling component parts, and ways to prevent an entire vehicle from being ‘totaled’ by insurance companies, even with minor damage, because any damage to the battery makes it too costly to repair. This will drive up insurance costs. n

Lawrence Makagon, Staff Writer

CYBER SECURITY OUTLOOK

Policy Matters: Creating Cybersecurity Policies that Won’t Weigh Employees Down

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

I still recall (many years ago) when I started my first day at a Fortune 500 company. As I admired my shiny new cubicle, a friendly HR representative approached me with a very large book in her hands. My enthusiasm crashed as I read the cover: “Employee Manual.” She explained the importance of reading the entire book, as they would expect that I was fully aware of all policies.

This manual was a big, blue binder with over 200 pages of all the things I was not allowed to do. There was never a chance I was going to read any of it. The moment she left my cubicle, I took that huge book and retired it to its new permanent home, the lowest shelf I could find.

Throughout all of my employment at this company, I never saw that book opened or referenced once, either by myself or any of the many colleagues I interacted with as a technician. While the information could have been useful, I would never know because the content was unapproachable. If you want employees to use your policies the way policies should be used—particularly for cybersecurity matters— there are better ways to approach it than my experience at that company.

First, let’s boil down why you’re creating policies: policies help ensure that your team does the same process the same way, in an efficient and secure manner. In terms of cybersecurity, this could mean forming complex

passwords or not taking vital documents home. Policies are also needed as requirements to meet a variety of compliance standards, regardless of your industry.

Now, ask yourself this question: Are you going to read two hundred pages of policies? Unless that’s your jam, the answer is probably not. That’s why my Big Book of Policies became my Big Shelf Holder of Policies.

Before I finally divulge how to approach cybersecurity policies, let’s take one more trip down memory lane, going back to my employment at a pharmaceutical company. It’s important to note that pharmaceutical companies are heavily regulated, and their policies

must be followed very closely—an example of those compliance standards I mentioned.

As a young network administrator, I was responsible for the life of the network, ensuring that everything worked and was protected. One of my roles included the backup of all important data. The company had a policy for how to perform backups, so, being the good employee that I was, I went and asked for the policy. My manager told me, in all seriousness, “I can’t give you that policy because, per the policy, you have to be director-level or above to see the backup policy.”

I was stunned into silence. How was I supposed to follow a policy that I was not permitted to see? In the end, I created and implemented my own backup process using industry standards and off-site backups, but to this day, I have no idea if it met the requirements of the company policy. I share this example because it’s vital for you to realize that

if you don’t give employees clear and easy policies to follow (and access to them), then they’ll make up their own policies and processes, and while it worked out in my case, it very easily could end up in disaster. So, what’s the magic formula for cybersecurity policies? Here are some tips to remember when creating a policy:

1. KISS: Keep it Simple, Stupid. Basically, create policies that are clear and concise.

2. Clearly define the audience that needs to follow the policies.

3. Include the name of the person or committee that wrote the policy.

4. Keep a log of policy changes and dates with the policy.

5. Review the policy each year.

6. Ensure proper training and access to the policies.

Policies can be a great way to support corporate culture and protect you if

something goes wrong, so it’s vital that they’re accessible and easy to follow. Your cybersecurity and employees will thank you.

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

MAY 2023

ISSUES OUTLOOK

by Royce Lowe

India on the Up and Up

India, the world’s most populous nation, has roughly 800 million working-age people and will add some 200 million more over the next thirty years. Manufacturing presently employs between 50 and 60 million people. A conservative projection based on output to 2047 sees manufacturing with the potential

to create 85 million more jobs. Of late, India has seen improvements in foreign trade and exchange controls, infrastructure and technological readiness. Market opportunities are there, including a large, growing domestic market. The business environment in India has seen improvements across most

parameters. The manufacturing sector is in development through lots of young labor, and the working-age population is forecast to be up by some 100 million in the period to 2030, to surpass 1 billion. (China’s will fall by 40 million to under 950 million.) India’s median age, at around 28 years, is some ten years below China’s.

There is lots of low-end manufacturing in India; hence low labor costs. Female participation in the Indian labor force is very low, hence its labor force is smaller than China’s. There are low levels of literacy and technical skills in India. Secondary education levels are inadequate. Education is missing years. There are skill gaps. Programs are in place to improve skills, but these will take time to bear fruit. There will be higher training costs.

India’s infrastructure, although improved, still leaves much to be desired. But more cargo is going through India’s ports, and its ports are more efficient. The railway network has hardly expanded since 2000 despite investment. The national highway network, on the other hand, has expanded rapidly in recent years, and has more than doubled since 2000. Land acquisition for infrastructure construction, and for construction of fabrication shops is difficult, but it is expected the government will make it more accessible. Infrastructure development that is underway will greatly reduce manufacturing costs. As regarding the ports, Mumbai, India’s largest and the 35th largest globally, handles only a tenth of Shanghai’s - the world’s largest.

Electricity supply, inland waterways and intermodal freight transfer all need significant improvement.

The Indian government has come up with a Production Linked Incentive, or PLI scheme, that is a form of performance-linked incentive to give companies incentives on incremental sales from products manufactured in domestic units. It is aimed at boosting the manufacturing sector and reducing imports. A further aim of the scheme is to attract Foreign Direct Investment. The

scheme applies to several industries, including automotive, aviation, chemicals, metals and mining, renewable energy and white goods. Each industry receives an approved financial outlay from the government over 3-5 years.

Progress is being made in the development of industrial corridors. But the ongoing infrastructure improvement, regardless of the effort being put into it, will be very long. During the past decade India has turned from being anti-free trade agreement (FTA) to seeing the benefits. The initial problem was a backlash by small local businesses which thought they might be “swallowed up” by them. The countries of South-east Asia are more involved in such similar agreements than is India.

Foreign Direct Investment to India has increased from next to nothing in 2005 to over $40 billion in 2022, with services, software and construction being the most attractive

sectors. India has fierce competition in this respect from South-east Asian countries, particularly from Indonesia. India is the world’s second largest producer of crude steel. There are two giants in this sector, namely Tata and JSW. Tata is also the owner of Air India, the company that recently signed a huge order with Boeing.

The biggest challenges facing India in its quest to become a major manufacturing influence, would seem to be its infrastructure, the acquisition of skills by its young workforce, and the attraction of Foreign Direct Investment. It should be noted here that India’s manufacturing industry performance in March was significantly superior to that of all other major manufacturing nations.

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

MAY 2023

GRAPHENE OUTLOOK

by Tim Grady

What Object Has Length, Width, and No Thickness?

Hint: 25 Have Been Identified and One is Booming

About 20 years ago, Professor Andre Geim and Professor Konstantin Novoselov at the University of Manchester in the UK were experimenting with pencil on paper.

They weren’t trying to draw pretty pictures. They were trying to isolate a material made of a single layer of carbon atoms by rubbing the pencil lead on the paper and then applying, removing, and discarding tape, hoping that the last thing on the paper would be the thinnest object ever created.

The elusive material didn’t appear. But one man’s trash is another man’s treasure, and when they examined the discarded tape, they found what they were looking for: carbon atoms in a hexagonal lattice a million times thinner than a human hair – now known as graphene. Graphene is lightweight, flexible, and 200 times continued

stronger than steel. It conducts electricity faster than most existing materials. Defect-free graphene is impermeable to all gases and liquids, but other states or chemical combinations can make it porous.

From Concept to Commercial Use

Since its discovery, universities, governments, and major corporations are pouring money into graphene research and development. The challenge is producing graphene at scale in sizes useful in the real world. Electronics, energy storage, sensors, coatings, composites, food processing, sports, defense, medical, and biomedical devices hold the potential to incorporate graphene. Advanced material supplier Nanografi, with commercial offices in Estonia and Germany, has identified more than 60 commercial uses of graphene in various combinations with other elements. The following are some of the fascinating developments.

Solar Cells

The goal of a solar cell is to convert sunlight into electricity. Most solar panes today are large, heavy, and rigid panels. The “What if” scenario would be a thin, lightweight, flexible, and more efficient way to collect and convert energy. Graphene has no relative thickness, is flexible, is 98% transparent, and can be purchased in 30cm x 30cm sheets (with larger sheets in development). It has potential commercial use on the surface of electric cars to charge them, clothes (wearable electronics), cell phones (for screens, internal electronics, and charging), and window panes as a thin layer like window tint or between layers of glass, both to convert sunlight to electricity. High-rise buildings with myriad window panes may become collection towers to power the entire building and return energy to the grid. Homes may become selfpowered on sunny days. Graphene-

enhanced Li-ion batteries show potential for a longer lifespan, higher capacity, and faster charging time, so buildings, cars, and homes may also be able to store electricity for cloudy days and reduce dependence on the grid, or return (sell) power back to it.

The size and efficiency of graphene, in combination with other materials, are being examined for increased energy capture and storage. Rapid advances in graphene can potentially disrupt investments in other forms of energy generation and capture, such as burning fossil fuels, wind turbines, nuclear, and even wave or tidal.

Medicine

Graphene is being experimented with in the treatment of cancer. It can detect cancer cells in the early stages of tumor formation and cause autophagy, leading to cancer cell death. Functionalized graphene can carry chemotherapy drugs to tumors, targeting cancer cells better and reducing or decreasing the toxicity of chemotherapy drugs that adversely affect healthy cells. Drug delivery is not limited to cancer treatment. Anti-inflammatory drugs have also been carried by graphene and chitosan combinations to yield promising results for chronic pain patients.

For people with diabetes, graphene sensor patches have been developed to detect blood sugar levels without breaking the skin to measure glucose levels. The patch detects the glucose by pulling it from the fluid between the cells using a hair follicle. It is expected to increase the accuracy of results and eliminate the painful methods of blood sugar monitoring.

For dialysis patients, graphene, combined with other materials to create a permeable state, can filter wastes, drugs, and chemicals from the blood. Since it is 20 times thinner than existing membranes, it will significantly decrease the time spent in dialysis by speeding blood flow through the filter.

Graphene, in combination with other chemical structures, is beneficial in regeneration of bone and dental tissues. It may also be useful for other tissue generation, such as growing cells on a lattice structure of the human heart, because it is flexible, impermeable, and electrically conductive. Tissue reengineering to improve the lives of people with neuronal disorders or neurodegenerative diseases, such as Alzheimer’s, Huntington’s, Parkinson’s, and other diseases that affect body activities, including balance, movement, talking, breathing, or heart function is being

explored. Because it can be useful at very small sizes, graphene has the potential to create computerbrain interfaces that could control prosthetic limbs.

Graphene is beginning to show incredible diagnotic results as ultrasensitive biosensors that can detect viral infections, most notably HIV at levels 100,000 times lower than current diagnotic approaches and as soon as one week after becoming infected. Graphene oxide and reduced graphene oxide are bactericidal and avoid the generation of bacteria, viruses, and fungi. Combining it with silver nanoparticles increases antibacterial properties. In combination with other materials, graphene can detect T-waves (THZ radiation) which will lead to safer body scans since T-waves, unlike X-rays, are harmless to the body.

Military Applications

Graphene is 200 times stronger than steel and better able to withstand the impact of a bullet than either steel or Kevlar, with only a few layers of the material thinner than a human hair. It will also reduce the weight of protective gear. Combined with other materials, it can create flexible, transparent, and low-cost UV sensors that will lead to wearable electronics.

Graphene supertransitors replace silicon with graphene to increase computer speed up to one thousand times current technology. Speed of data applications will impact military applications including robotics, weapon maneuvers, and simulations. Graphene can improve the waterproof needs of field devices and wearable electronics. It is also more touch-sensitive and transparent for smartphone, tablet, and computer screens. The U.S. Naval Research Laboratory has found a way for graphene to become a more reliable and controllable electromagnetic

material for hard drives and computer memory that is expected to increase capacity by almost one million times. It also has significant waterproof capabilities.

Because of its lightweight, flexibility, and transparency, graphene can be used for bulletproof military clothing, helmets, and even face shields. Impact energy diffusion will be the key to effectiveness in this arena.

So Much More…

Manufacturing Outlook will continue to report on graphene in future issues, covering sportswear, clothing, snake robots, sensors, use in food processing and packaging, water purification and desalination, crop protection, food security, health and fitness monitoring, rust-free surfaces, lubricants, and other applications. Tim Grady is Editor-in-Chief of Manufacturing Outlook and a host on Manufacturing Talk Radio. He can be reached at timgrady@ mfgtalkradio.com. n

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