Metals & Manufacturing Outlook eZine for August 2019

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FLYING CARS SEE WHO IS MAKING THEM AND HOW WE’LL USE THEM! PAGE 6

MANUFACTURING OUTLOOK PAGE 8

CNC MACHINING GUIDE PART 6 WHY ORGANIZATIONS CLAIM THEY WANT CHANGE, BUT REALLY DON’T PAGE 33

JULY ISM PMI: 51.2%

Released August 1st -The Full Executive Summary Report On Business - Page 29

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Metals & Manufacturing Outlook / August 2019

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TABLE OF CONTENTS

Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE ANDREA OLSON CHRIS KUEHL CRAIG ROVERE Production Manager LINDA HOPLER Current Circulation 45,200

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PUBLISHER’S STATEMENT

ENERGY OUTLOOK

A word from our publisher

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22

FLYING CARS

GLOBAL PMI OUTLOOK

Tackling Traffic by taking to the skies

by Norbert Ore

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MANUFACTURING OUTLOOK

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GLOBAL OUTLOOK

A global look at manufacturing

What’s happening around the world

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THE CREDIT MANAGER’S OUTLOOK

EURO OUTLOOK

by Dr. Chris Kuehl

A look at Europe

12 NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada & Mexico

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Energy and the environment

14 METALS OUTLOOK The cost, making and treating of metals

16 AEROSPACE OUTLOOK

25 ASIA OUTLOOK China still in trouble

26 SOUTH AMERICA OUTLOOK Brazil in the spotlight

27 CNC MACHINING

The aerospace industry

The complete engineering guide part 6

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AUTOMOTIVE OUTLOOK

JULY ISM REPORT

Auto industry news

20 ISSUES OUTLOOK Issues around the globe

The Manufacturing Executive Summary Report on Business presented by the Institute for Supply Management

33 WHY ORGANIZATIONS CLAIM THEY WANT CHANGE, BUT REALLY DON’T

by Andrea (Belk) Olson, MSC

PUBLISHERS STATEMENT

PUBLISHER’S STATEMENT A recent article in IndustryWeek contained these two statements: “The Brookings Institute found that while 58% see manufacturing as vital to the US economy, only 17% are confident in its future.”

“The national survey found that 58% of respondents see manufacturing as vital to the U.S. economy, while 14% think it is somewhat important, 6% feel it is not very important and 22% are unsure.”

I’m not questioning the statements or the findings, or IndustryWeek – a wonderful publication – only the awareness of the respondents who are unsure manufacturing is important, feel it is somewhat important or not very important. Really? If you are unsure about manufacturing, you must be sitting in a field with nothing around you or on you that was ever manufactured.

You’ll be naked in the nettles.

So let’s take a different tack. Let’s look at a future where manufacturing no longer exists because it wasn’t important and it all went out of business.

To start this out, that means that nothing which current exists and wears out will be replaced or upgraded. Kiss your next new cell phone and X-Box goodbye. In 20 years, your clothes will all be thread-bare. Your furniture, your living quarters, your bathroom, your vehicle, your toothbrush, your blow dryer will be gone, wearing out or falling apart. Better visit the South where they kept their knives and forks – maybe they will still have plates and glasses, or Yeti’s. Oops, except you will have starved to death long before 20 years is up because food cannot be harvested or processed fast enough to feed 9+ billion people – people using machines harvest and process food. You will have to make – gasp – a bow and arrow and hunt deer, rabbit, fish or squirrel for dinner, or eat dandelion salad. There will be no chicken, beef, pork, or fish processors. When their equipment breaks down, or can’t keep up with demand and wears out, the business would shut down.

There will be no paper products. Hmm…no toilet paper. I suppose that is one way to recycle – oops, there will be no recycling equipment. That Fred Flintstone foot-powered car will certainly cut down on noxious gas emissions, but the electric car will have run out of juice long ago because the turbine at the power plant wore out and no replacement parts were made. I suppose you could use that wooden-spoked bicycle or wagon wheel – if you could make one. Clean or dirty, coal will be gone, along with every other energy source, because no manufacturer is making machines or replacement parts to harvest energy.

In fact, no one is making anything at all. Everything electronic will be off – even if it were turned on, it would not be working because the electrical grid is dead. Everyplace will look like Chernobyl.

Forget solar – that takes invention, innovation – and – manufacturing. Forget anything you sit on, walk into, walk on, work on, wear, ride in, ride on, use for work or play because nothing is being made to capture the energy of the sun or air or water to power industry, homes, or modern conveniences. No manufacturing? In 50 years without manufacturing it won’t be the dark ages – it will be before that – way before that – like cave ‘person’ days.

And if you think some other country can make it all for us, it will all be imported faster, better and cheaper, where innovation only happens overseas and we’re just a nation of ‘thinkers’, think again. Manufacturing isn’t just important to the U.S. economy – it is the foundation of our daily lives and future progress. You may design it on paper or computer, but it is worthless unless you can build it and improve on it, and that’s manufacturing. It is a living industry, not some dark, dirty and dangerous sector going extinct like the Great auk.

So, wake up, get up, take a shower, get a cup of coffee while the coffeemaker still works, and open your eyes. Everything you touch around you was made, will wear out, and needs to be replaced, revised or reinvented. Much of what you taste and smell was packaged by some manufacturing process. The music you groove on was from instruments, recorded on equipment and played through manufactured listening devices. Even a wind chime has to be made of something by human ingenuity.

So, you can be sure, and you can be sure it is important – really important – or you can start looking for that cave before someone else gets it first! And to help reinforce your certainty, enjoy this issue of Metals & Manufacturing Outlook.

Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast.

Lewis A Weiss, Publisher Metals & Manufacturing Outlook / August 2019

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COVER STORY

FINALLY!

FLYING CARS

TACKLING TRAFFIC

BY TAKING TO THE SKIES.

by CRAIG ROVERE

The four electric motors sprung to life without any of the sputtering, noise or smoke of gas-powered engines. The propellers made a low buzz as they spun at idle speed. A team of engineers in a control hut nearby increased power, the propellers roared lifting the small, white craft about 10 feet off the ground. It hovered for about a minute then gently returned to the ground.

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Metals & Manufacturing Outlook / August 2019

That was the scene on Monday, July 25th as Japanese electronics manufacturer NEC tested their prototype flying car in a 10 x 20 meter cage at one of their facilities in the Tokyo suburb of Abiko, Japan. The test was uneventful. It has room for four, but for the test the craft was unmanned. The message was clear: flying cars are coming.

COVER STORY Calling them “cars” is a bit inaccurate. Most won’t be driving on the streets, then lifting off when traffic gets bad. They aren’t really helicopters either. The coming wave of “flying cars” are pretty much drones.

Eventually most will have no pilot. Most have no wings. They will likely be owned by ride sharing companies, running on fixed routes in major cities.

Unless you are a pilot, you won’t be driving one.

The test by NEC is part of Japan’s initiative to not be late to the flying car party as it was with electric cars and ride sharing services. NEC project leader Kouji Okada said, “Japan is a densely populated country and that means flying cars could greatly alleviate the burden on road traffic. We are positioning ourselves as an enabler for air mobility, providing location data and building communications infrastructure for flying cars.” The Japanese government has outlined an aggressive plan to begin using unmanned flying cars for shipping goods in the next 4 years and to have people riding in them in the next 10 years.

THE NEC PROTOTYPE TAKES FLIGHT

NEC has no plans to mass produce the aircraft.

Their partner, Cartivator will eventually be the ones bringing this particular vehicle to market and they are not alone. All over the world, the push is on to develop a quick, practical and safe way to transport goods and eventually people without adding to the traffic burden as the population grows.

The driving force behind the sudden explosion of flying car manufacturers is that cities around the world have become more crowded and surface traffic is becoming a serious issue, especially in densely populated cities like Japan. Singapore and Dubai have made clear their internet to have flying cars in their cities in the immediate future as well. The demand is there and recent technological developments in lightweight composite materials, communications and guidance systems have opened the doors to the flying car market.

The list of companies throwing their hats in the ring is long and there are some serious heavyweights in the mix. Aerospace giants including Embraer, Boeing and Airbus have created subsidiaries to work on their version of the flying car. Others such as Volocopter, Pal-V, Karem Butterfly and Kitty Hawk Cora are startups looking to build an empire on the burgeoning industry.

Airbus’ Vahana and Boeing’s Aurora are both working on their versions of fixed wing, vertical take off and landing (VTOL) solutions, which are a hybrid of a helicopter and an airplane. They use helicopter-like rotors to take off and land, but rely on traditional fixed wings for sustained lift during flight. Bell Helicopter’s Nexus aircraft, which it is developing as part of a partnership with Uber, utilizes 4 tilting rotors for takeoff, landing and flight propulsion. A scale model of the Nexus made its debut at the Consumer Electronics Show in Las Vegas this past January. In a statement to the press at the time, Uber said, “ The Nexus represents a major step in its Elevate initiative to create an on-demand Uber Air network and shows it is on track for delivering the world’s first aerial rideshare network in the coming years”. The Nexus is powered by a hybrid-electric system not unlike a Toyota Prius. Most of the flying cars in development are either all electric or hybrid-electric.

With all of these manufacturers pushing hard to be the first to market, we’re left to wonder how much a trip in one of these machines will cost. Will it be costeffective for the layperson? MIT’s Technology Review took a look at the numbers. They found that a short trip of a few miles would cost in the neighborhood of between $40 and $50 dollars (Uber says it will be cheaper), but the time savings will justify the additional cost.

OK. So we know who is making them, we know what they look like, but when will we see real, practical flying cars? Getting the technology in place is already well under way. The real hurdle is going to regulation.

Managing large numbers of small aircraft over a large city is going to be an issue. Licensing, permits, air traffic control and other regulatory infrastructure will have to invented, and we all know how quickly those wheels turn. The most optimistic estimates say within 5 years. The less rosy outlook say within 10 years.

Either way one thing inevitable: they are coming.

The real question is will they last?

Metals & Manufacturing Outlook / August 2019

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MANUFACTURING OUTLOOK

AUGUST 2019

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING CONTRACTS A LITTLE FURTHER. U.S. PMI STAYS IN EXPANSION, BUT IS TEETERING. EUROPE FALLS DEEPER AND OTHERS STILL SHAKY. MORE U.S. TARIFF THREATS AGAINST CHINA. BRITAIN GETS ITS BLOND BUFFOON.

by ROYCE LOWE The Global Manufacturing PMI went a little further into contraction in July at 49.3. Japan, the Eurozone, and the UK were also in contraction, while Canada climbed out. The U.S. fell to its lowest PMI reading in 3 years, but still in expansion.

business services with 31,000 new jobs; health care with 30,000 new jobs; social assistance with 20,000 new jobs and financial activities with 18,000 jobs. Manufacturing added 16,000 jobs, while mining lost 5,000 jobs.

The BLS jobs report for July shows the addition of 164,000 non-farm payroll jobs. The unemployment rate remained at 3.7 percent.

Most notable gains were seen in professional and

The Bureau of Economic Analysis recently released its ‘advance’ estimate for the annual rate of Real GDP growth in the second quarter of 2019, putting it at 2.1 percent. The figure for the first quarter of 2019 was 3.1 percent.

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MANUFACTURING OUTLOOK Trump says that on September 1, a ten percent tariff is to go on $300 billion worth of Chinese consumer and technology goods, including iPhones, toys, footwear and clothing.

The ISM PMI figure for U.S. manufacturing slipped back from 51.7 percent in June to 51.2 percent in July, representing the 35th consecutive month of growth in manufacturing. The overall economy grew for the 123rd consecutive month.

From IHS Markit: remarks on the U.S. noted that the PMI was at its lowest since September 2009, at 50.4 in July, down slightly from June’s 50.6. Production grew slightly but stifled demand affected the overall expansion. Employment fell for the first time since June 2013. Backlogs were reduced, optimism low. New orders picked up for a second successive month, signaling a possible increase in production during the month of August.

Boeing continues to live through troubling times, with more software problems coming to light, along with its use of $9 per hour software engineers. There is as yet no definite date for return to service of the 737Max. STEEL PRODUCTION CONTINUES TO RISE. World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – was at 158,978 MT for the month of June, up 4.6 percent year over year.

U.S. LIGHT VEHICLE SALES……..There are no more monthly sales reports coming out of the Detroit Big Three. They will report quarterly. We will continue to report on the major companies that report monthly.

Hence the figures below do not include GM, Ford, FCA and Tesla

The SAAR for the month of July is forecast at 16.6 million.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices, and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The consumer price increases represent year over year changes. The unemployment figures, %, are for the month as noted.

China’s crude steel production for June 2019 was again up a whopping 10.0 percent year over year, at 87.5 million tons.

U.S. crude steel production for June 2019 was 7.276 MT, up 3.1 percent year over year. Hot-rolled coil prices in U.S. are expected to recover.

Primary Global Aluminum Production in June 2019 was reported at 5.246 million tons, with production in China, at 2.956 million tons, representing 56 percent of world total. Production was 449,000 tons in GCC; 360,000 tons in the rest of Asia; 284,000 tons in Western Europe; 314,000 tons in North America and 344,000 tons in Eastern and Central Europe.

Metals & Manufacturing Outlook / August 2019

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CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

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

Combined Sectors This has been a year that tests the mettle of an economist and illustrates why the meteorologist remains such a kindred spirit. The expectation at the start of the year was that economic decline was both inevitable and imminent. The impact of the 2018 tax cuts had faded, consumers were losing confidence and headwinds from trade wars and slower segments of the economy (such as housing) would have an impact on everything from employment to the stock market. Yet, “here we are at the mid-point of the year and the data still points to a decent growth rate for the U.S. economy,” said NACM Economist Chris Kuehl, Ph.D. “The worrisome part is that some of the more reliable future indicators, including the CMI, are starting to falter.”

The combined index dropped this month as it fell from 55 to 53.4. This is still not as drastic a decline as has been experienced by the Purchasing Managers’ Index which tumbled to an even 50, but it is still the lowest reading since January.

January’s 53.4 had previously held the record as the lowest reading seen since 2017. In the last year, the combined index has only been lower than 54 a total of three times. The index of favorable factors took the biggest hit by dropping from 61.4 to 58.6. This measure has only been under 60 a total of four times in the last year; this month’s reading was the lowest of them all. The index of unfavorable factors stayed close to what it had been the month before with a reading of 50, down from 50.7 in June.

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Breaking down the factors that go into the favorable and unfavorable categories illustrates the problems affecting the credit sector. Sales slipped from 60.4 to 58.4, nearly as low as it was in March of this year. It seems a long way from the 65.9 notched in May. The new credit application numbers fell a little from 62.4 to 60.8, but this category remains respectable. The real concern is with the dollar collection numbers as they have tumbled from 60.3 to 56.6, back to the readings last seen in March. The amount of credit extended also fell quite a bit and hit 58.7 after having been at 62.5 the month before. This marks the first time this category has been under the 60 line in over a year. “There is simply not as much credit on offer these days,” Kuehl said.

The breakdown of the unfavorable factors also provides some insights. The rejections of credit applications stayed almost the same as it had been in June (up from 52.4 to 52.6). Kuehl noted, “That is good news given the decline in the number of applications. It means those applying are generally qualified.” The accounts placed for collection is not such a good news indicator as it has plunged out of the expansion zone (a reading above 50) deep into contraction territory. The reading now is 46.2 from the previous month’s 50. This would be more alarming if this category had not generally been in the mid-40s for most of the year. The disputes category actually improved and left the contraction zone with a reading of 50.5 down from 48.6 the month before. The dollar amount beyond terms got mired even deeper in

CREDIT MANAGERS’ OUTLOOK contraction with a reading of 46.1 after being at 49.8. The dollar amount of customer deductions gained a little ground and moved further into expansion territory with a reading of 51.2 compared to 50 in June. The filings for bankruptcy numbers remained almost exactly where they had been with a reading of 53.2 compared to last month’s 53.5. “The issues that have contributed to more accounts out for collection and reduced dollar collection have not become serious enough to boost the bankruptcy numbers,” he said. “What is of some concern is many of the bankruptcies are taking place with larger companies and they have tended to come in the retail sector as well as in industries that rely heavily on global trade— import side or export side.”

Manufacturing Sector Kuehl suggests that much of the manufacturing data of late has been contradictory. There have been gains in categories such as durable goods orders (once one separates out the aerospace data), but factory orders have been weak. The level of capacity utilization remains close to the preferred range between 80% and 85%, but the numbers slipped a bit. The data from the Purchasing Managers’ Index has been teetering on the edge of contraction and now there is a substantial tumble in the Credit Managers’ Index.

There are really no simple answers here, but the most often cited is volatility. There are too many unknowns at the moment—everything from the potential impact of an expanded trade and tariff war to the travails of the Boeing 737 Max. Add in labor shortages and the looming reality of a truly nasty election year, and businesses in general are uneasy.

In July, the combined score for the manufacturing sector dropped to the lowest level since January.

It now sits at 53.2. At the start of the year it was 53.1. This is certainly lower than it has been in recent months but not all that much lower as the high point was reached in May with a score of 55.4. The index of favorable factors dropped precipitously from 60.4 to 56., the lowest reading in several years. It is worth noting that in January the reading fell to 57.7 and subsequently recovered to 60 the next month. The index of unfavorable factors fell only slightly from the

month before and most importantly managed to avoid sinking back into contraction territory. It is sitting at 50.8 after June’s 51.3. The current reading is about where it has been for the year (49.9 in January, 51.4 in February, 50.7 in March, 50.2 in April, 50.3 in May).

The details in the subcategories tell a pretty compelling story. The sales reading stayed much as it was with a 57.6 compared to 58.5 in June. The category of new credit applications shifted down a little to 60 from 62.5. The big changes were with dollar collections and amount of credit extended.

The former saw a plunge from 59.2 to 54.7, which is worrisome as it suggests that income flow is weakening fast. “The trepidation among some companies is manifesting with their reluctance to offer as much credit as they have in the past,” Kuehl said. The drop in the credit extended subcategory went from 61.3 to 54.7. He added, “It is important to note that all these readings are still firmly in the expansion zone, but the trend is certainly not encouraging.”

There was some similar movement of note in the unfavorable categories and there has also been some encouraging news. The rejections of credit applications stayed almost the same as the prior month with a reading of 53.4 from 53.8. The accounts placed for collection stumbled quite a bit. This seems consistent with the decline in dollar collections noted above. The reading last month was a healthy 53.5 and this month the reading was a miserable 46.7. The disputes category actually improved and entered expansion territory for the first time since March with a reading of 51 up from 48.3 in June. The dollar amount beyond terms slipped back into contraction territory with a reading of 48 after June’s mark of 50.2. This was no surprise given the issues with dollar collections and the increase in accounts out for collection. The dollar amount of customer deductions improved quite a lot from 49.8 to 52.7, and that was a bit surprising. The filings for bankruptcies data improved slightly as well, as the reading went from 52 to 53.

“The bottom line this month is that some important warning signs are starting to flash,” Kuehl said. “The decline in dollar collections is an immediate concern. If one combines the increase in collection activity as well as slow pays, the future looks considerably less optimistic.”

Metals & Manufacturing Outlook / August 2019

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NORTH AMERICAN OUTLOOK

AUGUST 2019

NORTH AMERICAN OUTLOOK

by ROYCE LOWE

The Institute of Supply Management PMI figure eased back a little more from 51.7 in June to 51.2 in July. New orders are expanding slightly, production and employment are growing slower, supplier deliveries are slowing faster and inventories contracting slower, with customer inventories too low. Prices are decreasing faster, backlogs contracting faster and new exports and imports are contracting.

Of the 18 manufacturing industries, nine reported growth in July, in the following order: Wood Products; Printing & Related Support Activities; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber

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Products; Computer & Electronic Products; Textile Mills; Petroleum & Coal Products; and Chemical Products. The nine industries reporting contraction in July — in the following order — are: Apparel, Leather & Allied Products; Fabricated Metal Products; Primary Metals; Nonmetallic Mineral Products; Transportation Equipment; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery.

Comments from the manufacturing industry are by no means overly optimistic. Concerns involve tariffs, slowdowns due to slowdown in aircraft manufacture, in auto production and in some cases in overall product demand.

NORTH AMERICAN OUTLOOK CANADA ’s PMI climbed back into expansion, at 50.2 from June’s 49.2, from slower declines in production and new orders and the strongest rise in employment in five months. All this coupled with increased business optimism made for a better month for Canada. Canadian passenger car and light truck sales for July were off 1.0 percent year over year, with passenger car sales down 16.8

Commodities Up in Price

percent at 44,122 units, light trucks up 5.8 percent

Corn (2) and Steel Products* (3).

at 129,411 units. Canada produced 0.970 MT of crude steel in June, down 7.6 percent year over

Commodities Down in Price Aluminum (4); Aluminum Products; Copper (2); Corrugated Boxes (2); Electrical Components; Polypropylene; Steel; Steel — Hot Rolled (4); Steel — Scrap; Steel — Stainless (2); and Steel Products* (7).

MEXICO stayed in contraction for the second consecutive month, amid reduced domestic and export demand and a drop in production for the second consecutive month. Business optimism was

Commodities in Short Supply

down; there was reduced input purchasing and no

Electrical Components (2) and Helium.; Note: The number of consecutive months the commodity is listed is indicated after each item *Indicates both up and down in price.

year.

employment growth for the fifth straight month.

The PMI revived slightly from 49.2 in June to 49.8 in July. Mexico produced 1.580 MT of crude steel in June, down 9.1 percent year over year.

ISO9100:2015 and AS9100D

Metals & Manufacturing Outlook / August 2019

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METALS OUTLOOK

AUGUST 2019

METALS OUTLOOK THE COST, MAKING, TREATING AND APPLICATIONS OF METALS

by ROYCE LOWE

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Metals & Manufacturing Outlook / August 2019

METALS OUTLOOK MEPS International, a steel consulting group, recently stated that a new record high for stainless steel production is predicted, and that it’s being driven by developing nations. The forecast is for 53.1 million tons in 2019, up 4.6 percent over 2018, of which 28.3 million tons, up almost 6 percent on 2018, will be produced by China. That’s over 53 percent of the global total, a little less, percentage wise, than China’s share of global primary aluminum production. In 1999, China’s stainless steel production represented 2 percent of global output, but since 2014 it has accounted for over 50 percent.

restarted, another was waiting in line. U.S. steel was back, and for a while all in the garden was lovely. So long as the demand for the steel was there.

The U.S. and South Korea have so far managed to maintain moderate growth, but Japan and the EU have seen their stainless steel production reduced by some 20 percent.

Those that weathered this storm are companies that use the electric furnace route, notably Nucor, which although also feeling the effects of the global demand situation did so to a significantly lesser extent. Nucor will spend $3.5 billion over the next couple of years on a new galvanizing line, a new plate mill and improvements to present hot rolling mills. Steel Dynamics, another electric furnace steel producer, will spend $1.8 billion on a new mill in the Southwest.

China’s Tsingshan Iron and Steel has a large-scale production unit in Indonesia, and is planning investment in a 600,000 tons per year cold rolling plant in Busan in South Korea, a move that was at first welcomed as a boost to the ailing regional economy, but was later critically targeted by domestic producers and processors as a disruption of the local market. It has even caused some civil unrest.

The global stainless steel market is already in production overcapacity and the number of protectionist trade measures has increased.

This is not the time for further disruption.

Just over a year ago, when hot- and cold-rolled steel prices were at their highest for a considerable time, not long after Trump’s imposition of tariffs on imported steel, workers at U.S. Steel in Granite City cheered the man they thought had added impetus to the U.S. steel industry. One blast furnace had

Events since that time have taken a twisty turn.

Global demand for steel has dropped to the point where U.S. steel is, in effect, in an overcapacity situation. Prices tumbled accordingly, and the company recently idled two blast furnaces. AK Steel also uses the blast furnace route, and has been similarly affected. U.S. Steel’s value has taken a $5.6 billion hit of late.

U.S. Steel announced it will restart construction on an electric furnace plant in Alabama, and that it will invest $1 billion in Pennsylvania to produce more high-strength steel for the automotive industry.

There appears to be a consensus that the global steel market, for reasons of capacity and efficiency, is tolling the death of the blast furnace.

The price of domestic U.S. hot-rolled coil recently hit $600 per short ton for the first time in two months. Cold-rolled coil is at $ 730 per short ton.

The price of hot-rolled coil is expected to recover.

Cold-rolled should do likewise.

Recent price spreads for non-ferrous metals are: copper from $ 2.67 per lb in early July to $ 2.60 early August; aluminum from 0.81 in early July to $0.79 in early August; nickel from $ 5.60 in early July to $ 6.60 in early August and zinc from $1.11 in early July to $1.06 in early August.

Metals & Manufacturing Outlook / August 2019

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AEROSPACE OUTLOOK

AUGUST 2019

AEROSPACE OUTLOOK

by ROYCE LOWE

Any reference to aerospace at this time must include words about the Boeing Company and the situation regarding its 737 Max aircraft. As we all know, the aircraft was grounded some four months ago following two incidents that caused 346 fatalities. What has happened since investigations into the crashes began sounds like something that John Grisham or Robert Ludlum might have written.

Much information has been made available by those seemingly ever-present “people who aren’t authorized to speak about the matter.” It came to light that Boeing had been using $9 per hour

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Metals & Manufacturing Outlook / August 2019

software engineers from a “center of excellence” in Chennai, India, who didn’t have a deep background in aerospace. It also came to light that the 737 Max software was developed at a time when Boeing was laying off experienced engineers and pressing suppliers to cut costs. The word at the time was that the products were “mature” and hence there was no need for senior engineers.

The Economist magazine recently reported that Muilenberg, Boeing’s CEO, had called Trump and asked him to ‘call off’ the F.A.A. The date when the 737 Max will again take to the skies is unknown. There was talk of September,

AEROSPACE OUTLOOK but that seems overly optimistic. Air Canada has removed the plane from its schedule until January 2020 pending regulatory approvals, joining Southwest Airlines in this. Boeing’s production of the plane may move from a slowdown to a temporary shutdown. Boeing’s profits will be hit, as will those of its customers. Ryanair, Europe’s biggest low-cost airline, which flies exclusively Boeing and has 135 737 Max on order, will cut its flights to certain airports as a result of the grounding.

It is hoped that this issue might quickly be resolved.

There is adequate long-term demand for both the A320 Neo and the 737 Max and any continuing disruption would not bode well for either the aircraft manufacturer or for their supply chain.

Meanwhile, the European Union Aviation Safety Agency, EASA, has stipulated five major requirements before it will allow the 737 Max to return to service, according to that “person familiar with the matter.” These include pilots’ difficulties, inadequate training procedures and software issues. The agency has sent the list to both the U.S. F.A.A. and to Boeing. It is not yet certain if or how the EASA demands differ from those of the F.A.A. To add further to Boeing’s woes, it was recently reported that an engine issue has delayed the first flight of its 777X aircraft to early in 2020.

Saudi Arabian Airlines, via its low-cost subsidiary Flyadeal, recently gave an order to Airbus for 30 A320 neo jets, with an option for a further 20, effectively cancelling a $ 5.9 billion order for 50 737 Max.

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Metals & Manufacturing Outlook / August 2019

17

AUTOMOTIVE OUTLOOK

AUGUST 2019

AUTOMOTIVE OUTLOOK

by ROYCE LOWE

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Metals & Manufacturing Outlook / August 2019

AUTOMOTIVE OUTLOOK Plant closures, temporary workers, health care costs and a corruption scandal. The UAW is angry about plant closures and embarrassed by the corruption scandal, while executives are worried about slowing sales and the necessity to jump into the electrification pool. Thus the major issues in the UAW contract talks.

FCA and its UAW counterparts are still dealing with the legal fallout from ex-union and company officials draining millions from a union training fund; it seems, to enrich themselves. All this among falling sales and ongoing needs to change tack and “go electric.” Should be interesting.

Nissan, meanwhile, might wish it had those problems. Its ex-chairman is under his own corruption scandal. His prodigy and successor is reportedly walking on very shaky ground, and the company recently announced global job cuts of 12,500, mostly in manufacturing. This is all coupled with a 99 percent drop in earnings, an aging product range and a drop in sales in the U.S. and Europe.

JLR - Jaguar Land Rover - part of India’s Tata Motors Ltd., Jaguar, that ex-British icon, is planning to build a new range of electrified cars, involving the ninth generation of the XJ, in a multi-million pound investment.

THE 2019 JAGUAR I-PACE

The Jaguar I-Pace SUV, its first all-electric car, is being built in Austria. The company intends to develop facilities and technology that will allow diesel and gasoline vehicles to be produced alongside full electric models. New batteries will be assembled close to the auto assembly line.

There is a competition going on between auto giants on electrification. In the next few years, all the majors will come out with more new electric models, hoping that the motoring public will be ready to take to them in great numbers. They

will certainly be helped in Europe by imposition of anti-pollution laws that will surely become more stringent with time, and in North America, whose guidelines will become more strict if the Democrats take over the Oval office.

THE 2019 TESLA MODEL 3

Tesla is doing well in Europe with its Model 3, which has a base price of 44,500 euros ($50,000) and a range of 409 kms (254 miles). It also sells a twin-engine, four-wheel drive model with a longrange battery pack to give it a range of 537 kms (334 miles). Tesla sold 14,106 vehicles in Europe in June, a 250 percent year over year increase.

BMW will build an electric Mini Cooper near Oxford in the UK. The vehicle will have a range of 270 kms (168 miles) and will cost 32,500 euros ($36,400). It will be built in the UK until 2023 in spite of Brexit uncertainty and possible complications of trade of vehicles and parts. It will be available at the end of 2019. BMW is going up against Volkswagen and its ID.3 hatchback, whose basic version will sell for less than 30,000 euros ($33,600) and will have a range of 330 kms (205 miles).

Chevy has its Bolt, Nissan its Leaf and Honda its Clarity. Ford has announced its intentions to get seriously into the fray, and Toyota surely will.

Then there’s Dyson, he of the expensive vacuum cleaner, who won’t really tell us what to expect, but he has patents on it. We can be sure it will be different. China has an electric vehicle industry unto itself. Many billions of dollars have been spent on electric vehicles, and the manufacturers will be crossing their fingers for some time to come.

Metals & Manufacturing Outlook / August 2019

19

ISSUES OUTLOOK

AUGUST 2019

ISSUES OUTLOOK

by ROYCE LOWE

Dr. Charles Holland is Founder and CEO of QualPro, a process improvement consultancy, founded in 1982.

For ten years, from 1983 to 1993, he worked with Dr. W. Edwards Deming, assisting him in four-day quality seminars around the United States.

Dr. Deming was at the center of a 90-minute NBC News white paper in 1980, titled, “If Japan can, why can’t we?” It was Deming who suggested to American industry in the 1950s that they might profit from his statistical approach to Quality Control. Upon their refusal, he took his ideas to Japan, and for a good many years nursed Japanese industry through a quality control system that we recognize today as the world’s best. He was rewarded with the establishment of the Deming Prize that has been awarded to a deserving company for over 60 years.

The NBC News program and Dr. Deming’s methods triggered the interest of corporate America and were the basis of the quality revolution in the U.S. in the 1980s.

Dr. Holland postulates that Dr. Deming - who passed away in 1993 - would be dismayed at the state of U.S. manufacturing today, and he suggests that after making considerable progress in the 1980s and 1990s corporate America has, in fact, turned away from Dr. Deming’s teachings. He cites evidence that he sees today: 1. Short-term progress seems to be the norm in the U.S., stressing performance by quarter, rather than

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Metals & Manufacturing Outlook / August 2019

the long-term philosophy employed by Japanese executives. Dr. Holland cites as an example his own 2000 Lexus, still going strong with 265,000 miles on the clock.

2. There is a lack of teaching at the MBA level of Dr. Deming’s statistical techniques, and in fact, a lack of knowledge on the part of most U.S. CEOs, of Dr. Deming’s philosophy and work.

3. Deming’s work was based upon factory-floor workers being directly involved in the quality control process. Dr. Holland suggests that quality control today is divorced from the actual manufacturing operation.

4. Deming suggested minimizing total cost by working with one supplier, rather than switching suppliers based on cost.

5. U.S. manufacturing plants are older and contain older equipment than that found in many of the U.S.’s international competitors’ facilities. Too little attention is given to maintenance and upgrades.

Dr. Deming concluded in the 1980s that 85 percent of all business problems are caused by management.

Perhaps, according to Dr. Holland, Deming would tell us this figure is about the same today. The message, he suggests, is as relevant today as it was in the 1980s. Perhaps Dr. Holland is being a little harsh in his criticism, but he has an interesting opinion. What do you, the reader, think about this? We welcome your comments.

ENERGY OUTLOOK

AUGUST 2019

ENERGY OUTLOOK

by ROYCE LOWE

The so-called shale revolution of 2008 didn’t just transform the U.S. domestic energy outlook but also energy markets worldwide. The U.S. is the world’s largest oil and gas producer, with 20 percent more oil and 25 percent more gas than Russia. Further, the U.S. could become the largest global seller of these products within five years. Since the shale revolution, U.S. crude oil production is up 140 percent to 12.2 million barrels/day (b/d), with gas up 55 percent to 88 Billion cubic feet per day. The price collapse in the oil and gas business from 2014 to 2017 forced the industry to cut costs to survive.

Some 100 Exploration and Production firms went bankrupt during this time, and those that survived did so because they were, in fact, lean and mean.

This prompted IHS Markit to state that 1.9 million new jobs in oil and gas will become available from 2016 to 2035.

Oil and gas production currently meets 65 percent of total U.S. energy demand; oil fills 97 percent of transport needs and natural gas generates 35 percent of U.S. electricity. Gas will also remain integral to heating and manufacturing. U.S. oil demand remains high.

Belgian’s Antwerp, a city that for so long suffered from traffic congestion, is redesigning itself to include a dense network of cycle lanes, the ability to cycle or scoot from one side of the city to the other without encountering a private car, and an entirely carless neighborhood built around the site of a former hospital. Networks of cycle paths are growing and creeping outwards, and that of Paris will by next year have grown by 50 percent in five years. Barcelona has similar plans and the cycle and scooter phenomenon continues to gather strength in Europe.

Before we go any further, let’s just pause and say this is not a condemnation of America’s longlasting love affair with the automobile, nor with its consumption of fossil fuels, known particularly as oil and gas. Every country, in fact, has a love affair with the automobile, but no other country, with the possible exception of China, consumes oil and gas to the extent the U.S. does. The U.S. needs lots of oil and gas, and there is no alternate form of energy that, for the moment, can replace them. It has become evident that the U.S. capability to produce the increased quantities of oil and gas is and will be good for both the U.S. and for much of the rest of the world.

The U.S. Department of Energy predicts oil and gas will still supply over 60 percent of U.S. energy needs for as far out as 2050 - though it’s considered doubtful that such a prediction might stick with changes of government, climate accords, etc.

The U.S. exports over 2.5 million b/d of crude oil, 35 percent higher this past spring than in April 2018. By early 2020, U.S. Gulf crude export capacity should be some 8.5 million b/d. Natural gas, LNG, has three export facilities at present and three more coming online by the end of 2019. The total LNG exports capacity is forecast to reach almost 8 BCF/d or some 20 percent of global demand. Today, 4-5 Bcf/d of LNG is exported to 30 nations. The U.S. is slated to become the leading LNG exporter before 2025.

Then there’s the ‘China thing’. Before China upped its tariffs on U.S. LNG from 10 to 25 percent, it imported 25 U.S. LNG cargoes in the first half of 2018, a figure that was down to 8 in the second half of that year. In fact China’s imports of U.S. coal, LNG and crude are all down significantly of late. Russia is waiting in the wings.

The U.S. is responsible for over 70 percent of the new global oil supply over the next 5 to 7 years at least. There is no doubt that the world needs U.S. oil and gas, but it also needs the pioneering incentives of alternate energy, and bike and scooter paths.

Metals & Manufacturing Outlook / August 2019

21

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS No doubt that global manufacturing is slowing. Just doing the math, a one percentage point change in a m-o-m diffusion index (using 50 as the mid-point) results in two percent increase or decline based on the change in an index whether PMI or NMI. This month, 12 of the 18 surveys we follow had one percent or less expansion or contraction during July. Two of the remaining six indexes had a -1.1 percent reading. This may be a little mundane, but it illustrates more the lack of change versus the existence of change.

The U.S. non-manufacturing sector lost momentum, but remains at a sustainable level of growth,

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Metals & Manufacturing Outlook / August 2019

particularly when we consider continuing strength in Employment. According to the press release, ‘the past relationship between the NMI® and the overall economy indicates that the NMI® for July (53.7 percent) corresponds to a 1.8% increase in real GDP on an annualized basis.” The scatterplot below illustrates the convergence globally.

Eurozone: The Eurozone PMI (46.5, -1.1) was contractionary for the sixth consecutive month in July.

In July, EZ growth was in Greece (54.6, +2.2) and the Netherlands (50.7, unch). Germany (43.2, -1.8), Austria (47.0, -0.5), Spain (48.2, +0.3), Italy (48.5 +0.1), Ireland (48.7, -1.1), and France (49.7, - 2.2) failed to grow.

United Kingdom: The UK/CIPS PMI (48.0, unch) in July matched June’s pace of change. The weakening comes from domestic demand and the effects of the global softening. Among the most industrialized nations, the UK faces the greatest uncertainty in the near term.

China: China’s Official Report, the CFLP PMI (49.7, +0.3), and the Caixin Manufacturing PMI (49.9, +0.5) remain near the mid-point and fail to provide a true indication of the tariffs on China.

GLOBAL OUTLOOK India: India’s PMI (52.5, +0.4) expansion continued for its 23rd consecutive month. New orders & production remain strong, and employment is increasing.

South Korea: The PMI (47.3, -0.2) fell further into contractionary territory in July. The PMI reads below 50 percent for a third consecutive month.

North America: Canada’s PMI (50.2, +1.0) jumped into expansion following three months of contraction.

Mexico’s PMI (49.8, 0.6) has averaged 50.3 for the JanJul timeframe indicating little change overall for the manufacturing sector.

GLOBAL OUTLOOK

by ROYCE LOWE

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased very slightly further into contraction in July at 49.3 from June’s 49.4 reading, pushing the downturn into its third consecutive month.

Production and new orders declined further as conditions in many domestic markets remained

soft and international trade volumes continued to contract. This will probably result in a further round of job losses.

China, Japan, Germany, South Korea, Taiwan, France, UK, Italy and Brazil were among the countries that saw contraction. Although the U.S. and Canada were in expansion, their PMIs were only slightly above the 50 mark.

The downturn again affected intermediate and investment goods industries, whereas the consumer goods sector registered expansion and saw a mild improvement in its growth rate.

Metals & Manufacturing Outlook / August 2019

23

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) continued in contraction for the sixth consecutive month, with the PMI falling back from June’s 47.6 to 46.5 in July. Production and new orders were both down sharply as confidence hit its lowest point since December 2012, along with the most marked reduction in employment for over six years. Growth was sustained in the consumer goods category, but there were ongoing contractions in intermediate and investment goods.

Germany’s manufacturing economy recorded its sharpest deterioration in operating conditions for seven years, in large part due to trade tensions and accompanying automobile industry issues that are adversely affecting both domestic and export markets. Excess capacity is mirrored in falling backlogs and accompanying reductions in employment.

Crude steel production in Germany in June was at 3.405 MT, down 5.8 percent year over year; in Italy 2.086 MT, down 2.5 percent year over year; in France 1.310 MT, up 3.4 percent year over year and in Spain 1.210 MT, up 2.3 percent year over year.

Russia’s crude steel production for June was at 5.875 MT, down 2.6 percent year over year;

24

Metals & Manufacturing Outlook / August 2019

Ukraine’s was 1.659 MT, down 3.0 percent year over year.

IHS Markit’s PMI for the UK in July remained unchanged at its six-and-a-half year low of 48.0.

Production and new orders and employment fall again, but business forecasts production to be higher a year from now.

There were fewer orders from the EU and China, and some clients were routing supply chains away from the UK in advance of Brexit. Employment was down for the fourth straight month, and there were reports of recruitment freezes and costcontrol initiatives contributing to job cuts.

The UK produced 0.618 MT of crude steel in June, down 13.5 percent year over year.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by ROYCE LOWE

CHINA still voices concern over trade negotiations with U.S. There was a slight increase in new orders but employment was down at the quickest rate in five months. There are signs of recovery and business confidence is on the rise. Selling prices are down for the first time since January. July’s PMI was 49.9, up from June’s 49.4.

CHINA produced 87.533 MT of crude steel in June, up 10.0 percent year over year; Japan 8.789 MT, up 0.4 percent year over year; India 9.336 MT, up 4.0 percent year over year and South Korea 5.958 MT, down 2.6 percent year over year. Taiwan produced 1.960 MT in June, down 0.3 percent.

The Chinese Association of Automobile Manufacturers reports car sales down in China by 9.6 percent in June, to 2.04 million units.

JAPAN’s PMI for July increased very slightly to 49.4 from June’s 49.3. Production was down for the seventh successive month, along with continuing weakness in domestic and foreign demand. Selling prices were cut in efforts to boost sales. Business confidence was subdued.

Investment goods were hardest hit. There were lower sales to such key trading partners as China.

Auto industry weakness affected export demand.

Through all this, employment continues to rise.

INDIA saw growth in both new orders and production, up slightly from June. The PMI for July, at 52.5, was up from June’s 52.1. There was a slight increase in employment, and business optimism regarding growth projections.

Consumer goods led July’s upturn, and there was improvement in intermediate goods, whereas investment goods retreated into contraction.

Metals & Manufacturing Outlook / August 2019

25

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE

BRAZIL saw employment down at the quickest pace since mid-2017. Production was down for the first time since June 2018. There was a sustained growth in new orders, but business confidence was at a 21-month low. July’s PMI was at 49.9, down from 51.0 in June. Brazil’s crude steel production for the month of May was 2.823 MT, a decrease year over year of 3.1 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased very slightly further into contraction in July at 49.3 from June’s 49.4 reading, pushing the downturn into its third consecutive month. Production and new orders declined further as conditions in many domestic markets remained soft and international trade volumes continued to contract. This will probably result in a further round of job losses.

China, Japan, Germany, South Korea, Taiwan, France, UK, Italy and Brazil were among the countries that saw contraction. Although the U.S. and Canada were in expansion, their PMIs were only slightly above the 50 mark.

The downturn again affected intermediate and investment goods industries, whereas the consumer goods sector registered expansion and saw a mild improvement in its growth rate.

26

Metals & Manufacturing Outlook / August 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 6

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Metals & Manufacturing Outlook / August 2019

27

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 6

PART 6 USEFUL RESOURCES - IN THIS GUIDE WE TOUCHED UPON ALL YOU NEED TO GET YOU STARTED WITH CNC MACHINING. BUT THERE IS PLENTY MORE TO LEARN.

Knowledge Base BELOW WE LIST THE BEST AND MOST USEFUL RESOURCES ON CNC MACHINING AND OTHER DIGITAL MANUFACTURING TECHNOLOGIES THOSEarticles WHO WANT TO DELVE DEEPER. Here is a selection of our mostFOR popular on CNC machining: Reducing the cost of CNC machined parts

3D Printing VS. CNC machining

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Learn to Machine Are you looking to get your hands dirty with CNC machining? Then there are several ways to learn how to operate a CNC mill or CNC lathe.

Visit your local Fab Lab: Many Fablabs and Makerspaces have CNC milling capabilities and they will run courses on how to opperate them. Visit the official list of Fab Labs to find one near your area.

Find resources online: There are a lot of useful resources online to help you hone your CNC machining skills. The Titans of CNC Academy and NYCCNC are probably two of the best site to get you started.

Apply for an apprenticeship: Apprenticeships are probably the best way to kickstart your career as a CNC machinist. They are offered by established machine shops and many Universities.

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Metals & Manufacturing Outlook / August 2019

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 51.2% for July ISM PMI for the past 5 years

Metals & Manufacturing Outlook / August 2019

29

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in July, and the overall economy grew for the 123rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The July PMI® registered 51.2 percent. The New Orders Index registered 50.8 percent, an increase of 0.8 percentage point from the June reading of 50 percent. The Production Index registered 50.8 percent, a 3.3-percentage point decrease compared to the June reading of 54.1 percent. The Employment Index registered 51.7 percent, a decrease of 2.8 percentage

JULY 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

points from the June reading of 54.5 percent. The Supplier Deliveries Index registered 53.3 percent, a 2.6-percentage point increase from the June reading of 50.7 percent. The Inventories Index registered 49.5 percent, an increase of 0.4 percentage point from the June reading of 49.1 percent. Of the 18 manufacturing industries, nine reported growth in July, in the following order: Wood Products; Printing & Related Support Activities; Furniture & Related Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Computer & Electronic Products; Textile Mills; Petroleum & Coal Products; and Chemical Products.

PMI @ 51.2% ®

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

MANUFACTURING AT A GLANCE July Index 51.2 50.8 50.8 51.7 53.3 49.5 45.7 45.1 43.1 48.1 47.0

June Index 51.7 50.0 54.1 54.5 50.7 49.1 44.6 47.9 47.4 50.5 50.0

% Point Change -0.5 +0.8 -3.3 -2.8 +2.6 +0.4 +1.1 -2.8 -4.3 -2.4 -3.0

Growing Growing Growing Growing Slowing Contracting Too Low Decreasing Contracting Contracting Contracting

Rate of Change Slower From Unchanged Slower Slower Faster Slower Slower Faster Faster From Growing From Unchanged

Trend* (months) 35 1 35 34 41 2 34 2 3 1 1

OVERALL ECONOMY

Growing

Slower

123

Manufacturing Sector

Growing

Slower

Index PMI® New Orders Production Employment Supplier Deliveries Inventories Customers’ Inventories Prices Backlog of Orders New Export Orders Imports

Direction

35

*Number of months moving in current direction. Manufacturing ISM Report On Business data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes. ®

®

PMI 2017

2018

2019

51.2%

50% = Manufacturing Economy Breakeven Line 42.9% = Overall Economy Breakeven Line

PMI® Manufacturing expanded in July, as the PMI® registered 51.2 percent, a decrease of 0.5 percentage point from the June reading of 51.7 percent. This is the lowest reading since August 2016, when the index registered 49.6 percent. This indicates growth in manufacturing for the 35th consecutive month. The PMI® continued a period of expansion softening, with four straight months of expansion decline. Softening this month was primarily due to slower growth in demand and consumption, indicated by the New Orders, Production and Employment indexes.

COMMODITIES REPORTED Commodities Up in Price: Corn (2); and Steel Products* (3).

Commodities Down in Price: Aluminum (4); Aluminum Products; Copper (2); Corrugated Boxes (2); Electrical Components; Polypropylene; Steel; Steel — Hot Rolled (4); Steel — Scrap; Steel — Stainless (2); and Steel Products* (7).

Commodities in Short Supply: Electrical Components (2); and Helium.

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Metals & Manufacturing Outlook / August 2019

Note: The number of consecutive months the commodity is listed is indicated after each item. *Reported as both up and down in price.

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

July 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders (Manufacturing) 2017

2018

2019

50.8% 52.5% = Census Bureau Mfg. Breakeven Line

New Orders ISM’s New Orders Index registered 50.8 percent. Of 18 manufacturing industries, seven reported growth in new orders in July, in the following order: Furniture & Related Products; Wood Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Textile Mills; Chemical Products; and Computer & Electronic Products.

Production (Manufacturing) 2017

2018

2019

50.8% 51.7% = Federal Reserve Board Industrial Production Breakeven Line

Production ISM’s Production Index registered 50.8 percent. The eight industries reporting growth in production during the month of July — listed in order — are: Wood Products; Printing & Related Support Activities; Furniture & Related Products; Food, Beverage & Tobacco Products; Textile Mills; Primary Metals; Chemical Products; and Computer & Electronic Products.

Employment (Manufacturing) 2017

2018

2019

51.7% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2017

2018

2019

53.3%

Employment ISM’s Employment Index registered 51.7 percent. Of 18 manufacturing industries, nine reported employment growth in July, in the following order: Furniture & Related Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Paper Products; Machinery; and Chemical Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in July, as the Supplier Deliveries Index registered 53.3 percent. The seven industries reporting slower supplier deliveries in July — listed in order — are: Wood Products; Petroleum & Coal Products; Apparel, Leather & Allied Products; Plastics & Rubber Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; and Miscellaneous Manufacturing‡.

Inventories (Manufacturing) 2017

2018

2019

49.5% 44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Inventories The Inventories Index registered 49.5 percent. The seven industries reporting higher inventories in July — listed in order — are: Printing & Related Support Activities; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Paper Products; Food, Beverage & Tobacco Products; and Computer & Electronic Products.

Manufacturing (products such as medical equipment and

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

Metals & Manufacturing Outlook / August 2019

31

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

July 2019 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2017

2018

2019

Customers’ Inventories ISM’s Customers’ Inventories Index registered 45.7 percent. The five industries reporting customers’ inventories as too high during the month of July are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; and Paper Products.

45.7%

Prices (Manufacturing) 2017

2018

2019

Prices The ISM Prices Index registered 45.1 percent. Four of the 18 industries reported paying increased prices for raw materials in July: Printing & Related Support Activities; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Miscellaneous Manufacturing‡.

45.1% 52.5% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2017

2018

2019

Backlog of Orders ISM’s Backlog of Orders Index registered 43.1 percent. The two industries reporting growth in order backlogs in July are: Printing & Related Support Activities; and Furniture & Related Products.

43.1%

New Export Orders (Manufacturing) 2017

2018

2019

New Export Orders ISM’s New Export Orders Index registered 48.1 percent. The three industries reporting growth in new export orders in July are: Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Chemical Products.

48.1%

Imports (Manufacturing) 2017

2018

2019

47% ‡Miscellaneous

Imports ISM’s Imports Index registered 47 percent. The only industry reporting growth in imports during the month of July is Wood Products. The 11 industries reporting a decrease in imports in July — in the following order — are: Apparel, Leather & Allied Products; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Primary Metals; Nonmetallic Mineral Products; Fabricated Metal Products; Machinery; Computer & Electronic Products; Plastics & Rubber Products; and Transportation Equipment.

Manufacturing (products such as medical equipment and

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

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Metals & Manufacturing Outlook / August 2019

WHY ORGANIZATIONS CLAIM THEY WANT CHANGE, BUT REALLY DON’T

WHY ORGANIZATIONS CLAIM THEY WANT CHANGE...

BUT REALLY DON’T. Andrea (Belk) Olson, MSC

Metals & Manufacturing Outlook / August 2019

33

WHY ORGANIZATIONS CLAIM THEY WANT CHANGE, BUT REALLY DON’T We had an organization come to us that was struggling with getting sales trajectories turned around - a common problem for many companies.

Through extensive discussions, we identified a wide variety of issues, from bloated inventory to high-cost/low-return investments, to ineffective marketing strategies - all of which could be easily changed to get sales back on track. The team agreed that these areas needed addressing, and were eager to get sales moving up.

This occurs not because the data is flawed, or that one piece of information is missing that can take the discussion from idea to action. It happens because we are people. People who often want to make decisions based on logic, but are inherently guided by emotion and past experiences. Yet we continually try to build our case by piling on more data, instead of examining the three underlying reasons why change doesn’t occur: 1) Digesting the concept of change takes time.

When building a case, we often lose sight of the fact that we’ve been immersed with reading and research, and have inadvertently used that time to digest the concept of the change proposed. When delivered to another for the first time, they haven’t had the luxury of thinking it through. Depending on how often an organization deals with change, it may be very likely that weeks, months or even years will pass before individuals will truly internalize the idea. You’ll need to set your expectations accordingly and adjust your approach along the way.

2) Coming to terms with “being wrong”/ fear of the unknown.

Yet, nothing happened. Literally nothing. Follow up meetings and discussions resulted in rehashing the strategies and discussing justifications for maintaining the status quo. Time was of the essence, as the organization was struggling to stay afloat. Why did the leaders resist the opportunity to change?

We often believe that bringing logical arguments to the table is the foundation for instigating change. Whether it be an outside consultant or an internal employee, we often burn tens of hours on researching best practices, identifying proven approaches to success, and generating piles of data to prove a case. Often times, both parties are in agreement that an issue exists, and the fact that change is needed. However, more often than not, the gap remains between action and inaction.

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Metals & Manufacturing Outlook / August 2019

Fundamentally, change of any type subtly insinuates that what you were doing prior isn’t correct. It insinuates that something was missed along the way. With our client, it was clear that sales were slumping, and the strategic decisions they had made weren’t working. Yet, a new idea for change was taken as a judgment on previous decisions - as an insinuation on the decisions made in the past weren’t valid in the current circumstances. In short, it became personal. Often times, people will struggle with this emotional conflict, no matter how much data you plop on the table. And more data simply makes the situation worse.

In addition, the change itself, even if thoroughly planned, is still an unknown. The outcomes, the process, and even unforeseen obstacles all plague change. People often default to the familiar - the status quo - simply because it is familiar and known, even if the result is more of the same. This often results in a “hope and pray” strategy, rather than actually implementing the change required to improve the situation.

WHY ORGANIZATIONS CLAIM THEY WANT CHANGE, BUT REALLY DON’T

3) Internalizing the breadth and impact of the change.

Even when it’s crystal clear that change must happen, the concept can still be extremely intimidating. Change might require massive movement, or dealing with challenging situations. It may require a lot of time, additional resources, and extra effort above and beyond the usual day. This can be overwhelming, and people will often mire themselves in analyzing the perceived burden the change will create. Change often requires a new way of thinking, and this change-over requires ample mental processing. Will this change negatively impact my job? Do I trust this change is in my best interest? Will we even be able to complete this change or will we simply waste time and effort with no true outcomes?

While we all attempt to use data and logic to make the case for change in our organizations, making change occur is much more an exercise in psychology than in analytics. Next time you are looking to create change, think about the human side of your business case and consider whether you’re effectively addressing the emotionally-driven parts as well.

Metals & Manufacturing Outlook / August 2019

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