Jim Olsztynski 2014-05-30 01:25:01
Reshoring Gains Momentum ASA Materials Market Digest is published monthly by the American Supply Association. The following information is for April 2014. In a 2013 survey of U.S.-based manufacturing executives, the Boston Consulting Group (BCG) found that 54 percent of the respondents with overseas plants said they already have plans to bring production back to the U. S. or are considering it. Only 37 percent responded that way in February 2012. One reason so many pine for home-sweet-home is a narrowing of the productivity-adjusted wage gap between the U.S. and China, which, when wider, caused most companies to leave the U.S. in the first place. BCG projected that reshored production, coupled with rising exports, will create between 2. 5 million and 5 million American jobs by the end of this decade. Besides labor costs, U.S. manufacturers have learned — often the hard way — that producing goods overseas enacts various penalties that erode profits and contribute to a decline in product quality and customer service. Key factors driving reshoring include proximity to customers, access to skilled labor, transportation costs, supply-chain lead time and ease of doing business. Carbon Steel U. S. service center steel shipments in February 2014, increased by 0.4 percent from February 2013, according to the Metals Service Center Institute (MSCI). 2014 year-to-date steel shipments are up by 0.2 percent from the same period in 2013. Steel product inventories increased 0. 8 percent from February a year ago and 0.3 Percent from January. U. S. steel mills enjoyed a 3.4 percent increase in shipments in January over last December, the American Iron and Steel Institute (AISI) reported. However, the 7. 895 tons shipped represented a 3.8 percent decrease from 8.210 tons shipped in January 2013. Steel import permit applications for February declined 2. 0 percent from January, according to AISI. For the first two months of 2014, total and finished steel imports were up 24.0 percent and 15.0 percent, respectively, from the same period in 2013. The estimated finished steel import market share in February was 25.0 percent and is 25.0 percent year-to-date. World crude steel production increased 0.6 percent in February compared to February 2013, said the World Steel Association (WSA). Nobody would want to smoke, snort or shoot the stuff , but that didn’t stop Mexican drug cartels from Stealing about $1 billion worth of iron ore in 2013, according Canacero, the country’s national steel association. The bad guys allegedly sold most of the stolen ore to China in what has grown into a significant export business for the cartels. In a raid at a Mexican port in February, authorities seized 119,000 tons of allegedly illegal iron ore worth $15.3 million. Stainless Steel The big four domestic stainless steel producers all announced price hikes for April, achieved through reduction of the 2.0 percent functional discount. AK Steel, ATI, NAS and Outokumpu Stainless USA are riding a surge in nickel prices and a modest growth in demand. Nickel prices have been creeping up an average of 0. 7 percent per month for the three months through February, according to trading data from the London Metal Exchange (LME). During that time, nickel prices averaged $14,243 per ton, with a high of $14,595. Prices continued to climb during March, reaching $16,300 on March 25 — the highest level since April 2, 2013 — before dropping back to $15,770 by month’s end. Supply issues are thought to be behind the surge, coupled with a slight increase in demand. Prices also have been driven up by concerns over Western sanctions against Russia, whose economy includes the world’s largest nickel supplier. Cautious optimism was expressed in MEPS’ recent review of the global stainless steel market. The UK-based metals tracking firm reported that the business cycle had bottomed out, and sales volumes and prices would start to increase slowly but steadily this year. “The situation is more disappointing in the United States,” wrote one MEPS analyst. “Although there are encouraging signs from some consuming industries, the increased activity is predominantly due to inventory replenishment…effective selling values for grade 304 have risen by only US$10 per tonne.” Stainless steel melt shop production increased by 7. 8 percent in 2013, according to the International Stainless Steel Forum (ISSF). With the exception of Western Europe and Africa, all regions achieved positive growth. Tubular Products OCTG prices rose to the highest levels of the year in March, according to Tulsa-based Pipe Logix. Their average of $1,641 per short ton in March was 1.4 percent higher than the previous month’s. Seamless OCTG rose 1. 8 percent to an average of $1,769 per ton, while ERW products climbed 0.8 percent to $1,513 per ton from February’s average of $1,501. Wheatland Tube Co. Raised prices on sprinkler pipe by 6.0 percent, standard pipe by 5.0 percent and grade B ERW pipe by $40 per ton, effective April 3. The company cited higher raw material prices for domestic flat-rolled, as well as increased energy and transportation costs. A new type of deep drill pipe has been developed by Japan’s JFE Steel Corp., according to a company announcement. It is claimed to be the world’s first API X80-grade high-frequency welded steel pipe with a thickness of one inch. The pipe is used to support increasingly deep offshore drilling, which typically requires operators to turn to double-submerged arcwelded or seamless pipe to withstand the high pressures of such environments. JFE said it has already received two orders, from Dril-Quip Inc. and GE Oil & Gas, both based in Houston. The companies will use the Pipe as conductor casings, but JFE expects it also to be used in offshore pipelines. Northwest Pipe Co. Has sold substantially all of its OCTG assets to Centric Pipe, LLC, an affiliate of Dallasbased OCTG supplier SB International, Inc., for a purchase price of $42.7 million. The company will retain ownership of and lease to Centric Pipe its Houston real property. Centric Pipe will have the option to purchase the Houston property at a later date. Copper Copper prices continue to get slammed. After beginning the year at $3.43/lb. on January 2, copper has been on a steep downward slope. The Comex fell below $3.00/lb. for the first time in almost four years, reaching a closing low of $2.98 on March 11 after dropping to $2.95 earlier that day. Prices have inched up a bit since then but remained barely above the $3 level by month’s end. Weak demand from China is believed to be the primary culprit. The global refined copper market for 2013 showed an apparent production deficit of 193,000 tons, according to the International Copper Study Group (ICSG). This compares with a production deficit of 266,000 t in 2012. In 2013, world apparent usage is estimated to have increased by 4.0 percent to 21.2 million metric tonnes (Mt) compared with that in 2012. Chinese apparent demand increased by 7 percent. Excluding China, year-on-year world usage increased by 1.4 percent, with growth in the United States (3.6 percent), Brazil (3 percent) and Russia (3 percent) offsetting declines in South Korea (-5 percent) and the European Union (-1 percent). Japanese and Indian usage remained unchanged. The average world refinery capacity utilization rate for 2013 declined slightly to 78.5 percent from 79.2 percent in 2012. Scrap Midwest ferrous scrap prices were reported falling in March. AMM’s Midwest Ferrous Scrap Index for No. 1 busheling settled March 10 at $391.68 per gross ton, down 4.3 percent from $409.09 in February, while the index for shred settled at $389.31 per ton, down 4.1 percent. With busheling offering a much better yield in furnaces, this implies that either the industrial grade is now undervalued or that shredded scrap is overvalued, AMM reported. AMM’s Midwest Ferrous Scrap Index for No. 1 heavy melt settled March 10 at $373.91 per ton, down 3.1 percent from February. Stainless scrap prices in the austenitic grades were being driven up by higher nickel prices in March. AMM’s Broker/processor buying prices for Type 316 solids were selling between $2,125-$2,175 per gross ton during the last week of March, up from the $2,105-$2,150 range a week before. 304 solids jumped to $1,660 to $1,680 per ton from $1,635 to $1,680 per ton and 304 turnings rose as high as $1,545 per ton from $1,455 to $1,480 per ton Previously. Some observers blamed the rise on market manipulation of warehouse stocks more than a rise in demand. The steep decline in Comex prices were reflected in falling copper scrap prices during March. Buyers were said to be reluctant to commit while waiting for the market to settle down. U. S. copper-scrap consumers could face higher prices if a proposed rebate on value-added tax for China’s scrap recyclers is approved, according to AMM. The China Nonferrous Metals Industry Association has asked the finance ministry to implement a 40 percent rebate on the 17 percent value-added tax on copper scrap imports, according to AMM sister publication Metal Bulletin. Plastics The first quarter ended with higher prices for PE, PVC and ABS resins, according to Plastics Technology magazine. Polyethylene prices moved up 4¢/lb in February, and most suppliers issued a 6¢ increase for April 1. Weather-related supply disruptions led to tightness in butene-based LLDPE and HMW-HDPE. Plant operating rates for PE, which were in the mid-90s percentage range through last year, were closer to the high 90s through 1Q14. PVC prices rose by another 3¢/lb in February, the second consecutive increase of the year. Suppliers were aiming to get another 3¢ in March, which would bring the first quarter’s total increase in PVC prices to 9¢/lb. Much of the increase was attributed to shortages in ethylene and vinyl chloride monomer due to unplanned production disruptions. As a result, PVC plant operating rates were throttled back to 86 percent from 90 percent in December. Demand was believed to be up through the first two months due to significant pre-buying in anticipation of higher prices. ABS prices moved up in the first quarter as suppliers aimed to implement 4¢/lb price increases. About half of that was achieved, according to some analysts. Competition from imports reportedly leveled the gains. The Producer Price Index for plastic pipe jumped 2. 4 percent in February from the prior month, no doubt reflecting some of the aforementioned raw material price increases. News of Note It’s been a rough start to 2014 for ASA’s industrial PVF distributors. January’s sales were 5.9 percent below those of January 2013, and that was followed by a 7.8 percent sales decline, comparing February 2014 to the same month a year before. On a trailing 12-month basis, ASA’s PVF distributors’ sales were down an average 4 percent according to the association’s most recent Monthly Pulse Report. ASA’s PVF distributor inventories were down -0.7 percent in February compared with the same month of 2013. “2014 looks very favorable for the PVF industry.” That’s a conclusion drawn in the 2Q14 IPD Commodity Reports, compiled by ASA’s Industrial Piping Division (IPD). One of the contributing panels cites the energy sector as “the driving force for the U.S. economy,” with low-cost natural gas leading the way to capital expenditures that will result in “a large number of projects that need to go on stream later in the year or in 2015.” Manufacturers reported a stronger month than distributors in February, but business continued to expand for both groups, according to the most recent ISA Economic Indicator Report (EIR) from the Industrial Supply Association. The ISA Manufacturer Index rose from 62 percent in January to 63.2 percent in February, while the Distributor Index decreased from 66.4 percent in January to 59.2 percent in February. For each index, a reading above 50 percent indicates expansion, while a reading below 50 percent indicates contraction. The Indices have been above 50 percent since December 2012. Architecture firm billings continued to increase at a modest pace in February, with an Architecture Billings Index score of 50.7 (any score over 50 indicates billings growth), according to the American Institute for Architects (AIA). Slightly more firms reported improving conditions in February than in January, but overall, billings growth remains sluggish. Inquiries into new work also increased in February, as did the value of new signed design contracts.
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