Metals & Manufacturing Outlook September 2018

MANUFACTURING MILESTONE: THE FIRST 3D PRINTED METAL PART IN A PRODUCTION CAR PAGE 7

MANUFACTURING OUTLOOK PAGE 4

METALS OUTLOOK PAGE 10

ISSUES OUTLOOK PAGE 16

Brought to you by Open call for Contributing Writers see page 3

MANUFACTURING

MBC

BROADCASTING

CORPORATION

AUGUST

ISM PMI:

61.3%

Released September 4th The Full Report Page 25

CONTENTS

TABLE OF CONTENTS

14 AUTOMOTIVE OUTLOOK The EV Future is coming fast

04 MANUFACTURING OUTLOOK

Chaos is ongoing. Trump is fighting everybody, but through all this manufacturing in both the U.S. And Canada is forging ahead. Europe is softening a little and Asia is so-so.

07 COVER STORY The first 3D printed metal part in a production car

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16 ISSUES OUTLOOK Rusting bridges falling down!

18 ENERGY OUTLOOK Wind power is growing up

20 EURO OUTLOOK Economic softening is a concern

NORTH AMERICAN OUTLOOK

21

August PMI hits 61.3

ASIA OUTLOOK

12 AEROSPACE OUTLOOK The Right Stuff Again

Trade war looms large

22 SOUTH AMERICA OUTLOOK Some strengths, some weaknesses

23 GLOBAL PMI OUTLOOK

10 Metals Outlook The cost, making, treating and applications of metal

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Metals & Manufacturing Outlook / September 2018

Still out of sync

24 ISM REPORT OUTLOOK Very, very strong

PUBLISHER’S STATEMENT

PUBLISHERS STATEMENT

When things are this good, what do you talk about in manufacturing. It turns out – quite a lot.

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 Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office MANUFACTURING BROADCASTING CORPORATION 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

Open call for Contributing Writers for new and existing content. Let’s start a conversation – Contact us at editorialdept@mmoezine.com or visit mfgtalkradio.com/writer for more information. © 2018 MBC – Manufacturing Broadcasting Corporation. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher. Metals & Manufacturing Outlook is a registered trademark of MBC.

Industry 4.0, or the digital transformation and automation of labor-intensive processes can be seen to varying degrees in manufacturing plants across the U.S. and the world. As more machines and processes are automated, more data is generated to help manufacturers plan production throughput, planned downtime, product customization, machine availability and utilization, and even obsolescence, replacement and plant expansion.

Plant expansion can also be seen across the U.S. with the National Association of Manufacturers reporting on upgrades or additional capacity at almost all manufacturers in response to increasing demand, tax reductions, regulation alleviation, and an economy that, depending on how it is measured, could continue to expand for another 2 years or more.

And, unless the government ratchets up interest rates too quickly to cool inflation with the all to predictable result of tipping the scales and sending the economy into a recession, it might just be possible that the new normal is continuous economic expansion for some time to come.

Across the nation, the message is slowly seeping in that, for many, college isn’t the solution – getting a good paying job in manufacturing to make north of $50,000 a year is far better than getting a degree while sinking into debt of more than $100,000. Student loans guaranteed by the federal government seemed like such a good idea at the time – now there is more than $1.5 trillion in outstanding student loans, exceeding outstanding auto loans of $1.1 trillion and credit card debt of $977 million. Get ready for the government to take a huge write-down as baby boomers with student loan debts of their own or their children continue to declare bankruptcy in record numbers, shifting the loss to the public debt.

People are going to need those good paying jobs to pay more taxes imposed to balance the federal budget and reduce the national debt – as if paying down the national debt could ever truly happen.

As Industry 4.0 accelerates, so will cyberattacks. Cybersecurity will become critical to every computer and network across America well beyond your desktop PC, laptop or tablet. As Stuxnet proved after its release by our own federal government to invade Iran’s centrifuges being used to develop fissile material, destroying up to one-fifth of the centrifuges that were instructed by the worm to spin faster and faster until they tore themselves apart, attacks by foreign powers and even some internal forces will target our infrastructure (the power grid and dam operations), manufacturing plants, police databases, other first responder systems and various industries that could cripple everything from supply chains to daily living.

The Credit Manager’s Report from Dr. Chris Kuehl is generally positive, and the Global PMI Surveys from our senior correspondent Norbert Ore show that the world has shifted from all boats rising in a synchronous world economy to some ups and downs which will likely be exacerbated by the Trump tariffs until trade agreements are ironed out. Although a trilateral ‘new NAFTA’ seemed possible last month, we aren’t as certain this month. The ‘Mexican Stand-off’ isn’t between Mexico and the U.S., but it is a who-blinks-first stare-down between the U.S. and China and the U.S. and Canada. Canada will probably strike a deal; China – it’s debatable. This one may not end soon or end well, and it is highly unlikely to be resolved before the mid-term elections, so some roiling of economies and manufacturing will continue. It seems like big news, but the consumer appears unphased with consumer confidence at an all-time high and prices at retail seeing a bump up but too small to discourage spending.

Enjoy this issue of Metals & Manufacturing Outlook as we look forward to adding new writers as contributors to our coverage of this exciting industry.

Lewis A. Weiss Publisher Contact laweiss@gmail.com for comments, suggestions and ideas.

Metals & Manufacturing Outlook / September 2018

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MANUFACTURING OUTLOOK

SEPTEMBER 2018

MANUFACTURING OUTLOOK CHAOS IS ONGOING. TRUMP IS FIGHTING EVERYBODY, BUT THROUGH ALL THIS MANUFACTURING IN BOTH THE U.S. AND CANADA IS FORGING AHEAD. EUROPE IS SOFTENING A LITTLE AND ASIA IS SO-SO.

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Metals & Manufacturing Outlook / September 2018

MANUFACTURING OUTLOOK NAFTA and Brexit, between them, are causing a storm in territories that house about a billion people, but there is hope on both fronts.

The Global manufacturing PMI posts its lowest reading for almost two years.

The BLS jobs report for August shows the addition of 201,000 non-farm payroll jobs, and an unemployment rate steady at 3.9 percent. There were gains in professional and business services, health care, wholesale trade, transportation and warehousing and mining. Manufacturing lost 3,000 jobs in August, following a gain of 37,000 jobs in July.

The ISM PMI figure for U.S. manufacturing shot back to 61.3 percent in August from 58.1 percent in July, representing the 24th consecutive month of growth in manufacturing. The overall economy grew for the 112th consecutive month.

IHS Markit’s remarks on the U.S. put the PMI at 54.7 percent in August, down from July’s 55.3.

There was a strong, overall improvement in the health of the U.S. manufacturing sector, as witnessed by further increases in production and new orders, and renewed increases in export sales. The rise in production, however, was the weakest for almost a year. There were accompanying increases in employment and backlogs.

Together with all this, the rates of both input and output inflation eased back to six- and seven-year lows respectively. Business confidence improved.

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

The Bureau of Economic Analysis recently released its ‘second’ estimate for the annual rate of Real GDP growth in the second quarter of 2018, putting it at 4.2 percent. The (revised) figure for the first quarter of 2018 was 2.2 percent.

Steel production is still increasing as global production to July passed one billion tonnes. countries – which represent 99 percent of world crude steel production - for the month of July, continues to rise and was 154,576 MT, up 5.8 percent y-o-y. Capacity utilization for the month was 77.5 percent, up 3.8 percent on July 2017 and down 1.4 percent on June 2018.

U.S. crude steel production for July 2018 was 7.275 MT, up 4.5 percent y-o-y.

Primary Global Aluminum Production in July 2018 was reported at 5.472 million tons, with production in China, at 3.110 million tons representing 57 percent of world total. Production was 452,000 tons in GCC; 376,000 tons in rest of Asia ; 321,000 tons in Western Europe; 314,000 tons in North America and 343,000 tons in Eastern and Central Europe.

World crude steel production for the 64 reporting Metals & Manufacturing Outlook / September 2018

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MANUFACTURING OUTLOOK How critical is aluminum supply? See METALS OUTLOOK. Non-ferrous metal prices are still on a downward trend, with aluminum holding its own for the moment. See METALS OUTLOOK. Who’s to inherit the wind? See ENERGY OUTLOOK Bridges falling down....see ISSUES OUTLOOK

Consumer Prices and Unemployment Rates for the world’s major economies. These data are not necessarily good to the present day, but are mostly applicable to at least 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.

ISO9100:2015 and AS9100D

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Metals & Manufacturing Outlook / September 2018

COVER STORY

Evolution: The original bracket (far left) and the subsequent 3D printed design revisions

COVER STORY

BMW PRODUCES THE FIRST MASS-PRODUCED, 3-D PRINTED METAL COMPONENT

by IFRAM EZRA

Most of us have never heard of the Altair Enlighten Awards, but if you work in the automotive engineering field, it’s kind of a big deal. Held annually to recognize the auto industry’s work in the field of light weighting, the big winner this year was GM’s truck division for cutting 450lbs from their 2019 Silverado pickups. But the buzz at this years event, held in Traverse City Michigan, was BMW’s roof bracket which took the Module category award.

The small, unassuming bracket is the culmination of 10 years of effort by BMW’s Head of Additive Manufacturing Maximilian Meixlsperger. It makes the soft top on the BMW i8 Roadster raise and lower and it is the first mass-produced 3D printed metal component. The bracket is 44% lighter and 10x stronger than the part it replaces but what is more remarkable is that it is also the first ever 3D printed metal part used in a production vehicle.

The design for the new part would have been impossible to achieve without recent advances in metal additive manufacturing. The part is required to lift, push and pull the substantial weight of the

roof. The lighter design was impossible to produce using the die-cast process of the original part. With new developments in design software and metal 3D printing, Meixlsperger and his team were able to input specs such as the weight of the load and the amount of space they have, and the software will generate what is called a “load path”, which distributes the load throughout the part to allow for the least possible amount of material to be used making the part. Using traditional 3D printing required too much post-print finishing to make the part cost- and time-effective to produce. By refining the design and taking advantage of cutting edge materials, BMW was able to mass produce the part to meet the needs of a production vehicle.

“When the judges looked at this part, we said, ‘this is the tip of the iceberg for manufacturing,’” said Richard Yen, Altair Senior Vice President for global automotive and industry and one of a team of judges for the Altair Enlighten Awards. Meixlsperger said that once the material and equipment became available, the project went from concept to a final part in only 3 months time.

Metals & Manufacturing Outlook / September 2018

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NORTH AMERICAN OUTLOOK

NORTH AMERICAN OUTLOOK The Institute for Supply Management PMI figure moved forward from 58.1 in July to 61.3 in August, representing the twenty-fourth consecutive month of growth in manufacturing. There was growth in the overall economy for the 112th consecutive month.

by ROYCE LOWE Of the 18 manufacturing industries, 16 reported growth in August, in the following order: Computer & Electronic Products; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; and Printing & Related Support Activities. The two industries reporting contraction in August are: Wood Products; and Primary Metals.

“The toughest thing we deal with is the unknown.

Dealing with tariffs on steel purchases and not knowing if or when they will end makes planning difficult.” Thus the spokesperson for Fabricated Metal Products as a comment on the present situation.

Tariffs are a general concern, but most sectors are learning to accept and live with them, and are forecasting their businesses accordingly.

There is a general air of optimism in U.S. manufacturing.

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Metals & Manufacturing Outlook / September 2018

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

August

July

65.1 63.3 58.5 64.5 55.4

(60.2) (58.5) (56.5) (62.1) (slowing, faster) (53.3)

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

Backlog of orders New export orders Imports

August

July

41.0 72.1 57.5 55.2 53.9

(39.4) (73.2) (54.7) (55.3) (54.7)

Commodities Up in Price Aluminum* (22); Aluminum Based Products (4); Capacitors (3); Caustic Soda (14); Corrugate (23); Electrical Components; Electronic Components; Flour; Freight (7); Lumber (2); Nylon (3); Packaging

NORTH AMERICAN OUTLOOK

Materials; Paper (4); Phosphates; Plastics; Resistors (2); Steel — Cold Rolled; Steel — Hot Rolled (21); Steel — Stainless (5); and Steel Based Products (4).

Commodities Down in Price Aluminum*; Copper (2); and Corn.

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

Commodities in Short Supply Capacitors (14); Electrical Components (5); Electronic Components (4); Freight (4); Labor; and Resistors (10).

CANADA’s production volumes were very strong in August, with the rate of expansion in production at its sharpest since December 2010. But new order growth was down to a four-month low, along with the strongest input cost inflation – attributed to steel and aluminum tariffs - for about seven-and-ahalf years. The PMI was for all intents and purposes unchanged from 56.9 in July to 56.8 in August, and still hovering around June’s survey-record 57.1.

It’s all very wait and see in the midst of heightened business uncertainty and ongoing global trade tensions.

Quebec continued as the best performing region, with manufacturers in Alberta and B.C. showing a relatively strong rate of new export order growth.

Ontario was the weakest region for exports, while all regions experienced increasing average cost burdens.

Canada produced 1.020 MT of crude steel in July, down 9.3 percent y-o-y.

Canadian light vehicle sales continued to fall in August, but still posted the second-best August on record, dropping 1.6 percent from the previous year to 181,000 units. Passenger car sales were down 10.6 percent to 52,842 units, and light truck sales were up 2.6 percent to 128,100 units, MEXICO saw a softer improvement in their manufacturing sector performance in August, as the PMI fell to a ten-month low of 50.7 from July’s 52.1.

Production fell, there was a slower rise in new orders, and weaker employment.

Mexico produced 1.780 MT of crude steel in July, up 3.0 percent y-o-y.

Metals & Manufacturing Outlook / September 2018

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METALS OUTLOOK

SEPTEMBER 2018

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

by ROYCE LOWE Hot-rolled and cold-rolled steel prices in the U.S. eased slightly of late, with August prices for H.R.coil at around $890/ton and C.R. Coil at around $970/ton. Chinese H.R. Coil was around $495/ton, its C.R.coil around $550/ton.

Non-ferrous metal prices are mostly on a continuing downtrend, with aluminum staying relatively stable at around $0.93 per pound in early September; copper trending down at around $2.64 per pound in early September; nickel at around $5.65 in early September, down from $6.04 in early August; zinc at around $1.10 per pound in early September, down from $1.22 in early August.

What is it about aluminum that makes the metal so important, so critical to U.S. industry? Why does the U.S. produce so little of the metal today? What would it take to bring the U.S. aluminum industry back to where it was, but more to the point should, might this ever happen?

Back in 1981, the U.S. produced 30 percent of the world’s aluminum, and for many years through

2000 was the world’s largest producer of primary aluminum. Production had peaked in 1980 at 4.64 million metric tons. By 2014, it was sixth in the table, producing only 3.5 percent, a result of the recession and falling metal prices. It reached a point where several U.S. smelters were closed; the price of the metal and the costs of producing it – mostly energy-related -made it totally uneconomical to carry on.

The flip side of all this is that in 2017 (valueadded) Aerospace and Defense exports from the U.S. added up to a trade surplus of $86 billion.

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Metals & Manufacturing Outlook / September 2018

METALS OUTLOOK

What is it about aluminum that makes the metal so important, so critical to U.S. industry?

metal. How long it will take to get these smelters operating, and their ability to meet quality requirements, are surely strategic questions. But whatever happens to the U.S. aluminum industry, one thing is certain, the metal is a very strategic part of the U.S. aerospace and defense system, and its use in these industries requires aluminum alloys of very strict quality standards.

Rolled sheet aluminum awaiting shipment

Some 97 percent of jobs in the U.S. aluminum industry are in post-primary production, and they warrant much higher-than-average wages. The quality requirements of much of the metal used in aerospace and defense are beyond the capabilities of the majority of U.S. smelters, in fact much of this material comes in from Canada, Japan and China.

Today about 90 percent of U.S. primary aluminum is imported. A few smelters that had been closed are reported to be re-opening following 10 percent tariffs recently applied against imports of the

In line with this, Alcoa, the U.S.’s largest aluminum producer, has filed requests for waivers from U.S. tariffs; three for aluminum it said was unavailable from U.S. producers, and two for metal that can’t be made in sufficient quantity domestically.

The one-year request is for 39,500 tonnes, with Alcoa’s Canadian subsidiary listed as the metal source.

So tariffs or no tariffs, it is up to the U.S. aluminum industry to decide if it is better to re-start smelters or to continue to import the metal. The aerospace and defense industries are under the gun when it comes to capacity, and any delays or quality problems with aluminum alloys will be a cause of much concern.

Metals & Manufacturing Outlook / September 2018

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AEROSPACE OUTLOOK

SEPTEMBER 2018

AEROSPACE OUTLOOK

by ROYCE LOWE

Richard Branson stands in front of WhiteKnightTwo in Mojave, California

“Oh! I have slipped the surly bonds of earth/ And danced the skies on laughter-silvered wings.” Thus the beginning of a 1941 poem by an aviator named John Gillespie Magee Jr., used as a congratulatory message sent by a NASA astronaut to the Virgin Galactic team following a successful recent space flight.

Yes, a space flight, in WhiteKnightTwo. 12

Metals & Manufacturing Outlook / September 2018

AEROSPACE OUTLOOK Richard Branson, the British billionaire head of companies called Virgin, has long been interested in space, and has been pumping money into Virgin Galactic for about fifteen years. He plans to take half a dozen passengers on a “suborbital” flight, peaking at more than fifty miles above the earth. Blue Origin, owned by Amazon founder Jeff Bezos, has a similar altitude goal for its first manned flights. SpaceX, Elon Musk, wants to do the 33 million miles to Mars. Branson says he’ll leave Mars to Musk. Meanwhile SpaceX says it’s on schedule for a manned space mission in April 2019.

If ongoing tests are successful, Virgin could soon start offering space-flights to the six hundred customers who have already paid a quarter of a million dollars for the ninety-minute thrill of it all.

One might wonder how all this is going to happen, how the spacecraft will be built, the rockets, but particularly who will fly them.

For Galactic, it’s all happening in the Mojave desert at the company’s main hangar, known as FAITH (Final Assembly, Integration, and Test Hangar), a corrugated-metal structure that covers an area larger than a football field. Carbon fiber is the primary material used to build the space ships; it’s not likely to fail by fatigue as metals might, and one of the beauties of carbon fibre- composite

craft is that parts can be literally taped and glued on and off. That’s the simple part. Unlike its two rivals, Virgin Galactic doesn’t use automated vehicles, and once a Virgin Galactic ship is airborne, the fate of the ship and its passengers will be in the pilot’s hands.

Enter the pilot, Mark Stucky from Kansas and his co-pilot Dave Mackay, a Scot. The two of them have trained and retrained and dared to fly craft at numbing speeds and g forces. Between them they recently flew twice as fast as a Tomahawk cruise missile, reaching 170,000 feet, righting the ship through split seconds of off-course. For the first time, Virgin Galactic had done it all on its own, with its pilots, its rocket motor, its spaceship.

Richard Branson had been waiting longer than anyone. There were glitches during recent test flights, true tests for the pilots. They had what Tom Wolfe, recently-departed writer, might have called ‘The Right Stuff.’

So we have Virgin Galactic competing with startups SpaceX and Blue Origin to be the first private company to send tourists into space, a mission that some experts have deemed irresponsibly risky.

Time will tell who will be the first to dance the skies on laughter-silvered wings.

Virgin Galactic’s Spaceship Two during a recent test flight Metals & Manufacturing Outlook / September 2018

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AUTOMOTIVE OUTLOOK

AUTOMOTIVE OUTLOOK Big changes at Ford, Tesla keeps on keeping on and Dyson (yes, that Dyson) throws their hat in the electric car ring.

by ROYCE LOWE Things are not looking too healthy for Ford these days. The company’s $11 billion restructuring program along with its exit from the sedan market has analysts worried about its ability to continue to progress at the rate the business requires.

Ford further decided it wasn’t worth investing any more money in the Focus Active it makes in China, and is cancelling plans to import after Trump’s tariffs undermined the case for bringing the vehicle to the U.S. market. Ford had planned to start importing about a year from now, but the tariffs and the less-than 50,000 units Ford forecast selling sealed its decision.

Tesla, on the other hand, continues to surprise.

It was recently going private, then decided not to.

After ramping up to the forecast 5,000 Model S per week, some of which were reportedly finished in a tent outside the main plant, it invited analysts to look around again, which they did, and stated that production of 8,000 model S per week was on the cards for the not-too-distant future, and that the company was well on its way to achieving a steady, weekly production rate. This was all before two of

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Metals & Manufacturing Outlook / September 2018

Elon Musk’s key personnel up and left him, and he appeared on TV displaying other talents that most of us didn’t know he had.

Tesla is renowned for making news, but this is the kind they certainly don’t need. The stock market reacted accordingly. Tesla shares fell, then came back.

James Dyson, the prolific inventor of the bag-free, extremely powerful vacuum cleaner, and the hand dryer that always works and always does its job, has assembled a 400-strong auto team, with 300 more to come, to work on his electric vehicle. This man has a training scheme all his own, and all personnel on his automotive team will have been through it.

Dyson’s $2.6 billion EV plan will not use the Lithium-ion battery technology favored by VW AG, Daimler AG and GM, three companies that plan to offer EVs next year, along with Tesla and its Model 3. It will rather go for solid state batteries, which Dyson claims are smaller and more efficient.

Toyota is also into solid state, and plans to have them in EVs by the early 2020s.

AUTOMOTIVE OUTLOOK

It’s beginning to look a little like a bunch of formula one cars on the starting grid, with Tesla no longer necessarily, but maybe probably, in pole position.

Tesla has exceeded their goal of producing 5,000 Model S sedans every week

As the world converts to electric vehicles, phasing out diesel quickly and gas-powered soon thereafter, what will finally become of muscle cars? And will EV’s be able to go the distance between charging stations where ‘filling up’ may take more than just a few minutes at the pump. We are headed towards a different personal transportation future, and soon more cars may fly.

Ford cancels plans to bring their made-in-China Focus Active to the US Metals & Manufacturing Outlook / September 2018

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ISSUES OUTLOOK

SEPTEMBER 2018

ISSUES OUTLOOK

The recent collapse of the Morandi bridge in Genoa, Italy, and its resulting multiple deaths, raised questions about both the bridge’s design and the way it was built. It also shed further light on the fact that all countries have bridges and most of these countries have some bridges in various bad states of repair. This is adding to the concern of civil engineers that many bridges around the world which use reinforced concrete are deteriorating faster than expected.

The collapsed Morandi bridge the day after the disaster in Genoa, Italy, August 15, 2018

by ROYCE LOWE The Italian media had reported that in 2016, Antonio Brencich, a specialist in reinforced concrete, described the Genoa bridge as a “failure of engineering” and said that sooner or later it would have to be replaced. Since the bridge opened in 1967 the pre-stressed concrete tendons that support it have required continuous monitoring and maintenance.

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Metals & Manufacturing Outlook / September 2018

ISSUES OUTLOOK All around the world bridges built long ago, particularly those using reinforced concrete, are deteriorating, and even back in 1999, a study found that around 30 percent of road bridges in Europe had some sort of defect, particularly associated with corrosion of their steel reinforcing or prestressed tendons. Failure of prestressed concrete can initially be put down to small cracks in the concrete surface caused by winter/summer temperature variations, salt, ice, and of course heavy traffic. The cracks allow water in, in some cases laden with de-icing salt, and penetration through to the reinforcing bar and its subsequent corrosion. Corrosion involves the formation of rust and an attendant increase in volume, enlargement of the cracks, subsequent falling away of pieces or lumps of concrete and in the worst cases, failure.

In 2006, such a tragedy occurred to the north of the city of Montreal. The Boulevard de la Concorde bridge collapsed and caused five deaths. The bridge was built in 1970 and was supposed to last 70 years. The designers and engineers couldn’t really have forecast the quantity and the weight of trucks that might pass over the bridge in a day.

In spite of warnings about pieces falling from the bridge and the sight of holes in the concrete, nothing was done until the bridge collapsed. A neighbouring bridge built during the same project was demolished immediately after the incident.

Inquiries pointed to a number of individuals who were considered to be responsible for the tragedy, most of whom were guilty of poor quality control. If there can be said to be an upside to this tragedy, it is that people learned and standards were changed.

Boulevard de la Concorde is just an example of an ongoing problem. A report from the American Road & Transportation Builders Association in January 2018 stated that 54,259 of the country’s 612,677 bridges were “structurally deficient.” The problem bridges have an average age of 67 years and are crossed by vehicles 174 million times every day. At the present rate of repair and replacement, it will take 37 years to remedy all the problems.

There are ways to combat these problems. For years both epoxy-coated and stainless steel reinforcing bar have been used; concrete has been made stronger and self-healing concrete is being explored whereby any surface cracks appearing will trigger a chemical reaction that re-seals them.

When bridges were being built in the 1950s, 60s and 70s, many were expected to last for a century, but all the natural and man-made forces acting on them lead civil engineers to think largely of 50-60 years. Repairing such bridges is possible but slow and very expensive. It may be better to build a new bridge.

Money and good materials and quality control will be required to prime up our infrastructures and to keep us all safe.

Vehicles lie in the collapsed de la Concorde Blvd. overpass bridge

In August of 2007, the Minneapolis I-35W 8-lane bridge over the Mississippi River collapsed. It was built in 1967 and was identified by the federal government in 1990 to be structurally deficient.

Since 1950, it is just one of more than 150 partial or total bridge collapses worldwide.

Money, better materials, and quality control will be required to replace the crumbling bridge infrastructure around the world, but it won’t happen quickly, and it may not happen soon enough. Expect other horrific stories in the news about collapsing bridges and loss of life before sluggish governments fund new structures. Anyone who drives needs to get on elected representatives for faster results sooner, before it is too late.

Metals & Manufacturing Outlook / September 2018

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ENERGY OUTLOOK

SEPTEMBER 2018

ENERGY OUTLOOK

Wind power is not new, and neither are the turbines we see dotting the landscape across the globe, normally on ridges, surrounded by mountains, and near to a station that will capture the generated power.

GE Renewable Energy’s Haliade-X, the largest wind turbine in the world

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Metals & Manufacturing Outlook / September 2018

ENERGY OUTLOOK

GE predicts that a 750 MW windfarm of Haliade-X turbines could power a million homes.

by ROYCE LOWE Offshore is more complicated. Materials and installation are more critical. But the technology is being developed to increase the presence of offshore wind farms.

GE Renewable Energy is designing and building the world’s biggest ever wind turbine – the Haliade-X – which at 260m (853 feet) tall, will overshadow the present tallest turbine. Each of the turbine’s carbon hybrid blades, at 107 metres (351 feet) long, longer than a football field, is manufactured

by Danish company LM Wind Power. Each turbine will produce 45 percent more wind power than any existing turbine, will have an annual capacity of 67 GWh and will generate the power to feed 16,000 European homes. LM Wind Power has produced one fifth of the world’s turbine blades, 205,000; Haliade-X is its biggest project.

Offshore wind power is expected to account for 15 percent of the global wind industry in 2025, from 8 percent in 2017. Bigger turbines help bring down the cost of wind energy, but the bigger turbines also throw up challenges to the industry.

The Haliade-X and its 12 MW rating will be the tallest and as such will need to be the strongest.

GE’s cooperation with LM Wind Power will be a key factor here. The Danish company has all the required facilities to test for wind forces and for the fatigue resistance of the carbon hybrid blades.

Out at sea the Haliade-X will find all the space it needs, generating power-a-plenty. GE predicts that a 750 MW windfarm of Haliade-X turbines could power a million homes.

There are already plans to top this. A team led by the University of Virginia and funded by the Department of Energy, is already designing a turbine that would be capable of producing 50 MW and could reach a height of 500 m (1640 feet).

The University of Virginia will doubtless be watching with interest, as GE is hoping for a demonstration unit to be installed by 2019, shipping to start by 2021.

Worldwide, wind turbines are generating more than 540 gigawatts of electric power. By 2012, up to 800GW may be reached by projects in development, or enough electric power to run 560 million homes. Tidal power remains relatively untapped, and solar power generates less than 100GW a year at present. In 2016, total global electricity generation was 24,659 TW, so sources of clean energy have a very long way to go to displace coal, natural gas and oil.

Metals & Manufacturing Outlook / September 2018

19

EUROZONE

GLOBAL OUTLOOK

EUROZONE

by ROYCE LOWE Growth softened in August, with stronger production growth, but new orders increasing at the slowest rate for two years.

There are concerns in the Eurozone regarding tariffs and global trade. The run of expansion in the zone is stretching to 62 months, but of late it has seen the slowest growth since November 2016.

Investment goods are strongest, followed by intermediate. Backlogs are up, as is employment.

Steel and oil-related goods’ prices are up.

Crude steel production in Germany in July was at 3.900 MT, up 10.9 percent y-o-y; in Italy 2.210 MT, up 3.3 percent y-o-y; in France 1.310 MT, down 3.8 percent y-o-y and in Spain 1.200 MT, up 20.1 percent y-o-y.

Russia’s crude steel production for July was at 6.170 MT, up 0.8 percent y-o-y; Ukraine’s was 1.815 MT, up 11.4 percent y-o-y.

Car sales in Western Europe for the month of July were unusually high, due to the WLTP test

IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI) eased back from July’s 55.1 to 54.6 in August. scheduled to come in. YTD increases were 40 percent in France; 48.7 percent in Spain; 24.7 percent in Germany; 9.5 percent in Italy and 23.1 percent in the UK. The new emissions tests were doubtless the reason for the uncharacteristic sales increases.

The WLTP (Worldwide harmonized Light Vehicles Test Procedure) lab test and the accompanying RDE (Real Driving Emissions) on-road screening will be effective September 1. Any model not WLTPcertified cannot be sold after September 1.

IHS Markit’s PMI for the UK was down in August to a 25-month low of 52.8 from July’s (corrected) 53.8 figure, with production increase at its lowest rate in 17 months and growth in new orders down to its weakest during the current 25-month expansion sequence. Job creation is near stagnation.

Metals, electronic components, energy and a range of other inputs led to an increase in selling prices. Raw material shortages and supply-chain constraints are contributing to an increase in purchasing costs.

Uncertainty over Brexit and currency exchange rate are certainly contributing to a business optimism that is at a 22-month low.

The UK produced 0.750 MT of crude steel in July, up 26.9 percent y-o-y.

20

Keep a watchful eye on Europe. If its economy softens much further, it may begin a shift from growth into contraction. Although it is not the world’s largest importer or exporter, if it falls out of sync with other world economies, those adverse ripples could begin to move around the globe.

Metals & Manufacturing Outlook / September 2018

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

There is concern in China over the ongoing China-U.S. Trade war.

by ROYCE LOWE In CHINA, there was a further improvement in operating conditions in August, with production up at a quicker pace than in July, but new orders increased at the slowest rate since May 2017, and export sales were down for the fifth consecutive month. The August PMI eased slightly to 50.6 from July’s 50.8.

There is concern in China over the ongoing ChinaU.S. Trade war.

Backlogs of work are up for the 30th consecutive month, coincident with restructuring and job shedding. Inflationary pressures picked up as both input costs and output charges increased.

CHINA produced 81.241MT of crude steel in July, up 7.2 percent y-o-y; Japan 8.420 MT, down 2.0 percent y-o-y; India 9.000 MT, up 8.0 percent y-o-y and South Korea 6.177 MT, up 0.1 percent y-o-y.

Taiwan produced 2.040 MT in July, up 12.2 percent.

Chinese light vehicle sales for July, sedans, SUVs and minivans were down 5.3 percent y-o-y to 1.6 million. Total vehicle sales, including trucks and buses, fell 4 percent to 1.9 million.

August’s PMI eased up slightly to 52.5 from July’s 52.3.

Backlogs were up in August for the 12th successive month, necessitating extra staff.

‘Global geopolitics’ are a concern in Japan, but business optimism is holding up.

INDIA’s operating conditions improved at a slower pace in August, and the PMI slipped back to 51.7 from July’s 52.3. as production and new orders were up at a slower, but still good pace.

There was a slight increase in employment.

Inflationary pressures eased further in August.

There is said to be a strong, underlying demand in India; new export orders are up for the tenth consecutive month.

Overall, it’s the trade war between the U.S. and China that looms large.

Manufacturing Laughs

New energy vehicle sales, electric and plug-in hybrids, were up 47.7 percent to 84,000 units.

In August, JAPAN saw a moderate improvement in business conditions, with production up along with faster new order growth. Export orders were down for the second time in three months.

Cost pressures led to selling prices increasing at the sharpest rate in almost ten years. Shipping, fuel, metals and labor were all up in price.

Metals & Manufacturing Outlook / September 2018

21

SOUTH AMERICA

GLOBAL OUTLOOK

SOUTH AMERICA

by ROYCE LOWE BRAZIL saw its August PMI at a four-month high, up to 51.1 from July’s 50.6, on the back of strengthening operating conditions in its manufacturing sector. There was a faster increase in new orders and production, but input cost inflation was at its highest in ten years, to a large extent due to depreciation of the real.

Consumer goods outperformed the other two sectors. There were cutbacks in personnel.

Hope of a better economy, investment, product diversification and greater sales forecasts underpinned a 12-month production outlook.

Brazil’s crude steel production for the month of July was 3.022 MT, an increase y-o-y of 6.7 percent.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – dropped to a 21-month low of 52.5 in August from July’s 52.8.

Production growth was slightly up, but rates of expansion in new orders and employment slowed.

22

Metals & Manufacturing Outlook / September 2018

Hope of a better economy, investment, product diversification and greater sales forecasts underpinned a 12-month production outlook.

Confidence regarding the outlook for the next year dipped to a near two-year low.

There was further growth across the consumer, intermediate and investment goods industries.

Input and output inflation remained high in August.

South America remains a mixed bag of economies, from Chile and Colombia performing fairly well, to Brazil working on a comeback, and Venezuela headed for collapse. Given Venezuela’s oil-based economy with current world production climbing and prices stagnant, it is unlikely that Venezuela can avoid its economic demise, even if the World Bank and the IMF try to right the ship. As a whole, South America is seeing growth around 5.5% and contributes $6 trillion to the world GDP.

Manufacturing Laughs

GLOBAL PMI OUTLOOK

STRATEGAS

GLOBAL PMI OUTLOOK

by NORBERT ORE Supply chains are typically flexible due to everchanging conditions related to supply and demand. In manufacturing, change is constant and mostly unpredictable as exogenous factors play larger and larger roles. Recent events, driven by a reordering of priorities across markets, have tested even the best planners. Supply chain concerns grow with time as vulnerability increases.

In spite of these challenges, North America, Europe, and much of Australasia continue to see improvement in output, employment, orders, and investment.

This month 17 of the 18 surveys that we closely follow indicate growth. The outlier, South Korea, fell just below 50, continuing a six-month trend of modest contraction. The JP Morgan Chase Manufacturing PMI™ (which summarizes the data from 44 countries) posted a 52.5 (-0.2), continuing a longer term downward trend from a high of 54.5 percent in December 2017. Overall, we see a leveling in the overall velocity of these economies due to the strength of the largest economies as opposed to a downward trend.

four remaining countries averaged 52.8 percent which is generally a level that is on the borderline for expansionary employment and investment.

United Kingdom: The UK/CIPS PMI (52.8, -1.0) printed its weakest showing in the post Brexit era. In August, the PMI remained in expansionary territory for the 25th consecutive month. New export orders contracted for the first time since April 2016.

China: China’s Official Report, the CFLP PMI (51.3, +0.1), reported a slight slowing in growth. The Caixin China General Manufacturing PMI (50.6, -0.2) shows a similar rate of expansion. The trend from both surveys is for continuing growth consistent with the level of growth started in early 2016.

India: India’s PMI (51.7, -0.5) decelerated slightly while posting its 13th consecutive month of growth. Overall, the economy is growing and poised to continue to grow.

South Korea: The PMI (49.9, +1.6) strengthened m/m, but remains a touch outside of expansionary territory. Meanwhile, costs are still increasing, margins are shrinking, and confidence levels are falling.

North America: Canada (56.8, -0.1) expanded for the 30th consecutive month. This continues the strong performance that Canada has enjoyed recently. Mexico’s PMI (50.7, -1.4) is consistent with growth for the past 12 months averaging 51.7 percent. A settlement on tariffs should enhance growth for U.S., Canada, and Mexico.

Eurozone: The Eurozone PMI (54.6, -0.5) fell to its lowest level since posting a 53.7 in November 2016. Monthly rate of change for the EZ indexes ranged from +1.1 to -1.4, a relatively minor level of variability for the eight countries. The EZ’s manufacturing expansion continues to be led by the Netherlands (59.1, +1.1), Ireland (57.5, +1.2), Austria (56.4, -0.4), and Germany (55.9, -1.0). The Metals & Manufacturing Outlook / September 2018

23

STEM

DO YOU HAVE TO BE INTO STEM TO BE IN MANUFACTURING?

by ANDREA OLSON

This month’s Women And Manufacturing Podcast guests know STEM. Host Jennifer McNelly had the chance to speak with Stacy DelVecchio, Product Manager for Caterpillar, Inc., and talked about all things STEM related to a manufacturing career. Host Barbara Traultlein got to speak with Priyanka Komala, Technologist and STEM speaker in Washington D.C., about parental and cultural influences on women entering STEM fields. There is no question we are starting to make great inroads to empowering women to embrace STEM and moving into career fields that have not been traditionally female-dominated.

While this is a fantastic new wave, not only for manufacturing, but the increase of women engaging in STEM, we need to ensure that the message about opportunities in manufacturing doesn’t stop there. We’re all well aware in manufacturing, there is a need for more talent

24

Metals & Manufacturing Outlook / September 2018

across the board, including those that bring engineering, math, science, and skilled trade knowledge to the table. Yet we often fail to remember (or promote) that manufacturing is much, much more.

Manufacturers are like any other business.

They need employees and leaders that can help the organization advance and grow.

This includes skills such as accounting, sales, marketing, human resources, customer service, project management, purchasing, IT, and more.

Manufacturers need leaders that can effectively design strategic growth plans, analyze data, and develop unique approaches to compete in the marketplace. Manufacturers need employees that bring experience and perspectives from out-ofindustry, generating new ideas and delivering new perspectives to the business.

STEM In the past, many manufactures didn’t have the need to actively “sell” their products - the market demand was baked-in, and most companies focused on streamlining their back-of-thehouse production operations, implementing lean processes. Now, with the continual flood of changes in technology, the business landscape has transformed. Competitors can appear in an instant. Industries can be obsoleted overnight.

Manufacturers now have to be more nimble and strategic, focusing on how to go-to-market, compete, and manage their finances more effectively.

With these pressures, the industry not only needs to embrace and fold-in new faces into manufacturing, including women and minorities to gain new perspectives. They need a wide range of talent, both in STEM, but also in business. When we, as an industry, look to promote and build the “brand” that is manufacturing, we need to tell the whole story. The fact that manufacturing isn’t simply the shop floor, or requires an engineering degree to be a part of it. Manufacturing is a business, and with that comes the need for new strategic minds across all aspects and departments of the organization to look at innovative ways to grow.

If we only focus on one part of the business, the rest will suffer. As we continue to reach out to women to be a part of the industry, let’s make sure they know they don’t have to have an engineering degree to have a great career in manufacturing.

Manufacturers are like any other business. They need employees and leaders that can help the organization advance and grow.

Andrea Olson is CEO and Founder of Prag’madik and the author of No Disruptions: The New Future For Mid-Market Manufacturing. A 4-time ADDY® awardwinner, 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.

Metals & Manufacturing Outlook / September 2018

25

CREDIT MANAGERS’ INDEX

CREDIT MANAGERS’ INDEX

by CHRIS KUEHL Steady as she goes. Right at the moment, it feels good to have a month without a lot of drama.

There has been quite a lot taking place affecting the progress of the economy now and in the future.

As far as the data from the Credit Managers’ Index (CMI), there has been some stability with August readings looking a lot like last month. Where there has been change, it has been in a positive direction.

“Given all the turmoil surrounding trade issues and the mercurial behavior of the president, it might be expected this drama would be affecting the overall performance of the economy,” said NACM Economist Chris Kuehl, Ph.D. “The assessment is that the economic drivers are mostly shrugging off these issues and have been reacting to more traditional motivators. This state of calm is not likely to last, however, given the appearance of some inflation indicators and the potential impact of various trade deals, which have been on-again and off-again.”

The combined score for the CMI this month was 55.8, nearly identical to the 55.5 notched last month. There was significant similarity between last month and this month in the index of nonfavorable factors as well. This month fell slightly to 50.1 after a reading of 50.5 in July. There was more variation in the index of favorable factors with improvement in all four categories. It was at 63.1 in July and is now at 64.3—just below May and June of this year. The real news, as always, is in the details and the sub-index readings.

The sales category perked back up. That is always good news as it is the sale that starts the whole process in motion for a credit manager. Last

26

Metals & Manufacturing Outlook / September 2018

month, the reading was down to 63.9, the lowest mark since the 63 set in January. It is now back to 65, but not yet in the exalted territory reached in May and June when the levels were over 69. It always seems a little picky to look at readings in the 60s as troublesome—these have been spectacular numbers for a few years. What matters now is the trend, Kuehl explained. It is always good to see these readings improve. The new credit applications numbers also improved a little, increasing from 61.2 to 62.5. The often volatile dollar collections data improved as well (61 to 62.6). This reading is one of the best this year with only February and June exceeding this month. The amount of credit extended also saw a small improvement from 66.1 to 66.9. “The good news for this sector is it has been above 66 for seven months in a row,” he said. “That means good customers are asking for some considerable amounts of credit.”

There was not quite as much drama as far as the non-favorable factors. There was a slight dip in the rejections of credit applications (52.5 to 52.2), but this was a minor shift and comes at the same time that overall applications have been up. There was also a slip in the accounts placed for collection category as it went from 49.9 to 49. It had been hoped that it would break past the 50 barrier (anything above 50 is expansion) this month, but there are obviously still distressed creditors.

Likewise, there was a dip in the disputes category from 47.7 to 46.4. The dollar amount beyond terms saw an improvement—good news although the reading is still in the contraction zone at 48.5.

However, this is better than the previous month’s reading of 47.4. The dollar amount of customer deductions also saw some better numbers (47.9

CREDIT MANAGERS’ INDEX to 48.7). Finally, there are the numbers for filings for bankruptcies. They looked a bit weaker, falling from 57.4 to 55.9. Kuehl noted that readings in the mid-50s are good and this category is firmly in the expansion zone, but the trend is not where anyone would want it to be.

Manufacturing Sector There has been a lot of drama surrounding the manufacturing sector over the last several months.

Some of that volatility has been seen in the data.

Not as much variability as one would expect though. “The volatility seems to signal that most manufacturers are reacting to solid consumer demand from within the U.S. and outside,” said Kuehl. “The worry stems from the near constant threat of new tariffs and trade disputes. The steel and aluminum tariffs are still biting hard. Then, there is the roller coaster strategy that has tariffs imposed on cars and other products one day and those restrictions being lifted the next day.”

In the midst of that storm, there has been some manufacturing stability.

The combined score for the manufacturing sector improved over last month’s reading and is back to what it was in June (55.9). Even last month was not a huge dip, falling to just 55.4. For the past year, the sector has been strong with only one month under 54 (53.9 in December). The index of favorable factors improved as well, reaching 64.4 after slipping to 62.1 the month prior. There was a slight decline as far as the index of unfavorable factors from50.9 to 50.2. “This category has been hugging the border between contraction and expansion for the past year,” he said. “There is nothing to suggest this will alter any time soon.”

The sales category shifted up from 62.4 and hit 66.5 this month, bringing the reading back to what had been seen as normal over the last year. This year, the reading has been below 63 only twice;

in May and June the numbers were over 69. The new credit applications category also saw an improvement when the numbers jumped back into the 60s after a reading of 59.5 last month. It is now sitting at 61.4. The dollar collections data improved from 61.5 to 62.4. According to Kuehl, this has been a vexing area for the last year and seems to move in tandem with the non-favorable category of dollar amount beyond terms. The fewer slow pays, the better the dollar collection. There was also an improvement in the amount of credit extended (65.1 to 67.1).

There has been some movement in the nonfavorable categories as well. The rejections of credit applications stayed very close to previous readings (53.5 to 53.7). That is good news given that new applications went up. Kuehl suggested this means those who are applying for credit are getting approved. The accounts placed for collection reading fell a bit and is now in contraction territory. It was at 50.6 and now sits at 49.6. The last time this was in contraction territory was April when it hit 49.8. The disputes category

fell deeper into contraction with a reading of 45.8 compared to last month’s 47. “This is not a good sign as disputes nearly always lead to more serious issues, like collection and even bankruptcy,” he said. The dollar amount beyond terms stayed close to what it had been, with a reading of 48.4 compared to 48.1 in July, but at least it was an improvement. The dollar amount of customer deductions improved by quite a bit, but is still mired in the contraction zone. It was 46.9 and is now 48.1. The filings for bankruptcies category fell back quite a bit from what it had been, moving from 59.1 to 56.

“These are still very good numbers and suggest that most companies are finding a way to survive,” he concluded.

Metals & Manufacturing Outlook / September 2018

27

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 61.3% ISM PMI for the past 5 years

28

Metals & Manufacturing Outlook / September 2018

ISM REPORT OUTLOOK

ISM® REPORT ON BUSINESS®

MANUFACTURING E

conomic activity in the manufacturing sector expanded in August, and the overall economy grew for the 112th consecutive month, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The August PMI® registered 61.3 percent. The New Orders Index registered 65.1 percent, an increase of 4.9 percentage points from the July reading of 60.2 percent. The Employment Index registered 58.5 percent, an increase of 2 percentage points from the July reading of 56.5 percent. The Supplier Deliveries Index registered 64.5 percent, a 2.4-percentage point increase from the July reading of 62.1 percent. The Inventories Index registered 55.4 percent, an increase of 2.1 percentage points from the July reading of 53.3 percent. The Prices Index registered 72.1 percent in

AUGUST 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

August, a 1.1-percentage point decrease from the July reading of 73.2 percent, indicating higher raw materials prices for the 30th consecutive month. Of the 18 manufacturing industries, 16 reported growth in August, in the following order: Computer & Electronic Products; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Furniture & Related Products; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; and Printing & Related Support Activities.

PMI @ 61.3% ®

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

MANUFACTURING AT A GLANCE Aug Index 61.3 65.1 63.3 58.5 64.5 55.4 41.0 72.1 57.5 55.2 53.9

Jul Index 58.1 60.2 58.5 56.5 62.1 53.3 39.4 73.2 54.7 55.3 54.7

% Point Change +3.2 +4.9 +4.8 +2.0 +2.4 +2.1 +1.6 -1.1 +2.8 -0.1 -0.8

Growing Growing Growing Growing Slowing Growing Too Low Increasing Growing Growing Growing

Rate of Change Faster Faster Faster Faster Faster Faster Faster Slower Faster Slower Slower

Trend* (months) 24 32 24 23 23 8 23 30 19 30 19

OVERALL ECONOMY

Growing

Faster

112

Manufacturing Sector

Growing

Faster

24

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

Direction

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

®

PMI 2016

2017

2018

61.3%

50% = Manufacturing Economy Breakeven Line 43.2% = Overall Economy Breakeven Line

PMI® Manufacturing expanded in August as the PMI® registered 61.3 percent, an increase of 3.2 percentage points from the July reading of 58.1 percent. This indicates strong growth in manufacturing for the 24th consecutive month, led by continued expansion in all subindexes that make up the PMI®. The PMI® reached its highest level since May 2004, when it registered 61.4 percent. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

COMMODITIES REPORTED Commodities Up in Price: Aluminum* (22); Aluminum Based Products (4); Capacitors (3); Caustic Soda (14); Corrugate (23); Electrical Components; Electronic Components; Flour; Freight (7); Lumber (2); Nylon (3); Packaging Materials; Paper (4); Phosphates; Plastics; Resistors (2); Steel — Cold Rolled; Steel — Hot Rolled (21); Steel — Stainless (5); and Steel Based Products (4).

Commodities Down in Price: Aluminum*; Copper (2); and Corn.

Commodities in Short Supply: Capacitors (14); Electrical Components (5); Electronic Components (4); Freight (4); Labor; and Resistors (10).

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

Metals & Manufacturing Outlook / September 2018

29

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

August 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

New Orders (Manufacturing) 2016

2017

New Orders

2018

65.1% 52.4% = Census Bureau Mfg. Breakeven Line

ISM’s New Orders Index registered 65.1 percent. Thirteen of 18 industries reported growth in new orders in August, in the following order: Textile Mills; Computer & Electronic Products; Paper Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Machinery; Petroleum & Coal Products; and Plastics & Rubber Products.

Production (Manufacturing) 2016

2017

Production

2018

63.3%

51.5% = Federal Reserve Board Industrial Production Breakeven Line

ISM’s Production Index registered 63.3 percent. The 16 industries reporting growth in production during the month of August — listed in order — are: Printing & Related Support Activities; Computer & Electronic Products; Apparel, Leather & Allied Products; Miscellaneous Manufacturing‡; Nonmetallic Mineral Products; Textile Mills; Paper Products; Electrical Equipment, Appliances & Components; Furniture & Related Products; Transportation Equipment; Fabricated Metal Products; Food, Beverage & Tobacco Products; Machinery; Petroleum & Coal Products; Chemical Products; and Plastics & Rubber Products.

Employment (Manufacturing) 2016

2017

Employment

2018

58.5% 50.8% = B.L.S. Mfg. Employment Breakeven Line

Supplier Deliveries (Manufacturing) 53.1% 2016

2017

2018

64.5%

Inventories (Manufacturing) 2016

2017

43% = B.E.A. Overall Mfg. Inventories Breakeven Line

Manufacturing (products such as medical equipment and

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

30

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations slowed in August, as the Supplier Deliveries Index registered 64.5 percent. The 17 industries reporting slower supplier deliveries in August — listed in order — are: Apparel, Leather & Allied Products; Nonmetallic Mineral Products; Machinery; Furniture & Related Products; Wood Products; Computer & Electronic Products; Electrical Equipment, Appliances & Components; Plastics & Rubber Products; Textile Mills; Miscellaneous Manufacturing‡; Paper Products; Transportation Equipment; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Chemical Products; Primary Metals; and Fabricated Metal Products.

53.1% 2018

55.4%

‡Miscellaneous

ISM’s Employment Index registered 58.5 percent. Of the 18 manufacturing industries, the 10 reporting employment growth in August — listed in order — are: Miscellaneous Manufacturing‡; Computer & Electronic Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Transportation Equipment; Paper Products; Plastics & Rubber Products; Machinery; Chemical Products; and Fabricated Metal Products.

Metals & Manufacturing Outlook / September 2018

Inventories The Inventories Index registered 55.4 percent. The 14 industries reporting higher inventories in August — listed in order — are: Apparel, Leather & Allied Products; Furniture & Related Products; Wood Products; Electrical Equipment, Appliances & Components; Textile Mills; Paper Products; Primary Metals; Transportation Equipment; Machinery; Computer & Electronic Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; and Chemical Products.

ISM REPORT OUTLOOK

ISM Report On Business ®

®

manufacturing

August 2018 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2016

2017

2018

Customers’ Inventories ISM’s Customers’ Inventories Index registered 41 percent. The only manufacturing industry that reported customers’ inventories as too high during the month of August is Nonmetallic Mineral Products.

41%

Prices (Manufacturing) 2016

2017

2018

Prices

72.1%

The ISM Prices Index registered 72.1 percent. Sixteen of the 18 industries reported paying increased prices for raw materials in August, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Machinery; Petroleum & Coal Products; Computer & Electronic Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Plastics & Rubber Products; Fabricated Metal Products; Chemical Products; Transportation Equipment; Paper Products; Primary Metals; and Food, Beverage & Tobacco Products.

52.4% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2016

2017

2018

57.5%

Backlog of Orders ISM’s Backlog of Orders Index registered 57.5 percent. The 12 industries reporting growth in order backlogs in August — listed in order — are: Textile Mills; Computer & Electronic Products; Apparel, Leather & Allied Products; Printing & Related Support Activities; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Petroleum & Coal Products; Paper Products; Chemical Products; Machinery; Miscellaneous Manufacturing‡; and Transportation Equipment.

New Export Orders (Manufacturing) 2016

2017

2018

55.2%

New Export Orders ISM’s New Export Orders Index registered 55.2 percent. The six industries reporting growth in new export orders in August — listed in order — are: Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Fabricated Metal Products; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

Imports (Manufacturing) 2016

2017

2018

53.9%

‡Miscellaneous

Imports ISM’s Imports Index registered 53.9 percent. The 10 industries reporting growth in imports during the month of August — listed in order — are: Textile Mills; Apparel, Leather & Allied Products; Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; Machinery; and Transportation Equipment.

Manufacturing (products such as medical equipment and

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

Metals & Manufacturing Outlook / September 2018

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