Archive for January 6th, 2009
January 6th, 2009
I hate to show these type of stories, but when we think about what our customers are doing, it is one of the best forms of Market Research. So despite the gloom and doom of some of these industries, it also gives us clues as to what we could be seeing in the short term. “Better warned and forearmed than have our head in the sand”…here is the story from Britain:
“America’s largest aluminium maker, Alcoa, is to cut 15,200 jobs as it struggles to cope with a slowing global economy and sagging prices for metal.The Pittsburgh-based company last night announced that it was reducing its smelting capacity by 18% in a wide-ranging downsizing intended to save $450m (£300m) annually which will involve one-off costs of between $900m and $950m.
Its decision is likely to sound alarm bells throughout heavy industry. Alcoa is widely considered a barometer of the fortunes of industrial and raw materials companies.
“These are extraordinary times, requiring speed and decisiveness to address the current economic downturn,” said Alcoa’s chief executive, Klaus Kleinfeld. The “aggressive but prudent” measures would “ensure Alcoa maintains its competitive lead in today’s challenging markets”.
Alcoa’s global workforce will fall by 13,500 people, a reduction of 13%. The company will also shed 1,700 contractor positions and will impose a freeze on salaries and hiring.
Troubles afflicting the motor manufacturing industry have affected demand for aluminium, as has a broader downturn in electrical appliances. The price of Âaluminium fell by more than a third last year on the London Metal Exchange and is at its lowest point since 2002.
Alcoa intends to sell four operations: its electrical and electronic systems Âbusiness, its global foil arm, a car wheels operation and its European transport products division. These employ 22,600 people at 38 locations but lost $105m after tax last year.
There was no immediate indication of the impact on Alcoa’s operations in Britain, where the company has seven sites including a sheet and plates plant in Birmingham, a castings and forgings operation in Exeter and an automotive design shop in Essex.
Some believe that more cuts could follow. Tony Robson, an analyst at BMO Capital Markets in Toronto, told Bloomberg News: “The news is pointing in the right direction but we believe Alcoa has to take even more drastic action in cutting high-cost smelters.”
In October, Alcoa revealed that its third-quarter profits had slumped by 52% to $268m.
The company owns a 12% stake in London-listed Rio Tinto in partnership with Chinalco, a Chinese producer of aluminium.”
Source: Guardian, UK
January 6th, 2009
In an early sign that some steel prices may have bottomed out, steelmakers in the U.S., China and some other countries are attempting limited price increases and reopening a handful of mills that were closed because of weak demand a few months ago.
It isn’t clear whether the price increases will stick, however. Steel sellers often announce price increases or special surcharges, only to relent in the face of customer opposition or if rivals don’t follow suit. Nor is it clear whether the price increases reflect more demand or lower inventories.
Troubled auto makers, contractors, appliance and equipment makers have cut back on their steel purchases. The majority of mills closed over the last few months remain shuttered and many around the world are operating below 50% of their capacity.
But steelmakers signaled cautious optimism that there is enough demand to support price increases in some parts of the world. Pittsburgh-based Allegheny Technologies Inc. said it would increase its surcharges on electrical steel by 55% beginning in February to $321 a short ton. (A short ton is about 0.9 metric ton.) Surcharges are tacked on to base prices, typically to account for raw-material costs, and can change monthly.
AK Steel Holding Corp., based in West Chester, Ohio, said it is raising the surcharge on February shipments of electrical steel to $165 a short ton from $10 a short ton. The percentage can’t be calculated because the company doesn’t reveal its base prices.
ArcelorMittal, the world’s largest steelmaker by output, said it will reopen its wire rod mill in Georgetown, S.C., next Tuesday. The Luxembourg-based company on December 5 shut down much of the mill, laying off 300 workers, citing slack demand and low prices.
In China, several steel mills have announced price increases ranging from 5% to 25% for a variety of products. Baosteel Group Co. and Anshan Iron & Steel Group Corp. said that they will raise their prices for hot-rolled coil steel, a basic product that is processed into many steel applications. Baosteel also said it will increase production at some of its mills.
Japanese steel-industry executives said Tuesday they expect the steel market to start recovering around midyear as inventories decline and steelmakers reduce output.
Steel is a bellwether industry for the world economy. The proposed price increases and isolated plant openings indicate that parts of the global industrial base might be less anemic than they were.
Steel analysts, noting that the market remains generally weak, said the proposed price increases may reflect decreased inventories rather than stronger demand. “Steel demand will likely remain weak in 2009,” according to Moody’s Investors Service. “We expect that the rate of downward movement will slow and that a level of stabilization should occur in the second half.”
Source: WSJ
January 6th, 2009
YeGads!
The news seems to be getting grimmer. Even in the past few days, I’ve heard of local manufacturers who supply CAT and Deere seeing their 1st quarter orders cancelled and virtually drying up. Some operations of these two companies are working 8 days in Feb, MAYBE 10 days in March! Today, Toyota announced production stoppages in their home country.  Here is another snippet….
“BEIJING (Reuters) – Factories in China and India joined much of Europe in slashing output and jobs at a record pace in December, another sign the biggest emerging markets were wilting under the recession gripping industrialized nations.
Factory activity surveys in the United States were also expected to show a steeper contraction in December, as demand collapses in the Western countries that developing nations rely on as export markets.
Economists and policymakers had seen China, Russia, India and Brazil, with their vast markets and rising wealth, as the engines of growth that could save the world from recession. Those hopes are fading fast and forecasts are getting gloomier.
From job losses at Chinese factories to the biggest drop in South Korean house prices in five years, there were signs the export slowdown was rippling through domestic economies in emerging markets.
“What is worrying is that the weakness has spread rapidly from the externally-oriented sectors to domestically oriented sectors too,” analysts at OCBC Bank in Singapore said in a note after the country announced gross domestic product data.”
It looks like it’s time to really buckle down and search for those new markets!
