Metals & Manufacturing Outlook for July 2019

TOP TRENDS IN MANUFACTURING WHAT THE HOTTEST ISSUES MEAN FOR THE INDUSTRY NOW AND IN THE FUTURE PAGE 6

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Metals & Manufacturing Outlook / July 2019

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TABLE OF CONTENTS

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

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PUBLISHER’S STATEMENT

ENERGY OUTLOOK

A word from our publisher

6 TOP TRENDS IN MANUFACTURING What the hottest trends mean now and in the future

12 MANUFACTURING OUTLOOK A global look at manufacturing

14 THE CREDIT MANAGER’S OUTLOOK

by Dr. Chris Kuehl

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16 NORTH AMERICAN OUTLOOK Manufacturing in the US, Canada and Mexico

18 METALS OUTLOOK The cost, making and treating of metals

Energy and the environment

26 GLOBAL PMI OUTLOOK

by Norbert Ore

27 GLOBAL OUTLOOK What’s happening around the world

28 EURO OUTLOOK A look at Europe

29 ASIA OUTLOOK China in trouble

31 CNC MACHINING The complete engineering guide part 5

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AEROSPACE OUTLOOK

SOUTH AMERICA OUTLOOK

The aerospace industry

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ISSUES OUTLOOK

AUTOMOTIVE OUTLOOK

24 Issues around the globe

Brazil in the spotlight

34 JULY ISM REPORT The Manufacturing Executive Summary Report on Business presented by the Institute for Supply Management

PUBLISHERS STATEMENT

PUBLISHER’S STATEMENT

Well, as manufacturing moves through the summer months, which are typically slower, the U.S. PMI has moved closer to 50 and if you are into trend lines then the next few months may be troubling. It isn’t just in the U.S.; globally, economies are slowing and softening, as can be seen in the Scattergram in our Global Outlook section.

In the midst of this shift, supply chain buyers have been realigning their sources for continuity of supply, with Vietnam and their neighbors, Taiwan, and India winning new contracts that China is losing in the tariff trade battle with Trump. It is often the case that when buyers change their suppliers, they do not quickly change back when/if things settle out. So, China is losing business it wishes it wasn’t, but until the trade war is resolved, buyers will continue to source elsewhere. Most economies in Europe, Asia, and South America are operating below the PMI 50 mid-point, and eventually that will catch up to the U.S., if it hasn’t already.

As a result, whether or not the Fed implements a rate cut, it may make no difference. It is difficult for ships to rise as the tide recedes. Capex is being held back as manufacturing has excess capacity when the PMI is in the low 50’s and the trend line is downward. While we don’t expect two consecutive quarters of negative GDP, our senior correspondent, Norbert Ore, does expect two months where the PMI dips below 50 over the next 6 months. To find out if that is concerning, listen to that discussion this month on Manufacturing Talk Radio.

For additional insight into the economy, listen to our interview with Dr. Chris Kuehl, senior correspondent with Manufacturing Talk Radio, chief economist with the Fabricators and Manufacturers Association International, and a partner in Armada Corporate Intelligence. He discusses the Credit Managers Index, which also appears in this ezine, and goes into greater depth and analysis on economic issues and headwinds.

These two resources, Metals & Manufacturing Outlook and Manufacturing Talk Radio, provide in-depth information and analysis that isn’t available in news sound bites, which provides expert discussion with insightful explanation on the issues that impact manufacturing and the U.S. economy – including nonmanufacturing which is holding up well at present.

What could happen is this – the GDP operates in a range between 2.0 and 2.5 for the balance of 2019; enough to keep manufacturing humming and employment steady going into 2020. Then the election year rhetoric will really heat up, stirring up more angst and uncertainty – things that manufacturing does not like. Historically, election years have been good years for the economy – until the 21st Century rolled in.

Since then, presidential election years have been unpredictable for the economy, and that may be the new normal.

Keep in tune with how that impacts manufacturing by listening to Manufacturing Talk Radio and reading Metals & Manufacturing Outlook. Let us know your thoughts about our content in this issue. We appreciate you, and hearing from you.

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

Metals & Manufacturing Outlook / July 2019

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COVER STORY

TOP TRENDS IN MANUFACTURING WHAT THE HOTTEST ISSUES MEAN FOR THE INDUSTRY NOW AND IN THE FUTURE

by CRAIG ROVERE Reshoring - The U.S. Economic Boom is bringing jobs back home. With 19 straight quarters of sustained growth, the manufacturing industry is enjoying a powerful and long-overdue resurgence.

Propelled by innovation, demand, that sweet tax break in 2017 courtesy of a pro-manufacturing administration in the White House, companies are building new factories, hiring employees by the thousands and manufacturers that fled the country years ago are returning in droves.

A combination of relocated manufacturing and foreign direct investment in U.S. manufacturing brought 145,000 jobs to the United States in 2018.

This represents the second highest rate of job increase in recorded history.

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According to the Reshoring Initiative’s 2018 Reshoring Report, which includes data from 2010 through 2018, jobs repatriated from China account for a whopping 59% of all reshoring. The rate of reshoring combined with foreign direct investment jobs in 2018 was up nearly 2300% from 2010. Harry Moser, founder and president of the Reshoring Initiative as well as a recurring guest on Manufacturing Talk Radio, attributes a substantial portion of the increase to regulatory cuts, corporate tax breaks and an overall increase in U. S. competitiveness.

All together, the number of manufacturing jobs brought to the U.S. since the manufacturing industry’s employment low point in 2010 is over 757,000. While these numbers represent a huge success for the U.S. economy, Mr. Moser feels there is still more to be done. “With 5 million manufacturing jobs still offshore, as measured by

COVER STORY

JOBS ANNOUNCED, RESHORING + FDI, CUMULATIVE 2010 - 2018

our $800 billion/year goods trade deficit, there is potential for much more growth. We call on the administration and Congress to enact policy changes to make the United States competitive again.� said Moser.

The increase in jobs returning to the U.S. is likely to continue as the driving forces behind the manufacturing resurgence are not going to change or go away overnight. Corporate tax breaks and regulatory cuts, the deteriorating economic conditions in China, including rising wages and prices, and a closer look at the total cost of offshoring have manufacturers moving back to the U.S. in record numbers. The combination of less offshoring, more reshoring and foreign direct investment further accelerate the positive trend.

The purpose of the Trump tariffs, officially known as U.S. trade actions under Sections 301, 232 and 201 of U.S. trade law, is to first and foremost to reduce $800 billion/year non-petroleum goods trade deficit. Unfortunately the trade deficit keeps growing. In 2018 imports expanded around 6% from a $2.2 trillion base. In the same time frame Metals & Manufacturing Outlook / July 2019

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COVER STORY cumulative reshoring grew 23% from a $110 billion base. Overcoming a base that is 20x larger is the challenge, and a substantial one at that.

Experts agree that reducing the trade goods deficit will add over 5 million manufacturing jobs in the United States. The list of positive downstream effects is long and include reducing global pollution, a substantially strengthened defense industry, the restoration of the middle class and a reduction in income inequality. Some of the residual effects include a reduction in the opioid epidemic. According to Industry Week over 50% of those crippled by opioid addiction in the past 5 years had recently lost their manufacturing jobs. Building our manufacturing industry also strips China of the resources that allowed them to build a strong economy and military in the first place. Keeping manufacturing growing will further ensure a stronger, more secure America for generations to come.

Too many jobs, not enough skilled employees - As manufacturing jobs change from menial, repetitive tasks to more STEM-based job functions the industry is struggling to keep up. According to a report from the National Association of Manufacturers (NAM), in the first quarter of 2019, 25% of manufacturers reported having to turn down new business due to a lack of skilled employees. Indeed manufacturing has been slow to adapt.

The industry as a whole saw massive layoffs during the recession and when things improved, manufacturers invested heavily in new technology.

Unfortunately for the workers looking to return to their jobs, they found a manufacturing landscape

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they did not recognize. They had planned to stay in their positions with their specific skills for the duration of their careers. Now automation and new technology had rendered their skill sets nearly useless.

Mark Muro, senior fellow and policy director of the Brookings Institution said “We are operating under a very old model of employment. Our structure is left over from the days of the great American century where we dominated world economies.

Mass production was the norm and most people worked for one employer for their lifetime.”

While the dip in manufacturing is partially to blame, the industry also has a pretty serious image problem. Students perceive manufacturing as “dark, dirty and dangerous” and want little to do with that type of work. Today’s manufacturing is more based in robotics and engineering than riveting and hammering but the industry has struggled to get the message to tomorrow’s potential manufacturing employees.

COVER STORY

Apprenticeship programs are one way to get students familiar with today’s manufacturing.

Through programs like the Manufacturing Extensions Partnerships, like the ones provided by the New Jersey Manufacturing Extension Program, manufacturers can learn how to develop their manufacturing apprenticeship programs.

Another proven method is to set up actual working manufacturing companies within public high schools. Created in Allentown, PA in 2013 by the Manufacturers Resource Center, the ‘What’s So Cool About Manufacturing?” contest challenges students to produce videos that educate their peers on the exciting opportunities in today’s manufacturing sector. Teams of students are given camera equipment, software and together with their teacher coaches and manufacturing partner company, write, film and edit their stories.

Changing the minds of students regarding their attitude towards manufacturing will continue to be an uphill battle, but if manufacturing is to continue to thrive in the U.S., we must have skilled workers or risk once again watching manufacturing sail off overseas.

Tariffs - As the unusually hot summer of 2019 slogs on, so does the never-ending trade war between the U.S. and China. Tariffs, followed by more tariffs and the threat of even more tariffs dominate the landscape of this seemingly endless stalemate.

Tariffs have shaped the landscape of the manufacturing more than anything in recent history. The ongoing trade war with China has no end in sight. This has sent companies currently manufacturing in China looking for tariff-free alternatives in the region. Vietnam looked poised to benefit tremendously as manufacturers sought to take advantage of a cheap, technically proficient workforce ready to assemble electronic goods without the 25% hit they had to absorb when building their product in China. Unfortunately some manufacturers sought to cheat the system by moving Chinese steel through Vietnam in an attempt to conceal its true country of origin. This had the U.S. government playing whack-a-mole with tariffs, eventually levelling a hefty 400% tax on steel coming out of Vietnam.

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COVER STORY Earlier this year the Empire State Manufacturing Report took a sharp nosedive, falling 26.4 points to -8.6. This precipitous drop represents the first time the index has dipped into negative territory since October of 2016. Any number below zero represents a contraction in manufacturing activity in New York state. Analysts had predicted a significantly more favourable number of +10.

This negative activity was blamed on the mere threat of tariffs being imposed on imports from Mexico. The auto industry went into a panic as

government figures released Monday, July 15th show the country’s economic growth at the slowest it’s been in nearly thirty years. China’s GDP grew at a rate of 6.2 percent in the second quarter of this year, down from 6.4 percent in the first quarter. These numbers had a jubilant President Trump reaching for his phone to tweet “China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies

the Trump administration threatened to impose tariffs if Mexico didn’t comply with their demands regarding immigration. A last-minute agreement staved off what would have been an apocalyptic nightmare for the auto industry and its suppliers on both sides of the border. It remains clear the chaos that can result from using tariffs as a weapon with collateral damage in and around the manufacturing industry.

wanting to leave China for non-tariffed countries.

Thousands of companies are leaving. This is why China wants to make a deal with the U.S., and wishes it had not broken the original deal in the first place.”

The tariffs appear to be having the desired effect on the Chinese economy. New Chinese

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With very little movement on either side, the tariff stalemate continues. Threats from President Trump to increase tariffs have had little positive effect on negotiations as the summer, and the tariffs, drag on.

COVER STORY Environmental Regulation - The debate over climate change has never been, for lack of a better term, hotter. On the one side you have the scientific community, armed with studies and predictive models and tons of research that would paint the manufacturing industry as the main reason for heat waves, melting polar ice caps and droughts. On the other side is the manufacturing industry, with their own research and studies that insist that the environment is subject to planetary fluctuations and swings in temperature both up and down and that this has always been and always will be part of living on planet Earth. Each presents a convincing argument and the only conclusion one can truly arrive at is that the data can be spun to reflect whatever the folks who paid for the studies want it to say.

emissions levels by the year 2050. This has some manufacturers wondering if they’ll be able to turn the lights on without running afoul of the new targeted emissions levels. The new rules are pretty vague about how reductions will be tracked or what penalties non-compliant companies will face. Details such as these will be determined by committees to be set up in the coming years.

Regardless of the reason, be it in the interest of compliance or a genuine interest in not killing the planet, manufacturers will need to toe the line to some degree when it comes to environmental regulation. It won’t be an easy road.

Manufacturers instinctively distrust regulation.

Any regulation that could impede production will be met with stiff resistance. The compromise lies in the ability to reduce environmental impact without hurting production.

Here in the United States, manufacturing is flourishing in a way it hasn’t in a very long time and the economy as a whole has directly benefited from this resurgence. Nobody, especially the current administration wants to stifle that growth, but the scientific community can be pervasive and has backers on both sides of the isle. Some manufacturers have been pressured into taking steps to reduce their impact on the environment, usually in response to some incentive or another or as the result of new legislation. New York state recently enacted ambitious greenhouse gas reduction targets in its Climate Leadership and Community Protection Act. Under this new legislation the state as a whole must reduce greenhouse gas emissions to 85% of 1990

As 2019 reaches the halfway point, these issues will continue to shape the manufacturing landscape. Metals & Manufacturing Outlook can help you keep tabs on these and other critical issues in manufacturing. Subscribe to receive a new issue every month at steelforge.com.

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MANUFACTURING OUTLOOK

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING CONTRACTS A LITTLE FURTHER. U.S. PMI STAYS IN EXPANSION. EUROPE AND OTHERS STILL SHAKY. A U.S. - CHINA TRADE DEAL? BRITAIN’S NEW PM.

by ROYCE LOWE The Global Manufacturing PMI went a little further into contraction in June at 49.4. Japan, the Eurozone, Canada and the UK were also in contraction, while the U.S. stayed at its lowest PMI reading in years - although still growing.

There is hope that President Trump will make a significant trade deal with China’s chairman Xi. The BLS jobs report for June shows the addition of 224,000 non-farm payroll jobs. The unemployment rate increased to 3.7 percent.

The forecast was for 160,000 new jobs. Most notable gains were seen in professional and

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business services, health care, transportation, and warehousing sectors. Manufacturing employment took an unexpected jump by adding 17,000 jobs, with economists having predicted 3,000 jobs for the sector.

The Bureau of Economic Analysis recently released its ‘third’ estimate for the annual rate of Real GDP growth in the first quarter of 2019, putting it at 3.1 percent. The figure for the fourth quarter of 2018 was 2.2 percent.

Britain’s new Prime Minister is likely to be Boris Johnson, he whose lying was in large part responsible for the pro-Brexit referendum. Perhaps now he can help clean up the mess he created.

MANUFACTURING OUTLOOK The ISM PMI figure for U.S. manufacturing slipped back from 52.1 percent in May to 51.7 percent in June, representing the 34th consecutive month of growth in manufacturing. The overall economy grew for the 122nd consecutive month.

IHS Markit’s remarks on the U.S. noted that the PMI was at its second-lowest since September 2009, when it was at 50.6 in June, virtually unchanged from May’s 50.5. Production and new orders showed modest growth, and employment increased at its slowest rate since August 2016. Export orders increased at their quickest pace this year.

The U.S. Supreme Court refused to hear a challenge to Trump’s steel tariffs brought by a steel body, and turned away an appeal that challenged his use of national security as the legal justification for his trade agenda.

The FAA has ordered more changes to address a new software issue on the 737 Max, according to “people familiar with the subject.” This did not involve the system linked to the two fatal accidents, but could produce an ‘uncommanded dive’ similar to what occurred in the crashes according to “a person.” This may delay release of the 737 Max from its grounding. Meanwhile CEO Dennis Muilenberg has offered $100 million to the families of the 346 crash victims.

U.S. crude steel production for May 2019 was 7.653 MT, up 5.4 percent year over year.

Primary Global Aluminum Production in May 2019 was reported at 5.438 million tons, with production in China at 3.087 million tons, representing 57 percent of world total. Production was 464,000 tons in GCC; 374,000 tons in the rest of Asia; 293,000 tons in Western Europe; 326,000 tons in North America and 353,000 tons in Eastern and Central Europe.

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.

Ford will eliminate some 20 percent of its European workforce and close six factories in this money-losing region. This is being done as part of Ford’s preparation for its foray into electric and self-driving cars. The company is close to sealing a deal with VW to join forces on these vehicles.

STEEL PRODUCTION CONTINUES TO RISE. World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production – was at 162,744 MT for the month of May, and up 5.4 percent year over year.

China’s crude steel production for May 2019 was up a whopping 10.0 percent year over year, at 89 million tons.

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CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

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

Combined Sectors The last month has been a bit ragged as far as national data is concerned. Some of that concern has started to appear in the latest Credit Managers’ Index (CMI). In addition, the Purchasing Managers’ Index (PMI) for this month shows the lowest reading seen in over 10 years—barely above the threshold for contraction at 50.1. This is just for the manufacturing index as the service version has not yet been released. There have been other warning signs—durable goods orders are down and so is capacity utilization. “The dip in the overall CMI looks pretty positive in comparison to other economic trends as it slipped only slightly from 55.7 to 55,” said NACM Economist Chris Kuehl, Ph.D. “The drop in manufacturing, however, was more pronounced.”

The index of favorable factors stayed comfortably in the 60s, but there was a slight decline in the numbers from last month’s 63.8; it is now at 61.4.

The index of unfavorable factors improved by a bit moving from 50.2 to 50.7. “The bad news is the two-month positive trend has ended,” Kuehl said, “but the good news is there has not been the dramatic decline seen in some of the other indicators.”

The news from the favorable categories continues to be fairly decent even with the decline. The sales numbers are now at 60.4, close to the average seen over the last few months. The new credit applications data also slipped back to what was expected with a reading of 62.4 compared to

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64.2 the month prior. The dollar collections data improved a little. Kuehl noted that this is always very good news to a credit manager. It was at 59.8 and is now at 60.3, the highest reading since November of last year. The amount of credit extended slid from 65.4 to 62.5, but this is obviously still well into expansion territory (a reading above 50).

The improvements in the nonfavorable categories were subtle, but overall there was some gain and stability. The rejections of credit applications improved from 51.8 to 52.4. “This is always a good sign when overall applications are down,” Kuehl said. “It means those seeking credit are more creditworthy.” The accounts placed for collection also improved and escaped the contraction zone.

The last time numbers for this category were in the 50s was in September of last year. The reading this month was 50 and last month it was at 47, a pretty substantial improvement. The disputes category stayed right where it was last month at 48.6. This remains in contraction territory, but not quite as deep as has been the case earlier in the year. The reading for dollar amount beyond terms fell from expansion territory with a reading of 49.8 compared to 51.3 in May. He explained that this is a concern as slow pays are often the first sign of some impending trouble. The dollar amount of customer deductions entered expansion territory for the first time since February with a reading of 50, up from 49.3. He added that this is another early warning sign and could be the start of more serious issues. The filings for bankruptcies

CREDIT MANAGERS’ OUTLOOK saw some minor improvement (53.3 to 53.5). The important point is that this category has been comfortably in the expansion zone for well over a year.

Kuehl summarized the combined sectors for June as follows: Generally speaking, the data this month trends positive albeit at a slower pace than was attained earlier. Given the CMI often predicts the behavior of the PMI, it will be interesting to see what happens in the months ahead. Will the PMI slump continue or will there be a recovery sooner than later? The news conveyed by the CMI has been a little mixed of late, but the nice recovery in the nonfavorable categories has been encouraging. There were only two categories that were in the contraction zone this month; last month there were three. That is a trend one can only hope will continue.

Manufacturing Sector According to Kuehl: For the last several months, the manufacturing sector has been credited with fueling the economy in the U.S. and the world as a whole. At the same time, the biggest threats to the global economy have also impacted the manufacturing industry. Most of the concerns have revolved around the effect of the trade and tariff wars. Manufacturers were initially hit by the steel and aluminum tariffs, but then came the attacks on China, Europe and Mexico (among others). These are markets that the U.S. manufacturer needs, so the U.S. is affected indirectly. The Chinese slowdown has meant China buys less from other nations, which are often the markets for U.S. exports. This angst is starting to show up in measures like the Purchasing Managers’ Index and this month’s CMI. The overall score slipped, but not dramatically, as it went from 55.4 to 54.9, still higher than at any point since November of last year. The index of favorable factors remained in the 60s, but fell a little from 63.1 to 60.4. The index of unfavorable factors improved and clawed its way further into expansion territory with a reading of 51.3 compared to May’s 50.3.

The sales data fell quite a bit from the previous month’s reading as it dropped from 63.3 to 58.5, but this was more in line with the data seen over the last several months. Last month looks like

the anomaly. The new credit applications shifted slightly downward with a reading of 62.5 compared to 63.9 in May. The dollar collections data slipped out of the 60s, but only by a hair, going from 60.5 to 59.2. The amount of credit extended also downshifted a little (64.6 to 61.3). “The good news for this set of readings is that all are very comfortably in the expansion zone—two are in the 60s still,” Kuehl said.

There was a bit more variety with the unfavorable categories. The rejections of credit applications ticked upward a little with a reading of 53.8 after 52.5 last month. “This is always a positive sign as it suggests that more of the applicants are qualified and successfully getting the credit they have requested,” he said. Accounts placed for collection saw a nice jump back into the expansion zone with a reading of 53.5 up from 49 in May. The disputes category stayed roughly the same with a reading of 48.3; May’s reading was 48.2. It is close to leaving contraction, but has a way to go yet. The dollar amount beyond terms fell a little from the 51.8 noted last month, but it is still in expansion territory with a reading of 50.2. The dollar amount of customer deductions rose a bit, but still sits in contraction territory with a reading 49.8, up from 48.4. The filings for bankruptcies stayed right where it was last month with a reading of 52.

“Thus far, the worries that have affected the industrial community have not sent the manufacturing economy into a tailspin. The threats posed by the trade and tariff wars have been put off a number of times as there have been exemptions granted to major steel exporters to the U.S. (Brazil, South Korea),” Kuehl said. “It is expected that both Canada and Mexico will be next. The European tariffs have been delayed and the threats to Mexican business have not materialized. Even the most draconian of the restrictions on China have been put off for the time being.”

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NORTH AMERICAN OUTLOOK

JULY 2019

NORTH AMERICAN OUTLOOK

by ROYCE LOWE

The Institute of Supply Management PMI figure eased back a little further from 52.1 in May to 51.7 in June. New orders are contracting, production and employment are up slightly, supplier deliveries are slowing slower and backlogs are contracting. Raw material inventories and employment are growing faster; production is growing slower; supplier deliveries are slowing slower; inventories are growing slower and customer inventories are too low.

Order backlogs are contracting. Raw materials inventories are contracting and customer inventories are too low. Prices are down, exports are up and imports are unchanged.

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Of the 18 manufacturing industries, 12 reported growth in June, in the following order: Furniture & Related Products; Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Chemical Products; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery. The five industries reporting contraction in June are: Apparel, Leather & Allied Products; Primary Metals; Wood Products; Transportation Equipment; and Fabricated Metal Products.

Comments from the manufacturing industry are emphasizing the tariff effect in a negative vein. A Food, Beverage and Tobacco comment referred

NORTH AMERICAN OUTLOOK All this was accompanied by a rise in employment numbers for the second consecutive month.

to movement of shipments from U.S. plants to plants in Canada and Europe to avoid said tariffs.

Transportation equipment complained, re: the aerospace effect, or the disruption with the 737 Max. Comments are definitely less bullish than they were some months ago.

THE COMPLETE ISM REPORT ON BUSINESS MAY BE FOUND AT THE END OF THIS ISSUE CANADA saw further declines in new orders and production, but employment was maintained in June. The PMI was up very slightly in June at 49.2 from May’s 41-month low of 49.1, in contraction territory. The month of June saw the steepest fall in backlogs since (data collection began in) October 2010. Export sales were mostly unchanged in June, stopping a three-month period of decline. There was a drop in business optimism.

Canadian passenger car and light truck sales for June were down 7.2 percent year over year, with passenger car sales down 21.3 percent, and truck sales down 1.0 percent. For the first six months of the year, sales were down 5.5 percent year over year, with passenger car sales down 15.1 percent, and trucks down 1.4 percent. Canada produced 1.150 MT of crude steel in May, up 12.8 percent year over year.

MEXICO saw its PMI at a joint-survey low as new orders and production fell back into contraction.

There was a reduction in input buying. The PMI in June fell to 49.2 from May’s 50.0 figure. There was subdued client confidence and falls in employment. Mexico produced 1.670 MT of crude steel in May, down 4.1 percent year over year.

The price of domestic U.S. hot-rolled coil is running around $520 per short ton, that of coldrolled coil around $685. Recent price spreads for non-ferrous metals are: copper from $2.63 per lb in early June to $2.68 early July; aluminum effectively unchanged at $0.80; nickel from $5.35 in early June to $5.55 in early July ; and zinc from $1.19 in early June to $1.135 in early July.

ISO9100:2015 and AS9100D

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METALS OUTLOOK

JULY 2019

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

by ROYCE LOWE Safety and fuel economy are probably the two most important parameters by which modernday automobiles are measured. They have led to a requirement for new materials and higher standards. Advanced high-strength steels (AHSS) have for some years now been helping engineers meet requirements for safety, efficiency, emissions, manufacturability, durability and quality; all at lower cost. AHSS give high strength and other advantageous properties while maintaining the high formability required for manufacturing.

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AHSS have specific chemical compositions, and multiphase microstructures that result from precisely controlled heating and cooling processes.

This all follows many years of research and development into the effects of small amounts of alloying elements, and hot rolling and finishing temperatures on the strength and formability of these steels.

Conventional low- to high-strength steels include mild, interstitial-free - very low in carbon and nitrogen, very good for extra-deep drawing - bakehardenable - and high-strength low-alloy steels.

They have simple structures and have been widely used for many years.

METALS OUTLOOK A bake-hardenable steel may be defined as any steel that shows a capacity for a significant increase in strength through the combination of work hardening during part fabrication and strain aging during a subsequent thermal cycle such as a paint baking operation. There must be sufficient carbon and or nitrogen in solution to cause strain aging. Such steels are generally aluminum-killed, with sufficient aluminum to combine with nitrogen as aluminum nitride (AlN.) AHSS include dual- and complex- phase structures, and in fact, comprise just about every phase known to steel. For a long time these steels lived in the domain of the Research and Development laboratory, where alloying additions were studied: they were then transferred to hot-rolling mills, where the further effects of rolling and coiling temperatures, coupled with the various steel compositions were more fully investigated.

Each steel has unique microstructural features, alloying additions, processing requirements, advantages and challenges associated with its use.

Each type has unique applications where it might be best employed to meet performance demands of the part to be made from it. The development of AHSS in automotive applications is ongoing. At the same time, as the composition and properties of the various AHSS are being researched, so are their applications in the various areas of the automobile. Many new forming methods have been developed, in fact it was a necessity for some steels whose forming properties were somewhat unknown at the time of their development.

The future of AHSS for automotive applications is bright The future of AHSS for automotive applications is bright. Many groups are researching these new steels to better understand their properties and to continue tailoring unique sets of characteristics.

Others are focused on improving the technologies necessary for manufacturing parts made of AHSS. The steel and automotive industries have forged numerous partnerships to develop the materials and technologies necessary to put the next generation of safer and more environmentallyfriendly vehicles on the road.

In short, using stronger steel enables engineers to use thinner steel, to produce a lighter-weight part while maintaining or improving the strength and other performance properties of the material. We will return to this topic in future issues.

Metals & Manufacturing Outlook / July 2019

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AEROSPACE OUTLOOK

JULY 2019

AEROSPACE OUTLOOK

by ROYCE LOWE

It takes about 3.5 million components from around the world to build an Airbus A350 as assembled at the company’s factory in Toulouse.

Ten of these aircraft are completed per month.

The aircraft’s airframe is made up of seven sections, of which three are assembled into the fuselage, two being made at another site in France and a third in Germany. The two wings are made in Britain, then transferred to Germany to be finished. The tail fin and horizontal-stabilizer assembly are made in Spain.

These parts are flown to Toulouse in special transport planes called Belugas - after the whale they resemble - and they are made mostly of carbon fiber reinforced plastics (CFRPs). These are composite materials that cannot be riveted as can metal because of the damage this causes to the fibers. They are therefore held together by lock-bolts inserted through 10,000 specially drilled holes in the flanges where the sections overlap.

Assembly of the sections is quite a complex process. Connecting the sections involves fitting them together, drilling holes, unfitting them, cleaning debris from the holes and surrounding areas, applying a sealant to the flanges, fitting the pieces back together again and then inserting the lock-bolts. At this point, all those cables

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Metals & Manufacturing Outlook / July 2019

required to keep such a modern aircraft flying which have been pre-fitted into the airframe sections are joined together.

“Monuments” are installed in the fuselage sections before the final bonding. These are pieces of equipment - galleys, crews’ quarters etc. - that would not subsequently fit through the cabin doors. Following the remaining fitting out and painting, a pair of engines is fitted, one under each wing. This whole process takes about a month.

Airbus and Boeing dominate civil aviation, and presently have no significant competition.

They both have widespread supply chains, and competition between the two companies is fierce.

The rivalry helps along technical innovations.

AEROSPACE OUTLOOK The airframe on the A350 is 53 percent composite materials, and the weight reduction, according to Airbus, makes it 25 percent more fuel efficient than previous planes. This is a huge saving for the world’s airlines who, according to the International Air Transport Association, spent some 25 percent of their operating expenses, $180 billion in 2018, on fuel. Boeing claims its 787 Dreamliner is 50 percent composites and that it is 20 percent more fuel efficient than previous planes.

Composites, mostly CFRPs, neither corrode nor crack from metal fatigue, and of course, are light.

But damage is less obvious than to metal because there is no bending or denting. This is one reason why Airbus fits hundreds of sensors, from voltmeters to strain gauges, all over its A350s. These can warn of problems invisible to the eye.

Production of composites has advanced to the stage where giant looms are used to weave carbon-fiber ribbons into huge sheets. The looms can vary the tension in warp and weft such that sheets thus formed will take on the shape of the component of which they will become a part. Such speeding up of production will become crucial in light of recent forecasts from the two companies, with Airbus forecasting a 4.4 percent annual growth in air traffic over the next twenty years requiring some 36,600 new passenger planes and 830 cargo aircraft for a total value of $5.8 trillion. Boeing is somewhat more bullish, forecasting, in 2018, 4.7 percent annual traffic growth, over 41,000 new aircraft for a total value of $6.1 trillion. Its more recent estimate goes for 44,040 new aircraft valued at $ 6.8 trillion.

Both companies are working on methods to improve production of CFRPs, and research is presently being carried out on a product called spider silk which is stronger, tougher and lighter than almost any man-made material. The not-toodistant future is likely to see great strides made in materials and manufacturing technology, not least due to a “healthy” competition between the world’s two civil aviation giants.

Competition between these two giants is indeed fierce. Having been more than miffed at Boeing’s recent 200 plane, $24 billion order for the (still grounded) 737MAX from IAG, British Airways’ parent company, on which Airbus wasn’t even invited to bid, Airbus came out of June’s Paris Air Show with orders for 250 planes, including an order from Air Lease Corp for 27 of its newly-launched A321XLR, together with 23 A321neos, and 50 A220s - the plane it recently took over from Bombardier. At today’s prices, before discounts, that’s worth $11 billion. It should be noted that the IAG order is presently based on a non-binding letter of intent.

The Airbus XLR, for extra long range, will carry 240 passengers a distance of 4,700 nautical miles.

Boeing is eyeing the development of an NMA, that will carry 270 passengers a distance of 5,000 nautical miles.

Competition is good for both technology and business. Imagine if these two were to merge.

Metals & Manufacturing Outlook / July 2019

21

AUTOMOTIVE OUTLOOK

JULY 2019

AUTOMOTIVE OUTLOOK

by ROYCE LOWE

THE SHUTTERED GM PLANT IN LORDSTOWN, OHIO

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Metals & Manufacturing Outlook / July 2019

AUTOMOTIVE OUTLOOK U.S. LIGHT VEHICLE SALES……..Light vehicle sales were down 2.2 percent in June. Ford, like GM, is now reporting by quarter. Ford’s sales for quarter 2, at 650,336 units, were off 4.1 percent year over year. Ford’s trucks were up 7.5 percent; SUVs down 8.6 percent and passenger cars down 21.4 percent.

The SAAR for the month of June is 17 million.

GM is looking to hire more temporary workers at its U.S. plants and to cut its health care costs according to “people familiar with the customer’s thinking.”

Its union wants nothing to do with this.

It’s contract time. Can GM and the UAW hammer out a new four-year labor deal in the coming months? This time will be much tougher than the last, when things were really good for the auto industry and GM was looking to reap record profits. This time, with GM putting four plants and 2,800 jobs on the line, some workers have been forced to move factories or quit the company.

With these plants closing, GM is wanting more temporary workers and wants lower health care costs.

be a bone of contention during this summer’s negotiations. GM has an agreement whereby workers in some of its plants are paid less for jobs such as handling parts and materials preassembly. Four of its 33 plants work under such contracts.

On the other hand the union wants GM to increase its investment in U.S plants. GM says that of the 2,800 employees at issue, 1,500 have been relocated to other factories and there are jobs for the remaining 1,300 employees.

The UAW was particularly angry at GM starting to build the Chevy Blazer in Mexico just as it decided to close Lordstown. GM is the largest automaker in Mexico with 16,000 workers. The company argues that it has invested $23 billion in the U.S. since 2009, five times its investment in Mexico. Its U.S. workforce at 48,000 is triple that in Mexico. It will be a long, hot summer for GM and the UAW.

It’s obviously all about money. Workers at Japanese rivals Toyota, Nissan and Honda make $50 per hour in wages and benefits, GM workers $63 per hour, according to “people who asked not to be named.” GM’s argument will be that, if it can hire more temporary workers who are paid less and have a different health plan, it can offer greater security to its unionized employees.

“The people” say that GM would like to reduce its approximately $900 million annual health care bill for union workers, including getting greater worker contributions.

Japanese automakers presently employ some 20 percent temps compared to around 7 percent at GM. These workers are not on the way to becoming full-time GM employees, which will

BMW’s Chinese sales were up 33 percent in May after the company started local production of its X3 SUV, enabling it to avoid the 15 percent Chinese import tariff on cars that were previously shipped in from BMW’s South Carolina plant.

And Vietnam has started production of a hatchback, the Fadil, put out by Vinfast, the automotive unit of real estate conglomerate Vingroup JSC. The car will cost the equivalent of $17,000, but it has a tough row to hoe, since the Vietnamese consumer is very quality conscious, and it will take some time for the new model to be accepted.

But it is a further step on Vietnam’s development of a manufacturing sector in one of the word’s fastest growing economies that is up an average annual 6.6 percent since the year 2000.

Metals & Manufacturing Outlook / July 2019

23

ISSUES OUTLOOK

JULY 2019

ISSUES OUTLOOK

by ROYCE LOWE

Montreal, like many big cities, has what we might term an infrastructure problem. The city is, in actuality, an island, and as such depends on a number of bridges and tunnels to transport people to and from the island to the north and south shores.

Montreal has extremes of temperature, from balmy and humid summers to freezing, snowing, blowing winters. These play havoc with the city’s roads and bridges, and one, in particular, had suffered to the point where something had to be done.

Now, Montreal has a new bridge, and it’s open. On June 24, Quebec’s national holiday, the bridge opened south to north. On July 1, Canada Day, it opened north to south. The bridge spans the mighty St. Lawrence river and is named the Champlain bridge or le pont Champlain, after the French explorer and navigator Samuel de Champlain who founded Quebec City in 1608, Montreal a few years later.

The original Champlain bridge opened in 1962 and it was thought at the time it would be good for seventy years. Nobody knew how traffic volume would increase in the coming years and all that, coupled with some of the harshest winter conditions - snow and salt - on the continent, resulted in an early unforeseen deterioration. A decision was taken to build a new Champlain bridge and after four-anda-bit years, around $C4.4 billion later, the bridge is open. It was six months late and over $200 million over budget, not really too bad these days.

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The bridge is 3.4 kms (2.12 miles) long and has three lanes in each direction plus a central deck for public transit and a path for cyclists and pedestrians.

Construction began four years ago alongside its predecessor, and at the peak of construction some 1,600 workers were involved. The bridge is toll-free.

The existing bridge will be dismantled over the next three to four years at a cost which could reach $400 million.

It is estimated that this bridge will last 125 years, thanks to significant improvements in concrete and rebar technology. No more just plain old rebar, but steel that is protected against any instances of salt penetration through the concrete. In any event, officials have placed a time capsule inside the structure that includes a container of maple syrup, a hockey puck signed by the Montreal Canadiens hockey team, an LGBTQ pride flag and Mr. Mailhot’s Chief Engineer on the project - iron engineering ring.

The hopes of future generations of Montrealers will go with this ring.

The bridge is not a straight line. It curves gently so that Montreal-bound motorists get a view of the city skyline opening up before them. It isn’t just one long slab either, rather three side-by-side decks separated by open space, allowing sunlight to filter onto the supporting piers below.

It’s a bridge, a testament to engineering and to manufacturing. It is also, as befits its city, a thing of beauty.

ENERGY OUTLOOK of energy produced is falling at a significant rate. At the moment, the EU, the UK, and the Scottish government are footing the bill. With Brexit looming there is uncertainty regarding funding, but the success of the project may lead to subsidies no longer being necessary. Spain is involved, Finland is involved; over 20 percent of Europe’s wave energy is found around the Scottish coast.

JULY 2019

ENERGY OUTLOOK

by ROYCE LOWE

Unlike most forms of renewable energy, tidal energy is predicable.

Generation can be predicted every fifteen minutes for the next 25 years.

The turbines are predicted to last 25 years and will be removed for maintenance every six years.

ONE OF SCOTLAND’S MEYGEN TIDAL STREAM TURBINE

Somewhere in the U.S. government, there is an Office of Energy Efficiency and Research Energy, EERE, that has an operating budget of $ 2.3 billion, which it spends on research into EVs through to energy powered by ocean waves. If Trump has his way, as he sometimes does, this budget will be cut by some 70 percent to $700 million. This is because The Trump does not believe in climate change, is adamant that the U.S. is doing its best to reduce emissions, and thinks that the energy situation in the U.S. is just dandy.

Scotland, that little country just north of England, for the moment still part of Britain, hence the EU, is presently powered almost 70 percent by renewable energy. It hopes that figure will be 100 percent by 2020. There is, in Scotland, what is termed the MEYGEN project, the world’s largest of its type, which produces energy from tidal currents. This works through turbines with three blades each 30 feet long that are installed on steel bases on the sea floor, some 100 feet under water. Installation of the turbines on the bases takes 30 to 40 minutes.

Sounds good: no noise, no unsightly machinery, just three turbine blades - made from carbon fiber - that spin 7 to 15 times per minute. The power thus generated is fed into the national grid.

The ongoing problem is money, subsidies to be more precise, but on the upside here, the cost

So why all the talk of tidal energy in Scotland?

Because there are similar projects in development in the U.S. In fact, off the coast of Oregon, at what is known as the Pacific Marine Energy Center - South Energy Test Site, or PMEC - SETS, it seems the U.S. could have an edge over its competitors.

Elaine Buck, Technical Manager for wave and tidal energy research at the European Marine Energy Centre at the Orkney Islands, says the energy density of Pacific Northwest Waves is much more severe than in Orkney. EMEC estimates that annual wave power averages in the Pacific Northwest are almost double those on the Scottish coast. Testing and demonstrating a developer’s technology in such extreme environments suggests that these devices may be able to also find success elsewhere in the world.

The U.S. project is still on the drawing board, but there will doubtless be collaboration between Scotland, Europe and the U.S. to further the serious possibilities of wave energy. In fact, EMEC is partnered with Northwest National Marine Renewable Energy Center’s PMEC - SETS. The U.S. project will need funding, and in light of the present president’s reluctance to fund anything but fossil fuel, it will be up to states or the private sector to step in and keep this valuable work going.

Metals & Manufacturing Outlook / July 2019

25

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS For 2019, it is two quarters down, and two to go! The story line from global business survey data for the first half is deceleration among the major manufacturing indexes that we follow and instances of chaos due to tariffs & trade positioning – primarily in Q2.

The U.S. non-manufacturing sector, India, and Brazil performed significantly better than the rest of the world. The U.S. manufacturing sector lost momentum, but remained at a level that maintained employment gains of the last two years.

With most PMIs hovering near the 50 mark, and many

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Metals & Manufacturing Outlook / July 2019

of the global economies at or approaching stall speed, we expect to see global GDP significantly impacted (if not already). The scatterplot on the next page illustrates the weakness that we find spread around the globe as 13 of 18 Indexes are below the mid-point.

The non-manufacturing sector remained robust in June. U.S. non-manufacturing typically outperforms manufacturing in the later part of the U.S. business cycle by at least two percentage points. Also, the contribution of services is four times greater than that of manufacturing. The strength of New Orders and Business Activity in non-manufacturing appears to be enough to carry the U.S. forward through Q3, hopefully buying enough time for trade chaos to subside.

Eurozone: The Eurozone PMI (47.6, -0.1) contracted for the fifth consecutive month in June. While the rate of m-o-m contraction persists at under 48 percent, the trend in the EZ is more of an issue. In June, EZ growth was found in Greece (52.4, -1.8), France (51.9, +1.3), and Netherlands (50.7, -1.5) with an average PMI of 51.6.

GLOBAL PMI OUTLOOK On the negative side, Germany (45.0, +0.7), Austria (47.5, -0.8), Spain (47.9, -2.2), Italy (48.4, -1.4), and Ireland (49.8, -0.6) averaged 47.7.

India: India’s PMI (52.1, -0.6) expansion continued for its 23rd consecutive month. India’s Manufacturing PMI averaged 52.9 in 1H 2019 – a notable improvement over the 2018 average of 52.3.

United Kingdom: The UK/CIPS PMI (48.0, -1.5) fell further into negative territory from weakening domestic demand and softening global growth. It appears that the uncertainty surrounding BREXIT has finally slowed the manufacturing sector.

South Korea: The PMI (47.5, -0.9) fell further into contractionary territory in June. The PMI posted a reading below 50 percent for a second consecutive month.

China: China’s Official Report, the CFLP PMI (49.4, unch), and the Caixin Manufacturing PMI (49.4, -0.9) remained near the mid-point and failed to provide a true indication of the tariff impact on China.

North America: Canada’s PMI (49.2, +0.1) contracted for a third consecutive month after 38 consecutive months of growth. Mexico’s PMI (49.2, -0.9) averaged 50.4 in 1H 2019, indicating little change overall for the manufacturing sector.

GLOBAL OUTLOOK

by ROYCE LOWE

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – eased a little further into contraction in June to 49.4 from May’s 49.8 reading.

almost seven years, and business optimism down accordingly.

Operating conditions deteriorated again in intermediate and investment goods industries; consumer goods were better, despite slow growth not seen for three years.

The majority of the thirty nations for which a June PMI was available showed contraction, including China, Japan, Germany, the UK, Taiwan, South Korea, Italy and Russia. The U.S., Brazil, India and Australia registered expansion.

Production fell for the first time since October 2012, with new orders contracting at the fastest pace for

International trade continued to weaken at the end of the second quarter, with June seeing new export business decline for the tenth straight month and at the joint - fastest pace for six years. There were declines in the euro area, China and Japan and expansion in the U.S. and India.

Metals & Manufacturing Outlook / July 2019

27

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) continued in contraction for the fifth consecutive month, with the PMI easing back very slightly from May’s 47.7 to 47.6 in June. There was continuing decline in new orders, both domestic and export, and in production. Input prices were down as delivery times fell to the greatest degree in a decade Consumer goods’ operating conditions improved to the greatest degree since January, whereas intermediate and investment goods producers observed marked reductions. Trade tensions and problems with the auto industry are held to be responsible for many of the problems in the manufacturing industry. Job cuts were registered for the second successive month, with Germany, Italy, and Spain all showing reductions in employment. Metal prices were reported lower, as were crude oil prices.

Crude steel production in Germany in May was at 3.470 MT, down 6.2 percent year over year; in Italy: 2.215 MT, up 1.1 percent year over year; in France: 1.235 MT, down 7.6 percent year over year, and in Spain: 1.276 MT, down 7.1 percent year over year.

Russia’s crude steel production for May was at 5.950 MT, down 2.7 percent year over year; Ukraine’s was 1.827 MT, up 7.8 percent year over year.

Western European car sales were down 8.4 percent year over year in June, with Germany down 4.7

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Metals & Manufacturing Outlook / July 2019

percent, France down 8.4 percent, Spain down 8.3 percent and Italy down 2.9 percent. The UK was off 4.9 percent. For the YTD, sales in Western Europe were down 3.5 percent.

IHS Markit’s PMI for the UK was at its lowest since February 2013, falling to 48.0 in June from May’s 49.4. Production was down as new orders - both domestic and export - contracted. Business confidence dropped amid ongoing uncertainty, but in spite of this, some 44 percent are looking to higher production in a year’s time.

Employment was down for the third straight month, with job losses in the intermediate and investment goods sectors. Backlogs were down at one of the fastest rates in six-and-a-half years.

The UK produced 0.650 MT of crude steel in May, up 13.3 percent year over year.

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by ROYCE LOWE

CHINA spoke of trade tensions. There were renewed drops in new orders, both domestic and export. There was job shedding and fewer purchases of raw materials and semi-finished items. The pace of contraction was slight only.

June’s PMI was 49.4, down from May’s 50.2.

CHINA produced 89.091 MT of crude steel in May, up 10.0 percent year over year; Japan 8.676 MT, down 4.6 percent year over year; India 9.196 MT, up 5.1 percent year over year and South Korea 6.371 MT, up 2.2 percent year over year. Taiwan produced 2.040 MT in May, down 2.6 percent.

Passenger car sales in China continue to drop quite dramatically. Passenger car and commercial vehicle combined sales in May were off 16.4 percent year over year.

JAPAN fell a little further into contraction in June, with a PMI of 49.3, down from May’s 49.8.

Production and new orders fell at the fastest rate since March, and there was tepid export demand amid U.S. - China trade tensions.

Subdued auto sector trends contributed to weaker manufacturing performance.

Selling prices were down for the first time since December 2016. Employment growth dropped to its weakest in two-and-a-half years. There was a sharp reduction in backlogs.

INDIA saw a moderate increase in new orders, production, and employment in June, with consumer goods the key source of growth, where strong increases in new orders, production, and employment were registered. There were modest increases in production and new orders in intermediate goods, and capital goods were mostly unchanged. Additional staff was hired and further raw materials purchased. In spite of all this, June’s PMI was pegged at 52.1, down from May’s 52.7. There is ongoing business optimism.

Metals & Manufacturing Outlook / July 2019

29

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE

BRAZIL saw increases in new orders and production in June, along with an increase in input purchasing. Business sentiment improved amid more job losses. Exports were down at the sharpest pace in over two years.

The PMI in Brazil increased from 50.2 in May to 51.0 in June. Intermediate and investment goods performed better than consumer goods. In spite of job cuts, backlogs were reduced. Brazil’s crude steel production for the month of May was 2.751 MT, an increase year over year of 2.9 percent.

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Metals & Manufacturing Outlook / July 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 5

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE by 3D HUBS

PART 5 OF A 6 PART SERIES:

Start CNC Machining

3D Hubs make on-demand manufacturing easy, from prototyping to production. Their online service provides readily available production capacity for the fastest lead times and most price-competitive parts.

Simply upload your designs to get instant quotes for 3D printing, CNC machining, and Injection Molding. Our automated Design for Manufacturing (DFM) analysis detects any potential issues before production begins. Taking the risk out of manufacturing.

Founded in 2013, 3D Hubs has since produced more than 2,000,000 parts, serving engineering companies big and small.

Metals & Manufacturing Outlook / July 2019

31

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 5

PART 5 START CNC MACHINING - WITH YOUR PARTS DESIGNED AND OPTIMIZED FOR CNC MACHINING, IT IS TIME TO START THINKING ABOUT MANUFACTURING. IN THIS SECTION, WE WALK YOU THROUGH THE 3 SIMPLE STEPS NEEDED TO MANUFACTURE CUSTOM PARTS WITH CNC MACHINING.

Step 1: Export your design to a CNC-compatible CAD file format

The file formats predominantly used in CNC machining are STEP and IGES. These formats are open-source, standardized and can be used across platforms.

Export your designs directly from your native CAD software into the STEP file format.

On 3D Hubs, you can also upload files and get an instant quote for file formats used in your the native CAD software, including SLDPRT, 3DM, IPT, SAT and X_T.

Step 2: Prepare a technical drawing A technical drawing is not always required for machining parts with CNC. Yet it is recommended to include one in your order as it has information that is not presented in a STEP file.

A technical drawing is required in the following situations: • When your design contain threads • When any tolerances are specified • When certain surfaces need a different finishing

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Metals & Manufacturing Outlook / July 2019

CNC MACHINING: THE COMPLETE ENGINEERING GUIDE PART 5

Step 3: Get an instant quote & start manufacturing

With 3D Hubs, outsourcing parts for CNC machining is easy, fast and highly price-competitive.

By combining a network of manufacturing services with our smart sourcing engine, you can instantly access readily available production capacity for the best possible quotes and lead times.

When you upload your parts to 3D Hubs, our automated Design for Machinability analysis will detect any potential design issues before production begins and will give you an instant quote, based on our machine learning algorithm.

This way you can be sure that you always receive the best price in the market at the fastest turnaround times for your CNC machining parts!

In Next Month’s Issue: Part 6: Useful resources

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Metals & Manufacturing Outlook / July 2019

33

ISM REPORT OUTLOOK

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

ISM PMI at 51.7% for June ISM PMI for the past 5 years

2014

34

2015

Metals & Manufacturing Outlook / July 2019

2016

2017

2018

2019

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in June, and the overall economy grew for the 122nd consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The June PMI® registered 51.7 percent. The New Orders Index registered 50 percent, a decrease of 2.7 percentage points from the May reading of 52.7 percent. The Production Index registered 54.1 percent, a 2.8-percentage point increase compared to the May reading of 51.3 percent.

The Employment Index registered 54.5 percent, an increase of 0.8 percentage point from the May reading of 53.7 percent.

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

The Supplier Deliveries Index registered 50.7 percent, a 1.3-percentage point decrease from the May reading of 52 percent. The Inventories Index registered 49.1 percent, a decrease of 1.8 percentage points from the May reading of 50.9 percent.

Of the 18 manufacturing industries, 12 reported growth in June, in the following order: Furniture & Related Products; Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Chemical Products; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Machinery.

PMI @ 51.7% ®

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

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

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

May Index 52.1 52.7 51.3 53.7 52.0 50.9 43.7 53.2 47.2 51.0 49.4

% Point Change -0.4 -2.7 +2.8 +0.8 -1.3 -1.8 +0.9 -5.3 +0.2 -0.5 +0.6

Direction Growing Unchanged Growing Growing Slowing Contracting Too Low Decreasing Contracting Growing Unchanged

Rate of Change Slower From Growing Faster Faster Slower From Growing Slower From Increasing Slower Slower From Contracting

Trend* (months) 34 1 34 33 40 1 33 1 2 2 1 122

OVERALL ECONOMY

Growing

Slower

Manufacturing Sector

Growing

Slower

34

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

®

PMI 2017

2018

2019

51.7%

50% = Manufacturing Economy Breakeven Line

PMI® Manufacturing expanded in June, as the PMI® registered 51.7 percent, a decrease of 0.4 percentage point from the May reading of 52.1 percent. This is the lowest reading since October 2016, when the index registered 51.7 percent. This indicates growth in manufacturing for the 34th consecutive month. The PMI® continued a period of expansion softening that began in September 2018. Softening this month was primarily due to demand and inputs — new orders, supplier deliveries and inventories.

42.9% = Overall Economy Breakeven Line

COMMODITIES REPORTED Commodities Up in Price: Corn; Printed Circuit Board Assemblies; Soybean Products; and Steel Products* (2).

Commodities Down in Price: Aluminum (3); Copper; Corrugated Boxes; Lumber Products; Memory; Natural Gas (2); Scrap Metal (2); Steel — Cold Rolled; Steel — Hot Rolled (3); Steel — Stainless; and Steel Products* (6).

Commodities in Short Supply: Capacitors (3); Electrical Components; Electronic Components (14); and Integrated Circuits (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.

JUNE | JULY 2019 Metals & Manufacturing Outlook / July 2019

35

ISM Report On Business ®

®

manufacturing

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

New Orders (Manufacturing) 2017

2018

2019

50% 52.5% = Census Bureau Mfg. Breakeven Line

New Orders ISM’s New Orders Index registered 50 percent. Of 18 manufacturing industries, 10 reported growth in new orders in June, in the following order: Furniture & Related Products; Nonmetallic Mineral Products; Textile Mills; Printing & Related Support Activities; Chemical Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Miscellaneous Manufacturing‡; Paper Products; and Computer & Electronic Products.

Production (Manufacturing) 2017

2018

2019

54.1% 51.7% = Federal Reserve Board Industrial Production Breakeven Line

Production ISM’s Production Index registered 54.1 percent. The 13 industries reporting growth in production during the month of June — listed in order — are: Wood Products; Furniture & Related Products; Textile Mills; Printing & Related Support Activities; Petroleum & Coal Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Paper Products; Miscellaneous Manufacturing‡; and Machinery.

Employment (Manufacturing) 2017

2018

2019

54.5% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2017

2018

2019

50.7%

Employment ISM’s Employment Index registered 54.5 percent. Of 18 manufacturing industries, 12 reported employment growth in June, in the following order: Furniture & Related Products; Printing & Related Support Activities; Paper Products; Petroleum & Coal Products; Textile Mills; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Miscellaneous Manufacturing‡; Machinery; Food, Beverage & Tobacco Products; Chemical Products; and Transportation Equipment.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in June, as the Supplier Deliveries Index registered 50.7 percent. The nine industries reporting slower supplier deliveries in June — listed in order — are: Nonmetallic Mineral Products; Furniture & Related Products; Primary Metals; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; Machinery; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

Inventories (Manufacturing) 2017

2018

2019

49.1% 44.3% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Manufacturing (products such as medical equipment and

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

36

Metals & Manufacturing Outlook / July 2019

Inventories The Inventories Index registered 49.1 percent. The seven industries reporting higher inventories in June — listed in order — are: Printing & Related Support Activities; Textile Mills; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; and Machinery.

ISM Report On Business ®

®

manufacturing

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

Customer Inventories (Manufacturing) 2017

2018

2019

Customers’ Inventories ISM’s Customers’ Inventories Index registered 44.6 percent. The five industries reporting customers’ inventories as too high during the month of June are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; and Primary Metals.

44.6%

Prices (Manufacturing) 2017

2018

2019

47.9%

Prices The Prices Index registered 47.9 percent. Six of the 18 industries reported paying increased prices for raw materials in June in the following order: Furniture & Related Products; Food, Beverage & Tobacco Products; Nonmetallic Mineral Products; Plastics & Rubber Products; Computer & Electronic Products; and Transportation Equipment.

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

Backlog of Orders (Manufacturing) 2017

2018

2019

Backlog of Orders ISM’s Backlog of Orders Index registered 47.4 percent. The six industries reporting growth in order backlogs in June — listed in order — are: Furniture & Related Products; Nonmetallic Mineral Products; Printing & Related Support Activities; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; and Fabricated Metal Products.

47.4%

New Export Orders (Manufacturing) 2017

2018

2019

50.5%

New Export Orders ISM’s New Export Orders Index registered 50.5 percent. The seven industries reporting growth in new export orders in June in order are: Textile Mills; Furniture & Related Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Chemical Products; Paper Products; and Computer & Electronic Products.

Imports (Manufacturing) 2017

2018

2019

50%

‡Miscellaneous

Imports ISM’s Imports Index registered 50 percent. The eight industries reporting growth in imports during the month of June — listed in order — are: Wood Products; Primary Metals; Textile Mills; Nonmetallic Mineral Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; and Food, Beverage & Tobacco Products.

Manufacturing (products such as medical equipment and

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

Metals & Manufacturing Outlook / July 2019

37

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