Manufacturing Outlook October 2021

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MANUFACTURING OUTLOOK PAGE 6

AWARDS AS MARKETING FOR THE INDUSTRIAL SECTOR PAGE 8

MANUFACTURERS DISCOVER MICRO INFLUENCERS DRIVE BRAND AWARENESS AND SALES PAGE 10

THE CASS TRANSPORTATION INDEX PAGE 14

NEW SECTION: INNOVATION OUTLOOK

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OCTOBER ISM PMI: 61.1%

Released October 1st -The Full Executive Summary Report On Business - Page 16

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Manufacturing Outlook / October 2021

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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

5 PUBLISHER’S STATEMENT Manufacturing Malaise

Advertising ADVERTISE@MFGTALKRADIO.COM Editorial Office JACKET MEDIA CO. 75 LANE ROAD FAIRFIELD, NJ 07004 (973) 808-8300

6 MANUFACTURING OUTLOOK Global PMI stays put

MANUFACTURING TIDBITS

Insights from inside manufacturing in action

8 AWARDS AS MARKETING FOR THE INDUSTRIAL SECTOR

EUROZONE OUTLOOK

by Chris Anderson

29 GLOBAL PMI OUTLOOK

by Norbert Ore

32

10

by Dr. Chris Kuehl

MANUFACTURERS DISCOVER MICRO INFLUENCERS DRIVE BRAND AWARENESS AND SALES

by TR Cutler

ERGONOMICS LIVES AT HOME THANKS TO THE GREAT RESIGNATION

by TR Cutler

14 CASS INDEX

THE CREDIT MANAGER’S OUTLOOK

36 METALS OUTLOOK

Strange times in metal land

38 NEW INNOVATION OUTLOOK Transforming fabics and textiles into integrated devices and systems

40 AEROSPACE OUTLOOK

Cass Transportation Systems

The Canny Irishman

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42

ISM MANUFACTURING REPORT ON BUSINESS

Wind Over New Jersey

20 NORTH AMERICA OUTLOOK

by Amelia Roy

© 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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byTR Cutler

PMI Holding Strong at 61.1%

Text “RADIO” to 66866 for comments, suggestions and ideas and guest requests for MFGTALKRADIO.COM podcast.

COVER STORY ASIA OUTLOOK

by Christine Casati

12 Production Manager LINDA HOPLER

24

22 SOUTH AMERICA OUTLOOK

by Jeanne-Marie Lowrie

ENERGY OUTLOOK

44 AUTOMOTIVE OUTLOOK Detroit’s electrification war

46 CYBER SECURITY OUTLOOK Your Employees, Friend or Foe: 6 Tips for Successful Cyber Training

48 ISSUES OUTLOOK

Open call for...

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.

PUBLISHERS STATEMENT Publisher’s Statement

Manufacturing Malaise As someone who has read the ISM Manufacturing Report on Business® for decades, as well as other articles in industry trade magazines, major newspapers, and online sources, I am finding the current manufacturing atmosphere troubling – even though the indicators signal a wonderful, expanding economy. The problem is, I just don’t “feel” it.

It may be the Covid pandemic that keeps resurfacing creating a shortage of people all over the world who are unable to perform their everyday jobs. Maybe it is the ‘social distancing’ that keeps us further apart, relying on tablet meetings instead of table meetings. It could be general disconnects in the supply chain that make deliveries unpredictable and expensive, or millions of containers on ships moored offshore around the U.S. and Canada that are unable to offload. Or the shortage of dock workers, container space at ports, and truck chassis to move the goods to the next destination that create uncertainty in the supply chain.

Perhaps it is Washington, frozen in party politics on how to make the other party look bad instead of doing good things for We, the People. Or the lingering tariffs on goods received in U.S. ports which do not punish China or other countries – they punish us, We, the People, because the company here pays the tariff, not the sender, and that American company here has to recover that cost from guess who? You! It may have saved the American steel industry, with a short ton of cold rolled steel at $2000, up from $440 just two years ago, but who pays for that cost increase? If you answered, “I do” then you got the answer right.

It could be the chip shortage that has gone past a slowdown in automobile production to a chip shortage hitting other industries, as well. So much for offshoring – seemed like a good idea at the time, but U.S. industries that support everyone from the everyday consumer to the Federal Government are now looking at a problem that may not be fully solved until 2024 when new chip foundries become operational in the U.S. Then, it could be when we are told we aren’t right about the obvious. Take transitory inflation. It hasn’t left – like an unwelcomed house guest, it keeps hanging around. And because of all I have just mentioned above, and other issues surrounding us, like a worker shortage in virtually in every business across both the Services sectors and the Manufacturing sectors. There are help wanted signs everywhere and people not working – a huge disconnect.

Businesses have ramped back and many have closed because they don’t have staff, not even unskilled labor. And hiring skilled labor; well, now you’re asking for the moon, even with increased wages for both skilled and unskilled workers.

So, I don’t feel it, and I don’t get it. We should be applauding loudly, cheering wildly, because the ISM Purchasing Manager’s Indexes are in rarified expansionary air. Other sources of similar data are similar – readings above 50, some above 60, and a GDP that looks to be stronger than 4% and maybe even 5% for 2021. That is terrific territory – but do you “feel” it? So, I keep waiting for a shoe to drop, or a whole closet full to spill out. Let me know what you “feel” with a short email to publisher@manufacturingoutlook.com. n

Have a Special Day Lewis A. Weiss, Publisher Contact laweiss@mfgtalkradio.com or text “RADIO” to 66866 FOLLOW US:

Manufacturing Outlook / October 2021

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MANUFACTURING OUTLOOK

OCTOBER 2021

MANUFACTURING OUTLOOK GLOBAL MANUFACTURING PMI STAYS PUT. SUPPLY CHAIN DISRUPTION, RAW MATERIALS SCARCITY, AND SKILLED LABOR SHORTAGES ARE STILL MAJOR ISSUES. CHIP SHORTAGE HURTING AUTO SALES WORLDWIDE.

by ROYCE LOWE The ISM PMI figure for U.S. manufacturing rose from 59.9 in August to 61.1 in September. The overall economy continued in its sixteenth month of expansion. The Bureau of Economic Analysis says the Real Gross Domestic Product increased at an annual rate of 6.7 percent in the second quarter of 2021, according to the Bureau’s “third” estimate. The real GDP increase in the first quarter of 2021 was 6.3 percent. IHS Markit’s remarks on U.S. manufacturing for September show their PMI figure at a five-month low of 60.7 down from August’s 61.1.

IHS states that production was hampered by ongoing material and labor shortages. Although production improvement was at its lowest level

for five months, it was nonetheless substantial. Both domestic and export orders rose at historically elevated rates, and the increase in backlogs

continued

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Manufacturing Outlook / October 2021

MANUFACTURING OUTLOOK was the fastest on record, as efforts to beef up the workforce persisted.

Selling prices increased at a record pace. The raw material availability issue is adversely affecting the degree of confidence.

Global crude steel production was down by 1.4 percent year-over-year in the month of August for the 64 reporting countries – which represent 99 percent of world crude steel production – to 156.8 million tons (MT).

U.S. crude steel production for August was 7.5 MT, up 26.8 percent year-over-year. In August, China produced 83.2 MT, down 13.2 percent year-over-year; India 9.9 MT, up 8.2 percent; Japan 7.9 MT, up 22.9 percent; Russia 6.3 MT, up 4.4 percent; South Korea 6.1 MT, up 6.2 percent; Germany 3.0 MT, up 6.7 percent, and Brazil 3.1 MT, up 14.1 percent. The EU (27) produced 11.6 MT, up 27.1 percent.

Primary Global Aluminum Production in August was reported at 5.699 million tons, with production in China at 3.299 million tons,

representing 58 percent of the world total. Production was 504,000 tons in GCC; 384,000 tons in the rest of Asia; 278,000 tons in Western and Central Europe; 315,000 tons in North America, and 350,000 tons in Russia and Eastern Europe.

Predictions from three automotive analysis groups forecast U.S. light vehicle sales at less than 3.4 million for the July through September period this year, down 13-14 percent from the same period last year when volumes were depressed due to the pandemic. The expected 24-26 percent fall in September is due to the ongoing shortage of semiconductors.

The lack of production, together with strong consumer demand, has caused inventories to sink to record lows.

The month of August saw sales of 112,000 plug-in vehicles in the U.S. 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 unchanged at 54.1 in September. This was a seven-month low. The global manufacturing upturn remains constrained by disruptions of supply chains and material shortages. There were small expansions in production and new orders. Growth continued across the consumer, intermediate and investment goods sectors. Of the 31 nations for which September data are available, 24 registered PMI readings over 50. Labor and skill shortages are a continuing major issue in global manufacturing.

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, or annual rate. The consumer price increases represent year-over-year changes. The unemployment figures, %, are for the month as noted. n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / October 2021

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MANUFACTURING TIDBITS

Awards As Marketing For The Industrial Sector

by TR Cutler

continued

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Manufacturing Outlook / October 2021

MANUFACTURING TIDBITS Every year manufacturers miss an obvious marketing opportunity: winning awards.

While some of the variety of awards have a small fee to apply, others are simply a matter of completing a nomination form. In general, manufacturers are loathe to do this; they see it as bragging and self-aggrandizing. It is, but no less important to toot your own horn.

Some of the value of winning or receiving a nomination is sustaining.

Supply & Demand Chain Executive magazine has an annual award called Pros to Know.

2022 Pros to Know Recognizes outstanding executives whose accomplishments offer a roadmap for other leaders looking to leverage supply chain for competitive advantage.

Nominations Open: Monday, Oct. 25, 2021 Nominations Close: Sunday, Dec. 19, 2021 Awards are not about being humble Don’t be shy or humble; it doesn’t serve the company. In fact, when awards are part of the marketing outreach effort it becomes part of the sales narrative and establishes clear competitive differentiation.

Other awards are more local. Most of the 40+ Business Journals have a Manufacturer of the Year competition, often delineated by size (small, medium, and large). Other awards acknowledge up and coming rising stars with awards titled “40 under 40” or “30 under 30.”

For manufacturers or distributors who belong to associations, it’s critical to apply for their recognition awards.

There are highly prestigious manufacturing awards for manufacturing companies with outstanding projects or leaders who deserve recognition.

One of the most important national awards is the Manufacturing Leadership Awards. The 2022 season is open now through December 20, 2021. It recognizes excellent projects that demonstrate performance transformation in manufacturing and outstanding operational leaders who are influencing the industry’s future.

These awards do not happen all at once They are sprinkled throughout the year, but it’s vital to keep ahead of the chore of completing the nomination forms and applications. If there is an internal marketing director, this must be on the agenda. Increasingly, we see that most PR firms lack the sector knowledge of these awards; it really requires an industry insider. Having served as a judge for many industrial award competitions, it’s an honor to shine a spotlight on the great work of manufacturers.

Still, it’s amazing how many manufacturers, whether because they are too humble or simply unaware, fail to participate in this free or low-cost marketing outreach campaign element.

Broadening the sectors served by winning awards More and more manufacturers are broadening their sector outreach.

Moving beyond a single sector outreach, such as electronics, manufacturers are now migrating to other areas of the industrial complex which

can utilize their technology. Immediately the awards, associations, and publications within these newly expanded marketing efforts must be investigated.

Marketing personnel are busy these days working to navigate the return of in-person conferences and tradeshows or hybrid events that are remote. User conferences, customer webinars, and case studies are everywhere. Yet the publicity value of winning one or two awards accomplishes a seminal goal: shortening the sales cycle. Award recognition is a seal of approval; a layer of due diligence conducted by an objective third party, lending credibility to the product, service, and company.

Awards must be on the to-do list for all industrial companies.

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector.

Over 5000 industry leaders follow Cutler on Twitter daily at @ ThomasRCutler.

Contact Cutler at trcutler@trcutlerinc.com n

Manufacturing Outlook / October 2021

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MANUFACTURING TIDBITS

Manufacturers Discover Micro Influencers Drive Brand Awareness and Sales By: TR Cutler Creating solutions that set the standard in the influencer marketing industry is still a new concept. No longer are celebrity infomercials cost-effective or viable as a way to market industrial products and services.

That approach is simply too expensive and consumes all the margins of products. One of the trending solutions is partnering brands with micro influencers for content creation.

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Influencer marketing is not a linear exercise and there are many ways that brands and influencers work together (often because the target customer is identical).

Many industrial marketers have traditionally used Influencers to amplify or socialize initiatives. This was commonplace during the height of COVID; a content production

solution. B2B industrial brand leaders recognized that influencers have sway over sizeable audiences as well as being highly skilled at conceiving, shooting, and editing photo and video material. They are quasi-ad agencies.

Micro influencers have more power in the D2C (direct to consumer) and B2B (business to business) fast-growing creator economy. Micro influencers are categorized as having 50,000 continued

Manufacturing Outlook / October 2021

MANUFACTURING TIDBITS Leveraging micro influencers to custom produce content solves a lot of problems. As native, digital entertainers, influencers know how to draw on the same authenticity that makes UGC so engaging. However, more and more Creators can also customize content for “polish,” equal to most commercial productions, and yet still seem native where consumers are likely to view that content: social platforms.

or less followers and are known for having a particular area of interest and very high engagement rates.

Manufacturers are building full-scale influencer marketing campaigns.

Industrial brands want to both improve their owned social media channels as well as create dynamic website images; using content for paid media and working with micro influencers ensures high quality content and savvy appropriate messaging.

Instead of the obsession with search engine optimization (SEO), PR firms working with manufacturers in forming partnerships test many

segmented strategies. Members of the 9000+ member Manufacturing Media Consortium are segmenting their messaging among their audience by age, gender, title, and sector nuance, to generate appropriate and impactful content that converts to inquiry and sales.

Statistically, this highly targeted content out-performs the brands internal content and solidifies influencers as an invaluable source of content.

Willingness to test and desire to be an early adopter of whitelisting micro influencer’s content results in a remarkable response rate and sales strategy.

User-generated content (UGC) The pandemic has forced more people online than ever before and industrial brands are seeing that the authenticity shown in the influencer-produced content yields high engagement.

Until recently, most UGC has been produced for licensing purposes, and sold on libraries, which makes the content hard to customize on a brandto-brand basis.

The terms “influencer” and “creator” are interchangeable. Great creators are aware that influence over their audience is a distinguishing factor over traditional production. Creators often promote content on their accounts and channels for a fraction of what they might typically charge for a standard campaign. Combined with dramatic savings in production costs, promotion means the return on investment (ROI) between production and awareness.

Author Profile: Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector. Over 5000 industry leaders follow Cutler on Twitter daily at @ ThomasRCutler.

Contact Cutler at trcutler@trcutlerinc.com. n

Manufacturing Outlook / October 2021

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MANUFACTURING TIDBITS MANUFACTURING TIDBITS

Ergonomics Lives at Home Thanks to the Great Resignation

By TR Cutler With one in several American workers planning to resign before the end of the year (dubbed the great resignation), the issues of occupational health and safety (OHS) and environmental health and safety (EHS) have moved into the homes of employees, consultants, and remote workers.

From December 2000 to the beginning of the COVID-19 pandemic in 2020, the United States resignation rate never surpassed 2.4% of the total workforce. High quit rates indicate worker confidence in the ability to get higher paying jobs, which typically

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Manufacturing Outlook / October 2021

coincides with high economic stability, an abundance of people working, and low unemployment rates.

Conversely, during periods of high unemployment, resignation rates tend to decrease as hire rates also decrease.

For example, during the Great Recession, the US quit rate decreased from 2.0% to 1.3% as the hire rate fell from 3.7% to 2.8%.

U.S. resignation rates during the COVID-19 pandemic initially followed this pattern. In March and April 2020, a record 13.0 and 9.3 million workers (8.6% and 7.2%) were

laid off, respectively, and the quit rate subsequently fell to a seven-year low of 1.6%. Much of the layoffs and resignations were driven by women, who disproportionately work in industries that were affected most by the lockdowns, like service industries and childcare.

As the pandemic has continued, however, workers have paradoxically quit their jobs in large numbers. This is despite continued labor shortages and high unemployment. continued

MANUFACTURING TIDBITS The COVID-19 pandemic has allowed workers to rethink their careers, work conditions, and long-term goals. As many workplaces attempted to bring their employees in-person, workers desired the freedom to work from home as experienced during the pandemic. With telecommuting also came schedule flexibility, which was the primary reason to look for a new job for the majority of those studied

by Bankrate in August 2021. Additionally, many workers, particularly in younger cohorts, are seeking to gain a better work–life balance.

Many former and potential employees fear returning to an unsafe workplace.

Working from home may have both physical and psychological impacts.

According to an Adobe study, the exodus is being driven by Millennials and Generation Z, who are more likely to be dissatisfied with their work.

More than half of Gen Z reported planning to seek a new job within the next year.

For decades, ergonomists evaluated the reach, bending, placement of products, assembly, and packaging. Now the question of safety is transformed to monitor height, keyboards which avoid carpel tunnel, and seating which provides lumbar support.

While COVID may have promulgated this shift to working from home, the reality is a permanent work model that redefines how to work safely and without long-term injury.

Recently I succumbed to a new office chair. Despite a standing desk for emails and other quick responses, the reality, as a journalist, is to be seated for too many hours. Investigating chairs with all kinds of claims and gadgets it became clear that gamers, who spend 6 – 15 hours a day seated, had chairs that allowed them the occupational health and safety requirements.

New Jersey Manufacturers,

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

• Positions that have high turnover?

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Author Profile:

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., celebrating its 23rd year. Cutler is the founder of the Manufacturing Media Consortium including more than 9000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement.

TR Cutler, Inc. recently launched three new divisions focusing on Gen Z, the African manufacturing sector, and manufacturing in the entertainment sector. Cutler authors more than 1000 feature articles annually regarding the manufacturing sector.

Over 5000 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@ trcutlerinc.com. n

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Manufacturing Outlook / October 2021

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CASS INDEX OUTLOOK

Cass Transportation Index Report

by CASS INFORMATION SYSTEMS, INC.

To see the complete report, including charts, visit jacketmediaco.com/cass Cass Freight Index - Shipments The shipments component of the Cass Freight Index® slowed to just 0.6% y/y growth in September.

On a seasonally adjusted (SA) basis, the Cass Shipments Index fell by 4.9% m/m in September, after a 4.8% m/m increase in August. The two-year stack reversed to a 1.3% decline from 3.7% growth in August. The softening in September fits the pattern of many data sets, like rail volumes and employment, and we’d ascribe some of the softness to Hurricane/Tropical Storm Ida. This suggests some rebound in Q4, but the chip shortage also worsened in September, and that recovery will take longer.

Freight volumes also remain capacityconstrained, as shown by the armada of containerships at anchor off

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Manufacturing Outlook / October 2021

North American ports. Signs are emerging that rail network congestion is improving, which could help things unlimber a bit, but we think intermodal volumes will be limited by chassis tariffs for some time.

Freight Expenditures The expenditures component of the Cass Freight Index measures the total amount spent on freight, which rose 32% y/y in September. This index slowed from 42% growth in August, largely on tougher prior-year comparisons. If normal seasonality were to play out for the rest of this year, the full-year increase in this index would be 34% in 2021, after a 7% decline in 2020 and no change in 2019.

After an 11.3% m/m jump on an SA basis in August, expenditures fell 2.5% m/m in September as a result of

lower volumes and higher rates.

On a two-year stacked basis, the Cass expenditures index was up 34% in September, more than explained by higher rates, as shipment volumes were down slightly on this basis.

Tougher comparisons in the coming months will naturally slow these y/y increases further, but normal seasonality implies a 25% y/y growth rate in Q4.

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

The freight rates embedded in the two components of the Cass Freight Index were 31.4% higher y/y in September, accelerated from the 26.6% y/y

continued This CASS INDEX has been posted with the permission of Cass Information Systems, Inc.

CASS INDEX OUTLOOK increase in August on a similar prior year comparison.

The inferred rates rose 2.6% m/m on a seasonally adjusted basis in September, building on a 6.1% m/m increase in August.

Though difficult to quantify, there are a lot of excess miles in the system due to all of the supply chain disruptions in the shortage economy of 2021.

Examples include containers being offloaded at small remote ports to attempt to avoid the backlogs in LA and Long Beach, and chassis shortages pushing freight from the congested rail network onto truckload, considerably raising the length of haul in the largest freight market.

These excess miles are part of the 31.4% y/y increase in inferred freight rates, because, as noted in the calculation above, these rates are on a per shipment basis, rather than a per mile basis. But the difference between the increase in overall inferred freight rates (2.6% m/m) and the Cass Truckload Linehaul Index® (1.1% m/m) also includes higher fuel surcharges, sharper increases in air cargo rates, and mix shifts between modes, with a smaller proportion of low-cost intermodal and rail, and a larger proportion of relatively highercost air and refrigerated truckload.

Moreover, these data show broad and material increases in freight rates across modes. For full-year 2021, if normal seasonality were to play out, this index would be up about 20% from 2020.

The data set is diversified among all modes, with truckload representing more than half of the dollars, followed

by LTL, rail, parcel, and so on.

Truckload Linehaul Index The Cass Truckload Linehaul Index® value of 150.4 in September rose 1.1% from August, setting a new record.

On a y/y basis, the index rose 12.7%, in line with the 12.6% increase in

August. Based on inflationary effects from the COVID-19 Delta variant, Hurricane Ida, and chip shortages, to name a few, and now risk related to vaccine mandates which could disturb the fragile driver recovery, we would still expect this index to trend higher near-term.

Longer-haul mix related to intermodal chassis shortages pushing more freight off the rails and into West Coast to Midwest truckload lanes is continuing to pressure these data.

Freight demand is clearly still strong, and supply challenges continue to mount, keeping upward pressure on rates.

challenges have also limited capacity.

Chassis production is still below replacement, but has improved in recent months and improving chassis turns are also helping to reduce rail network congestion.

Drivers Though driver capacity is still generally tight, the BLS trucking employment data have improved for four straight months and the ACT Research For-Hire Driver Availability Index continues to recover.

Eventually, improving driver and equipment capacity will help rebalance the market, but several recent factors, including Hurricane Ida, the Delta variant, and the chip and chassis shortages have been inflationary for freight rates, extending the cycle at the margin.

The gradual easing of supply constraints for critical components of trucking capacity–drivers and equipment–will continue to be key to the longer-term outlook. This should change the trajectory of the Cass Truckload Linehaul Index over the next year, just not quite yet.

Vaccine mandates and a closed loophole in the FMCSA Drug & Alcohol Clearinghouse are new inflationary risks this month and will challenge the driver recovery, as discussed in depth in this month’s ACT Research Freight Forecast report. This report also forecasts the shipments component of the Cass Freight Index and the Cass Truckload Linehaul Index through 2023.

Freight Expectations A skeptic might look at flattish volume and record rate increases and shout “stagflation!”, but we would disagree. Freight demand is anything but stagnant, and has been caged by supply constraints, which are likely peaking with the season.

The extent to which constraints on equipment and driver supply ease in the coming months will largely dictate volume and rate trends. Intermodal volumes have been inching up sequentially in recent weeks as chassis turns improve, and China’s power outages will likely impact exports, so the containership backlog should ease in the coming months. Still, a low inventory/sales ratio and an early Chinese New Year in 2022 starting on February 1st support strong import demand in early 2022.

Equipment Semiconductor shortages continue to separate Class 8 tractor production from demand, and trailer supply chain

Freight demand fundamentals remain strong, based on a strong U.S. consumer balance sheet, inventory restocking, and an industrial sector struggling to grow into record orders with infrastructure stimulus likely on the way.

But the dynamics of tight supply and exceptionally strong demand which have characterized the past year or so will not last indefinitely. The chip shortage continues to be a key fulcrum on which much in the world economy depends. As discussed in depth in ACT’s monthly report, there’s good reason to hope easing will start in Q4. n

Manufacturing Outlook / October 2021

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ISM REPORT OUTLOOK

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

BREAKING NEWS

ISM PMI at 61.1% for September 2021 Released October 1

ISM PMI for the past 5 years

SEPTEMBER 2021 61.1%

Expanding Contracting

continued

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Manufacturing Outlook / October 2021

ISM REPORT OUTLOOK INSTITUTE FOR SUPPLY MANAGEMENT®

Analysis by

reportonbusiness Economic activity in the manufacturing sector grew in September, with the overall economy notching a 16th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The September Manufacturing PMI® registered 61.1 percent.

The New Orders Index registered 66.7 percent, unchanged from the August reading. The Prices Index registered 81.2 percent, up 1.8 percentage points compared to the August figure of 79.4 percent.

The Employment Index returned to growth with a reading at 50.2 percent, 1.2 percentage points higher compared to the August reading of 49 percent. All of the six biggest manufacturing industries — Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and Transportation Equipment, in that order — registered moderate to strong growth in September.

The 17 manufacturing industries reporting growth in September — in the following order — are: Furniture & Related Products; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Apparel, Leather & Allied Products; Textile Mills; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Nonmetallic Mineral Products; and Plastics & Rubber Products. ISM ‡Miscellaneous Manufacturing (products such as medical equipment and supplies, jewelry, sporting goods, toys and office supplies).

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

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

MANUFACTURING

PMI at 61.1% ®

PMI

Manufacturing grew in September, as the 2019 Manufacturing PMI® registered 61.1 percent, 1.2 percentage points higher than the August reading of 59.9 percent. All 10 subindexes were positive for the period; a reading of ‘too low’ for the Customers’ Inventories Index is 50% = Manufacturing Economy considered a positive for future production. A Breakeven Line reading above 50 percent indicates that the 43.1% = Overall Economy Breakeven Line manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting.

2020

2021

61.1%

Manufacturing at a Glance INDEX

Sep Index

Aug Index

% Point Change

Direction

Rate of Change

Trend* (months)

Manufacturing PMI®

61.1

59.9

+1.2

New Orders

66.7

66.7

0.0

Growing

Faster

16

Growing

Unchanged

Production

59.4

60.0

16

-0.6

Growing

Slower

16

Employment

50.2

Supplier Deliveries

73.4

49.0

+1.2

Growing

From Contracting

1

69.5

+3.9

Slowing

Faster

67

Inventories Customers’ Inventories

55.6

54.2

+1.4

Growing

Faster

2

31.7

30.2

+1.5

Too Low

Slower

60

Prices

81.2

79.4

+1.8

Increasing

Faster

16

Backlog of Orders

64.8

68.2

-3.4

Growing

Slower

15

New Export Orders

53.4

56.6

-3.2

Growing

Slower

15

Imports

54.9

54.3

+0.6

Growing

Faster

15

Overall Economy

Growing

Faster

16

Manufacturing Sector

Growing

Faster

16

*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.

Commodities Reported

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

Commodities Up in Price: Adhesives (3); Aluminum (16); Aluminum Extrusions (2); Aluminum Products (6); Caustic Soda (4); Copper; Corrugate (12); Corrugated Packaging (11); Diesel Fuel (9); Electrical Components (10); Electrical Motors (3); Electronic Components (10); Foam; Freight (11); High-Density Polyethylene (HDPE) (9); Labor — Temporary (5); Logistics Services; Maintenance, Repair, and Operations (MRO) Supplies; Natural Gas (3); Ocean Freight (10); Packaging Supplies (10); Pallets (3); Paper; Plastic Containers; Plastic Resins (13); Polyethylene (8); Polypropylene (15); Resins; Resin-Based Products (8); Rubber-Based Products (2); Semiconductors (8); Solvents; Steel (14); Steel — Carbon (10); Steel — Cold Rolled (2); Steel — Drums; Steel — Galvanized; Steel — Hot Rolled (13); Steel — Stainless (11); Steel Products (13); Surfactants; and Tires.

Note: To view the full list, visit the ISM® Report On Busines ® website at ismrob.org

continued 12

ISMWORLD.ORG

Manufacturing Outlook / October 2021

17

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI® New Orders (Manufacturing) 2019

September 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 66.7 percent. Of the 18 manufacturing industries, the 13 that reported growth in new orders in September — in the following order — are: Primary Metals; Food, Beverage & Tobacco Products; Furniture & Related Products; Petroleum & Coal Products; Computer & Electronic Products; Machinery; Chemical Products; Miscellaneous Manufacturing‡; Paper Products; Nonmetallic Mineral Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Fabricated Metal Products.

66.7%

52.8% = Census Bureau Mfg. Breakeven Line

Production (Manufacturing) 2019

2020

Production

2021

59.4%

70

52.1% = Federal Reserve Board Industrial Production Breakeven Line

The Production Index registered 59.4 percent. The 14 industries reporting growth in production during the month of September — listed in order — are: Printing & Related Support Activities; Furniture & Related Products; Petroleum & Coal Products; Textile Mills; Machinery; Nonmetallic Mineral Products; Transportation Equipment; Chemical Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Primary Metals; Computer & Electronic Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing‡.

Employment (Manufacturing) 2019

2020

Employment

2021

ISM’s Employment Index registered 50.2 percent in September. Of the 18 manufacturing industries, the six industries reporting employment growth in September — in the following order — are: Electrical Equipment, Appliances & Components; Furniture & Related Products; Computer & Electronic Products; Primary Metals; Fabricated Metal Products; and Machinery.

50.2% 50.6% = B.L.S. Mfg. Employment Breakeven Line

20

Supplier Deliveries (Manufacturing) 53.1% 2019

2020

2021

73.4%

80

Inventories (Manufacturing) 2019

2020

2021

55.6% 44.5% = B.E.A. Overall Mfg. Inventories Breakeven Line

‡Miscellaneous

Supplier Deliveries The delivery performance of suppliers to manufacturing organizations was slower in September, as the Supplier Deliveries Index registered 73.4 percent. The 17 industries that reported slower supplier deliveries in September — in the following order — are: Apparel, Leather & Allied Products; Textile Mills; Paper Products; Machinery; Miscellaneous Manufacturing‡; Nonmetallic Mineral Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Computer & Electronic Products; Furniture & Related Products; Petroleum & Coal Products; Plastics & Rubber Products; Chemical Products; Wood Products; Transportation Equipment; Electrical Equipment, Appliances & Components; and Primary Metals.

Inventories The Inventories Index registered 55.6 percent. The 10 industries reporting higher inventories in September — in the following order — are: Printing & Related Support Activities; Apparel, Leather & Allied Products; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Paper Products; Transportation Equipment; Chemical Products; Machinery; Computer & Electronic Products; and Fabricated Metal Products.

Manufacturing (products such as medical equipment and

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

continued

18

Manufacturing Outlook / October 2021

ISM REPORT OUTLOOK

ISM Report On Business ®

®

Manufacturing PMI®

September 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

31.7%

Prices (Manufacturing) 2019

2020

2021

81.2%

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

Backlog of Orders (Manufacturing) 2019

2020

2021

64.8%

Customers’ Inventories ISM’s Customers’ Inventories Index registered 31.7 percent. The only industry reporting higher customers’ inventories in September is Petroleum & Coal Products. The 16 industries reporting customers’ inventories as too low during September — listed in order — are: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Primary Metals; Wood Products; Machinery; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Computer & Electronic Products; Chemical Products; Plastics & Rubber Products; Paper Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Fabricated Metal Products; and Furniture & Related Products.

Prices The ISM Prices Index registered 81.2 percent. In September, 17 of 18 industries reported paying increased prices for raw materials, in the following order: Apparel, Leather & Allied Products; Textile Mills; Printing & Related Support Activities; Paper Products; Plastics & Rubber Products; Machinery; Miscellaneous Manufacturing‡; Furniture & Related Products; Nonmetallic Mineral Products; Computer & Electronic Products; Fabricated Metal Products; Transportation Equipment; Food, Beverage & Tobacco Products; Primary Metals; Chemical Products; Electrical Equipment, Appliances & Components; and Wood Products.

Backlog of Orders ISM’s Backlog of Orders Index registered 64.8 percent. The 14 industries reporting growth in order backlogs in September, in the following order, are: Apparel, Leather & Allied Products; Furniture & Related Products; Primary Metals; Machinery; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing‡; Nonmetallic Mineral Products; Paper Products; Plastics & Rubber Products; Chemical Products; Electrical Equipment, Appliances & Components; Transportation Equipment; Computer & Electronic Products; and Fabricated Metal Products.

New Export Orders (Manufacturing) 2019

2020

2021

New Export Orders

53.4%

ISM’s New Export Orders Index registered 53.4 percent. The seven industries reporting growth in new export orders in September — in the following order — are: Paper Products; Primary Metals; Miscellaneous Manufacturing‡; Food, Beverage & Tobacco Products; Chemical Products; Computer & Electronic Products; and Machinery.

2021

Imports

Imports (Manufacturing) 2019

2020

54.9%

‡Miscellaneous

ISM’s Imports Index registered 54.9 percent. The nine industries reporting growth in imports in September — in the following order — are: Nonmetallic Mineral Products; Petroleum & Coal Products; Computer & Electronic Products; Miscellaneous Manufacturing‡; Furniture & Related Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; Transportation Equipment; and Machinery. n

Manufacturing (products such as medical equipment and

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

Manufacturing Outlook / October 2021

19

NORTH AMERICAN OUTLOOK

OCTOBER 2021

NORTH AMERICAN OUTLOOK

by Amelia Roy The Institute of Supply Management PMI figure rose from 59.9 in August to 61.2 in September.

New orders, employment, and production are growing, supplier deliveries are slowing at a faster rate, backlogs are growing, manufacturing inventories are growing, customer inventories are too low, prices are increasing, and exports and imports are growing. However, employment

grew at the slowest pace in September of 2021 because applications and requisite skills for available jobs are scarce. Job openings continue to outpace employment by a ratio of 10 openings to each new hire.

All of the six biggest manufacturing industries — Petroleum & Coal Products; Computer & Electronic Products; Chemical Products; Food, Beverage & Tobacco Products; Fabricated Metal Products; and

Transportation Equipment, in that order — registered moderate to strong growth in July. The 17 manufacturing industries reporting growth in September — in the following order — are Furniture & Related Products; Petroleum & Coal Products; Machinery; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Chemical Products; Apparel, Leather & continued

20

Manufacturing Outlook / October 2021

NORTH AMERICAN OUTLOOK

Allied Products; Textile Mills; Paper Products; Printing & Related Support Activities; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; Fabricated Metal Products; Transportation Equipment; Primary Metals; Nonmetallic Mineral Products; and Plastics & Rubber Products. The only industry reporting a decrease in September compared to August is Wood Products.

Comments from the manufacturing industry again stress difficulties of material availability and cost, port congestion, lack of containers, and truck haulage. The labor shortage is still as critical, with a Fabricated Metal Products comment referring to the necessity to outsource machining due to a lack of qualified machinists.

Commodities up in price Adhesives (3); Aluminum (16); Aluminum Extrusions (2); Aluminum Products (6); Caustic Soda (4); Copper; Corrugate (12); Corrugated Packaging (11); Diesel Fuel (9); Electrical Components (10); Electrical Motors (3); Electronic Components (10); Foam; Freight (11); High-Density Polyethylene (HDPE) (9); Labor — Temporary (5); Logistics Services;

Maintenance, Repair, and Operations (MRO) Supplies; Natural Gas (3); Ocean Freight (10); Packaging Supplies (10); Pallets (3); Paper; Plastic Containers; Plastic Resins (13); Polyethylene (8); Polypropylene (15); Resins; Resin-Based Products (8); Rubber-Based Products (2); Semiconductors (8); Solvents; Steel (14); Steel — Carbon (10); Steel — Cold Rolled (2); Steel — Drums; Steel — Galvanized; Steel — Hot Rolled (13); Steel — Stainless (11); Steel Products (13); Surfactants; and Tires.

Commodities down in price Lumber (3); Steel — Scrap; and Wood (2) Commodities in short supply Adhesives and Paints (3); Aluminum (6); Aluminum Products (5); Corrugated Packaging (3); Electrical Components (12); Electronic Components (10); Freight; Harnesses; Labor — Temporary (5); Nylon 6,6 Polymer; Ocean Freight (6); Plastic Containers; Plastic Products (8); Plastic Resins — Other (7); Plastic Totes; Polyvinyl Chloride (PVC) Plastics; Printed Circuit Board Assemblies (2); Resin-Based Products (2); Rubber-Based Products (2); Semiconductors (10); Steel (10); Steel — Hot Rolled (11); Steel — Stainless (7); and Steel Products (8).

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

CANADA’s manufacturing industry showed solid growth in September in new orders and production; albeit, slightly moderated from August.

There was continuing solid growth in

employment. Backlogs increased at the joint-fastest rate in survey history, with record rates of production, and input price inflation. There were increases in pre-production inventories. Prices of steel, oil and transportation increased at record rates.

September’s PMI at 57.0 was very slightly lower than August’s 57.2. There was strong demand in both Canada and the U.S. There was material scarcity, a shortage of containers, freight delays, and ongoing lengthening of supplier deliveries. There were difficulties finding labor to deal with a jointrecord rate of backlog accumulation.

There is a high level of positive sentiment that production will increase over the coming twelve months.

Light vehicle sales in Canada for September were down 19.6 percent year-over-year, at 136,584 vehicles, versus 169,876 one year ago. Ford and Stellantis lost further market share, while Toyota, Kia and VW saw notable sales gains.

MEXICO continues to suffer bad news, with factory production falling further in September, and production and new orders down for the 19th consecutive month, but at a slower and only moderate rate reduction.

There was a reduction in employment and input purchasing. Export sales were down. The PMI for September, at 48.6, was up from August’s 47.1, but still in contraction for the country. n Amelia Roy, Staff Writer

Manufacturing Outlook / October 2021

21

SOUTH AMERICAN OUTLOOK

GLOBAL OUTLOOK

SOUTH AMERICA

by Jeanne-Marie Lowrie The Hidden Free Trade Zone Gems for Manufacturing in Central and South America South America is comprised of twelve sovereign states, two independent territories (the Falkland Islands; South Georgia and the South Sandwich Islands), and one internal territory (French Guiana). Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, and Venezuela are the states, although they are often referred to as countries. Central America consists of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, and Panama.

South America has only been lightly utilized by manufacturers in the U.S. for near-shoring, value-added work, or parts production from base metals,

22

Manufacturing Outlook / October 2021

plastics, chemicals, or paper. Mexico has seen better utilization of all the U.S. southern neighbors. Those U.S. companies that have experience in South and Central America may have a strategic advantage right now as the offshoring emphasis on China is losing its appeal.

There is significant opportunity in many of these countries for U.S. manufacturers to find reliable labor at favorable wages and quality of work in the Free Trade Zones. As always, there are cultural and language barriers but not as significant as those encountered with China in the early days of offshoring there. Spanish and English are the predominant languages in Central and South America, and Portuguese in Brazil.

Each country has their own import barriers for competing goods going into the country, but many have

favorable conditions for goods being produced in-country for export.

One barrier may be the level of existing manufacturing technology in the various countries south of the U.S. border, which may be some years behind the level of technology needed to create an advanced manufacturing operation able to meet the production scale required. This is not much different than the difficulties faced when U.S. companies went offshore to China. In many cases, the U.S. manufacturer invested in a plant incountry. This has made it expensive to move a production relationship from China, regardless of the new country, because the physical plant and/or equipment may not be transportable to reduce the capital outlay in the new country, plus the production disruption that will occur during the transition may be significant. continued

Looking forward, given current and potential future geopolitical concerns with China, reducing the distance between supplier and manufacturer, which also reduces time and transit disruption risks and may reduce supply chain cost volatility, is a strategic advantage for U.S. manufacturers who determine that some components of their product are better produced outside the U.S. to benefit the bottom line.

Thus, the countries of Central and South America should be considered as viable alternatives to more distant suppliers in the Asia region. As an example, Uruguay has created Free Trade Zones specifically for

this purpose. Nearly $6 billion U.S. dollars has been invested in Uruguay’s FTZ from business globally. Multiple FTZ’s exist in Chile, Costa Rica, El Salvador, Mexico, Panama, Peru, Venezuela, Argentina, Brazil, Colombia, Ecuador, Guatemala, Honduras, Nicaragua, Paraguay, Puerto Rico, the Dominican Republic, and Uruguay.

a physical facility is required, and likely less than a year when an existing facility can be utilized and even improved. However, the ROI should be both realistic in time and favorable in reliability and quality in these near-shore relationships. Thus, another examination of countries in Central and South America is warranted in the current geopolitical and economic climate.

Generally, the willingness of Central and South American countries and people to work with U.S. companies is high when it brings lasting jobs to their respective FTZ’s and local communities. It will take a few years to develop production when

Additional information can be found at this website in this slide deck: https://www. slideshare.net/neo_ group/selecting-asourcing-locationin-latin-america n Jeanne-Marie Lowrie, Staff Writer

Manufacturing Outlook / October 2021

23

COVER STORY ASIA OUTLOOK

GLOBAL OUTLOOK

ASIA

by Christine Casati CHINA – Major Developments impacting manufacturing this month, including energy and transportation Coal Shortages China is the largest consumer of coal in the world, and its second largest economy. Over two-thirds of China’s power supply is derived from coal. Right now, demand far outweighs supply, driven in part by overall economic growth in Asia and also by China’s dwindling supplies.

Both of these factors have led to skyrocketing prices domestically and contributed significantly to a global “coal crunch”. China’s coal inventories have shrunk due to the central government efforts to meet its climate change goals and closures of coal mines due to accidents and safety upgrades. Some local power

companies wait until the last minute to buy essential coal, and some refuse altogether. They would rather shut down than operate at a loss. There are equally important geopolitical factors at play. China has halted imports from their primary foreign coal supplier, Australia, while they blame Australia for criticizing China’s handling of COVID investigations and for participating in a regional military buildup with the West to safeguard the South Pacific region against China’s incursions. This has led to a “redrawing of global coalsupply chains.” Australia is attracting new buyers. In the first half of 2021, demand for coal from Australia rose by 56% from South Korea and 65% from Japan. China is seeking new sources in Latin America, Africa, and Europe. Gainers are Columbia and Kazakhstan, among others.

Ongoing energy shortages in September have spilled over into October, with no end in sight. In response, the central government has begun drastic interventions, such as controlling enterprise production limits, ordering drastic curtailments of raw material manufacturing, and rationing power to localities. Many localities had not met their lower energy consumption targets to begin with, exacerbating the shortages.

Hardest hit by the new restrictions are large smelters and other civilian enterprises with huge energy consumption which have been told to shut down indefinitely. Additionally, local governments have been told to classify remaining companies into five 5 categories: Categories 1 and 2 are Military and Essential Services, which will continue to have full power. Category 3 encompasses continued

24

Manufacturing Outlook / October 2021

COVER STORY ASIA OUTLOOK

smaller metal-working and processing enterprises, such as machining and forging, which do not consume a lot of power. These enterprises will be allowed to run for 6 days per week and close for 1 day at designated hours each day. Category 4 includes medium to large metal-working facilities and smaller smelters with less energy consumption. They will work for 4 days per week at designated hours and close for 3 days.

Category 5 includes most small to medium size smelters who are now operating every other day and only for 8 hours at night. It is hoped that by maintaining the jobs of workers from these medium and small nonstate-subsidized enterprises, localities will avoid major unemployment problems and social unrest.

Ningbo) at various times in August and September due to Covid, but they have reopened and are attempting to remedy the bottlenecks, including shortages of truck drivers and warehousing space. Congestion at other world ports such as Los Angeles, CA, Savannah, GA, and Vancouver, BC, have contributed to shortages of containers in China, as ships can’t unload and return on time. Container stockpiling at USA ports is now referred to as “Containerggedon”. Major US retailers (Costco, Walmart, Target, Home Depot, and Dollar General, among others) have chartered their own fleets of ships in response. This development might help gradually relieve shipping nightmares for industrial supply chain victims.

OUTLOOK: ongoing production delays and increases in raw material prices through year end.

OUTLOOK: Continued congestion and delivery delays to USA and Canadian ports until 2023.

Shipping Bottlenecks

September PMI

China suffered some Eastern port and airport closures (Shanghai,

The official Purchasing Managers’ Index for China’s manufacturing

sector dipped slightly to 49.6 from 50.1 in August, showing a slight cooling in manufacturing. China’s own Caixin Global Index, which includes many smaller and mediumsized enterprises, leveled off at 50.0. Both numbers could drop significantly in October due to above developments.

Trade Policy Developments October is bringing renewed contacts among policymakers as both China and the USA trade teams accelerate negotiations and prepare for a virtual meeting between President Biden and President Xi before year’s end.

President Xi will not attend the upcoming G20 meeting. He has not been out of China for nearly two years. Expectations are low, as the USA has made little progress for decades trying to open China’s markets through engagement.

Although China is a member of the WTO, its factory subsidies and its state-centered model are not covered under WTO clauses. Efforts are underway to get the Chinese to fulfill continued

Manufacturing Outlook / October 2021

25

COVER STORY ASIA OUTLOOK

their Phase One Trade Agreement purchases (negotiated under the Trump Administration). For the time being, Biden will keep tariffs in place.

OUTLOOK: China will continue with its strategic policy of blunting the USA’s influence in trade matters and filling up the geopolitical space that the USA has ignored. Both sides have cards to play and deeper behind the scenes engagement is taking place, according to Katherine Tai, Biden’s USA Trade Representative and lead negotiator. She described Mr. Biden’s China strategy as largely ignoring China, by investing in infrastructure to rebuild the economic strength of the USA, push USA companies to manufacture more at home to insulate them from supply disruptions, and work with allies on

26

Manufacturing Outlook / October 2021

new trading arrangements to address China-related issues not constrained

by WTO. Property Markets and Potential Impact on Manufacturing Loan payment defaults by China’s largest property developer, Evergrande, and an ensuing default by a smaller developer, Fantasia, have led to sinking property bond markets and potential instability in financial institutions affecting localities throughout China.

OUTLOOK: Limited government intervention, more defaults, financial distress and real-estate downturn, as affected buyers of unfinished apartments demonstrate and empty apartments abound.

South China Sea Regional Developments U.S. troops have been deployed in Taiwan for over a year as a partial response to concerns over China’s increasingly aggressive threats.

150 flights of fighter jets close to Taiwan occurred during the China National Holiday period. But they did not actually enter Taiwan’s airspace. Experts state that China will be ready to invade Taiwan militarily by 2025, but may not do so for decades, if at all, unless geopolitical developments were exceedingly advantageous. The Biden administration is doing its best to make that temptation less realistic. Taiwan states it is not claiming independence from China because it doesn’t have to. It has been a sovereign nation with its own military and currency for 70 years. continued

COVER STORY ASIA OUTLOOK Japan

Business Travel Around Asia

Japan’s Prime Minister Yoshihide Suga has stepped down after just one year. Mr. Suga will be succeeded by the next LDP president who will take over as Prime Minister sometime in October. His replacement is expected to be former Foreign Minister Fumio Kishida, who wants to increase stimulus spending which has already caused a rise in Japan’s Nikkei Stock Average. His stated goal is to reduce the disparity between rich and poor in Japan, and champion the rise of the middle class. The new leader will soon face upcoming Parliamentary elections.

Notable is New Zealand’s recent

Meanwhile Hong Kong has one of the strictest ‘zero-COVID’ policies in the world. It used to be one of the favorite business stopover destinations in the world. And residents were the most traveled people in the world, to the tune of about 95 million departures in 2019 according to census statistics. Now the residents have been basically grounded. And as of August 9, even inoculated visitors are required to quarantine in a government approved hotel at their own expense for 7 to 21 days.

relaxing of restrictions. Also notable is Vietnam’s factory lockdowns due to the spread of the Covid Delta variant. China has opened its doors with a huge price: entering travelers and returning citizens must first quarantine in specially built quarantine facilities with their own kitchens and medical staff for two weeks, and after that spend an additional week at home or in a hotel. Tracking devices will be used and violators will be jailed.

Quote of the Month “Sophisticated investors... remain underinvested in China”. Carlyle Group, Inc. Chief Executive Kewsong Lee (Reuters, New York) n

NEW EPISODES EVERY TUESDAY AT MFGTALKRADIO.COM

Manufacturing Outlook / October 2021

27

EUROZONE OUTLOOK

GLOBAL OUTLOOK

EUROZONE

by Chris Anderson IHS Markit’s Eurozone Manufacturing Composite Purchasing Managers’ Index (PMI), fell back again in September to 58.6 from August’s 61.4. This represented the largest drop in PMI since April 2020, as supply-side constraints impacted goods production. There were strong inflationary pressures.

The month saw further marked rates of expansion in production, new orders, and employment, but notable slowdowns in all three. New export sales grew at the slowest rate since January. Business confidence was slightly higher in September.

The European auto market picked up again in August, to a selling rate of

28

Manufacturing Outlook / October 2021

11.9 million units per year. Plug-in sales in Europe in August were up by 60 percent year-over-year, at 155,734 units, for a market share of 17 percent (8% for battery EVs, 9% for plug-in hybrid EVs). The two most popular were the VW ID.3 (8,025) and the Tesla Model 3 (7,878). The Ford Mustang Mach E sold 3,743 units.

For the YTD, over 1.35 million passenger plug-in EVs were registered in Europe, again for 17 percent of the total market. The Model 3 is number one YTD, with 76,440 sales, ahead of the VW ID.3 at 44,625. It may be worthy of mention here that, in the first half of 2021, plug-ins accounted for 82.7% of the Norwegian market;

55.6% of the Icelandic; 39.9% of the Swedish; 28.3% of the Finnish and 26.8% of the Danish. Both Germany and France were over 20%.

The UK PMI rolled slightly lower from 60.3 in August to 57.1 in September., a seven-month low but strongly expansionary. Production and new orders rose at the slowest rate since February, with new export business down for the first time in eight months. The manufacturing upturn slowed further, as supply chain and labor shortages hindered growth.

Growth slowed in the consumer, intermediate, and investment sectors.

There were upturns at medium and large-scale producers that were offset by continued downturns among smaller firms. Although there are difficulties with staff shortages and hiring of the required skills, the outlook is positive. As could be expected, some of the blame for what is going wrong with manufacturing in the UK is being put at the door of Brexit. As regards the labor shortage, this is probably a just Chris Anderson, Staff Writer conclusion. n

GLOBAL PMI OUTLOOK

GLOBAL PMI OUTLOOK

by NORBERT ORE, DIRECTOR, HEAD OF INDUSTRIAL SURVEYS, STRATEGAS RESEARCH PARTNERS

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

NEW ORDERS GROWING – DELIVERIES SLOWING SEPTEMBER 2021 BUSINESS SURVEY INSIGHTS The global economy took a near knockout blow from the global lockdown in spring 2020. It was what we will call a micro recession – one that can’t otherwise be classified and was too short to get full recognition. But of such magnitude that it rattled supply chains out of sync around the world. Many of the traditionally most capable supply chains are still trying to pull the links back together. This month’s scatterplot shows varying degrees of expansion as 15 of the 18 surveys we follow closely were sufficiently above the level that we consider expansion. Six PMIs were in the ExpandingStrengthening quadrant and nine PMIs were in the Expanding-Weakening quadrant. This represents a better balance than we have seen since June 2020 when the manufacturing sector started its comeback. Currently, supply chains are showing resilience and new supply chains are being formed.

continued Manufacturing Outlook / October 2021

29

GLOBAL PMI OUTLOOK ISM U.S. Manufacturing PMI™ A reading above 43.1 percent generally indicates an expansion of the overall economy. Therefore, the Manufacturing PMI in September indicated the overall economy grew for the 16th consecutive month following a contraction in April 2020. According to the ISM press release, “the past relationship between the Manufacturing PMI® and the overall economy indicates that the Manufacturing PMI® for September (61.1 percent) corresponds to a 5.1-percent increase in real gross domestic product (GDP) on an annualized basis.” Activity could be stronger if supply chain disruptions were less severe (i.e. labor disincentives, chip shortages, school closures, skill mismatches, high inflation).

– usually a contrarian indicator in that it signals slower delivery times as economically bullish – is still stretched.

New Orders Minus Inventories: This key spread declined to 11.1 from 12.5 despite New Orders being unchanged and Inventory (55.6, +1.4) growing for the second month. This is a move in the right direction as we like to see New Orders typically outpace Inventories by an average of 6-8 points.

Customers’ Inventories: The index (31.7, +1.5) for raw materials, components, and finished goods was “too low” for the 60th consecutive month. The index set a new low in July and has been under 40 percent for the past 14 months. Petroleum & Coal was the only industry that reported higher customers’ inventories in September.

Prices: The Manufacturing Prices index established a new high in June at 92.1, fell in August to 79.4, and then bounced up to 81.2 in September.

Drivers: New Orders (66.7, unchanged), Production (59.4, -0.6), and Employment (50.2, +1.2) boosted Manufacturing activity in September, continuing the volatile growth experienced so far this year. The Supplier Deliveries index (73.4, +3.9)

continued

30

Manufacturing Outlook / October 2021

GLOBAL PMI OUTLOOK A Quick Word on Capacity Thirteen industries are still operating below their pre-pandemic capacity utilization levels in the U.S., contributing to output limitations. Looking at the relative importance, these thirteen groups comprise 64% of industrial production. n

Manufacturing Outlook / October 2021

31

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 2021 has been a year of missed forecasts and predictions on the part of economists and analysts. To date, it has been a roller coaster of high estimates one month followed by low ones the next.

“The rapid growth at the start of the year was unexpected and so was the decline that occurred at the end of the summer,” said NACM Economist Chris Kuehl, Ph.D. “Now there seems to be a recovery of sorts, and that was not altogether expected either.”

NACM’s Credit Managers’ Index for September nudged upward with a 0.4-point gain as it returned close to levels seen in July. The index of

favorable factors held at 66.0, while unfavorable factors improved slightly with a 0.7-point gain to 52.8. “While these shifts are not dramatic, the trend is once again positive and in some notable areas,” Kuehl said.

With a 1.8-point jump, sales returned to the 70s for the eighth time over the last 13 months. New credit applications improved 0.6 points to 65.0 as dollar collections data took a 1.7-point drop to 61.1. Credit extended also took a 0.9-point hit, falling to 67.5.

“Companies seem to be ordering more than is normal and requiring additional credit,” Kuehl said.

“Although an increase in demand could be the reason, businesses are

likely stockpiling materials due to concerns about the stability of supply chains.”

Rejections of credit applications and filings for bankruptcies held fairly stable with only 0.1-point losses.

Accounts placed for collection held, while amount of customer deductions gained 2.2 points and dollar amount beyond terms, 0.3 points. Following two months of numbers in the high 40s, disputes left the contraction zone with a 1.8-point jump.

“There have been some issues as far as creditors are concerned, but thus far there has yet to be a surge of bankruptcy activity,” Kuehl noted. continued

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Manufacturing Outlook / October 2021

CREDIT MANAGER’S OUTLOOK

Manufacturing Outlook / October 2021

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CREDIT MANAGER’S OUTLOOK Manufacturing Sector The overall index for manufacturing remained unchanged, but there was some variability in the subsectors.

Favorable factors slipped 0.3 points as unfavorable factors gained 0.4 points. “The latest numbers show that manufacturers have managed to weather these storms better than expected,” Kuehl said. Two of the sector’s favorable categories saw strong gains. Sales data jumped 2.6 points—reaching the 70s for the ninth time in the last year; and new credit applications, 1.3 points.

However, dollar collections took a sharp 4.6-point drop, and amount of credit slipped 0.8 points.

“Dollar collections is the lowest it

has been in well over a year, and that is of some concern,” Kuehl said.

“Some companies may be stretching their ability to keep up on their obligations or are at least trying to guard their cash flow.”

Within unfavorable factors, dollar amount beyond terms fell into the contraction zone with a 0.9-point drop. Rejections of credit applications slipped 0.7 points. Despite a 1.6-point gain, the disputes category remains in contraction territory. Accounts placed for collection rose 1.4 points, and dollar amount of customer deductions improved 0.6 points.

Filings for bankruptcies remained unchanged.

continued

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Manufacturing Outlook / October 2021

CREDIT MANAGER’S OUTLOOK

n 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. Chris has a doctorate in Political Economics and advanced degrees in Soviet Studies and Asian Studies and was a professor of international economics and finance for over 15 years prior to starting Armada.

Manufacturing Outlook / October 2021

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METALS OUTLOOK

OCTOBER 2021

METALS OUTLOOK

by Royce Lowe Strange Times in Metal Land Not too long ago, in mid to late September, the price of iron ore was on the drop, thanks to China not buying in its usual quantities, and cutting back on steel production.

But, of late, the price is fighting its way up again, and is having difficulty stabilizing. Coal supplies are tight in China, and together with toughening emission standards, conditions are right for a power shortage affecting everything from air conditioning and home heating - depending on where in China you live - to the price of aluminum. It

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takes an awful lot of electricity to extract alumninum from bauxite, so power shortages equate to shutting down smelters. Such was the case in Mongolia and Xijiang, where aluminum production was cut. And there have been droughts in China, which are not good for generation of hydro electricity. The price of nickel slipped, with Chinese stainless steel production suffering from reduced power availability, hence a reduced demand for nickel.

There was a military coup in Guinea in early September, which means uncertainty for the global aluminum

scenario. Guinea, one might say?

Well, Guinea, along with heavy Chinese investment, produced, in 2020, 90 million tons of bauxite, about 25 percent of the global total.

Guinea, in fact, supplies over half the bauxite used in Chinese production.

Add this uncertainty to the beer that was drunk from aluminum cans at home during lockdowns, the demand for aluminum in construction during recovery, and its (greater) use in electric vehicles, and we have a recipe for more expensive aluminum. It’s up over 30 percent in the past six months. There will surely be a shortterm way out of this dilemma, but continued

Manufacturing Outlook / October 2021

METALS OUTLOOK one major factor that has nothing to do with bauxite or aluminum or steel, as such, are the upcoming Winter Olympics in Beijing, and China’s absolute determination to do all this under the bluest skies possible.

So we could say that in some large measure, the Winter Olympics are responsible for the power shortage and its subsequent effects. China’s crude steel production in August was a mere 83 million tons, down over 13 percent year-over-year, something again designed for the Winter Olympics.

Meanwhile, there are recent announcements from the U.S. for plans to increase steelmaking capacity by over six million tons.

Nucor will add a new electric arc melt shop at one of its existing bar mills in the Western U.S. The new $100 million mill will have an annual capacity of some 600,000 tons.

Nucor has 15 bar mills strategically located across the U.S. that produce a broad range of bar, re-bar, and section products for applications that cover the whole spectrum of bar manufacture, including four mills that produce special bar products. These mills produce a combined 9.5 million tons per year.

Nucor is also evaluating locations in Ohio, Pennsylvania, and West Virginia as potential sites for a new $2.7 billion sheet mill, with a capacity of 3 million tons per year. This mill will be aimed at the automotive market, with its everdemanding strength and formability requirements. The mill will include two galvanizing lines, one for automotive, one for construction grade. Once all necessary approvals are finalized, construction is expected to take two years.

U.S. Steel is similarly looking at locations in Alabama and Arkansas, where it has existing EAF operations as well as Greenfield sites. This mill will cost $3 billion and will produce 3 million tons per year. Construction will start in the first half of 2022, production in 2024.

The two steel companies are looking ahead to a steel market that will continue to be buoyant, with prices staying at or near the elevated levels to which the U.S. market has become accustomed for a goodly while. The strength of the automotive market, and the pressing need for new infrastructure are important aspects of the equation.

The price of hot-rolled coil in the U.S. is showing signs of stability, whilst hovering around the $1950 per ton mark. Cold-rolled coil attained a level of $2200 per ton. Prices are softening somewhat in Europe in the face of cheaper imports, and are mostly stable in S.E. Asia.

The price of aluminum went from $1.22 per lb. to $1.32 in September, and in the past six months from $1.00 per lb. to $1.32. Copper slipped from $4.27 to $4.23 per lb. in September, and rose from $4.00 to $4.23 over the past six months. Nickel eased from $8.60 per lb. to $8.40 in September, and in the past six months from $7.40 per lb. to $8.40. Zinc went from $1.355 per lb. to $1.395 in September; from $1.26 per lb. to $1.395 over the past six months. n

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

Manufacturing Outlook / October 2021

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NEW SECTION INNOVATION OUTLOOK

TRANSFORMING FABRICS AND TEXTILES INTO INTEGRATED DEVICES AND SYSTEM AFFOA (Advanced Functional Fabrics of America), a Manufacturing USA institute, is catalyzing a domestic manufacturing-based revolution, transforming traditional fibers, yarns, and textiles into highly sophisticated integrated and networked systems; facilitating the conversion of the textile industry into a value-added, high-tech industry.

AFFOA leads the convergence of advanced technology into fiber and textile production to commercialize products that will benefit the warfighter and consumer.

Manufacturing USA, a public-private partnership with 14 manufacturing institutes across the nation, connects companies, academic institutes, non-profits, and local, state, and federal entities to solve industry-relevant advanced manufacturing challenges in new technology areas with the goals of enhancing industrial competitiveness and economic growth and strengthening national security.

Technology Focus Area The merger of semiconductor technology into fiber and textile manufacturing in the U.S. will enable computation in and connectivity among advanced fabric products for both small-batch production and mass customization. Functions of fibers will dramatically increase over the coming years, creating a “Moore’s Law for Fibers.” Alongside commercial applications, advanced fabric technology offers opportunities to develop unique solutions to critical national security challenges, such as soldier systems, functional composite materials for ground and air vehicles, and undersea and space capabilities.

Approach to Innovation and Collaboration

CREDIT: Kayana Szymczak

LEARN MORE

+

CONNECT WITH AFFOA Cambridge, MA 617-446-6738 affoa.org info@affoa.org

Part of AFFOA’s strategy is to accelerate exciting, advanced, connected textile products that introduce new business models to the industry. With highly functional fabric device systems, the ability to offer consumers “fabrics as a service” creates value in the textile industry— moving it from producing commodity goods in price-competitive markets to recurring revenue models with rapid innovation cycles, characteristic of high margin technology sectors.

Fabric Innovation Network: a collaborative infrastructure of industrial and academic partners with significant, yet previously isolated expertise, which provides an intergrated collaborative prototyping and pilot manufacturing engine for the nation and establishes a virtuous high-margin innovation cycle Fabric Discovery Centers: aimed at creating jobs and facilitating innovation in local communities throughout the nation Nonproprietary Roadmap Projects deliver product prototypes that excite follow-on industry investment, through proprietary projects funded by industry members and executed through the Fabric Innovation Network in order to meet market needs and demands and train and grow the domestic supply chain MicroAward Program: applies the prototyping expertise of the Fabric Innovation Network to the manufacturing challenges associated with scaling advanced fabric products, with defined needs from manufacturing roadmaps released as solicitations and iterative project cycles of 90-days or less

Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

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continued Manufacturing Outlook / October 2021

NEW SECTION INNOVATION OUTLOOK

COLLABORATIVE PROJECT EXAMPLES “The Fabric Discovery Center will unlock advances and jobs in revolutionary fabrics and textiles and harness emerging technologies critical to the Commonwealth’s competitiveness in advanced manufacturing and creating jobs for Massachusetts residents.”

– The Honorable Charlie Baker, Governor of Massachusetts

LOOks PROGRAMMABLE BACKPACK:

LOOks is the world’s first programmable backpack that is mass produced yet completely unique. LOOksPacks are made of an advanced fabric that is manufactured at Inman Mills in South Carolina and enables the wearer to program their pack through a smartphone app called LOOks. Users with the LOOks app can retrieve information from the LOOks fabric by just pointing their phone at it (LOOking). The fabric development for LOOks advanced domestic manufacturing processes in South Carolina and exemplifies the role of U.S. product and manufacturing innovation in “advanced fabrics.”

FABRIC COMMUNICATIONS: In collaboration with members, AFFOA launched a Gen 1 “Fabric LiFi” (Light Fidelity refers to the transmission of data via light) product platform.

An advanced fabric-based hat receives data from overhead light source for long distance, directional and high-bandwidth communications. This system can be used to provide precise indoor position, locate and communicate in radio-frequency and GPS denied environments and transfer highly secure information.

A spectrally-unique platform was used to create a fabric turret cover for identification of friendly forces from above.

ELECTROPHORETIC

COLOR CHANGE: Low-power, electrophoretic-based color changing fibers and fabrics were created with conceptual product design for implementation in 2018. These fabrics can provide on-demand color and pattern changes to adapt to changing environments. The transduction mechanism they employ is inherently low power to enable mobile solutions with long operational lives.

“We are approached by vendors all the time who want to add gimmicks to backpacks, but the AFFOA technology offers great simplicity: this backpack has no wires or batteries, yet still connects with the digital world.”

– Steve Munn, President, JanSport-Americas Advanced Manufacturing National Program Office, NIST | www.ManufacturingUSA.com | 301-975-2830 | amnpo@nist.gov

Manufacturing Outlook / October 2021

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AEROSPACE OUTLOOK

OCTOBER 2021

AEROSPACE OUTLOOK

by Royce Lowe A Canny Irishman People who fly around Europe out of the UK or Ireland very often find themselves in the hands of Ryanair, the budget airline based in Dublin, and ruled with an iron hand in a velvet glove by its head honcho Michael O’Leary. The man is somewhat of a legend in the business, and loves to keep attention on his airline by proposing interesting changes to the way people fly, such as standing to allow more passengers per plane, charging for use of the toilet, etc. The intercoms on most flights are unintelligible. But if you want to or need to get from the UK or Ireland to France, Spain, Germany,

Scandinavia and elsewhere, then Ryanair is more than likely the least expensive way to do it. The airline allows people to visit many parts of Europe at discounted rates, and allows people who have second homes in Europe to go “home” from time to time, again at discounted rates.

Ryanair is Europe’s largest budget airline and one of Boeing’s largest customers. It is backing off from its interest in purchasing up to 250 new 737 MAX aircraft over a price dispute. The 737 MAX 10 is a new, larger model of the twin-

engine, narrow-body aircraft, not yet in commercial service but also slated to be operated by United Airlines. Michael O’Leary said he was disappointed that an agreement couldn’t be reached, but allegedly said that Boeing had a more optimistic outlook on aircraft pricing than Ryanair does, who have a disciplined track record of not paying high prices for aircraft. Boeing, meanwhile, says it is maintaining pricing discipline while working in the interests of its customers and the company.

Boeing has large orders on its books for 737 Max aircraft from Southwest continued

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Manufacturing Outlook / October 2021

AEROSPACE OUTLOOK Airlines and United Airlines.

Ryanair does not seem likely to switch to Airbus as a supplier, but suggests that it has lots of time to reach an agreement on 737 Max supply.

Canada’s Bombardier, which had serious financial problems some 5 or 6 years ago, prior to selling its C series to Airbus - which was renamed the A220 - has just announced an order for an upgraded version of its Challenger 350 business aircraft, its biggest business jet deal this year.

The order - whose customer has not yet been revealed - is for 20 new jets, named the Challenger 3500, that was launched in early September, as Bombardier looks to protect its dominant share of the market and capitalize on a higher demand for private flying during the pandemic.

The order is worth $534 million. The

Challenger 3500 is scheduled to take to the air in the second half of 2022.

Space travel, for want of a better term, is becoming commonplace. We recently saw Branson and Bezos go “into space” to the extent of 86 km and 107 km respectively, just enough to get out of Earth’s atmosphere.

We recently saw another mission, conceived and paid for by Jared Isaacman, a billionaire whose trip was not to show off his own wares, but to enjoy those of someone else, SpaceX, while raising money for a charity close to his heart, St Jude Children’s Research Hospital in Memphis.

This mission was more ambitious in that instead of briefly crossing the arbitrary line in the upper atmosphere which defines “space” as Branson and Bezos did, Isaacman and his

three civilian companions went all the way to orbit, propelled by a SpaceX Falcon 9 rocket. At 575 km they were some 150 km higher than the International Space Station (ISS). The mission lasted three days and 40 orbits, and was similar to the flights SpaceX provides as part of its contract with NASA to take astronauts to and from the ISS. This contract was what got SpaceX into human spaceflight. The next step is a tourism sideline that it is considering.

SpaceX is pre-eminent with its use of refurbished hardware and its ambitions. A Japanese businessman has booked a flight around the moon, with hardware not even finalized as yet. Who knows where all this will take us, least of all to what end? n Author profile: Royce Lowe, Manufacturing Talk Radio, UK and EU International Correspondent, Contributing Writer, Manufacturing Outlook.

Manufacturing Outlook / October 2021

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ENERGY OUTLOOK

OCTOBER 2021

ENERGY OUTLOOK

Wind Over New Jersey

by Jocelyn Bright Wind farms, be they on land, offshore, or offshore and floating, have several things in common.

They are huge, powerful, capable of feeding many millions of homes with electricity, and, to put it mildly, terribly expensive. How expensive seems to be a number in the possession of a few privileged people only.

Germany’s EEW Special Pipe Constructions Group GmbH, founded in 2008, has a pipe plant that is strategically located very near the open sea. Here it manufactures XL monopiles with wall thicknesses up to around 150 mm (6”); diameters up to 12 meters (472”); lengths to 120 meters, and piece weights up to 2,500 tons. The company manufactures the accompanying transition pieces that connect the monopile foundations to the turbine towers.

The monopiles are manufactured from S355 steel, an equivalent to A572 Grade 50, with 0.23% max carbon, 1.6% max manganese, to give the required 50,000 PSI minimum yield strength. We may ask how we get to make monopiles up to 12 meters diameter and 120 metres long.

It all starts with plates of the requisite length that are then cold formed into a part of the required diameter.

Subsequent operations from here are tack welding, longitudinal welding, scrupulous testing, surface treatment and coating.

There are transition pieces that serve to connect the monopile, once it is driven onto a prepared site on the seabed, to the wind turbine. The tower is normally made from a steel similar to that used for the monopile.

Once the tower is installed, the nacelle, which houses the inner machinery, including the generator - which converts mechanical energy to electrical energy - is installed on top of the tower. Last, certainly not least, three turbine blades, aerodynamically designed to make the most of the wind, are fitted to the nacelle. The blades are normally made from fibers and polymers, and have a lifespan on the order of 20 years.

This simple outline of the installation of a wind turbine does not take into account the enormity of the logistics and skilled workforces required to complete the task. We are talking here of manipulation of monopiles over 30 meters long, towers that stretch to over 70 meters high, and all this in seas that can see waves continued

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Manufacturing Outlook / October 2021

ENERGY OUTLOOK Watts across the border

to 15 meters high. The parts are shipped from shore to “farm” on a ship 151 meters (500 feet) long, that weighs some 26,000 tons, with legs that weigh some 900 tons each.

This floating installation vessel is used on a hire basis, and has on board a skilled crew from Denmark, Germany, Holland, and Britain, that works 28-day assignments to do a job that requires precision to millimeters.

The crew needs to be alert at all times on the job. There is no room for error. As compensation, they have on board a very qualified chef whose responsibility is an ongoing supply of delicious food, made to order according to the crew members’ country of origin. This is no small task, but the energy generated makes it all worthwhile.

A similar operation is coming to the U.S., to New Jersey, where construction is underway on a project called Ocean Wind, a joint venture between Denmark’s Ørsted and the Public Service Enterprise Group (PSEG), and German steel pipe manufacturer EEW. In December 2020, New Jersey Governor Phil Murphy announced a $250 million investment into a new monopile manufacturing facility located at

the Paulsboro Marine Terminal.

Ground was broken in April 2021.

The start of construction marks a significant milestone in delivering the largest industrial offshore wind manufacturing facility in the United States to date.

EEW has contracted with more than 30 New Jersey companies to provide design services, site work, and concrete. Once complete, the facility, comprising two large buildings for circumferential welding, sandblasting, and painting - as per the process in Europe - will manufacture monopiles to supply the 1,100-MW Ocean Wind farm off the coast of southern New Jersey.

EEW’s facility will create as many as 260 jobs during the first phase of construction and manufacturing.

The facility is a key asset for the state, and in addition to supplying Ocean Wind, will serve the rapidly progressing U.S. offshore wind industry for years to come.

Production is scheduled to start in 2023. There will be an ongoing demand for a skilled workforce to accomplish this project. Extensive training will be required.

New York State has awarded a 25-year contract to HydroQuébec, the company’s largest ever export contract. Starting in 2025, H-Q will supply almost 1,250 megawatts of hydroelectricity per annum, equivalent to the electricity consumption of some one million homes. Québec’s premier, François Legault, called it “a deal in principle worth over $20 billion over 25 years.”

Massachusetts has already signed a 20-year agreement for 9.45 terawatts.

Fossil fuels presently account for 85 percent of the region’s electricity supply. The state wants renewable energy to account for 70 percent of its energy consumption by 2030.

The Champlain Hudson Power Express (CHPE) project will involve the construction of 339 miles of underground and subriver transmission line between the Canada - U.S. border and New York City. A 38-mile portion will be built in Québec, and Hydro-Québec will co-own this portion with the Mohawk Council of Kahnawake, the elected body of the Mohawk community on Montreal’s South Shore.

A Hydro-Québec spokesperson said “Not only does this project provide a new source of revenue for the utility, but it also allows New York State to reduce its greenhouse gas emissions.

It’s a huge climate gain,” she added.

“Greenhouse gases know no borders, so what’s good for our neighbours is good for Quebecers. It’s like taking 44 percent of the vehicles in New YorkCity off the road.” As a footnote, New York’s governor, Kathy Hochul, also highlighted a goal of 10Gw of solar power by 2030, that will power nearly 1.7 Jocelyn Bright, Staff Writer million homes. n Manufacturing Outlook / October 2021

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AUTOMOTIVE OUTLOOK

OCTOBER 2021

AUTOMOTIVE OUTLOOK

by Lawrence Makagnon DETROIT’S ELECTRIFICATION WAR In 1909, the founder of General Motors (GM), William Crapo Durant, offered Henry Ford $8 million for his company. Henry said no, and with his reply made way for one of the fiercest rivalries in corporate history. Ford started mass production with his Model T in 1908, while GM’s marketing genius Alfred Sloan promised a “car for every purse and purpose” in the 1920s. Who made the best engine to go into the best-looking, most powerful car, etc? And so it went on, through the Thunderbird and the Corvette, to the Camaro and the Mustang in the sixties.

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Today the battle goes on in the race to electrify, especially trucks and pickups, the biggest profit source for both. GM has said it will build four battery factories by 2025 with its partner LG Chem, and on September 27 Ford and its partner SK Innovation announced an $11 billion investment in three battery factories and an assembly plant for electric F-series pickups.

Ford says that 40 percent of its global sales will be electric by 2030, which coincides with the date that Joe Biden would like to see half of the cars sold in the U.S. battery powered. GM

wants all its vehicles to be emissionfree by 2035. This competition will determine which Detroit giant will have the upper hand in the market for EVs and autonomous driving. Both Ford and GM started slowly in the EV race, behind European and Japanese rivals, but are now rushing to catch up, with Ford spending $30 billion ; GM $35 billion by 2035.

The two were forced to act. They have been losing their home market for years. In 2020, 65 percent of Ford’s revenues and over 80 percent of GM’s, along with most of their profits, came from domestic buyers. continued

Manufacturing Outlook / October 2021

AUTOMOTIVE OUTLOOK But Ford and GM’s market share of 30 percent compares weakly with the combined 50 percent of 20 years ago, not to mention the 70 percent in the 1970s.

Ford has had a new boss, Jim Farley, for just over a year. Neither one of his predecessors, Mark Fields and Jim Hackett, brought the touch the company and the market required.

Farley is credited with being a “car guy” who loves cars and speed, and is a detail man. His presence is already being felt in the EV models available and those planned. Ford is, in fact, overtaking GM in the field, with more models out, such as the Mustang Mach-E and the F-150 Lightning that goes on sale in 2022.

GM has Mary Barra, there since 2014, who took away anything that was underperforming in the company. She took GM out of Russia and India and sold Opel, its European operation, to the PSA Group. GM’s share price has very much outperformed Ford’s

over the past ten years. The race to electrification will go on. It will more than likely bring out the best in both companies.

In the meantime Carlos Ghosn, he who escaped from whatever it was he escaped from, says the Germans are the most likely challengers to Tesla.

Toyota plans to spend $13.6 billion on batteries by 2030, and aims to cut battery costs by half per car by 2030.

It further says it aims to make its production carbon neutral by 2035, instead of the previous 2050 target.

units. These new figures reflect what has happened to the supply chain over the past year or so. First were the chips, then winter storms in Texas, a factory fire in Japan, and Covid-19 outbreaks in Southeast Asia.

The latest disruption originated in Malaysia, an important part of the semiconductor packaging and testing processes. The government there has implemented lockdown measures that may prevent the industry from returning to full capacity until late October, IHS said.

IHS Markit, a forecaster whose production projections are cited by automakers, suppliers, and research analysts the world over, just revised downward its estimates that have been falling all year due to the global chip shortage. It cut its production forecast for this year by 6.2% -- or 5.02 million vehicles -- and lowered its projection for 2022 by 9.3%, or 8.45 million cars and trucks. It also trimmed its 2023 estimate by 1.1%, or 1.05 million

Tesla, on the other hand, had a very good third quarter, selling 241,300 cars worldwide, a record, over 96 percent Models 3 and Y. This figure beat the average 223,677 figure from 12 analysts surveyed by Bloomberg, and also the average projection of 221,952 Tesla sent to investors. The previous record was 201,250 cars in Lawrence Makagon, the second quarter Staff Writer of 2021. n

Manufacturing Outlook / October 2021

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CYBER SECURITY OUTLOOK

SEPTEMBER 2021

CYBER SECURITY OUTLOOK

Your Employees, Friend or Foe: 6 Tips for Successful Cyber Training

By Ken Fanger MBA, CMMC-RP, President, On Technology Partners As we enter Cyber Security Awareness month in October, I wanted to start by addressing the main concern with cybersecurity: your employees. In my career, I have been asked questions like, “Why can’t the employees just do the smart thing?”, “How do I make my employees safer?”, “Why do my employees want to shut me down?”, and “How come people can’t just stay safe?”. Those are all good questions and they stem from the same area.

No one is going to know instinctively how to keep safe. There are many threats and dangers, and it is very easy to fall into the cyber trap that hackers lay out for us. This does not mean that your employees are trying to destroy your company, nor does it mean that they are the enemy. What it does mean is that if you have not taken the time to properly get them trained and protected, they are very likely to fall into one of the traps.

You need to remember, as Expert Insights shared, “Cyber-criminals aren’t going after your business software anymore – they’re going after your people.” (https://expertinsights.com/ insights/which-of-your-employeesare-most-at-risk-of-cyber-attacks/) This means that your employees are your weakest link, but also your greatest ally—IF you prepare them properly. continued

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Manufacturing Outlook / October 2021

CYBER SECURITY OUTLOOK According to Forbes magazine, even while 70% of companies say they have high readiness for working remotely, nearly half admit to not providing enough cybersecurity training. Forbes goes on to say that “no amount of sophisticated anti-malware, spam filters or detection software can protect against human error.” (https:// www.forbes.com/sites/forbeshumanresourcescouncil/2021/07/07/attack-theroot-cause-of-cyber-threats-one-employee-at-a-time/?sh=53af968277ae) The human direction is becoming more of the cyber attackers’ focus as technology continues to close other avenues of attack. Spectrum Business tells us, “Criminals increasingly see humans as the weakest link. What that means: Alert and well-trained employees are more important than ever for business cybersecurity.” (https://www. spectrum.com/business/insights/ management/5-ways-your-employees-can-help-prevent-cyberattacks/) This has led to the problem of training. I have had many of my clients’ employees tell me that most cybersecurity training is boring and confusing. Almost none of the employees know what is in the policies or employee handbook. Many of us believe that a long, drawn-out, all-day session once a year will meet the need for cybersecurity training. It is even the minimum required by many compliances, such as Cybersecurity Maturity Model Certification (CMMC). This method is no longer working. You need to make cybersecurity training part of your team’s daily life.

Here are six tips on having a successful cybersecurity training: 1. Set a specific objective for the training.

There is a reason that you are holding security training, and it is always important to not lose sight of that objective. If the training is about email security, do not address issues like patching computers. Define the exact behavior and outcome you want them to follow, and then focus the training on achieving those results. Always

remember that training for security is designed to get your students to a specific action or behavior.

2. Always design your training with your audience in mind.

When you are administering training, it is important to keep in mind the audience that you are addressing. Your training should reflect their: • skill levels • current interest or concern • regional differences and preferences • desired method of learning • setting • medium (virtual live, prerecorded, or in-person) 3. Remember the reason why your students are learning.

The reason a training session is being held and the reason a student attends that session are not always aligned.

That misalignment can cause problems. If students are attending your training but do not value the materials, it will be harder to get them to adjust to meet the outcome for the session.

Align their goals and outcomes with your training goals and outcomes. For example, if you are administering a training on email security, but email security isn’t important to your students, show them how email hacking may cause them to lose work, effort, or money. If your students were sent to meet a compliance requirement, show how that compliance requirement connects to your training.

4. Control your scope.

When planning your training, keep your scope limited and focused. Most people have a hard time retaining more than three major topics from a single session. Always define your intention early in the training and work to stay on track throughout the session. Personal stories are very helpful in getting individual points across, but make sure all stories are moving towards the desired outcome. Avoid rambling if you can.

5. Make it fun and engaging.

Try making a game out of it. Give points for questions, or give individuals or groups goals to achieve. Games can increase engagement, retention, and implementation, so use them as often as you can. Contact us at info@ ontechpartners.com and ask for some free, fun ways to engage training.

6. Continue learning.

It is vital to remember that training never ends, for you or your team. You want to keep training as a constant but not overbearing process. There have been many client employees that have told me they cannot do another cybersecurity training class.

Always be looking to update and enhance the training materials. Cybersecurity has become more about human training as we move forward. That is why it is important to keep your team on the same page. It is not a you-versus-them (the employees); it is all of us against a very aggressive world that wants your information at all costs.

On Technology Partners Info@ontechpartners.com (216) 920-3100. n Author profile: Ken Fanger, MBA has 30 years of industry experience in the fields of technology and cyber security, and is a sought-after CMMC Registered Professional, helping manufacturers and contractors to meet DoD requirements for CMMC compliance. He is passionate about technology deployment, and his MBA in Operations & Logistics has helped him to be an asset in the designing and deployment of networks to enhance the manufacturing experience. Over the past 5 years, he has focused on compliance and security, including working on the SCADA control system for the Cleveland Power Grid. Mr. Fanger works with each client to identify their unique needs, and develops a customized approach to meeting those needs in the most efficient and cost-effective ways, ensuring client success.

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OCTOBER 2021

ISSUES OUTLOOK

by Royce Lowe In 2020 it seemed that Vietnam had tamed the Covid-19 virus, but it now finds itself in the middle of its worst outbreak by far. Parts of the country are in strict lockdown, and many factories can only operate if sleeping quarters can be arranged for their workers. Intel is spending millions for hotel accommodations for many of its workers. Factories making such products as shoes for Nike or smartphones for Samsung have either slowed down or shut down.

This is, of course, not good for global supply chains, in which Vietnam is an important link.

In 2020 Vietnam’s GDP grew by 2.9 percent when most countries were suffering deep recessions, and for the most part, Vietnam kept its economy in good shape. But in late August, the World Bank cut its growth projection for 2021 by two percentage points to 4.8 percent. To date, only around two percent of Vietnam’s population, verging on 100 million people, have been vaccinated. Half the infections and 80 percent of fatalities are in Ho Chi Minh City. The merchandise trade balance moved into deficit, and caution has spread among foreign investors.

Domestic retail sales are down by

almost 20 percent. Growth in the balance of the year and into 2022 will naturally depend upon control of the current Covid-19 outbreak, vaccination, and fiscal measures to stimulate the economy.

The World Bank says that economic fundamentals remain solid in Vietnam, and that the economy could head again to pre-pandemic GDP growth of 6.5 to 7 percent for 2022. Vietnam’s manufacturing PMI, as measured by IHS Markit, was at around 55 in June, and is now around the 40 mark. It would seem there is no way to go from continued

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Manufacturing Outlook / October 2021

ISSUES OUTLOOK here but (back) up. So what is it about Vietnam that might make it a second China? The country is open to trade and investment, and has made itself that important link in supply chains. This has led to what has been described as a remarkable expansion. Over the past 30 years, it has come through as one of the fastest growing countries in the world, royally beating its neighbours Malaysia, Thailand, and the Philippines. It has done this by steady growth, not by fits and starts.

Vietnam, a communist country like China, is led by a one-party political system that turned capitalist and concentrated on exports. Since 1990, Vietnam has received foreign-directinvestment injections of 6 percent of GDP each year, more than twice the global level, and far more than China or South Korea have recorded over a long period. Development in the rest of East Asia, along with rising wages, prompted manufacturers to seriously consider Vietnam, with its low labor costs and stable exchange rate, as an ideal source, leading to an export boom in the country. In the past decade,

exports by domestic firms have risen by 137 percent, those by foreignowned companies by 422 percent. As previously mentioned, foreign investors are seeing Vietnam in a different light these days, but this will surely change in the not-too-distant future.

Vietnam is making headway in steel production, and is on its way to 30 million tons per year, with hot-rolled and cold-rolled coil accounting for some 40 percent of that. Historically, sales to the U.S. consisted mostly of cold-rolled and corrosion-resistant material, and reached an all-time high in 2018 of 769,714 tons, with hot-rolled coil making up a mere 2 percent of that total. Since that time, imports from Vietnam to the U.S. dropped off because of tariffs, but of late, with the huge price spread between the two sources, Vietnam will ship hot-rolled coil to the U.S. to arrive at the back end of this year.

Vietnam is usually known for intermediate manufacturing, but it is, in fact, in the automotive manufacturing business through VinFast, its carmaker,

part of its Vingroup. This is an EV startup that is planning to open a U.S. factory, and also to start sales in Canada and Europe in 2022. VinFast sold some 30,000 vehicles in 2020, and forecasts sales over 45,000 in 2021. It will begin delivery of EVs produced in the northern port city of Haiphong to domestic customers by December.

To give some idea of how far Vietnam has to go: Vietnamese consumers bought just under 300,000 cars last year, with Hyundai Motor as the leading brand, with sales of just over 80,000. This is about what Chinese consumers buy in two weeks. Vietnam finds itself at a strange crossroads, but once out of the pandemic quandary it will surely shoot forward again. n

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

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