Articles in Category: Manufacturing

A 2014 Bureau of Labor Statistics report showed that companies in the top quartile of inventory turnover tend to have no more than three to four days of raw materials on hand. For metals suppliers this could lead to shortages and disrupt customers’ supply chains.

Two-Month Trial: Metal Buying Outlook

Supply chain financing, though, can help buyers and sellers work to manage supply and cost issues. The role of supply chain finance is to optimize both the availability and cost of capital within a given supply chain by aggregating, packaging, and utilizing information generated during supply chain activities and matching this information with the physical control of goods.

If you’re buying metals for product manufacturing, for example, it can be beneficial to have the cash-flow flexibility of supply chain financing, especially if you’re a smaller manufacturer. In supply chain finance, an agreement is made between the buyer and supplier to use credit facilities or other financial instruments to bring down costs and risks for both parties.

Buyers can utilize “buy now, pay later” open account transactions which can be counted as regular payments for a continuing flow of goods rather than specific transactions or set prices and quantities. Buyers can extend payment terms with their suppliers. Suppliers, such as metals service centers, can use their credit ratings to bring in customers who, without support from banks, might otherwise not be able to do business with them. Other third-party financiers can also join in the agreements and assist either side with loans or other financing instruments.

In aerospace and defense, this could mean optimizing purchasing across a global supply chain. SCF provider Taulia recently announced a partnership with Exostar, which provides cloud-based solutions to the sector, as well as to the life sciences and health care sectors. There are more than 100,000 aerospace and defense corporate buyers using Exostar’s solutions that now have access to Taulia’s supply chain finance offerings. Taulia’s SaaS product is being integrated directly into the Exostar interface so if you’re a small manufacturer providing electronics or metal parts, you could have the same buying advantages of a larger organization.
Earlier last year, TradeRocket and Hitachi Capital America entered a similar agreement. TradeRocket provided Hitachi Capital with a pool of mid-market buyers (companies with annual revenues of $25 million to $500 million) who, once underwritten, would be able to use TradeRocket’s early pay invoice option to its entire supplier network.

Click Here for Current Metal Prices

Giving buyers payment flexibility and suppliers access to new markets is a win-win for both bottom lines.

Set of copper pipes of different diameter lying in one heap

Copper prices increased last week on the heels of Chinese data indicating inflation growth, reassuring strong demand from the world’s largest consumer of the metal.

According to a report from MarketWatch, copper for March delivery grew 2.9% on the Comex division of the New York Mercantile Exchange last Tuesday, which was the largest one-day increase in nearly two months.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“The 2017 growth rate was supported (by) much faster than expected project ramp ups in Peru in particular, and much lower than statistically normal rates of production losses through the year,” Citi wrote, according to the news source. “We believe both of these factors will be difficult to replicate in 2017.”

Overall, a weaker dollar was supporting metals and, in the short-term, a reduction in copper stocks in LME warehouses indicates a tighter market, which could further boost prices.

Copper Bounces Back from December

Our own Raul de Frutos wrote recently that copper prices declined some in December, along with other industrial metals, but the bull narrative is still in effect:

“The recent price decline in copper prices wasn’t that dramatic. So far, it seems like the bulls are still in control. A strong dollar and a possible slowdown in Chinese demand are factors that could bring prices down. Up until now, China’s demand looks strong and the dollar hasn’t had a big impact on metal prices. Therefore, we need actual reasons to turn bearish on copper,” he wrote.

How will copper and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

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.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

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.

Two-Month Trial: Metal Buying Outlook

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.

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.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

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.

Welcome to the first MetalMIner Week-in-Review of 2017!

This week, trade issues came to the forefront as President-elect Donald Trump, now just two weeks from his inauguration, named veteran trade lawyer and former Reagan administration official Robert Lighthizer as his U.S. Trade Representative.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

While nobody could accuse China of getting a free ride from the current administration, I think it’s safe to say the U.S. Trade Rep’s office website won’t have an endorsement of the Trans-Pacific Partnership on it come January 20th.

Michigan or Michoacan?

Who gets hurt the most by a bunch of fair trade hardliners coming into office with Trump? It might look like Mexico right now — Ford Motor Company just pulled up stakes on a new facility there and instead invested in Michigan — but it’s actually China, as the U.S. trade deficit with them is our largest and the director of Trump’s National Trade Council, Peter Navarro, is a longtime critic of the way the People’s Republic trades with the U.S. and the entire world. Expect Navarro, Lighthizer and Commerce Secretary nominee Wilbur Ross to set their sights squarely on China’s trade with the U.S.

Also, China says it’s really serious about cleaning up its dirty steel mills and smelters this time.

From Russia with Hard-to-Find Oil

President-elect Trump has had mostly good things to say about Russia and he’s even boasted that he’d “get along well” with Russian Federation President Vladimir Putin, despite intelligence community accusations that Russia “hacked” the recent election by providing information from the Democratic National Committee and Democratic Nominee Hillary Clinton’s campaign manager, John Podesta, to organizations such as Wikileaks for wide distribution and dissemination. Trump may get tested early on that Russian reset, anyway, because Russia is already reclassifying its biggest shale oil find to avoid sanctions placed on the federation when it annexed Crimea.

Two-Month Trial: Metal Buying Outlook

If Russia can avoid sanctions on its oil exports what will that say about any other country thumbing its nose at international law? Interesting trade times coming up.

To begin 2017, aluminum prices inched higher with the U.S. dollar retreating and traders awaiting clarity on the market.

According to a recent report from the Economic Calendar, downward pressure on aluminum has been the story since December, but over the course of 2016 the metal saw a 13% increase. The reason? falling supply with the closure of capacity while demand grew as the result of China’s infrastructure initiatives.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

Donald Levit, writing for the Economic Calendar, said: “Even though it is typical for aluminum prices to retreat in late fall and winter, prices held steady through mid-December after Donald Trump won the U.S. presidential election in November. Trump made a campaign promise to move to further stimulate the U.S. economy, and that stimulus could potentially include infrastructure spending. That would boost aluminum demand.”

What does 2017 have in store for aluminum prices? Volatility could be the word with traders attempting to assess how the market will evolve as the year progresses.

The Auto Industry and Aluminum

Our own Raul de Frutos echoed the sentiments of aluminum’s struggles in December after a 2016 of growth. But what does the auto industry have to do with it? Raul writes:

“The auto industry is a key driver of aluminum demand. Auto sales in US and China (the world’s biggest car market) finished the year on a strong note. Total vehicle sales in the U.S. hit an 11-year high in December, aided by a fourth-quarter surge in demand that exceeded expectations. In China, car sales hit an all-time record in November, up 17.1% year-on-year.”

How will aluminum and base metals fare in 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds:

Ed. note: Jonas Divine currently serves business intelligence leader at Atlas Holdings, a private investment firm based in Greenwich, Conn., that recently acquired Atlanta-based Merchants Metals. He has contributed before to our sister site, Spend Matters, on the topic of blockchain and P2P networks, and we just published Part 1 of his most recent article on SM, titled: Bleeding on the Bayou: Procurement Near-Misses in Times of Price Volatility.

Here is an excerpt:

Fred Farmer’s interminably slow drawl echoed off the rickety galvanized siding of his Louisiana-based hot-rolled steel tube factory, unfortunately located on the banks of a bayou threatened by frequent floods and the occasional alligator infestation.

“2-3/8 pipe…4-1/8 pipe…6-3/8 aluminized…6-3/8 anodized…6-3/8 black vinyl coated…6-3/8 green vinyl coated…”

Farmer’s proud and emphatic articulation of his exhaustive product catalog called to mind a veritable Bubba Gump of the steel tube industry. He was born and raised in a rural Louisiana town called Ponchatoula about 50 miles outside of New Orleans, and rose up the ranks from maintenance to line supervisor and ultimately CEO after his uncle Willy succumbed prematurely to a heart condition (most likely brought on by decades of fried alligator and beignets consumption).

In his second-quarter-of-2008 earnings conference, Farmer introduced his third-generation family business to its new owners, an investment company represented by a team of Boston-based former management consultants with a strong affinity for 2×2 matrixes, Porter’s Five Forces diagrams and Starwood rewards points. The acquisition had barely closed a month before this distressed middle-market enterprise with flagging sales experienced a precipitous rise in raw material costs, driven largely by China’s insatiable appetite for iron ore.

After Farmer finally exhausted all possible combinations of product sizes and features, he “saw a 4% decline of topline year over year combined with rising operating costs leading to a 15% decline in EBITDA.” The tone and content landed as nothing short of a death knell to those of us responsible for turning this ship around, and one of the most critical concerns for the remainder of the year was when to purchase raw materials given that rising commodity costs had contributed significantly to Farmer’s margin compression.

Over the course of my time spent advising on supply chain matters at this new acquisition, I learned how important it is to resolve questions on how to purchase as much as or more than those dealing with when to purchase.

Read the full article on Spend Matters here.

Before joining Atlas Holdings, Jonas managed supply chain and procurement departments at some of the largest mining and metals processing companies in the world, and led business transformation projects involving technology upgrades, new ERPs, and procurement platforms. He holds an MBA from MIT Sloan School of Management and a BA from Columbia University. Contact him at jonas[dot]divine[at]alum[dot]mit[dot]edu

China’s Caixin manufacturing purchasing managers’ index rose to 51.9 in December from 50.9 in November and beat market expectations.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The figure marks the sixth straight month of growth and the strongest upturn in Chinese manufacturing conditions since January 2013.

China Caixin Manufacturing PMI. Source: Tradingeconomics..com.

By now it’s pretty clear that this growth has been the main driver of higher metal prices in 2016. Industrial production in China has been on an upswing for most of the year, mainly because of the surge in infrastructure spending.

China PMI Up

However, there are concerns that the country’s demand growth rates could slow next year. The real estate and automotive sectors are the engine propelling this rapid growth. If the demand growth from these sectors slows, this could have strong repercussions on China’s demand for industrial metals. Read more

China will impose higher power costs for steel mills operating outdated production equipment, the country’s economic planner said in a statement on Tuesday.

MetalMiner Price Benchmarking: Current and Historical Prices for the Metals You Buy

The National Development and Reform Commission (NDRC) ordered utilities to raise power prices by 0.5 yuan ($0.0719) per kilowatt-hour on top of current prices for steel mills preserving equipment that ought to be eliminated.

AISI Hires Tax and Trade Policy Director

The American Iron and Steel Institute today announced the appointment of Raphael Goodstein as director of tax and trade policy.

Two-Month Trial: Metal Buying Outlook

Goodstein has 15 years of Congressional and government affairs experience, including 10 years representing the common policy interests of the domestic auto industry as legislative director with the American Automotive Policy Council. He has also worked on Capitol Hill, for Senator Debbie Stabenow, and for a number of political and public affairs organizations.

Ezio Gutzemberg/Adobe Stock

Steel rebar prices in China dropped more than 2% to end 2016, reversing previous gains made earlier in the final week of the year.

According to a report from Reuters, coke and coking coal also remainder under pressure due in part to concerns about slowing demand from volatile trading that typically takes place at the end of the year.

Want a short- and medium-term buying outlook for aluminum, copper, tin, lead, zinc, nickel and several forms of steel? Subscribe to our monthly buying outlook reports!

“The pullback shows traders are not confident about the steel market and future demand during the winter,” Wang Yilin, steel analyst at Sinosteel Futures, told Reuters.

For the week leading up to the New Year, steel prices have been seesawing back and forth due to low turnover from major international exchanges having the ‘Closed’ sign up for the holiday season.

It’s also important to note, cites Reuters, that steel mills usually curb output in a slow construction period, which is typically the case during the winter months ahead of the Chinese Lunar New Year holiday.

2017: the Year of Steel?

Our own Raul de Frutos recently covered the top 3 reasons why steel prices will rise in the next year. He cites a Trump presidency and investors betting on steel companies, as well as rising Chinese steel prices and an overall industry metals boom as those reasons.

“We are witnessing powerful moves across the board. Even copper, a metal whose fundamentals didn’t look appealing, recently rose near 20% in a matter of days. The bullish sentiment across base metals is another reason the expect a rebound in steel prices,” de Frutos wrote.

How will steel and base metals fare for the remainder of 2016 and into 2017? You can find a more in-depth copper price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: