Author Archives: Lisa Reisman

Part One: How Green Is My Supply Chain?

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Environment, Green

The concept of climate change and the need to reduce carbon emissions is far from widely accepted in the U.S., but viewpoints are beginning to change, largely due to customer demand. Japan and the European Union were early converts to the argument that we are changing our planet’s weather patterns, and much of the current legislation is appearing in these countries. Given the trend, though, the U.S. will not be far behind.

We have all heard a great deal about carbon emissions and the ways both individuals and companies can reduce electricity usage and save on transportation. That’s the easy part. The expenditure is simple to quantify, and the carbon emissions are easy to measure. The much larger challenge for companies is measuring the carbon footprint of a product, defined here as the total set of greenhouse gas emissions caused by the production of one unit of a product. This implies knowledge of the carbon emissions released at each stage of the supply chain and production as well as the transportation of all the raw materials and components. To offer an example, the Carbon Trust, an independent company funded by the UK government, recently illustrated the components that create the carbon footprint of a can of cola.

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More Changes for Chinese Exporters

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Global Trade

It looks like China will be making further changes to its export rebate structure by the start of the new year, according to Susan Schwab, U.S. trade representative, after trade talks with Chinese authorities. At this stage, the extent to which these changes will apply to export subsidies and VAT rebates is still unclear. Amid mixed support from the home crowd, Schwab claims that this agreement, just two weeks ahead of the Bush administration’s twice yearly trade talks in Beijing, was forced through threats of WTO sanctions. Schwab’s assertion that these rebates are unfair has a slightly hypocritical ring coming from a country which provides massive subsidies to its farming community and consequently distorts the international market for a range of commodities, making life particularly difficult for some developing countries. (The U.S. is not alone in this, since the EEC is just as bad — but as committed free marketers, we are opposed in principal to all forms of subsidization.)

Manufacturers in many countries — the EEC block being typical — are VAT neutral, being able to both claim back VAT they pay on purchases and collecting VAT for the revenue service on sales. When it comes to exports, these companies are not required to charge any VAT, yet they can claim back the VAT on their raw materials. In China, this is not possible without the VAT rebate structure manufacturers pay VAT on domestic purchases, and it’s next to impossible to claim it back if they export finished goods. At present, most commodities have a partial VAT rebate structure, but this has been systematically reduced over the last 18 months under pressure from the U.S. and EEC trading blocks. Combined with a gradually appreciating currency, this has choked off exports of some products, notably steel and certain non-ferrous metals, although clearly not enough for the AFL-CIO, a federation of 54 unions representing 10 million U.S. workers who have demanded stronger action to reduce the rising trade deficit. Whatever your politico-economic position on this subject, the fact remains that steel products in particular are set to become more expensive from the turn of the year, just as massive steel manufacturing investments in China begin to come on stream increasing capacity. Expect the rollercoaster ride for the steel markets to continue in 2008 as supply and demand in different product sectors drive price increases and decreases between markets.

–Stuart Burns

The Dubai Air Show ended recently, and already the papers are announcing the massive sales secured by Airbus and Boeing — not just for their new offerings, the A380 and 787 Dreamliner, but for the stable stock in trade of A320’s and 777’s. Both makers have bulging order books with more than 1000 aircraft each on order. In addition, producers of smaller commuter aircraft like Embraer and Bombardier are also booming.

We see so many opportunities for the aircraft industry, but how does this affect the supply market feeding these production lines? After several years of sustained growth both in the West and Asia, the metals markets are already tight, particularly for the supply of semi-finished metals like plate, larger diameter bars, and the famous fasteners that have so delayed the Dreamliner. Read more

Welcome to MetalMiner!

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This may sound sad, but it’s true: We lie awake at night thinking about how manufacturers could save (or avoid spending) money on their metal purchases. It’s a strange thing to think about, but alas, someone has to do it. With this blog, we aim to take a global perspective on the issues, trends, strategies, and trade policies that will impact how you source and or trade metals and related metals services.

What kind of background do we offer? For the past three and a half years, we have been operating a boutique consulting firm called Aptium Global Inc., working with middle market companies to reduce costs for direct material purchases. Although we tried to position ourselves more broadly than just metals, companies continue to ask us for help with the global sourcing of metals, commodity hedging strategies, or plain vanilla cost reduction and cost avoidance assistance.

It isn’t illogical that the requests tend to be metals related. Both Stuart and I have backgrounds in this area. In fact, that’s how we became partners. We used to trade semi-finished aluminum and brought in some of the first Russian metal from a company called Rusal. We’ll share some war stories at a later date, but suffice it to say, importing Russian material in 1994 was not very popular. In addition, my grandfather was a metallurgist and my great grandfather started the first metals powder press company here in the US, which was sold in 2001 to GKN Sinter Metals. So in short, metals just may be in my blood.

Stuart, on the other hand, might not have any metals in his blood, but as a young industrial process and geology graduate interested in commodity trading, he kept gravitating toward metals. Soon Stuart was running an export department for a large metals brokerage, and he eventually decided to run a trading company, which is now the largest importer of aluminum bar products into the UK.

Essentially, we started this blog as a new means of communication, beyond the general musings or industry ramblings typical of many trade publications. Combining our metals backgrounds, we intend to offer commentary and opinions on news, trade issues, and other trends within the metals industry as they relate to organizations buying metals related products and services.

— Lisa Reisman

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