WIND ENERGY:
A PATH TO CREATING A CLEANER EARTH PAGE 16 PAGE 26
PLUS PAGE 26
THE CREDIT MANAGER’S INDEX PAGE 25
KEEPING AND RETAINING THE RIGHT EMPLOYEES REQUIRES MORE THAN A GOOD PAYCHECK PAGE 27
AND
PAGE 26
NOVEMBER
ISM PMI:
Brought to you by MANUFACTURING
MBC
BROADCASTING
CORPORATION
59.3%
Released December 1st The Full Report Page 28
presents
CONTENTS
TABLE OF CONTENTS
05 PUBLISHER’S STATEMENT A word from our publisher
06 MANUFACTURING OUTLOOK A global look at manufacturing
08 NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada and Mexico
10 METALS OUTLOOK The cost, making and treating of metals
12 AEROSPACE OUTLOOK Trouble for Rolls Royce
13 AUTOMOTIVE OUTLOOK EV’s everywhere
14 ENERGY OUTLOOK Energy and the environment
16 COVER STORY Wind Energy: A Path To Creating A Cleaner Earth
20 ISSUES OUTLOOK The Global MFG PMI
21 GLOBAL PMI OUTLOOK by Norbert Ore
22 EURO OUTLOOK A look at Europe
23 ASIA OUTLOOK China sees little change
24 SOUTH AMERICA OUTLOOK Brazil in the spotlight
25 THE CREDIT MANAGER’S OUTLOOK by Chris Kuehl
27 KEEPING AND RETAINING THE RIGHT EMPLOYEES REQUIRES MORE THAN A GOOD PAYCHECK by Andrea Olson
28 THE NOVEMBER ISM REPORT The Manufacturing ROB
PUBLISHERS STATEMENT
PUBLISHER’S STATEMENT Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE TIM GRADY NORBERT ORE ANDREA OLSON CHRIS KUEHL
ANNA KUČÍRKOVÁ
Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office MANUFACTURING BROADCASTING CORPORATION 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300
Open call for Contributing Writers for new and existing content. Let’s start a conversation – Contact us at editorialdept@mmoezine.com or visit mfgtalkradio.com/writer for more information. © 2018 MBC – Manufacturing Broadcasting Corporation. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Metals & Manufacturing Outlook is a registered trademark of MBC.
Given the plethora of good news about U.S. manufacturing and non-manufacturing coming out of the Institute for Supply Management, the IHS Markit survey, and PMI surveys followed by Norbert Ore, our Senior International Correspondent, along with the ISM Business Survey Committee’s recently released 2019 Semi-Annual Economic Forecast, we can only summarize it all by saying, “Happy Holidays!” Or, as our Senior Correspondent, Dr. Chris Kuehl would say, “Unless…” and that means unless some global leader, U.S. government body or radical guerilla group does something profoundly foolish to muck up a perfectly good year-end and forecast for 2019. And there are any number of contenders for that dubious distinction, perhaps led by the incoming U.S. Congress with all things Trump, followed closely by the British Parliament with Brexit, the EU with Brexit, the Middle East just being the restless Middle East, the Fed’s inflation jitters, the Trade Wars, and a few rogue nations or radical groups here and there looking to disrupt peace. Barring those possible disruptions or an Act of God, 2019 portends to be a very good year. In fact, if the U.S. economy grows through the first and second quarters, it will be the longest U.S. economic expansion in either the 20th or 21st Centuries. As we then approach the second half of 2019, our crystal ball grows cloudy with a chance of storms in the forecast. Since the U.S. economy is cyclical, at some point a recession will pop up. Given the long, slow recovery from 2007-2008 that has been absent wild overheating of the economy, any corrective recession could be mild, perhaps only 2 quarters long and rather shallow. Unless… {Re-read the second paragraph again, beginning with, “…the incoming U.S. Congress…”}. All this economic muttering aside, some new developments are occurring at the Manufacturing Broadcasting Corporation (MBC), producers of the Manufacturing Talk Radio and Women And Manufacturing podcasts, with two new podcasts in development, one of which will launch in January followed by another in February and both focused on different aspects of manufacturing. On January 8th, MBC will launch Manufacturing Matters with Cliff Waldman, who is the CEO of New World Economics, a research and consulting firm in Arlington, VA, that specializes in contract research in the areas of manufacturing, small business, and frontier markets. Cliff will interview thought leaders and industry experts in manufacturing, as well as provide his own insightful commentary about the state of the industry from specific sector research to the broader direction of manufacturing in America. The second podcast is entitled, Where’s Willie, hosted by William Miller, North American Sales Manager for Koganei International America. Willie travels extensively throughout the U.S. and speaks with manufacturers about new developments in their manufacturing operations. Koganei is Japan’s leading manufacturer of pneumatic products such as actuators, flow meter / pressure switches, vacuum pumps and parts, as well as ionizers, electric actuators, chemical solutions equipment, flouroresin equipment and constant delivery pumps. Willie will be reporting from within manufacturing operations in hands-on interviews with customer executives, engineers, and production personnel. These new shows will offer all staff members of manufacturers, and the personnel at businesses that serve them, from raw material suppliers to eventual customers, along with individuals interested in both manufacturing and the non-manufacturing sectors, the opportunity to gain useful insights into the industries and companies that drive America’s economy. We trust you will enjoy this issue of Metals & Manufacturing Outlook and will tune in at www.mfgtalkradio.com to listen to the new podcasts. Lewis A Weiss, Publisher Contact laweiss@gmail.com for comments, suggestions and ideas. Metals & Manufacturing Outlook / December 2018
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MANUFACTURING OUTLOOK
DECEMBER 2018
MANUFACTURING OUTLOOK THE GLOBAL PMI CONTINUES ITS DOWNWARD TREND, AND ITALY STAYS IN CONTRACTION. U.S. MANUFACTURING IS THE ONLY REALLY BRIGHT SPOT AMONG DEVELOPED NATIONS. THERE IS MUCH TRADE UNCERTAINTY.
by ROYCE LOWE The month of November 2018 will remain forever memorable for the seeming unwillingness of major industrial nations to get along with each other when it comes to trade. The U.S. and China are having a go at each other on tariffs, and at the moment no one is certain whether or not in three months there will be U.S.-imposed tariffs on $200 billion more Chinese goods. There are deals being flaunted, but the Chinese will remain inscrutably silent until it is time. Similarly, under threat of increased tariffs on European (read German) automobiles entering the U.S., the major companies were asked to consider producing lots of electric vehicles in the U.S. in exchange for favorable consideration. Trump, for some strange reason, sent Wilbur Ross to do this deed. Volkswagen announced major plans for a mammoth electric vehicle plant in Eastern Germany.
The BLS jobs report for November shows the addition of 155,000 non-farm payroll jobs. The unemployment rate stayed at 3.7 percent. This was the 98th consecutive month of job growth in the U.S. There were gains in healthcare, 32,000; professional and business services, 32,000 and manufacturing, 27,000. Transportation and warehousing gained 25,000 jobs. The Bureau of Economic Analysis recently released its ‘second’ estimate for the annual rate of Real GDP growth in the third quarter of 2018, putting it - unchanged from the advance estimate - at 3.5 percent. The figure for the second quarter of 2018 was 4.2 percent.
A new NAFTA deal, called USMCA, will pass through Congress in the not-too-distant future.
The ISM PMI figure for U.S. manufacturing climbed back to 59.3 percent in November from October’s 57.7 percent, representing the 27th consecutive month of growth in manufacturing. The overall economy grew for the 115th consecutive month.
Brexit, that phenomenon that has kept the British press busy for two-and-a half years, and probably upped beer sales to the roof, will see the deal Mrs May agreed with Europe pass through Parliament in mid-December, and it is more than possible that it will be voted down, thus a Brexit with no deal, which will keep the British press busy for many more years. Stay tuned.
IHS Markit’s remarks on the U.S. put production as remaining strong in November, but easing and at the joint-weakest rate in over a year. New orders rose at the fastest rate for six months and employment showed a solid increase. The PMI at 55.3 percent in November, was very slightly down from October’s 55.7.
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Metals & Manufacturing Outlook / December 2018
MANUFACTURING OUTLOOK New export orders were up at the fastest pace for nine months, and there was a further rise in employment. In spite of reported struggles to cope with increases in new orders, and despite higher staffing levels, as backlogs continue to rise, business confidence dipped to its weakest in over a year amid concerns regarding the sustainability of new order growth. There are still concerns regarding capacity pressures and cost burdens resulting from supplier shortages and tariffs. STEEL PRODUCTION IS STILL INCREASING. World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – for the month of October, continues to rise and was 156,583MT, up 5.8 percent year-over-year.
THE ECONOMIST magazine, in its latest weekly report on world economies highlights changes in Gross Domestic Product (GDP), Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy. The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted.
U.S. crude steel production for October 2018 was 7.571MT, up 10.5 percent year-over-year. Primary Global Aluminum Production in October 2018 was reported at 5.414 million tons, with production in China, at 3.050 million tons representing 56 percent of world total. Production was 450,000 tons in GCC; 377,000 tons in the rest of Asia; 321,000 tons in Western Europe; 323,000 tons in North America and 343,000 tons in Eastern and Central Europe. U.S. LIGHT VEHICLE SALES……..J.D. Power estimates that light trucks accounted for 71.2 percent of new-vehicle retail sales through November 18.
Metals & Manufacturing Outlook / December 2018
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NORTH AMERICAN OUTLOOK
DECEMBER 2018
NORTH AMERICAN OUTLOOK by ROYCE LOWE
The Institute of Supply Management PMI figure climbed back from 57.7 in October to 59.3 in November. Of the 18 manufacturing industries, 13 reported growth in November, in the following order: Computer & Electronic Products; Plastics & Rubber Products; Paper Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Furniture & Related Products; and Petroleum & Coal Products. The three industries reporting contraction in November are: Printing & Related Support Activities; Nonmetallic Mineral Products; and Primary Metals. Comments from the manufacturing sector are mostly very positive, but there are concerns regarding tariffs, supplier lead times and transportation costs. Chemical Products comments that the truck market is loosening and that there
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are depots full of empty containers - a sign of falling demand. Machinery points to a lack of competitiveness due to tariffs and commodity prices. Fabricated Metal Products points to a lack of experienced workers; CNC machinists, assemblers and welders, that is impacting production. THE COMPLETE ISM REPORT ON BUSINESS MAY BE FOUND AT THE END OF THIS MMO REPORT CANADA bounced back from its October setback, thanks to a survey-record rise in employment in November. There were slight improvements in production and new order growth, and input cost inflation eased to a nine-month low. The PMI in November, at 54.9, was up from October’s 53.9. Supply-chain pressures continued in November, with a sharp lengthening of delivery times for raw materials, low supplier stocks and ongoing shipping delays for items imported from Asia. Input and output inflation both softened. Alberta and B.C. were the best performing provinces for manufacturing growth, followed by Ontario. There was a sustained fall in production volumes in Quebec.
NORTH AMERICAN OUTLOOK
Canada bounced back from it’s October setback. Canada produced 1.160 MT of crude steel in October, down 14.6 percent year-over-year. Canadian light vehicle sales fell in November for a ninth straight month of decline. Passenger car sales, at 39,031 units, were down 11.4 percent year-overyear and light trucks, at 104,637 units, were down 8.7 percent year-over-year. Total sales, at 143,668 units, were down 9.4 percent year-over-year, with light trucks accounting for 73 percent of sales. MEXICO’s manufacturing sector suffered from weak demand in November, as the PMI figure eased further, from 50.7 in October to 49.7 in November. In spite of a continued solid expansion in export sales, there is an inherent weakness in domestic demand. This is aggravated by higher prices for chemicals, electronic components, metals, plastics and textiles. Companies are predicting (hoping) that the recent change in government will help sales and production growth. Mexico produced 1.690 MT of crude steel in October, up 1.1percent year-over-year.
ISO9100:2015 and AS9100D
Metals & Manufacturing Outlook / December 2018
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METALS OUTLOOK
DECEMBER 2018
METALS OUTLOOK THE COST, MAKING, TREATING AND APPLICATIONS OF METALS by ROYCE LOWE
Steel prices in the U.S. are retreating somewhat...
Sweden’s SSAB, a steel company, is starting work on a $150 million pilot plant, near the Arctic Circle, with the aim of helping Sweden become the world’s first country to produce fossil-free steel. The idea for this plant didn’t come so much from climate change as from joining in with, or not missing out on, Sweden’s aim to become carbon neutral by 2045. SSAB’s existing blast furnace and steel plant emits 1.6 tons of carbon dioxide for every ton of steel produced, and though low by global standards, the industry as a whole makes for some ten percent of Sweden’s total emissions. The world’s steel is made, at 75 percent, starting with the blast furnace, which uses coke to reduce the iron ore. The hot metal produced in the blast furnace is then transferred to a Basic Oxygen Furnace (BOF) to make steel. When coke and iron ore combine in the blast furnace, the ‘by-products’ are carbon monoxide and carbon dioxide. The most ‘friendly’ BOF process emits some 2 tons of CO2 per ton of steel. SSAB, together with its partners in the iron ore and power industries, are looking to replace the blast furnace/BOF process by ‘direct reduction’ of the iron ore using hydrogen - which will form water rather than CO2 - and using an electric arc furnace to make steel. This is not altogether new; the Midrex process has been used for decades to reduce iron ore using natural gas. SSAB’s project aims to go several steps cleaner. The process will not go commercial before 2035. The amount of electricity required at the various stages, direct reduction and electric arc steelmaking, will be enormous, and will add over 20 percent to the cost of crude steel. This
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is a noble, if not overly ambitious project, but a realization that the steelmaking process that today produces over a billion tons of crude steel annually must somehow be ‘brought under control.’ Between now and 2035 however, it is inevitable that modifications and repairs will be undertaken on present plant, and that somehow this must be justified. It might be noted that China is looking to produce more of its steel using the electric arc furnace. Again, a noble project. It is presently impossible to predict a date when steelmaking might be fossilfree, and so far nobody has offered. But there is
METALS OUTLOOK December, from 1.05 USD/lb six months ago; Copper 2.85 USD/lb early December, from 3.30 six months ago; Nickel 5.05 USD/lb early December from 7.00 six months ago, and Zinc 1.23 USD/lb early December from 1.46 six months ago. Crude steel production in Germany in October was at 3.600 MT, up 1.4 percent year-over-year; in Italy 2.299 MT, up 1.1 percent year-over-year; in France 1.309 MT, down 3.5 percent year-over-year and in Spain 1.290 MT, down 7.4 percent year-over-year. Russia’s crude steel production for October was at 6.020 MT, up 0.6 percent year-over-year; Ukraine’s was 1.788 MT, down 6.7 percent year-over-year. The UK produced 0.660 MT of crude steel in October, down 5.7 percent year-over-year. CHINA produced 82.552 MT of crude steel in October, up 9.1 percent year-over-year; Japan 8.564 MT, down 4.5 percent year-over-year; India 8.770 MT, up 0.4 percent year-over-year and South Korea 6.185 MT, up 3.5 percent year-over-year. Taiwan produced 1.965 MT in October, up 9.7 percent. Brazil’s crude steel production for the month of October was 3.135 MT, an increase year-over-year of 3.0 percent.
no doubt there will be much progress in this field and others whose aim is carbon reduction, and at the moment they are being led by Scandinavia and China. Steel prices in the U.S. are retreating somewhat, with H.R. coil at just under $38 per cwt and coldrolled around $43.50 per cwt. Grade 60, #5 rebar is running $35/36 per cwt. There is, however, no sign as yet of a plunge in prices, and in fact H.R. prices just took a slight upturn. Non-ferrous metal prices are on a downward trend, with aluminum at 0.895 USD/lb early Metals & Manufacturing Outlook / December 2018
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AEROSPACE OUTLOOK
DECEMBER 2018
AEROSPACE OUTLOOK by ROYCE LOWE
The Chinese and the Russians are getting together on aerospace. China’s Commercial Aircraft Corp. and Russia’s United Aircraft Corp. recently revealed a model of a cockpit and a cabin for their commercial aircraft joint venture, a wide-body twin-engine aircraft to carry up to 320 passengers. The CR929 is scheduled to make its inaugural flight in 2023. The joint venture, formed in 2017, CRAIC - the China-Russia Commercial Aircraft International Corp. Ltd., is looking to a 10 percent global wide-body market share by 2035, or the market presently shared by the Boeing 787 and the Airbus A350. The aircraft will be manufactured in Shanghai and both GE Aviation and Rolls Royce
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Metals & Manufacturing Outlook / December 2018
have been approached regarding engine supply, although inevitably the joint venture will look to manufacture its own engines, with time. Meanwhile United Technologies, the world’s largest aerospace supplier, which recently bought Rockwell Collins for some $23 billion, is to ‘split itself up.’ Its aerospace business will operate as two divisions, Pratt and Whitney Jet Engines and Collins Aerospace Systems. Otis Elevator and Carrier will operate as independent companies. Canada’s Bombardier will lose 5,000 jobs over 7 percent of its workforce - and sell off its Turboprop and Training units, to bring in around C$900 million and yield annual savings of some C$250 million by 2021.
AUTOMOTIVE OUTLOOK
DECEMBER 2018
AUTOMOTIVE OUTLOOK by ROYCE LOWE
Recent automotive news centers on a drastic shake-up at General Motors, a moving around of personnel at Ford and an announcement by Volkswagen regarding its plans for electric vehicle manufacture. GM is to let go some 14,000 jobs by the end of next year. It will lay off 15 percent of its salaried staff, including 25 percent of its executives, to ‘streamline decision making.’ The move is forecast to cut costs by $6 billion per year, and emphasis will be put on the production of crossovers, SUVs and light trucks, over sedans - something the U.S. was never very good at producing in any event. Assembly plants will be closed at DetroitHaMTramck ; Lordstown in Warren, Ohio and Oshawa, Ontario. Propulsion facilities in Baltimore and Warren, Michigan, will be closed. Two additional plants outside North America will close by the end of 2019.
Ford meanwhile will not cut jobs but will cut shifts at factories in Michigan and Kentucky, and will transfer some 1,150 workers to plants where stronger-selling vehicles are produced. Ford, along with the world’s largest retailer Walmart, will collaborate on a driverless delivery service. Volkswagen is building Europe’s biggest electric car plant - to go up against Tesla - that will manufacture up to 300,000 electric vehicles per year. The company will invest 1.2 billion euros ($1.4 billion) to revamp a plant in Eastern Germany. Production of electric vehicles will start in around one year, with both cars and battery cells made using renewable energy. The plant presently makes Golf Hatchbacks. This move is part of a VW plan to produce some 50 battery-powered models across its 12 automotive brands by 2025. Tesla will start selling its (bestselling in the U.S.) Model 3 in Europe in early 2019. Battery cells for the new plant will come from Poland and Hungary, where suppliers will use green energy, despite coal dominating energy in both countries. VW plans increases in EV output at two factories in China, and its only U.S. plant, in Chattanooga, is likely to produce electric cars for the North American market. The company is looking to sell between two and three million electric cars by 2025, or about a quarter of its overall sales.
Manufacturing Laughs
The company will prioritize future vehicle investments in its next generation of batteryelectric vehicles, especially in trucks, crossovers and SUVs. GM states that resources allocated to electric and autonomous vehicles will double in the next two years. All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.
Metals & Manufacturing Outlook / December 2018
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ENERGY OUTLOOK
DECEMBER 2018
ENERGY OUTLOOK by ROYCE LOWE
Energy these days, wherever we look, seems to concern sun, wind and water. It’s also replete with controversy, as with the ongoing lack of consensus on climate change and its postulated effects on many recent weather disasters on the planet. Carbon dioxide and other gaseous emissions have been charged with extraordinary temperature increases. The news isn’t all bad. The U.S. carbon dioxide emissions fell significantly from 2016-2017 by 40 million tons. (During this same time period, China’s increased by 120 million tons.) They fell 2.7 percent during Trump’s first year in office, a fact that his coal-loving EPA secretary leaped on, and credited to ‘President Trump’s regulatory reform agenda.’ In fact the decline had little to do with these policies, rather with the fact that since 2007 power plants have been switching to cheaper, cleaner natural gas and away from ‘Trump’s beloved rock’ – coal. Today natural gas provides twice as much energy as coal, and energy from renewable sources such as wind and solar now makes up just over 10 percent of America’s energy consumption. Coal is in sharp decline. The emissions from China and India are by far the world’s worst, and it has been estimated that 1.2 to 2.2 million Indians die
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Metals & Manufacturing Outlook / December 2018
annually from breathing PM2.5, the fine dust that penetrates deep into people’s lungs. The news may not be all bad, but the reduction in carbon dioxide that ensues from the increased use of natural gas is less than that agreed upon by the U.S. in the Paris Climate Agreement of 2015. On current trends, carbon dioxide emissions will be 17 percent lower in 2025 than they were in 2005, or some way short of the 26-28 percent reduction envisaged in the Paris Agreement. Reams have been written on this subject, reams more will be. There’s an interesting bit of history. Ralph Waldo Emerson, the 19th century American writer and philosopher, visited England in the mid-1850s, and through his overall delight at the place commented in no uncertain terms on its weather and its overall gloominess. He says, ‘The only drawback on this industrial conveniency is the darkness of its sky. The night and day are too nearly of a color. It strains the eyes to read and to write. Add the coal smoke. In the manufacturing towns, the fine soot or blacks darken the day, give white sheep the color of black sheep, discolor the human saliva, contaminate the air, poison many
ENERGY OUTLOOK plants and corrode the monuments and buildings.’ Emerson had put his finger on the industrial revolution and the perils of the burning of coal. Smog - a word coined in the early twentieth century, a blending of smoke and fog - killed twenty people and sickened thousands more in Donora, Pennsylvania, in 1948. There’s a memorial.
before joining the Trump administration, ‘The world is going to have to continue using fossil fuels, whether they like it or not.’ And let’s not forget the Koch brothers. In fact, oil company executives expressed delight some decades ago at the news that melting in the Arctic would increase their drilling periods from two to as many as five months.
But the worst was yet to come, and come it did in London in 1952, in a city that had long been used to dirty atmospheres, and to anticyclones that normally hung around for two days and blew pollution accumulations away with them. In 1952 London suffered under a deadly cloud of fog and pollution for five days. At the time the city ran on cheap coal for everything from power generation to heating of homes. An anticyclone caused cold air to stagnate over London and the sulphur dioxide, carbon dioxide and smoke particles mounted, and finally choked as many as 12,000 people to death. This was, in fact, known as the killer smog.
We have recently seen the U.S. pull out of the Paris Climate Agreement, to find itself outnumbered 19 to 1 at the late-November G20 conference. Fortunately, there are wiser heads in the U.S. who are making concerted efforts to reduce pollution, by using solar and wind power.
This great smog spurred the passage in 1956 of the Clean Air Act in the UK. This represented the first federal legislation in the world where a government, not just a local or municipal one, had placed such restrictions on industry and local citizens and provided subsidies so that Londoners could start conversion from coalburning fireplaces to smokeless fuel, which was very expensive. It was a blueprint for other nations to follow. It should be mentioned that, at the time of the killer smog, London was the world’s most overpopulated and industrialized city, and that some 80 percent of its citizens smoked. Further, the terms greenhouse gases and climate change were hardly on many people’s lips. Climate change, global warming, call it what we might, is hardly the object of a consensus. Even when 90 scientists agree there’s a crisis, there are always many more oil, coal, and steel executives who disagree. For many decades, responsible people in responsible positions in seemingly responsible companies have spoken out about the dangers of climate change, only to be shouted down by their ‘superiors,’ not the least of whom was the ex-Secretary of State Rex Tillerson, who said at his last ExxonMobil shareholder meeting
A recent turnaround has been announced by ExxonMobil. It will team up with Danish renewable energy firm Orsted to power its Permian oil field with 500 MW of renewables made up of 250 MW of solar power and 250 MW of wind power. Finally, we travel to Scotland, that little place that’s still part of the UK, where almost 70 percent of the power is generated by renewables. It’s actually tidal power, helped along by turbines with three 30 foot blades that are eased on to foundations 100 feet under water, and switch with the tide four times a day. Scientists can predict how much energy is being generated every 15 minutes for the next 25 years. The problem is cost, but at the moment the Scottish government subsidizes to the tune of some 50 percent. Scotland aims to be 100 percent renewable-powered by 2020.
Manufacturing Laughs
All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.
Metals & Manufacturing Outlook / December 2018
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WIND ENERGY
WIND ENERGY: A PATH TO CREATING A CLEANER EARTH by ANNA KUČÍRKOVÁ, CONTRIBUTING WRITER As climate change and global warming are bearing down on the planet, the calls for renewable, sustainable sources of energy are becoming too loud to drown out. We need ways to generate power that don’t rely on burning fossil fuels that release noxious gases into the air. And while solar energy was the first renewable energy source, wind is now becoming a strong contender for easing our need for fossil fuels. Let’s examine how wind power could be the path to creating a cleaner earth. How Do Wind Turbines Work? Wind is a free, clean, renewable energy source. Wind turbines around the world are capturing the wind’s power and transforming it into electricity, with over 35,000 wind turbines operating around the globe. Modern electric wind turbines vary in styles and sizes, depending on how they are used. The most common “horizontal axis design” is the most frequently seen and used, with two to three blades that spin upwind of the tower it is placed on.
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Metals & Manufacturing Outlook / December 2018
WIND ENERGY These horizontal axis wind turbines are made of three large parts: the blades, the tower, and a box behind the blades: the nacelle. The nacelle is where motion is turned into power. Large turbines have hydraulic controls that position the blades into the wind. The blades are attached to an axle that connects to a gearbox, and the gearbox controls the speed of the blades’ rotation, from 50 rpm to 1,800 rpm. The spinning shaft spins inside the generator, producing electricity. To harness the power of wind currents, a turbine’s blades spin clockwise, capturing energy. The main shaft is triggered to spin, which is connected to a gearbox within the nacelle. The gearbox directs the energy to a generator, converting it to electricity. The electricity then enters the power grid. Wind energy’s potential is huge. There is so much possibility for real growth in the future of this renewable power, and wind turbine manufacturers are racing to develop larger, more efficient wind turbines to serve the public need for electricity. However, electricity without the right frequency and voltage will not be compatible with a utility grid. The speed of the generator will vary based on wind speed, which produces fluctuations in the power output. To solve this problem, there are constant speed turbines as well as variable-speed turbines. Variablespeed turbines have power controls in the generator to avoid overloads or other issues. Some small wind turbines can be used for providing power off the grid. 250-watt turbines can be used for charging batteries on a sailboat. 50-kilowatt turbines can power grain and dairy farms, as well as small, remote villages. The largest wind turbines are used by utility companies to provide electricity to a power grid. These turbines range from 250 kilowatts all the way up to 3.5 to 5 MW machines used offshore. In 2009, the average land-based wind turbine could create 1.75 MW. Utility-scale turbines are placed in groups or rows called wind farms. These farms often consist of hundreds of turbines, creating electricity to power thousands of homes. Wind Farms The largest wind turbines generate enough electricity to supply 600 US homes with electricity for a year. Wind farms with hundreds of these turbines can power thousands of homes. Smaller, single turbines placed in a backyard can create enough power for a single home. Metals & Manufacturing Outlook / December 2018
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WIND ENERGY
But, they must first catch the wind to create power. So for wind turbines, placement is everything. To build an efficient wind farm, utility companies need to know how much wind passes through an area, how fast or slow the winds are, and how long those speeds last. Kinetic energy in wind rises exponentially in proportion to its speed, meaning a small bump up in wind speed creates a large increase in power potential. Scientists have determined that a doubling of wind speed creates an eight-fold increase in power potential. Wind farms are the most cost-efficient use of windenergy. Most utility-scale wind turbines have power volumes between 700 KW and 1.8 MW, and they are placed for maximum capture of available wind resources. The turbines are spaced far apart in rural areas with high wind speeds; agriculture development around wind farms remains largely unaffected due to the small footprint of the turbine towers. Now that we know wind is a viable solution, we must figure out how much it will help us. Using Wind To Replace Fossil Fuels Wind power has the potential to help us reduce our dependence on fossil fuels. In 2018, the state of Texas
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Metals & Manufacturing Outlook / December 2018
reached a critical juncture: their use of wind power surpassed their use of coal and became the secondlargest electricity source in Texas. A 155-megawatt wind farm in West Texas helped increase the state’s wind power capacity to more than 20,000 megawatts, according to the Electric Reliability Council of Texas. And this is just the first state in America to reach this goal. The current total electricity generation in America is approximately 3.6 trillion kWh annually. Wind power could potentially generate far more than 1% of that electricity. According to the American Wind Energy Association, “the estimated U.S. wind-energy potential is about 10.8 trillion kWh per year -- about equal to the amount of energy in 20 billion barrels of oil (the current global yearly oil supply). To make wind energy feasible in a given area, it requires minimum wind speeds of 9 mph (3 meters per second) for small turbines and 13 mph (6 meters per second) for large turbines. Those wind speeds are common in the United States, although most of it is unharnessed.” The comparison between wind power and the burning of fossil fuels leaves no doubt: Burning natural gas releases between 0.6 and 2
WIND ENERGY pounds of carbon dioxide equivalent per kilowatt-hour (CO2E/ kWh) Burning coal emits between 1.4 and 3.6 pounds of CO2E/kWh Wind, on the other hand, is responsible for only 0.02 to 0.04 pounds of CO2E/kWh Additionally, wind power requires essentially no water to operate. This leaves our waterways free from industrial pollution and does not strain supplies by competing with drinking water, agriculture, or other water needs. This is just one of the many benefits of wind energy.
of Dec. 2005) per kWh of wind energy produced for wholesale distribution during the first 10 years the wind farm is up and running. Net metering: Individuals and businesses producing renewable energy receive credits for each kWh they produce above and beyond what they need. As an individual or business produces more electricity than needed, the power meter runs backwards, transmitting the extra electricity to the nearest power grid. The owner then receives credits for the electricity sent to the grid, which count as payment toward any future electricity drawn from the grid when the turbine can’t provide enough power. Renewable-energy credits: Many states have renewable-energy quotas for power companies, meaning those companies must buy a certain portion of their electricity from renewable sources. Installation tax credits: The federal government and some states offer tax credits for the costs of setting up a renewable-energy system. Maryland, for instance, offers businesses or landlords a credit for 25 percent of the cost of purchasing and installing a wind-turbine system if the energy-supplied building meets certain overall “green criteria.”
The Enormous Benefits of Wind Energy While it is clear that wind energy is certainly an attainable goal for sustainable energy, consumers want to know what benefits they can expect.
But replacing fossil fuels isn’t the only benefit: on average, more jobs are created for each unit of electricity generated from renewable sources than from fossil fuels.
Cut your electricity bills: Wind is free, so once you’ve paid for the initial installation, electricity costs will be reduced.
Renewable, sustainable energy programs already support thousands of jobs in the United States. According to ucsusa.org, “In 2016, the wind energy industry directly employed over 100,000 full-timeequivalent employees in a variety of capacities, including manufacturing, project development, construction and turbine installation, operations and maintenance, transportation and logistics, and financial, legal, and consulting services. More than 500 factories in the United States manufacture parts for wind turbines, and wind power project installations in 2016 alone represented $13.0 billion in investments.”
Get paid for what you generate: Through Feed-in Tariffs, you get paid for the electricity you generate even if you use it. What you don’t use, you can export to the local grid - and get paid for that too. Cut your carbon footprint: Wind electricity is green, renewable energy and doesn’t release any harmful carbon dioxide or other pollutants. Store electricity for a calm day: If your home isn’t connected to the national grid you can store excess electricity in batteries and use it when there is no wind. Government incentives for all wind turbine producers allow for the economic feasibility of a wind-power system. Some of the current economic incentive programs run in the United States for renewable energy systems are certainly worth considering:
Conclusion As mankind moves towards renewable, sustainable energy, the advances in wind power are offering new opportunities. It offers us a chance to reduce our dependence on fossil fuels, and it has created a new industry offering more jobs. If we can harvest wind energy cleanly, we can stop polluting our planet and maintain a healthy environment for all its inhabitants.
Production Tax Credit: Basically, wind-power generators, usually businesses, receive 1.8 cents (as Metals & Manufacturing Outlook / December 2018
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ISSUES OUTLOOK The new Champlain Bridge was due to open in December 2018, but it won’t. The usual delays in construction, coupled with the odd period of ‘labor unrest,’ have put opening estimates back to early 2019.
DECEMBER 2018
ISSUES OUTLOOK
by ROYCE LOWE
Montreal, Canada’s second-largest city, is an island of around 500 sq. kms (around 190 sq. miles.) Because it’s an island in one of the world’s largest rivers, its populations that live off the island need bridges, quite a few of them, to get into the city. The bridge that might be called the most iconic, that links the South Shore to the city, is the Champlain bridge - named after Samuel de Champlain, who founded Quebec City in 1608. The old Champlain bridge was opened on June 28 1962, and had taken some five years to build. It was estimated at the time that the bridge would last 70 years or so, but like much of Montreal’s infrastructure it has fallen prey to the ravages of Quebec winters and the de-icing salt that goes along with them. The corrosive salt seeps through the concrete to reach the reinforcing bar, corroding its surfaces to rust. Add to this the temperature spread that a typical Montreal year brings and there is a recipe for wear and tear that taken to its conclusion might only end in disaster. Thus the need for a new bridge.
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Metals & Manufacturing Outlook / December 2018
The bridge will cost C$4.2 billion - around $3.3 billion - and word from the consortium that built it is that it will last for 125 years. It will have five lanes each way, three for traffic, one for cyclists and one for pedestrians. The bridge with its approaches will be 6 kms (3.7 miles) long. The bridge will take some 60 million vehicles per year. That’s just over half the traffic on New York’s George Washington Bridge. Along with the bridge, sweeping changes are being made to the approaches to and around the bridge, which have made Montreal look like one big construction site for the past few years. Word is there are two seasons in Montreal; winter and construction. And while we’re speaking of bridges, it’s more than noteworthy that the world’s busiest bridge, New York’s George Washington Bridge, affectionately known as GWB, is undergoing a $1.9 billion repair and modification program. Part of the project involves replacement of the 592 stainless steel vertical suspender ropes that connect the roadway to the bridge’s four main cables and hold it up over the Hudson River. The main cables each contain 26,474 pencil-thin wires. This project is underway and due for completion in 2025. The scope and cost of the Champlain and George Washington bridges brings home to us the overwhelming task involved in the repair and replacement of infrastructure in North America.
GLOBAL PMI OUTLOOK
GLOBAL PMI OUTLOOK
by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS Last month we attributed the slowing rates of growth apparent in global business surveys to cyclical forces. Additionally, tariffs were starting to play a role in suppressing growth, particularly in metals and agriculture, and a quick resolution seemed unlikely.
Exports fell for the third month in a row. United Kingdom: The UK/CIPS PMI (53.1, +2.0) bounced after registering its lowest posting since July 2016 (the month following the EU referendum). The PMI is averaging 53.8 YTD, a respectable performance considering the uncertainty surrounding BREXIT. China: China’s Official Report, the CFLP PMI (50.0, -0.2), and the Caixin Manufacturing PMI (50.2, +0.1) barely changed in November and remain teetering at the midpoint. India: India’s PMI (54.0, +0.9) accelerated, posting its 16th consecutive month of growth. For India, the trend line is definitely upward.
In November, North American supply managers went defensive in a month long round of panic buying and inventory build, reversing the deceleration and driving the indexes higher. Though shrouded in confusion, and bearing a rising need for urgency, the announcements coming from the U.S.-China trade meetings need to yield results during the 90-day negotiation period. Based on this report, the U.S. is better positioned to withstand the challenges, but growth targets are at risk.
South Korea: New orders and output weakness hurt the PMI (48.6, -2.4), reversing two months of +50. Cost pressures were noted as particularly troubling. Business confidence remains historically low.
Eurozone: The Eurozone PMI (51.8, -0.2) hit a 27-month low in November as the PMI weakened for the fourth consecutive month. The Netherlands, Ireland, Austria, and Greece indexes averaged 55.1 while Spain, Germany, France, and Italy averaged 51.0.
North America: Canada’s PMI (54.9, +0.9) expanded for the 33rd consecutive month. However, Mexico’s PMI (49.7, -1.0) slipped after 12 consecutive months of growth.
Taiwan: Taiwan’s CIER-SMIT PMI (48.0, -3.8) fell into contraction territory after 33 consecutive months of expansion. The Export and Import indexes contracted 41.6 and 41.4, respectively.
Metals & Manufacturing Outlook / December 2018
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EUROZONE OUTLOOK
GLOBAL OUTLOOK
EUROZONE
Passenger car registrations in Western Europe fell again in November, by 8.3 percent, due to the continuing impact of the Worldwide Harmonized Light Vehicle Test (WLTP), mandatory on September 1. Sales were down year-over-year from 1.14 million to 1.05 million, with the S.A.A.R up to 13.4 million from October.
IHS Markit’s PMI for the UK was up in November to 53.1 from October’s 51.1 figure. There were slight improvements in production and new orders following October’s decline. New export orders were down for the second consecutive month. Overall optimism was down to a 27-month low, as Brexit uncertainty, exchange rate concerns and a slowing economy weighed on confidence. Input and output prices were up slightly.
by ROYCE LOWE IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) eased further in November to 51.8, from October’s 52.0, its lowest reading since August 2016. Production growth was marginal, with a weakness centered on the investment goods sector. The consumer goods sector showed solid growth but the export business was down for a third consecutive month. Cost pressures stayed high but eased slightly from October. Recent anti-pollution standards are affecting the auto industry, particularly in Germany, where manufacturers are presently pessimistic. Through all this, employment growth was maintained in November.
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Metals & Manufacturing Outlook / December 2018
ASIA OUTLOOK
GLOBAL OUTLOOK
ASIA OUTLOOK
by ROYCE LOWE CHINA’s manufacturing production was stable in November ; in fact, there was a marginal improvement with a slightly stronger increase in total new orders, despite a reduction in export orders - which have fallen for the past eight months. There was an easing of inflationary pressures. The PMI for November was at 50.2, very slightly up from October’s 50.1. Chinese total vehicle sales for October were down for a fourth consecutive month, 11.7 percent year-over-year, to 2.38 million. Total vehicle sales for the first ten months were down 0.4 percent at 22.826 million. Electric vehicle sales for the month of October were up 49.7 percent year-over-year at 110,000 units.
There was a further lengthening of input delivery times, with a strong deterioration in vendor performance, coupled with cost pressures associated with increases in fuel, steel, paper, chemicals and food. INDIA’s operating conditions picked up in November, with new orders and production increasing at the second-quickest pace in over two years, and input buying growth at at a ten-month high. Optimism strengthened from October’s recent low, and the PMI rose to 54.0 from October’s 53.1. Growth in new export orders increased to the fastest in just under four years, and the employment increase the fastest seen in six years. Business confidence in India looks to higher production over the course of the next year.
Manufacturing Laughs
JAPAN saw new orders rise at the joint-weakest rate in just over 2 years, with a moderate growth in production. Business confidence was down for the sixth consecutive month. Additional staff was hired, while input buying grew at an accelerated pace. The PMI slipped from 52.9 in October to 52.2 in November. New export orders were in from such Asian markets as South Korea and Taiwan, but there was weaker demand from China and Europe.
All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.
Metals & Manufacturing Outlook / December 2018
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SOUTH AMERICA OUTLOOK
GLOBAL OUTLOOK
SOUTH AMERICA
by ROYCE LOWE BRAZIL saw its strongest production expansion for eight months as new orders strengthened. Hiring was up and business confidence was up to the highest seen in the series history, with 77 percent of firms confident that production will expand in the next 12 months, only 1 percent pessimistic. A stronger real translated into softer increases in input costs and output charges. November’s PMI increased to 52.7 from October’s 51.1. 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) – was effectively unchanged from its lowest level, at 52.0, in almost two years in November.
Manufacturing Laughs
There were expansions across the consumer, intermediate and investment goods sectors. Business conditions were up in the U.S., the euro area, Japan, China, the UK, Brazil and India, with deterioration in South Korea, Italy, Taiwan, Mexico, Poland, Turkey, Thailand and Malaysia. New orders rose at a pace unchanged from October’s 25-month low, with international trade flows the major stumbling block.
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Metals & Manufacturing Outlook / December 2018
All cartoons in our publication are intended for ‘comic relief’ and not to reflect a particular political point of view or bias.
CREDIT MANAGERS’ OUTLOOK
CREDIT MANAGERS’ OUTLOOK by CHRIS KUEHL It was not a big bounce back, but the good news is the data certainly didn’t get any worse. This is not an unusual pattern for this year—comparisons have been made to a rollercoaster for months. It seems that a dip one month is followed by a recovery the next. Thus far, there have been few longer-lasting trends. “The more pertinent data is showing some consistent concerns within the nonfavorable categories as well as some consistently good news within the favorable categories,” said NACM Economist Chris Kuehl, Ph.D. “The reason for this split in performance is that some sectors are doing very well (the oil and gas business, automotive and health care), but other sectors are consistently struggling (some retail, agriculture and aerospace).” The combined score moved from 54.5 to 55.8. This takes the measurement back to levels last seen in August. In fact, there has been quite a lot of consistency with the overall data. The lowest point in the last 12 months was the 53.7 notched in April. The high point was 56.6. That was reached twice—once in February and again in May. The important thing is these readings have all been close to the mid-50s for the last couple of years. That means general expansion has been in place. The index of favorable factors also rebounded—moving from 61.6 to 63.2. This is not as robust as it had been the last two months, but it is headed in the right direction. The index of unfavorable factors crept back into expansion territory (anything over 50) with a reading of 50.9 up from 49.7 the month previous. There has been a consistent pattern with these nonfavorable readings as the range has been from 49.4 to 50.9.
This month actually marked the highest reading in the last 12 months. The detail is, as always, the most interesting data. The sales category made something of a comeback with a reading of 64.5 up from 62.7 last month. This is still a little short of where the readings stood in August (65) and September (68.8), but trending in the right direction. The new credit applications data also improved as it went from 61.7 to 62.2. The dollar collections data moved back into the 60s with a reading of 60.9 compared to the 57.5 last month. The amount if credit extended shifted up as well (64.5 to 65.3). There was also some interesting and encouraging data coming from the nonfavorable categories. The rejections of credit applications remained static at 51.4, which leaves this category just slightly under the norm for the last several months. The accounts placed for collection reading worsened just a little and remained in the contraction zone (dropping from 48.8 to 48.2). The disputes reading emerged from contraction territory, but only by a hair as it went from 49.9 to 50.1. The dollar amount beyond terms made a bigger leap out of contraction with a reading of 52.3 after one of 47.7 the month prior. The dollar amount of customer deductions was little changed with a reading of 49.6 after the previous month’s reading of 49.5. It is still in contraction territory, but at least it is slowly heading in the right direction. There was more progress in the filings for bankruptcies category as it has moved from 52.1 to 53.6.
Metals & Manufacturing Outlook / December 2018
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CREDIT MANAGER’S OUTLOOK is now vanishing. That will mean buying the much higher-priced steel. “This month the data has been solid enough and an improvement over what it had been the month before, but the issues and concerns are starting to manifest,” he added. The combined score went from 54.4 to 55.6, back to the levels seen in the last few months (although not yet back to the 56.4 reading in September). The favorable factors improved from 61.5 to 63.2, but remained below the 64.4 that was noted in both August and September. The unfavorable index climbed free of the contraction zone with a reading of 50.5. Last month it has fallen to 49.6. The more indicative data is in the subcategories.
Kuehl noted that the overall sense of the reading this month is there has been some progress, but nothing to suggest the pattern of ups and downs will be broken anytime soon. The other data coming out regarding the economy looks similar to this. The Purchasing Managers’ Index has slipped a bit the last few months and there have been declines in measures like durable goods orders and factory orders. This is the time retailers do the bulk of their work, but the news has not been all good. “The fact is that sales are up, but with all the discounts and sales, the profits have not been as solid. Revenue is up and the hope is those shopping later will be less attuned to those discounts and sales.” “The manufacturing sector continues to expect the other shoe to drop at any moment, but thus far, the impact has been delayed,” Kuehl said. “From the moment the steel tariffs were announced, there was an expectation prices would surge to the point that many manufacturers would have to lose money by holding prices constant to hang on to market share, or they would have to jack up those prices and risk alienating consumers.” The tariff is 25% for steel and 10% for aluminum, but the price hikes have been far greater than this. On average, the hike has been between 40% and 45%. The full impact is just starting to be felt as many companies sought to buy as much steel as they could prior to the price hike. That inventory
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Metals & Manufacturing Outlook / December 2018
The sales category recovered from the 62.3 reading in October—the lowest level seen since July. It is now at 64.2. That is still lower than it has been for several months, but at least the trend is in the right direction. The new credit applications numbers (61.7) remained very close to what they had been in October (61.5). There was a significant improvement in the dollar collections data as it climbed back into the 60s with a reading of 61.6 after sinking to 58.5 in October. The amount of credit extended also improved with a reading of 65.4 compared to 63.7. The activity within the unfavorable data was instructive as well. The rejections of credit applications improved and worked its way up into the mid-50s with a reading of 53.1. This is exactly the same as was noted in September and an improvement over the 51.9 reported the month prior. The accounts placed for collection stayed mired in contraction territory with a reading 49.2—slightly better than the 49.1 noted in October. The disputes category got a bit closer to escaping the contraction zone with a reading of 49.6 from last month’s 48.7. The dollar amount beyond terms escaped the contraction zone going from 49.1 to 50.3. The dollar amount of customer deductions moved up slightly from 48 to 48.6 and the filings for bankruptcies clambered back to near respectability with a reading of 52.2 after a slide to 50.9. “As expected, the manufacturing sector is in flux,” Kuehl said. “It is likely this will start showing up in next month’s CMI as well as the ones to come in 2019.”
KEEPING AND RETAINING THE RIGHT EMPLOYEES REQUIRES MORE THAN A GOOD PAYCHECK by ANDREA OLSON There’s an art to employee recruitment and retention. It’s not simply amassing hundreds of resumes, pouring through them for previous job titles or employers, and doing a cursory interview to see if they are a “good person”. Manufacturers today need to have a holistic understanding of what their existing employees and potential hires want in a role, and shape their offerings to those needs. In a sense, we need to think of them as customers. In last month’s series of Riveting Exchange Podcast episodes on Women And Manufacturing, myself and Desiree Grace discussed at length how to gracefully exit from an organization when it’s not the right fit. I also spoke on The Customer Mission Podcast, also on Women And Manufacturing about how manufacturers need to address the strategic gap when it comes to hiring and employee retention. Last but not least, Amy Nicklaus, host of Full Time with Amy Nicklaus, spoke with Akasha Garnier about how to build your own brand and effectively negotiate a great salary, offer and position in an organization. These podcasts can be heard at womenandmfg.com. Times have dramatically changed. It is now an employee market, where potential hires have the flexibility and opportunity to make bigger demands, leverage to negotiate salaries and benefits, and the power to walk away from an organization that doesn’t fulfil their expectations. Some might perceive this as ‘entitlement’ (as many have with the millennial generation), yet, there’s another way to look at it.
Think about something simple like buying a car. Do you go onto the used car lot, pick one out, walk up and pay the sticker price? Or do you ask about multiple cars, their history, look under the hood, take it for a test drive, and negotiate the best deal for yourself and your budget? Is that considered “entitlement” or simply just a smart, logical way to make a purchase? Potential employees are now doing the same thing with potential employers. Given that the number of hours you work in a lifetime consists of 1/3 of your total life, it’s reasonable to look for a good deal. A good deal may constitute higher pay, shorter commute, better benefits, flexible hours, learning opportunities, promotion opportunities, a fun company culture, or simply a role that fits your passion. A job isn’t just a paycheck anymore, as employers are desperately seeking new and better talent. While employers are making more demands on their employees, in turn, employees are doing the same. Even if we don’t want to believe it, this is the new normal. Manufacturers must step back and examine their approach to not only recruitment, but employee retention. After all, spending the time and money to get a great new employee on board only to lose them in 90 days is throwing good money after bad. As we begin to tackle the impending “skills” gap, those manufacturers that get creative and understand that a job needs to be more than a good paycheck, won’t have a skills gap, but a surplus - and a revenue surplus to go along with it. Andrea Olson is the CEO and Founder of / Prag’madik /
Metals & Manufacturing Outlook / December 2018
27
ISM REPORT OUTLOOK
THE INSTITUTE FOR SUPPLY MANAGEMENT’S MANUFACTURING REPORT ON ® BUSINESS BREAKING NEWS
ISM PMI at 59.3% ISM PMI for the past 5 years
2014
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2015
Metals & Manufacturing Outlook / December 2018
2016
2017
2018
ISM REPORT OUTLOOK
ISM® REPORT ON BUSINESS®
MANUFACTURING E
conomic activity in the manufacturing sector expanded in November, and the overall economy grew for the 115th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®. The November PMI® registered 59.3 percent. The New Orders Index registered 62.1 percent, an increase of 4.7 percentage points from the October reading of 57.4 percent. The Employment Index registered 58.4 percent, an increase of 1.6 percentage points from the October reading of 56.8 percent. The Supplier Deliveries Index registered 62.5 percent, a 1.3-percentage point decrease from the October reading of 63.8 percent. The Inventories Index registered 52.9
NOVEMBER 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee
percent, an increase of 2.2 percentage points from the October reading of 50.7 percent. The Prices Index registered 60.7 percent, a 10.9-percentage point decrease from the October reading of 71.6 percent, indicating higher raw materials prices for the 33rd consecutive month. Of the 18 manufacturing industries, 13 reported growth in November, in the following order: Computer & Electronic Products; Plastics & Rubber Products; Paper Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing ‡; Machinery; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Furniture & Related Products; and Petroleum & Coal Products.
PMI @ 59.3% ®
‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).
MANUFACTURING AT A GLANCE Nov Index 59.3 62.1 60.6 58.4 62.5 52.9 41.5 60.7 56.4 52.2 53.6
Oct Index 57.7 57.4 59.9 56.8 63.8 50.7 43.3 71.6 55.8 52.2 54.3
% Point Change +1.6 +4.7 +0.7 +1.6 -1.3 +2.2 -1.8 -10.9 +0.6 0.0 -0.7
Growing Growing Growing Growing Slowing Growing Too Low Increasing Growing Growing Growing
Rate of Change Faster Faster Faster Faster Slower Faster Faster Slower Faster Same Slower
Trend* (months) 27 35 27 26 26 11 26 33 22 33 22
OVERALL ECONOMY
Growing
Faster
115
Manufacturing Sector
Growing
Faster
27
Index PMI® New Orders Production Employment Supplier Deliveries Inventories Customers’ Inventories Prices Backlog of Orders New Export Orders Imports
Direction
*Number of months moving in current direction. Manufacturing ISM Report On Business data is seasonally adjusted for the New Orders, Production, Employment and Supplier Deliveries Indexes. ®
®
PMI 2016
2017
PMI®
2018
59.3%
50% = Manufacturing Economy Breakeven Line
Manufacturing expanded in November, as the PMI® registered 59.3 percent, an increase of 1.6 percentage points from the October reading of 57.7 percent. This indicates growth in manufacturing for the 27th consecutive month, led by strong new orders, production output and continued slowing supplier delivery performance. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.
43.2% = Overall Economy Breakeven Line
COMMODITIES REPORTED Commodities Up in Price: Aluminum* (25); Capacitors; Electrical Components; Electronic Components (4); Hydraulic Components; Methanol (2); Nylon (6); Plastic-Based Products; Resistors (2); Scrap Metal (2); Steel* (3); Steel — Stainless (8); and Steel-Based Products (7). Commodities Down in Price: Aluminum* (2); Caustic Soda (2); Copper Products; Steel* (3); Steel — Cold Rolled (2); and Steel — Hot Rolled (3). Commodities in Short Supply: Capacitors (17); Electrical Components; Electronic Components (7); Printed Circuit Board Components (2); Resistors (13); Silicone; and Steel-Based Products (2).
12
Note: The number of consecutive months the commodity is listed is indicated after each item. *Reported as both up and down in price.
NOVEMBER | DECEMBER 2018 Metals & Manufacturing Outlook / December 2018
29
ISM Report On Business ®
®
manufacturing
November 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee
New Orders (Manufacturing) 2016
2017
New Orders
2018
62.1% 52.4% = Census Bureau Mfg. Breakeven Line
ISM’s New Orders Index registered 62.1 percent. Eleven of 18 industries reported growth in new orders in November, in the following order: Furniture & Related Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Paper Products; Textile Mills; Machinery; Chemical Products; Transportation Equipment; and Food, Beverage & Tobacco Products.
Production (Manufacturing) 2016
2017
Production
2018
60.6%
51.5% = Federal Reserve Board Industrial Production Breakeven Line
ISM’s Production Index registered 60.6 percent. The 11 industries reporting growth in production during the month of November — listed in order — are: Plastics & Rubber Products; Apparel, Leather & Allied Products; Computer & Electronic Products; Paper Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Machinery; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; and Primary Metals.
Employment (Manufacturing) 2016
2017
Employment
2018
58.4% 50.8% = B.L.S. Mfg. Employment Breakeven Line
Supplier Deliveries (Manufacturing) 53.1% 2016
2017
2018
62.5%
Inventories (Manufacturing) 2016
2017
2018
43% = B.E.A. Overall Mfg. Inventories Breakeven Line
Manufacturing (products such as medical equipment and
supplies, jewelry, sporting goods, toys and office supplies).
30
Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in November, as the Supplier Deliveries Index registered 62.5 percent. The 11 industries reporting slower supplier deliveries in November — listed in order — are: Computer & Electronic Products; Machinery; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Miscellaneous Manufacturing‡; Fabricated Metal Products; Chemical Products; and Paper Products.
53.1%
52.9%
‡Miscellaneous
ISM’s Employment Index registered 58.4 percent. Of the 18 manufacturing industries, the 10 reporting employment growth in November — listed in order — are: Computer & Electronic Products; Furniture & Related Products; Paper Products; Chemical Products; Transportation Equipment; Petroleum & Coal Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Plastics & Rubber Products; and Machinery.
Metals & Manufacturing Outlook / December 2018
Inventories The Inventories Index registered 52.9 percent. The nine industries reporting higher inventories in November — listed in order — are: Wood Products; Textile Mills; Apparel, Leather & Allied Products; Computer & Electronic Products; Petroleum & Coal Products; Paper Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; and Machinery.
ISM Report On Business ®
®
manufacturing
November 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee
Customer Inventories (Manufacturing) 2016
2017
2018
41.5%
Customers’ Inventories ISM’s Customers’ Inventories Index registered 41.5 percent. The only industry reporting customers’ inventories as too high during the month of November is Electrical Equipment, Appliances & Components. The 11 industries reporting customers’ inventories as too low during November — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Primary Metals; Paper Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Fabricated Metal Products; Machinery; Chemical Products; Miscellaneous Manufacturing‡; and Plastics & Rubber Products.
Prices (Manufacturing) 2016
2017
Prices
2018
60.7%
52.4% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line
Backlog of Orders (Manufacturing) 2016
2017
2018
56.4%
The ISM Prices Index registered 60.7 percent. Thirteen of the 18 industries reported paying increased prices for raw materials in November, in the following order: Apparel, Leather & Allied Products; Machinery; Miscellaneous Manufacturing‡; Chemical Products; Food, Beverage & Tobacco Products; Textile Mills; Computer & Electronic Products; Paper Products; Transportation Equipment; Primary Metals; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; and Plastics & Rubber Products.
Backlog of Orders ISM’s Backlog of Orders Index registered 56.4 percent. The 10 industries reporting growth in order backlogs in November — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Computer & Electronic Products; Nonmetallic Mineral Products; Paper Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; Chemical Products; and Transportation Equipment.
New Export Orders (Manufacturing) 2016
2017
New Export Orders
2018
52.2%
ISM’s New Export Orders Index registered 52.2 percent. The eight industries reporting growth in new export orders in November — listed in order — are: Textile Mills; Miscellaneous Manufacturing‡; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; and Machinery.
Imports (Manufacturing) 2016
2017
2018
53.6%
‡Miscellaneous
Imports ISM’s Imports Index registered 53.6 percent. The 11 industries reporting growth in imports during the month of November — listed in order — are: Furniture & Related Products; Petroleum & Coal Products; Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Machinery; Food, Beverage & Tobacco Products; and Chemical Products.
Manufacturing (products such as medical equipment and
supplies, jewelry, sporting goods, toys and office supplies).
Metals & Manufacturing Outlook / December 2018
31
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