Commodity cost inflation ‘unavoidable’

Persistent disruptions in supply chains are creating supply-side bottlenecks and roiling markets, according to consultancy IHS Markits.

Commodity markets are replete with examples of industries roiled by the pandemic: steel sheet is on allocation in the U.S., semiconductor shortages are hampering auto production, drops in South American mine output have sent copper inventories to their lowest level in 10 years.

These supply-side problems are highlighted most prominently in the IHS Markit Purchasing Manager Indexes (PMI) for backlogs and delivery times. December data showed delivery times rising alarmingly again after spiking in early 2020. This testifies to continuing problems in meeting orders. Rising backlogs are another manifestation of the same problem, the research indicates.

Together, backlogs and delivery times indicate how stretched—and even fragile—supply chains have become.

Commodity price surges are largely absorbed in company profit margins but there are clear signs that building cost pressures are beginning to push downstream, with a burst of goods price inflation over the next six months now unavoidable.

The price increases have been stronger and lasted longer than was expected six months ago. “This upstream pressure in supply chains is now guaranteed to push into intermediate materials and even final goods prices in early 2021,” says John Mothersole, pricing and purchasing research director at IHS Markit.

COST PRESSURES—The Institute for Supply Management’s January survey found aluminum, copper, steel products (especially rebar) had seen price increases since December. Commodities in short supply included steel products, including tubing.

Source: Institute for Supply Management

Much will depend on capacity utilization rates, whether capacity will meet anticipated demand growth through 2021 or even 2022. “Our sense is that, just as demand will slowly build during the year, so too will problems on the supply side slowly be resolved,” the economist says.

In fact, there may even be modest corrections in commodity pricing by spring or summer. “Our Material Price Index, after increasing almost 50 percent between the July 2020 and March 2021, will then retreat by as much as 10 percent by year end,” he predicts.

The IHS Markit Materials Price Index (MPI) measures a weighted average of weekly spot prices for crude oil, chemicals, ferrous and nonferrous metals, paper pulp, lumber, rubber, fibers, tech components and ocean-going freight rates.

Steel industry, workers urge Biden to keep tariffs in place

Four domestic steel industry associations and the United Steelworkers union urged President Joe Biden to ensure steel tariffs and quotas, put in place in 2018 to protect national security, are preserved. In a joint letter, the American Iron and Steel Institute, Steel Manufacturers Association, USW, Committee on Pipe and Tube Imports and American Institute of Steel Construction urged that, “Continuation of the tariffs and quotas is essential to ensuring the viability of the domestic steel industry in the face of massive and growing excess steel capacity. Removing or weakening these measures before major steel producing countries eliminate their overcapacity—and the subsidies and other trade-distorting policies that have fueled the steel crisis—will only invite a new surge in imports with devastating effects to domestic steel producers and their workers.” The Organization for Economic Cooperation and Development last year projected that steel overcapacity would grow to 700 million metric tons in 2020, or eight times the total steel output of the United States during 2019. China, Vietnam and Turkey, among others, continue to increase their steel production even as the pandemic has caused demand for steel to drop around the world.

Optimism improves among PMA members

Metalforming companies expressed optimism that business conditions would improve through the first part of the second quarter, according to the Precision Metalforming Association January business conditions report.

Nearly 40 percent of survey respondents forecast an improvement in economic activity in the next three months (up from 34 percent in December), while 54 percent forecast no change and only 7 percent predicted a decline in activity (compared with 17 percent in December).

Half of survey respondents forecast an increase in orders (compared to 41 percent in December), and only 9 percent believed orders would decline (down from 20 percent in December). Forty one percent of the group foresaw steady incoming order rates.

Despite the uptick in expectations, PMA President David Klotz says that great challenges remain, “including the current record-high prices for steel and supply chain problems that are causing low steel inventories as supply tightens.”

Average daily shipping levels improved in January among members, with only 12 percent experiencing a decrease (compared to 24 percent in December).

Aluminum Association offers policy priorities to White House

The Aluminum Association has released a series of policy documents laying out priorities to support a strong U.S. aluminum industry. The brief includes key policy goals for energy, environment, infrastructure and trade. Top priorities in these areas include ensuring continued access to reliable, affordable and efficient domestic energy sources; developing common sense, science-based environmental regulation; increasing long-term public and private funding to help shore up the nation’s highways, transit systems, electric grid and other critical infrastructure; negotiating with China to address structural aluminum overcapacity, eliminate trade barriers for countries that play by the rules and pursue targeted trade enforcement for countries that do not; and promoting policies to enable the recruitment of a skilled and diverse workforce and improve workplace health and safety.

Rio Tinto enters scandium market

Rio Tinto, London, will become the first producer of high-quality scandium oxide in North America, as it builds a commercial-scale demonstration plant at its Rio Tinto Fer et Titane metallurgical complex in Sorel-Tracy, Quebec. Rio Tinto is investing $6 million on construction of a first module in the plant, with an initial capacity to produce 3 metric tons of scandium oxide per year, or about 20 percent of the current global market. The company expects to begin commercial supply of scandium oxide during the second quarter.

New technique builds super-hard metals

Brown University researchers have found a way to customize metallic grain structures from the bottom up. In a paper published in the journal Chem, the researchers describe a method for smashing individual metal nanoclusters together to form solid macro-scale hunks of solid metal. Mechanical testing of the metals manufactured using this technique showed that they were up to four times harder than naturally occurring metal structures. “We’ve create[d] nanoparticle building blocks that fuse together when you squeeze them. This way we can have uniform grain sizes that can be precisely tuned for enhanced properties,” said Ou Chen, an assistant professor of chemistry at Brown and co-author of the paper. Commercial applications for these metallic structures might include high-performance coating materials, electrodes or thermoelectric generators and industrial components.

Producers launch Alumobility

Constellium, Paris, and Novelis, Atlanta, have launched Alumobility, a non-profit organization focused on providing innovative implementation-ready solutions to advance the adoption of aluminum automotive body sheet. This global ecosystem of aluminum producers and downstream technology partners will drive value for automakers and consumers by helping to fulfill the promise of a lighter, more efficient, more sustainable mobility future. Through collaborative technical projects and thought leadership, as well as working in partnership with global automotive manufacturers, Alumobility will further develop smarter, lighter, safer and more sustainable vehicles.

Iron Ore producer seeks to reduce GHG

Cleveland-Cliffs Inc., Cleveland, has set a target to reduce its greenhouse gas emissions by 25 percent by 2030. This goal represents combined Scope 1 (direct) and Scope 2 (indirect) greenhouse gas emission reductions on a mass basis (as measured in metric tons per year) compared with 2017 baseline levels. Cleveland-Cliffs’ plan is based on executing five priorities: Develop domestically sourced, high quality iron ore feedstock and consume natural gas in the production of hot-briquetted iron (HBI); implement energy efficiency and green energy projects; invest in developing carbon capture technology; enhance greenhouse gas emissions transparency and sustainability focus; and support public policies that facilitate carbon reduction in the domestic steel industry.

Trio of suppliers join NASA

Three operational suppliers have joined the North American Steel Alliance. Allor Manufacturing produces roller levelers, tension levelers, rolls, backup bearings and conveyor products, and repairs, rebuilds and upgrades machines. BLM Group USA builds processing equipment for tube and sheet metal, including laser tube and flat sheet cutting, press brakes, cold sawing, bending, end forming, end machining and wire bending machines. General Building Products (GBP) provides LED lighting, ventilation and heating solutions, including for industrial customers.

Defense firm names top supplier

The Texas division of Future Metals, Tamarac, Florida, was named an Elite Supplier by Lockheed Martin Aeronautics Co., representing the top 1 percent of a supply base of more than 1,400 suppliers. Future Metals has contributed to Lockheed Martin’s part in the F-35 Lightning II program by consistently providing outstanding support and high-quality parts while delivering on time.

ASTM publishes a special COVID-19 report

ASTM International, West Conshohocken, Pennsylvania, has published a special issue of its Smart and Sustainable Manufacturing Systems journal, titled, “Smart and Sustainable Manufacturing in the Post-COVID-19 Manufacturing Era.” The special issue includes 21 peer-reviewed Technical Notes that address how various areas of manufacturing have been impacted by the COVID-19 pandemic. The featured papers address various topics including how to standardize biotechnology platforms for vaccine production, pandemic-proofing factories, how artificial intelligence can help manufacturing, and more.

Bailey Metal implements software

Bailey Metal Processing, Burlington, Ontario, a provider of lightweight steel products, has implemented the Stratix metal service center software from Invera, Dallas. The package includes solutions for inventory management, purchasing, sales, online production planning, coil processing functions, shop-floor production recording, online shipment planning, non-conformance reporting, invoicing and financials.

Messe Düsseldorf India events postponed

Due to the continued effects of the COVID-19 pandemic, trade show organizer Messe Düsseldorf India postponed the concurrently held trade fairs wire India, Tube India, METEC India and India Essen Welding & Cutting to Sept. 8-10, 2021, at the Bombay Exhibition Center in Mumbai. The events were originally scheduled to take place March 25–27. The September 2021 staging will ensure maximum participation given the internationality of metal trade fairs, allowing all stakeholders to plan their participation carefully and efficiently, emphasizing health and safety.

Service center hires operations head

Carlos Tamez has joined Future Metals, Tamarac, Florida, as Texas division operations manager. Tamez had worked for global Tier I aerospace supplier Safran Seats. As a product support supervisor, he led teams on the operations and engineering side of aircraft seating. Tamez will manage all aspects of personnel, warehouse and site operations at the Texas facility.

Equipment builder makes structural changes

International equipment builder and technology provider Andritz has instituted changes to its corporate structure. Andritz Asko Inc., Andritz Asko BV, Andritz Herr-Voss Stamco Inc. and Andritz Metals Inc. were merged to form Andritz Metals USA Inc. With headquarters in Callery, Pennsylvania, the group maintains nine locations, eight of them in the United States and one in the Netherlands. No change will occur in the sourcing of Andritz products and services nor in the personnel who work with customers.