Manufacturing Outlook May 2021

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MANUFACTURING OUTLOOK PAGE 6

MANUFACTURING TIDBITS PAGE 12

MORE THAN HALF OF SUPPLY CHAIN ORGANIZATIONS IMPROVE DIVERSITY, EQUITY, AND INCLUSION PAGE 18

MANUFACTURERS CONTINUE TO STEP UP TO GET AMERICA VACCINATED

IRON ORE PRICES GO BALLISTIC AS METALS BOOM PAGE 48 CASS INDEX PAGE 26

NORTH AMERICA OUTLOOK PAGE 32

AUTOMOTIVE OUTLOOK PAGE 56

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TABLE OF CONTENTS

Publisher LEWIS A WEISS Editor in Chief TIM GRADY Creative Director CRAIG ROVERE Contributing Writers ROYCE LOWE NORBERT ORE CHRIS KUEHL THOMAS R. CUTLER AMELIA ROY JEANNE-MARIE LOWRIE JOCELYN BRIGHT CHRIS ANDERSON LAWRENCE MAKAGON Production Manager LINDA HOPLER Current Circulation 45,200 Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

Text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast. © 2021 Jacket Media Co. No part of this publication may be reproduced or used in any form without the prior written permission of the publisher.

Manufacturing Outlook is a registered trademark of Jacket Media Co.

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PUBLISHER’S STATEMENT A word from our publisher

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28 ISM MANUFACTURING REPORT ON BUSINESS

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NORTH AMERICA OUTLOOK Manufacturing in the US, Canada & Mexico

MANUFACTURING OUTLOOK A look at manufacturing around the globe

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SOUTH AMERICA OUTLOOK

Brazil in the spotlight

COVER STORY: CAN AN EMPLOYER BE HELD LIABLE IF AN EMPLOYEE CONTRACTS COVID-19 AT WORK?

by Michael A. Posavetz

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

12 PROJECT BUSINESS AUTOMATION: A NEW CATEGORY OF BUSINESS SYSTEMS FOR LARGE MANUFACTURERS

by T.R. Cutler

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ASIA OUTLOOK China, Japan and India

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EUROZONE OUTLOOK A look at Europe

37 GLOBAL PMI OUTLOOK

by Norbert Ore

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THE CREDIT MANAGER’S OUTLOOK

THE DRIVERS OF MANUFACTURING INDUSTRY 4.0

by Dr. Chris Kuehl

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METALS OUTLOOK

by John Hamlin

MORE THAN HALF OF SUPPLY CHAIN ORGANIZATIONS IMPROVE DIVERSITY, EQUITY, AND INCLUSION

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IRON ORE PRICES GO BALLISTIC AS METALS BOOM

by T.R. Cutler

by Julia Horowitz, CNN Business

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CHRISTINA FUGES AND THE UPCOMING AMERIMOLD EXPO

THE BATTLE FOR RARE EARTHS AND FOR COBALT

by T.R. Cutler

by Royce Lowe

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MANUFACTURERS CONTINUE TO STEP UP TO GET AMERICA VACCINATED

The aerospace industry

Comments by Jay Timmons, CEO, NAM

26 CASS INDEX

Cass Transportation Systems

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Contributing Writers for new and existing content. Let’s start a conversation – Contact us at info@jacketmediaco.com or visit mfgtalkradio.com/writer for more information.

AEROSPACE OUTLOOK

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ENERGY OUTLOOK Energy and the environment

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AUTOMOTIVE OUTLOOK Auto industry news

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ISSUES OUTLOOK Issues around the globe

PUBLISHERS STATEMENT Publisher’s Statement

Manufacturing Continues To Boom The much anticipated reopening of the economy and resurgence of manufacturing seems to be upon us. Covid-19 and the year 2020 pales in comparison to the Spanish Flu of 1918 that ended the lives of an estimated 50 million people and infected some 500 million, but it has been a global misery that caused the untimely death of too many people. How did the world turn back this perilous pathogen?

Manufacturing and a health care system – meaning courageous first responders often short of PPE – that rallied to confront the enemy, and front line workers on production lines to ensure the manufacture of ventilators, a vaccine, PPE, and a myriad of supplies vital to success. This battle still rages in many countries, but seems to be subsiding, although it may be due to season factors, as well.

Now the next phase rolls out – recovery and an effort to return ‘to normal’. But part of coming back to work may create new problem, such as those addressed in our cover story that addresses employer liability if an employee contracts Covid at work. Regardless of how it could or would be proven, this new risk factor will go into the equation for daily operations across all industry sectors, both manufacturing and services. The goods news is that America and several others countries are, hopefully, on the exiting edge of this pandemic.

That means, it’s time to get back into the groove and revaluate everything, from the future of overseas suppliers as compared to domestic ones, to office space and the flow on the production floor.

Frequently, Manufacturing Talk Radio interviews a company in the software space with an automation solution for warehousing, distribution, factory floors, and manufacturing shipping operations. The time taken to evaluate whether or not automation made sense has been reduced from “should we” to “how fast can we.”

A new sales channel has also evolved much more rapidly during the pandemic – direct to consumer sales. Along with it are automation considerations for customization of the product to meet consumer tastes, even down to the level of one-offs. Thus the supply channels and sales channels are changing quickly as up to 40% of workers remain at home and may never return to their office or cubicle, and some volume of consumer goods previously purchased in-store will now be delivered direct to the home.

Businesses always compete to present the best value proposition to consumers, but a disruptive event alters the landscape significantly, unexpectedly, and accelerates the adoption of change, and in this latest pandemic, change becomes survival – not only of the fittest, but of the most nimble and creative.

We work hard to be a part of that, communication to you, our readers, useful and actionable information that helps you be more nimble and creative. Beyond this publication, we encourage you to visit www. jacketmediaco.com and consider the manufacturing and business content there to also provide material for your consideration to sprightly respond to the new conditions in your industry sector.

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

Manufacturing Outlook / May 2021

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MANUFACTURING OUTLOOK

MAY 2021

MANUFACTURING OUTLOOK

GLOBAL MANUFACTURING STILL FULL TILT AHEAD. SUPPLY CHAINS GETTING SLOWER, RAW MATERIALS SCARCER, MORE EXPENSIVE. STEEL PRICES SKYROCKETING, ALUMINUM AND COPPER BRINGING UP THE REAR. INFLATIONARY PRESSURES WORSENING.

by ROYCE LOWE The ISM PMI figure for U.S. manufacturing rolled up to 60.7 in April from 64.7 in March. The overall economy returned to an eleventh month of expansion. Readings above 50 signal expansion, and readings above 60 signal very robust manufacturing activity. So far, although the ISM Manufacturing Report on Business® shows prices rising significantly, inflation is not an issue, to date.

The Bureau of Economic Analysis says the Real Gross Domestic Product increased at an annual rate of 6.4 percent in the first quarter of 2021, according to the Bureau’s “advance” estimate. The real GDP increase in the fourth quarter of 2020 was 4.3 percent.

The IMF recently published its World Economic Outlook for GDP growth for 2021 and 2022. It forecasts global growth of 6.0 percent for 2021 and 4.4 percent for 2022, following 2020’s contraction of 3.3 percent. Forecasts for the U.S. for 2021 and 2022 are 6.4 and 3.5; for Euro Area 4.4 and 3.8; Japan 3.3 and 2.5; China 8.4 and 5.6; UK 5.3 and 5.1; Canada 5.0 and 4.7.

IHS Markit’s remarks on U.S. manufacturing for April show their PMI figure at 60.5, up from March’s 59.1.

New order growth went to an eleven-year high, along

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Manufacturing Outlook / May 2021

with the greatest deterioration in supplier performance on record, leading to soaring costs. There was a quicker expansion in production, and quickening job creation from backlog accumulation. Raw material shortages meant faster price hikes, and increases in selling prices.

Optimism for the next twelve months is at a threemonth low, due to concerns regarding supply-chain disruptions.

GLOBAL CRUDE STEEL PRODUCTION WAS UP BY 15.2 PERCENT YEAR-OVER-YEAR IN THE MONTH OF MARCH for the 64 reporting countries – which represent 99 percent of world crude steel production – to 169.2 million tons (MT.)

MANUFACTURING OUTLOOK U.S. crude steel production for March was 7.1MT, up 1.0 percent year-over-year. In March, China produced 94.0 MT, up 19.1 percent year-over-year; India 10.0 MT, up 23.9 percent; Japan 8.3 MT, up 4.6 percent; Russia 6.6 MT, up 9.4 percent; South Korea 6.1 MT, up 4.7 percent; Germany 3.6 MT, up 10.4 percent, and Brazil 2.8 MT, up 4.1 percent. The EU (27 countries) produced 11.9 MT, down 7.1 percent.

In late April, the tally for U.S. light vehicle sales was forecast at 1.4 million units, up 97 percent year-overyear.

It should be noted that for the period January to March 2021, North America produced 5.2 percent less crude steel year-over-year; Asia produced 13.2 percent more.

In the same period the U.S. produced 6.3 percent less year-over-year; China 15.6 percent more.

Through the first two months of 2021, total and finished steel imports into the U.S. are 4,310,000 and 2,662,000 net tons (NT), down 7.5% and 11.1%, respectively, vs. the same period in 2020. Annualized total and finished steel imports in 2021 would be 25.9 and 16.0 million NT, up 17.4% and down 1.0%, respectively, vs. 2020. Finished steel import market share was an estimated 18% in February and is estimated at 17% over the first two months of 2021.

The World Steel Association (worldsteel) recently announced its Short Range Outlook (SRO) for steel demand for 2021 and 2022. It forecasts an increase of 5.8 percent in 2021 to 1,874 million tons (MT) and a further increase in 2022 to 1,924.6 MT, assuming stabilization in the second quarter and steady vaccination progress for the production workforce.

Primary Global Aluminum Production in March was reported at 5.725 million tons, with production in China at 3.310 million tons, representing 58 percent of world total. Production was 497,000 tons in GCC; 378,000 tons in the rest of Asia; 288,000 tons in Western Europe; 338,000 tons in North America, and 353,000 tons in Eastern and Central Europe.

The JP MORGAN GLOBAL MANUFACTURING PMI – a composite index produced by JPMorgan and IHS Markit in association with ISM and IFPSM (International Federation of Purchasing and Supply Management) – was up from 55.0 in March, a ten-year high, to 55.8 in April. This was in the midst of intense supply-chain pressures and record producer selling prices, up at the greatest extent in a decade.

Production was up at the quickest pace in over a decade. There was much pressure on capacity, and the lengthening supplier lead times were up to a record. The rate of growth in work backlogs at manufacturers was at a 17-year high. There was strong jobs growth, and solid growth across the consumer, intermediate, and investment goods sectors, with investment goods at a 129-month high.

THE ECONOMIST magazine, in its latest weekly report on world economies, highlights changes in Gross Domestic Product (GDP), Consumer Prices and Unemployment Rates for what it considers the world’s major economies.

These data are not necessarily good to the present day, but are mostly applicable to at latest the past two months, and show definite trends in the world economy.

The figures are qualified as being the latest available, and with reference to a given quarter or month. The figures for GDP represent the % change on the previous quarter, annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / May 2021

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COVER STORY

CAN AN EMPLOYER BE HELD LIABLE IF AN EMPLOYEE CONTRACTS COVID-19 AT WORK?

by MICHAEL A. POSAVETZ A question which has been on many employers’ minds

Most significantly, the workers’ compensation law

during the current pandemic is whether they can be

acts as a bar to employees suing their employer for

held liable if an employee contracts COVID-19 at work.

work-related injuries. While the exceptions to workers’

An employer has various protections, and certain

compensation vary from state to state, the general rule

obligations, which if followed, will put them in the best

is that an employer must be found more than merely

position to reduce any potential liability.

negligent.

I. COVID 19 Should Not Become A Windfall For Plaintiffs First, a plaintiff always has to assemble a complete case of causation before they can even attempt to hold their employer liable for contracting COVID-19. Whether a plaintiff can prove they became infected with COVID-19 at work might be the biggest hurdle. While everyone knows this virus spreads very easily, proving you were exposed only at work would, at best be difficult if the employee is not otherwise isolating from all contacts

If the employer can establish, especially with

with others.

on business as usual as prior to COVID-19, it might be

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Manufacturing Outlook / May 2021

documentation that they took all reasonable steps specific to the care and safety of their workers based on guidance from OSHA, CDC and local governing bodies, it should be difficult for an employee to establish the level of negligence needed to avoid the workers compensation “bar”. If however (in an extreme example), an employer took no precautions and carried

COVER STORY easy for a plaintiff to argue local workers’ compensation statutes and regulations should not prevent a court from holding the employer liable. It should be noted however, various states including New Jersey are considering expanding workers’ compensation eligibility for benefits to include work related cases of COVID-19.

At this time, New Jersey’s statutes contain a rebuttable presumption that workers’ compensation coverage applies for COVID-19 cases contracted by “essential employees”.1 Because there is no uniform federal COVID-19 liability shield, states have begun to implement what amounts to a patchwork of protections. For example, in April, 2020 New Jersey provided an emergency based immunity shield for health facilities from liability related to COVID-19 exposure. Since then, New Jersey’s Legislature has sought to extend these protections to non-healthcare businesses protecting them from claims for damages resulting from COVID-19 exposure.

(Assembly Bill 41892 and Senate Bill 25023). At least 13 states have enacted laws immunizing most or all businesses from personal injury liability for COVID-19

harm.6 While there is no OSHA standard specific to COVID-19, OSHA has prepared guidance7 for employers to help identify risks of being exposed to and of contracting COVID-19 in the workplace and to determine appropriate control measures to implement.

This guidance is not a standard or regulation, and creates no new legal obligations, but as OSHA notes, a workplace “prevention program is the most effective way to mitigate the spread of COVID-19 at work.”

Compliance with the guidelines would be perhaps the

claims.4

most important first step of risk reduction.

According to Bloomberg Law, as of February 20201

Virtually every state has implemented and maintained

“laws to limit liability related to COVID-19 exposures could be on the books in 20 or more states in a matter

further mandatory protocols for both which and the manner in which business can operate during

of weeks.5

the COVID-19 pandemic. For example, New Jersey’s

II. Existing Federal and State Statutes, Regulations,

items defining and establishing COVID-19 workplace

and Recommendations Employers are already required to comply with both the US Federal Occupational Safety and Health Administration (OSHA), Center for Disease Control and Prevention (CDC) guidelines and recommendations, as well as all State, County and/or Municipal ordinances/ regulations which may have been enacted due to COVID-19. Under OSHA, employers are responsible for providing a safe workplace free from recognized hazards which could cause death or serious physical

“COVID-19 Information Hub”8 has a large number of safety standards. This information is further broken down by various industries including Manufacturing and Warehousing9 and specifically requires, among other things, the wearing of facemasks on the premises; workers and customers maintain six feet distance from one another; the prohibition of non-essential visitors from a worksite; restricting the number of individual who can access common areas at the same time, limiting sharing of tools or equipment; providing sanitization equipment, routinely cleaning Manufacturing Outlook / May 2021

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COVER STORY A case of interest to follow, involved a spouse who contracted COVID-19 suing her husband’s employer in Federal Court in California10 and claiming she contracted COVID-19 through her husband who contracted it at work. The U.S. District Court for the Northern District of California dismissed the case based on the fact the state’s workers’ compensation law provides the only possible remedy for work related injuries. As of this writing, it remains unclear how other federal or state courts will handle claims of this type, noting many states hold manufacturers liable when a worker’s spouse contracts an asbestos-related disease.

Three additional “take-home” COVID-19 exposure cases are currently pending in the states of Illinois, and New Jersey. In Illinois, the daughter of Esperanza and disinfecting high-touch areas, conducting daily health checks, preventing sick workers from entering the workplace, and prompt notification of any known exposure to COVID-19 at the worksite.

Equally important to complying with all of the federal and state requirements, employers should document the changes they have made, as well as the date of implementation of complying with each recommendation. This puts an employer in the best position of not being found liable if a suit or claim arises over an employee contracting COVID-19 at work.

III. COVID-19 Related Lawsuits In The Workplace – “Take-Home Exposure” Over the last year, there has been a significant increase in the number of employment related damages claims filed in federal District Courts compared to the months preceding the pandemic.

So far, the districts with highest number of COVID-19 employment cases are the Southern District of New

Ugalde alleges her mother died from COVID-19 which her father contracted at a meat processing plant11; Miriam Alavarez Reynoso alleges she contracted COVID-10 from her husband who worked as a parts assembler12; and in New Jersey, Denise Hansen alleges she contracted COVID-19 through her husband, who contracted the disease while employed with New Jersey Transit and ultimately died.13 IV. CONCLUSION Employers and business premises owners are living in unprecedented times which make it more important than ever to keep abreast and comply with new and existing local, state, and federal regulations.

Furthermore, following the pertinent regulations will put an employer in the best position to receive the protections of the workers’ compensation bar, which as of this writing is still a significant hurdle employees will have to overcome.

Author profile Michael A. Posavetz, is a Senior Attorney at ECKERT

York, the Southern District of Florida, the District of New

SEAMANS CHERIN & MELLOTT, LLC in Newark, NJ. He

Jersey, and the Eastern District of Pennsylvania.

may be reached at mposavetz@eckertseamans.com

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Manufacturing Outlook / May 2021

COVER STORY 1 https://www.njleg.state.nj.us/2020/Bills/ S2500/2380_R1.PDF 2 https://legiscan.com/NJ/text/A4189/2020 3 https://legiscan.com/NJ/bill/S2502/2020 4 Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Tennessee, Utah, and Wyoming - https:// doi.org/10.1017/jme.2021.17 7 https://www.osha. gov/coronavirus/safework 5 https://news.bloomberglaw.com/daily-laborreport/virus-liability-shields-can-be-redundantmaking-exceptions-key

7 https://www.osha.gov/coronavirus/safework 8 https://covid19.nj.gov/pages/safetystandards 9 https://covid19.nj.gov/faqs/nj-information/ reopening-guidance-and-restrictions/aremanufacturing-and warehousing-businesses-openwhat-safety-precautions-must-they-take 10 Kuciemba et al. v. Victory Woodworks Inc., 3:20cv-09355.

11 https://www.abajournal.com/news/article/suitsallege-businesses-are-liable-to-family-members-of-

6 General Duty Clause of the OSH Act - Section 5(a)(1): “Each employer shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious

workers-who contract-covid-19#google_vignette

physical harm to his employees.”

Corp.pdf

12 Id. 13 https://www.chamberlitigation.com/sites/default/ files/Joseph%20Hansen%20v%20NJ%20Transit%20

Manufacturing Outlook / May 2021

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MANUFACTURING TIDBITS

PROJECT BUSINESS AUTOMATION: A NEW CATEGORY OF BUSINESS SYSTEMS FOR LARGE MANUFACTURERS

by THOMAS R. CUTLER Much attention has been paid to the small and mid-sized manufacturer. As local and regional job creators that attention has been well-deserved. However, the reality is large manufacturers continue to represent a significant portion of jobs within the sector, and new solutions geared to their needs are among the most innovative and dynamic. Project Business Automation (PBA) is a new category of business systems built specifically to support large project-based manufacturers from end-to-end.

PBA allows companies to operate with real-time visibility and control. Any large manufacturer that delivers its goods or services to its customers through projects will find PBA ideal.

25% of all large manufacturers require Project Business Automation Project-based industries represent between 20 to 30 percent of all large manufacturers, most of which require their own business system. Traditional systems do not work for this type of manufacturing process. Typically, a business system is any technological system that supports a business’ operations from end-toend, such as an Enterprise Resource Planning (ERP) solution. ERPs were originally designed for traditional industries with high-volume, repeatable processes.

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Manufacturing Outlook / May 2021

MANUFACTURING TIDBITS The term ERP was originally used by the Gartner Group to represent a system that encompassed the capabilities of material requirements planning (MRP), and later, manufacturing resource planning (MRP II). As such, it is blatantly obvious that these traditional systems do not support large manufacturing project businesses.

Typical application landscape for project-based large manufacturers To compensate for the lack of support from traditional ERPs, a large project manufacturer typically employs between 10 and 15 systems and applications to manage its business processes.

The mix of applications used invariably includes massive amounts of spreadsheets. To manage this limitation, most large manufacturers employ controllers and data processors to export, import, and consolidate data from these different systems.

They manipulate the data to create reports for executives attempting to manage the business with this information. It is a deeply flawed and antiquated methodology for large project-based manufacturers in 2021.

The result of this disparate application landscape is a lack of control over the operations. Since work and information flows are not connected, trying to standardize or insert a mechanism of control over such a landscape is impossible. The lack of visibility and control leads to poor business performance.

Project timelines and budgets slip, margins erode, and cash flow dissipates.

The PBA solution The solution to a non-integrated mode of operation is to integrate. That is precisely the function of a PBA solution. It standardizes, integrates, and systemizes all project business processes data for large manufacturers. This single system automates project business processes (including the core elements of Project Financials, Project Operations, and Project Insight).

Adeaca built the first Project Business Automation system, providing an all-in-one business management solution for project-based companies.

Disjointed data utilization suffers two major problems: lack of visibility and lack of control Project business executives typically have very little visibility into the current real-time status

Their expertise in project-based industries, together with Microsoft’s enterprise platform, Dynamics 365 Finance, delivers a comprehensive solution that is used by large manufacturing companies worldwide.

of their projects and therefore the business as a whole. Under their current fragmented application landscape, they may receive weekly status updates and monthly overviews. Sadly, this information is already outdated by the time they receive it, due to the time required to consolidate the data and generate reports. As a result, issues and risks go unnoticed until they have grown into drastic production crises which risk the entire project.

Decision-making becomes extremely difficult for large manufacturers of project business operations with limited, outdated, and inaccurate information.

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 22nd year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

Cutler authors more than 1000 feature articles annually regarding the manufacturing sector.

More than 4800 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com Manufacturing Outlook / May 2021

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MANUFACTURING TIDBITS

The Drivers of Manufacturing Industry 4.0

by JOHN HAMLIN Since the dawn of industrialization, advances in technology have led to multiple industrial revolutions. The term Industry 4.0 refers to the 4th revolution that is upon us. During these past 2 centuries, mankind has witnessed three major revolutions that enabled them to advance the way no one could have ever imagined. The advent of steam engines, water power, and mechanization marked the first industrial revolution which occurred towards the end of the 17th century.

The second revolution was brought on by the creation of assembly lines, almost a century ago.

The third, taking place in the 1970s, involved the inclusion of computers and automation in many manufacturing processes. The 4th industrial revolution stems from this amalgamation of computers and industry. The name ‘Industry 4.0’ was first presented in 2011 at the Hannover fair and from that point onwards Industry 4.0 has turned into the focal point of consideration of the public authority in Germany and across numerous different nations.

products and moving towards production specific to customer requirements. The main objective behind this revolution is to fulfill individual customer needs, which involves areas like order management, research and development, manufacturing, delivery and utilization, and recycling of materials. The fundamental difference between Industry 4.0 and previous advancements is the consideration of the role of humans in the production process. It promotes the idea of connecting physical devices like sensors to each other and to the internet. Currently, many researches are being performed and prototypes created, aiming to convert regular machines to self-learning and self-aware machines. This would lead to the creation of an industrial platform where machines interact with themselves as well as the products being manufactured.

The vision behind all this is to modernize and modularize manufacturing systems in such a way that products can control their own manufacturing processes. It defines a new level of organization in the overall life cycle of

The collection and evaluation of data on a large scale refers to Big Data. This data is collected from many different sources including production equipment and systems, enterprise, and customer care systems. This data then becomes the basis

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Manufacturing Outlook / May 2021

The four main pillars of Industry 4.0 are Internet of things (IoT), Industrial Internet of things (IIoT), Cloud computing, and smart manufacturing which has digitized the manufacturing process.

MANUFACTURING TIDBITS for the implementation of real-time decision making. Forrester defines Big Data as having four dimensions: Data volume, variety of data, data value, and the rate at which data is generated and analyzed. Analysis of data recovered from previous production methods can reveal threats and can be used to prevent accidents in the future.

This influx of large amounts of data has enabled robots to become more autonomous, agile and easy to work with day by day. Researchers believe that at this rate it is certain that robots will one day interact with each other, and work alongside humans and learn from them. These intelligent and autonomous robots are used to perform methods that require unmatched precision and a limited amount of time.

Simulations are slowly being integrated into manufacturing plants. This helps convert real-time data from the physical world into a virtual model, which includes machines, products and humans thereby reducing the risk and extra cost during the

experimentation stages. These virtual models are either 2D or 3D and can be used to assess cycle times, energy consumption and any irregularities in the procedures. They are also able to improve the decision making quality by working out easy and fast solutions using simulations.

The internet of things (IoT), comprises a worldwide network of interconnected objects that are addressed uniformly and communicate with each other via different protocols. This includes Internets of Service, Manufacturing Services and people. Furthermore, it goes on to Integration of Information and Communication Technology (IICT) and embedded systems. The highlighting features of IoT are context, omnipresence, and optimization. Context refers to interaction between objects and the environment and responding immediately to any changes recorded, also known as context-aware. Omnipresence helps provide information regarding different locations and physical and atmospheric conditions of an Cont’d on Page 16

Manufacturing Outlook / May 2021

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MANUFACTURING TIDBITS

object. Optimization refers to improvement and refinement of methods by integrating physical objects, human factors, autonomous machines, and smart sensors all across the factories of the future.

The increasing connectivity over the internet across these integrated systems, have also increased cyber threats dramatically. This makes the use of secure communication lines and controlled access to machinery very essential.

Cyber Physical Systems are defined as systems with closely integrated natural and man-made systems with computation, communication, and control systems. CPS with proper sensors and other methods to acquire data can help recognize faults in machinery well before time, and preparations for fault repairs are automatically initiated. These systems also find the optimal utilization times of machines and other stations across the industry floor. Thus, it is very important for these systems to be well-protected against foreign access and decentralized, making any information provided by these systems credible.

Cloud computing is a fairly new concept encompassing advancements in hardware, virtualization, distributed computing, and service delivery over the internet. It aims to provide users

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Manufacturing Outlook / May 2021

and manufacturers with cloud-based computing power and different software applications all over the internet.

Augmented reality (AR) is currently being considered a highly promising technology with huge prospects for the future of industries. It allows viewing computer graphics in real life environments. It is mostly used in description,

planning, and monitoring operations in real-time, diagnosing faults and recovery, and to provide training about industrial products and processes.

Reports suggest that many manufacturers have implemented AR based systems to train their

MANUFACTURING TIDBITS employees, quality management and product design among other implementations.

Additive manufacturing is the manufacturing technique in which different objects are constructed by melting thin layers onto other materials. This is usually done by melting thin layers of powder and adding one layer of material, plastic or metal, on top of another. This requires planning and highly sophisticated designs created using Computer-Aided Design (CAD) modules.

3D printing technology enables manufacturers to create miniature prototypes to study the designs. This ultimately speeds up the design and manufacturing process and the product ends up with little to no faults. The integration of additive manufacturing techniques has also enabled manufacturers to tend to the individual needs and requirements of each customer.

Manufacturing industry is widely adopting the Industry 4.0 features. Automated processes using artificial intelligence alongside machine sensors are being integrated into various manufacturing processes. Cold forging is a well known forming process under continuous development. It is employed to produce products with high levels

of complexity. The products of cold forging have high tolerances and surface finish to a lack of expanding materials. Robotic installations in cold forging processes have been introduced recently at various facilities. These robots are flexible enough to handle the complete process.

Also, simulations to study and improve crack propagation in forging dies are also an important advancement in manufacturing industries.

Industry 4.0 has enabled manufacturers to use smart, efficient, effective, and customized methods of production at reasonable costs. With the integration of faster computers, complex sensors and cheaper ways to store and transmit data, machines, and products are now smarter and are able to communicate, work with, and learn from each other. It also aims to provide for manufactures and end users in a sustainable way that protects the environment as well as tends to the customers’ specific needs.

Author profile: John Hamlin is a freelance industrial manufacturing writer who can be reached at john@industrial-info.com

Manufacturing Outlook / May 2021

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MANUFACTURING TIDBITS

MORE THAN HALF OF SUPPLY CHAIN ORGANIZATIONS IMPROVE DIVERSITY, EQUITY, AND INCLUSION (DEI)

by THOMAS R. CUTLER According to new survey findings from Gartner and the Association for Supply Chain Management (ASCM), over half of supply chain organizations have improving diversity, equity, and inclusion (DEI) as an objective or goal, but only a quarter have formal targets. Additional findings include: People of color make up 30% of the overall supply chain workforce, but representation starts to drop at the very first level of leadership and falls to 9% at VP level.

Company size plays a role with only 24% of small business supply chains having improved DEI as an objective.

Consumer and retail organizations are more likely than other industry sectors to either have a general objective for DEI or formal targets or goals.

18

Manufacturing Outlook / May 2021

In a survey of 298 supply chain professionals from November through December 2020, 59% of surveyed supply chain organizations reported having some form of objective to improve any dimension of DEI - race/ ethnicity, gender, LGBTQ+, physical and cognitive ability, veteran status or age - and 23% of those organizations have formal target or goals included in management scorecards.

Company size plays a role when it comes to the dedication of senior leadership to improve DEI. The largest supply chain organizations are far more likely to have DEI objectives - particularly formal targets or goals - than their smaller peers. Only 24% of small business supply chains have improved DEI as an objective.

Dana Stiffler, vice president analyst with the Gartner

MANUFACTURING TIDBITS The coronavirus pandemic has prompted a change in workplace culture which might provide smaller businesses with the opportunity to catch up. “Due to the rise of remote and hybrid work, even smaller supply chain organizations will have the opportunity to hire diverse talent, simply because the available talent pool is bigger and more diverse,” Ms. Stiffler added.

Supply Chain Practice noted, “In a global organization, it’s more likely they’ll have a DEI officer or an HR leader that owns and cascades the DEI strategy. Where this is not happening fast enough, some chief supply chain officers (CSCOs) have designed and launched their own initiatives.”

“Building a diverse workforce is essential, not aspirational,” said ASCM CEO Abe Eshkenazi, CSCP, CPA, CAE. “Diversity of thought, influence, and input — particularly from women and people of color — is crucial to today’s global supply chains.”

Representation of People of Color Declines with Each Step Up the Corporate Ladder While people of color (POCs) make up 30% of the overall supply chain workforce, their representation declines dramatically on the upper parts of the corporate ladder.

Only 9% of vice presidents in supply chain organizations in the U.S., Canada, and Europe are people of color.

Concrete Actions Lead to Progress Once supply chain organizations have goals and objectives, those should translate into specific projects and initiatives. DEI is particularly vulnerable to statements and goals that are not always backed up by actions. Thirty-six percent of respondents said that the supply chain organization is leading initiatives, while 20% said their company has enterprise-wide initiatives.

This leaves 44% who do not have any kind of initiative or are still considering starting one.

“The most successful initiatives are those that are integrated in the recruiting and pipeline planning process. In recruiting, that means diverse interview panels, diversity referral programs, summer internship programs for diverse students, blind resumé reviews, and diverse campus recruiting. In integrated pipeline planning, it means re-designing recruiting, development, performance management, and succession planning to reduce bias,” Ms. Stiffler concluded.

“Prior to the pandemic, demand for supply chain professionals exceeded supply by a ratio of six to one,” added Mr. Eshkenazi. “This need will only continue to grow, which is why it’s critical that teens have access to education and mentorship about career opportunities in supply chain regardless of their gender or color.”

“POC representation already starts to drop at the very first level of leadership,” Ms. Stiffler said. “Compared to the overall representation in the workforce, there’s nearly a 50% drop once at the manager and supervisor positions. This trend then continues in the upper parts of the career ladder.”

The entire report can be downloaded here: https://www.gartner.com/en/supply-chain/trends/ supply-chain-diversity-equity-inclusion-ascm

The biggest differences in POC representation are not between industries, but again between organization sizes. Large supply chains with an annual revenue of $5 billion or more show greater representation of people of color than any of their smaller peers at all levels of the organization.

Author Profile:

“In the largest global supply chain organizations, 13% of vice president positions are occupied by people of color, compared to 6% in small businesses,” Ms. Stiffler said.

“While large, global organizations clearly benefit from better access to diverse talent, they’re also putting in the work to practice inclusion in leadership development and succession planning.”

A complimentary webinar is available here: https://www.gartner.com/webinar/3997286 Thomas R. Cutler is the President and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating its 22nd year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Nearly 5000 industry leaders follow Cutler on Twitter daily at @ ThomasRCutler. Contact Cutler at trcutler@trcutlerinc. com.

Manufacturing Outlook / May 2021

19

MANUFACTURING TIDBITS

CHRISTINA FUGES AND THE UPCOMING AMERIMOLD EXPO

by THOMAS R. CUTLER Twenty years ago, I met Christina Fuges, the Editorial Director for MoldMaking Technology (MMT) magazine and contributed my first of many articles. She is a pioneer, leader, and widely respected.

Fuges has 28 years of experience in trade publishing.

She has been MMT’s Editorial Director for the past 22 years. She was a founding partner of Communication Technologies, Inc. (CTI), which launched the publication and its annual trade show, the MoldMaking Expo (now

Fuges’s passion is building community within the

Amerimold expo).

audiences her publications serve by providing relevant print, digital, and conference content focused on

Fuges also was editorial director for CTI’s three other

both technology and business issues, while working

trade publications: Time-Compression Technologies,

cooperatively with technology suppliers, mold builders,

Continuity Insights, and Emergency Number

industry associations, and educational facilities.

Professional.

She is the current secretary for the Society of Plastics Engineers Mold Technologies Division, which exists to

MMT was acquired by Gardner Business Media in 2004

foster growth in the moldmaking and design profession

where she continues to serve as the brand’s Editorial

by encouraging the training of moldmakers at the

Director. Fuges is also the Technical Conference Director

apprentice level, supporting the continuing development

for the annual Amerimold expo and a contributing

of established moldmakers, and by gathering and

editor for Additive Manufacturing focused on mold and

exchanging information on materials and mold

toolmaking applications. Prior to MMT, Fuges was with

performance. Fuges also works with other moldmaking

Witter Publishing as Managing Editor for two critical

trade associations, such as the American Mold Builders

cleaning publications: Precision Cleaning and Parts

Association and PLASTICS, on special projects such as

Cleaning magazines.

the MoldMaking Matters educational video series.

20

Manufacturing Outlook / May 2021

MANUFACTURING TIDBITS

She moderates panels and speaks at industry

Cutler: How has the moldmaking industry managed

trade events on workforce development, mold

during the pandemic?

manufacturing, and the brand’s annual Leadtime Leaders Awards program. Fuges uses various media

Fuges: The mold manufacturing marketplace answered

outlets to help educate her audience, including

the call and went above and beyond during the COVID

industrial video projects that highlight shop

pandemic, and MMT has shared plenty of stories

innovations, and guest spots on IMTSTV for IMTS, and

to support their work (whether it was face shields,

Plastics TV on the NPE Network to discuss moldmaking

ventilators, respirator components, you name it … and

trends and technology.

all in record lead times with the utmost in quality). This marketplace has proven itself essential. And it was

She received her bachelor’s degree in

supply chain partners that made it possible for mold

telecommunications from Wilkes University in Wilkes-

builders to answer the call.

Barre, Pennsylvania.

On top of that, recent investment activity in businesses Interviewee: Christina Fuges (pictured left) Editorial

across the mold manufacturing marketplace only

Director, MoldMaking Technology; Technical Director,

emphasizes the value of the products and services

Amerimold Expo,

these businesses provide and the positive outlook they have on the future of this marketplace. Plus, I continue

Event Info: Amerimold Expo, September 21-23, 2021

to hear stories of increased technology investment,

at the Donald E. Stephens Convention Center in

expansion efforts, diversification models, and workforce

Rosemont, Illinois. www.amerimoldexpo.com

New Jersey Manufacturers,

Do You Have...

• Jobs that are difficult to fill with the right candidates?

• Positions that have high turnover?

• Occupations where a highlyskilled workforce is retiring soon?

Cont’d on Page 22

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Workforce challenges are still the number one concern for New Jersey manufacturing businesses. NJMEP is offering manufacturers a suite of workforce programs focused on solving these businesses most disruptive issues.

• Positions requiring skills that can be learned on the job?

New opportunities were developed using funds provided by the CARES Act. These new recruiting and upskilling programs are available for a limited time at a reduced cost.

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Manufacturing Outlook / May 2021

21

MANUFACTURING TIDBITS development initiatives—all of which help move the

build relationships. We’re really looking forward

marketplace forward.

to bringing the mold manufacturing marketplace together under one roof to learn best practices for

TRC: How does Amerimold this year differ than in

improving operating efficiencies and profitability,

previous years?

connect with technology seekers, and reacquaint with old industry friends and make new ones.

CF: In the past, Amerimold has been a two-day event focused only on moldmaking, but we’ve transitioned

The goal of Amerimold has always been to leave the

that concept to what we believe is a $12 to $13 billion

industry in a better position than it was before the

mold manufacturing marketplace that includes

show, and our FREE educational program is one of

molders and OEMs performing moldmaking and

the ways we make sure that happens.

molding within their facilities. This marketplace needs its own spot. A two-day event is just not

The Amerimold Tech Talk Theater returns to the

enough to share the amount of content, technology,

show floor. Throughout the three-day schedule,

and networking required. So, with feedback from

attendees will hear from some of the industry’s

exhibitors and attendees, we added a third day to

brightest minds as they share new and proven

Amerimold to give the industrial mold manufacturing

technologies, processes, and workforce strategies

marketplace THE spot to call their own.

that are advancing mold manufacturing.

Plus, we are co-locating this event with our annual Molding and Extrusion Conferences organized by the editors of our Plastics Technology media brand.

Molding 2021 is an educational conference where industry leaders discuss the latest developments in various molding processes, equipment, materials, and management techniques, with special emphasis on adding value to their business. Extrusion 2021 is a two-and-a-half day conference consisting of sessions devoted to technical and business issues common to all types of extrusion, followed by breakout sessions devoted to specific types of extrusion. Attendees to these paid conferences will receive FREE admission onto the Amerimold show floor.

Presentations will dive into topics such as: CAD/CAM Simulation Data Management 3D Printing Hot Runners Mold Components Mold Material Machining EDM Automation Cutting Tools Inspection& Measurement Maintenance Surface Treatment Repair Molding Workforce Development

TRC: What are the top trends you are seeing this year that will be highlighted at Amerimold?

CF: Amerimold 2021 is set to bring together this critical marketplace in one place for three days to share ideas, learn about new technology, and

22

Manufacturing Outlook / May 2021

Attendees will also have access to a full schedule of In-Booth Demos. Leading technology suppliers,

MANUFACTURING TIDBITS service providers, mold builders, and molders will demonstrate equipment live in their booths, allowing attendees to see the latest technology, processes, and products in action.

TRC:Why is the event a “must attend” show in 2021?

CF: The need for people to connect has never been as great as it is now. We just experienced a long time of not getting together, and the communities within the mold manufacturing marketplace are very eager to reengage.

By adding a third day to Amerimold, everyone will have more time. We will have more time to connect buyers and sellers, and attendees and exhibitors will have more time to check out technology, and more opportunities to network to make those critical connections that are so important for the mold

CF: Acquisitions throughout the moldmaking industry have picked up the last few years, and to some, that might be a bit unsettling, but it’s not all bad news. Taking a closer look and having some candid conversations reveals some opportunities this mergers and acquisitions (M&A) activity has presented to our community:

manufacturing marketplace globally.

The investment community has learned the On top of that, three days offer more flexibility to

importance of mold builders in the manufacturing

work around schedules and avoid the pressure of

supply chain.

having to see everything on the show floor, consume all of the educational opportunities, and meet everyone in two days. Plus, it will ease travel plans and allow attendees to structure their visit around their shop’s production schedule.

TRC: Having coordinated the show since 1999, what has surprised you the most?

Educated new ownership has done their homework and knows the value of investing in the right technology and equipment to keep businesses healthy.

Many baby-boomer-owned businesses must transition, and changing hands will help move that shop into the next decade and save jobs.

CF: What has surprised (and delighted) me the most

Private equity-owned businesses tend to provide

is the increase in mold builders and molders not only

employees with better healthcare, a 401K, etc., that

attending, but exhibiting at this event.

many smaller shops cannot afford.

TRC: Do you see mergers & acquisitions impacting

Combining forces opens the doors to more and new

the industry?

business with added capabilities and sites.

Cont’d on Page 24

Manufacturing Outlook / May 2021

23

MANUFACTURING TIDBITS Consolidation opportunities can build powerful

Next is our Leadtime Leader Award Presentation

service networks with multiple sites capable of

at 5:00 PM Wednesday, September 22, 2021 during

servicing customers with different skill sets and

which MoldMaking Technology and Progressive

areas of expertise, improving the reliability of

Components honor our 2021 Leadtime Leader

supply chains worldwide.

Award winner. This annual presentation has been recognizing the outstanding performance and

Let’s break down this last bullet item as an example.

innovation in mold manufacturing since 2003.

That statement not only applies to M&A activity but also to shops who monitor trends (in this case,

The Awards Ceremony is followed by our Grand

trends accelerated by COVID-19) and capitalize on

Reception from 5:30 – 7:30 PM, which has become

the opportunities they present, which may force

the mold manufacturing industry’s premier meet-

them—whether they are looking to sell or not—to

and-greet event.

change their business model.

TRC: How can people register for the event?

Many shops are looking at moldmaking differently today and acknowledge that it might be time to

CF: Visit www.amerimoldexpo.com to register for

adjust how they see and run their businesses.

free by using Promo Code: REG1

Let’s face it; things are changing—the industry has

https://www.xpressreg.net/register/AMER0921/

moved from moldmaking to mold manufacturing

landing.asp?sh=AMER

to advanced manufacturing. But remember with change, comes opportunity.

Author Profile: TRC: What are some of the special events attendees

Thomas R. Cutler is the President

of Amerimold can expect?

and CEO of Fort Lauderdale, Floridabased, TR Cutler, Inc., celebrating

CF: We are hosting a 30 Under 30 Happy Hour at

its 22nd year. Cutler is the founder of the

4:00 PM on Wednesday, September 22, 2021 to

Manufacturing Media Consortium including more

celebrate the next generation of professionals

than 8000 journalists, editors, and economists

making an impact in the mold manufacturing

writing about trends in manufacturing, industry,

marketplace. This event was established after

material handling, and process improvement.

the success of MoldMaking Technology’s 2018 30

Cutler authors more than 1000 feature articles

Under 30 Honors Program. We just finished up

annually regarding the manufacturing sector.

our 2021 feature recognizing 30 more stand-out

Nearly 5000 industry leaders follow Cutler on

under-30 moldmaking professionals, so look for

Twitter daily at @ThomasRCutler. Contact Cutler at

that content this spring/summer.

trcutler@trcutlerinc.com.

24

Manufacturing Outlook / May 2021

MANUFACTURERS CONTINUE TO STEP UP TO GET AMERICA VACCINATED

MANUFACTURING TIDBITS

by NAM MEDIA RELATIONS

Timmons: This is our shot to finally end this pandemic, so we’re going to keep working with the administration, state and local leaders and our member companies to get everyone vaccinated as soon as possible.

Washington, D.C. – Following President Joe Biden’s call to employers across America to do everything they can to help their employees—and their communities—get vaccinated, National Association of Manufacturers President and CEO Jay Timmons released the following statement: “Vaccines are how we get armed against COVID-19, protect our loved ones, grow our economy and get back to the moments we miss. The hard work and innovation of America’s pharmaceutical manufacturers, coupled with the Biden administration’s laser focus on vaccine distribution and the dedication of local vaccination teams across the country, have enabled the administration to double its lofty goal set for the first 100 days.”

President Biden announced that he expects the nation to have administered 200 million shots within his first 100 days. He called on every employer in America to offer full pay to their employees for any time off needed to get vaccinated and announced a paid leave tax credit that will offset the cost for businesses with fewer than 500 employees.

Timmons added, “Manufacturers remain absolutely committed to helping our teams get safely vaccinated. Through our ‘This Is Our Shot’ project, we’re making resources available to answer questions and share the facts about how these vaccines are safe and effective and have reached more than 2.25 million people to date. Additionally, many manufacturers have supported vaccination by giving employees time off to get vaccinated.

With a new tax credit, it will be even easier for manufacturers and all employers to offer this option.

This is our shot to finally end this pandemic, so we’re going to keep working with the administration, state and local leaders and our member companies to get everyone vaccinated as soon as possible.”

Background on “This Is Our Shot”: Launched earlier this year, the project, live at NAM. org/ThisIsOurShot, includes six main components: (1) science-based messaging research; (2) emergency industry convening and education, such as webinars; (3) an online vaccine information hub; (4) a PSA campaign; (5) the Yellow and Red Ribbon Initiative (for vaccinated individuals to show their peers they’re a part of the fight); and (6) a rapid response media and digital campaign. Resources available on the webpage are updated regularly, providing the latest information and tools for vaccine outreach and access.

-NAMThe National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states.

Manufacturing employs 12.3 million men and women, contributes $2.33 trillion to the U.S. economy annually and has the largest economic multiplier of any major sector and accounts for 63% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www. nam.org.

Manufacturing Outlook / May 2021

25

CASS INDEX OUTLOOK

CASS TRANSPORTATION INDEX REPORT

by CASS INFORMATION SYSTEMS, INC.

The shipments component of the Cass Freight Index® grew at a record 27.6% y/y pace in April, accelerating from a 10.0% y/y increase in March.

While it has never risen this much on a y/y basis, the only past declines as large as during the economic quarantine of Q2’20 were during the 2008-2009 financial crisis. So, the pandemic recovery is progressing considerably faster than the recovery from the Great Recession, when y/y growth peaked at 18.5% in mid-2010.

Yet, this strong acceleration was expected because it was more than explained by the easier comparison against the Q2’20 pandemic shutdown. On a seasonally adjusted (SA) basis, the Cass Shipments Index fell 3.1% m/m from March to April, giving back most of the 3.4% m/m (SA) increase in March.

While some of the March m/m increase was make-up from activity lost during the polar vortex in February, our sense is the April m/m decline was due more to ongoing supply constraints and the deepening semiconductor shortage, which resulted in considerable downtime in auto and truck manufacturing in April. On the Class I

26

Manufacturing Outlook / May 2021

railroads, motor vehicle carloads fell about 20% from March to April. Near-term supply chain risks remain, with constrained chip supply unlikely to be fully resolved quickly as lead times on new semiconductor manufacturing capacity are generally about 18- 24 months.

Still, if the Cass Shipments Index continues on a normal seasonal pattern from here, it will be up 27% y/y in Q2, with growth slowing to about 10% y/y in Q3 as prior year comparisons improve.

On a two-year stacked basis, the Cass Shipments Index was 1.3% below April 2019, just slightly below the pre-crisis level.

Cass Freight Index - Expenditures The Cass Expenditures Index set another new record in April, its fourth in five months, and was 45.1% above the year-ago level, surging from 27.5% y/y growth in March.

On a seasonally adjusted basis, the Cass Expenditures Index rose 1.1% from March, and with volumes a bit softer m/m, the increase was more than explained by higher embedded rates, which rose 3.4% m/m.

CASS INDEX OUTLOOK On normal seasonal patterns, the easier comparisons would suggest y/y growth at or above 50% in May and June, then slowing to more like 30% y/y growth rates in Q3.

Freight Rates A simple calculation of the Cass Freight Index data (expenditures divided by shipments) produces a data set of “implied freight rates” that explains the overall movement in rates.

The freight rates embedded in the two components of the Cass Freight Index slowed to a 13.7% y/y increase in April from a 15.8% y/y increase in March. This y/y slowdown was due to a tougher prior year comparison, which may have been due to unusual changes in mix in the April 2020 shutdown period.

The embedded rates rose another 3.4% m/m on a seasonally adjusted basis in April, following a 3.5% m/m increase in March consistent with the rising trend of the past five months. With much of the annual contract freight market repriced at this point, we expect these increases to begin to slow near-term. However, with strong freight demand and supply constraints on both drivers and trucks, spot and contract rates should continue to rise.

This data series is diversified among all modes, with truckload representing more than half of the dollars, followed by rail, LTL, parcel, and so on.

Truckload Linehaul Index The Cass Truckload Linehaul Index® value of 146.5 in April represented a second-straight all-time record and accelerated to a 13.0% y/y increase from a 10.1% y/y increase in March. On a m/m basis, the seasonally adjusted index was 2.4% higher than March, in the tenth straight increase.

With strong freight demand and major supply constraints in both of the critical components of trucking capacity – drivers and tractors – the near-term trend of the Cass Truckload Linehaul Index should remain up and to the right. Driver challenges continue to mount, as discussed below, and the annual Road Check law enforcement event in early May was a factor in pressing spot truckload rates even higher. Meanwhile, parts shortages continue to limit truck production and keep the truckload market tight.

Freight Expectations Even with considerable supply constraints, the freight cycle is essentially in full swing as all components of the Cass indexes, with the

exception of the Cass Shipments Index, posted new record highs again this month. With tailwinds from a very strong retail economy, a backlog of containerships still anchored in the San Pedro Bay and inventories recovering but still tight, 2021 is setting up to be an extraordinarily strong year of recovery across the U.S. freight network.

Since the strong rebound in early March from the polar vortex, rail trends have continued modestly above normal seasonal patterns, but Q2’21 acceleration in the y/y data below is mostly due to easier prior year comparisons. Similar to the Cass Freight Index data, rail volumes will show extraordinary y/y growth in the coming months.

Trucking appears to be experiencing a similar pattern, and with 25%-30% y/y increases in the next few months against the economic shutdown period in Q2 of last year, the sequential, seasonally adjusted data will be more informative on the longer-term trend in the coming months.

In addition to strong demand and ongoing equipment supply chain shortages, the driver shortage is a major factor in the freight market equation. While it’s a complex issue, discussed in depth in the ACT Freight Forecast report, the record low driver availability has perhaps played an even larger role in driving freight rates to record levels recently than the truck production challenges.

When asked about the factors behind the extraordinarily challenging driver availability situation, fleet executives we talk with list: • Demographic tightening (more retirements than new entrants) • The shift to local trucking • Economic stimulus impacting driver school attendance • The FMCSA’s Drug and Alcohol Clearinghouse • Higher pay incentivizing vacation But with enough time, the cure for high prices is high prices. Check out the ACT Freight Forecast for data-driven predictions for supply, demand, and the rate cycle in the truckload, LTL, and intermodal markets over a three-year planning horizon. While taking seasonality into account, these forecasts consider several crucial variables, including freight market conditions, economic conditions, inventory levels, and supply side factors.

Manufacturing Outlook / May 2021

27

ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 60.7% for April ISM PMI for the past 5 years

APRIL 2021 60.7%

28

Manufacturing Outlook / May 2021

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in April, with the overall economy notching an 11th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The April Manufacturing PMI® registered 60.7 percent. The New Orders Index registered 64.3 percent, declining 3.7 percentage points from the March reading of 68 percent. The Production Index registered 62.5 percent, a decrease of 5.6 percentage points compared to the March reading of 68.1 percent.

The Backlog of Orders Index registered 68.2 percent, 0.7 percentage point higher compared to the March reading of 67.5 percent. The Employment Index registered 55.1 percent, 4.5 percentage points lower than the March reading of 59.6 percent. The Supplier Deliveries Index registered 75 percent, down 1.6 percentage points from the March figure of 76.6 percent. The Prices Index registered 89.6 percent, up 4 percentage points compared to the March reading of 85.6 percent.

All 18 manufacturing industries reported growth in April, in the following order: Electrical Equipment, Appliances & Components; Textile Mills; Furniture & Related Products; Machinery; Fabricated Metal Products; Primary Metals; Miscellaneous Manufacturing‡; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Transportation Equipment; Paper Products; Petroleum & Coal Products; Printing & Related Support Activities; and Wood Products. ISM ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

12

Timothy R. Fiore, CPSM, C.P.M.,

Chair of the Institute for Supply Management® Manufacturing Business Survey Committee

MANUFACTURING

PMI at 60.7% ®

PMI

Manufacturing grew in April, as the Manu2019 2020 facturing PMI® registered 60.7 percent, 4 percentage points lower than the March reading of 64.7 percent. Although the Manufacturing PMI® has cooled compared to March, it remains at historically high levels.

50% = Manufacturing Economy The Manufacturing PMI® continued to indicate Breakeven Line strong sector expansion and U.S. economic 43.1% = Overall Economy Breakeven Line growth in April. Four of the five subindexes that directly factor into the Manufacturing PMI® were in growth territory.

2021

60.7%

Manufacturing at a Glance INDEX

Apr Index

Mar Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

60.7

64.7

-4.0

Growing

Slower

11

New Orders

64.3

68.0

-3.7

Growing

Slower

11

Production

62.5

68.1

-5.6

Growing

Slower

11

Employment

55.1

59.6

-4.5

Growing

Slower

5

Supplier Deliveries

75.0

76.6

-1.6

Slowing

Slower

62

Inventories

46.5

50.8

-4.3

Contracting

From Growing

1

Customers’ Inventories

28.4

29.9

-1.5

Too Low

Faster

55

Prices

89.6

85.6

+4.0

Increasing

Faster

11

Backlog of Orders

68.2

67.5

+0.7

Growing

Faster

10

New Export Orders

54.9

54.5

+0.4

Growing

Faster

10

Imports

52.2

56.7

-4.5

Growing

Slower

10

Overall Economy

Growing

Slower

11

Manufacturing Sector

Growing

Slower

11

*Number of months moving in current direction.

Manufacturing ISM® Report On Business® data is seasonally adjusted for the New Orders, Production, Employment and Inventories indexes. **Correction made to consecutive months from previous report.

Commodities Reported

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

Commodities Up in Price: Acetone (3); Acrylonitrile Butadiene Styrene (ABS) Plastic (4); Adhesives (2); Aluminum (11); Aluminum Extrusions (3); Aluminum Products; Caustic Soda; Coatings; Copper (11); Copper Products (2); Corrugate (7); Corrugated Boxes (6); Crude Oil (5); Diesel (4); Electrical Components (5); Electronic Components (5); Fasteners; Foam Products (2); Freight (6); High-Density Polyethylene (HDPE) (4); Liquid-Crystal Displays (LCD); Lubricants; Lumber (10); Maintenance, Repair and Operating (MRO) Materials; Natural Gas; Nylon Fiber (4); Ocean Freight (5); Packaging Supplies (5); Paper Products (5); Petroleum-Based Products (2); Plastic Film; Plastic Resins (8); Polycarbonates; Polyethylene (3); Polypropylene (10); Polyvinyl Chloride (PVC) Resins (7); Precious Metals; Printed Circuit Boards; Propylene Glycol; Resin-Based Products (3); Rubber Products (3); Semiconductors (3); Soybean Products (7); Steel (9); Steel — Carbon (5); Steel — Cold Rolled (8); Steel — Hot Rolled (8); Steel — Stainless (6); Steel Products (8); Styrene (2); Wood for Pallets; and Wood — Pallets (Finished Product) (5). Commodities Down in Price: Propylene.

Note: To view the full list, visit the ISM website at ismworld.org.

ISMWORLD.ORG Manufacturing Outlook / May 2021

29

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI® New Orders (Manufacturing) 2019

April 2021 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

20

2020

New Orders

2021

ISM’s New Orders Index registered 64.3 percent. Of the 18 manufacturing industries, the 16 that reported growth in new orders in April — in the following order — are: Electrical Equipment, Appliances & Components; Textile Mills; Fabricated Metal Products; Primary Metals; Paper Products; Machinery; Nonmetallic Mineral Products; Chemical Products; Furniture & Related Products; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Transportation Equipment; Wood Products; Plastics & Rubber Products; Computer & Electronic Products; and Petroleum & Coal Products.

64.3%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021

62.5%

70

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 62.5 percent. The 14 industries reporting growth in production during the month of April — listed in order — are: Electrical Equipment, Appliances & Components; Primary Metals; Machinery; Petroleum & Coal Products; Miscellaneous Manufacturing‡; Fabricated Metal Products; Furniture & Related Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Chemical Products; Wood Products; Computer & Electronic Products; Textile Mills; and Nonmetallic Mineral Products.

Employment (Manufacturing) 2019

2020

Employment

2021

55.1%

50.6% = B.L.S. Mfg. Employment Breakeven Line

20

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021

75%

80

ISM’s Employment Index registered 55.1 percent in April, 4.5 percentage points lower than the March reading of 59.6 percent. Of the 18 manufacturing industries, the 13 industries reporting employment growth in April — in the following order — are: Printing & Related Support Activities; Furniture & Related Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Textile Mills; Food, Beverage & Tobacco Products; Plastics & Rubber Products; Nonmetallic Mineral Products; Machinery; Primary Metals; Transportation Equipment; Miscellaneous Manufacturing‡; and Computer & Electronic Products.

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in April, as the Supplier Deliveries Index registered 75 percent. Of the 18 industries, 17 reported slower supplier deliveries in April, listed in the following order: Apparel, Leather & Allied Products; Textile Mills; Paper Products; Machinery; Computer & Electronic Products; Fabricated Metal Products; Furniture & Related Products; Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing‡; Chemical Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Primary Metals; Transportation Equipment; Food, Beverage & Tobacco Products; and Wood Products.

Inventories (Manufacturing) 2019

2020

2021

Inventories The Inventories Index registered 46.5 percent. The five industries reporting higher inventories in April are: Printing & Related Support Activities; Furniture & Related Products; Textile Mills; Machinery; and Fabricated Metal Products.

44.5% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

46.5%

Manufacturing (products such as medical equipment and

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

30

Manufacturing Outlook / May 2021

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI®

April 2021 Analysis by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management ® Manufacturing Business Survey Committee

Customer Inventories (Manufacturing) 2019

2020

2021

28.4%

Customers’ Inventories ISM’s Customers’ Inventories Index registered 28.4 percent. None of the 18 industries reported higher customers’ inventories in April. The 15 industries reporting customers’ inventories as too low during April — listed in order — are: Wood Products; Textile Mills; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Paper Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing‡; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Furniture & Related Products; and Plastics & Rubber Products.

Prices (Manufacturing) 2019

2020

2021

89.6%

52.7% = B.L.S. Producer Prices Index for Intermediate Materials Breakeven Line

Backlog of Orders (Manufacturing) 2019

2020

2021

68.2%

Prices The ISM Prices Index registered 89.6 percent. In April, for the second month in a row, all 18 industries reported paying increased prices for raw materials, in the following order: Apparel, Leather & Allied Products; Furniture & Related Products; Textile Mills; Printing & Related Support Activities; Primary Metals; Nonmetallic Mineral Products; Wood Products; Fabricated Metal Products; Plastics & Rubber Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Food, Beverage & Tobacco Products; Petroleum & Coal Products; Miscellaneous Manufacturing‡; Transportation Equipment; Chemical Products; and Paper Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 68.2 percent. The 14 industries reporting growth in order backlogs in April, in the following order, are: Textile Mills; Fabricated Metal Products; Machinery; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Nonmetallic Mineral Products; Computer & Electronic Products; Transportation Equipment; Primary Metals; Furniture & Related Products; Chemical Products; Miscellaneous Manufacturing‡; and Food, Beverage & Tobacco Products.

New Export Orders (Manufacturing) 2019

2020

2021

New Export Orders ISM’s New Export Orders Index registered 54.9 percent. The seven industries reporting growth in new export orders in April — in the following order — are: Electrical Equipment, Appliances & Components; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Machinery; and Computer & Electronic Products.

54.9%

Imports (Manufacturing) 2019

2020

2021

52.2%

‡Miscellaneous

Imports ISM’s Imports Index registered 52.2 percent. The seven industries reporting growth in imports in April — in the following order — are: Chemical Products; Machinery; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Furniture & Related Products.

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / May 2021

31

NORTH AMERICAN OUTLOOK

MAY 2021

NORTH AMERICAN OUTLOOK

by AMELIA ROY

The Institute of Supply Management PMI figure rolled up to 60.7 in April compared with 64.7 in March. New orders, production and employment are growing; supplier deliveries are slowing at a slower rate; backlogs are growing; raw materials inventories are contracting; customer inventories are too low; prices are increasing, and exports and imports are growing.

All 18 manufacturing industries grew in April.

All the six biggest manufacturing industries — Fabricated Metal Products; Chemical Products; Food, Beverage & Tobacco Products; Computer &

32

Manufacturing Outlook / May 2021

Electronic Products; Transportation Equipment; and Petroleum & Coal Products, in that order — registered moderate to strong growth in April.

Companies and suppliers face a constant struggle to meet increased demand due to COVID-19 limiting the availability of parts and materials.

Comments from the industry are pointing to a universal need to obtain sufficient supplies, on time, at a reasonable price. The semiconductor shortage, together with the high price and availability of metals, particularly steel, aluminum, and copper, are aggravating the situation.

NORTH AMERICAN OUTLOOK CANADA’s PMI eased from March’s record high of 58.5 to 57.2 in April. There were supplier delivery delays and increased raw material costs. Some companies went to advanced buying. Selling price inflation rose to the sharpest in the survey to date. Backlogs are up, employment with them.

There was a sharp increase in production and new orders, but these were slightly moderated from March. Employment was up for the tenth consecutive month. There is an upbeat sentiment regarding the next 12 months’ production.

MEXICO saw new orders, production and employment all contract at a slower rate. Business closures, lower sales, and raw material shortages all led to a further deterioration in Mexico’s manufacturing industry in April.

There was a rise in input costs.

The PMI for April, at 48.4, was up Amelia Roy, Staff Writer from March’s 45.6.

NEW EPISODES EVERY TUESDAY AT MFGTALKRADIO.COM

Manufacturing Outlook / May 2021

33

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by JEANNE-MARIE LOWRIE

BRAZIL’s new orders and production are in contraction for a second consecutive month.

There is stagnation in input buying. The PMI for April, at 52.3 is down from March’s 9-month low of 52.8. There was some job creation in April.

Business closures and COVID-19 restrictions adversely affected demand, but export orders showed a marginal increase. There is still an increase in positive sentiment from March, and it is above the long-term average.

Brazil, however, took a different path to address COVID-19, with fewer restrictions. Even though there is debate whether commonly available masks help to reduce catching the virus, although they are primarily effective for reducing the distance an infected person can exhale the virus, Brazil suffered a high contagion rate, third in the world, and a 2.77% death rate. It may be turning the corner; albeit, slowly, and herd immunity will be difficult to achieve in Brazil,as well.

34

Manufacturing Outlook / May 2021

South America, as a whole, with just under $4 trillion in GDP – if you include Mexico, which most analysts look upon as part of North America, simply isn’t a massive buying or production block. Without Mexico, South America’s total GDP falls between the production of two European countries, Germany at $34. Trillion, and the UK at $2.5 trillion (USD).

What is absent from South America is stability; what is present is a good deal of corruption in politics that makes country fiscal management divisive and difficult. Thus, many of the 13 countries (not counting Mexico or Central America) and three territories and caught in a cycle that precludes global progress. This, in addition to difficult terrain and climate conditions, or unique, irreplaceable ecologies like the Amazon, limit rapid growth in agriculture or industrilaization.

Jeanne-Marie Lowrie, Staff Writer

ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA OUTLOOK

by CHRIS ANDERSON

CHINA’s PMI for April was up to a four-month high, due to the strongest production and sales figures for four months. The PMI rose from 50.6 in March to 51.9 in April. Selling prices were moved up on material shortages and higher raw material costs.

Employment returns to growth and there is solid export demand. China sold 2.526 million vehicles in March, 74.9 percent up year-over-year.

Shortages of both container ships and containers have driven the cost per ton of goods shipped from China to increase 3-fold, from US $155 per metric ton to $455 per metric ton. Given that recovering businesses will pay whatever they must to get their production nearer pre-pandemic demand amidst steady demand, it is unlikely that container costs will decline back to pre-pandemic levels in 2021. With cold-rolled and hot-rolled steel prices rising globally, and not expected to fall anywhere near pre-pandemic levels in 2021, inflation then becomes a headwind in the near term, likely in the 3rd quarter of 2021, so interest rates will likely rise in Q4 2021.

The chip shortage still looms large from Asia sources, and as demand rises in Asia for products dependent upon semi-conductor chips, competition will be fierce until new chip factories come online in 2022 at the earliest. Countries and companies are quickly discovering that having your own home-grown sources is a more secure supply chain scenario than relying on suppliers half a world away.

JAPAN’s PMI was at its highest for three years in April, rising from 52.7 in March to 53.6 in April.

There were quicker expansions in production and new orders, as demand and confidence recovered. Employment was up for the first time

in four months, and optimism at its strongest since July 2017. Japan, like most countries, was subject to rising raw material costs, and had difficulty sourcing raw materials due to global shortages.

Japan, once the world leader in consumer electronics, needs to find its global niche, whether that is consumer electronics or some other export category. It’s population is simply too old to generate much demand that drives growth, and the following generations are not boosting the child per woman expansion as their predecessors did.

Unfortunately, Japan has lost its quality reputation luster, and is now more famously known for the nuclear mess at Fukishima.

INDIA saw a further easing in growth in new orders and production. Input buying was stepped up to rebuild inventories. There were sharp increases in costs and selling prices, with the steepest increases in input costs for almost seven years. The PMI, at 55.5, was virtually unchanged from the 55.4 in March.

India is currently being rocked by the COVID pandemic. The caste system that held much of the populace in poverty, socioeconomically with a derth of government health care services in the impoverished areas now has a health care response problem. There are too few hospitals, too few ICU beds, too few clinics to distribute the vaccine, and overcrowding in slums and cities giving the air-borne virus too many pathways to infect people. Social distancing isn’t easily achieved, or administration of vaccines fast enough to have much hope of Chris Anderson, herd immunity in 2021.

Staff Writer

Manufacturing Outlook / May 2021

35

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by CHRIS ANDERSON

IHS Markit’s Eurozone Manufacturing Composite

Product shortages drove prices up at a rate seen

Purchasing Managers’ Index (PMI), rose further from

only once in the survey history (Feb 2011). There

62.5 in March to 62.9 in April.

were employment gains and positive projections

April saw further considerable increases in production and new orders, with supplier delivery

for the coming 12 months. West European car registrations were up 63 percent, year-over-year in March at 1.39 million. This includes UK figures.

The UK PMI rose to a 329-month high of 60.9 in April from 58.9 in March. Growth in new orders and production were among the best seen over the past seven years. Average selling prices rose at the fastest pace in over 20 years. Manufacturing employment was up for the fourth successive month.

times lengthening at unprecedented rates,

There are supply-chain issues;

accompanied by price increases. Intermediate and

inflationary pressures, with

investment goods sectors showed considerable

66 percent of companies

gains, with investment goods showing its strongest ever gain. Consumer goods showed a marked improvement, but lagged the other two categories.

36

Manufacturing Outlook / May 2021

remaining positive at the start Chris Anderson, Staff Writer

of the second quarter.

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

Global Survey Insights Thu. May 6, 2021

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL Strategas Securities, LLC SURVEYS, STRATEGAS RESEARCH PARTNERS Norbert Ore (404) 488-7380 Erica Halie Comp, CBE

(646) 292-7951

nore@strategasrp.com ecomp@strategasrp.com

Norbert Ore, Director, Head Of Industrial Surveys, Strategas Research Partners

SUPPLY CHAIN OLYMPICS – ORDERS OUTRUN OUTPUT APRIL 2021 BUSINESS SURVEY INSIGHTS We close the books on Q1-2021 with a clearer expectation for the rest of this year. We will also see a shift in the topics that are dominating conversations. As we approached the end of Q1, concerns started to shift away from Covid, masks, distancing, and herd immunity with the success of the vaccine rollout. We have all added to our vocabulary through this ordeal. So, life is supposed to be getting easier as we move to a post-Covid world. Globally, most of the industrialized world is benefitting from economic growth.

The best part of the reports is the breadth they show as 18 of 18 industries are growing while Services indicates 17 out of 18 growing. The U.S., Eurozone, U.K., Australia, and Taiwan were the manufacturing leaders in April with PMIs above 60. Mexico and Brazil were the weakest economies.

PLEASE DO NOT REDISTRIBUTE Please see Appendix for Important Disclosures.

Manufacturing Outlook / May 2021

37

GLOBAL PMI OUTLOOK

05/06/21

SUPPLY CHAIN OLYMPICS – ORDERS OUTRUN OUTPUT

Emerging Markets

Developed Markets

Global Manufacturing Summary

38

Americas Canada United States Europe Austria Denmark France Germany Ireland Italy Netherlands Norway Spain Switzerland United Kingdom Pacific Australia Japan New Zealand Singapore Americas Brazil Mexico Europe Czech Republic Greece Hungary Poland Russia Asia China (CLFP) China (Caixin) India Indonesia Korea Malaysia Philippines Taiwan (Markit) Thailand

Manufacturing Outlook / May 2021

Period

Most Recent Data Current Reading Prior Reading

Current Reading vs.

6 Mo Avg. 12 Mo Avg.

Apr-21 Apr-21

57.2 60.7

58.5 64.7

0.8 0.2

3.4 3.9

Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21

64.7 72.0 58.9 66.2 60.8 60.7 67.2 59.1 57.7 69.5 60.9

63.4 67.6 59.3 66.6 57.1 59.8 64.7 60.5 56.9 66.3 58.9

7.0 20.3 4.5 5.1 5.6 4.6 6.7 3.3 4.8 8.1 3.9

11.1 18.6 6.9 10.7 8.2 7.2 12.9 6.6 6.8 14.6 6.8

Apr-21 Apr-21 Mar-21 Apr-21

61.7 53.6 63.6 50.9

59.9 52.7 54.2 50.8

4.5 2.5 8.5 0.3

8.2 5.7 12.1 0.9

Apr-21 Apr-21

52.3 48.4

52.8 45.6

-5.3 3.9

-5.2 5.8

Apr-21 Apr-21 Apr-21 Apr-21 Apr-21

58.9 54.4 50.8 53.7 50.4

58.0 51.8 48.8 54.3 51.1

2.0 5.3 0.0 1.1 0.4

6.8 5.9 1.2 3.0 2.0

Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21 Apr-21

51.1 51.9 55.5 54.6 54.6 53.9 49.0 62.4 50.7

51.9 50.6 55.4 53.2 55.3 49.9 52.2 60.8 48.8

-0.4 -0.2 -1.0 2.4 0.5 4.2 -1.9 2.4 1.2

-0.2 -0.4 2.9 6.8 4.1 4.6 -0.1 7.3 2.5

PLEASE DO NOT REDISTRIBUTE

2

GLOBAL PMI OUTLOOK 05/06/21

ISM U.S. Manufacturing PMI™ Life in the manufacturing sector is now characterized by shortages of no less than 28 critical commodities ranging from semiconductors to steel and essential services (e.g., ocean containers, over-the-road trucks, and drivers). And as if that is not enough – inflation and labor shortages.

The manufacturing data for April supports the continuation of an aggressive recovery as the sector has grown for 11 consecutive months. According to the ISM release, the Manufacturing PMI® for April (60.7 percent) corresponds to a 5-percent increase in real gross domestic product (GDP) on an annualized basis.

Drivers: The indexes for New Orders (64.3, -3.7) and Production (62.5, -5.6) were meaningfully contributive in April as the overall expectation is for a continuation of expansion for the balance of 2021.

Additionally, survey respondents expect Supplier Deliveries (75.0, -1.6) to remain extended. The biggest challenge is rebuilding depleted Inventories (46.5, -4.3) in supply chains, particularly in those such as autos, where intermediate components play a large role. Employment (55.1, -4.5) on a national level is still lagging. Labor shortages persist due to skill & technology requirements and Covid-19.

New Orders Minus Inventories: This key measure rose to (17.8, +0.6), indicating New Orders continued to expand faster than Inventories in April. Compared to the average gap (+4.8) since 2011, inventory availability continues to present challenges.

Customers’ Inventories: Customers’ Inventories (28.4, -1.5) for raw materials, components, and finished goods were “too low” for the 55th consecutive month. The Manufacturing Outlook / May 2021 PLEASE DO NOT REDISTRIBUTE

39

3

GLOBAL PMI OUTLOOK 05/06/21

index has been under 40 percent for the past nine months. Fifteen industries reported customers’ inventories as “too low” in April: Wood Products; Textile Mills; Nonmetallic Mineral Products; Primary Metals; Fabricated Metal Products; Machinery; Paper Products; Chemical Products; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; Food, Beverage & Tobacco Products; Furniture & Related Products; and Plastics & Rubber Products. No industries reported higher customers’ inventories.

Prices: The Manufacturing ISM® Prices Index rose slightly (89.6, +4.0), indicating input prices increased for the 11th consecutive month. This is the index’s highest reading since June 2008 when it registered 91.5 percent. Longer lead-times as indicated by the Supplier Deliveries Index support higher prices and buyers can expect the price issue challenge until many of the bottlenecks are resolved.

Commodities Up in Price: Acetone (3); Acrylonitrile Butadiene Styrene (ABS) Plastic (4); Adhesives (2); Aluminum (11); Aluminum Extrusions (3); Aluminum Products; Caustic Soda; Coatings; Copper (11); Copper Products (2); Corrugate (7); Corrugated Boxes (6); Crude Oil (5); Diesel (4); Electrical Components (5); Electronic Components (5); Fasteners; Foam Products (2); Freight (6); High-Density Polyethylene (HDPE) (4); Liquid-Crystal Displays (LCD); Lubricants; Lumber (10); Maintenance, Repair and Operating (MRO) Materials; Natural Gas; Nylon Fiber (4); Ocean Freight (5); Packaging Supplies (5); Paper Products (5); Petroleum-Based Products (2); Plastic Film; Plastic Resins (8); Polycarbonates; Polyethylene (3); Polypropylene (10); Polyvinyl Chloride (PVC) Resins (7); Precious Metals; Printed Circuit Boards; Propylene Glycol; Resin-Based Products (3); Rubber Products (3); Semiconductors (3); Soybean Products (7); Steel (9); Steel – Carbon (5); Steel – Cold Rolled (8); Steel – Hot Rolled (8); Steel – Stainless (6); Steel Products (8); Styrene (2); Wood for Pallets; and Wood – Pallets (Finished Product) (5).

Commodities Down in Price: Propylene.

Commodities in Short Supply: Adhesives (2); Aluminum; Corrugated Boxes (6); Electrical Components (7); Electronic Components (5); Foam Products (2); Freight (2); Liquid-Crystal Displays (LCD); Light-Emitting Diode (LED) Displays (2); Lumber (2); Nylon Fiber; Ocean Freight; Personal Protective Equipment (PPE) – Gloves (14); Plastic Products (3); Plastic Resins; Other (2); Polypropylene; Rubber-Based Products; Semiconductors (5); Steel (5); Steel – Hot Rolled (2); Steel Stainless (2); Steel Drums; Steel Products (3); and Wood – Pallets.

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

Sectoral Breakdown: All 18 manufacturing industries reported growth in April: Electrical Equipment, Appliances & Components; Textile Mills; Furniture & Related Products; Machinery; Fabricated Metal Products; Primary Metals; Miscellaneous Manufacturing; Chemical Products; Plastics & Rubber Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Nonmetallic Mineral Products; Apparel, Leather &

40

Manufacturing Outlook / May 2021

PLEASE DO NOT REDISTRIBUTE

4

GLOBAL PMI OUTLOOK

05/06/21

Allied Products; Transportation Equipment; Paper Products; Petroleum & Coal Products; Printing & Related Support Activities; and Wood Products.

ISM Mfg PMI (SA) New Orders (SA) Production (SA) Employment (SA) Supplier Deliveries (SA) Inventories (SA) New Orders - Inv Customers' Inventories (NSA) Prices (NSA) Backlogs (NSA) New Export Orders (NSA) Imports (NSA)

1/31/2021 58.7 61.1 60.7 52.6 68.2 50.8 10.3 33.1 82.1 59.7 54.9 56.9

2/28/2021 60.8 64.8 63.2 54.4 72.0 49.7 15.1 32.5 86.0 64.0 57.2 56.2

3/31/2021 64.7 68.0 68.1 59.6 76.6 50.8 17.2 29.9 85.6 67.5 54.5 56.7

4/30/2021 60.7 64.3 62.5 55.1 75.0 46.5 17.8 28.4 89.6 68.2 54.9 52.3

A Quick Word on Capacity Utilization Most industries are still operating below their pre-pandemic capacity utilization levels, contributing to output limitations. Only five industry groups are currently operating above.

Looking at the relative importance, these five groups comprise ~23% - 24% of industrial production. Conversely, ~76% - 77% of production is operating below it pre-pandemic capacity utilization level.

Industry Aerospace/Misc Transportation Eqpt Apparel and Leather Goods Machinery Food, Beverages, and Tobacco Wood Products Sum Paper Miscellaneous Durable Goods Textiles and Products Fabricated Metal Products Plastics and Rubber Products Chemicals Primary Metals Computer and Electronic Products Electrical Eqpt, Appliances, and Components Petroleum and Coal Products Electric and Gas Utilities Nonmetallic Mineral Products Furniture and Related Products Mining Motor Vehicles and Parts Printing/Related Support Activities Other Manufacturing Sum

% of Capacity Relative Importance 2/20 3/21 Chg 3/21 67.8 71.9 6.1% 4.1 61.6 65.4 6.0% 0.2 76.0 78.2 3.0% 5.6 75.7 77.3 2.0% 11.9 77.8 78.1 0.4% 1.6 23.3 86.0 74.9 69.3 81.3 76.7 75.4 69.9 73.5 75.2 80.4 73.5 69.1 77.0 89.1 78.3 73.0 58.5

85.0 73.8 68.1 80.0 75.2 73.8 68.4 71.7 73.4 75.6 68.8 64.5 71.5 82.2 71.8 65.5 52.0

-1.2% -1.4% -1.6% -1.7% -2.0% -2.1% -2.2% -2.4% -2.5% -6.0% -6.4% -6.7% -7.2% -7.7% -8.3% -10.2% -11.2%

2.5 2.7 0.6 5.9 3.6 13.3 2.9 5.1 1.9 3.2 10.3 2.3 1.1 13.3 5.4 1.1 1.5 76.7

PLEASE DO NOT REDISTRIBUTE

Manufacturing Outlook / May 2021

5

41

GLOBAL PMI OUTLOOK

05/06/21

ISM U.S. Services PMI™ (formerly ISM Non-Manufacturing PMI)

A Services PMI® above 49.2 percent, over time, generally indicates an expansion of the overall economy. Therefore, the April Services PMI® (62.7, -1.0) indicates expansion for the 11th straight month following two months of contraction and a preceding period of 127 months of growth. According to the press report, “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for April (62.7 percent) corresponds to a 4.7-percent increase in real gross domestic product (GDP) on an annualized basis.”

The ISM U.S. Services Employment Index (58.8, +1.6) gained modest momentum in April, but it is still lacking the robustness that we would expect as lockdowns and other challenges fade. There is still much to recover as the Services Employment Index averaged a meager 44.1 for the last three quarters of 2020. Services Employment grew at an average index reading of 56.0 January through April while Manufacturing Employment averaged 55.4 for the same period. When we compare the average over the long term, Manufacturing averages 51.4 pp while Services averages 51.6 pp -- a good indication we are making steady progress, but at a much slower rate when compared to order and output rates slowed by component shortages, etc.

Drivers: In April, the Services PMI (62.7, -1.0) continued to expand at a rate consistent with Q1 data. Business Activity (62.7, -6.7) and New Orders (63.2, -4.0) both indicate that momentum can carry into Q3 and Q4.

Prices: The Prices Index (76.8, +2.8) reflected pricing power in April favoring sellers as buyers mentioned supply concerns and the implication of broad-based inflation.

42

Manufacturing Outlook / May 2021

PLEASE DO NOT REDISTRIBUTE

6

GLOBAL PMI OUTLOOK

05/06/21

Commodities Up in Price: Aluminum; Aluminum Products; Cheese; Chemicals (2); Computer Hardware; Construction Materials (2); Copper Products (3); Copper Wire; Corrugated Boxes; Diesel (5); Electrical Components (3); Electronic Components; Fuel* (4); Gasoline (5); Gloves; Labor (5); Labor — Construction (2); Labor — Temporary (4); Lumber (4); Nitrile Gloves; Oriented Strand Board (OSB) (5); Personal Protective Equipment (PPE)* (15); Polyvinyl Chloride (PVC); Polyvinyl Chloride (PVC) Products (8); Resin Products (4); Shingles; Shortening; Steel (8); Steel Products (4); Vinyl Windows; Water Works Supplies and Fittings; and Wood Products (3).

Commodities Down in Price: Fuel*; Natural Gas; and Personal Protective Equipment (PPE)* (3).

Commodities in Short Supply: Appliances; Circuit Breakers; Construction Contractors (7); Electrical Components; Electronic Components; Fiber-Optic Cable; Gloves (5); Labor — Construction (4); Labor — Temporary (4); Lumber; Needles & Syringes (5); Nitrile Gloves (11); Pipette (2); Polyvinyl Chloride (PVC) Products (3); Semiconductors (2); Steel Products (5); and Transformers.

Note: Parentheses indicate the number of consecutive months the commodity is listed. Asterisk indicates both up and down in price.

Sectoral Breakdown: Seventeen services industries reported growth in April: Arts, Entertainment & Recreation; Wholesale Trade; Management of Companies & Support Services; Construction; Real Estate, Rental & Leasing; Utilities; Public Administration; Transportation & Warehousing; Retail Trade; Other Services; Finance & Insurance; Mining; Health Care & Social Assistance; Professional, Scientific & Technical Services; Educational Services; Information; and Accommodation & Food Services. The only industry reporting a decrease in April is Agriculture, Forestry, Fishing & Hunting.

ISM NMfg PMI (SA) Business Activity (SA) New Orders Employment (SA) Supplier Deliveries (SA) Prices (SA) Inventory Change (NSA) Inventory Sentiment (NSA) Backlogs (NSA) New Export Orders (NSA) Imports (NSA)

1/31/2021 58.7 59.9 61.8 55.2 57.8 64.2 49.2 49.7 50.9 47.0 53.5

2/28/2021 55.3 55.5 51.9 52.7 60.8 71.8 58.9 54.3 55.2 57.6 50.5

3/31/2021 63.7 69.4 67.2 57.2 61.0 74.0 54.0 52.7 50.2 55.5 50.7

4/30/2021 62.7 62.7 63.2 58.8 66.1 76.8 49.1 46.8 55.7 58.6 55.7

PLEASE DO NOT REDISTRIBUTE Manufacturing Outlook / May 2021

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43

CREDIT MANAGER’S OUTLOOK

CREDIT MANAGERS’ OUTLOOK

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

Combined Sectors At some point the economists are going to run out of superlatives. This economic growth has been about as unexpected as the collapse from last year. There was little or no warning as far as the pandemic collapse but this recovery has been nearly as shocking. It was only a few months ago that many analysts were suggesting with great trepidation that 2021 might see annual growth rates around 4.5%. Now the Federal Reserve has offered the opinion that 6.5% is more likely for the year. The markets are up and so are virtually every economic indicator one can name. The Credit Managers’ Index has added its voice to that chorus with numbers that are unprecedented. A few months ago, the “unprecedented” assertion was being used to describe the economic collapse and now it is referring to really rapid growth.

Throughout the index there are very high numbers – the highest that have been seen in many years.

The combined score broke past the 60 mark with a reading of 60.6 after sitting in the high 50s for several months. It was just last year that these readings were in the 30s and 40s and seemed mired in the contraction zone. The index of favorable factors reached 68.2 – nearly as high as was noted in January when the data showed a reading of 69.7.

The last year has been very positive for all of these favorable categories as the numbers have been above 60 since June of 2020 when it hit 55.3. The readings were last in the contraction zone in May of last year (39.5). The index of unfavorable factors hit 55.6 and that is higher than it has been since the lockdown recession began. The readings have been on a fairly steady climb since the bad days of last March and April.

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Manufacturing Outlook / May 2021

The movement in the sub-categories have been equally impressive. The sales numbers returned to the heights noted in January when the reading was 75.9 – this month it reached 74.7 and a very far cry from the 20.0 notched a year ago in April of 2020.

There was also an increase in the reading for new credit applications as it went from 63.9 to 65.9 – not quite as high as it was in February but close. The dollar collections numbers dipped a little and went from 64.5 to 63.1 but any numbers in the 60s show solid growth. There was also a gain in the amount of credit extended as the reading went from 68.4 to 69.0. These are all impressive numbers and reflect the overall gains in the economy noted thus far this year.

The rejections of credit applications numbers improved from 52.0 to 53.0, the highest level seen in several years. This category has been tracking above 50 since June of last year. The accounts placed for collection saw the highest reading seen in many years at 59.6. There doesn’t seem to be a problem with getting paid in many sectors these days. There was also improvement in the disputes category as it went from 50.6 to 51.3. There was an equally impressive gain in the dollar amount beyond terms category as it reached 59.4 after hitting 57.0 last month. Not only are companies paying what they owe, they are doing it on time. The dollar amount of customer deductions moved up from 52.0 to 53.0 and there was another big improvement noted as far as filings for bankruptcies as it moved from 55.7 to 57.1. This marks the sixth straight month with no readings falling into the 40s and that is nearly unprecedented as far as the CMI history is concerned.

CREDIT MANAGER’S OUTLOOK

Manufacturing Sector The manufacturing sector tended to escape the worst of the pandemic recession and some areas even boasted of growth as consumers shifted their attention from services to buying things. There has been consistent demand for a host of consumer items such as vehicles, appliances, electronics and

the like – anything to keep people occupied during a lockdown. There have been other manufacturing sectors that have not fared as well – especially those that are aimed at supporting the service sector businesses (airplane manufacturing was down for example). The combined score for the manufacturing sector was 61.4 – slightly higher than the 60.0 reached in January. The index of Manufacturing Outlook / May 2021

45

CREDIT MANAGER’S OUTLOOK favorable factors hit 68.7 and that was only slightly off the pace in January when the reading was 70.5.

The index of unfavorable factors also showed considerable progress with a reading of 56.6 – the highest number seen in several years. These are all very firmly in the expansion zone and this marks six straight months of very positive performance.

Most of the favorable categories showed significant gains this month with the exception of dollar collections. This category retreated very slightly from 65.5 to 64.7 but numbers in the mid-60s is still very robust. The sales numbers went from 72.7 to 75.6 and nearly back to the levels set in January. The new credit applications shifted up as well and went from 62.3 to 65.4. The amount of credit extended category also improved again – up to 68.8 after a 67.8 reading in March. These numbers are still a little short of the levels notched in January and February but are close.

The rejections of credit applications numbers remained exactly as they were the month prior but at 53.8 that is good news as these readings have not been this high in months. The accounts placed for

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Manufacturing Outlook / May 2021

collection data showed a major leap forward with a reading of 65.4 compared to the 56.3 notched in March. The sense is that companies are working hard to maintain their credit status in anticipation of needing more access later in the year. The disputes category was the only sour note in this month’s collection as it slumped from 50.4 to 49.6.

This was not a big tumble into the contraction zone but it suggests that companies are getting more sensitive regarding their cash flow. The dollar amount beyond terms category jumped into the 60s with a reading of 61.3 following a 57.2 in March. Again, this indicates a desire to stay current with creditors. All of the data on capital spending has been trending in a positive direction over the last few months and that is reflected in this latest credit data as well. The dollar amount of customer deductions improved from 50.8 to 52.8 and the filings for bankruptcies went from 55.6 to 56.7.

Were it not for that blip in the disputes category there would have been another month of readings entirely in expansion territory.

CREDIT MANAGER’S OUTLOOK

Author profile Dr. Christopher Kuehl (PhD) is a Managing Director of Armada Corporate Intelligence and one of the co-founders of the company in 1999. He has been Armada’s economic analyst and has worked with a wide variety of private clients and professional associations in the last ten years. He is the Chief Economist for the National Association for Credit Management and is on the Board of Advisors for their global division – Finance, Credit and International Business. He prepares NACM’s monthly Credit Managers Index. He is the Economic Analyst for the Fabricators and Manufacturers Association and writes their bi-weekly publication, Fabrinomics, which details the impact of economic trends on the manufacturer.

Chris is the chief editor for the Business Intelligence Briefs, distributed all over the world by business organizations and he is one of the primary writers (with Keith Prather) for the Executive Intelligence Briefs. He also makes close to a hundred presentations each year to business and industry associations in the US and overseas. He is on the Board of the Business Information Industry Association in Hong Kong and serves as a resource for the media and for many trade publications.

Manufacturing Outlook / May 2021

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METALS OUTLOOK

IRON ORE PRICES GO BALLISTIC AS METALS BOOM

by JULIA HOROWITZ, CNN BUSINESS London (CNN Business)As investors place bets on the economic recovery, there’s a new frenzy that’s taken over markets. Around the world, there’s a rush to buy metals.

What’s happening: China’s benchmark iron ore futures rallied an eye-popping 10% to a record high on Monday.

“The demand picture in China is very buoyant,” Warren Patterson, head of commodities strategy at ING, explained. Outside China, the economic situation is also looking “more optimistic,” putting a strain on iron ore supplies.

Additionally, there are strong incentives for factories in China to ramp up steel production, which requires iron ore, Patterson told me. Geopolitical tensions between China and Australia, a key supplier of raw materials, are a factor, too.

The explosion in iron ore prices comes amid a broader metals boom. The price of copper also hit an all-time high on Monday, while steel prices are roughly triple their 20-year average. The Bloomberg Commodity Spot Index, which is at its highest level

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Manufacturing Outlook / May 2021

in a decade, has risen in 14 of the past 15 trading sessions.

Investor insight: Metals mania is great news for the stocks of mining companies, which are up sharply. Rio Tinto (RIO) shares rose more than 3% in London on Monday, while Glencore (GLCNF)’s stock is 2% higher.

But Patterson expressed concerns about just how long the buying spree can last — especially because a growing number of professional investors are piling in.

“We’re seeing a lot more speculative and investor money coming into the iron ore market and the broader commodities complex,” he said.

Anxiety on Wall Street about inflation is pushing traders to consider hedges. And when there are worries about rising prices, investors tend to favor physical assets that can act as a store of value — like metals.

The run-up may have gone too far, though, creating a painful bubble that could be about to pop.

“I struggle to see a number of metal prices sustaining this move,” Patterson said. “We’re getting to a stage where prices are not aligned with the fundamentals.”

49 U.S. TOLL FREE 800.600.9290 - IN CANADA: 416.363.2244 Manufacturing Outlook / May 2021

METALS OUTLOOK

THE BATTLE FOR RARE EARTHS AND FOR COBALT

by ROYCE LOWE

We mentioned briefly last month that China grabbed hold of the global rare-earth supply back in the eighties, and effectively has never let it go. What are these metals called rare earths, seventeen of them, with their strange names, unfamiliar to us mere mortals who don’t have a doctorate in chemistry, nuclear physics or medicine? Why is it so important for us to have companies that mine them and process them? Why is it that in 2010, China put a stop to exports to Japan because Japan was holding a Chinese fishing boat that had “strayed?”

As a short aside, let’s list them: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium and yttrium.

Neodymium and praseodymium, for example, combine to make powerful magnets that are used

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Manufacturing Outlook / May 2021

in aircraft, headphones and more. Yttrium, a silvery metal, is used in cancer and rheumatoid arthritis drugs, as well as color TVs and camera lenses. Rare earths are used in iPhones, EVs and wind turbines, and are especially critical to advanced weapon systems - an F35 takes 900 pounds, a Virginia-class submarine some 9,000 pounds.

We have a situation where China accounts for twothirds of the mining of rare earths, 85 percent of its refining and 90 percent of its production. We further have a situation where the only working mine in the U.S. sends all its output to China for processing. This mine, Mountain Pass in California, was shut down in 2015 because it was unable to compete with rareearth producers in China. MP Materials bought the mine in 2017, and recently stated that production had jumped by 40 percent in 2020. Aided by grants from the U.S. Defense Department, the company will build processing facilities to at least cut down on

METALS OUTLOOK some of the reliance on Chinese suppliers. The U.S. presently imports some 80 percent of its rare-earth compounds and metals from China. In 2020, China mined 140,000 tons of rare earths ; the U.S. 38,000 tons. All the U.S. tonnage was processed in China.

USA Rare Earth, a private company, is developing the Round Top rare-earth deposit in Texas. And that, for the moment, MP Materials and Rare Earth, is it as far as mining in the U.S. is concerned. Resources in the U.S. are estimated at 2.7 million tons. There is an urgent need for processing equipment to be installed in the U.S. Canada has its own plans for a processing plant in Saskatoon, Saskatchewan, scheduled to start production in late 2022.

Consumption of rare earths is forecast to almost double by 2030, from just over 200,000 tons to 400,000 tons per annum. This may be on the low side, as the amount of future production of electric vehicles, wind turbines etc, is effectively an unknown.

It is a given that, for the moment, there are enough rare earths in the ground to feed all the processing equipment that the U.S., Japan, South Korea and Europe can find it or install. It is also a given that China, holding all the cards in this game, could use this to implement stop-start shipments to Japan, the U.S. or Europe.

The Biden administration has the rare earth situation high on its agenda. But that’s not enough. Rare earths need to be mined and processed in North America and elsewhere so that there will be enough materials to supply all the auto, electronics, and other industries that will need more and more of them in the future. More money must be pumped into R&D, to develop the use of alternative materials.

There’s another metal in this scenario: cobalt. Cobalt is currently worth some $50,000 per ton. In January, it was worth a little under $30,000 per ton. This is likely due to the continuing growing demand for electric vehicles. Cobalt is an integral part of the batteries of these vehicles.

Most of the world’s cobalt, some 90 percent, is mined in the Democratic Republic of the Congo (DRC), via Glencore, an Anglo-Swiss trader, and China Molybdenum, a Chinese state-owned company.

These two companies use modern technology to mine and refine the ore. In addition to these two giants, some 200,000 Congolese natives use pick and shovel to get the stuff out of the ground, as a way to augment their very meagre incomes. The bottom line is that if you need cobalt you must, in some manner or another, do business with the DRC.

North America is not really a player in the cobalt game. There is hardly any mining and no refining whatsoever. A Toronto company wants to change that. (It should be noted that there is a town in Northern Ontario named Cobalt, the home of mines in days passed.) First Cobalt recently announced the signing of a five-year supply contract with Glencore to ship material from Kamoto Copper Company, Glencore’s subsidiary in the DRC, starting in the fourth quarter of 2022. Glencore has, in fact, helped finance First Cobalt’s plans to reopen. The company also signed a memo of understanding with IXM.SA, a subsidiary of China Molybdenum Co., to source cobalt from the Tenke Fungurume mine in the DRC. The (First Cobalt’s) only permitted primary cobalt refinery in North America, when restarted, could produce over 25,000 tons of cobalt sulfate per year from purchased ore. The company has a cobalt exploration project at the Iron Creek Cobalt Project in Idaho, which indicates 2.2 million tons at 0.32 percent cobalt.

There is promise here too, but it’s not for tomorrow.

Present data suggest that there is no U.S. company looking to either mine or process cobalt. Somebody needs to make the first move.

Steel continues its relentless price rise, with hotrolled coil in the U.S. at $1,450 per ton, up by over $110 per ton from late March. The European price for hot-rolled, at 995 euros per ton, was up by 150 euros per ton over the same period, S.E. Asia, at $915 per ton, was up by $150 per ton. U.S. cold rolled was up by some $80 per ton at $1622 per ton. Prices in Canada followed the same pattern, with cold-rolled at C$ 2,000 per ton.

Non-ferrous metal data show some significant price increases over the past month. Aluminum is up over the past month from $1.01 per pound to $1.10; copper up from $4.00 per pound to $4.45; nickel up from $7.20 to $8.00, and zinc from $1.27 per pound to $1.32. So far, there are few indications that metal prices will decline over the next few months with demand increasing as the world recovers from COVID and gets back into production.

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / May 2021

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AEROSPACE OUTLOOK

MAY 2021

AEROSPACE OUTLOOK PERSEVERANCE AND INGENUITY

by ROYCE LOWE

Around 295 million kilometers, or 184 million miles in distant space, Perseverance and Ingenuity are spending most of their time performing the wishes of the teams at NASA, about sixteen-and-a-half minutes away by radio signal. Perseverance, we will recall, is the spacecraft that made it to the red planet in February. Its partner, Ingenuity, is a very small helicopter that it is hoped will help the team find what they’re looking for out there.

of the Earth’s - which should make flying easier - its atmosphere is only around one percent as dense. This thin air, equivalent to an elevation three times the height of the Himalayas, makes it difficult to generate lift. The blades on Ingenuity have thus to spin at 2,400 rpm, or five times faster than helicopters on Earth, and need hundreds of computer-controlled adjustments every second to maintain their stability.

Ingenuity’s project manager, Dr. MiMi Aung, says she could not resist watching film of its flights, short as they were, over and over. She seeks to remind us of the difficult engineering challenge involved. Though the gravity on Mars is one-third

At 1.8kg, Ingenuity is tiny, but it could lead to bigger things. NASA’s rovers free missions from being stuck in the places they land, but Ingenuity will free them from the surface altogether. Future generations of Mars helicopters could scout

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Manufacturing Outlook / May 2021

AEROSPACE OUTLOOK

areas of interest for further study. Bob Balaram, Ingenuity’s chief engineer, says the design could be scaled up to some 30kg, capable of carrying 4kg of instruments.

The helicopter has to date made four short flights.

The fourth, in late April, by far the longest, at just 117 seconds, reached a height of 5 meters, just over 16 feet, and did a lateral manuever of 266 meters, about 872 feet, round trip.

NASA officials have allowed the little guy one more flight before Perseverance receives the command to search for life in that piece of Mars real estate called the Jezero crater. Ingenuity, meanwhile, will be further stretched, and perhaps tested to destruction.

NASA has awarded a contract worth $2.9 billion to SpaceX, as the sole provider, to land the first astronauts on the moon since 1972, beating out Jeff Bezos’ Blue Origin and defense contractor Dynetics. The prototype Starship spacecraft is currently being tested at the SpaceX south Texas facility.

And China began construction of an orbiting space station with the launch of Tianhe, which roughly translates as “Heavenly Harmony,” its 25ton core and the first of three planned modules.

When fully assembled, in late 2022, the Chinese station, weighing around 73 tons, with room for three astronauts, will be about one sixth the size of the existing International Space Station. U.S. objections to sharing technology with China kept it out of the ISS.

The Max Won’t Go Away Boeing, meanwhile, is in a bit of a mess again.

Apart from a heavy financial loss for the sixth consecutive month, electrical issues have recently come to light on the 737 Max. The defect was discovered during normal production - certainly the best place to find it - and Boeing stated that a potential problem requires “verification that a sufficient ground path exists for a component of the electrical power system.” The FAA has been notified. Some planes have been grounded and Airlines are checking them.

Nine days after the first 737 Max crash in 2018, the U.S. Transportation Department shelved a major move to improve safety at aircraft manufacturers that is being put back on the table. Aircraft regulators are looking anew at a measure that is supported by industry and is crucial in avoiding future accidents. “People familiar with the situation” say that the initiative to require manufacturers to adopt a management safety system - was contrary to Trump’s antiregulatory policies. The FAA, which reports to the Department of Transport, and wanted to bring such a scheme into effect in 2018, now says it won’t be able to effect such a move until early in 2024.

Such programs require manufacturers to bring in safety-policing measures, and will allow access to upper management by safety personnel.

Questions have been raised again about Boeing’s ability to monitor safety issues, and this has been brought up repeatedly during reviews of the 737 Max crashes.

There is a further issue with the 737 Max: the European Aviation Safety Agency recently issued a directive regarding CFM International Inc. Leading Edge Aviation Propulsion, LEAP-1B engines, on planes that were grounded for long periods. The engines may be affected by corrosion, possibly affecting throttle controls, and need to be inspected.

Thanks to Bloomberg for this Boeing information Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / May 2021

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ENERGY OUTLOOK

MAY 2021

ENERGY OUTLOOK

by JOCELYN BRIGHT

WATTS ACROSS THE BORDER Back in the early seventies, Hydro-Québec, the province-owned electricity company, undertook construction of what would become one of the world’s largest hydro-electric systems. This is called the James Bay project, and is located in North Western Québec, some 1,000 kms (620 miles) north of Montreal. The project turned out to be fraught with political anger, sociological disruption, union infighting - in fact union wars - and final success. There is material enough in the James Bay saga to fill many books, which the material has done. The saga extended over many years, and involved agreements with Cree and Inuit natives, which led to relocation of peoples in some instances and relocation of some phases of the project in others.

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Manufacturing Outlook / May 2021

The project involved the construction of a series of hydroelectric power stations on the La Grande river, and the diversion of neighbouring rivers into the La Grande watershed. The project covers over 177,000 sq. kms (68,000 sq. miles), or some 11 percent of Québec’s total area, an area the size of New York State, larger than Florida, twice the size of Scotland. There are eight generating stations, producing an average of 83 terawatt-hours (TWh) per year, sufficient to meet the total demand of a small industrialized economy such as Belgium.

In other words, this project produces an enormous quantity of electricity, and from the outset there has been excess power available for “export.” In 2019, for example, Hydro-Québec’s net exports

ENERGY OUTLOOK reached 33.7 TWh, of which almost half was sold to New England, 25 percent to New York State, and the rest to other markets outside Québec, including neighbouring provinces Ontario and New Brunswick.

Québec is, of course, always more than ready to pat itself on the back for James Bay, and its present Premier, François Legault, likes to call his province - with its 40 TWh surplus of cheap electricity - the “battery of the northeast.” A terrawatt hour is a trillion watts consumed in a onehour period, or roughly the amount of electricity used by New York City in a week.

Québec has a 20-year contract to supply Massachusetts and Maine, but this contract is in jeopardy, since Maine is to hold a referendum on the transmission line that will pass through the state. The line was initially to pass through New Hampshire, but this route was rejected on the grounds that the unsightly transmission line would damage the state’s tourist industry.

The 233 km (146 mile) line now faces the same pressure from opponents in Maine, who have successfully pushed for a referendum. It should be noted that final approval of the transmission line, called New England Clean Energy Connect, came in the form of a presidential permit issued on Jan. 15 by the outgoing Trump administration.

A previous attempt to hold a referendum was rejected as unconstitutional by the Maine Supreme Judicial Court.

Janet Mills, Maine’s current Democratic governor, when first elected in 2018, said she had serious concerns about the line, for effectively the same reasons that New Hampshire had thrown out the project. Hydro-Québec was to change her mind, by offering a US $258-million package that included 500,000 megawatt-hours a year of electricity for 20 years; a discount for consumers; and US $10 million for electric-vehicle charging stations. Mills now supports the line, and has vetoed two bills to block it. Still, there will be a referendum, on November 2 this year.

A Hydro-Québec spokesman has stated that work on the line is underway and will not stop because of the planned referendum. He would not say if

Hydro-Québec or its American partners would take legal action to overturn the referendum, noting the line has been fully approved in the U.S. Hydro-Québec is looking for long-term contracts with Massachusetts and New York, while conceding the competition from natural gas producers and wind energy. Maine is pretty poor in wind power, but of course has potential, both on land and at sea. In view of the slow rate of U.S. progress in offshore wind power, generation by such means is not for tomorrow.

Meanwhile the natural gas lobbyists, wellendowed as they are, are fighting back by naming Québec as a foreign government whose stateowned enterprise has really no right to put its case for this project, nor its intention to provide reduced, stable prices for electricity, while reducing local air pollution. The French-language press in Québec threw in its lot by suggesting that air pollution knows no boundaries, certainly not the Maine-Québec border. Hydro-Québec is running ads in Maine to explain the long-term benefits of the transmission line to consumers.

The dilemma is an interesting one. It’s for sure that transmission lines clash with nature, but there is no doubt that the two are seen in partnership around the world. The line under construction has been approved in the U.S. and work on it continues. What will happen if the referendum goes against the project? We’ll know in around six months, unless the referendum goes away. In the near term, HydroQuébec is the only candidate to produce guaranteed clean power.

Jocelyn Bright, Staff Writer At least on the U.S. East coast.

Manufacturing Outlook / May 2021

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AUTOMOTIVE OUTLOOK

AUTOMOTIVE OUTLOOK

by LAWRENCE MAKAGON

GM BATTERY POWER Ultium Cells LLC is a joint venture owned by GM and LG Energy Solution. The two companies first announced the battery joint venture, Ultium, in 2019, when it announced the construction of a $2.3 billion battery R&D center and factory in Lordstown, Ohio. That location is slated to become operational sometime in 2022.

Ultium recently announced that it will build a second plant for the manufacture of EV batteries, a plant of 2.8 million-square-feet that will create 1,300 new manufacturing jobs and will cost $2.8 billion. The plant will be located in Spring Hill, Tennessee, and will supply GM’s nearby Spring Hill assembly plant, which GM said last October would change to the production of electric-only vehicles, such as the latest Cadillac models. GM’s CEO, Mary Barra, said this plant was the latest step in the company’s total commitment to an electric future.

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Manufacturing Outlook / May 2021

Across the Atlantic, Tesla is going through a tough time with German bureaucracy, as it attempts to get construction of its first European gigafactory, just outside Berlin, ready to start production this coming July. The factory is scheduled to produce 500,000 EVs per annum, and will employ some 12,000 people. Tesla is getting irritated by the bogging down of things, and in a letter to Berlin’s highest administrative court said “it had experienced first hand how obstacles in German authorization procedures slow down industrial transformation.”

Tesla, along with German environmentalist group DUH, is saying that Germany will miss its climate targets. It was, in fact, environmentalist groups that tried to slow down the project, at one point complaining the plant would use too much water.

DUH is anti-diesel, and is not affiliated with the environmentalist groups that are anti-Tesla.

AUTOMOTIVE OUTLOOK

Tesla has the backing of Economy Minister Peter Altmaier, a close ally of Chancellor Angela Merkel, and has already won several preliminary approvals that allowed it to push ahead with construction. These delays are a headache for Tesla, as this factory is the key to its growth in Europe. It is also under construction just as German rivals VW, Daimler, and BMW are pushing ahead with their own EV plans.

Elon Musk has been putting on the charm, tweeting in surprisingly good German and donning garb traditionally worn by local craftspeople. Like him or not, and it’s for sure a lot of people won’t, the “Technoking” has done an awful lot to disrupt the automotive and energy industries, along with their little-known intricacies. He’s moving into AI and will likely disrupt that too. His auto company Tesla, that only a few years ago was unsure of its continuing existence, has since led the way in electric vehicles, batteries, and other aspects of technological life.

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Aside from his stint as host of Saturday Night Live, and his everincreasing progeniture, Mr. Musk recently warranted a special tribute in “The Economist” magazine, noting his technological and business accomplishments. His forays into China and Europe, at first welcomed by the host countries, have recently veered to social media ridicule in China and to bureaucratic tiffs in Germany.

Lawrence Makagon, Staff Writer

Yet the man and his machines have succeeded, turning out ever more, affordable electric vehicles, and prompting the majority of global auto companies to follow him. And Joe Biden seems to be a fan. According to Car and Driver magazine, the Tesla Model 3 comes third behind the Kia Kona EV and the Mustang MachE EV, but ahead of the VW ID4.

Manufacturing Outlook / May 2021

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ISSUES OUTLOOK

by ROYCE LOWE

MAY 2021

ISSUES OUTLOOK POT HOLES OR POLITICS Joe Biden’s $2.3 trillion infrastructure plan, in all its ambition and efforts to be all encompassing, has of course run into some criticism and counter proposal. Bloomberg suggests that America’s economic future is at stake, and cites China as proof that modern infrastructure is an essential component of industrial competitiveness and

repairing all America’s pot holes. It will be noted that the tax on gasoline, at 18.4 cents per gallon, has not changed since 1993.

Bloomberg lauds the plan’s efforts to decarbonize the economy, with its calls for carbon-free

economic growth.

electricity by 2035, for example, but wonders

It’s true that China doesn’t have to put up with

thus raising costs. The plan was also lauded

feuding political factions, but it does use the same basic materials as everyone else, steel and concrete. There is the cost of what may be called “humdrum repairs” to roads and bridges, that could run to $1trillion, and these repairs should be one of the more important aspects of any plan of this type. One has to wonder at the cost of

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Manufacturing Outlook / May 2021

about the “Buy America,” limiting imports, by domestic steelmakers and the United Steel Workers Union.

In late April, several Republican senators released a pared-down infrastructure bill, worth $568 billion, covering funding for roads, bridges, public transit, ports, airports, broadband and

ISSUES OUTLOOK

water storage. The bill omits things Republicans

including roads and bridges, as well as grants for

considered inappropriate for an infrastructure

companies to build more EV charging stations.

bill, including public housing. The Republicans described their bill as a “good-faith effort to

The Republicans are against increasing the

find common ground.” The National Association

corporate tax rate to 28 percent, and non-

of Manufacturers’ (NAM) CEO, Jay Timmons,

traditional infrastructure investments. Counter

praised it as a way to reach consensus. The NAM

proposals to increasing the corporate tax rate

“applauded” the Senate Republicans’ proposal, just

are the imposition of new user fees on EVs and

as it “welcomed” the release of President Biden’s

“repurposing already-cleared federal funds.”

infrastructure plan.

Republican comments regarding childcare and affordable housing measures mentioned them as

The Republican bill proposed $299 billion for

tantamount to expanding the welfare state.

roads and bridges, $65 billion for broadband infrastructure, $61 billion for public transit

The automobile has been America’s favorite mode

systems, $49 billion for waste water and water

of transportation for a long, long time, to the

storage, $44 billion for airports and railroads,

detriment of public transportation and railroads.

$17 billion on ports and inland waterways, and

Back when the highways were built there was no

$13 billion on safety. This is supposedly the

telling that there would be over 150 million cars on

largest infrastructure bill ever put forward by

them, and what damage these vehicles would do.

Republicans. The Biden bill proposes $621 billion

Hence the need for ongoing repairs.

in total for transportation infrastructure alone,

200” Max O.D. 6” Min O.D. To 80,000 lbs.

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Manufacturing Outlook / May 2021

59

ISSUES OUTLOOK And what can the government do to help manufacturing, apart from cooperate in training

The last word here will go to The New Yorker,

programs for its workers? Isn’t manufacturing

which, in a rather long article on Greenwich, CT

in the hands of manufacturing executives and

in March 2020, stated that Connecticut has the

workers? And isn’t it important to educate and

richest one per cent of any state, but, according

train the workers?

to several studies of crumbling infrastructure, its roads are among the worst in the country. In spite

Biden’s plan, of course, won’t please everybody;

of all its money, “there are roads that don’t get

nobody’s ever would. What it needs is

improved, public transport that doesn’t get built,

cooperation, which is in very short supply in

and schools that don’t get fixed.”

Washington, D.C. Unfortunately, neither plan can be fully paid for by user fees or taxation schemes by either party. Both add to the national debt, claim to be amortized over 10 years to soften the blow, and are such vast amounts that no one truly understands how the funds will be managed or wasted.

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Manufacturing Outlook / May 2021

Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

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