Metals & Manufacturing Outlook May 2018

In this issue:

Lack Of Sales Isn’t Your Problem

By Andrea Olson page 18

GLOBAL PMI OUTLOOK PAGE 12

ENERGY OUTLOOK PAGE 14

EUROZONE OUTLOOK PAGE 15

APRIL

ISM PMI:

57.3% The Full Report Page 20

Cert. # C2015-01481

IN THIS ISSUE PUBLISHERS STATEMENT - p.2 MANUFACTURING OUTLOOK - p.3 Publisher – Lewis A. Weiss Editor-In-Chief – Tim Grady Design – Rovere Media

INTRODUCING WOMEN AND MANUFACTURING - p.6

Contributing Writers:

NORTH AMERICAN OUTLOOK - p. 7

Royce Lowe, UK and EU International Correspondent

METALS OUTLOOK - p.9

Tim Grady, Co-Host, Manufacturing Talk Radio

AUTOMOTIVE OUTLOOK - p.10

Chris Kuehl, PH.D - Chief Economist, FMA

AEROSPACE OUTLOOK - p.11

Norbert Ore, Senior Correspondent for Global PMI Survey Reports

GLOBAL PMI OUTLOOK - p.12

by NORBERT ORE

Andrea Olson - MSC - CEO of Prag’madik Advertising advertise@mfgtalkradio.com Current Circulation - 45,200 Editorial Office Manufacturing Broadcasting Corp.

75 Lane Road Fairfield, NJ 07004 (973) 808-8300 © 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. © 2018 MBC.

ISSUES OUTLOOK - p.13

by ROYCE LOWE ENERGY OUTLOOK - p.14 EUROZONE OUTLOOK - p.15 ASIA OUTLOOK - 16 SOUTH AMERICA OUTLOOK - 17 LACK OF SALES ISN’T YOUR PROBLEM - p.18

by ANDREA OLSON APRIL ISM PMI REPORT - p.20

Advertise with Metals & Manufacturing Outlook:

Get your brand in front of manufacturing professionals across the country. Contact advertise@mfgtalkradio.com

Ad Sales Representatives Wanted:

Metals & Manufacturing Outlook is looking for advertising sales representatives.

Please contact us at info@steelforge.com for more information.

2

Metals & Manufacturing Outlook

PUBLISHERS STATEMENT

BY LEWIS A. WEISS According to the National Association of Manufacturers survey of the members, the Tax Cuts and Jobs Act has created a significantly positive change at manufacturers. Employee wages are rising, employment has been steadily increasing in 2018, and CapEx – or capital expenditures on new plant or equipment – is running well ahead of even the most aggressive predictions at the end of 2017. If you receive the Manufacturing Economy Daily briefing from NAM, you will see company after company announcing plant expansions or upgrades to existing facilities.

This is due to the reduction of taxes and regulations on manufacturing during the Trump administration so far, and the repatriation of dollars held overseas during the two Obama administrations.

In addition, prognosticators from all corners are predicting a 2018 GDP in the 3’s, possibly extending into 2019 – unless – the Trump administration gets stuck in a corner with no new NAFTA agreement, no TPP agreement, no China deal, and tariffs imposed on imports. This would bog down the U.S. in a protracted trade war with no winners on either side, and mainstream small and midsize businesses from both manufacturing and nonmanufacturing taking severe increase hits on cost of goods | May 2018

sold. That is the real risk here – a self-inflicted economic wound that triggers inflation here due to rising cost inputs where everyone loses across the board. That won’t make America great again – it will just repeat the folly of past administrations who played the Draconian gambit way to early in trade negotiations and sacrificed their Queen trying to desperately avoid checkmate. Right now, I’d say we’re in check, but I’m just a pawn – what do I really know about all the negotiations the administration has in play?

Sadly, there are lots of pawn companies and pawn people anxiously waiting for negotiations to get settled favorably so we can get out of this messy chess match and go outside and play in the summer sun. We’ll know by fall, and we may know by June 1 if Canada and Mexico lose their tariff exemptions – unless – that can gets kicked down the road again, like until June 30. But, it is unsettling, and as manufacturers know all too well, unsettling means pull back, wait-and-see.

That is exactly what we are hearing from some manufacturers – their customers are going to place the order but they haven’t released the PO yet. And, we are hearing it more, and more often.

That could signal a turn in the economy that could shave a full point off GDP, solely because of overly aggressive gambits during

trade negotiations. Sometimes that works in the give-and-take of negotiating, but one usually plays the ‘take-away’ card last, not first.

This president plays the takeaway card first and demonstrates that he (read: We, the People) are willing to walk away from the table – perhaps, regardless of the cost.

Remember when he said, “They’re [trade wars] easy to win, too.”

That’s not looking so good, right now.

However, China and the U.S. seem to be coming to terms and the tariffs on 1,300 Chinese goods coming into the U.S. might not get hit with tariffs, although steel and aluminum tariffs are still in place, and now the administration is talking about tariffs on automobiles, trucks and automotive parts coming into the country. This one may just let the bear loose on Wall Street.

Protected industries, like steel or automotive, tends to raise prices because buyers shift to domestically made cars and trucks, or steel and aluminum, so domestic manufacturers can get away with higher prices. However, higher prices trigger inflation, which causes the Fed to raise rates, which makes borrowing more expensive for businesses, which slows business investment and consumer spending, which slows the economy, which turns into a recession. Does no one in D.C. get this simple linear causeand-effect chain of events?

Well, rather than go on and on about this, we’ll leave you to reading the more upbeat news in the following pages of Metals & Manufacturing Outlook.

Metals & Manufacturing Outlook

3

MANUFACTURING OUTLOOK

BY ROYCE LOWE

U.S. AND CHINA IN TRADE TALKS; A BOEING 737 ENGINE FAILURE The U.S. demanded eight key points of China at the start of trade talks, which should keep representatives of both countries busy for a goodly while. SEE ISSUES OUTLOOK. There is a fatality when a Southwest Airlines plane’s engine blows up. More problems with the F-35. SEE AEROSPACE OUTLOOK. Global manufacturing, although easing back in places, is still in a healthy state.

Steel demand to continue growing. SEE METALS OUTLOOK A 3D-P bridge for Amsterdam.

SEE METALS OUTLOOK. The BLS jobs report for April

shows the addition of 164,000 non-farm payroll jobs, - and a 3.9 percent unemployment rate - including 24,000 new jobs in manufacturing, mostly in durable goods. Machinery added 8,000 jobs and Fabricated Metal Products over 4,000 jobs.

Over the year 245,000 jobs were added in manufacturing, some 75 percent in durable goods.

Where has all the cobalt gone?

SEE METALS OUTLOOK. Ford cuts cars...SEE AUTOMOTIVE OUTLOOK There is some optimism regarding significant progress in not too much time on NAFTA. There is also uncertainty.

The ISM PMI figure for U.S. manufacturing fell back to 57.3 percent in April from 59.3 percent in March, representing the 20th

consecutive month of growth in manufacturing. The overall economy grew for the 108th consecutive month. See NORTH AMERICAN OUTLOOK. IHS Markit’s remarks on the U.S. points to the PMI, at 56.5 percent in April, up from March’s 55.6, being at its highest in over three-and-a-half years, and manufacturing conditions improving at the fastest rate since September 2014. Production was up at the quickest pace since January 2017, and new orders at the sharpest pace in over 3 1/2 years.

The rate of input price inflation accelerated to the sharpest in almost seven years and the greater global demand for raw materials and recently introduced tariffs were instrumental in pushing up cost burdens in April. | May 2018

4

Metals & Manufacturing Outlook

Business optimism is high.

U.S. LIGHT VEHICLE SALES

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

General Motors will no longer publish its monthly sales figures, stating that they are not a true representation of its overall market. It will instead report quarterly figures.

The Bureau of Economic Analysis recently released its ‘advance’ estimate for the annual rate of Real GDP growth in the first quarter of 2018, putting it at 2.3 percent. The figure for the fourth quarter of 2017 was 2.9 percent.

World crude steel production for the 64 reporting countries – which represent 99 percent of world crude steel production - for the month of March was 148,330 Mt, up 4.0 percent y-o-y. Capacity utilization for the month was 74.5 percent, up 2.2 percent on March 2017 and up 0.9 percent on February 2018.

U.S. crude steel production for March 2018 was 7.261 Mt, up 5.3 percent y-o-y.

Primary Global Aluminum Production in March 2018 was reported at 5.482 million tonnes, with production in China, at 3.1 million tonnes representing over 56 percent of world total.

Production was 463,000 tonnes in GCC; 377,000 tonnes in rest of Asia ; 310,000 tonnes in Western Europe, 319,000 tonnes in North America and 345,000 tonnes in Eastern and Central Europe.

Brexit brings us news on a daily basis, way too much even to try to detail here. There are constant to’s and fro’s between the two major political parties in the UK and between the EU and UK Brexit representatives. | May 2018

Sales were down 5.5 percent in April – with some Japanese companies being particularly hard hit – on 24 sales days compared to 26 sales days in 2017.

2018

2017

Ford

203,856

213,436

-4.5

FCA

184,149

176,176

+4.5

Toyota

192,348

201,926

-4.7

Honda

125,701

138,386

-9.2

Nissan

87,764

121,998

-28.1

Hyundai/Kia 106,648

116,408

-8.4

VW

27,557

28,794

Manufacturing Laughs

% change

+4.5

Metals & Manufacturing Outlook

5

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Industrial Production, Consumer Prices and Unemployment Rates for what it considers the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy.

The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate.

The industrial production figures represent year-on-year changes, as do the consumer prices increases. The unemployment figures, %, are for the month as noted.

JUNE 12-14, 2018 // NEW YORK, NY JACOB K. JAVITS CONVENTION CENTER

ATTEND THE EAST COAST’S LARGEST ADVANCED MANUFACTURING EVENT REGISTER NOW at advancedmanufacturingnewyork.com/podcast | May 2018

6

Metals & Manufacturing Outlook

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

Never before has the manufacturing industry been in such an accelerated state of change, from retirees leaving the workforce creating a serious skills gap and brain drain to the implementation of the technological innovations of modern manufacturing often referred to as Industry 4.0, or the 4th Industrial Revolution. The hosts of Women And Manufacturing, all successful women in their own right, will interview women who are in the midst of a successful career in the industry and their respective companies, providing the guests with an opportunity to give guidance, insight, and inspiration to women who may or may not have considered a career in the industry, from teenagers just beginning to think about their career path to women in the industry or in transition in their own professional lives.

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

Each will share their thoughts in congenial, collegiate conversations with one of 6 hosts who will alternate each week. Hosts will also tease out insights through guest introspection, along with suggestions and recommendations from guests to listeners about navigating the manufacturing and corporate world.

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

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

Visit WOMENANDMFG.COM for more information. | May 2018

Metals & Manufacturing Outlook

7

NORTH AMERICAN OUTLOOK

BY ROYCE LOWE

The Latest Manufacturing Reports from the United States, Canada and Mexico The Institute of Supply Management PMI figure fell back from 59.3 percent in March to 57.3 percent in April, representing the twentieth consecutive month of growth in manufacturing. There was growth in the overall economy for the 108th consecutive month.

Of the 18 manufacturing industries, 17 reported growth in April, in the following order: Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Paper Products; Machinery; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Miscellaneous Manufacturing; and Apparel, Leather & Allied Products.

No industry reported a decrease in PMI in April compared to March.

Comments from the manufacturing industries continue in positive mode, but there are continuing concerns regarding availability, prices and delivery times of raw materials, particularly steel. There are also labor shortages, and again, from Food, Beverage & Tobacco Products, a shortage of trucks and drivers.

Following is a summary of the five major indexes, each weighted at 20 percent in calculation of the PMI number for April; March’s readings are in parentheses: New orders Production Employment Supplier Deliveries Inventories

61.2 57.2 54.2

(61.9) (61.0) (57.3)

61.1 52.9

(60.6) (55.5)

The following five components are not instrumental in the PMI calculation, but are an important part of the manufacturing industry:

Customer Inventories 44.3 Prices 79.3 Backlog of orders 62.0 New export orders 57.7 Imports 57.8

(42.0) (78.1) (59.8) (58.7) (59.7)

Commodities Up in Price Aluminum (18); Caustic Soda (10); Copper (6); Corrugate (19); Diesel; Electrical Components; Freight (3); Pallets; Polypropylene; Steel — Hot Rolled (17); Steel – Scrap (5); Steel — Stainless; and Wood.

Commodities Down in Price Soybean Oil. Commodities in Short Supply Capacitors (10); Electrical Components; Resistors (6); and Steel – Hot Rolled.

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

| May 2018

8

Metals & Manufacturing Outlook

The complete ISM Report on Business may be found at the end of this ezine.

CANADA showed strong new business and employment growth, with production growth held back by capacity constraints and supplier delays in April. Price inflation hit a seven-year high in April.

The month overall was positive and the latest increase in export orders was the strongest since 2011.

There was a further accumulation of backlogs and supply chain problems, with the most marked deterioration in supplier performance since October 2010 .

The manufacturing PMI eased back very slightly in April to 55.5 from March’s 55.7.

| May 2018

There were manufacturing constraints, especially at steel mills, and shipping delays for materials imported from Asia and ongoing issues with truck driver availability in the U.S. Business optimism is strong, and employment continues to increase strongly. All regions report improvements in manufacturing business conditions, with Quebec the best performing area, with overall growth the fastest since May 2012. Quebec also shows the strongest new export sales growth.

Alberta and BC show the fastest rate of job creation.

Canada produced 1.230 Mt of crude steel in March, up 4.7 percent y-o-y.

Canadian light vehicle sales in April

were off 2.7 percent y-o-y, with sales at 191,856 units. Light truck sales represented 70 percent of total sales.

MEXICO saw manufacturing expanding for the sixth consecutive month in April, with the PMI easing from March’s 52.4 to 51.6 in April.

A further increase in new orders leads to another rise in production.

Job creation in April was at an eight-month high.

There were delivery delays and steel prices were ‘through the roof.’

Mexican manufacturers are ‘strongly optimistic.’

Mexico produced 1.750 Mt of crude steel in March, up 2.9 percent y-o-y.

Metals & Manufacturing Outlook

METALS OUTLOOK

BY ROYCE LOWE

The World Steel Association has published a short-term outlook on global finished steel demand for the years 2018 and 2019.

2018

2019

NAFTA;

+3%, 145Mt

+1.6%, 147.3Mt

Central & S.America

+6.2%, 43.5Mt

+4.9%, 45.6Mt

EU 28

+2.0%, 165.6Mt

+0.8%, 166.9Mt

Other Europe

+4.5%, 44.2Mt

+4.4%, 46.1Mt

C.I.S.

+2.3%, 54.0Mt

+1.8%, 55.0Mt

Africa

+4.5%, 36.6Mt

+4.6%, 38.3Mt

Middle East

+4.6%, 55.7Mt

+3.7%, 57.8Mt

Asia & Oceania +1.1%, 1071.4Mt

- 0.2%, 1069.7Mt

Global

+0.7%, 1626.7Mt

+1.8%, 1616.1Mt

Hot-rolled and cold-rolled steel prices in the U.S. are still on the up, and at the end of April hot-rolled coil was being quoted at just under $880 per ton, cold-rolled coil on the verge of $1,025 per ton. Rebar was being quoted at around $700 per ton. European hot-rolled coil is still pricing around €570 per tonne, or equivalent to around $630 per ton, but is expected to increase.

More price increases are expected from U.S. mills.

European steel prices rise are expected to continue to rise in the wake of the tariffs and a generally healthy demand climate.

Non-ferrous metal prices saw

aluminum bouncing back to $1.14 per pound in mid April, then easing to $1.00; copper at around $3.17 per pound early April, easing to $3.08; nickel peaking at around $6.90 mid April, easing to $6.30 per pound; zinc recently falling from $1.60 to $1.42 per pound.

Cobalt is not a metal we read about often, but each battery for electric vehicles (EVs)- known as Lithium-ion batteries - contains 22 lbs of the metal. Big deal we might say, so what? But over half the metal comes from the Democratic Republic of Congo; hardly the easiest, friendliest place in the world to mine ores. And over 80 percent of the cobalt sulphates and

9

oxides used to make cathodes for Li-ion batteries are refined in China, from a mine in the Congo majority owned by a Chinese firm, China Molybdenum.

China, committed to EV production, will purchase, through battery maker GEM, a third of the cobalt shipped by Glencore (an AngloSwiss conglomerate and the world’s largest producer of the metal) between 2018 and 2020.

Total world production of cobalt in 2017 was 110,000 tonnes, and China got the lion’s share. The price of the metal went from $26,500 per tonne in 2016 to a recent quote of $90,000 per tonne.

Cobalt is presently used mostly in smart phones and superalloys; its use for EVs could go from 9,000 tons in 2017 to 107,000 tons in 2026.

Some time ago we brought news of a 3D-Printed Bridge that was to be fabricated in Amsterdam, and to be installed for all eternity over a bridge in the red light district of the city. The (stainless steel) bridge has been completed, thanks to four robots, 4500 kg of stainless steel – 110 kms of wire. The project took six months; the finished bridge is 41 feet long and 20 feet wide.

Jorgensen Forge, the Seattle-area aerospace manufacturer, recently announced it will cease operations and close in 2018 after 75 years in business, stating ‘ Recent market changes have rendered business financially unviable, leading to the decision to cease operations.’

Some 110 workers will be laid off, but the company says it is working with Washington State and local workforce resources to find new employment for these workers.

The company makes open-die and rolled rings in low-alloy and stainless steel, and aluminum, titanium and Ni-base alloys. The 22-acre site will be sold to a realestate developer. | May 2018

10

Metals & Manufacturing Outlook

AUTOMOTIVE OUTLOOK

BY ROYCE LOWE

Ford plans $11.5 billion in extra cuts and kills most U.S. cars.

The company won’t invest in new sedans for the North American market, eventually reducing them to the Mustang and an all-new Focus Active crossover coming in 2019. By 2020 almost 90 percent of its North American production will be for pickups, SUVs and commercial vehicles. Ford’s first quarter earnings per share beat estimates.

Toyota will invest $170 million and add 400 jobs at its Blue Springs, Mississippi assembly plant, to build the 12th generation Corolla. This is part of the $10 billion Toyota committed to invest over a fiveyear period in 2017; this brings the amount thus far invested to $4.27 billion.

Manufacturing Laughs

| May 2018

Metals & Manufacturing Outlook

AEROSPACE OUTLOOK

BY ROYCE LOWE

Engine maker CFM International Inc., the maker of the engine that blew up recently on a Southwest Airlines jet, was on the verge of recommending inspections that would have included that engine right before the fatal accident.

CFM, in response to a similar malfunction in 2016, had recommended in 2017 that carriers inspect a limited number of older fan blades that didn’t include the one that failed recently.

But a draft recommendation circulated to some carriers for their input would have expanded the list enough to include the engine powering flight 1380 when a fan blade broke off over Pennsylvania.

This incident has set in motion testing and recommendations for more testing on the CFM56-7B engine. The whole issue is complicated by the switching of fan blades from older to newer engines, hence the necessity for scrutiny on the most minute level.

Investigation is ongoing – is this metal fatigue? Forty experts from GE Aviation and Safran – the two CFM jv partners – have been deployed to support Southwest

Airlines’ accelerated inspection program.

The Pentagon has halted F-35 deliveries in a ‘cost dispute’ between the U.S. Defense Department and Lockheed Martin Corp. The Pentagon has stopped accepting most deliveries of the new high-tech aircraft due to maintenance costs on over 200 jets already in service with the U.S. Air Force, the U.S. Marine Corps and the U.S. Navy.

There was no comment on this from the Pentagon, but a Lockheed Martin representative said production on the F-35 continues and they are confident of meeting the delivery target of 91 aircraft for 2018.

The F-35 program is under ongoing scrutiny due to extremely high unit costs, from $94.6 million to $121.8 million, depending on the model.

There is a current dispute regarding maintenance costs for the fleet of 270 F-35s already deployed by the U.S.A.F., the U.S.M.C. and the U.S.N. and the defense forces of other nations. A defense Department official recently revealed that

11

modernization costs to fix a production error on jets will run to around $16 billion through 2024.

Rolls-Royce meanwhile has a problem with the Boeing 787.

A wear problem in the Trent 1000’s compressor is worse than thought, and additional inspections on this engine for the 787 Dreamliner jet are underway, to investigate an ‘existing durability issue.’

The Boeing Co and Embraer SA are reportedly closing in on a final agreement with the Brazilian government that would result in joint-venture ownership for the Embraer commercial aircraft business – a prospect that developed late last year.

Boeing reportedly is seeking to expand its share of the global commercial jet market; Embraer is the world’s third-largest civil aircraft manufacturer, with particular strength in regional and medium-range single-aisle jets.

The prospective combination has been compared to last year’s acquisition of a 50% stake in Bombardier’s C Series program

by Boeing’s main rival, Airbus SA. Boeing Commercial Airplanes reported an order from budget airline Ryanair for 25 highcapacity 737 MAX 8 jets, an order worth $3 billion. The jets to be supplied represent “options” available to Ryanair under its initial order of 100 737 MAX, announced in 2014. Ryanair later increased the order by 10 aircraft, and so the current total to be supplied is 135 aircraft of the new 737 MAX series.

Dublin-based Ryanair has ordered more 737-800 aircraft (the predecessor to the 737 MAX 8) than any other airline; in March, Ryanair took delivery of its 500th 737-800. It is the largest Boeing operator in Europe. | May 2018

12

Metals & Manufacturing Outlook

GLOBAL PMI OUTLOOK

BY NORBERT ORE Again this month, 17 of the 18 PMIs that we cover are expanding with the exception of South Korea (48.4, -0.7). Furthermore, 11 of the 18 PMIs are growing at slower rates. The JP Morgan Chase Manufacturing PMI™ which summarizes the data from 44 countries posted a 53.5, the second lowest reading since October 2017; however, it is equal to the average for the past 12 months. The Eurozone and North America PMIs are still quite strong, but there is little doubt that they have peaked this cycle.

Surveying global manufacturing after four months, the data indicates activity should remain elevated even though we have passed the peak in this cycle.

Eurozone: The Eurozone PMI (56.2, -0.4) expanded at a slower rate for the fourth consecutive

| May 2018

month. While the rate of growth has slowed, the PMI has remained above the 54-mark for 17 consecutive months.

The EZ’s manufacturing expansion continues to be led

by Netherlands (60.7, -0.8), Germany (58.1, -0.1), and Austria (58.0, unch). The five remaining countries averaged 54.0 for the period. So, while the rate of expansion has moderated, the EZ PMIs remain at levels that encourage expansion in investment and employment.

United Kingdom: The UK/CIPS PMI (53.9, -1.0) cooled to one its lowest readings since Brexit.

However, the PMI remains in a range that promotes decent economic growth.

China: China’s Official Report, the CFLP PMI (51.4, -0.1), equaled

the 21-month average for the index. The Caixin China General Manufacturing PMI (51.1, +0.1) is trending similarly, averaging 51.0 for the same period. Both surveys exhibit the continuation of China’s soft-landing.

India: India’s PMI (51.6, +0.6) accelerated slightly, posting its ninth consecutive month of growth, but still below its 1Q average (51.8). Overall, the economy is growing and the stage appears set for a continuing expansion.

North America: Canada’s PMI (55.5, -0.2) was expansionary for the 26th consecutive month with sharp rises in new orders and production. Mexico’s PMI (51.6, -0.8) was also expansionary, but fell below its 1Q average reading (52.2).

ISSUES OUTLOOK

Metals & Manufacturing Outlook

13

BY ROYCE LOWE

For trade talks in Beijing, the U.S. has set out eight demands on China, a synopsis of which follows: China will cut the two nations’ trade deficit by at least $ 200 billion by the end of 2020.

Chinese purchases of U.S. goods will represent at least 75 percent of a commitment to a $ 100 billion increase in purchases of U.S. exports for the 12 months beginning June 1, 2018, and at least 50 percent of China’s commitment to an additional $100 billion increase in purchases of U.S. exports in the 12 months beginning June 1, 2019.

The demands continue with clauses on the Protection of American Technology and Intellectual Property; a Reduction on the Investment in Sensitive Technology; U.S. Investment in China; Tariff and Non-tariff barriers – whereby, by July 1, 2020, China will reduce tariffs on all products in non-critical sectors to levels no higher than the levels of the corresponding U.S. tariffs.

Products or restrict supply of services.

More than 1,100 economists, including Nobel laureates and former presidential advisers, have signed a letter warning Donald Trump about his tariffheavy approach to trade. Many of its passages quote directly from another letter sent in 1930, cautioning against protectionist measures the U.S. imposed at the start of what became the Great Depression.

The letter was organized by the Washington-based National Taxpayers Union, and came as the Trump administration traveled to China recently for talks aimed at averting a trade war and

weighed whether to permanently exempt allies from steel and aluminum tariffs. Those disputes are clouding the outlook for the U.S. economy, which is now in its second-longest expansion on record.

The original letter was sent 88 years ago to urge U.S. lawmakers to reject the Smoot-Hawley Tariff Act, but it didn’t work.

The law passed in 1930 and was a key factor in a trade war that deepened the worldwide economic slump. The authors of the current letter -- including last year’s Nobel winner Richard Thaler and Gregory Mankiw, a former chief economic adviser to President George W. Bush -- fear a repeat.

Manufacturing Laughs

There is a demand for China to improve market access in specified ways for U.S. Services and Services Suppliers, and for U.S. Agricultural Products.

Both countries will meet quarterly to review targets and reforms. If the U.S. declares China is not in compliance with the framework, the U.S. can impose tariffs or other restrictions on Chinese | May 2018

14

Metals & Manufacturing Outlook

ENERGY OUTLOOK

BY ROYCE LOWE

A U.S. solar startup has picked its own trade fight with President Donald Trump.

1366 Technologies Inc., which spun out of the Massachusetts Institute of Technology, has drawn a rebuke from the U.S. Energy Department for asking that its silicon wafer factory under construction in Asia be exempt from American tariffs. The Energy Department says the overseas facility may violate an agreement to manufacture in the U.S. as part of a $150-million federal loan guarantee for a factory the startup was planning in Upstate New York.

“Constructing and operating the Southeast Asia facility is likely contrary to 1366’s U.S. manufacturing commitments,” John Lucas, acting general | May 2018

counsel at the Energy Department wrote in a letter to the U.S. trade representative released Monday.

“DOE takes this matter very seriously and is currently looking into 1366’s compliance with its DOE funding agreements.”

Not so fast, said Laureen Sanderson, a spokeswoman for 1366. The company, she said, withdrew its request for a loan guarantee in January.

1366 is partly owned by Hanwha Group in South Korea.

Manufacturing Laughs

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

EUROZONE

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) eased further, from March’s 56.6 to a 13-month low of 56.2 in April.

Five of the nations covered in this survey (Netherlands, Germany, Italy, Spain and Greece) registered slower growth rates than in the previous month.

The slowdown was mainly seen in the intermediate goods industry, although there was a mild softening in the rate of growth at investment goods producers.

There were slower increases in new orders and employment, with

production increasing at a slightly faster pace than in March.

All nations reported an increase in employment in April. There was a substantial rate of input price inflation. There were raw material shortages and average vendor lead times lengthened to one of the greatest extents in the survey history.

Crude steel production in Germany in March was at 3.900 Mt, up 0.6 percent y-o-y; in Italy 2.280 Mt, up 1.0 percent y-o-y; in France 1.353 Mt, up 1.5 percent y-o-y and in Spain 1.310 Mt, down 4.1 percent y-o-y.

15

Russia’s crude steel production for March was at 5.700 Mt, down 10.0 percent y-o-y; Ukraine’s was 1.711 Mt, up 4.7 percent y-o-y.

Car sales in Western Europe were up 9.1 percent y-o-y, with many markets seeing a higher number of selling days than in 2017.

Car registrations were at 1.22 million; the Seasonally Adjusted Annualized Rate of Western European sales rose by only 1.1 percent, from 14.27 million in March to 14.42 in April.

Sales increases of 6.5 percent were seen in Italy; 8 percent in Germany; 9 percent in France, 10.4 percent in UK and 12.3 percent in Spain.

IHS Markit’s PMI for the UK showed growth slowing at the start of the second quarter, with the UK manufacturing PMI at a 17-month low of 53.9 in April, down from March’s 54.9. There was slower growth in production, new orders and employment, along with a slowdown in export business.

Business optimism was at a 5-month low.

The UK produced 0.630 Mt of crude steel in March, down 0.9 percent y-o-y.

| May 2018

16

Metals & Manufacturing Outlook

GLOBAL OUTLOOK

BY ROYCE LOWE

ASIA

There was a marginal improvement in operating conditions in April in CHINA’s manufacturing sector, with the seasonally-adjusted PMI easing very slightly up to 51.1 from March’s 51.0.

The Production rate was up slightly, but new order growth slowed along with a renewed fall in new export work. Employment continued to fall, in spite of increases in backlogs.

CHINA produced 73.980 Mt

Manufacturing Laughs

of crude steel in March, up 4.5 percent y-o-y; Japan 9.082 Mt, up 2.2 percent y-o-y; India 9.227 Mt, up 5.3 percent y-o-y and South Korea 6.095 Mt, up 4.7 percent y-o-y. Taiwan produced 2.000 Mt in March, unchanged.

and a 21st consecutive month of rising production in the month. Employment was up amid improving demand, but not sufficient to prevent backlogs increasing. April’s PMI was up at 53.8 from March’s 53.1.

China sold just over 6 million cars in the first quarter of 2018, some 4 percent up on the first quarter of 2018. The seasonally adjusted selling rate stands at 24.8 million vehicles for the year.

In April, JAPANESE manufacturers saw production growth up to a 3-month high

There was a softening of input and output inflation rates. There are higher food, fuel and metal costs.

Business confidence continues to strengthen.

INDIA saw a faster increase in production and new orders in April, along with a renewed rise in employment, with the PMI at 51.6, up from March’s 51.0.

Input cost inflation was down to its weakest since September 2017.

Business optimism is the strongest since the implementation of the Goods and Services Tax in July 2017.

| May 2018

Metals & Manufacturing Outlook

17

GLOBAL OUTLOOK

BY ROYCE LOWE

SOUTH AMERICA BRAZIL saw growth continuing in its manufacturing sector in April, with production and new orders up but at softer rates. Production was up for the 14th consecutive month.

in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – edged up from March’s adjusted 53.3, to 53.5 in April.

Input buying and employment were up.

A mild improvement was seen at the beginning of the second quarter, with growth in production and new orders up slightly, leading to steady and solid job creation.

The PMI in April was at 52.3, down from March’s 53.4.

Business optimism is good.

Brazil’s crude steel production for the month of March was 3.065 Mt, an increase y-o-y of 7.6 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced

by JPMorgan and IHS Markit

Developed nations, on average, performed better than emerging nations, in spite of a continuing slowdown from December 2017’s record high. China and India strengthened slightly, but there was a slowdown in Brazil.

Raw material prices and vendor deliveries were global issues.

ISO9001:2008 and AS9100C

| May 2018

18

Metals & Manufacturing Outlook

LACK OF SALES ISN’T YOUR PROBLEM

BY ANDREA OLSON

It began with a conversation. The CEO sat at his wide, glass-topped desk, sipping his coffee. “We just need more sales. It’s as simple as that,” he flatly stated. “Our organization has been through multiple transformations over the years. New processes have come and gone. New marketing trends have come and gone. I’ve seen them all.”

“Growth is about fundamentals.

The fundamental truth that sales drives everything. Whether it’s a new market, new products, or new acquisitions, more sales solves all problems. It’s not complicated,” he remarked. “So we focus our efforts on pushing the sales force to identify what customer needs are, and what we can do to fulfill those needs.”

This all wasn’t a surprise. Every business school, venture school, and entrepreneurial program drives home the message of “increasing sales”. Yes, there’s no question that cash flow, cost reductions, capital injections, and a myriad of other mechanisms play a part in organizational growth. If these methods | May 2018

didn’t work, they wouldn’t be riddled throughout hundreds of books, processes, courses, and conferences.

The CEO, while not wrong, was overlooking the most critical component to growth – customers. While one might believe that sales and customers are one in the same, they are radically different. When we think about growth in terms of sales, we are focused on the product, service, or company offering. We are focused on quantity and not quality, and by quality, we mean profitability.

When taking the mindset of “we need more sales”, it centers on the premise that what you currently offer is your only source of profit, and that simply more of the same will generate the returns sought. In addition, while many companies look to identify new offerings to expand their product lines, these are frequently the same expansions that their competitors seek and actively fold into their portfolios.

This limits not only innovation, but also true and sustainable differentiation. It becomes a race to be first to market, or first to the price bottom. Product offerings

Metals & Manufacturing Outlook

19

for the lack of the ability to fulfill a need efficiently, effectively, and painlessly.

When we design and architect products, services – and more importantly – organizations around the customer, it transforms not only our mindsets, but also the ability to innovate and differentiate more effectively.

then convert to commodities or perceived commodities and diversification ensues – and the cycle starts all over again.

The customer isn’t part of the equation. With a focus on sales, the customer gets distilled into a generic market profile, including demographics such as industry, age, gender, location, previous buying behavior, and more. These aggregated macro-trends can provide high-level insights, but

virtually impossible to capitalize on without the internal structure and capabilities to execute on the information. In addition, these types of broad generalities also often include many assumptions, most prominently the one that your customer segment needs what you sell.

It’s not about sales, but about serving customers and their needs. Customer needs consists of much more than an experience, journey or simply satisfaction.

While customers continually seek a positive, smooth experience and easy engagement with a company, service or product, a great experience cannot make up

Andrea Olson is CEO and Founder of Prag’madik and the author of No Disruptions: The New Future For MidMarket Manufacturing. A 4-time ADDY® award-winner, she began her career at a tech start-up and led the strategic marketing efforts at two global industrial manufacturers. In addition to writing, consulting and coaching, Andrea speaks to leaders and industry organizations around the world on how to craft an effective marketing and communications programs to discover new sources of revenues and savings.

She can be reached via www. pragmadik.com.

Manufacturing Laughs

they only give you a singular and assumptive perspective.

For example, you wouldn’t generally assume that all males are into sports, or all females are making decisions for household purchases.

But the problem is that many companies do. Customer segmentation can not only be extremely time consuming, but resource draining, and can be | May 2018

20

Metals & Manufacturing Outlook

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

ISM PMI at 57.3% ISM PMI for the past 5 years

| May 2018

Metals & Manufacturing Outlook

21

PMI® at 57.3% New Orders, Production, and Employment Growing Supplier Deliveries Slowing at Faster Rate; Backlog Growing Raw Materials Inventories Growing; Customers’ Inventories Too Low Prices Increasing at Faster Rate; Exports and Imports Growing Of the 18 manufacturing industries, 17 reported growth in April, in the following order: Wood Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Transportation Equipment; Furniture & Related Products; Paper Products; Machinery; Primary Metals; Nonmetallic Mineral Products; Chemical Products; Computer & Electronic Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Printing & Related Support Activities; Miscellaneous Manufacturing; and Apparel, Leather & Allied Products. No industry reported a decrease in PMI® in April compared to March.

WHAT RESPONDENTS ARE SAYING “We are seeing strong sales in the U.S., Europe and Asia.” (Chemical Products) “Business is off the charts. This is causing many collateral issues: a tightening supply chain market and longer lead times. Subcontractors are trading capacity up, leading to a bidding war for the marginal capacity. Labor remains tight and getting tighter.” (Transportation Equipment) “Shortages of trucks and drivers has impacted delivery times.” (Food, Beverage & Tobacco Products) “The recent steel tariffs have made it difficult to source material, and we have had to eliminate two products due to availability and cost of raw material.” (Fabricated Metal Products) “Demand is up for products. Commodity pricing for steel and other materials increased due to the proposed tariffs. We are seeing commodity futures coming down. A lot of suppliers are asking for increases, and the team is battling those requests.” (Machinery) “[The] 232 and 301 tariffs are very concerning. Business planning is at a standstill until they are resolved. Significant amount of manpower [on planning and the like] being expended on these issues.”

(Miscellaneous Manufacturing) “Production orders at this time are still strong and being driven partially by construction factors and customers purchasing ahead to avoid potential price increases.” (Plastics & Rubber Products) “The general outlook for 2018 remains positive and upbeat as we see continued signs of a growing economy and investment in housing and infrastructure.” (Nonmetallic Mineral Products) “Business conditions have been good; order book is full and running around 98 percent capacity.”

(Primary Metals) “Backorders remain strong. New order rate exceeds shipment rate.” (Computer & Electronic Products)

| May 2018

22

Metals & Manufacturing Outlook

Manufacturing at a Glance April 2018 Index Series Index Apr Series Index Mar Change Trend* (Months) PMI® 57.3 59.3 -2.0 Growing

Percentage Point Change

Slower

Slower

28

Production

57.2 61.0 -3.8 Growing

Slower

20

Employment 54.2 57.3 -3.1 Growing

Slower

19

Inventories

52.9 55.5 -2.6 Growing

Customers’ Inventories

Backlog of Orders

Slower

4 Slower

19

Faster 26

62.0 59.8 +2.2 Growing

New Export Orders 57.7 58.7 -1.0 Growing Imports

Faster 19

44.3 42.0 +2.3 Too Low

Prices 79.3 78.1 +1.2 Increasing

Rate of

20

New Orders 61.2 61.9 -0.7 Growing

Supplier Deliveries 61.1 60.6 +0.5 Slowing

Direction

57.8 59.7 -1.9 Growing

Faster 15 Slower

Slower

OVERALL ECONOMY

Growing

Slower

108

Manufacturing Sector

Growing

Slower

20

26

15

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

Commodities reported up/down in price and in short supply

Commodities Up in Price

Aluminum (18); Caustic Soda (10); Copper (6); Corrugate (19); Diesel; Electrical Components; Freight (3); Pallets; Polypropylene; Steel — Hot Rolled (17); Steel – Scrap (5); Steel — Stainless; and Wood.

Commodities Down in Price

| May 2018

Metals & Manufacturing Outlook

23

Soybean Oil.

Commodities in Short Supply

Capacitors (10); Electrical Components; Resistors (6); and Steel – Hot Rolled.

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

April 2018 Manufacturing Index Summaries PMI®

Manufacturing expanded in April as the PMI® registered 57.3 percent, a decrease of 2 percentage points from the March reading of 59.3 percent. “This indicates strong growth in manufacturing for the 20th consecutive month, led by continued expansion in new orders, production activity, employment and inventories, with suppliers continuing to struggle delivering to demand,” says Fiore. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

A PMI® above 43.2 percent, over a period of time, generally indicates an expansion of the overall economy.

Therefore, the April PMI® indicates growth for the 108th consecutive month in the overall economy and the 20th straight month of growth in the manufacturing sector. “The past relationship between the PMI® and the overall economy indicates that the PMI® for April (57.3 percent) corresponds to a 4.3 percent increase in real gross domestic product (GDP) on an annualized basis.”

The Last 12 Months Month PMI® Apr 2018

57.3

Mar 2018

59.3

Feb 2018

60.8

Jan 2018

59.1

Dec 2017

59.3

Nov 2017

58.2

Month PMI® Oct 2017

58.5 | May 2018

24

Metals & Manufacturing Outlook

Sep 2017

60.2

Aug 2017

59.3

Jul 2017

56.5

Jun 2017

56.7

May 2017

55.5

Average for 12 months - 58.4 High - 60.8 Low - 55.5 New Orders

ISM®’s New Orders Index registered 61.2 percent in April, which is a decrease of 0.7 percentage point when compared to the 61.9 percent reported for March, indicating growth in new orders for the 28th consecutive month. “New orders expansion continues at a strong pace — slower compared to March’s reading, but still at or above 60 percent for the 12th straight month. Customer inventories remain too low, and backlog expansion maintained high levels,” says Fiore. A New Orders Index above 52.4 percent, over time, is generally consistent with an increase in the Census Bureau’s series on manufacturing orders (in constant 2000 dollars).

Sixteen of 18 industries reported growth in new orders in April, listed in the following order: Wood Products; Furniture & Related Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Transportation Equipment; Primary Metals; Paper Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Fabricated Metal Products; Petroleum & Coal Products; Textile Mills; Chemical Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Machinery. The only industry reporting a decrease in new orders in April compared to March is Apparel, Leather & Allied Products.

New Orders % Higher

% Same

% Lower

Apr 2018

42.4 49.5 8.1

+34.3 61.2

Mar 2018

43.3 48.0 8.6

+34.7 61.9

Feb 2018

40.6 50.9 8.5

+32.1 64.2

Jan 2018

35.2 54.3 10.5 +24.7 65.4

Net

Index

Production

ISM®’s Production Index registered 57.2 percent in April, which is a decrease of 3.8 percentage points when compared to the 61 percent reported for March, indicating growth in production for the 20th consecutive | May 2018

Metals & Manufacturing Outlook

25

month. “Production expansion continues; however, the index fell below 60 for the first time in 10 months.

Labor constraints and supply chain disruptions continue to prevent or limit maximum production potential,” says Fiore. An index above 51.5 percent, over time, is generally consistent with an increase in the Federal Reserve Board’s Industrial Production figures.

The 15 industries reporting growth in production during the month of April — listed in order — are: Furniture & Related Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Printing & Related Support Activities; Nonmetallic Mineral Products; Fabricated Metal Products; Chemical Products; Primary Metals; Miscellaneous Manufacturing; Machinery; Computer & Electronic Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; and Plastics & Rubber Products. The only industry reporting a decrease in production in April compared to March is Paper Products.

Production

% Higher

% Same

% Lower

Apr 2018

33.6 58.5 8.0

+25.6 57.2

Mar 2018

36.1 55.7 8.2

+27.9 61.0

Feb 2018

35.5 54.9 9.6

+25.9 62.0

Jan 2018

32.8 56.2 11.0 +21.8 64.5

Net

Index

Employment

ISM®’s Employment Index registered 54.2 percent in April, a decrease of 3.1 percentage points when compared to the March reading of 57.3 percent. This indicates growth in employment in April for the 19th consecutive month. “Employment expansion continues at slower rates due to companies struggling to hire skilled workers. Many respondents continue to see the labor market as a constraint to their production and their suppliers’ production,” says Fiore. An Employment Index above 50.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Of the 18 manufacturing industries, the 12 reporting employment growth in April — listed in order — are: Paper Products; Miscellaneous Manufacturing; Fabricated Metal Products; Machinery; Nonmetallic Mineral Products; Petroleum & Coal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Transportation Equipment; Chemical Products; Primary Metals; and Electrical Equipment, Appliances & Components. The three industries reporting a decrease in employment in April compared to March are: Textile Mills; Printing & Related Support Activities; and Furniture & Related Products.

Employment % Higher

% Same

% Lower

Apr 2018

23.1 66.8 10.2 +12.9 54.2

Mar 2018

22.9 66.3 10.8 +12.2 57.3

Feb 2018

28.4 61.8 9.8

Net

Index

+18.7 59.7 | May 2018

26

Metals & Manufacturing Outlook

Jan 2018

17.6 70.6 11.8 +5.8 54.2

Supplier Deliveries

The delivery performance of suppliers to manufacturing organizations was slower in April, as the Supplier Deliveries Index registered 61.1 percent. This is 0.5 percentage point higher than the 60.6 percent reported for March. “This is the 19th straight month of slowing supplier deliveries, a continuing constraint to production growth. Lead-time extensions in many areas, supplier labor shortages, and transportation delays and uncertainty in the steel and aluminum markets will continue to restrict production output for the foreseeable future,” says Fiore. A reading below 50 percent indicates faster deliveries, while a reading above 50 percent indicates slower deliveries.

The 16 industries reporting slower supplier deliveries in April — listed in order — are: Apparel, Leather & Allied Products; Machinery; Fabricated Metal Products; Textile Mills; Printing & Related Support Activities; Primary Metals; Furniture & Related Products; Paper Products; Computer & Electronic Products; Food, Beverage & Tobacco Products; Chemical Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Nonmetallic Mineral Products; Plastics & Rubber Products; and Miscellaneous Manufacturing. No industries reported faster supplier deliveries in April compared to March.

Supplier Deliveries

% Slower

% Same

Apr 2018

25.6 71.3 3.2

+22.4 61.1

Mar 2018

28.4 65.9 5.7

+22.7 60.6

Feb 2018

26.2 70.4 3.4

+22.8 61.1

Jan 2018

23.5 71.3 5.2

+18.3 59.1

% Faster

Net

Index

Inventories*

The Inventories Index registered 52.9 percent in April, which is a decrease of 2.6 percentage points when compared to the 55.5 percent reported for March, indicating raw materials inventories grew in April.

“Suppliers were not able to maintain desired inventory expansion levels consistent with production demands for the second straight month. Broad supplier lead-time extensions and freight uncertainties will continue to impact inventory accounts,” says Fiore. An Inventories Index greater than 43 percent, over time, is generally consistent with expansion in the Bureau of Economic Analysis (BEA) figures on overall manufacturing inventories (in chained 2000 dollars).

The eight industries reporting higher inventories in April — listed in order — are: Wood Products; Electrical Equipment, Appliances & Components; Printing & Related Support Activities; Paper Products; Petroleum & Coal Products; Transportation Equipment; Chemical Products; and Food, Beverage & Tobacco Products.

The four industries reporting lower inventories in April are: Textile Mills; Furniture & Related Products; Nonmetallic Mineral Products; and Miscellaneous Manufacturing. Six industries reported no change in raw materials inventories in April compared to March. | May 2018

Metals & Manufacturing Outlook Inventories

% Higher

% Same

% Lower

Apr 2018

20.4 65.0 14.6 +5.8 52.9

Mar 2018

22.1 66.7 11.1 +11.0 55.5

Feb 2018

23.8 66.0 10.3 +13.5 56.7

Jan 2018

24.4 55.7 19.9 +4.5 52.3

Net

27

Index

Customers’ Inventories*

ISM®’s Customers’ Inventories Index registered 44.3 percent in April, which is 2.3 percentage points higher than the 42 percent reported for March, indicating that customers’ inventory levels were still considered too low in April. “Customers’ inventory levels remain too low for the 19th consecutive month,” says Fiore.

The only manufacturing industry reporting customers’ inventories as too high during the month of April is Nonmetallic Mineral Products. The 12 industries reporting customers’ inventories as too low during April — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Paper Products; Primary Metals; Machinery; Transportation Equipment; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Computer & Electronic Products; Chemical Products; and Miscellaneous Manufacturing.

Customers’ Inventories

% Reporting % Too High

Apr 2018

87

9.7

69.2 21.1 -11.4 44.3

Mar 2018

80

7.8

68.5 23.7 -16.0 42.0

Feb 2018

50

5.1

77.3 17.7 -12.6 43.7

Jan 2018

58

9.4

72.5 18.1 -8.7 45.6

% About Right

% Too Low

Net

Index

Prices*

The ISM® Prices Index registered 79.3 percent in April, an increase of 1.2 percentage points from the March level of 78.1 percent, indicating an increase in raw materials prices for the 26th consecutive month. In April, 61.2 percent of respondents reported paying higher prices, 2.6 percent reported paying lower prices, and 36.2 percent of supply executives reported paying the same prices as in March. The Prices Index is at its highest level since April 2011, when it registered 82.6 percent. “The increases in prices across all industry sectors continues. The Business Survey Committee noted price increases in metals (all steels, steel components, aluminum and copper), corrugate, wood, wood products and plastics. Shortages continue in electronics components,” says Fiore. A Prices Index above 52.4 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

| May 2018

28

Metals & Manufacturing Outlook

Seventeen industries reported paying increased prices for raw materials in April, in the following order: Apparel, Leather & Allied Products; Textile Mills; Furniture & Related Products; Fabricated Metal Products; Paper Products; Electrical Equipment, Appliances & Components; Primary Metals; Machinery; Printing & Related Support Activities; Petroleum & Coal Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Computer & Electronic Products; Miscellaneous Manufacturing; Chemical Products; and Transportation Equipment. No industry reported a decrease in prices in April compared to March.

Prices % Higher

% Same

% Lower

Apr 2018

61.2 36.2 2.6

+58.6 79.3

Mar 2018

57.1 42.1 0.8

+56.2 78.1

Feb 2018

51.0 46.4 2.7

+48.3 74.2

Jan 2018

46.6 52.1 1.3

+45.3 72.7

Net

Index

Backlog of Orders*

ISM®’s Backlog of Orders Index registered 62 percent in April, which is 2.2 percentage points higher than the 59.8 reported in March, indicating growth in order backlogs for the 15th consecutive month. “Backlog expansion continued during the period, with the index reaching its highest level since May 2004, when it registered 63 percent. Strong backlog, low levels of customer inventory and continued strong new order expansion indicates that production requirements should remain robust through Q2,” says Fiore.

The 16 industries reporting growth in order backlogs in April — listed in order — are: Wood Products; Paper Products; Plastics & Rubber Products; Textile Mills; Petroleum & Coal Products; Apparel, Leather & Allied Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Printing & Related Support Activities; Transportation Equipment; Machinery; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Primary Metals; and Food, Beverage & Tobacco Products. The only industry reporting a decrease in order backlogs during April is Miscellaneous Manufacturing.

Backlog of Orders*

% Reporting % Higher

% Same

Apr 2018

88

32.3 59.3 8.3

Mar 2018

87

32.1 55.4 12.5 +19.7 59.8

Feb 2018

88

31.8 56.0 12.2 +19.6 59.8

Jan 2018

89

27.8 56.8 15.4 +12.5 56.2

% Lower

Net

Index

+24.0 62.0

New Export Orders*

ISM®’s New Export Orders Index registered 57.7 percent in April, a decrease of 1 percentage point when compared to the 58.7 percent reported for March, indicating growth in new export orders for the 26th consecutive month. “All six big industry sectors continued to expand export activity during the period,” says | May 2018

Metals & Manufacturing Outlook

Fiore.

29

The 14 industries reporting growth in new export orders in April — listed in order — are: Wood Products; Petroleum & Coal Products; Nonmetallic Mineral Products; Furniture & Related Products; Computer & Electronic Products; Machinery; Paper Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Miscellaneous Manufacturing; and Fabricated Metal Products. No industries reported a decrease in new export orders in April as compared to March.

New Export Orders* % Reporting % Higher

% Same

Apr 2018

79

18.6 78.2 3.2

+15.4 57.7

Mar 2018

80

22.6 72.0 5.3

+17.3 58.7

Feb 2018

79

27.9 69.8 2.3

+25.6 62.8

Jan 2018

79

20.7 78.2 1.1

+19.6 59.8

% Lower

Net

Index

Imports*

ISM®’s Imports Index registered 57.8 percent in April, a decrease of 1.9 percentage points when compared to the 59.7 percent reported for March, indicating that imports grew in April for the 15th consecutive month.

“Imports continued to expand to support production demand, but at slower expansion rates,” says Fiore.

The 12 industries reporting growth in imports during the month of April — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Machinery; Primary Metals; and Computer & Electronic Products. The two industries that reported a decrease in imports during April compared to March are: Plastics & Rubber Products; and Fabricated Metal Products.

Imports

% Reporting % Higher

% Same

Apr 2018

86

21.6 72.4 6.0

+15.6 57.8

Mar 2018

84

26.1 67.1 6.7

+19.4 59.7

Feb 2018

82

24.5 71.9 3.5

+21.0 60.5

Jan 2018

81

22.5 71.6 5.8

+16.7 58.4

% Lower

Net

Index

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

| May 2018

30

Metals & Manufacturing Outlook

Buying Policy Average commitment lead time for Capital Expenditures increased in April by six days, to 145 days. Average lead time for Production Materials increased by four days, to 67 days. Average lead time for Maintenance, Repair and Operating (MRO) Supplies increased by one day, to 35 days. “Capital expenditure lead time and production material lead-time increases rebounded during April. This is in line with general comments received during March and reflects continued strong demand in both sectors of the manufacturing economy,” says Fiore.

Percent Reporting Capital Expenditures Hand-to-Mouth Year + Average Days

30 Days

60 Days

Apr 2018

21

5

10

21

21

22

145

Mar 2018

22

5

12

15

29

17

139

Feb 2018

21

6

11

17

23

22

145

Jan 2018

18

6

11

18

25

22

150

Production Materials Hand-to-Mouth Year + Average Days

30 Days

60 Days

Apr 2018

10

35

28

17

7

3

67

Mar 2018

13

37

23

18

6

3

63

Feb 2018

12

37

27

14

7

3

64

Jan 2018

11

40

25

16

6

2

60

MRO Supplies Hand-to-Mouth Average Days

30 Days

60 Days

Apr 2018

35

41

15

7

2

0

35

Mar 2018

39

37

17

4

3

0

34

Feb 2018

33

42

17

6

2

0

33

Jan 2018

33

42

15

8

2

0

34

90 Days

6 Months

1

90 Days

6 Months

1

90 Days

6 Months

1 Year +

About This Report DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report’s information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of April 2018.

| May 2018

OPEN DIE FORGINGS FOR THE

AEROSPACE INDUSTRY

RODS - SHAFTS - BLOCKS - HUBS - BLIND CYLINDERS CYLINDERS - BLANKS - DISCS - SEAMLESS ROLLED RINGS STAINLESS - ALLOY - NICKEL - CARBON - ALUMINUM TITANIUM - TOOL STEEL - COPPER PH: 973.276.5000 - FAX: 973.276.5050

TOLL FREE: 800.600.9290 INFO@STEELFORGE.COM

STEELFORGE.COM

ISO9001: 2008 AND AS9100C