Metal Fabricated Parts

The federal government’s Highway Trust Fund is nearly dry again. Remember when we played this game last year?

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Transportation Secretary Anthony Foxx on Friday said, “we ought to be embarrassed as a country” about the state of the nation’s infrastructure, as lawmakers once again scramble to beat a May 31 deadline for extending federal transportation funds.

A Patch for the Patch

Lawmakers have talked about passing a $10 billion patch to extend transportation funding until the end of the year, but Foxx said temporary extensions are not sufficient enough to address the nation’s infrastructure needs.

“We ought to be embarrassed as a country,” he said after an appearance at a Washington, D.C., Metrorail subway station in Northern Virginia.

Foxx has a point as last year’s fix for hundreds of millions of dollars in highway, bridge and public works projects was supposed to give lawmakers time to come up with a comprehensive solution to funding the steel, concrete and underground pipe and tunnel work necessary to ensure safety of our rapidly aging infrastructure. The Highway Trust Fund is currently funded only by gas taxes and a user fee that hasn’t been adjusted since 1993. The fund runs out of money on May 31.

Manufacturers Urge Long-Term Fix

Dennis Slater, president of the Association of Equipment Manufacturers, recently wrote in a Milwaukee Journal-Sentinel Op-Ed that, “the cycle of short-term fixes already is damaging our economy. States already have pulled back on hundreds of millions of dollars’ worth of investment amid uncertainty over whether Congress will pay its trust fund tab. That hurts job creation right here in Wisconsin, among our state’s many manufacturers, contractors and workers in related industries.”

Slater and AEM urged Congressman Paul Ryan, chairman of the influential House Ways and Means committee, to push for a 5-year, fully funded fix for the trust fund rather than another short-term extension.

“Ryan has begun to float a short-term extension to buy himself more time to craft comprehensive tax reform legislation — a laudable goal — which he says would account for highway investments,” Slater wrote. “But the safety of America’s roads and bridges shouldn’t depend on the fate of tax reform, which faces an arduous path forward on Capitol Hill.”

Congress has three weeks to act.

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A few weeks ago I had dinner at a friend’s. The floor ended up kind of messy so I offered to sweep the floor in gratitude for the delicious meal.

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But that wasn’t necessary because my friend had a vacuum-cleaning robot. I had heard about these robots before but never thought they would work so well. I was impressed.

The robot, with sensors built in, was able to avoid every obstacle in the house and recognize the dirtier areas so it could stay longer in those. Finally, when the robot finished cleaning it automatically came back to its spot to recharge itself. This little vacuum-cleaning robot has become exponentially better and cheaper during the past few years and today even a cat can drive one of these.

I have No Need of a Protocol Droid

But this is just a pretty basic robot. Today, robots come with simple user interfaces. Take, for example, Baxter, a two-armed robot with an animated face to create friendlier interactions with humans. The robot doesn’t need complicated code programming, it just learns through guided imitation, allowing line workers to “coach” the robots. Moreover, with the exponential growth of artificial Intelligence (AI), putting robots through their motions will soon be replaced by simply having a conversation with them. Robot & Frank is a movie that I think describes pretty well what robots with AI will look like in the near future.

Furthermore, we are also seeing exponential progress in robotics’ agility and mobility. Thanks to AI and a new generation of actuators and sensors, robots of all sizes and modes of mobility are already in the marketplace. Now robots can run, crawl, climb or even fly like a bird.

During the past few decades, advances in robotics were relatively slow as they were basically run out of university labs or programs funded by governments, such as the Defense Advanced Research Projects Administration (DARPA) robots above. That all changed about two years ago when Google announced the acquisition of eight robotics companies and Amazon is already getting into the drone business. Robotics can only grow faster now that the big players are in the game.

I’m Sorry, Dave, I’m Afraid I Can Do Your Job

Robots are already replacing humans in the supply chain. Foxconn (a Chinese manufacturer for Apple’s iPhone) has a fully automated factory operating in Chengdu. The company has been annually adding 30,000 industrial robots to its factories.

As chips and sensors get cheaper, there will be fewer reasons to hire humans when robots can get the job done. Robots don’t take vacations, nor time for lunch or sleep and they can work an assembly line for as little as $4 hour.

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CloudDDM is currently operating 100 high-tech 3D printers running 24 hours, 7 days a week in UPS’ Global Supply Chain Solutions Campus in Louisville, Ky. CloudDDM’s founder, entrepreneur Mitch Free said just three employees: one for each of the eight-hour shifts, can oversee the entire operation. UPS handles packaging and shipping of parts and prototypes created using CloudDDM. Free said the facility can turn around orders that typically take a week to complete in 24 hours.

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“We offer a strong value proposition to design teams who need to iterate quickly, those who produce products in low volume, those who want to customize products on demand as well as the spare parts replacement market,” Free said. “Our customers require high-quality parts with structural integrity, the consumer-grade 3D printers would not be adequate for their needs. Further, our customers trust us to make sure their proprietary data and the details of their next generation product are secure.”

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Although stainless steel demand is expected to grow moderately this year, service centers are flush with inventory which is putting pressure on US mills.

Why Manufacturers Need to Ditch Purchase Price Variance

Combined with successive months of declines in nickel prices, service centers are only purchasing what is absolutely necessary. Both domestic mills and Asian mills have robust North American inventories, a stark contrast from a year ago when lead times went beyond the standard 6-8 weeks, causing service centers to seek alternative sources.

Technical Issues Hurting Mills

Another exacerbating factor in last year’s supply was Outokumpu’s technical issues with its cold-rolling mills and a lack of alternative domestic supply led service centers to seek other sources. With lead times extended, the domestic mills were able to pass through several base price increases in 2014.

With higher US base prices and the strength of the US dollar, Asian imports did not subside. Asian producers need other markets for their surplus material as Chinese demand is weak and both Europe and India have taken anti-dumping actions against China.

End market demand is strong for automotive,​ residential​ appliance and food service/food processing equipment. The only market that appears to be suffering is energy which is due to the low price of oil. Stainless demand is decent according to many sources and stainless base prices will remain under pressure.

Inventory Backlog

The North American market​ ​is ​saturated with inventory​ ​so​ lowering the base price will not spur on demand. Until service centers reduce their inventory backlogs and nickel prices start to improve, service centers will not buy, regardless of price. Service centers need to focus on getting their inventories in check before they resume anything resembling regular buying patterns. ​​Unfortunately, the mills are under pressure to book capacity which oftentimes leads to acts of desperation.

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Today in MetalCrawler, losses widened at a major stainless steel manufacturer, an aluminum giant gets a new CEO and two design and construction software companies team up for better workflows for HVAC designers and installers.

AK Steel Loss Widens

AK Steel Holding Corp. said its first-quarter loss widened from a year earlier on a big write-down related to its investment in iron-ore pellet joint venture Magnetation LLC.

Why Manufacturers Need to Ditch Purchase Price Variance

Average selling prices fell 8.9% from a year earlier, while shipments increased 39%, with a boost from an acquisition and strong demand from the automotive sector.

Ohio-based AK Steel in March predicted that shipments of carbon and stainless steel to the automotive market would remain strong because of market demand. However, the company warned that it expected its shipments to decline 14% from the fourth quarter to roughly 1.7 million tons on weakness in the carbon steel spot market, which AK Steel attributed to rising imports.

Martens Leaves Novelis

Novelis Inc., the US’ largest aluminum recycling and rolling company, has announced the departure of Philip Martens as the company’s president and CEO. Replacing Martens as president on an interim basis is Steve Fisher. Novelis says it has begun a search for a permanent CEO.

Martens, a former Ford Motor Co. executive, joined Novelis in 2009. During his tenure with Novelis the company shifted its focus toward servicing the automobile industry.

Vulcan Works With AECOsim for Ductwork

Geo-positioning and construction software manufacturer Trimble recently started supporting new construction modeling workflows with enhanced integration between Bentley Systems‘ AECOsim Building Designer software and Trimble’s Vulcan sheet metal cutting software for the HVAC market. The new workflow integration enables design models to be shared easily, securely and accurately. The move expands the companies’ ongoing collaboration around “Construction Modeling” and enhanced information mobility.

Vulcan is a sheet metal cutting software product for HVAC contractors, design/build firms and duct manufacturers, who rely on the software to increase shop productivity, plan duct design and installation and reduce waste.

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This week, the UK’s Metalysis and GKN Aerospace announced a bold, new process that’s a significant step forward in the adoption of 3D printing/additive manufacturing for aerospace. The advance will allow users to essentially sinter titanium from rutile powder, a process that previously could be accomplished with only lighter metals.

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The cost of the powder in 3D parts makes up roughly 50% of the final cost so a significant reduction in powder costs could be a major spur to the adoption of such technology in more applications and in industries beyond aerospace and medical devices, such as automotive.

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An exciting development in the UK heralds more widespread adoption of additive layer manufacturing, or 3D printing, from titanium powder far beyond its current limited use in the aerospace industry.

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The UK’s Aerospace Technology Institute (ATI) has agreed to invest £1.5 million ($2.3 million) in a collaborative R&D project, led by GKN Aerospace and Metalysis, the specialist metals technology company with partners Phoenix Scientific Industries Ltd. and The University of Leeds to develop the use of Metalysis’ high quality, low-cost titanium powder for use in aerospace additive manufacturing for the first time with a commercial partner.

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The US ranks 41st in the world in terms of the ease of gaining federal permits to proceed with construction or infrastructure projects, according to the 2014 World Development Indicators‘ Ease of Doing Business Index.

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Philip K. Howard of Common Good, recently discussed with us how permitting, not funding, is the biggest obstacle to renewing and replacing the nation’s crumbling infrastructure.

A Chief Permitting Officer

Senators Rob Portman (R. – Ohio) and Claire McCaskill (D. – Mo.) have introduced a bill that requires the first chief permitting officer for federal agencies. The bill would impact projects that cost more than $25 million and receive federal dollars, which includes most interstate roads and bridges. However, it does not give the new CPO the right to force individual agencies involved with projects to make decisions or move forward on projects in a timely manner.

“It’s a multi-headed federal bureaucracy that we have,” Howard said. “The problem with their bill is the CPO doesn’t have any authority. He can’t lean on one unreasonable agency if it’s holding up a project. There needs to be a dialectic here. If any one of 19 different agencies involved (in the Bayonne Bridge project in New Jersey) decides it’s going to dig in its heels in, there is no alternative but to give in to what they want. That feeds the paralysis. There needs to be a presumptive authority somewhere. There needs to be someone who can cut through that. If that authority is too high-handed that won’t work, either. You want an incentive for everyone to be reasonable and agree to make decisions within a reasonable timeline.”

In countries that rate higher on the Ease of Doing Business Index, interstate road or bridge projects there is a permitting officer or a department designated as the one stop for permitting and review. You can’t ignore it. There is an internal mechanism where agencies inside the permitting process can, essentially, complain if their concerns are being ignored by the overseeing agency and its CPO.

“If the question is the adequacy of environmental review, the decision maker to draw the line on that would be an environmental official,” Howard said. “If it’s a powerline running through several states, it should be the agency responsible for the adequacy of the power grid.”

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The Metals Service Center Institute (MSCI) recently held its Specialty Metals Division Conference in Phoenix. Attended by 236 people, the conference brought in member service centers and mills from the North American stainless, tool steel and nickel alloy industries.

While I am no longer part of the MSCI membership, I eagerly awaited the return of attendees to hear about it secondhand. The event, primarily networking in nature, included producers, distributors and service centers.

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Three key themes emerged from this year’s conference: stainless demand will grow this year, service centers must embrace their brands and also seek out innovation.

Anti-dumping Despite Demand Growth?

The specialty metals industry demand will see growth this year. Key stainless drivers in the automotive and appliance sectors have solid demand. Stainless prices, however, remain under pressure even though domestic mills announced base price increases in Q4 2014. Nickel’s London Metal Exchange decline in recent months and the import surge has placed downward pressure on stainless prices.

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The nation’s reliance on imported minerals has more than doubled in the past 30 years and manufacturing executives say the lack of domestic exploration has affected their businesses.

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In a recent PricewaterhouseCoopers report published by Minerals Make Life, 78% of high-tech industry CEOs said that their businesses face minerals and metals scarcity. 73% of automotive CEOs and 67% of renewable energy CEOs agreed that their businesses face minerals and materials scarcity.

Though the US is home to more than $6.2 trillion worth of key mineral resources US-based businesses imported more than $42 billion worth of minerals last year to help meet manufacturing needs.

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