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EuroWire – November 2011
30
Transat lant ic Cable
Perhaps ttingly, the eight “debaters” on the manufacturing
panel were likewise split; and their division was along
professional lines. As noted by the
Times
, business people saw a
bright spot in a sector long in decline. Economists did not.
Is it possible that manufacturing might help the US
economy recover and produce needed jobs? Or is domestic
manufacturing – at least in the traditional sense – a relic of
the past, incapable of rescuing the American labour market?
Here, abridged and lightly edited, is a response from one of the
optimists:
“Productivity and Quality Are Up” is the title chosen by Lei
Chen, a research fellow at the American Institute for Economic
Research (Great Barrington, Massachusetts). In the main he
sticks to those topics, noting that manufacturers are returning
to America and hiring new workers. Last year, US manufacturers
created 136,000 net new jobs, the rst increase since 1997.
Mr Lei went on to make these points:
❈
US rms have good reasons to come home. One is economic.
China, the primary destination of outsourced jobs, is
becoming more expensive. America’s labour productivity –
a key factor in determining pro t – is among the best in
the world
❈
Small and mid-size American manufacturers, less able than
their bigger counterparts to build factories overseas, have
the advantage in quality control and on-time delivery.
Moving production back to America also shortens the
supply chain, enabling stateside manufacturers to adjust
production when necessary, avoid delays, and get to market
quickly
Mr Lei noted that a container ship takes two weeks to travel the
6,000 miles from China to the US west coast. Clearing customs
and reaching domestic outlets further slow a product’s journey.
In his view, shortening the supply chain can make a critical
competitive di erence.
❈
Some statistics round out the optimistic outlook. In 2010,
manufacturing contributed 12% of the gross domestic
product (GDP) of the US and 9% of total non-farm
employment. US manufacturing output ranked rst in the
world, accounting for more than 20% of total manufacturing
output worldwide. “Made in America” is back, according to
Mr Lei. He wrote: “While manufacturing might not be the
ultimate force that fuels the economic recovery and puts the
country back to work, it will certainly play a major role.”
Steel
The world’s largest producer of niobium
(Brazil) and its largest importer (China)
feature in a $1.95 billion deal
A group of ve Chinese companies led by the stainless steel
producer Baosteel has acquired a 15% stake in the Brazilian
rm Companhia Brasileira de Metalurgia e Mineração (CBMM),
the world’s leading niobium producer, for $1.95 billion. Noting
the “strategic value [of the deal] for all parties,” Baosteel said in
a statement that world demand for niobium grew at an annual
rate of about 10% from 2002 through 2009, re ecting the
importance of the mineral in the production of high-grade steel
alloys. China is the world’s biggest importer of niobium.
Baosteel’s partners in the stake, all Chinese, are CITIC Bank
and the steel makers Anshan Iron & Steel, Shougang Corp,
and Taiyuan Iron & Steel. The September news came after
the purchase in March of another 15% stake in CBMM, also for
$1.95 billion, by a group that includes South Korea’s Posco
and the Japanese companies JFE Steel and Nippon Steel. As
noted by
Business News Americas
(2
nd
September), demand for
niobium is expected to outpace the expansion in world crude
steel production. Brazil has the largest proven niobium reserves
anywhere, followed by Canada and Australia. According to the
private mining association Instituto Brasileiro de Mineração
(Ibram), in 2010 Brazil produced approximately 80,000 metric
tons of niobium, or 96% of total global output. CBMM by itself
commands an 80% share of the niobium market worldwide.
Nucor’s impressive second-quarter
earnings performance was enhanced by
a surge in pricing strength
Ever the maverick – even under barely post-recessionary
conditions – Nucor Corp (Charlotte, North Carolina) posted
second-quarter net earnings of $299.8 million, as compared with
net earnings of $159.8 million in the rst quarter of 2011 and of
$91 million in the second quarter of 2010.
Doing the arithmetic, the largest mini-mill operator in the
US said that these numbers indicate pro t increases of 88%
and 229%, respectively. For the rst half of 2011 the company
reported net earnings of $459.6 million, compared with net
earnings of $122 million in the rst half of last year.
Nucor pointed out that these results were achieved despite
some signi cant dampening factors: the rebalancing by its
customers of supply chain inventories, the impact on the
manufacturing/automotive sector of the earthquake and
tsunami in Japan, and lost production, sales and shipments from
weather-related power outages and Mississippi River ooding.
Acknowledging “the very real shock waves that shot through
the [US steel] industry” in the aftermath of the Japanese tsunami
in March, investment advisor Christopher Barker of
Motley Fool
pronounced Nucor’s “de ant” increase in net pro t over the
prior-year period a truly remarkable achievement. But he also
placed the extraordinary results in a broader context than that of
a sharp downturn in domestic growth momentum.
Mr Barker wrote (22
nd
July) that an overdue surge in pricing
strength may have spared the entire industry from feeling
the full impact of rising input costs, supply-chain disruptions,
reduced capacity utilisation, and other operational challenges.
Nucor’s consolidated sales volume grew only 1% over the
prior-year period, but the company’s realised sales price per
ton surged by 21%. Accordingly, “Sales revenue expanded 22%
to $5.1 billion, while net earnings skyrocketed 229% to nearly
$300 million.”