Metals & Manufacturing Outlook December 2017

INTRODUCING

WOMEN AND MANUFACTURING PODCAST PAGE 21

CREDIT MANAGER’S INDEX PAGE 20

NOVEMBER

ISM PMI:

58.2%

The Full Report Page 26

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 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 advertise@mfgtalkradio.com Current Circulation - 45,200

MANUFACTURING OUTLOOK - p.3 INVEST IN WORKFORCE - p.6

by MIKE WOMACK NORTH AMERICAN OUTLOOK - p. 7 METALS OUTLOOK - p.9 AUTOMOTIVE OUTLOOK - p.10 AEROSPACE OUTLOOK - p.11 GLOBAL PMI OUTLOOK - p.12

by NORBERT ORE ISSUES OUTLOOK - p.13

by ROYCE LOWE ENERGY OUTLOOK - p.15

by ROYCE LOWE EUROZONE OUTLOOK - p.16 ASIA OUTLOOK - p.18

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SOUTH AMERICA OUTLOOK - 19

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WOMEN AND MANUFACTURING - p.21

CREDIT MANAGERS OUTLOOK - p.20

by CHRIS KUEHL THE SPEED OF CHANGE HAS CHANGED - p.22

by ANDREA OLSON NOVEMBER ISM PMI REPORT - p.22

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Metals & Manufacturing Outlook

PUBLISHERS STATEMENT

BY LEWIS A. WEISS

A

h, don’t look now, but the economy is cookin’!

Unemployment is reaching historical lows and consumer confidence is hitting all-time highs. The government is making course corrections that favor the winds of manufacturing which have been blowing in the right direction more briskly in 2017 than any year since 2008.

And, as of November 30, this expansion will be 102 months long, the third longest expansion in U.S. history and just 5 month shy of overtaking the February 1961 through December 1969 expansion of 106 months.

Longing for the good ‘ol days?

Look around – you are in them!

Isn’t manufacturing wonderful?

Right now, manufacturing is at near full tilt. In less than a month, every conceivable type of toys for tots, clothes for adults, games, hard goods, and memorable sweaters and fruit cakes will be exchanged during various holiday celebrations, from Hanukkah to Christmas, and Kwanzza to Festivus for the rest of us. This year, ponder for a moment where all those wonderful things | December 2017

originated. Napolean Hill said, “Whatever the mind of man can conceive and believe it can achieve” and through the marvels of manufacturing, machines hum across the country churning out the many things the bright minds of men and women thought of over the years.

And manufacturing isn’t the domain of men – and hasn’t been for many years. In celebration of that, the Manufacturing Broadcasting Corporation, of which this publication is a part, and which launched Manufacturing Talk Radio 4 years ago this month, launched Women And Manufacturing this November on the 8th with a powerful and historic conversation with Anna Hess, one of the original “Rosie the Riveters” – one of over 3 million women who went to work in factories all across America to support our men in battle fighting for freedom in Europe and the Pacific to preserve our freedom here at home, and to maintain the bulwark of human freedom, dignity and democracy that continues to touch lives, leaders and countries around the world.

Women And Manufacturing is the broadcast voice of women working in the manufacturing industry, from the shop floor to C-Suite throughout every level of management, across every discipline from engineering through production to driving forklifts, picking up everything from an iPad to a welding torch with as much brilliance, skill and moxie as any of their male counterparts. Although they are 51% of the U.S. population, they are only a bit more than 25% of the manufacturing workforce – but witness history in motion this very day and every day as women demonstrate their powerful prowess in manufacturing.

We invite you to listen to some of the incredible stories being posted on Women And Manufacturing where accomplished women interview accomplished women.

The information these successful women share is positively electrifying and inspiring to young women just considering manufacturing as a career path to women in the industry or mid-way through their careers, and perhaps those in the service sector looking at manufacturing as the new cool, creative place to build a great career and living. Only in manufacturing can you see, smell, touch, feel and even taste the output of your efforts or those of the company for which you work.

As always, we hope you enjoy this issue of Metals & Manufacturing Outlook and its many sections that look across the landscape of the industry with all the progress and promise it holds for many generations to come.

Warm Regards, Lewis A. Weiss Publisher

Metals & Manufacturing Outlook

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MANUFACTURING OUTLOOK

BY ROYCE LOWE

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he month of October was what we might call egregiously memorable, with further instances of what humans are capable of doing to one another, and to the beautiful planet on which we all live.

Global manufacturing continued to grow, again led by Europe and North America along with continuing strength in Japan.

TRUMP LASHES OUT AT JAPAN. He shouldn’t....see ISSUES OUTLOOK. October saw 261,000 nonfarm jobs created, less than the 310,000 expected, and an unemployment rate of 4.1 percent. Food and drink establishments saw a gain of 89,000 jobs, professional and business services 50,000 jobs, health care 22,000 jobs and manufacturing 24,000 jobs.

September’s 33,000 job loss was

revised to an 18,000 job gain.

The ISM PMI figure for U.S. manufacturing fell back to 58.7 percent in October from September’s 60.8 percent, representing the 14th consecutive month of growth in manufacturing. The overall economy grew for the 101st consecutive month. See NORTH AMERICAN OUTLOOK.

IHS Markit shows an increase in the U.S. PMI from September’s 53.1 percent to 54.6 percent in October.

IHS Markit says both production and new orders were up at faster rates in October, and that supplier performance deteriorated at its quickest pace since February 2014. Growth in employment picked up to a 24-month record.

U.S. export sales were up at the quickest pace since August 2016.

There was firmer export demand from Europe and Asia.

Inflationary pressures stayed marked in October due to supply chain disruption from hurricanes.

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 ‘advance’ estimate for the annual rate of Real GDP growth in the third quarter of 2017, putting it at 3.0 percent. The figure for the second quarter of 2017 was 3.1 percent.

GALLUP’s U.S. Economic Confidence Index is around the +5 level in late October. | December 2017

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Metals & Manufacturing Outlook

World crude steel production for the 66 reporting countries for the month of September was 141.43Mt, up 5.6 percent y-o-y.

Capacity utilization for the month was 73.5 percent, up 2.8 percent on September 2016 and up 0.6 percent on August 2017.

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

U.S. crude steel production for September 2017 was 6.716Mt, up 8.6 percent y-o-y.

The IMF slightly raised its forecast for world growth to 3.6 percent in 2017, and to 3.7 percent in 2018. The IMF looks for a strong rebound for advanced economies, driven by growth in Canada, the euro area and Japan, but there are still doubts about an uncertain policy outlook for the U.S. and lack of progress in Brexit talks for the UK. NAFTA is still a hot issue. See ISSUES OUTLOOK BREXIT, which cannot be ignored, even on an international level, is in the kind of mess that this column has been predicting for the last year and a half. See ISSUES OUTLOOK. Paradise Papers are involved in a recent revelation that the Queen of England, Wilbur Ross and the Bronfmanns are directly or indirectly involved in stashing huge amounts of money in Caribbean havens.

Primary Global Aluminum Production in September 2017 was reported at 4.927 million tonnes, of which 2.682 million tonnes, over 54 percent, were produced in China. The Gulf Corporation Council (GCC) produced 394,000 tonnes, North America 324,000 tonnes, Western Europe 310,000 tonnes, Eastern and Central Europe 329,000 tonnes and Asia, excluding China, 327,000 tonnes. | December 2017

In associated auto sales news, World Vehicle Sales for the month of September 2017, at 8.71 million units, were up 4.6 percent y-o-y.

For the first nine months of the year, North America accounted for 23 percent of sales, Europe for 22 percent, Asia Pacific for 46 percent and South America for 4 percent.

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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

| December 2017

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Metals & Manufacturing Outlook

WHAT INVESTING IN A WORKFORCE CAN DO TO A MANUFACTURER’S BOTTOM LINE

BY MIKE WOMACK

W

ith cutting costs always on the mind of a manufacturing enterprise, it can be difficult to see the big picture when it comes to investing in talent. Business leaders are actively seeking new ways to keep costs to a minimum and bringing up the idea that investing in employee training and a few key areas throughout an organization is often rejected.

However, these actions can actually have the opposite effect.

When a business provides employees with training and professional development along with flexible work schedules and competitive wages, it can have a dramatic impact on the bottom line.

Focusing on training and professional development has the potential to begin making an impact on a business’s profitability nearly immediately.

Using a simplified example, this fact becomes clear. An employee tasked with operating a CNC machine with only minimal training on the equipment might take 1 hour to complete a task. With in-depth training of the equipment and processes associated with manufacturing a component on a CNC machine, the time it takes to manufacture that same part can become 15 minutes. Each hour, the operator produces 4 parts instead of one. This is an | December 2017

incredibly simplified example but one that holds merit. A welltrained employee can accomplish more and provide more value to an organization as a whole.

One thing that has not been affected by the flood of technology making its way to the manufacturing shop floor is the fact that high morale cultivates motivated employees. Motivation and pride in one’s work has a tendency to inspire employees to go above and beyond for their employer. If an individual is unhappy with their working conditions, doesn’t have faith in their leadership and doesn’t feel as though they are respected, it is difficult for them to find the drive to put in that extra effort which can have a monumental impact on the way a business operates.

A common ‘want’ from employees in nearly every sector is the option for flexible work hours. This is a difficult ask for a manufacturing organization and may not be impossible. Investing the time and energy into devising a way to offer employees a more flexible work schedule could have a dramatic impact on recruiting and employee retention. These core concepts have been around for decades and continue to prove themselves as a valuable way to improve efficiency and maintain a loyal workforce.

There are few things that can stir up motivation throughout a workforce like money can. The manufacturing industry may not be viewed by the public as a career path that can provide decent compensation but this could not be farther from the truth.

The median salary for an entrylevel manufacturing engineer is $63,360 according to Payscale, much higher than the $44,148 per year median wage for workers in the U.S. according to the Bureau of Labor Statistics. Ensuring that a manufacturing organization offers fair compensation to their workforce is vital in order to retain their workforce and keep employees motivated. Fair compensation has a great chance to keep employees working hard, productive and a manufacturing business moving forward.

Investing in talent can have a tremendous impact on the profitability of a manufacturing enterprise. A business is only as good as their workforce and offering these individuals what they need to remain content and motivated will drive any organization forward.

Understanding the effort involved and the return on the investment is key. However, leadership is still a vital part of the process.

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NORTH AMERICAN OUTLOOK

BY ROYCE LOWE

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

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he Institute of Supply Management PMI figure fell back from 60.8 percent in September, to 58.7 percent in October, representing the fourteenth consecutive month of growth in manufacturing. There was growth in the overall economy for the 101st consecutive month.

Of the 18 manufacturing industries, 16 reported growth in October, in the following order: Paper Products; Nonmetallic Mineral Products; Machinery; Transportation Equipment; Wood Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Petroleum & Coal Products; Plastics & Rubber Products; Textile Mills; Chemical Products; Computer & Electronic Products; Fabricated Metal Products; Furniture & Related Products; Electrical Equipment, Appliances & Components; and Primary Metals. Two industries reported the same level of activity as September.

Comments from the manufacturing industries were in general very positive, focusing on steps taken to navigate hurricane effects rather than attributing problems to the hurricanes. In certain cases price increases were attributed to the adverse weather conditions.

A comment from Non-Metallic Mineral Products stated that plants are sold out for 2017 and no more orders could be taken.

Following is a summary of the five major indexes, each weighted at 20 percent in calculation of the PMI number for October. September’s readings are in parentheses: New orders 63.4 (64.6) Production 61.0 (62.2) Employment 59.8 (60.3) Supplier Deliveries slowing slower 61.4 (64.4) Inventories contracting from growing 48.0 (52.5) The following five components are not instrumental in the PMI

calculation, but are an important part of the manufacturing industry: Customer Inventories too low 43.5 (42.0) Prices. increasing slower 68.5 (71.5) Backlog of orders 55.0 (58.0) New export orders 56.5 (57.0) Imports 54.0 (54.0) Commodities Up in Price Aluminum (12); Brass (2); Caustic Soda (4); Chemicals; Corrugate (13); Corrugated Boxes; Distillates; Diesel; Freight (2); Glycols; HDPE (2); Hydrochloric Acid (2); LDPE (2); Memory — Computer (4); Plasticizers; Plastic Resins (3); Polyethylene (2); Polypropylene (2); Polyvinyl Chloride (2); Resin Based Products; Solvents (3); Stainless Steel; Steel — Hot Rolled* (11); Sulfuric Acid; Titanium Dioxide; and Vitamins.

Commodities Down in Price Steel – Scrap; and Steel – Hot Rolled*. | December 2017

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Metals & Manufacturing Outlook

Commodities in Short Supply Capacitors (4); Electric Components (5); HDPE (2); Integrated Circuits; Methacrylates (3); Plasticizers; and Polyethylene Resin. *Indicates both up and down in price.

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

CANADA saw slightly weaker growth of both production and new orders in October, with new export orders falling for the first time in a year. Hurricane Harvey in the U.S. led to longer delivery times and higher raw material costs.

The manufacturing PMI for October was at 54.3, down slightly from September’s 55.0 reading.

Backlogs of work were up for the sixth time in the past seven months, and employment was up

in response to the pressure on capacity.

There is confidence that production will increase over the coming year, with sentiment little changed from September.

Manufacturers in Alberta and B.C. saw the biggest improvement in manufacturing growth, with employment up at its fastest pace in over six years, while things were mostly unchanged in Ontario, amidst subdued export sales.

All regions reported modest increases in manufacturing performance in October.

Canada produced 1.01Mt of crude steel in September, up 1.0 percent y-o-y.

Canada sold 164,124 new light vehicles in October, a 6.3 percent y-o-y increase, for a total y.t.d. figure of 1.76 million. Figures are on track to set a new sales record in 2017.

ISO9001:2008 and AS9100C

| December 2017

Some 70 percent of sales were light trucks, which gained 13.6 percent y-o-y, and passenger car sales were down 8 percent y-o-y.

GM’s sales were up 26.5 percent for the month, Ford’s down 2 percent and FCA’s down 12 percent.

In MEXICO, new orders, production and employment, together with stocks of purchases were all in contraction in October, following earthquakes and exchange rate volatility. Operating conditions in the manufacturing sector worsened for the first time in four years. The PMI for October was at 49.2, down from September’s 52.8.

Mexico produced 1.585 Mt of crude steel in September, down 0.4 percent y-o-y.

Metals & Manufacturing Outlook

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METALS OUTLOOK

BY ROYCE LOWE

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integrating forging activities within its components business area to form one of the world’s largest forging organizations with sites in North and South America, Europe, India and China. The new business unit, Thyssenkrupp Forged Technologies, employs 7,000 people at 18 production sites and a broad distribution network in over 70 countries. The business unit, which operates Meanwhile global steel prices are more than 50 forging presses in general holding up. U.S. rebar worldwide, will be managed from prices will likely slide with coming Thyssenkrupp’s headquarters winter and an attendant slowdown in Essen, Germany. Its product in the construction industry. portfolio includes forged and machined components and MEPS International predicts systems for the automotive and that world crude stainless steel construction machinery sectors production will reach an all-time and for general mechanical high of 47.5 million tonnes in engineering applications.

2017, and that it will increase to 49 million tonnes in 2018.

Japan’s Kobe Steel, that finds itself in the midst of a ‘quality Thyssenkrupp announced it is he World Steel Association (worldsteel) recently released its Short range Outlook (SRO) for global steel demand. The SRO forecasts global steel demand will reach 1,622.1Mt in 2017 and 1,648.1Mt in 2018. Global steel demand excluding China will reach 856.4Mt (up 2.6 percent) in 2017 and 882.4Mt (up 3.0 percent) in 2018.

misrepresentation’ situation on aluminum, copper and steel products, has been cleared on some aluminum products by Toyota.

Some 500 companies worldwide, including Ford, GM and Boeing in the U.S., are ‘victims’ of falsified certifications on mechanical properties on metal products going back to at least 2007.

This inquiry is likely to go on for some little time and the cost to Kobe will be considerable.

Allegheny Technologies Inc and GE Aviation are to build a plant to manufacture ‘meltless titanium alloy powder’ in Richburg S.C., to be in service by 2019. The facility will be built adjacent to an ATI Specialty Materials’ melting, rolling and forging plant. | December 2017

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Metals & Manufacturing Outlook

AUTOMOTIVE OUTLOOK

BY ROYCE LOWE

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hese days we hear an awful lot about electric vehicles, who’s making them and how many, and how many people are going to buy in the years starting in 2020 through 2040. We hear about diesel sales falling in Europe and the UK, and gasoline engines coming back to replace them.

Pretty soon it will even be illegal to drive diesel vehicles at certain times in certain cities.

So electric it will become, but it will take decades and we all know this. In the meantime the automotive industry carries on in fine fashion, with the companies involved turning out their gasoline, diesel, hybrid and electric models and all vying to outdo one another with their future plans. It will be interesting to see who’s still standing when the battle is over.

The Chevy Bolt is reputedly the longest-range electric vehicle on the market, and sold 6,700 units in the third quarter of this year. Which isn’t a lot, but it’s still taking sales away from its stable mate the Chevy Volt, its plug-in hybrid predecessor. But these figures look good compared to recent production and sales figures on Tesla’s much vaunted Model 3, whose third-quarter output was 260 units – instead of the projected 1500 – due to ‘production bottlenecks.’ Tesla recently sacked several hundred of its workers, mostly sales and administration staff. | December 2017

This might seem like just a glitch though to Tesla, whose latest move, according to ‘people familiar with the matter,’ is an approach to the government of Shanghai to explore manufacturing in the city’s free trade zone.

Honda’s engine plant in Anna, Ohio, has produced its 25 millionth engine since operations started in 1985. Investment over the period amounts to $2.7 billion.

Alphabet Inc’s Waymo is concentrating on self-driving systems rather than building its own cars and Uber is up to its eyes in legal troubles and regulatory setbacks. Through all this General Motors is growing its Maven car-sharing business, is planning 20 new electric models by 2023 and testing autonomous vehicles in several U.S. cities. Its Cruise Automation unit has said it is able to mass produce selfdriving Chevy Bolts.

VW announces that electric trucks and buses for local deliveries will exceed five percent of market share by 2025, according to the head of the Truck and Bus Division. VW has invested $1.7 billion in this project. VW’s U.S. affiliate Navistar International will adopt some of the systems, while its MAN and Scania divisions will both deliver wholly electric buses next year to European cities, adding to bio-diesel, hybrid and natural-gas systems.

In what appears to be a running battle with Tesla, Daimler AG announces its E-Fuso Vision One electric truck prototype, capable of carrying 11 tons of cargo as far as 220 miles before recharge.

The truck could go on sale in four years in Europe, Japan and the U.S. Tesla was planning to show a model truck in midNovember with a range of 300 miles.

Toyota has cut the planned investment for its factory in Mexico and halved its production target amid pressure from Trump for manufacturers to keep more production in the U.S. Toyota will reduce the investment to $700 million, from $1 billion and cut the planned capacity to 100,000 units per year. The company further states that this move is not political and that it could increase its investment in the future based on market demand. Toyota’s (38 percent owned) Denso is expanding its U.S. plant and creating 1,000 jobs for EVs and car safety systems, effectively betting a billion dollars that the U.S. auto industry will go electric. The expansion at its factory in Maryville, Tennessee, is to make components for electrified, connected and selfdriving cars. The additional 1,000 jobs will bring the workforce up to 4,600.

Metals & Manufacturing Outlook

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AEROSPACE OUTLOOK

BY ROYCE LOWE

I

n answer to the recent Airbus/ Bombardier partnership, Boeing is strengthening its ties with Brazil’s Embraer, whose E2 model competes directly with Bombardier’s C series. The two companies already work together on the KC-390 military planes.

Boeing meanwhile recently celebrated, literally, at the White House, a $13.8 billion order with Singapore Airlines, for 20 777-9s and 19 787-10s, with options for six additional, 12 in total, 777s and 787s.

that Lockheed Martin had not applied the required primer in fastener holes on the F-35 substructures during production.

This program calls for an eventual planned U.S. fleet of 2,456 planes plus over 700 additional planes to be sold to allies.

Steps are being taken to apply the

Manufacturing Laughs

required primer to the fastener holes.

CAN SOMEBODY EXPLAIN why it took a ‘thorough government and industry investigation’ to show that Lockheed Martin had not applied the required primer to the holes in question? Doesn’t somebody need to ‘tick a box’ when they do a job?

Prepare to be amazed: the Pentagon’s F-35 program recently hit another quality glitch that halted deliveries of this Lockheed Martin Corp. over-priced piece of military equipment for 30 days.

The problem was linked to a primer that was supposed to be applied as a protective layer on aluminum fasteners to prevent corrosion. A thorough government and industry investigation showed | December 2017

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Metals & Manufacturing Outlook

GLOBAL PMI OUTLOOK

BY NORBERT ORE

M

anufacturing continues its rapid expansion globally – particularly in the U.S., Eurozone, and UK. Nonmanufacturing is now showing strength like manufacturing thus broadening the overall expansion significantly. The ISM NMI™ accelerated to 60.1 in October, marking the fastest rate of growth in 94 months.

Eurozone: The Eurozone PMI (58.5, +0.4) set a 80-month high while posting a 12th consecutive month above the 50 percent mark. The Eurozone’s manufacturing expansion continues to be led by Germany (60.6, unch), the Netherlands (60.4, +0.4), and Austria (59.4, unch). For the fifth month, all eight EA countries reported a PMI above 50.

United Kingdom: The Brexit vote was 15 months ago. Since then, the UK/ CIPS PMI has averaged 55.3 percent with a high of 56.9 and a low of 53.3.

In October, the UK (56.3, +0.3) posted another strong month. The duration and breadth of the manufacturing expansion in the UK has benefitted jobs as the Employment Index is at a 40-month high.

China: China’s Official Report, the CFLP PMI (51.6, -0.8) continued above the 51-mark for the 15th consecutive month with gradual improvement being obvious. The Caixin China General Manufacturing PMI (51.0, unch) provided a similar read. The two surveys support a consistent and persistent expansion.

India: Expansion in India appears to be impeded by the new Goods & Services Tax. October’s PMI (50.3, -0.9) indicates little growth while other major economies are experiencing rapid growth.

Taiwan: Taiwan’s CIER/SMIT PMI (57.7, -1.0) posted robust numbers | December 2017

again, particularly in its premier industry (Computers, Electronic, and Optical Products).

North America: Canada (54.3, -0.7) reported growth for the 20th

consecutive month with an YTD average of 54.9. Mexico (49.2, -3.6) ended 50 consecutive months of growth likely due to the tragic earthquakes that occurred.

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ISSUES OUTLOOK

BY ROYCE LOWE

U

.S. Manufacturing has had a lot of bad press in the past; still gets it to some extent. That’s too bad when we consider that manufacturing and all its economic offshoots add up to around 30 percent of the economy. Where did this come from and where is it going?

There are still lots of parents around in the U.S. who want their offspring to go to college, student loans or no. A lot of these parents look at jobs in manufacturing and consider them to be ‘beneath’ their kids, think they’re dirty, unsophisticated, and not at all suitable. This criticism of manufacturing is not new, but in fact a good number of students, both men and women, have looked into the situation and decided that yes, it is for them; they can work in clean, healthy conditions, and just as importantly they can get decent pay. They can also learn the job while doing the job.

To further help in shedding this outdated image of manufacturing, the U.S. manufacturing industry has, for the past five years,

celebrated the first Friday in October as manufacturing day.

Some 2,800 events across the country were organized this year, ranging from factory tours to banquets. Intel displayed its wafer-fabrication equipment at its huge semiconductor manufacturing campus near Portland OR, while Toyota showed off its robots and other advanced equipment used to make trucks at its plant in San Antonio.

For a long time jobs left the U.S. and between 1980 and 2009 employment dropped from 19 million to just under 12 million, with places like Rochester NY and Scranton PA being particularly hard hit. Was it all due to offshoring? Was China the real culprit in the loss of all those U.S. manufacturing jobs? Maybe for some, but studies have shown that many past factory job losses were the result of investments in automation, which continue to pay off. U.S. manufacturing has in fact more than doubled output in real terms since the Regan era, to over $ 2 trillion today. Productivity is soaring and output per labor-hour rose by 47 percent between 2002

and 2015, faster than in France, Germany and Britain. A 2016 survey of global chief executives by the consultancy Deloitte, found that bosses expect U.S. manufacturing to become more competitive than China’s as soon as in the next few years, in part due to large Chinese pay increases.

There is little doubt that the U.S. is right up there when it comes to today’s technology, and this is part of the problem. Not nearly enough candidates are available to take up the jobs that the many new technologies are creating.

Hence the famous ‘skills gap’, the phrase that should scare people much more than it seems to be doing. This is a wake-up call.

Deloitte, again, together with The Manufacturing Institute, calculates an upcoming need for 3.5 million manufacturing jobs in the decade to 2025, but that 2 million may go unfilled. All are looking for skilled workers and there are programs in place to train them – but not enough. JPMorgan Chase recently announced a $40 million investment in Chicago’s struggling South and West sides | December 2017

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Metals & Manufacturing Outlook themselves embroiled in the widespread plague of impropriety currently sweeping parts of the western world.

TRUMP IN JAPAN, or here’s another chance to show a little diplomacy. The president told Japanese business leaders that they (Japan) had been winning on trade in recent decades, and called on them to ‘build more cars in America.’ The president has either been misinformed or didn’t do much homework before leaving on his trip.

over three years and it is also helping to revitalize Detroit.

All this is a start. But it will take more than a few programs, enterprising colleges and local partnerships with companies.

A question that might be asked involves the role and numbers of women in manufacturing. We hear of those who have made it into management, some right to the top, but are we aiming at them, encouraging them to come participate?

We have a situation where there is a skills shortage and a dramatic increase in the presence of automation. We need the automation and we need the skills of people to manage the automation. Together with the people who perform other manufacturing tasks and the organizations that can educate and train future participants, we can make the manufacturing process work again.

NAFTA.....will he or won’t he? Will trump scuttle NAFTA just because he said he might, just because he said it was the world’s worst deal?

Amid continuing negotiations and over-the-top U.S. demands, | December 2017

particularly on the automotive sector, it is becoming clear that the U.S. (Trump) wants drastic changes to an agreement that the U.S. Chamber of Commerce says it will fight ‘like hell’ to preserve. The C of C’s CEO, Tom Donahue, says the group plans to send an ‘army’ of representatives to Capitol Hill to demonstrate support for the deal.

Watch this space. This is an ongoing saga that is far from over.

Meanwhile, over in Brexit Land, the president of the Confederation of British Industry (CBI), Paul Drechsler, whose body is normally pro Conservative, speaks of a ‘soap-opera’ approach to the Brexit talks, of a prime-time soap opera, with a different episode each week, from Article 50, two dinners with Juncker and no doubt many exciting episodes to follow. Each one becomes the big story until the next one rolls around.

All this will doubtless be too much for Prime Minister Theresa May. Her ‘Brexit People’ are having a tough time getting negotiations moving in the right direction, if moving at all. She faces an ongoing revolt from her party, and certain of her ministers find

The Japanese Automobile Manufacturers’ Association’s U.S. Office released a new report – ‘35 years of Manufacturing and R&D in America.’ In 1982 Honda opened the first Japaneseowned auto plant in the U.S. in Marysville, Ohio. In 2016, Japanese automakers produced 3.98 million vehicles and 4.68 million engines, purchased parts valued at $69.9 billion and exported 412,281 vehicles. They employ 90,000 people, 64,000 in manufacturing and 5,700 in R&D. This means that almost a quarter of the cars manufactured in the U.S. in 2016 came from Japanese companies.

Perhaps Donald Trump should read about William Edwards Deming, the American engineer who is credited in large part as being responsible for the Japanese post-war economic miracle. From 1950 to 1960 he effectively taught the Japanese about product quality and testing.

He is the only non-Japanese person to have a Japanese prize named after him. Even in the 1980s he was largely ignored in his native land.

The Japanese will not reply angrily to Trump; for that they are way too diplomatic.

Metals & Manufacturing Outlook

15

ENERGY OUTLOOK

BY ROYCE LOWE

F

irst Solar Inc., a manufacturer of solar panels, has come out at odds with the Solar Energy Industries Association and most of the rest of the industry, by supporting the imposition of tariffs on imported panels. The trade complaint was initiated in April by a company that had just filed for bankruptcy.

First Solar states that import prices have fallen more rapidly than could be explained by cost improvements. SEAI’s response calls the accusations ‘demonstrably false’ and said punishing tariffs won’t help the industry overall.

First Solar uses thin-film technology that’s different from the conventional polysilicon panels that dominate the industry.

This makes its products exempt from the trade dispute and the Tempe, Arizona-based company stands to gain from tariffs.

President Trump will make the final decision.

2 gigawatts they import from Malaysia, made with subsidies from the Malaysian government, is an egregious affront to the intelligence of the trade commission.”

Northvolt, a start-up company in Sweden, will build Europe’s biggest factory for electric car batteries in its home country, to rival Tesla’s Gigafactory in Nevada. The company has selected Skelleftea, a coastal town in the industrial north east for the site, which will employ 2,500 people. Sweden’s main nickel,cobalt, lithium and graphite deposits are nearby.

Construction will start in 2018 and once fully operational, the site is to produce lithium-ion batteries totaling 32 Gigawatt hours (GWh) per year.

The project requires an investment of four billion euros (US$4.7 billion) over six years for which financing is already covered.

Northvolt’s factory will be aimed not only at electric cars and other vehicles, but also at renewable energy producers looking for electricity storage, as well as industrial companies.

Manufacturing Laughs

Edward Fenster, chairman of rooftop solar company Sunrun Inc., has another take on the situation, stating that “First Solar’s self-serving proposal to impose tariffs on imports of all solar panels except the | December 2017

16

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

EUROZONE

and went to its best showing in 80 months.

I

There was a further significant increase in supplier lead times with deliveries stretching to their greatest extent in 6.1/2 years.

Input and output charges were up, with selling prices up for the 13th consecutive month, and the inflation rate rising to its highest level since June 2011.

HS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) rose to an 80-month high of 58.5 in October from September’s 58.1 reading. A strong new order growth tested production capacity and led to a survey-record job growth. All eight nations in the survey recorded production, new order and employment increases.

Growth in the euro zone was again led by strong growth in Germany, the Netherlands and Austria. Growth in production in the area eased back from September’s high, but the new order increase remained strong

The outlook for euro zone manufacturing is positive, with companies reporting that on average they expect production volumes to be higher in 12 months time.

Crude steel production in Germany in September was at

3.510 Mt, up 8.1 percent y-o-y; in Italy 2.174 Mt, up 8.3 percent y-o-y; in France 1.322 Mt, up 3.2 percent y-o-y and in Spain 1.253 Mt, up 6.7 percent y-o-y.

Russia’s crude steel production for September was at 6.025 Mt, up 5.8 percent y-o-y; Ukraine’s was 1.845 Mt, down 0.8 percent y-o-y.

Car sales in Europe were up in October, with Germany up 3.9 percent, France and Spain – despite Catalonia - both up 14 percent, and Italy up 7.1 percent.

Sales of diesel cars are falling in Europe, except for Italy, where they still have a 55 percent market share. Diesel share for Germany is 36 percent, for France and Spain 46 percent.

IHS Markit reports manufacturing in the UK saw a positive start to the fourth quarter, with the PMI in October up to 56.3 from 56.0 in September. Production and new order growth remain strong, while input costs and output price inflation accelerate. The domestic market is strong and there are increasing export orders.

Consumer, intermediate and investment sectors all showed growth in October, with domestic orders stronger than export, albeit there was good demand from the U.S., Europe, South America and Australia – with some help from weak sterling.

Increased production led to increased employment, with over 50 percent of companies forecasting higher production one year from now and only 8 percent expecting a decline.

The Society of Motor Manufacturers and Traders (SMMT) is forecasting a decrease in new car sales from 2016’s total, 2.693 million, to 2.397 million by 2019, or an 11 percent decrease from the 2016 total.

The UK produced 0.640Mt of crude steel in September, down 9.4 percent y-o-y.

| December 2017

Metals & Manufacturing Outlook

17

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| December 2017

18

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

ASIA

T

here was expansion in CHINA in October, with the PMI unchanged from September’s 51.0. Production increased at its weakest pace since June and companies continued to lay off workers in efforts to improve efficiency. Outstanding business rose solidly.

Strict environmental policies contributed to a sharp rise in input costs and companies raised selling prices.

The general trend in China is modestly up, with slight increases

in domestic and export sales and production.

CHINA produced 71.827Mt of crude steel in September, up 5.3 percent y-o-y; Japan 8.623Mt, up 2.0 percent y-o-y; India 8.200Mt, up 1.9 percent y-o-y and South Korea 5.880Mt, up 2.8 percent y-o-y. Taiwan produced 1.900Mt in September, up 12.3 percent y-o-y.

Car sales were up 5.7 percent in China in September at 2.709 million units, and up 4.5 percent for the first nine months of 2017 at 20.225 million units. Sales of electric vehicles were up 79.1

percent at 78,000 units.

Manufacturing growth remained strong in JAPAN in October with solid increases in both production and new orders.

October’s PMI, 52.8, was virtually unchanged from September’s 52.9. There was new business from China, Taiwan and South Korea, and with backlogs accumulating at the quickest pace since February additional workers were hired.

Suppliers’ delivery times

Manufacturing Laughs lengthened in October.

INDIAN manufacturing stagnated in October, as production increased slightly but new orders showed no tendency to rise.

October’s PMI fell to 50.3 from September’s 51.2.

Outstanding business volumes triggered further hiring.

Input costs were the highest since May and the level of positive sentiment the lowest since February

| December 2017

Metals & Manufacturing Outlook

19

GLOBAL OUTLOOK

BY ROYCE LOWE

SOUTH AMERICA

B

razil saw manufacturing jobs increase for the first time in over 2.1/2 years, and an increase in both production and new orders for the eighth consecutive month.

Input costs and output charges were up further, with higher prices reported for energy, plastics, cardboard, metals and fuel.

The PMI for October was at 51.2 up slightly from September’s 50.9.

Brazil’s crude steel production for the month of September was 2.959Mt, an increase y-o-y of 7.6 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced

by JPMorgan and IHS Markit in association with ISM and Global PMI Production

New orders

New exports

Employment

Input prices

Output prices

‘Future Output’

IFPSM (International Federation of Purchasing and Supply Management) – moved up from September’s (revised) 53.3, to a 6.1/2 – year high of 53.5 for October.

Business conditions were good across the consumer, intermediate and investment sectors, with growth picking up in the latter to the highest since March 2011.

The euro area rose to an 80-month high, and U.S. growth was the fastest since January.

All indexes were up, production, new orders and employment, and backlogs of work rose to the greatest extent in over 6.1/2 years.

Price pressures and supplier delivery times continued to build.

Oct 53.5 53.8 54.2 52.7 52.7 61.3 53.5 62.6

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Sept 53.3 53.9

53.8 52.5 52.2 60.9 53.9 63.5 | December 2017

20

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

he upward trend seems to have stalled at just two months duration, but the decline was not deep. The overall score for the combined sectors is still at 55.5, in the same ballpark as the other high points. Last month’s 56.5 was the highest level reached in over two years; it is not too surprising there was a slight retreat. As mentioned last month, there will be some challenges as far as interpreting data for the next month or so. “The storms altered a lot of economic patterns,” said NACM Economist Chris Kuehl, Ph.D. “That has been seen in everything from volatile job numbers, changes in the rate of housing starts and even internal migration patterns for skilled workers.

There are already signs of shifts as reconstruction gets thoroughly underway.” The division between the performance of the favorable and the unfavorable factors remains stark. The index of favorables improved from 63.5 to 63.8, a very healthy number. | December 2017

The unfavorable combined score retreated a little from 51.8 to 50. This reading remains in the expansion category (anything above 50), but only by the narrowest of margins. Most of the good news is coming from the favorable categories. The sales numbers fell back a bit, but they remain very high at 66.8. Last month, they were 67.3. The last two months have seen readings that are close to six points higher than they have been in over a year. In June, the reading jumped to 66.5, but prior to that, the range was from 56.9 to 63.8. The current reading is down from last month, but still ranks as the second-best reading in a year.

The new credit applications reading improved from 60.5 to 62.8, a genuinely good sign as it indicates a greater demand for credit and thus a desire to grow and expand. In addition, there was a modest gain in the dollar collections category as it moved from 60 to 60.2. There was a slight decline in the amount of credit extended, but the numbers stayed high at 65.5. The previous month saw a reading of 66.3.

“Even with the small areas of retreat, the numbers for the favorable sectors remained in very solid territory,” said Kuehl.

It was not the same story as far as the unfavorable factors are concerned. The dip was not severe—the overall reading stayed at the 50 level as opposed to sliding back into contraction territory. The rejections of credit applications slipped from 52.5 to 51.8, but at least it is still in expansion territory. The category of accounts placed for collection fell out of the expansion zone by dropping from 50.3 to 49.5. This is actually back to the pattern that has been observed all year as last month was the first in nearly two years to be above 50. There was a big decline in the numbers for disputes as well—last month the reading was 51.7. This month, it tumbled all the way to 47.6.

The numbers for dollar amount beyond terms took another dive and ended up at 47.3 after having been at 50.4 the previous month. “The volatility that has characterized the CMI for the last several months has been largely attributed to the vagaries of the slow pay,” explained Kuehl.

There was also a decline in the category of dollar amount of customer deductions. It was at 49.8 last month and fell to 48.7 this month. Likewise, there was a dip in the readings for filings for bankruptcies, although the numbers stayed comfortably in the expansion zone at 55.3. It was at 56.2 the month prior.

“The bad news is that readings for the unfavorable factors were nearly all in expansion territory last month with only one reading in the 40s,” said Kuehl. “This month the situation is reversed, with only two categories in the expansion zone and both of these also saw some decline from the month before.”

Metals & Manufacturing Outlook

21

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. | December 2017

22

Metals & Manufacturing Outlook

THE SPEED OF CHANGE HAS CHANGED

BY ANDREA OLSON

here’s been talk about a T “tsunami of technology” heading our way within

manufacturing, including additive, IoT, robotics and more. Many mid-sized manufacturers are surprisingly unfazed by this incoming wave of changes.

We spoke to over two dozen manufacturers across the midwest, and found that the majority even entirely disregard the future impact of these technologies to their business.

Some of them have said: “Our current technology works just fine. It costs too much to change to new technologies, and it always slows down productivity.”

“Our culture isn’t good at adopting new technologies, and we’d lose some great people if we made a major change.”

“Certain technologies are really for larger companies, and these types of things won’t impact our business.”

While there’s a nugget of truth in each of those statements, these manufacturers are missing the big picture. In the past, changes in technology have been incremental - one new innovation comes along every 10, 20, 30 years, and the organization has time to adjust and adopt.

Today, the pace of change has sped up dramatically more than in years past. According | December 2017

to a 2013 article in Harvard Business Review, “It took 30 years for electricity and 25 years for telephones to reach 10% adoption but less than five years for tablet devices to achieve the 10% rate. It took an additional 39 years for telephones to reach 40% penetration and another 15 before they became ubiquitous.

Smart phones, on the other hand, accomplished a 40% penetration rate in just 10 years.”

And rapid technology changes are the biggest threat to manufacturing today. According to Forbes, the rapid rate of technological and digital advance was the biggest challenge for global manufacturing business leaders according to their 2015 industrial leadership survey.

Technology was chosen as a major challenge by 68% of respondents, compared with 60% who cited shifts in economic and political power and 59% who named climate change as among the biggest threats.

While manufacturers sit idly by and hope this technology wave is a passing fad, they are continuing to fall behind, faster than ever before. Technology grows exponentially. The doubling of computer processing speed every 18 months, known as Moore’s Law, is just one manifestation of the greater trend that all technological change occurs at an exponential rate.

Integrating new technology, whether in operations, customer-facing engagement, communications, marketing, sales, or customer service, is now essential instead of optional.

Shaping your organizational culture to adopt and embrace change is a critical factor for success. Whether you have already begun to embrace technology or are fighting hard to resist it, this wave will come, and impact not only the way you do business, but more importantly, how your customers do business with you.

If you’re not ready to serve them using the technology they are already adopting, you’ll find it’s not your organization forcing change, but customers that are demanding it.

Andrea Olson is CEO and Founder of Prag’madik and the author of No Disruptions: The New Future For Mid-Market Manufacturing.

A 4-time ADDY® award-winner, she began her career at a tech start-up and led the strategic marketing efforts at two global industrial manufacturers. In addition to writing, consulting and coaching, Andrea speaks to leaders and industry organizations around the world on how to craft an effective marketing and communications programs to discover new sources of revenues and savings. She can be reached via www.pragmadik.com.

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23

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Metals & Manufacturing Outlook

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

FOR RELEASE:

10:00 a.m. ET; December 1, 2017

Contact:

Kristina Cahill Report On Business® Analyst ISM®, ROB/Research Manager Tempe, Arizona +1 480.455.5910 Email: kcahill@instituteforsupplymanagement.org

BREAKING NEWS

PMIPMIatat 58.2% 58.2% ®

November Manufacturing ISM® Report On Business® New Orders, Production, and Employment Continue Growing Supplier Deliveries Slowing at Slower Rate, Backlog Growing Raw Materials Inventories Contracting, Customers’ Inventories Improving Prices Increasing at Slower Rate (Tempe, Arizona) — Economic activity in the manufacturing sector expanded in November, and the overall economy grew for the 102nd 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 November PMI® registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. The New Orders Index registered 64 percent, an increase of 0.6 percentage point from the October reading of 63.4 percent. The Production Index registered 63.9 percent, a 2.9 percentage point increase compared to the October reading of 61 percent. The Employment Index registered 59.7 percent, a decrease of 0.1 percentage point from the October reading of 59.8 percent. The Supplier Deliveries Index registered 56.5 percent, a 4.9 percentage point decrease from the October reading of 61.4 percent. The Inventories Index registered 47 percent, a decrease of 1 percentage point from the October reading of 48 percent. The Prices Index registered 65.5 percent in November, a 3 percentage point decrease from the October level of 68.5, indicating higher raw materials prices for the 21st 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 stable and expanding, and export orders all continuing to grow in November. Supplier deliveries continued to slow (improving), but at slower rates, and inventories continued to contract during the period. Price increases continued, but at a slower rate. The Customers’ Inventories Index improved but remains at low levels.”

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. | December 2017

Metals & Manufacturing Outlook

27

WHAT RESPONDENTS ARE SAYING …

• • • • • • • • •

“Continuing to see more orders for the next six to 12 months.” (Chemical Products) “Strong sales through third and now fourth quarters. Backlog increasing, and capacity at suppliers tightening.” (Machinery) “Business has leveled out but remains strong heading into the end of the year.” (Computer & Electronic Products) “We are just coming off a record sales year. We expect to continue in 2018 robust activity.” (Miscellaneous Manufacturing) “We are seeing steady, consistent demand for end of year. We usually see a slowdown, which we haven’t seen yet.” (Fabricated Metal Products) “Overall industry demand remains strong. Continue to have a healthy backlog of orders. Local economy is also strong, with a fairly tight labor market.” (Transportation Equipment) “Business is strong. Employment is tight. Supplier deliveries have lengthened. A few suppliers are still blaming Hurricane Harvey for the lead times.” (Food, Beverage & Tobacco Products) “Strong season demand for products and continued requirements for uptime.” (Nonmetallic Mineral Products) “Currently, we have not experienced the typical seasonal slowdown toward the end of Q4. Could be that there is a lot of optimism in the American economy.” (Plastics & Rubber Products)

MANUFACTURING AT A GLANCE November 2017 Series Index Nov

Series Index Oct

Percentage Point Change

Direction

Rate of Change

Trend* (Months)

PMI®

58.2

58.7

-0.5

Growing

Slower

15

New Orders

64.0

63.4

+0.6

Growing

Faster

15

Production

63.9

61.0

+2.9

Growing

Faster

15

Employment

59.7

59.8

-0.1

Growing

Slower

14

Supplier Deliveries

56.5

61.4

-4.9

Slowing

Slower

19

Inventories

47.0

48.0

-1.0

Contracting

Faster

2

Customers’ Inventories

45.5

43.5

+2.0

Too Low

Slower

5

Prices

65.5

68.5

-3.0

Increasing

Slower

21

Backlog of Orders

55.0

55.0

0.0

Growing

Same

10

New Export Orders

56.0

56.5

-0.5

Growing

Slower

21

Imports

54.5

54.0

+0.5

Growing

Faster

10

OVERALL ECONOMY

Growing

Slower

102

Manufacturing Sector

Growing

Slower

15

Index

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes.

| December 2017

28

Metals & Manufacturing Outlook *Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE AND IN SHORT SUPPLY 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.

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.

NOVEMBER 2017 MANUFACTURING INDEX SUMMARIES PMI® Manufacturing expanded in November as the PMI® registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. “This indicates growth in manufacturing for the 15th consecutive month led by expansion in new orders and production, offset by supplier delivery improvement and declines in raw material inventory,” says 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 November PMI® indicates growth for the 102nd consecutive month in the overall economy and the 15th 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 November (57.4 percent) corresponds to a 4.5 percent increase in real gross domestic product (GDP) on an annualized basis. In addition, if the PMI® for November (58.2 percent) is annualized, it corresponds to a 4.7 percent increase in real GDP annually.”

THE LAST 12 MONTHS Month

PMI®

Month

PMI®

Nov 2017

58.2

May 2017

54.9

Oct 2017

58.7

Apr 2017

54.8

Sep 2017

60.8

Mar 2017

57.2

Aug 2017

58.8

Feb 2017

57.7

Jul 2017

56.3

Jan 2017

56.0

Jun 2017

57.8

Dec 2016

54.5

Average for 2017 – 57.4 Average for 12 months – 57.1 High – 60.8 Low – 54.5

| December 2017

Metals & Manufacturing Outlook

29

New Orders ISM®’s New Orders Index registered 64 percent in November, which is an increase of 0.6 percentage point when compared to the 63.4 percent reported for October, indicating growth in new orders for the 15th consecutive month. “New Order expansion continues at a strong pace with the index at six straight months of levels above 60 percent,” 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).

Fourteen of 18 industries reported growth in new orders in November, listed in the following order: Electrical Equipment, Appliances & Components; Paper Products; Furniture & Related Products; Plastics & Rubber Products; Machinery; Primary Metals; Printing & Related Support Activities; Computer & Electronic Products; Transportation Equipment; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Chemical Products; Miscellaneous Manufacturing; and Fabricated Metal Products. Two industries — Wood Products; and Textile Mills — reported a decrease in new orders in November compared to October.

New Orders

%Better

%Same

%Worse

Net

Index

Nov 2017

31

60

9

+22

64.0

Oct 2017

35

52

13

+22

63.4

Sep 2017

35

56

9

+26

64.6

Aug 2017

33

52

15

+18

60.3

Production ISM®’s Production Index registered 63.9 percent in November, which is an increase of 2.9 percentage points when compared to the 61 percent reported for October, indicating growth in production for the 15th consecutive month. This is the highest reading since March 2011, when the index registered 64.2 percent.

“Production expansion continues at levels that kept pace with new orders, consumed raw material inventory and positively impacted customer inventory,” 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 14 industries reporting growth in production during the month of November — listed in order — are: Paper Products; Furniture & Related Products; Plastics & Rubber Products; Transportation Equipment; Machinery; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Printing & Related Support Activities; Computer & Electronic Products; Chemical Products; Primary Metals; Miscellaneous Manufacturing; and Nonmetallic Mineral Products. No industry reported a decrease in production in November compared to October.

Production

%Better

%Same

%Worse

Net

Index

Nov 2017

33

59

8

+25

63.9

Oct 2017

30

59

11

+19

61.0

Sep 2017

31

59

10

+21

62.2

Aug 2017

32

56

12

+20

61.0

Employment ISM®’s Employment Index registered 59.7 percent in November, a decrease of 0.1 percentage point when compared to the October reading of 59.8 percent. This indicates growth in employment in November for the 14th consecutive month. “Employment expansion remains strong in spite of signs of labor market

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Metals & Manufacturing Outlook tightening,” 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 November — listed in order — are: Textile Mills; Machinery; Computer & Electronic Products; Transportation Equipment; Paper Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Chemical Products; Fabricated Metal Products; and Petroleum & Coal Products. Two industries — Apparel, Leather & Allied Products; and Electrical Equipment, Appliances & Components — reported a decrease in employment in November.

Employment

%Higher

%Same

%Lower

Net

Index

Nov 2017

23

70

7

+16

59.7

Oct 2017

25

68

7

+18

59.8

Sep 2017

24

69

7

+17

60.3

Aug 2017

26

67

7

+19

59.9

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in November, as the Supplier Deliveries Index registered 56.5 percent. This is 4.9 percentage points lower than the 61.4 percent reported for October. “This is the 19th straight month of slowing supplier deliveries, and reflects delivery performance improvement over the prior month, but still insufficient to maintain raw material inventory levels,” says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 10 industries reporting slower supplier deliveries in November — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Paper Products; Machinery; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; and Fabricated Metal Products. Three industries — Furniture & Related Products; Primary Metals; and Electrical Equipment, Appliances & Components — reported faster deliveries in November compared to October.

Supplier Deliveries

%Slower

%Same

%Faster

Net

Index

Nov 2017

21

68

11

+10

56.5

Oct 2017

26

69

5

+21

61.4

Sep 2017

32

64

4

+28

64.4

Aug 2017

18

78

4

+14

57.1

Inventories* The Inventories Index registered 47 percent in November, which is a decrease of 1 percentage point when compared to the 48 percent reported for October, indicating raw materials inventories contracted in November. “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 five industries reporting higher inventories in November are: Printing & Related Support Activities; Transportation Equipment; Machinery; Chemical Products; and Primary Metals. The 11 industries reporting lower inventories in November — listed in order — are: Wood Products; Textile Mills; Paper Products; Furniture & Related Products; Petroleum & Coal Products; Food, Beverage & Tobacco

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31

Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Fabricated Metal Products; Computer & Electronic Products; and Nonmetallic Mineral Products.

Inventories

%Higher

%Same

%Lower

Net

Index

Nov 2017

16

62

22

-6

47.0

Oct 2017

17

62

21

-4

48.0

Sep 2017

22

61

17

+5

52.5

Aug 2017

22

67

11

+11

55.5

Customers’ Inventories* ISM®’s Customers’ Inventories Index registered 45.5 percent in November, which is 2 percentage points higher than the 43.5 percent reported for October, indicating that customers’ inventory levels were still considered too low in November. “The index remains at low levels and continues to contract, but November performance indicates that production output made some improvement in meeting customer inventory requirements,” says Fiore.

Three manufacturing industries — Furniture & Related Products; Miscellaneous Manufacturing; and Food, Beverage & Tobacco Products — reported customers’ inventories as being too high during the month of November. The eight industries reporting customers’ inventories as too low during November — listed in order — are: Primary Metals; Electrical Equipment, Appliances & Components; Paper Products; Chemical Products; Computer & Electronic Products; Machinery; Fabricated Metal Products; and Transportation Equipment. Seven industries reported no change in customer inventories in November compared to October.

Customers’ Inventories

% Reporting

%Too High

%About Right

%Too Low

Nov 2017

57

9

73

Oct 2017

54

9

Sep 2017

58

Aug 2017

55

Net

Index

18

-9

45.5

69

22

-13

43.5

6

72

22

-16

42.0

5

72

23

-18

41.0

Prices* The ISM® Prices Index registered 65.5 percent in November, a decrease of 3 percentage points from the October level of 68.5 percent, indicating an increase in raw materials prices for the 21st consecutive month. In November, 37 percent of respondents reported paying higher prices, 6 percent reported paying lower prices, and 57 percent of supply executives reported paying the same prices as in October. “The Business Survey Committee noted price increases continue most notably in primary materials, including metals (steel, aluminum, copper, nickel based metals); basic and intermediate chemicals; corrugate, plastic resins and parts made from plastic resins,” 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.

Fifteen industries reported paying increased prices for raw materials in November, in the following order: Nonmetallic Mineral Products; Plastics & Rubber Products; Textile Mills; Machinery; Food, Beverage & Tobacco Products; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Petroleum & Coal Products; Furniture & Related Products; Chemical Products; Primary Metals; and Computer & Electronic Products.

No industry reported price decreases in November compared to October.

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Metals & Manufacturing Outlook

Prices

%Higher

%Same

%Lower

Net

Index

Nov 2017

37

57

6

+31

65.5

Oct 2017

43

51

6

+37

68.5

Sep 2017

45

53

2

+43

71.5

Aug 2017

30

64

6

+24

62.0

Backlog of Orders* ISM®’s Backlog of Orders Index registered 55 percent in November, the same level of expansion as the 55 percent reported for October, indicating growth in order backlogs for the 10th consecutive month.

“Backlog expansion has stabilized during the period, consistent with October and at pre-Hurricane levels.

This provides strong support to continued manufacturing expansion,” says Fiore. Of the 92 percent of respondents who reported their backlog of orders, 25 percent reported greater backlogs, 15 percent reported smaller backlogs, and 60 percent reported no change from October.

The 11 industries reporting growth in order backlogs in November — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Primary Metals; Furniture & Related Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products; Computer & Electronic Products; Transportation Equipment; and Food, Beverage & Tobacco Products. The four industries reporting a decrease in order backlogs during November are: Wood Products; Fabricated Metal Products; Plastics & Rubber Products; and Miscellaneous Manufacturing.

Backlog of Orders

% Reporting

%Greater

%Same

%Less

Net

Index

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

Aug 2017

90

28

59

13

+15

57.5

New Export Orders* ISM®’s New Export Orders Index registered 56 percent in November, a decrease of 0.5 percentage point when compared to the 56.5 percent reported for October, indicating growth in new export orders for the 21st consecutive month. “All six big industry sectors continued to expand export activity during the period,” says Fiore.

The eight industries reporting growth in new export orders in November — listed in order — are: Paper Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Transportation Equipment; Miscellaneous Manufacturing; Computer & Electronic Products; Machinery; and Chemical Products. One industry — Fabricated Metal Products — reported a decrease in new export orders. Nine industries reported no change in export orders in November compared to October.

New Export Orders

% Reporting

%Higher

%Same

%Lower

Net

Index

Nov 2017

80

14

84

2

+12

56.0

Oct 2017

77

17

79

4

+13

56.5

Sep 2017

78

18

78

4

+14

57.0

Aug 2017

81

16

79

5

+11

55.5

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Imports* ISM®’s Imports Index registered 54.5 percent in November, an increase of 0.5 percentage point when compared to the 54 percent reported for October, indicating that imports grew in November for the 10th consecutive month.

The 11 industries reporting growth in imports during the month of November — listed in order — are: Textile Mills; Primary Metals; Printing & Related Support Activities; Nonmetallic Mineral Products; Transportation Equipment; Computer & Electronic Products; Machinery; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; and Paper Products. Two industries — Food, Beverage & Tobacco Products; and Electrical Equipment, Appliances & Components — reported a decrease in imports during November compared to October.

Imports

% Reporting

%Higher

%Same

%Lower

Net

Index

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

Aug 2017

83

16

77

7

+9

54.5

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

Buying Policy Average commitment lead time for Capital Expenditures decreased in November to 140 days from 145 days. Average lead time for Production Materials decreased by 1 day to 59 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased by 4 days to 37 days.

Percent Reporting Capital Expenditures

Hand-toMouth

30 Days

60 Days

90 Days

6 Months

1 Year+

Average Days

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

Aug 2017

19

7

12

17

25

20

143

Production Materials

Hand-toMouth

30 Days

60 Days

90 Days

6 Months

1 Year+

Average Days

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

Aug 2017

12

38

24

18

6

2

61

Hand-toMouth

30 Days

60 Days

90 Days

6 Months

1 Year+

Average Days

MRO Supplies

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Metals & Manufacturing Outlook

Nov 2017

32

38

19

8

3

0

37

Oct 2017

34

40

19

5

2

0

33

Sep 2017

33

39

19

7

2

0

35

Aug 2017

31

42

18

6

3

0

36

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 November 2017.

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 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 non-moveable 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.

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Metals & Manufacturing Outlook

35

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. 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 NonManufacturing) (“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 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, datastreams, 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.

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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.

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Metals & Manufacturing Outlook

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 December 2017 data will be released at 10:00 a.m. ET on Wednesday, January 3, 2018. *Unless the NYSE is closed.

ISM PMI 2012 - 2017

| December 2017