Gearing Up for 2015
Tuesday | 21 October, 2014 | 9:27 am
By Corinna Petry
October 2014 - Like most economists, who are lucky if they’re half right with their predictions, business journalists rely on the past—and on their sources’ long experience—to produce educated guesses even with the knowledge that the past is not always a predictor of the future.
But when there is such a preponderance of evidence supporting the view that the economy in North America is finally treading on solid ground, it’s difficult not to view 2015 with some bit of hopefulness.
Let’s address some of the key indicators the metals industry typically follows. September’s manufacturing Purchasing Managers Index landed at 56.6 percent which, although lower than August’s reading, reflects growth in new orders for 16 consecutive months, 15 straight months of job growth and survey respondents who, despite geopolitical unrest, provided a generally positive business outlook.
The Census Bureau’s full report on durable goods shipments and new orders is a revelation. Year to date through August, shipments from all manufacturing industries grew 2.8 percent; for durable goods producers, shipments rose 4.8 percent; industrial machinery shipments soared 35.8 percent; and automobile shipments grew 8.9 percent.
The value of new orders for iron and steel mills through August improved 4 percent from 2013; for aluminum and other nonferrous producers, new orders grew 8.5 percent—that’s arguably better than China’s pace!
Business journals report construction spending figures each month but the fact is the government has revised its figures upward—sometimes substantially—every month this year. For example, May and June’s revisions had total nonresidential construction put in place add 1.5 and 2.7 percentage points of value, respectively. That’s close to $2.2 billion in incremental spending not accounted for in the initial estimates.
“Warehouse and multifamily construction seems to be continuing strong,” a metals fabricator told the Institute for Supply Management’s Manufacturing Business Committee last month.
Another positive indicator is rail traffic. The American Association of Railroads reported that the volume of freight through Sept. 20 totaled 27 million carloads, and has averaged close to 710,500 carloads per week, up 4.3 percent compared with 2013.
PwC, in a July 2014 outlook study, found 52 percent of surveyed U.S. manufacturers planned capital projects over the successive 12 months, compared with 40 percent who had such plans in mind a year earlier.
The investment trend in the metals sphere is possibly even more pronounced as producers, distributors and fabricators—particularly those trying to move aluminum into automotive and light truck frames and those trying to move pipe into the oil patch—are expanding capacity in the U.S., Canada and Mexico.
What Modern Metals is offering readers this month are the ongoing and upcoming trends that will help them to make sense of a very complex beast: the global market. Trends run the gamut such as higher North American auto sales and production, lightweighting of passenger vehicles for greater fuel efficiency and lower emissions, lightweighting of jet engine components for the same reasons and stricter regulations for safe transportation of raw fuels that may be a boon for carbon steel plate demand.
Readers also have to be aware of cycles, like those affecting Chinese steel exports or the fact that mines are reaping greater quantities of commodities but not necessarily buying new equipment to get at the material, or Turkish steel mills’ diminished purchases of U.S.-generated ferrous scrap; and of foreign policies, like Indonesia’s ban on nickel ore exports.
In case it hasn’t been clear up to now, the outlook for 2015 is mostly positive, but competition, domestic and foreign, is always the overriding force that determines whether volume, price and demand forecasts are in balance. MMSource: Modern Metals