Commentary

When pharmaceutical manufacturer Biogen Idec planned a new headquarters building in Boston’s growing Kendall Square tech center, they knew the construction and program needs of the 325,000-square foot, five-story project would be a challenge for the architects, engineers and general contractor selected.

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Cambridge, the suburban Boston municipality Kendall Square is located in, had a zoning requirement that all projects stay under 75 feet. That meant architect Spagnolo, Gisness and Associates had to cut its original plan for a six-story building down to five stories.

Biogen had its own needs, too. The company wanted to break down barriers between its management and employees and encourage collaboration among its scientists and researchers through the architecture of the building.

Open Office Plan

The new global headquarters has no private offices, just individually designed workstations called “I spaces” and common “huddle rooms” for private phone calls or spontaneous meetings. The company scrapped telephone landlines for employees, who are issued laptops and headsets.

Panels in the ceilings and floors can be brought down to add soft walls and subdivide rooms for smaller group collaboration.

“The idea was to bring everyone together, no separate offices for executives or private areas for senior management, everyone has the same office in the open floor plan,” said Malisa Heiman, senior associate in the real estate and site planning for Biogen.

Construction Manager Consigli Construction co-located with SGA and several of the project’s subcontractors during the design stage of the project. All mechanical, electrical and plumbing subcontractors were on board during design meetings.

By using 3D building information modeling Consigli and SGA were able to design and deliver a composite slab system with steel trusses. All trusses were prefabricated, some smaller with penetrations and spaces for mechanical systems in beams.

One Less Floor

Consigli and SGA were able to shave the entire mechanical floor off the building and achieve the 75-foot zoning height required by putting the mechanical systems in the steel frame. With the utility floor squeezed into the building’s steel frame was completed seven months early and $2.3 million under budget. Biogen took occupation in late 2013. The artifact handed over for facility management was a 3D model.

“We demanded detail early one. The level of coordination allowed fabrication to start more quickly,” said Andy Deschenes, director of project services and innovation at Consigli.

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That China uses overseas investment as a tool for political as well as economic advancement is no surprise to anyone.

Why Manufacturers Need to Ditch Purchase Price Variance

Beijing has come under criticism in the past for investing in places like Zimbabwe and Sudan regardless of the human rights flavor of the regime in power, but such criticism is like water off a ducks back. China is in it for China’s gain and cares little for what others may say.

It will be intriguing looking back 10 years from now to see what some of these emerging markets have given away to China in return for much-needed investment. Beijing is not stupid and exacts a price for it’s infrastructure and development investments in in the form of ownership of mines and agricultural assets useful for their industry and food supplies.

A Tale of Two Centuries

Many would argue this is no different from western nations’ exploitation of African and South American countries in the last century, but you would certainly hope the recipients had learned from such experiences. One advantage China wrings from such deals is often the supply of materials and equipment in addition to expertise and finance.

In many cases even the workforce is supplied, too, in the construction of infrastructure projects. In the face of growing global alarm at rising Chinese steel and aluminum exports, recipients of direct investments can hardly complain about the provider supplying materials, so major road, rail and power projects provide an opportunity for substantial Chinese exports.

China in Brazil

This appears to be one of the major attractions in investment decisions made this month in Brazil following Premier Li Keqiang’s visit to Brazil, Columbia, Peru and Chile. Li announced billions of dollars of investments while there last week, potentially up to some $50 billion to Brazil alone according to Reuters, on top of a similar amount in other South American countries.

In return, Brazil has gained not just desperately needed finance and investment but concessions for exports such as a lifting of the 2012 beef ban following an outbreak of mad cow among Brazil’s herds. According to the Guardian newspaper, trade between China and Latin America as a whole exploded from barely $10 billion in 2000 to $255.5 billion in 2012, while Chinese-Brazilian trade mushroomed from $6.5 billion in 2003 to $83.3 billion in 2012.

Although China is just the 12th-largest investor in Brazil, it is Brazil’s largest export market, mostly of raw materials, a situation Brazil would dearly like to change if it were only competitive when it comes to manufactured goods. One area of expertise is aircraft, part of the recent deal is a $1.3 billion sale of 22 Brazilian Embraer commercial jets to China’s Tianjin Airlines.

Anyone familiar with the trials Vale SA has been going through gaining agreement to use its fleet of new Valemax super ore carriers docking at Chinese ports, will not be surprised to hear the iron ore producer has finally caved in and sold four of the vessels to China Merchants Energy Shipping Co. Ltd. for an undisclosed sum. It was only ever about China having a role in that trade.

Construction has started on a 2,800-kilometer transmission line by China’s State Grid Corp., the world’s largest utility to link the Belo Monte hydroelectric dam under construction in the Amazon to the industrial state of Sao Paulo whilst much talk is being made of a possible railway from the southeastern Brazilian port of Santos more than 3,500 km (2,200 miles) to the Peruvian Pacific port of Ilo.

For Brazil, it offers the chance to avoid the Panama Canal and, for China, lower-cost access to Brazil’s markets via the Pacific in addition to the steel, rolling stock and associated equipment that would no doubt be part of the deal.

China has become adept at, as the Japanese before them, combining finance, expertise and material supply in their overseas investments. State driven and financed, they can afford to play the long game and maximize political and well as commercial aims. In that regard, cash-strapped but economically more developed South America has much more potential than Africa did. Expect more of the same in the years ahead as China seeks to both spread its influence and put those massive reserves to use abroad.

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Nickel has perplexed and confounded investors for the last year or more.

Prices had been expected to rise on the back of an anticipated shortfall in ore supply, only for the expect opposite to happen. Yet Norilsk Nickel, in it’s latest 2015 Strategy update, reported in a Platts blog that China’s inventories of nickel ore are down significantly, with only around two months of consumption left.

Why Manufacturers Need to Ditch Purchase Price Variance

Norilisk also believes China’s dependence on imported refined nickel is set to rise. It estimates that total nickel demand in China in 2015 will be made up of 42% imported refined nickel, 47% imported feed, and around 11% of domestic feed.

Imports Rising

In 2014, by comparison, total nickel demand in China consisted of 28% imported refined nickel, 61% imported feed, and 11% domestic feed. In its 2014 full-year results, the company forecast a 20,000 metric ton global deficit this year down from a 93,000 mt surplus in 2014. While a number of analysts are also forecasting a revised deficit between 20,000-45,000 mt this year, you have to say previous predictions have failed to materialize so why would this time be any different?

Maybe the issue here is that Norilisk is a producer and they are going to be bullish by nature, and indeed not all agree with Norilisk’s estimate of the current situation. The World Bureau of Metal Statistics reported just this week that the nickel market was in surplus From January to March 2015 with production exceeding apparent demand by 32.9 kilotons, less of a surplus than was running in 2014 but still significant.

Nor did they see it trailing off, in March nickel smelter/refinery production was 147.8 kt and consumption was 137.1 kt suggesting the surplus is continuing and may run through Q2.

The long-awaited dearth of ore supply resulting from the Indonesian export ban last year has failed to materialize. Chinese buyers have switched to a blend of Indonesian and Filipino ores for making nickel pig iron and an increase in refined nickel imports to meet demand.

Demand: Still Down

Demand is down, anyway. The Chinese economy is growing more slowly and stainless production (the source of two-thirds of nickel demand) is, at best, lackluster. In addition we are now coming towards the quieter summer period when demand falls and so it is unlikely the demand side is going to force a change in the downward trend in prices. Demand has stabilized in Europe after previous years’ weakness, but distributors are said to be well stocked and a restocking cycle is unlikely when most are anticipating further weakness in the nickel price.

As prices have fallen, stocks have risen, most obviously on the London Metal Exchange. Part of this rise can be attributed to finance stocks moving out of China and into supposedly safer LME Asian warehouses, but even so some 446,000 mt of LME stocks are going to take some working through and those speculators that have headed for the exits are not likely to pile back in again until they see a sustained downward trend in stocks.

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Autodesk recently released its 2016 software portfolio of design, engineering, and construction products.

Why Manufacturers Need to Ditch Purchase Price Variance

The 2016 suites for buildings and civil infrastructure projects are the Autodesk Building Design Suite, Autodesk Infrastructure Design Suite and Autodesk Plant Design Suite.

The biggest change is that each design suite now includes Autodesk ReCap, a laser scanning and large image processing program that allows project teams to capture existing conditions and directly import them into a 3D model.

The Revit Building Information Modeling platform also has new rendering engines. The “Mental Ray” rendering engine that has been used since Revit 2008 has been replaced by Autodesk Raytracer and Rapid RT in the 2016 version. This can mean, in some cases, a leap from 2 hours for a detailed rendering to 3 minutes.

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ive thanks to all of the service men and women who served our nation and defended our freedom today, let us also remember the international trade pacts and enforcement bodies created to keep wars and conflicts from ever being fought again over such things as one nation illegally exporting millions of tons of its products into another nation. Which only happened at least nine times before.

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Here at the MetalMiner week-in-review, let’s give thanks that such wars are no longer fought in anything but the World Trade Organization and look back at some of the very, very cold trade wars looming and what can be done about them now.

China Now Admitting Dumping

The Chinese have previously taken the tack of apologizing for their domestic steel industry. Highly subsidized at the state and national level, Chinese steel companies have been accused of dumping in the US and EU. Previously, officials from Beijing have thrown their hands up and essentially said “we’re trying to get the situation under control.”

That all changed this week. Ministry of Commerce spokesman Shen Danyang said the rise in steel exports is due to higher global demand and is a result of Chinese steel products having strong “export competitiveness.”

Export Competitive US GOES

What a novel concept! Maybe if our government subsidized AK Steel and Allegheny Technologies at the state and national levels US grain-oriented electrical steel (GOES) could be as “export competitive!”

The EU is already mad at us for, yes, dumping GOES there. Seriously. The European Commission has just set tariffs on imports of GOES following a complaint lodged in June 2014 by the European steel producers association, Eurofer. There are only about 16 manufacturers of GOES in the world, so, apparently everyone manufacturing it is dumping GOES in the EU.

The World’s Dumbest Trade ‘War’

Okay, so trade agreements may not have made the steel industry harmonious and happy. Surely most metals are okay, right? Hasn’t the green energy movement made the production of, say, solar panels seamless? Surely you jest.

The spat between the US and China over solar panels has been called by Slate and others the dumbest trade war in the world. And it is. A German company, SolarWorld, has secured duties against Chinese manufacturers of inexpensive silicon solar panels. And bulk silicon. The fight is threatening adoption of solar in the US and driving up the price of other silicon products.

Thanks a lot, Germany.

While we’re thankful that our trade wars aren’t real wars, anymore, our trade agreements haven’t exactly delivered on the promise of an even international playing field, either. The MetalMiner week-in-review suggests manufacturers do everything they can to stay “export competitive.”

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China has changed its tack on steel exports.

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In previous years it has sought a more conciliatory position to complaints by trade partners, a WSJ article says in the past CISA, China’s steel trade association, has sought to persuade local steel mills to curb exports and show restraint but this year, in the face of an unprecedented surge in volumes, Ministry of Commerce spokesman Shen Danyang is quoted as taking a much more defensive line saying the rise in steel exports is due to higher global demand and is a result of Chinese steel products having strong “export competitiveness.”

Chinese Now Say Exports ‘Justifiable’

Set against a backdrop of the EU’s recent investigation into dumping of cold-rolled coil from China and Russia, Shen is reported to have come out fighting, saying “Under such circumstances (demand and competitive pricing), I feel that it’s quite normal for Chinese steel exports to these countries to be rising, and it’s quite justifiable.”

Meanwhile, the WSJ adds the US, Australia and South Korea have also signaled that they are lining up support for trade action against Chinese steel exports, which rose by 50.5% last year to a record 93.8 million metric tons and have continued at a high level this year.

Chinese steel mills are on a roll according to data reported by the WSJ. Between September last year and January this year, the volume of China’s outbound steel shipments each month shattered the preceding month’s record. While in the first four months of 2015, steel exports were 32.7% higher than a year earlier.

The reason isn’t hard to find, domestic steel prices in China have been on a slide as demand has collapsed. According to a Bloomberg article Infrastructure and construction together account for about two thirds of China’s steel demand, citing HSBC research, and construction is slow as housing prices fall there.

Construction Slump Continues

New home prices slid in 69 of the 70 cities tracked by the government in April from a year earlier, according to National Bureau of Statistics data. As a result construction-related steel prices such as rebar have hit their lowest level since 2003.

What’s worse is the peak buying period for the construction sector is now in the past and demand would fall for seasonal reasons even if construction was strong. According to Reuters, prices have dropped 13% so far this year with the most-traded rebar futures contract for October settlement on the Shanghai Futures Exchange down to 2,355 yuan ($379.71) per ton, while MetalMiner’s own China tracking service has recorded a 16% fall in domestic steel prices this year from 2,810 yuan/mt at the beginning of the year to 2,340 yuan now.

What is Chinese ‘Cost?’

Such a slump in prices has aided steel mills in their drive to dump excess capacity overseas. Is it below cost? What is the cost price in China? what are a mill’s true costs for state enterprises that receive all kinds of support both at the regional and state level?

Steel mills are under pressure to close excess capacity but so far the result has been limited, excess capacity is being offered for export rather than any real attempt made to exercise market discipline and shutter plants. The trend is likely to get worse before it gets better, particularly if Beijing’s hard line continues, we can expect more trade disputes and possibly lower prices in the year ahead.

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Autodesk, Inc. announced the release of its 2016 Design Suites at a launch event in Boston this week, offering more control over all aspects of the design-build process through a connected desktop and cloud user experience.

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For structural steel, the main difference in the 2016 suite of software products is a much tighter integration of the Advance Steel, a 2013 acquisition, and the Revit 2016 3D building information modeling platform.

“The means of production – how we think about and deliver buildings and infrastructure, both intellectually and physically, is changing,” said Amar Hanspal, senior vice president of Autodesk’s information modeling and product group. “By 2020 there will be 50 billion connected devices in use, with the number rising by 20 billion per year. Buildings are joining the digital world.”

New Rendering Engines

The 2016 version of Revit has new rendering engines that can deliver a rendered scene in minutes instead of hours under the old engine. It also has linked model cropping and better support of the open-source IFC file format.

“Customers don’t want to work in a different environment when doing design and detailing,” said Jim Lynch, vice president of Autodesk’s building group. “No longer have to use (a separate design tool) for detailing. Steel, cast-in-place concrete can all be done in Revit. The plan is to integrate (Advance Steel’s design tools) into Revit. We will keep Advance Steel as a separate product but WILL make it work seamlessly in the Revit environment.”

Better Integrated

Plant 3D, a plant design product, and Advance Steel have also been integrated so you can bring Advance Steel content into Plant 3D.

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There is a lot of talk in the business press about trade agreements.

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Most of us skip such articles on our way to the sports pages as it’s that impacts on such a macro scale that it is of little relevance to us day to day, but that is to overlook the massive impact trade liberalization has had on our lives over the last twenty years.

Although the low-hanging fruit has already been plucked, further agreements could yet impact, for good and bad, in the years to come. Lawmakers are split on many lines over the issue. Some are intrinsically against liberalization on the basis that it can expose domestic industries to unfair competition from abroad, that by reducing trade barriers, it encourages off shoring and the export of jobs overseas.

What is Trade Liberalization?

Others say trade liberalization raises GDP for all and the rising tide lifts the boats of everyone’s income levels, in developed and developing markets. The experience of the last 20 years can be used to support both arguments and, in reality, both are true to a greater or lesser extent.

Currently considerable argument rages about the President’s two plurilateral (by which we mean between a limited number of partners) trade agreements known as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

Why Only Certain ‘Partners?’

The fact these agreements will be between a limited number of countries is itself a bone of contention. Many argue only multilateral agreements such as the failed Doha negotiations are the way to go because they encourage a universal set of rules and standards, but with the more readily agreed issues resolved further progress is proving increasingly difficult and acrimonious.

The FT did a quick idiot’s guide to the TPP and TTIP summarizing them as follows. The TPP is a negotiation with 11 countries, most importantly Japan. Its partners account for 36% of world output, 11% of population and about one-third of merchandise trade. The TTIP is between the US and the EU, which accounts for 46% of global output and 28% of merchandise trade.

The main partner not included in these negotiations is, of course, China. Import tariffs are only a part, arguably a small part of what these agreements are about. In the FT’s analysis, the agreements are more about making rules more compatible with one another and more transparent for business, particularly around intellectual property rights.

Not a Trade Booster, An IP Defender

They are an effort to shape the rules of international commerce, the FT argues and quotes Pascal Lamy, former director-general of the World Trade Organization, saying that “TPP is mostly, though not only, about classical protection-related market access issues . . . TTIP is mostly, though not only, about . . . .  regulatory convergence.”

The benefits of each to national incomes is small. Even supporters do not claim the level seen in earlier trade agreements. The FT quotes independent analysis suggesting between 0.4% and less than 1% rise in national incomes as a result, with the US-EU TTIP towards the upper end of the range and the US-Asia TPP towards the lower end. The most reliable guess is they will be positive but modest. That will make the President’s job correspondingly harder to get past a skeptical Congress.

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According to a report, crude-steel output in China dropped 1.3% to 270.07 million metric tons in the first four months of 2015 as compared to the same period in 2014. The World Steel Association has forecast that China will end up using far less steel this year and maybe even the next. Which again means more supply and far less demand.

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The report quoted Alan Chirgwin, BHP Billiton iron ore marketing vice president, as saying steel supply was expected to rise by about 110 million metric tons this year, exceeding demand growth by around 40 mmt.

Yet this has not fazed Rio Tinto Group, for example, which recently announced it would continue with its plan to produce iron ore at full capacity despite the fall in prices. While BHP and Brazil’s Vale SA have, for now, stepped on the brakes vis-à-vis their medium-term plans, team Rio, on the other hand, thinks reducing production costs will help it hang on to its lead…and profits.

Betting on a Comeback

Rio Tinto sees China coming back with renewed vigor and driving global iron ore demand through 2030.

Where does that leave India? So far as iron ore or even steel consumption is concerned, China is miles ahead of India, even in the fatigued condition it finds itself today. India, as reported by MetalMiner, drew a blank for about two years due to a court-imposed ban on ore mining, which left its steel companies at the mercy of imports, something that they continue to rely on even today.

That had also affected its iron ore exports, especially from the ore-rich provinces of Goa and Odisha. India’s iron ore imports went up dramatically to a record 6.76 million tons in the first 7 months of the 2014-15 fiscal year. Once, the country was the third-largest supplier of iron ore to the world, but, because of the export duty and a national mining ban, it had turned into an importer.

Analysts predict India was likely to remain a net importer of iron ore in 2015-16 as well, no thanks to the continued drop in falling international rates. The only silver lining, claimed analysts, could be that due to the resumption in the domestic production of iron ore, the quantity of imports may not be as high as the last fiscal year.

Captive Market

India’s steel companies do not have captive mines, so they have to get their average 95 mmt a year of iron ore from elsewhere. With international price of ore hovering today at about $50 per mt for high-grade ore, it is too attractive a deal for Indian steel mills to be passed on. As reference points, last year, iron ore imports happened when rates had touched $90 per mt.

In all this, Australia, a country that sells about 80% of its ore to China, sits in a happy position. While it hopes that the recent cuts in interest rates will revive the Chinese economy, and thus its demand for iron ore and coking coke, it is also looking increasingly to India to pick up its stock. Last year, for example, as reported by MetalMiner Australia had approved Adani Group’s approximate $15.5-billion (AUS $16.5 billion) Carmichael coal project in Queensland that could yield up to 60 million mt of coal per year. That was just the beginning. For the Aussies, if the dragon’s appetite for iron ore and coking coal is satiated, the hungry tiger is always lurking in the background.

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When the Tiger and the Dragon dine together the world sits up and takes note.

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Signing business agreements worth $22 billion is a big deal so Indian Prime Minister Narendra Modi’s recent visit to China made big, bold headlines here. Some of India’s old, and some not so old (Adani, Bhusan Power and Steel), players in the steel and power sectors, were signatories to the 26 deals.

Steel and Energy Deals

The notable contracts included the one between India’s IL&FS Energy Development Co. and China Huaneng Group for a 4,000-megawatt thermal power project, and India’s Bhushan Power and Steel sealing a pact with China National Technical Import and Export Corporation for an integrated steel project in Indian province of Gujarat.

So here were two Asian, nee global, giants, breaking bread and talking business at the same table, sending analysts scurrying to their laptops to chalk out spreadsheets and draw pie charts in an effort to understand the impact of all this in the long term.

While business leaders of both nations, including Alibaba Group Chairman Jack Ma, spoke of long-term interests, such talk brought the arclight swinging back to the present and short-term situation currently prevailing in the Asian region, especially in iron ore and coking coke, two crucial ingredients in making steel.

There’s no doubt in anyone’s mind that steel is the mainstay of Asia’s infrastructure, a fact that has had iron ore and coal miners — and even steel majors in China, India and as so far as Australia — jockeying for a major piece of new market share. With demand from Europe and the US lacking, suppliers in all three countries are walking a thinly veiled tight rope to ensure their survival.

Wither Demand

Once a destination of hope, the Chinese dragon, for now, has lost some of its hunger. Some say next-door neighbor India is where one can find fresh action. The jury’s honestly still out on that one, though. But the slowdown in China’s economy means less need for steel, in turn, lowering the demand for ore and coking coal. Leaving miners re-tweaking their business plans.

Last year, for example, the Rio Tinto Group, BHP Billiton Ltd. in Australia, and Vale SA of Brazil, to stem the tide, had stepped up low-cost output to pump up volumes, leading to a glut. Now, everybody’s mantra seems to be – cut production costs faster than the falling prices.

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