Author Archives: Stuart Burns

Set against the backdrop of the recent presidential election, the media’s constant referral to protecting American jobs and employment should come as no surprise, even though the level of national employment has never been better.

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The reality, of course, is that national figures mask regional disparities and the disproportionate impact in some industries of offshoring and global competition has been intense. In practice, though, globalization is only part of the issue when it comes to the loss of jobs in certain industries. There has been a great deal of recent research which supports the position that automation is having as much, if not more, impact on certain industries than competition from abroad.

Automation Continues

As the Financial Times observed recently, automation has been a constant for decades, and the latest advances in robotics and artificial intelligence all but guarantee that the pace will accelerate, but some industries or job roles are particularly vulnerable to replacement by machines. All industries operate in a global environment, the decision as to whether to invest in automated processes should not and cannot be made based on employment, alone, if firms want to survive in the long-term.

The key question is not whether automation, robotics or artificial intelligence will replace humans in existing roles, the question is simply when. For society at large, the pace of automation will determine how easily the displacement of workers can be handled — and whether this creates a political backlash or is accommodated through retraining and the creation of new jobs.

Source: Direct Industry

We are used to seeing rows of gleaming robots assembling cars in modern automotive factories but a recent article in Direct Industry explores developments in the agricultural industry and highlights the fast pace of robotic developments that could well see the replacement of humans for many agricultural activities in the years ahead. Read more

After a recovery late last year, the oil market seems to have settled with a price around $55 a barrel… at least for now. That level is not likely to dissuade consumption but most Organization of Petroleum Exporting Countries members seem to feel it justifies their oil output cut agreed to late last year.

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A few producers, such as Venezuela, that are running massive budget deficits have targeted $70 or more, but most analysts would agree that if oil can hang onto recent price gains for the next six months it will be doing well. Read more

Well we all knew that the Volkswagen admissions scandal was the story that was going to run and run, so it should come as no surprise that the media is full of the latest allegations being made against Fiat Chrysler by the Environmental Protection Agency.

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The Washington Post, the Economist and the Financial Times all report the EPA’s announcement that they are in discussions with the automaker over software which they say, might be illegal. The EPA has held back from calling the technology a “defeat device” in the terms used in last year’s cases against VW.

But in broad terms the operation of the software appears to work in a similar way to that of VW’s in that it also has the characteristics of the emissions controls under certain circumstances. Contrary to what many others believed, in fact, emission control equipment is allowed some pretty wide parameters of operation.

Diesel’s Easier… To Pollute With

In Europe where the rules are less rigorous, the testing regime allows diesel cars up to 14 times more noxious gases on the road under test conditions. According to the Economist, they are allowed to shut down their emission controls on the grounds that not doing so might damage engines when the ambient temperature is low. But in some cases this ambient threshold could be as high as 17 degrees, a temperature not reached for months in many Northern European countries. Read more

Most aluminum consumers seem quite content with the range-bound behavior of the light metal over recent months.

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Aluminum on the London Metal Exchange has been trading broadly between $1,700 and $1,750 per metric ton for much of the fourth quarter. Maybe not to the same extent as copper or zinc, but aluminum along with most of the base-metal sector benefited from renewed investor interest as 2016 went on. Although net long positions have been trimmed back following some recent significant deliveries into LME warehouses, the consensus remains positive regarding prices for 2017. Read more

By anyone’s reckoning, iron ore and coking coal had a stellar year in 2016. Driven by infrastructure investment and a robust construction market, Chinese imports of our iron ore could top 1 billion metric tons for the first time in 2016. Prices more than doubled in the space of 12 months and the supply-demand situation seemed to be largely in balance for much of the year.

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After topping $80 per mt in early December, prices eased back a little toward the end of the year prompting many to ask “have we seen the peak in iron ore prices?” Mills typically cut output during the quieter winter months when construction demand slows. Many steel mills have already curbed output due to chronic smog alerts across northern China.

Chinese Demand

Seasonally, it would not be unusual if iron ore prices remained subdued up to the Chinese New Year and then picked up in preparation for the peak production months of late spring and summer. But, while Chinese demand defied many expectations of a slowdown in 2016, the recent softening of both iron ore and coking coal raw material prices, and the price of some finished steel products over the last week or 10 days, has lent support to some analysts’ predictions that we could be seeing markedly lower Iron ore prices throughout this year and next. Read more

There are many in the business community who share a sense of anxiety as to what trade policies the new administration of President-elect Donald Trump will introduce in the year ahead but, if it’s any consolation, the U.S. is not alone in pandering to populist calls for limits on free trade.

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Here in Europe there is a quieter but no less disturbing war being fought between the European Union Commission and the European Parliament and the E.U. member states. Historically, the European Commission handled trade negotiations on behalf of the single market, but the 2009 Lisbon Treaty, intended to make the EU more efficient and transparent, also gave all the EU’s 38 National and regional parliaments essentially the right of veto on any new trade accord.

Anyone Can Veto… Anything

As Carnegie Europe in a recent post observed the sheer complexity of trade deals, which cover many topics that are not included within the European Commission’s powers, means that ratification is becoming a de facto requirement of any new trade deal. As politics becomes more populist in the E.U., as in the U.S., an array of interest groups can challenge any deal on the grounds of environmental, health, cultural, employment concerns, or any combination of the above. Read more

Even in today’s price competitive global market place there are a few industries in which the United Kingdowm can be said to punch above its weight. Automotive is one, it accounts for 10% of the UK’s trade in goods, and over 50% of UK manufactured cars go out for export.

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Defense is another. The U.K. is the world’s fourth-largest arms exporter after the US, Russia and China. But maybe the crown jewel of U.K. manufacturing is the aerospace sector. It doesn’t come much more value-add than aerospace and the U.K. ranks fourth in the world behind the US, Germany and France for export values. However, France’s numbers are distorted by the fact Airbus aircraft are receive their final assembly in Toulouse. So, although 75% of the aircraft is imported as major components — fuselage, wings, tail, engines, etc. — the total value of the aircraft is reflected in France’s export earnings even though most isn’t made there.

And therein lies the problem for the U.K. post-Brexit. The wolves are gathering around the gates slavering at the prospect that the majority of the citizens’ decision to leave the E.U. means the position of U.K. aerospace manufacturers in the Airbus supply chain is up for grabs.

According to the Financial Times, Airbus will face political pressure to bring jobs back to France, Germany and Spain as a result of the U.K.’s decision to leave the single market. BAE Systems has played a leading role in the development of wing technology, designing and manufacturing virtually the entire wing for Airbus’ super jumbo jet, the A380. But there has been a constant move by Germany to get as much wing work out of the U.K. because it is one of the most lucrative parts of the supply chain. The bottom skins of the wing for the new A350 went to Spain and Germany, both keen to secure further work as new models come up for bidding.

Last year, the U.K. aerospace sector grew by 6.5% to £31 billion ($38 billion) 87% of which was exported. The industry fears a clampdown on free movement of labor and political influence over trade regulations could combine to raise the cost of business for U.K. companies in the sector.

Although aircraft and their parts are exempt from tariffs under World Trade Organization rules, the FT reports there is a fear the competitors could encourage their governments to find loopholes during exit negotiations that would create barriers or raise the cost of business for U.K. companies. For Rolls-Royce, the U.K.’s premier aero-engine manufacturer, the major concern is that a block on free movement of labor would inhibit the company’s ability to move workers between Europe and the U.K. at short notice as production issues demand.

About a quarter of Rolls-Royce’s workforce is based in the E.U. outside the U.K. Despite the U.K.’s reputation for engineering excellence, the country is desperately short of engineers. As a result, the manufacturing sector has been at the forefront of lobbying government for exemptions to a blanket block on immigration.

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The future prosperity of U.K. manufacturing was probably not at the forefront of voters’ minds when they opted to leave the E.U., but if it is found that highly paid jobs are lost as a result of the U.K.’s exit from the single market, economic issues me yet come back to become a focal point in any post-Brexit analysis.

If there is one area in which 2017 is going to be a momentous year, it is in trade.

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The incoming Trump administration campaigned on and has, since winning the election, robustly promoted an anti-free trade platform saying the North American Free Trade Agreement is “the worst trade deal maybe ever signed anywhere,” bullying GM, Ford Motor Company and various other multinationals into rethinking strategic investments planned for Mexico and forcing them to be shelved or amended. Read more

You probably wouldn’t be the first to nominate the Daily Mail or its owner, the Daily Mail and General Trust, for an award for cutting edge journalism but a recent article from Daily Mail Australia certainly grabs your attention.

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It underlines why China has such an intractable problem with pollution. It also suggests how Chinese steel mills are managing to have such a disruptive effect on global steel prices apparently bereft as they are of the legislation imposed on the rest of the world.

Unlicensed Steel Mills

In a series of graphic photographs (please click through to the link above, MetalMiner cannot republish the photos due to copyright) the paper illustrates the appalling state of many private steel plants on the fringes of the Chinese steelmaking industry. Certainly, the industry is dominated by major state enterprises, but it is also riddled with hundreds of smaller steel plants operating almost entirely outside the law.

Paying little more than bribes to buy off investigating officials, these mills not only ignore worker’s rights and safety but compliance with air and soil pollution legislation is non-existent. When you pay peanuts, ignore environmental requirements (and hence costs) and operate on the fringe the dividing line between profit and loss is blurred. These mills not only pollute the environment not just to the detriment of their workers and the local community, they also, when it suits them, dump excess capacity both domestically and for export.

The photos, taken by photojournalist Kevin Frayer in an arid region in the country’s north called Inner Mongolia show images of steel mills we have not seen in the west since the days of Charles Dickens.

Not surprisingly, after several years of a “war on pollution” Beijing was again suffering from a yellow smog alert recently with hundreds of flights cancelled and highways closed across northern China as average concentrations of small breathable particles known as PM 2.5 soared about 500 micrograms per cubic meter in Beijing and surrounding regions, according to Reuters.

Shadow Steel Industry

Although Beijing has taken strenuous measures to control emissions with so much energy produced from coal and so many industries still failing to meet environmental standards, it’s no surprise progress is slow. While China is the world’s biggest polluter it is also, to its credit, a global leader in establishing renewable energy sources such as wind and solar power. Yet, as these photographs show, a great deal more needs to be done. Until Beijing cleans up the production side of the equation, no amount of new renewable energy technology is going to solve the problem.

Following Russia’s military success in their support the Syrian regime, you could be excused for thinking Western sanctions, applied in 2014 in response to Russia’s annexation of Crimea, have had little or no effect on the country.

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Certainly, they seem to have had little impact in altering or encouraging a change in behavior but there are examples in which the sanctions have had quite a profound effect on the economy and particularly on certain industries.

A recent article in the Financial Times explores the challenges Gazprom Neft is facing in trying to exploit Russia’s vast shale gas reserves without the benefit of Western partners. Following the imposition of sanctions Western oil and gas companies withdrew support from any projects to exploit shale reserves requiring fracking technology, and as a result firms like Gazprom Neft, the oil division of state-controlled Gazprom, have been forced to go it alone in developing the technologies and practices necessary to exploit shale rock containing oil and gas resources.

Source: Financial Times

Progress has been slow, in spite of the huge potential. As Russia’s hydrocarbon resources dwindle from their peak in Soviet days, the country is sitting on vast shale resources rivaling the U.S. Read more