Metals & Manufacturing Outlook January 2018

DECEMBER

ISM PMI:

59.7%

The Full Report Page 26

INTRODUCING WOMEN AND MANUFACTURING PODCAST PAGE 6

ISSUES OUTLOOK PAGE 13

CREDIT MANAGER’S INDEX PAGE 20

IN THIS ISSUE PUBLISHERS STATEMENT - p.2 Publisher – Lewis A. Weiss Editor-In-Chief – Tim Grady Design – Rovere Media Contributing Writers: Royce Lowe, UK and EU International Correspondent Tim Grady, Co-Host, Manufacturing Talk Radio Chris Kuehl, PH.D - Chief Economist, FMA

MANUFACTURING OUTLOOK - p.3 INTRODUCING WOMEN AND MANUFACTURING - p.6 NORTH AMERICAN OUTLOOK - p. 7 METALS OUTLOOK - p.9 AUTOMOTIVE OUTLOOK - p.10 AEROSPACE OUTLOOK - p.11 GLOBAL PMI OUTLOOK - p.12

Norbert Ore, Senior Correspondent for Global PMI Survey Reports Mike Womack, Social Media Manager, Manufacturing Talk Radio Andrea Olson - MSC - CEO of Prag’madik Advertising

by NORBERT ORE ISSUES OUTLOOK - p.13

by ROYCE LOWE ENERGY OUTLOOK - p.16

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SOUTH AMERICA OUTLOOK - 19 CREDIT MANAGERS OUTLOOK - p.20

by CHRIS KUEHL MANUFACTURING IN 2018: 5 TECHNOLOGIES MAKING A DIFFERENCE - p.22

by MIKE WOMACK DECEMBER ISM PMI REPORT - p.26

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Metals & Manufacturing Outlook

PUBLISHERS STATEMENT

BY LEWIS A. WEISS

H

appy New Year! The champagne corks popped as the New Year rolled in riding the wave of 2017 with better than 3% GDP. Many manufacturers use the forecasted GDP as their expected grow rate in revenues, so with 2017 above 3% and 2018 forecast to also exceed 3%, there was reason to share the champagne.

There is no reason to wring our hands about what might derail the economy, as those kinds of geopolitical, economic or financial events could disrupt any growth cycle. For 2018, it simply makes sense to plan for another good year and possibly a great one for manufacturing. We’ll try to ignore that it is a mid-term election year and all the distracting noise from Washington D.C. as officeholders try to get re-elected. Anyone who can stay mentally and emotionally above the sniping and negativity will be able to really contribute to growth in 2018.

Each month, the ISM issues the Purchasing Manager’s Index Report on Business® by the committee chaired by Tim Fiore.

In that report, highlighted in our pages, is the list of industries within the sector that are doing well. You will also find the full | January 2018

report included in Metals & Manufacturing Outlook. How each industry is doing is reported with those expanding strongest listed first through those not expanding listed last.

We have watched an exciting shift in the number of industries expanding from 12 in January of 2017 to 14 of 18 in November of 2017, while the PMI itself has rolled up above 50, and in recent months to well above 50.

Above 50 is the plus territory for economic expansion, with the current economic expansion running at 103 months, challenging second place of February 1961 through December of 1969. Ah, remember the ‘good ‘ol days’ – well, these are those.

Now manufacturing will move nicely forward with each company’s New Year’s Resolutions, also known as their business forecast. We hope you put in some “stretch goals” for 2018 that will challenge the spirit of your team because the stage is set for a possible shot at the 4% GDP number you heard during the 2016 presidential campaign. This is a notable improvement over the previous 10 years where the U.S. couldn’t hit a GDP above 3%, and many years was under 2%.

2% is a key turning point for manufacturers – above 2% means manufacturers are experiencing growth that supports more than simply maintenance and repair of production equipment. At 2% or lower, manufacturers play their cashflow very close to their vest. With a year forecast at above 3%, and a year behind us above 3%, manufacturing is in a boom time across most industry segments. It’s not perfect for every manufacturer, but for most, 2018 looks very, very good.

The tax package with all its touted benefits for manufacturing and lower taxes for – well, we’ll have to see about that because what has been said may not match up when you file in April of 2019.

Your take-home pay may rise, and your withholding be less, but deductions were also curtailed so it will be well into 2019 before Ma and Pa Kettle really know if this tax reform measure helped their household. As we learned from the ACA promises, “you get to keep your doctor; you get to keep your plan” wasn’t actually accurate and the individual mandate actually was a new tax. And the ‘new and improved’ health care bill is still in limbo.

So, we aren’t bold enough to say, “you’ll pay less in taxes; your household income will improve” because it is just too ethereal until all the facts are in – regardless of what either party or the OMB puts out. But for manufacturing and businesses in general, it appears flowery at first blush.

Enjoy this issue of Metals & Manufacturing Outlook as we begin the New Year in positive economic territory and a forecast for more of the same.

Warm Regards, Lewis A. Weiss Publisher

Metals & Manufacturing Outlook

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MANUFACTURING OUTLOOK

BY ROYCE LOWE

T

rump paid another visit to the world stage, and with his usual, almost predictable aplomb did nothing to raise his country’s reputation in the world. Riots were the result of his moving the capital of Israel to Jerusalem.

Trump speaks of a reciprocal $250 billion trade deal with China.

Global manufacturing was at an 80-month high in November, with Europe again the ‘bright spot.’

SEE GLOBAL OUTLOOK. November saw the BLS nonfarm employment up by 228,000 jobs in November. Professional and Business Services jobs were up by 46,000 while the Manufacturing sector added 30,000. In this sector Machinery added 8,000 jobs, Fabricated Metal Products 7,000 jobs, Computer and Electronic Products 4,000 jobs and Plastics and Rubber Products 4,000 jobs. Since a recent low in 2016,

manufacturing employment has increased by 189,000 jobs.

The ISM PMI figure for U.S. manufacturing fell back to 58.2 percent in November from October’s 58.7 percent, representing the 15th consecutive month of growth in manufacturing. The overall economy grew for the 102nd consecutive month. See NORTH AMERICAN OUTLOOK.

IHS Markit speaks of solid but slightly weaker increases in production and new orders, with output prices up at the greatest extent since December 2013.

There was a slight decrease in the IHS Markit U.S. PMI from October’s 54.6 percent to 53.9 in November. Employment was up at a good pace, and output prices increased to the greatest extent since December 2013.

Positive sentiment is improving

to its highest level since January 2016, and a number of panel members linked greater optimism to larger client bases and planned expansion into new markets.

The five ISM components are equally weighted at 20 percent each. The IHS Markit components are weighted: 30 percent New Orders, 25 percent Production, 20 percent Employment, 15 percent Supplier Deliveries and 10 percent Raw Materials Inventories.

The Bureau of Economic Analysis recently released its ‘second’ estimate for the annual rate of Real GDP growth in the third quarter of 2017, putting it at 3.3 percent. The figure for the second quarter of 2017 was 3.1 percent.

GALLUP’s U.S. Economic Confidence Index is around the +7 level in late November.

| January 2018

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Metals & Manufacturing Outlook

World crude steel production for the 66 reporting countries for the month of October was 145.254Mt, up 5.9 percent y-o-y.

Capacity utilization for the month was 73.0 percent, up 3.0 percent on October 2016 and down 0.6 percent on September 2017.

U.S. crude steel production for October 2017 was 6.976Mt, up 12.0 percent y-o-y.

China is set to become the world’s largest importer, as the world’s factory becomes the world’s number one consumerdriven country. China already imports more than the U.S. from Asia, Africa, Oceania, South Africa and Eastern Europe. It will likely shove the U.S. from top importer spot in five years if the present recovery continues. And the Chinese government is reportedly discussing a plan to allow foreign carmakers to set up whollyowned electric-vehicle businesses in its free-trade zones.

GE, it is reported, is planning to cut 12,000 jobs in its power division. This equates to 18 percent of GE Power’s workforce and will mostly affect professional and production personnel workers outside the U.S. Neither NAFTA nor BREXIT are making what could be termed considerable progress. See ISSUES OUTLOOK Microsoft’s purchase of LinkedIn upped the software company’s percentage of women, halting a two-year decline. The combined company has 27 percent of women employees as a whole versus 26 percent last year at Microsoft. Not much but at least heading in the right direction.

CITIGROUP INC says that removing barriers that exclude women from the workforce could boost OECD (Organization for Economic Cooperation and | January 2018

Development) growth by between 6 and 20 percent.

Canada’s Prime Minister, Justin Trudeau, it is reported, would consider one-on-one talks with the U.S. on trade if negotiations to update NAFTA fail.

Read about Robots, idle over IoT – see ISSUES OUTLOOK. Primary Global Aluminum Production in October 2017 was reported at 4.957 million tonnes, of which 2.628 million tonnes, over 54 percent, were produced in China. The Gulf Corporation Council (GCC) produced 423,000 tonnes, North America 335,000 tonnes, Western Europe 320,000 tonnes, Eastern and Central Europe 342,000 tonnes and Asia, excluding China, 336,000 tonnes.

Here are the latest figures for US new car and light truck sales for ‘the big eight’ for November 2017.

Metals & Manufacturing Outlook

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THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, 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 industrial production figures represent year-on-year changes, as do the consumer prices increases. The unemployment figures, %, are for the month as noted.

Manufacturing Laughs

| January 2018

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Metals & Manufacturing Outlook

M

ost people have heard that women are 51% of the U.S. population and only 27% of employees in manufacturing. But there is so much more to this story than a few statistics. To bring the story to life, the Manufacturing Broadcasting Corporation (MBC), broadcasters of Manufacturing Talk Radio and A Global Perspective with Dr. Adriana Sanford, has launched Women And Manufacturing, an exciting new show where accomplished women interview accomplished women who can share their experiences and encourage women to look across the broad landscape of manufacturing, from the loading dock doors to the C-Suite, and the expanse of jobs and careers in between, to learn more about this exciting sector of the U.S. economy and what it might hold for them.

Never before has the manufacturing industry been in such an accelerated state of change, from retirees leaving the workforce creating a serious skills gap and brain drain to the implementation of the technological innovations of modern manufacturing often referred to as Industry 4.0, or the 4th Industrial Revolution.

The hosts of Women And Manufacturing, all successful women in their own right, will interview women who are in the midst of a successful career in the industry and their respective companies, providing the guests with an opportunity to give guidance, insight, and inspiration to women who may or may not have considered a career in the industry, from teenagers just beginning to think about their career path to women in the industry or in transition in their own professional lives.

The subject matter of the interviews will cover the spectrum of unique challenges any woman might face in the workplace or the industry from the success and accomplishments of women from the C-suite to the shop floor, from executive management to labor unions, and from educational to governmental institutions.

Each will share their thoughts in congenial, collegiate conversations with one of 7 hosts who will alternate each week. Hosts will also tease out insights through guest introspection, along with suggestions and recommendations from guests to listeners about navigating the manufacturing and corporate world.

Tune in to each episode to hear the accomplished women share their experiences with this generation and the next generation of women who will make and remake manufacturing for the generations who follow in this noble profession which contributes to the greater good of all, improving products, making things better and safer, and fulfilling lives – not just making a living.

All of us involved with Women And Manufacturing appreciate your listenership and look forward to your feedback as this incredibly exciting show develops.

Visit mgftalkradio.com for more information. | January 2018

Metals & Manufacturing Outlook

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NORTH AMERICAN OUTLOOK

BY ROYCE LOWE

The Latest Manufacturing Reports from the United States, Canada and Mexico

T

he Institute of Supply Management PMI figure fell back slightly from 58.7 percent in October to 58.2 percent in November, representing the fifteenth consecutive month of growth in manufacturing. There was growth in the overall economy for the 102nd consecutive month.

Of the 18 manufacturing industries, 14 reported growth in November, in the following order: Paper Products; Machinery; Transportation Equipment; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Chemical Products; Furniture & Related Products; Fabricated Metal Products; Miscellaneous Manufacturing; and Primary Metals. Two industries reported contraction during the period: Wood Products; and Petroleum & Coal Products.

Comments from the manufacturing industries were again very positive, and mostly related to extraordinary business conditions, where, for example, slowdowns that are characteristic of year-ends are not happening this year.

Following is a summary of the five major indexes, each weighted at 20 percent in calculation of the PMI number for November. October’s readings are in parentheses: New orders

64.0

(63.4)

Production

63.9

(62.2)

Employment 59.7

(59.8)

Supplier Deliveries 56.5 (61.4) slowing slower Inventories 47.0 48.0 contracting from growing The following five components are not instrumental in the PMI calculation, but are an important

part of the manufacturing industry: Customer Inventories 45.5 43.5 too low Prices 65.5 68.5 increasing slower Backlog of orders 55.0 55.0 New export orders 56.0 56.5 Imports 54.5 54.0 Commodities Up in Price Aluminum (13); Caustic Soda (5); Copper; Corrugate (14); Nickel Based Metals; Pallets; Plastic Resins (4); Polycarbonate; Polyethylene (3); Polypropylene (3); Resin Based Products; Silicone; Soybean Oil; Steel – Hot Rolled (12); Steel Tubing; Titanium Dioxide (2); and Zinc Oxide.

| January 2018

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Metals & Manufacturing Outlook

Commodities Down in Price None Commodities in short supply Capacitors (5); Resistors; and Titanium Dioxide.

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

CANADA saw production growth ease to an 11-month low in November, with production volumes up at the slowest pace so far in 2017. New orders growth was up slightly, despite a fall in export sales. Input cost inflation was the strongest since April 2014, with prices rising particularly for metals, plastics and packaging.

The manufacturing PMI for November was at 54.4, virtually unchanged from October’s 54.3 reading.

Manufacturers in Alberta and B.C. saw the fastest regional improvement in business

| January 2018

conditions in November, supported by a survey-record job creation rate.

Ontario showed a sustained acceleration in manufacturing growth, bucking November’s national trend.

Quebec showed a subdued improvement in manufacturing conditions.

There were sharp increases in input costs in all regions monitored by the survey in November.

Canada produced 1.085Mt of crude steel in October, up 13.4 percent y-o-y.

Canada sold 158,653 light vehicles in November, down 1.2 percent y-o-y. Car sales were down 10 percent to 44,061 compared to 48,945 in November 2016, with light truck sales up to 114,592 from 111,628 in 2016. Total light vehicle sales to date in 2017 are 1.91 million, suggesting very

strongly that sales for the year will reach 2 million.

MEXICO saw recovery from the recent earthquake-related downturn, with a sharp increase in new orders and expansions in production and buying levels.

Goods producers took on additional employees.

The PMI for November increased to 52.4 from October’s 49.2.

The month saw solid buying levels in raw materials and semi-finished products.

Business confidence was up from October’s seven-month low, and manufacturers are looking for greater client bases, expansions into new export markets, product diversification and innovation to support production growth in the coming year.

Mexico produced 1.650 Mt of crude steel in October, down 2.6 percent y-o-y.

Metals & Manufacturing Outlook

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METALS OUTLOOK

BY ROYCE LOWE

N

ucor Corp. will build a fullrange merchant-bar-quality (MBQ) mill at its existing steel mill in Bourbonnais, Ill. The MBQ mill will have an annual capacity of 500,000 tons and is expected to cost $180 million. The project, which will take approximately two years to complete, will allow Nucor to fully utilize its existing bar mill by optimizing the melt capacity and infrastructure already in place. It will also take advantage of an abundant scrap supply in the region.

ArcelorMittal, the number one steelmaker in both the U.S. and Europe, is forecast to report its biggest annual profit in five years.

Steel prices and producers’ shares are riding a wave of good news. Global steel demand is strong and ArcelorMittal sees usage up 3 percent in 2017.

China is shutting plants to cut pollution and exporting much less in the face of anti-dumping measures. But China is still producing more crude steel than it did a year ago.

ArcelorMittal is still out there buying; from ThyssenKrupp AG’s plant in Alabama to – awaiting European Commission approval – Europe’s biggest steel plant in Italy. It is also looking at a jointventure in India, and considering bids for both Bhushan Steel Ltd and Essar Steel, according to people familiar with the situation (who do not wish to be identified because the matter is private.)

Arconic announced a multi-year cooperative research agreement with Airbus to advance metal 3D printing for aircraft manufacturing.

The companies will develop customized processes and parameters to produce and qualify large, structural 3D-printed components, such as pylon spars and rib structures, up to approximately 3 feet in length. The deal combines Arconic’s expertise in metal additive manufacturing and metallurgy with Airbus’ design and qualification capabilities.

Tough on China...The Trump Administration is now probing Chinese aluminum imports that

could lead to tariffs, and trigger a rise in the shares of Alcoa Corp. and Century Aluminum Co. The investigations are on Commercial Quality sheet, whose imports in 2016 totalled some $600 million, and were initiated using authority granted by the tariff act of 1930 according to the Commerce Department.

China responded by saying the move was “rare in the history of international trade.’’

China produced 31.9 million tons of aluminum in 2016. Aluminum prices are up 25 percent in 2017.

The U.S. will import 425,000 tons from China in 2017, some 1.3 percent of its production of primary aluminum.

It is not yet certain that tariffs will be applied. It should not be forgotten that the U.S. aluminum industry is not in the best of shape, particularly when it comes to making those grades required by the aerospace industry.

| January 2018

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Metals & Manufacturing Outlook

AUTOMOTIVE OUTLOOK

BY ROYCE LOWE

B

uffet-backed BYD, the Chinese vehicle producer, is to up its investment in Canada on the back of growing demand for electric vehicles and provincial tax incentives that create a warmer welcome than in the U.S. in the short term. Startup, in Ontario, will be in 2018 and will initially employ 40 people. Further details are imminent.

Ford and China’s Anhui Zotje Automobile Co. are to manufacture and sell a full line of electric vehicles that will sell under a new brand unique to the Chinese market. The companies plan a new manufacturing facility in Zhejiang province as part of a 50-50, $756 million (5 billion yuan) venture.

Ford, who has other joint-ventures in China, expects the market for new-energy vehicles in the country to grow to 6 million per year by 2025, of which some 4 million will be all-electric. Deliveries of such vehicles were up 53 percent to 507,000 units in 2016, according to the China Association of Automobile Manufacturers. | January 2018

Tesla also came along with the ‘fastest production car ever made,’ a new Roadster sports car whose windshield won’t shatter. But they’re not alone; Daimler AG, Volvo AB, Navistar International Corp. and Volkswagen AG are all out to better Tesla. VW and Anhui Jianghuai Automobile Group Corp. have partnered to make electric cars.

Tesla, whose recent problems with its model 3 sedan were in large part due to ‘automation challenges,’ has acquired Perbix, a maker of automated machines that has supplied Tesla for the past three years, with a view to alleviating said production problems.

The company recently unveiled its new semi that it claims will do 500 miles (800 kms) between charges, and whose battery and motors are good for 1 million miles (1.6 million kms.) Operating costs are claimed to be lower than for diesel models.

Toyota meanwhile is talking about savings. It says it saved 100 billion yen ($875 million) in the half-year ended September through measures that included a new manufacturing process.

This saved money will help to increase R&D spending – on new electrified powertrains and AI to a record 1.06 trillion yen.

The company recently told its U.S. workers in Kentucky that Made-in-Japan Camrys are more profitable, and that Kentucky should cut costs now or ‘face an uncertain future.’

Metals & Manufacturing Outlook

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AEROSPACE OUTLOOK

BY ROYCE LOWE

A

irbus just make its biggest single commercial deal by taking an order for 430 aircraft for $49.5 billion from Indigo Partners, a U.S. investment firm who are tied in with four low-cost airlines in Europe and The Americas. The deal is for the A320neo model, a very fuel-efficient aircraft. Airbus had been snubbed by Emirates on a A380 deal. Emirates went for Boeing’s 787 Dreamliner model to the tune of $40 billion. Boeing has further orders from Chinese leasing companies, one for $37 billion for narrow- and wide-body aircraft, plus a $7.4 billion for 737s – including 737 MAX 10s – and 787 Dreamliners. This order is part of the $250 billion reciprocal deal that came out of Trump’s recent vist to China.

in the industry, with the longest range and speed. A thousand jobs have been added in Montreal. In a further Canadian development it is said, yet to be confirmed, that the Canadian Government will cancel a $5.3 billion order for 18 F-18 Super Hornet fighter aircraft in retaliation for Boeing’s tradeviolation complaint that led to the U.S. Commerce Department’s

investigation into sales of Bombardier C-series passenger jets to Delta Air Lines. Canada may buy a fleet of used F-18s from Australia.

Airbus, Rolls Royce and Siemens will team up for electric aircraft, and are committed to demonstrating a hybrid-electric propulsion technology by 2020.

Manufacturing Laughs

It seems Airbus can’t make its A320neo aircraft fast enough, whereas there are questions regarding the viability of its A380.

Meanwhile Bombardier’s Global 7000 aircraft will enter service in 2018, two years late. This is the largest purpose-built business jet | January 2018

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Metals & Manufacturing Outlook

GLOBAL PMI OUTLOOK

BY NORBERT ORE

T

he global surveys indicate an overall gain in momentum as they are growing, on average, at a faster rate. All 18 of the surveys that we follow closely are growing with sweeping impetus, especially in the Eurozone, UK, and U.S which collectively account for 45 percent of global manufacturing. Manufacturing continues to be the leader of the expansion. However, the nonmanufacturing sector continues to grow as small to midsize companies benefit from an especially strong 2017.

Eurozone: The Eurozone PMI (60.1, +1.6) hit its highest level since April 2000 while all eight EA countries printed a reading above 50 for the sixth consecutive month. The Eurozone’s manufacturing expansion

| January 2018

continues to be led by Germany (62.5, +1.9),

(50.8, -0.2) is similarly signaling a “soft-landing.”

Netherlands (62.4, +2.0), and Austria (61.9, +2.5).

India: The expansion experienced a four-month hiatus as the economy absorbed the impact of the new Goods & Services Tax. November’s PMI reading (52.6, +2.3) indicates a return to significant expansion.

United Kingdom: It has been 17 months since the Brexit vote and the UK/CIPS PMI has averaged 55.0 over that time. November established a new high of 58.2 (+1.6), rendering robust expansions in output and employment. The UK manufacturing sector is upward trending thanks to the weaker GBP and single market access.

China: China’s Official Report, the CFLP PMI (51.8, 0.2), continued above the 51-mark for the 16th consecutive month. The Caixin China General Manufacturing PMI

Taiwan: Taiwan’s CIER/SMIT PMI (57.2, -0.5) continues to post very strong numbers, particularly in its premier industry (Computers, Electronic and Optical Products).

North America: Canada (54.4, +0.1) expanded for the 21st consecutive month with an impressive YTD average of 54.8. Mexico’s (52.4, +3.2) manufacturing sector bounced back following the devastating earthquakes experienced during October.

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ISSUES OUTLOOK

W

ashington is looking to rewrite the NAFTA deal to the effect that vehicles manufactured in North America could only qualify for duty-free access to the U.S. market if they contain at least 50 percent U.S. content and 85 percent North American content.

It is reported that the Canadian government, in the recent round of NAFTA talks in Mexico City, warned the Trump administration that such a move, to rewrite the deal in favor of the U.S. would backfire and cost American jobs and profits. It also stated that the Detroit three, GM, Ford and Fiat Chrysler would suffer most.

Canadians pointed out the health of the U.S. auto sector today – with employment climbing at some 6 percent on a y-o-y basis during the past decade - and

investment in U.S. auto plants totaling $9.5 billion in 2017, thus creating or retaining 12,000 jobs.

In 2016, the auto sector invested $8 billion in U.S. plants and $20 billion in R&D. Parts that move back and forth across the Canada -U.S. border during manufacture would be hit with levies several times, upping their final price tag.

A possible outcome of all this would be auto makers losing money on the operations in Canada and Mexico, or moving said operations to the U.S., which would involve tens of billions of dollars in additional capital spending, hence increased costs of vehicles in the U.S. Such cost increases would adversely affect U.S. vehicle production, but would be good for, say, South Korea, which already has preferential access to the U.S. and Canadian markets through free-trade deals.

The next, sixth round of NAFTA negotiations is in Montreal from January 23 to 28, 2018.

BREXIT meanwhile is held up by the Irish Border question. Will Northern Ireland and Ireland end

BY ROYCE LOWE

up with a hard border that will be almost impossible to police?

Ireland wants talks to move to trade, and after the U.K. has the most to lose from a ‘messy’ exit.

Without some final trade deal at exit from the EU, a hard border is almost inevitable.

And Theresa May is fighting her cabinet again. Boris Johnson and Michael Gove- the two politicos who engineered the Brexit vote in June 2016, seem to be in opposition to anything that softens the UK stand, even though at the moment it’s in no position to take a hard one.

May is scheduled for a further meeting in Brussels where moves toward talks on trade are the desired outcome. A very ongoing saga is Brexit.

The Robots are coming, the robots are coming!

In the nineties, Steelcase, a manufacturer of office furniture, had seven factories around Grand Rapids, MI, that employed some 10,000 workers, making chairs, filing cabinets, desks and tables and all the fasteners that went into them. The workers did all | January 2018

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Metals & Manufacturing Outlook $700 million trucking industry.

Construction too will be affected, as witnessed by one New Yorkbased firm that has initiated a laser-guided system that can lay 800-1200 bricks a day, over twice as many as an average mason.

Automation’s roots are finding their way in more and more of the manufacturing, sales and distribution systems.

We will discuss some of the more interesting cases over the coming months.

The internet of things, or how I learned to stop worrying and love my washing machine.......

the lifting, polishing, painting and assembly. A place at Steelcase was a plum job at the time.

Today there are two plants in Michigan that employ less than 2,000 workers.

Things were good until the dot. com bubble burst and countless startups found themselves putting their office furniture up for auction.

Steelcase lost a third of its sales and started closing plants and moving manufacturing to Mexico, China and then India.

Things are getting better again and there is demand for new workspaces, standing desks etc. But present-day technology means far fewer workers, and automated assembly lines means robotic arms lifting tabletops that once were handled by men. The present-day automated processes are effectively mistake-proof and the system won’t let workers proceed if a step isn’t completed correctly.

A decade ago industrial robots assisted workers, but now the workers who remain assist the robots.

Reshoring makes sense if processes can be automated, thus using fewer workers. | January 2018

Everywhere there are fewer jobs, but they are higher skilled and better paying, viz the workers who were fortunate enough to keep their jobs at Steelcase.

Manufacturing jobs now account for some 10 percent of the American workforce, but as this 10 percent winds its way through the economy, picking up suppliers along the way, it accounts for around 30 percent of the economy. As plants have closed, displaced employees have sought work in fast-food restaurants and in big-box retail stores where pay and benefits are much less attractive.

McDonald’s ‘digital ordering kiosks’ will replace human cashiers at 5500 restaurants by the end of 2018. Automation of long-haul trucking will significantly affect the almost 2 million longdistance truck drivers in the U.S., mostly male with no college degree, whose wages account for a third of the costs in the

Whirlpool has asked the U.S. government to impose a 50 percent tariff on laundry machines coming in from LG and Samsung.

Their official argument is that the two Korean companies have been upping their market share by offering appliances at low prices. In other words, Whirlpool is getting beat and wants the government to help it win.

It may well be that Whirlpool and its supporters in government have failed to understand the shift occurring in business as a result of the so-called Internet of Things (IoT) – in this case appliances that send and receive data. For example, whether or not you wish to do it, you CAN change the water temperature in the middle of a wash cycle when you’re not home, or get a second-by-second

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Whirlpool too makes smart appliances, but having the right products isn’t the same as having the right approach to the market. Unlike the two Korean competitors, Whirlpool hasn’t embraced the Amazon lesson – that the way to win in a datadriven business is to push prices as low as possible in order to build a customer base, enhance data flow and cash in the long term.

report on how much energy your dryer is consuming. Apart from smart washers and dryers there are toasters, coffee-makers, refrigerators, ovens, dishwashers, garbage cans, light bulbs, toilets and pet feeders.

IoT is at its relative beginnings, sort of like the Internet in the late nineties, when there were many failures. But there was Amazon, the company that more than any other suggests what is to come, Amazon the company that for most of its existence has made little or no profit, and in its early days was often ridiculed for this.

But its managers and investors quickly realized that its most valuable asset was not individual sales but data – its knowledge about its loyal customer base.

Amazon doesn’t evaluate customers by their most recent purchase, rather customers have a lifetime value, a prediction of how much money each one will spend in the future. Amazon can calculate all this with increasing accuracy – it knows which books we read, which movies we watch, what data we store and what food we eat. And since the introduction of voice-operated devices the company learns when some customers wake up, go to work, listen to news, play with their kids and go to sleep.

When an appliance is constantly sending data back to its maker, that company has continuous relationships with those who bought its products, and can find all sorts of ways to make money from such relationships. A company knows years after you buy its stove exactly how often you cook, what you cook,when you shop and what you watch on a stove-top screen while you cook. It can continuously monetize your relationship – selling you recipe subscriptions or getting a cut of your food orders.

Appliances now order their own supplies when they are about to run out.

Douglas Irwin,a renowned economist, says Whirlpool is putting its resources into stopping the competition when maybe it should concentrate on better serving its customers.

He points out that Whirlpool’s trade complaint was first filed under the Obama administration, which had imposed tariffs on LG and Samsung in two related cases – most of the tariffs were small and easily negotiable. But Trump views free trade from a different standpoint and may well impose huge tariffs on all laundry-machine imports. This may well produce a flood of tradeprotection complaints from other American firms, which will be bad for anyone who wants to buy a laundry machine but in the long run will be even worse for American business.

Manufacturing Laughs

| January 2018

16

Metals & Manufacturing Outlook

ENERGY OUTLOOK

BY ROYCE LOWE

W

est Virginia may be about to benefit from the $250 billion dollar U.S.-China deal.

The China Energy Investment Corp. plans to invest $83.7 billion in shale gas development and chemical manufacturing projects in the state over two decades, according to the state’s Chamber of Commerce. West Virginia was hard hit by coal’s long-term decline.

A memo of understanding (MOU) has been drawn up. It is nonbinding, but it is a start.

Tesla won its recent bet that said it would have a new battery system up and running in Australia in December, or it would do it for free. The system has been installed in South Australia, which encounters fairly frequent power outs . A 100MW lithiumion battery system, activated on December 1, is now humming merrily away, just in time for the holidays. The system is connected to the Neoen-run, 99 turbine Hornsdale Wind Farm, making it the world’s largest lithium-ion battery. It can feed an hour’s worth of power to 30,000 homes. But somebody is surely lurking somewhere looking to make a bigger battery. | January 2018

Manufacturing Laughs

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

EUROZONE IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) leapt to a high of 60.1 in November from October’s 58.6 reading, the best reading apart from April 2000’s series-record high. Growth in production and new orders went to multi-year highs, supporting survey-record job creation.

PMI readings were at or near record highs in Germany, The Netherlands, Austria and Ireland.

The fastest rate increase was in investment goods, slowest in consumer products.

New export business increased at the fastest rate since the survey began in 1997.

17

per year in November. Germany had its best November since 2006, and YTD registrations are up 3 percent y-o-y. France’s 10.3 percent y-o-y growth served to send the selling rate towards 2.4 million units per year from 2.1 in October. This is the highest French selling rate for any month since March 2011.

Spain’s good run continued with registrations up 12.4 percent, the first November to break 100,000 units since 2007. And Italy’s good year continued, with registrations up 6.8 percent y-o-y, and for the YTD, the Italian car market is up 8.7 percent on 2016 for the first 11 months.

IHS Markit’s PMI for the UK rose to its highest in over four years, from October’s 56.6 percent to 58.2 percent in November.

Crude steel production in Germany in October was at 3.600 Mt, up 2.7 percent y-o-y; in Italy 2.275 Mt, up 6.1 percent y-o-y; in France 1.358 Mt, up 1.6 percent y-o-y and in Spain 1.305 Mt, up 11.9 percent y-o-y.

Russia’s crude steel production for October was at 6.225 Mt, up 5.0 percent y-o-y; Ukraine’s was 1.910 Mt, down 4.7 percent y-o-y.

Car sales in Western Europe were up by 5.4 percent y-o-y in November , with the selling rate up from 14 million units per year in October to 14.6 million units

Production, new orders and employment all rose at faster rates, with new orders for investment goods rising at the fastest pace since August 1994.

There was solid domestic demand and steeper gains in new export business.

There was increased demand for UK investment goods, plant and machinery, with new orders for these products rising to its greatest extent in over two decades.

Car sales in the UK are still bad news, with registrations for November down by 11.2 percent y-o-y. This is the eighth consecutive decrease in UK car sales, and improvement is not forecast until well into 2018.

The UK produced 0.702 Mt of crude steel in October, down 4.6 percent y-o-y. | January 2018

18

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

ASIA

perating conditions continued O to improve in CHINA in November, but at a marginal pace, with production and new orders showing modest gains.

The PMI for November, at 50.8, was slightly down from October’s 51.0.

There were increases in input costs and in selling prices. Cost cutting led to a reduction in employment.

There was a fall in confidence regarding the business outlook to the joint-lowest on record.

Manufacturing Laughs

| January 2018

CHINA produced 72.362 Mt of crude steel in October, up 6.1 percent y-o-y; Japan 8.978 Mt, down 1.0 percent y-o-y; India 8.629 Mt, up 5.3 percent y-o-y and South Korea 6.200 Mt, up 4.0 percent y-o-y. Taiwan produced 1.965 Mt in October, up 2.5 percent y-o-y.

Vehicle sales were up by 2 percent y-o-y in China in October, representing the fifth consecutive monthly increase. The Chinese Association of Automobile Manufacturers (CAAM) said 2.70 million vehicles were sold in October.

YTD sales are up 4.1 percent y-o-y to 22.9 million units.

New-electric vehicles (NEV) are up 106.7 percent in October to some 91,000 units, behind government pressure to support this industry. NEV sales through October were at around 490,000 units, up 45.4 percent y-o-y.

The CAAM looks to NEV sales of 700,000 this year. This includes all-electric battery vehicles and plug-in petrol-electric hybrids.

Manufacturing growth remained strong in JAPAN in November as conditions improved at the sharpest rate since March 2017.

The PMI for November, at 53.8 was up from October’s 52.8.

Production, new orders (including export), employment and backlogs were all up at a faster rate, with new export orders up at the fastest rate in almost four years.

Input price inflation – cheaper yen and higher material prices – intensified cost pressures.

INDIAN manufacturing looked positive in November, with the manufacturing PMI increasing to 52.6 from October’s 50.3, as growth rates for production and new orders were the fastest since September 2016.

Input cost inflation saw its fastest increase since April and was solid overall, with price increases for chemicals, steel and petroleum products.

Metals & Manufacturing Outlook

19

GLOBAL OUTLOOK

BY ROYCE LOWE

SOUTH AMERICA

B

razil just went through its best growth spell for almost seven years, with November’s PMI at 53.5, an 81-month high, up from October’s 51.2.

Production took off at its fastest rate since January 2013, on the back of strong demand.

Consumer goods were the bestperforming category, and there was growth in both intermediate and investment goods.

There was job creation for the second consecutive month.

Brazil’s crude steel production for the month of October was 3.045Mt, an increase y-o-y of 3.9 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) – moved to an 80-month high of 54.0 in November from October’s 53.5.

Business conditions were

good across the consumer, intermediate and investment sectors, with strongest growth in intermediate, slowest in consumer.

The bright spot was the euro area with its PMI up to a near-record high. Japan rose to a 44-month high, the UK to a 51-month high, Australia to an 8-month high and Canada to a 2-month high.

Growth slipped slightly in the U.S. but overall was solid.

In the main emerging nations, growth was at a 5-month low in China but accelerated in India to best in a year, in Brazil to an 81-month high, and Russia.

Mexico returned to expansion.

Global manufacturing production grew at the quickest pace since February 2011, along with similar increases in new orders.

There were also increases in international trade flows, as new export business growth hit a near 7-year high.

Job creation pace increased to the best in 6.1/2 years.

Price pressures increased, with the inflation rate in input and output charges the sharpest registered since May 2011.

Oct Global PMI 53.5 Production 53.7

New orders 54.2

New exports 52.8

Employment 52.6

Input prices 61.4

Output prices

53.5

‘Future Output’

62.6

ISO9001:2008 and AS9100C

Nov 54.0 54.9 55.1 53.7 52.8 62.2 54.2 63.1 | January 2018

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Metals & Manufacturing Outlook

CREDIT MANAGER’S OUTLOOK

BY CHRIS KUEHL

The following information is condensed from the NACM.org Credit Manager’s Index report.

For the full report, please visit CMI Credit Managers’ Index under News at NACM.org.

T

hat old familiar pattern has returned after a couple of months where we seemed to be heading for some semblance of consistency. The good news is that this month saw an improvement over last month, the direction we all would all like to head. There were some aspects of this growth that are familiar and some that are more unique to this set of readings. The familiar part is that most of the gain was in the favorable factors although there was also a small improvement in the unfavorable categories as well. “By and large, the Credit Managers’ Index (CMI) this month is quite consistent with a variety of other economic measures such as the Purchasing Managers’ Index, durable goods orders and capacity utilization numbers,” said NACM Economist Chris Kuehl, Ph.D. Kuehl noted that one interesting wrinkle that has appeared in other economic data involves bank lending. “There has | January 2018

been a sharp drop in demand for business loans in the last few months. That strikes many as odd given the kind of growth the U.S. has sported in that same period.

It appears that many companies are self-financing their growth as opposed to borrowing. That has implications for the credit industry as a whole.”

The overall index recovered a lot of the momentum lost last month.

The combined index number is at 56.6, almost identical to what it was in September (56.5) and a nice rebound from the 55.5 registered in October. The index of favorable factors jumped to 65.7 after languishing at 63.8 in October. This reading is the highest seen in many years.

When one looks at the specific sub-readings one can see why.

The index for the unfavorable factors is not nearly in the same realm, but has been improving— that’s what really counts. It was at 50 (the dividing line between contraction and expansion) last month and is now all the way up to 50.4! The important thing is the index is over 50 and has been for most of the past 12 months.

The sales category is very strong right now—as strong as

it has been since the recession started, with a reading of 68.3.

This is quite near a record high.

The new credit applications reading also improved, but not by such a significant degree as it moved from 62.8 to 63.7. The dollar collections number was as robust as has been seen since the recession. It is now at 63.1. This had been the problem category through most of the year, but not this month. Finally, there is the amount of credit extended number, which remained very high at 67.8. “This category has been performing very well for the last few years as the bigger credit seekers have been asking for larger amounts consistently,” said Kuehl.

There has been good news as far as the nonfavorable categories as well, but the numbers suggest there is still a lot of damage to work through as some categories are still in the 40s. The rejections of credit applications improved from a reading of 51.8 to 52.4, good news when paired with the growth in credit applications. The accounts placed for collection lurched out of the contraction zone with a reading of 50.5 as compared to the 49.5 last month.

The disputes category remained in contraction territory at 48.3, but that is better than the 47.6 the month prior. Dollar amount beyond terms also remained in the contraction zone, but with some improvement to 47.5 after a 47.3 reading. The same pattern was observed with dollar amount of customer deductions as the reading stayed in contraction, but was marginally better with a move from 48.7 to 48.9. The readings

Metals & Manufacturing Outlook

for filings for bankruptcies also moved, but downward—the only one of these readings to do so.

It was small, going from 55.3 to 55.1. Kuehl reported that there are still three readings in the 40s, but all three of these saw some improvement, and that is a welcome sign.

Manufacturing Sector The performance of the combined CMI was mirrored in the manufacturing sector. The overall score moved from 55.6 to 56.1, as high as it has been since April of this year. The overall number for the favorable index also made a nice jump as it went from 63.5 to 65.3. The change in the nonfavorable index was not quite as dramatic, but it is not necessarily trending in the right direction by falling from 50.4 to 50.1. It is a very slight adjustment, moving closer to contraction territory—not where anybody would want it to be.

The sales category made a nice jump from 67.4 to 68.2. These

are some of the highest numbers seen in more than five years. As an anecdotal addition to this data, there is the experience of the big FabTech show in Chicago. Kuehl’s experience at the show was that more companies exhibited than has been the case since the recession, more companies and people attended, and there were more sales of machinery than there had been in 10 years.

NACM CMI — 3 — November 2017 This performance has also been repeated in many other manufacturing shows this year.

The new credit applications reading also improved from 61.8 to 64.5. There was similar good news from the dollar collections data as it got back into the 60s with a reading of 60.9 compared to the 59.5 tracked the month before. The amount of credit extended jumped all the way to 67.4 after being at 65.2. This takes the reading back to where it was in April when the spring boom was just getting started.

The rejections of credit applications slipped a little from

21

53.7 to 52.6. That takes a little of the bloom off the applications for credit number. The important point is that this category remains in the expansion zone. The accounts placed for collection got out of the contraction zone with a reading of 51.5 as compared to the 48.6 notched in October.

The disputes category slid deeper into contraction, however, with a reading of 47.1 compared to 48.2 the month before. Readings for dollar amount beyond terms has been a challenge most of this year—“slow pays have been the bane of the credit managers’ existence,” said Kuehl. This month the reading stayed under the 50 line, but there was not all that much change as it went from 48.6 to 48.2. The worst reading was dollar amount of customer deductions as it sagged deeply into contraction territory with a reading of 45.7 after last month’s 47.1. There was also some trouble as far as filings for bankruptcies as this fell from 56 to 55.4.

| January 2018

22

Metals & Manufacturing Outlook

MANUFACTURING IN 2018: 5 TECHNOLOGIES MAKING A DIFFERENCE

BY MIKE WOMACK

W

ith 2018 right around the corner, it’s time to look at the incoming technology trends revolutionizing the manufacturing industry. Each year businesses are forced to deal with a plethora of disruptive trends claiming to be the next big thing. However as time goes on, more and more of these trends actually become critical components helping businesses increase their competitive advantage and offer their customers more value. Let’s dive into the 5 top technologies that are working their way out of the theoretical realm and are set to become the next tool in the modern manufacturers’ belt.

Looking Back to 2017 Each year Manufacturing Talk Radio puts together a forwardthinking article to discuss what will have the largest impact on the industry in the new year. See what 2017 had in store.

1) 3D Printing

Even though 3D printing originated in the 1980’s it took quite some time before it became capable enough to provide even | January 2018

the slightest bit of value to the manufacturing industry. Starting off as an affordable prototyping option, it wasn’t until recently that 3D printing critical components and end-use parts on a large scale became possible. Now, at the tail end of 2017, 3D printing has made a tremendous impact on the modern industry and it shows no signs of slowing down.

From new software exponentially increasing print speed, to Rolls Royce partnering up with AMAZE to further increase its capabilities, 3D printing is ready to make 2018 a year for the history books.

Entire manufacturing businesses are even being created exclusively utilizing the process to manufacture their products.

With a much larger range of both metallic and plastic materials at their disposal, manufacturers of all kinds are gearing up to take full advantage of 3D printing in the new year.

2) Self-Driving Technology / Electric Vehicles

The automotive industry was turned on its head this past

year. A push toward electric vehicles and embracing selfdriving technology, it may have at first seemed only the everyday commuter would feel an impact.

However, this could not be further from the truth. The manufacturing industry may see these technologies have a dramatic impact on their business and the supply chain.

Tesla unveiled the Tesla Semi, an electric and partially autonomous semi truck that has the potential to revolutionize the way businesses ship their goods. Furthermore, electric vehicles call for an entirely different manufacturing process and components like batteries and conventional engines are beginning to be called into question. When companies like

Metals & Manufacturing Outlook Volvo make an announcement that they plan to make all new models include an electric motor from 2019-2021, automotive suppliers will need to reconsider what products they offer. These developments are going to leave their mark as the manufacturing industry moves into the new year and being prepared will be critical.

3) Widespread Adoption of IIoT

With the Industrial Internet of Things continuing to mature, the manufacturing industry is nearly ready to embrace this technology and all it has to offer.

Adoption was slow at first, with cybersecurity being a primary concern but recent data suggests widespread acceptance is on the horizon. BSQUARE and Software Connect both released surveys suggesting a true IIoT transformation is on its way.

Data suggests manufacturers are warming up to the idea of connecting their enterprise through the digital web. 44% of manufacturers have already been using the IIoT for 12 months and 77% of manufacturers have some kind of IIoT solution in place today. This is an amazing step in the right direction for the industry as a whole. Adoption may have been slow but the slew of unknowns was to blame. As more industry leaders begin to embrace the concept of connectivity, SME’s and businesses of all sizes are ready to try their hand with the IIoT. 2018 will be another monumental stepping stone toward a truly connected manufacturing industry.

4) Exoskeletons

There has always been the idea of strapping on this light-weight exoskeleton to make physical work less demanding. Now this concept is taking a step out from the world of science fiction and onto the shop floor. Ford is already testing out their new technology from the California based Ekso Bionics and is excited about its potential.

The benefits of an exoskeleton are plentiful. Manufacturers that perform repetitive tasks or need to hold their hands over their head for extended periods of time are finding relief with the EksoVest.

This technology to address physically demanding tasks has gone over extremely well with Ford’s workforce. As with any new technology, adoption happens gradually. Smaller manufacturers that don’t have the capabilities to partner with a startup or cannot justify a large investment on an untested technology wait for industry leaders like Ford to pave the way forward. With the automotive manufacturers’ early success with the pilot program, it’s only a matter of time before the technology opens up to a wider user base. 2018 could be the year when a majority of manufacturers on the shop floor begin sporting these high-tech accessories.

5) Augmented / Virtual Reality

23

Both Augmented and Virtual Reality are beginning to make a bigger name for themselves in the manufacturing world. Innovators like Ford, Lockheed Martin and even technology manufacturers such as Nvidia are beginging to see how these technologies can benefit the modern manfuacturing industry. From testing processes in a virtual world to creating a more effective way to streamline maintenance, augmented and virtual reality are nearly ready to redefine how manufacturers think about their industry.

Businesses are using augmented reality as training or maintenance tools, able to offer digitally imposed visuals and real-time alerts over real-world machinery.

Manufacturers can recreate their facilities in a virtual world to ensure processes move forward as efficiently as possible.

Businesses are even finding that developing products in virtual reality can be a substitute for prototyping. These kind of applications were impossible to imagine without modern technologies and it’s starting to have a monumental impact on the way manufacturers conduct business. With the technology still very much in its infancy, especially in regard to virtual reality, 2018 might be the year when monumental breakthroughs start the chain of events toward becoming widely accepted and utilized throughout the manufacturing industry.

With dramatic and important developments taking place nearly everyday, it can be difficult to keep up with the direction manufacturing in heading. These five technologies listed above are high on the watch list for modern manufacturers but are in no means the only tech trends ready to make their mark on the industry. Be sure to keep checking back on MFGTalkRadio.com for the latest stories, technologies and economic trends driving the industry forward in the new year. | January 2018

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Metals & Manufacturing Outlook

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

ISM PMI for the past 5 years

| January 2018

Metals & Manufacturing Outlook

27

December PMI at 59.7% PMI® at 59.7%

New Orders, Production, and Employment Continue Growing Supplier Deliveries Slowing at Faster Rate; Backlog Growing Raw Materials Inventories Contracting, Customers’ Inventories Too Low Prices Increasing at Faster Rate (Tempe, Arizona) — (Tempe, Arizona) — Economic activity in the manufacturing sectorexpanded in December, and the overall economy grew for the 103rd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report on Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee: “The December PMI® registered 59.7 percent, an increase of 1.5 percentage points from the November reading of 58.2 percent. The New Orders Index registered 69.4 percent, an increase of 5.4 percentage points from the November reading of 64 percent. The Production Index registered 65.8 percent, a 1.9 percentage point increase compared to the November reading of 63.9 percent. The Employment Index registered 57 percent, a decrease of 2.7 percentage points from the November reading of 59.7 percent.

The Supplier Deliveries Index registered 57.9 percent, a 1.4 percentage point increase from the November reading of 56.5 percent. The Inventories Index registered 48.5 percent, an increase of 1.5 percentage points from the November reading of 47 percent. The Prices Index registered 69 percent in December,

| January 2018

28

Metals & Manufacturing Outlook

a 3.5 percentage point increase from the November reading of 65.5 percent, indicating higher raw materials prices for the 22nd consecutive month. Comments from the panel reflect expanding business conditions, with new orders and production leading gains; employment expanding at a slower rate; order backlogs expanding at a faster rate; and export orders and imports continuing to grow in December. Supplier deliveries continued to slow (improving) at a faster rate, and inventories continued to contract at a slower rate during the period. Price increases continued at a faster rate. The Customers’ Inventories Index declined and remains at low levels.”

Of the 18 manufacturing industries, 16 reported growth in December in the following order: Machinery; Computer & Electronic Products; Paper Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Petroleum & Coal Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Furniture & Related Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; and Electrical Equipment, Appliances & Components.

Two industries reported contraction during the period: Wood Products; and Textile Mills.

WHAT RESPONDENTS ARE SAYING...

“Our business is moving higher into the new year. Increased sales are resulting in increased purchases of CapEx and raw materials.” (Chemical Products) “Strong international sales — Europe and Australia — versus last two years. U.S. sales continue to grow. Seeing commodity pricing pressures.” (Machinery) “We are seeing a ramp-up with companies releasing early 2018 spend now.” (Computer & Electronic Products) “Business conditions are good; we are tracking well to our projections for the year.” (Miscellaneous Manufacturing)

| January 2018

Metals & Manufacturing Outlook

29

“First quarter 2018 probably will be better than the fourth quarter 2017.” (Fabricated Metal Products) “Domestic and international sales on the rise.” (Transportation Equipment) “Economy [is] strong and business is strong, yet signals of headwinds in 2018 are persistent.” (Food, Beverage & Tobacco Products) “All suppliers are reporting strong business activity and difficulties obtaining qualified employees.” (Paper Products) “Demand at this time is strong in the construction part of our business. I think it is due to the impact of the hurricanes and the rebuild and new construction that is required.” (Plastics & Rubber Products)

Manufacturing at a Glance December 2017

Index

Series Index Oct

Series Index Sep

Percentage Point Change

Direct ion

Rate of Chang e

Trend* (Mont hs)

PMI®

59.7

58.2

+1.5

Growi ng

Faster

16

New Orders

69.4

64.0

+5.4

Growi ng

Faster

16

Productio n

65.8

63.9

+1.9

Growi ng

Faster

16

Employme nt

57.0

59.7

Growi ng

Slower

15

Supplier Deliveries

57.9

56.5

Slowin g

Faster

20

-2.7

+1.4

| January 2018

30

Metals & Manufacturing Outlook

Inventorie s

48.5

47.0

Customer s’ Inventorie s

42.0

45.5

Prices

69.0

65.5

Backlog of Orders

56.0

New Export Orders Imports

+1.5

Contra cting

Slower

3

Too Low

Faster

6

+3.5

Increa sing

Faster

22

55.0

+1.0

Growi ng

Faster

11

58.5

56.0

+2.5

Growi ng

Faster

22

57.5

54.5

+3.0

Growi ng

Faster

11

OVERALL ECONOMY

Growi ng

Faster

103

Manufacturing Sector

Growi ng

Faster

16

-3.5

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

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY Commodities Up in Price

| January 2018

Metals & Manufacturing Outlook

31

Aluminum* (14); Caustic Soda (6); Copper (2); Corrugate (15); Electrical Components; Memory; Polypropylene (4); Rubber; Steel; Steel — Scrap; Steel — Hot Rolled (13); Stainless Steel; and Titanium Dioxide (3).

Commodities Down in Price Aluminum*.

Commodities in Short Supply Capacitors (6); Electrical Components; Resistors (2); and Titanium Dioxide (2).

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

DECEMBER 2017 MANUFACTURING INDEX SUMMARIES PMI® Manufacturing expanded in December as the PMI® registered 59.7 percent, an increase of 1.5 percentage points from the November reading of 58.2 percent. “This indicates growth in manufacturing for the 16th consecutive month, led by strong expansion in new orders and production with hiring growing at a slower rate and supplier deliveries continuing to struggle,” says

| January 2018

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Metals & Manufacturing Outlook

Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 43.3 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the December PMI® indicates growth for the 103rd consecutive month in the overall economy and the 16th straight month of growth in the manufacturing sector. Fiore says, “The past relationship between the PMI® and the overall economy indicates that the average PMI®for January through December (57.6 percent) corresponds to a 4.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for December (59.7 percent) is annualized, it corresponds to a 5.2 percent increase in real GDP annually.”

THE LAST 12 MONTHS Month Dec 2017

59.7

Nov 2017

58.2

Oct 2017

58.7

Sep 2017

60.8

Aug 2017

58.8

Jul 2017

56.3

Month

| January 2018

PMI®

PMI®

Jun 2017

57.8

May 2017

54.9

Metals & Manufacturing Outlook

Apr 2017

54.8

Mar 2017

57.2

Feb 2017

57.7

Jan 2017

56.0

33

Average for 12 months - 57.6 High - 60.8 Low - 54.8

NEW ORDERS ISM®’s New Orders Index registered 69.4 percent in December, which is an increase of 5.4 percentage points when compared to the 64 percent reported for November, indicating growth in new orders for the 16th consecutive month. This is the highest reading since January 2004, when the index registered 70.6 percent.

“New Orders expansion continues at a strong pace, with the index at seven straight months of levels above 60 percent. This is its highest expansion level in 14 years,” says Fiore. A New Orders Index above 52.3 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Fifteen of 18 industries reported growth in new orders in December, listed in the following order: Machinery; Apparel, Leather & Allied Products; Primary Metals; Computer & Electronic Products; Plastics & Rubber Products; Miscellaneous Manufacturing; Printing & Related Support Activities; Paper Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Chemical Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Petroleum & Coal Products. The only industry

| January 2018

34

Metals & Manufacturing Outlook

reporting a decrease in new orders in December compared to November is Wood Products.

New Orders

% Better

% Same

% Worse

Net

Index

Dec 2017

37

55

8

+29

69.4

Nov 2017

31

60

9

+22

64.0

Oct 2017

35

52

13

+22

63.4

Sep 2017

35

56

9

+26

64.6

PRODUCTION ISM®’s Production Index registered 65.8 percent in December, which is an increase of 1.9 percentage points when compared to the 63.9 percent reported for November, indicating growth in production for the 16th consecutive month. This is the highest reading since May 2010, when the index registered 66.5 percent.

“Production expansion continues at the strongest levels in seven years, but could not keep up with new order input and customer inventory needs, resulting in lower customer inventories and higher backlogs,” says Fiore. An index above 51.4 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The 13 industries reporting growth in production during the month of December — listed in order — are: Apparel, Leather & Allied Products; Machinery; Paper Products; Computer & Electronic Products; Petroleum & Coal Products; Primary Metals; Printing & Related Support Activities; Furniture & Related Products; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Electrical

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Equipment, Appliances & Components. The only industry reporting a decrease in production in December compared to November is Nonmetallic Mineral Products.

Production

% Better

% Same

% Worse

Net

Index

Dec 2017

32

59

9

+23

65.8

Nov 2017

33

59

8

+25

63.9

Oct 2017

30

59

11

+19

61.0

Sep 2017

31

59

10

+21

62.2

EMPLOYMENT ISM®’s Employment Index registered 57 percent in December, a decrease of 2.7 percentage points when compared to the November reading of 59.7 percent. This indicates growth in employment in December for the 15th consecutive month.

“Employment expansion remains strong, but difficulties across the supply chain continue to constrain production output. ISM®’s recent Semiannual Economic Forecast indicates that 65 percent had difficulty hiring new employees and 44 percent increased starting pay to attract new workers,” says Fiore. An Employment Index above 50.5 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, the 11 reporting employment growth in December — listed in order — are: Primary Metals; Machinery; Computer & Electronic Products; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Chemical Products; Miscellaneous

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Manufacturing; Nonmetallic Mineral Products; and Electrical Equipment, Appliances & Components. Two industries — Apparel, Leather & Allied Products; and Fabricated Metal Products — reported a decrease in employment in December.

Employment

% Higher

% Same

% Lower

Net

Index

Dec 2017

20

71

9

+11

57.0

Nov 2017

23

70

7

+16

59.7

Oct 2017

25

68

7

+18

59.8

Sep 2017

24

69

7

+17

60.3

SUPPLIER DELIVERIES The delivery performance of suppliers to manufacturing organizations was slower in December, as the Supplier Deliveries Index registered 57.9 percent. This is 1.4 percentage points higher than the 56.5 percent reported for November. “This is the 20th straight month of slowing supplier deliveries and continued delivery-performance difficulties affecting production expansion.

Modest gains were made to inventories in spite of these ongoing supply chain issues,” says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 12 industries reporting slower supplier deliveries in December — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Fabricated Metal Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; Chemical Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Primary

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37

Metals; and Miscellaneous Manufacturing. Two industries — Electrical Equipment, Appliances & Components; and Transportation Equipment — reported faster deliveries in December compared to November.

Supplier Deliveries

% Slower

% Same

% Faster

Net

Index

Dec 2017

20

74

6

+14

57.9

Nov 2017

21

68

11

+10

56.5

Oct 2017

26

69

5

+21

61.4

Sep 2017

32

64

4

+28

64.4

INVENTORIES The Inventories Index registered 48.5 percent in December, which is an increase of 1.5 percentage points when compared to the 47 percent reported for November, indicating raw materials inventories contracted in December. “The inventory contraction reflects the continued difficulty of the supply chain to deliver materials and services meeting production schedules,” says Fiore. An Inventories Index greater than 42.9 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The 10 industries reporting higher inventories in December — listed in order — are: Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Paper Products; Plastics & Rubber Products; Computer & Electronic Products; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; and

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Metals & Manufacturing Outlook

Miscellaneous Manufacturing. The seven industries reporting lower inventories in December — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Primary Metals; Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; and Transportation Equipment.

Inventories

% Higher

% Same

% Lower

Net

Index

Dec 2017

18

61

21

-3

48.5

Nov 2017

16

62

22

-6

47.0

Oct 2017

17

62

21

-4

48.0

Sep 2017

22

61

17

+5

52.5

CUSTOMERS' INVENTORIES* ISM®’s Customers’ Inventories Index registered 42 percent in December, which is 3.5 percentage points lower than the 45.5 percent reported for November, indicating that customers’ inventory levels were still considered too low in December. “The index continues to remain at low levels and continues to contract, at a faster rate. Production output was not sufficient to maintain acceptable customer inventory levels,” says Fiore.

One manufacturing industry — Furniture & Related Products — reported customers’ inventories as being too high during the month of December. The 13 industries reporting customers’ inventories as too low during December — listed in order — are: Textile Mills; Primary Metals; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Miscellaneous Manufacturing; Chemical Products; Paper Products; Food, Beverage & Tobacco Products;

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Transportation Equipment; Machinery; Fabricated Metal Products; and Computer & Electronic Products.

Customers' Inventories

% Reportin g

% Too High

% About Right

Ne t

Inde x

Dec 2017

54

7

70

23

-16

42.0

Nov 2017

57

9

73

18

-9

45.5

Oct 2017

54

9

69

22

-13

43.5

Sep 2017

58

6

72

22

-16

42.0

PRICES* The ISMŽ Prices Index registered 69 percent in December, an increase of 3.5 percentage points from the November level of 65.5 percent, indicating an increase in raw materials prices for the 22nd consecutive month. In December, 41 percent of respondents reported paying higher prices, 3 percent reported paying lower prices, and 56 percent of supply executives reported paying the same prices as in November. “The Business Survey Committee noted price increases continue on metals (steel, aluminum, copper and scrap) intermediate chemicals, corrugate and plastic resins. The Committee also reported some price relief on selected electronic components,� says Fiore. A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Seventeen industries reported paying increased prices for raw materials in December, in the following order: Apparel, Leather & Allied Products; Wood Products; Nonmetallic Mineral Products;

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Metals & Manufacturing Outlook

Machinery; Plastics & Rubber Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Chemical Products; Computer & Electronic Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Primary Metals; Transportation Equipment; Petroleum & Coal Products; Furniture & Related Products; and Paper Products. The only industry reporting price decreases in December compared to November is Textile Mills.

Prices

% Higher

% Same

% Lower

Net

Index

Dec 2017

41

56

3

+38

69.0

Nov 2017

37

57

6

+31

65.5

Oct 2017

43

51

6

+37

68.5

Sep 2017

45

53

2

+43

71.5

BACKLOG OF ORDERS* ISM®’s Backlog of Orders Index registered 56 percent in December, an increase of 1 percentage point when compared to the 55 percent reported for November, indicating growth in order backlogs for the 11th consecutive month. “Backlog expansion continued during the period. Backlog provides strong support to continued manufacturing expansion,” says Fiore. Of the 89 percent of respondents who reported their backlog of orders, 28 percent reported greater backlogs, 16 percent reported smaller backlogs, and 56 percent reported no change from November.

The 11 industries reporting growth in order backlogs in December — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Nonmetallic

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Metals & Manufacturing Outlook

41

Mineral Products; Furniture & Related Products; Paper Products; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; and Primary Metals. The five industries reporting a decrease in order backlogs during December are: Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; and Chemical Products.

Backlog of Orders*

% Reporting

% Greater

% Same

% Less

Net

Inde x

Dec 2017

89

28

56

16

+12

56.0

Nov 2017

92

25

60

15

+10

55.0

Oct 2017

88

26

58

16

+10

55.0

Sep 2017

89

29

58

13

+16

58.0

NEW EXPORT ORDERS* ISM®’s New Export Orders Index registered 58.5 percent in December, an increase of 2.5 percentage points when compared to the 56 percent reported for November, indicating growth in new export orders for the 22nd consecutive month. “Five of the six big industry sectors, accounting for 63 percent of manufacturing GDP, continued to expand export activity during the period,” says Fiore.

The 10 industries reporting growth in new export orders in December — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing; Plastics & Rubber Products; Chemical Products; Transportation Equipment; Fabricated Metal Products; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in new export

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Metals & Manufacturing Outlook

orders in December compared to November is Primary Metals.

Six industries reported no change in new export orders in December compared to November.

New Export Orders*

% Reporting

% Greater

% Same

Dec 2017

78

20

77

Nov 2017

80

14

Oct 2017

77

Sep 2017

78

% Less

Net

Inde x

3

+17

58.5

84

2

+12

56.0

17

79

4

+13

56.5

18

78

4

+14

57.0

IMPORTS* ISM®’s Imports Index registered 57.5 percent in December, an increase of 3.0 percentage points when compared to the 54.5 percent reported for November, indicating that imports grew in December for the 11th consecutive month. “Imports expanded at significantly greater rates during the period to keep pace with production output,” says Fiore.

The 13 industries reporting growth in imports during the month of December — listed in order — are: Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Fabricated Metal Products; Petroleum & Coal Products; Machinery; Miscellaneous Manufacturing; Transportation Equipment; Food, Beverage & Tobacco Products; Chemical Products; and Paper Products. The only industry that reported a decrease in imports during December compared to November is Primary Metals.

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Metals & Manufacturing Outlook

Imports*

% Reporting

% Higher

% Same

% LOwer

Net

Index

Dec 2017

83

20

75

5

+15

57.5

Nov 2017

82

14

81

5

+9

54.5

Oct 2017

80

16

76

8

+8

54.0

Sep 2017

83

14

80

6

+8

54.0

43

*The Inventories, Customers' Inventories, Prices, Backlog of Orders, New Explort Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

BUYING POLICY Average commitment lead time for Capital Expenditures decreased in December to 139 days from 140 days. Average lead time for Production Materials remained the same at 59 days.

Average lead time for Maintenance, Repair and Operating (MRO) Supplies decreased by 1 day to 36 days.

Percent Reporting Capital Expenditur es

% Handto-Mouth

% 30 Days

% 60 Days

% 90 Days

6 Mont hs

1 Year +

Averag e Days

Dec 2017

19

9

11

17

25

19

139

Nov 2017

19

7

10

18

28

18

140

Oct 2017

20

5

13

18

22

22

145

Sep 2017

20

8

11

15

26

20

142

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Metals & Manufacturing Outlook

% Handto-Mouth

% 30 Days

% 60 Days

% 90 Days

6 Mont hs

1 Year +

Averag e Days

Dec 2017

12

38

25

19

4

2

59

Nov 2017

11

37

26

19

6

1

59

Oct 2017

13

36

26

17

6

2

60

Sep 2017

11

34

29

18

6

2

62

Production Materials

MRO Supplie s

6 Mont hs

1 Year +

Averag e Days

8

3

0

36

19

8

3

0

37

40

19

5

2

0

33

39

19

7

2

0

35

% Handto-Mouth

% 30 Days

% 60 Days

Dec 2017

33

41

15

Nov 2017

32

38

Oct 2017

34

Sep 2017

33

% 90 Days

ABOUT THIS REPORT DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of December 2017.

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The data presented herein is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

DATA AND METHOD OF PRESENTATION The Manufacturing ISM® Report on Business® is based on data compiled from purchasing and supply executives nationwide.

Membership of the Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Food, Beverage & Tobacco Products; Textile Mills; Apparel, Leather & Allied Products; Wood Products; Paper Products; Printing & Related Support Activities; Petroleum & Coal Products; Chemical Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Furniture & Related Products; and Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers’ Inventories, Employment and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction (higher, better and slower for Supplier Deliveries) and the negative economic direction (lower, worse and faster for Supplier

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Metals & Manufacturing Outlook

Deliveries), and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive).

The resulting single index number for those meeting the criteria for seasonal adjustments (PMI®, New Orders, Production, Employment and Supplier Deliveries) is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to nonmoveable holidays. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The PMI® is a composite index based on the diffusion indexes of five of the indexes with equal weights: New Orders (seasonally adjusted), Production (seasonally adjusted), Employment (seasonally adjusted), Supplier Deliveries (seasonally adjusted), and Inventories.

Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. A PMI® reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. A PMI® above 43.3 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 43.3 percent, it is generally declining. The distance from 50 percent or 43.3 percent is indicative of the strength of the expansion or decline.

With some of the indicators within this report, ISM® has indicated the departure point between expansion and decline of comparable government series, as determined by regression analysis. The Manufacturing ISM® Report on Business® survey is sent out to Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month.

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ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the first business day of the following month.

The industries reporting growth, as indicated in the Manufacturing ISM® Report on Business®monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

Responses to Buying Policy reflect the percent reporting the current month’s lead time, the approximate weighted number of days ahead for which commitments are made for Capital Expenditures; Production Materials; and Maintenance, Repair and Operating (MRO) Supplies, expressed as hand-to-mouth (five days), 30 days, 60 days, 90 days, six months (180 days), a year or more (360 days), and the weighted average number of days.

These responses are raw data, never revised, and not seasonally adjusted since there is no significant seasonal pattern.

ISM ROB CONTENT The Institute for Supply Management® (“ISM”) Report on Business® (both Manufacturing and Non-Manufacturing) (“ISM ROB”) contains information, text, files, images, video, sounds, musical works, works of authorship, applications, and any other materials or content (collectively, "Content") of ISM ("ISM ROB Content"). ISM ROB Content is protected by copyright, trademark, trade secret, and other laws, and as between you and ISM, ISM owns and retains all rights in the ISM ROB Content. ISM hereby grants you a limited, revocable, nonsublicensable license to access and display on your individual device the ISM ROB

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Metals & Manufacturing Outlook

Content (excluding any software code) solely for your personal, non-commercial use. The ISM ROB Content shall also contain Content of users and other ISM licensors. Except as provided herein or as explicitly allowed in writing by ISM, you shall not copy, download, stream, capture, reproduce, duplicate, archive, upload, modify, translate, publish, broadcast, transmit, retransmit, distribute, perform, display, sell, or otherwise use any ISM ROB Content.

Except as explicitly and expressly permitted by ISM, you are strictly prohibited from creating works or materials (including but not limited to tables, charts, data streams, timeseries variables, fonts, icons, link buttons, wallpaper, desktop themes, on-line postcards, montages, mash-ups and similar videos, greeting cards, and unlicensed merchandise) that derive from or are based on the ISM ROB Content. This prohibition applies regardless of whether the derivative works or materials are sold, bartered, or given away. You shall not either directly or through the use of any device, software, internet site, web-based service, or other means remove, alter, bypass, avoid, interfere with, or circumvent any copyright, trademark, or other proprietary notices marked on the Content or any digital rights management mechanism, device, or other content protection or access control measure associated with the Content including geo-filtering mechanisms. Without prior written authorization from ISM, you shall not build a business utilizing the Content, whether or not for profit.

You shall not create, recreate, distribute, incorporate in other work, or advertise an index of any portion of the Content unless you receive prior written authorization from ISM. Requests for permission to reproduce or distribute ISM ROB Content can be made by contacting in writing at: ISM Research, Institute for Supply Management, 309 W. Elliot Road, Suite 113, Tempe, AZ 85284-1556, or by emailing kcahill@instituteforsupplymanagement.org.

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ISM shall not have any liability, duty, or obligation for or relating to the ISM ROB Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any ISM ROB Content, or for any actions taken in reliance thereon. In no event shall ISM be liable for any special, incidental, or consequential damages, arising out of the use of the ISM ROB. Report on Business®, PMI®, and NMI® are registered trademarks of Institute for Supply Management®. Institute for Supply Management® and ISM® are registered trademarks of Institute for Supply Management, Inc.

ABOUT INSTITUTE FOR SUPPLY MANAGEMENT® Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually.

Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world.

ISM leads the profession through the ISM Report on Business®, its highly regarded certification programs and the newly launched ISM Mastery Model®. This report has been issued by the association since 1931, except for a four-year interruption during World War II. The full text version of the Manufacturing ISM® Report on Business® is posted on ISM®’s website at www.ismrob.org on the first business day* of every month after 10:00 a.m. ET. The next Manufacturing ISM® Report on Business® featuring January 2018 data will be released at 10:00 a.m. ET on Thursday, February 1, 2018. *Unless the NYSE is closed.

| January 2018

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