EoW November 2011

Transat lant ic Cable

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. 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.” Nucor’s impressive second-quarter earnings performance was enhanced by a surge in pricing strength

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

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EuroWire – November 2011