REB Blog

The job ahead

2008-08-22T18:00:00Z

Burgeoning demand for capital goods, especially in the heavy equipment market, has gone largely unnoticed in the past year, and that was one reason I was glad to be able to include this month’s FM&T feature story by the Steel Founders’ Society of America’s Raymond Monroe. Earlier this week the Wall Street Journal veered into this subject in a report about “manufacturers and construction contractors scrambling to find enough skilled workers to plug current and future holes.” There is a lot of money tied up in infrastructure and capital goods projects — and those investments need to be supported by reliable and productive workforces.

Labor and employee management are subjects that are never far from the minds of metalcasting executives and operators. The next issue of FM&T will have a report examining the looming threat of unionization if the Employee Free Choice Act becomes federal law during the next president’s administration.

But, in more general terms, the difficulty of recruiting good and talented people is a longstanding concern. The aging demographics of manufacturing workforces have been noted for more than a decade, as nearly as I can tell. The Journal report offers some clever examples of the ways some groups are working to catch the attention of good job candidates.

But, my own observation about this situation is that the “problem” isn’t merely a matter of recruiting good candidates: it’s also a matter of keeping them once they've been located and hired. As I wrote a few weeks back, I recently met a young man who’s rising fast in a good foundry organization, a talented individual who never considered his current career — but "lucked" into it. The foundry got lucky, too, I should say.

This young man, I suspect, would have succeeded in almost any career he chose to put his heart into, and in the coming years he will have that opportunity. Other foundries may offer him positions. Companies in other industries may see his potential for their own organizations, and woo him with attractive rewards and ideas.

Foundries and diecasters need to have viable and actionable organizational strategies in order to attract the best candidates, and to keep the good people they recruit. Even more important, they need to have that plan so that they know what they want to do, and to judge who they want to help them to do that.

I would be gravely mistaken if I didn’t use this subject to extol the good work done by the Foundry Educational Foundation over six decades to develop new generations of metalcasting leaders. FEF has an ambitious Endowment Campaign underway, which deserves support. As of August 1 the Campaign is more than 30% subscribed toward its $7.5 million goal, and they will succeed in reaching that goal because they have never failed in any important effort. But, your contribution would be a big help.

Safety in numbers?

2008-08-15T19:27:00Z

Chapter 11 may be the safest place for some metalcasters in the coming weeks or months. Intermet Corp., despite some resourceful management efforts over the past three years, checked itself into bankruptcy court this week. It’s the second stay there for Intermet – which filed for creditor protection just about four years ago under circumstances that were similar to what’s happening now.

Back in 2004, the issue that tripped up Intermet (and Citation Corp., too, by the way) was the steady rise in raw materials and energy prices. Those issues are still serious concerns, but now there is also the ominous situation of the automotive industry … the major customer for many metalcasters.

Intermet’s filing was the news of the day on Wednesday this week, but the word on this impending heartburn went out earlier with the release of the Summer 2008 Automotive Industry Review by the business think-tank Grant Thornton L.L.P.

The report speculates that about 30% of all North American auto parts suppliers may be on the brink of bankruptcy because of declining vehicle sales (especially trucks) and increasing commodity costs. Grant Thornton sees no relief in sight for suppliers who are heavily concentrated in the truck/SUV segment. And, it sees no potential for these manufacturers to pass on to customers the steadily rising costs of raw materials.

According to a statement by Grant Thornton’s Kimberly Rodriguez, "The decline in (automotive) industry volumes and the shift to more fuel-efficient vehicles is creating a massive ripple effect in the supply chain. The full impact of very low truck and SUV production in the second half of the year and any new production cutbacks this fall—something we believe is likely—will only make supplier cash flow problems more difficult to manage."

All this has been apparent in the metalcasting market for much of the past year. Diecaster Spartan Light Metal Products is not in bankruptcy, but it has started scaling down its operation in the hope of surviving “overall weakness in the U.S. economy.” Spartan reportedly has been particularly hard hit by Ford Motor Co.’s lower production volume (though, its own statements only refer to customers that have made “dramatic changes in their order patterns.”)

This is the effect of a U.S. economic pattern that has been developing for at least a year. Manufacturers were initially confident that the declining value of the U.S. currency would enhance their sale opportunities to global customers — and in various cases, it has done so. But, the declining dollar devalues everything it touches, and punishes everyone whose income is paid in dollars, whose purchases are made in dollars, and whose assets are valued in dollars. That means everyone.

It's always possible to find good news amid the gloom. The recent pattern for bankruptcies in the metalcasting market suggests success with a "pre-packaged" approach that will revamp the financial side of a business while the operations continue as usual. That would make sense for Intermet, where most of the past three years have been dedicated to organizational overhaul and a renewed customer focus. If so, it would be another sign that, as the researchers detect, the problem is with the market, not the manufacturer. And that may mean Intermet won't be alone in court.

Kick them when they're down

2008-08-07T20:46:00Z

Efforts to revitalize the domestic auto industry present all manner of challenges to the executives and engineers who’ve bravely accepted the task, some that are real and immediate (like the recent decision to end or curtail auto leasing programs), and some that are more existential or philosophical (like Chrysler’s move toward Nissan on passenger car development, which would indicate a fundamental organizational shift away from manufacturing and toward consumer product marketing.)

People love to comment and evaluate these companies, probably because they love cars, but that doesn’t make their analyses insightful. This week, a Wall Street Journal columnist praised Ford because he believes their new vehicle lineup is promising (he liked a car he saw parked in Paris), but called for GM CEO Rick Waggoner’s firing because it’s direction is less clear.

Now, to be fair to that columnist, none of these companies looks very good in the news pages. In the past two weeks both GM and Ford posted quarterly losses in the multi-billions of dollars, and Cerberus Capital (which privatized Chrysler last year) is reportedly having trouble locating new sources of cash.

Around here, though, we have a different perspective. It isn’t that Chrysler, Ford, or GM deserve more time to get things right, but an understanding to manufacture something, and manufacture it right, one has to account for more than just a nice looking product parked on the curb.

Perhaps Chrysler is making the right decision, one that’s balanced by their previous moves to lease out manufacturing space.

As for Ford, in terms of “auto manufacturing” it’s still making up its mind. It won’t be casting metal, we know, and now even getting out of that business is going to be more costly. The Cleveland Casting Plant was set to close in 2009, which was postponed ‘til 2010 as an incentive to the United Autoworkers union. Now, Ford has to pay another $1.4 million just to shut down the plant. If Ford had decided to stay in the business of casting engine blocks, that money might have gone into the cupola updates that were already approved and permitted. (Regulators in Ohio didn’t seem too anxious to have Ford casting metal there, but couldn’t let them stop without making one last grab for its cash. Who can blame Ford for seeming confused?)

Of these three companies, only GM is making a wholehearted commitment to manufacturing cars and trucks, including metalcasting. It’s $200-million investment in new casting technologies at Bedford, IN, Defiance, OH, Saginaw, MI, is a fraction of its current losses, and so get very little credit from the showroom-focused analysts. But, that commitment reveals an understanding of what it takes to be “in” the business of auto manufacturing. And that makes GM much more attractive.

Union yes/no?

2008-08-04T04:01:00Z

People who complain about the lack of “issues” being discussed in the U.S. Presidential campaign rarely point to labor relations as one of the most significant issues being determined this November. But, with all that’s developed in global trade over the recent months, the looming possibility of trade wars is magnifying the significance of the labor issues to be decided during the next administration.

Global discussions toward a wide-ranging free-trade program collapsed last week — not because of objections by Western interests, but because of the emerging defiance to the idea from India and China (particularly), as well as Brazil and other “emerging” trading giants. They don’t want to be in the position of supplying commodity goods alone, while North American and European nations supply the value-added products.

This would be understandable, and maybe negotiable, if the “developed” nations were not already split over their own economic futures. On our side, there is a split between those who think growth can only be measured by capital gains and those who think progress is indicated by financial security. One variation of this split is the management-labor divide.

This is not a new development, but it’s current outbreak centers around the Employee Free Choice Act. (We’ve covered it before, and we will again in the coming weeks.) This is the so-called “card check” legislation that would allow unions to initiate organizing drives without notifying employers, and would prevent employers from effectively verifying the results of unionization votes.

Wal-Mart caught some scrutiny last week for its efforts at discouraging store managers from supporting Democrat candidates, who they recognize would support a more union-friendly approach in Washington. Wal-Mart no doubt also is concerned over an outbreak of anti-free trade policies and regulations, because its success is based as much on availability of goods as it is on affordable labor. It relies on high levels of consumer spending, which would be seriously impacted by both higher fixed labor costs (it would spur higher unemployment) and higher consumer prices.

The concern for domestic manufacturers is surely the higher labor costs that will be inevitable if EFCA becomes law. But, the concern for all of us ought to be the sort of global trade environment that prevails when EFCA becomes law.

Buy? Sell? Hold?

2008-07-25T18:57:00Z

What a week! On Monday, at the summer meeting of the Casting Industry Suppliers Assn., I listened to two presentations on the challenges and difficulties of managing a metalcasting operation — one from the second-generation owner/operator of a foundry, the other from a general manager with several decades of experience in ferrous foundry operations.

They described the everyday dilemmas of owning and operating a metalcasting operation. Among their ongoing challenges is working to maintain equitable advantages with casting buyers and product/service suppliers, both of which groups have become considerably more consolidated in the past decade — leaving less latitude to metalcasting operations, which have not consolidated to nearly the same degree.

On Tuesday I gladly took the latter gentleman’s invitation to tour his plant — an impressive layout, busy, engaged with their customers, and operated by some equally impressive people. It’s too little to say that was the highlight of my week; it may have been the highlight of my month for all the insights I took away from there.

Wednesday I came back to earth, or actually back to the office, where I reentered the daily routine. This includes a tedious tide of messages, reminders, and pitches; a range of projects slowing down or coming apart; and a constant feeling that time is running short to complete something that should have been done already.

Late Wednesday I got a call from a sometime correspondent who’s not happy with me or my past decisions. He’s a consultant who arranges deals for owners seeking to sell their mid-sized manufacturing businesses, and he writes essays describing the logic and strategy of such deals. His writing ability is fine, and I have no quibble with his business. It’s just that I’m not sure FM&T is the place for that discussion. Or, rather, the message behind that discussion.

Metalcasting operations get bought and sold frequently. In recent weeks we’ve reported a range of plant sales: a ferrous foundry, a chain of aluminum diecasting plants, and a holding company adding another asset to its group. I think such news is worthy, but I’ve never felt generalized commentary on the necessity or strategy of selling assets is the right way to fill our pages. We have clearer obligations to our readers.

The consultant objects that readers have responded well to his presentations, but that’s not too persuasive to me. I’m sure that a lot of other readers find discussions of plant sales are unsettling and unwelcome. I’m quite sure, because they’ve told me so, that some readers think such reports are bad for their business.

I’m still unresolved on this point, and I’d welcome readers’ opinions on it. But, I agreed to read his draft article, which I did for the first time on Thursday. As of today, I haven’t made up my mind about whether to run it in FM&T.

I’m sure some of the foundry operators and suppliers I met this week face much more difficult decisions on an hourly basis. This is a difficult time to have executive and operating responsibilities in the metalcasting business: there is anxiety in the air because of wholesale organizational and financial upheavals, even as mid- and long-term economic trends suggest a very positive future for the industry. Should they respond to pressure to ease current anxieties? Or, should they continue to plan, build, and sacrifice for future gains?

It’s like that every day. Every week.

Coming attractions

2008-07-20T02:48:00Z

A certain “dark” movie is lighting up movie screens this weekend, reportedly earning $67 million in its first day of showings. Our expectations are bit less than that, and also a bit brighter, we hope.

We’ve introduced a new venture we believe regular readers will want to visit, and revisit. Foundry Theater is a site we’ve developed to allow suppliers of metalcasting products and services to exhibit demonstration videos. As more Web users get better systems and networking functions, video makes more sense for suppliers to promote their capabilities.

We’re glad to help that effort. And we hope you’ll be glad to see the videos posted there. Over and over again.

Show me another

2008-07-14T02:44:00Z

There is a journalistic truism that one incident is not necessarily news, and two may be a coincidence, but three similar developments indicate a trend. If a liquor store gets robbed on Friday, no news. If another one gets hit on Saturday, that’s not unusual. When the third one gets knocked over you have a crime spree.

In the past few weeks we’ve discovered two intriguing examples of multi-alloy casting. Neither one of these is a random development: both have been well researched and tested, to the point where they have commercial implications. I’m not sure we need to wait for the third to conclude that the sky’s the limit for such techniques.

The Camito process is a method of compositing gray iron with tool steel, and already has been commercialized by Novacast Technologies AB.

Eck Industries in Manitowoc, WI, has licensed the Cast-Decant-Cast process, and expects to begin producing prototype castings by September 1. It’s a technology developed by Dr. David Brown at University College Dublin, in Ireland.

The “novelty” of combining disparate metals or alloys into a single product has significant implications for product design, and product development.

The idea is not limited to cast shapes, either: Novelis (until a few years ago it was the rolled products division of Alcan Inc.) introduced its Fusion just about two years ago, and already has expanded its commercial production from North America to Europe and the Far East, and recently announced plans to add it in South America.

“Fusion” involves casting differing alloys into a single ingot, in such a way that the subsequent rolling of the ingot creates aluminum sheet with different, but complimentary metallurgical properties. For example, the sheet can have internal characteristics that enhance formability, but surface qualities that improve heat resistance.

Much of what concerns metalcasters lately centers on ongoing operations. Cost and energy savings, for example, or environmental or labor policies. But, growing the market for cast products may be even more important to advancing the industry. Giving metalcasters new capabilities gives designers new opportunities to create products, and thus to grow markets. Advances in metallurgy and metallurgical processes are critical to advancing these opportunities. Let’s hope it’s a trend.

Workers of the world unite

2008-07-03T16:58:00Z

Keeping political issues out of my published opinions is a constant objective for me, and yet sometimes a subject emerges and the politics of it are just too glaring to overlook.

“The United Steelworkers, North America's largest private sector union, and Unite the Union, the largest labor organization in the United Kingdom and Ireland, today signed an agreement clearing the way for the creation of Workers Uniting, the world's first global union,” announces the unions' release.

They are taking this step in order to challenge “the growing power of global capital,” states United Steelworkers president Leo W. Gerard. “Globalization has given financiers license to exploit workers in developing countries at the expense of our members in the developed world. Only global solidarity among workers can overcome this sort of global exploitation wherever it occurs."

This doesn’t surprise me at all. It might have been predicted when the USW entered into a global agreement with the European Metalworkers’ Federation and the International Metalworkers Federation, as well as the world’s largest steelmaker, ArcelorMittal. They’re seeking to improve occupational safety standards across that company, which spans five continents.

Of course, big corporations are always willing to work with unions when there is no competition to take advantage of their agreement. Corporations don’t object to unions (as the dynamic is typically portrayed) as much as they object to competing corporations. And unions are always eager to partner with “global capital” when it confers power or legitimacy on their organization.

The emergence of a global union is clarifying because it underscores the truth that unions are autonomous organizations dedicated to their own growth, prosperity, and perpetuation. (That’s true of corporations, obviously, but they acknowledge it, or if they say otherwise they’re not believed.)

Why do I imply that there’s politics in any of this? Because, I hope this development will mark the end of the empty patriotism of unions and their members. Their opposition to competitive hiring and compensation standards have done more to limit domestic manufacturing competitiveness than any foreign trade policy. Still, unions never fail to resort to victim status when domestic manufacturers take the necessary steps to remain globally competitive.

Quite simply, unions are the principle obstacle to economic growth in the jurisdictions where they wield influence. Anyone seeking to persuade me otherwise will have to explain Michigan and Ohio. Union activists and supporters in states like these once objected to jobs moving South. Now, they fret about “global capital.”

There is a lot of capital spreading global influence, and it carries a lot of different objectives. Labor’s new global initiative will differ in that its objective will be contradictory to all the others. Its purpose will be to obstruct progress, to slow economic growth, and to stunt enterprise, so that Labor's influence can’t be denied.

Crisis mentality

2008-06-26T01:29:00Z

What puzzles me about the ongoing energy “crisis” is that anyone should be surprised by it – or that there should be any doubt about how to resolve it. To begin, calling it a “crisis” is questionable, because there is no apparent shortage of energy: there are abundant sources of energy (oil, natural gas, coal, water, wind, and others); we have the means to produce fuel (drill for oil or gas, mine for coal) or power our grids (coal-fired or nuclear power); and we know how to increase the output of each of these. (As well, we know how to capture more hydropower, wind power, solar power, and geothermal power, but those opportunities are not much in debate at the present time, except as alternatives to other options.)

So, there is no energy-supply shortage, but there is a global energy-demand surge, and the problems that rise from that are what we call a crisis because we haven’t properly prepared ourselves to deal with the current consequences (higher energy prices, mainly.)

It doesn’t have to stay this way. It’s possible to increase energy supplies — but for any number of reasons, as a society we have chosen not to increase supplies in order meet to market demand. That could change, so long as we (as a society and a democracy) allow a free market to do so rather than hinder its effectiveness with penalties, restrictions, or over-regulation.

This should be understood, because there’s a similar dynamic being played out in the market of steel scrap … and it’s useful to keep the energy problems in mind as an example when pondering the scrap “crisis.” As with energy, it's not clear that the shortage of scrap is a “crisis.” It may also be the case that the scrap shortage is the result of policies and regulations. And, the frustration that domestic steelmakers and foundries have over this shortage is similar to drivers who can't keep up with rising gas prices.

Steel-scrap exports boomed earlier this decade, when the domestic steel industry went into recession. Unfortunately, the trend did not revert when the domestic industry rebounded — as it has, along with steel industries worldwide. U.S. steel scrap exports continue at an all-time high rate. Two of the largest domestic electric steelmakers addressed their scrap problems by acquiring their major scrap suppliers, Nucor bought David J. Joseph and Steel Dynamics Inc. bought OmniSource. These moves have only made the domestic supply scene more acute for other steelmakers and foundries.

I got an earful of outrage from some steel foundry operators recently, and there’s no doubt they see it as a crisis. The American Foundry Society, Steel Manufacturers Assn., and National Precast Concret Assn., leading a coalition of over 1,500 companies, probably agree. They have re-formed the American Scrap Coalition, principally to address global market distortions they see as the result of export barriers in foreign markets. Meaning, because other nations restrict scrap exports, the open U.S. market is the only supplier able to serve most of the rest of the world.

The ASC wants the U.S. government to resolve this, and they have three priorities:

-- Identify and remove barriers to trade in steel scrap, which hinder U.S. companies and global competition;
-- Ensure that scrap exports are not permitted as an easy way around state, federal, and international environmental obligations; and
-- Consider actions by Congress, the Commerce Department and the Office of the U.S. Trade Representative to remove trade barriers.

The Institute of Scrap Recycling Industries is probably smirking its way through all this: why should they care who pays premium prices for the scrap they collect, sort, process, and distribute? But credit ISRI for the moderate tone of its response to the ASC: “Scrap and finished steel are globally traded commodities,” ISRI president Robin Weiner stated. “Efforts to artificially restrict that trade can have negative repercussions that are felt around the world.” Based on the outrage I’ve heard, that bit of insight will be received just about as well as $4.00/gallon gasoline.

Who knows how sincere the ISRI response may be? But it doesn’t matter, as long as we avoid the disastrous effects of the U.S. government once again trying to “fix” global trade. The ASC may be correct about the causes of the scrap “crisis,” but their priorities seem to be going in a different direction. “Remove barriers …”? Great; go for it. “Ensure (etc.) …”? That sounds like a new invitation to more federal regulation. “Consider actions by Congress (etc.) …”? That sounds like it could be the start of the next “crisis.”

Another piece of the puzzle

2008-06-18T20:28:00Z

Someday, the auto industry will be thriving again – designing and building exciting products, and selling lots of them. Until then, we get to watch them grope and stumble their way through reengineering, reorganization, and re-identifying themselves.

This is more than spectatorship; it’s self interest: Metalcasters supply a lot of components to automakers. More important, automakers are some of the highest-volume producers of castings.

A year ago that point deserved some inquiry, because the three domestic automakers were beginning their restructuring programs, and the unanswered questions were all out in public. There are various objectives to these restructurings — cost savings, of course, but also product quality, technical innovation, brand management, and other hard-to-quantify elements of large-scale manufacturing.

Where is metalcasting in all this? General Motors decided to go all-in for its casting operations, outlining about $200 million of new capital improvements for its plants in Bedford, IN, Defiance, OH, and Saginaw, MI. Its emphasis seems to be on product development and quality control.

Ford is going the other way, closing metalcasting operations in England and Windsor, ON, and slating the Cleveland Casting Plant for shutdown. Its emphasis is on cost control, but also product development: Ford is notably undecided on its future engine designs, but being uncommitted may give it more flexibility in that area — and more purchasing leverage.

Somewhere between these two approaches is Chrysler Corp.

The maker of Chrysler, Dodge, and Jeep vehicles has been slow to reveal a strategy about its metalcasting operations, but now we have a hint based on emerging reports of a $60-million plan to lease production space at Chrysler’s Kokomo, IN, transmission plant to Linamar Corp. Linamar makes a wide range of automotive components, for engines and drivetrains, and as well as other industrial markets. A similar strategy is being hinted for Chrysler’s casting and machining operations.

Workers at Kokomo would remain Chrysler employees, but their salaries and benefits would be “subsidized” by Linamar, which would get to implant itself further into the Chrysler supply chain. Some parts produced by Chrysler employees would go into Chrysler vehicles, though not all. Some may be intermediately handled by other Tier 1 suppliers.

Chrysler, which in various ways is taking the auto industry’s most unorthodox restructuring approach, is especially focused on cash conservation: CEO Robert Nardelli, has said the organization must cut capital spending and focus resources on “the parts of cars that influence consumer purchases and perceptions.”

Metalcasters and their advocates may interpret some insult from that particular point, but Chrysler’s management concept is intriguing. It may be ideal for that organization. It may be a valuable opportunity for one or more metalcasting organization.

More to the point, this prospect shows again that there is no single formula for success. Let’s hope each strategy works out for the automakers — and especially for the metalcasters that are such an integral part of what they do.

Why the long face?

2008-06-13T18:02:00Z

The U.S. Environmental Protection Agency is crowing this week about a settlement it “reached” with a gray iron foundry, involving a comparatively small fine (easy for me to say; I don’t have to pay it) but a notable development in regulatory policy for foundries.

The agency now has precedent for ruling that baghouse dust from gray iron foundries is a hazardous waste. I’m going to add this to the list of things to worry about.

When I left CastExpo last month I had two ideas running in my head: first, I was encouraged and impressed with the number of novel and interesting products and technologies that metalcasting suppliers have made commercially available.

But, being human, metalcasters are carrying around a lot of doubt about the present and future of their industry. In the exuberance of a trade show, I was surprised to hear (without much solicitation) how much anxiety there is in the minds of metalcasters. Is it warranted?

I tend to think it’s not, and that much of the anxiety is the influence of external circumstances and events. But, to be certain, I started noting the anxieties that people bring to my attention — and trying to categorize them for clearer understanding.

• I wrote about the problems involving metallurgical coal and coke in a recent entry. It’s a serious issue that affects ferrous foundries. It’s part of the larger, global raw materials and energy crunch. Coal and coke are also, obviously, factors in debates that involve environmental regulations and fuel/energy shortages. I think people are right to worry about these matters, though I’m not convinced these conditions are permanent.

• A lot of anxiety relates to economic issues. Global competition is a long-standing problem for domestic foundries. While some operations have been helped by the declining value of the dollar, slow-downs in demand from the automotive, construction, and other consumer-driven markets are discouraging. I’ve offered my thoughts on this subject, too, in an earlier entry. I think it’s a serious issue … but I think it’s one that could be addressed the right economic policies.

• Politics is the subject of many metalcasters’ anxieties. In general, they’re unenthusiastic about the “change” being promised in the coming Presidential election, regardless of who may win. They expect the new Administration and the next Congress to implement stricter environmental standards (see above), to implement laws and regulations that strengthen organized labor, and to foster taxation policies that will make businesses less profitable and individuals less inclined to spend money on consumer goods.

Each of these subjects is serious in its own way, and much more detailed than I’m implying. But, this column from earlier in the week framed the whole matter in helpful way. There rarely is just one issue influencing how we feel or what choices we face. Technology has expanded our understanding and heightened our awareness of the larger world — and exaggerated the sense that because we know more we should be able to do more, to matter more. I think, that is something to worry about.

Is this any way to run a supply chain?

2008-06-06T14:45:00Z

The demise of Lunt Manufacturing isn’t news — it was announced earlier this year; in fact, in April the magnesium diecaster was swept up by a private-equity outfit that plans to consolidate it into its Contech group of light-metal automotive diecasters.

This week I skimmed over the announcement of a “Web-cast equipment auction” involving some of Lunt’s assets: on June 12 you’re invited to bid on 11 HPM magnesium/aluminum diecasting machines (up to 400-ton capacities), hydraulic trim presses, melting furnaces, CNC machining centers, turning centers, vertical tapping centers, testing and inspection equipment, welding equipment, parts-handling robots, forklifts, and pick-up trucks, among other things.

Apparently, Contech’s interest in Lunt doesn’t involve a whole lot of manufacturing. But Lunt hasn't been the only one with a problem. There is a report now that Swedish diecaster Tonsberg Magnesium Group Intl. has filed for bankruptcy. Such developments take me back to my original reaction to the news of Lunt’s demise: there’s something deeply dysfunctional about the magnesium business.

As nearly as I can tell, the magnesium diecasters' problem isn’t on their customer side. Automakers and aircraft manufacturers appreciate magnesium, especially in cast form, because of its lightness and strength-to-weight qualities.

Nor can the problem with magnesium be isolated to the component manufacturers. Magnesium diecastings regularly win design awards for innovation and effectiveness, demonstrated by the efficiencies they impart to manufacturing processes when their products replace heavier assemblies and weldments

Virtually everything about magnesium is right in line with what we’re told are the prevailing trends in automotive manufacturing: it’s very light, it’s strong, it forms well, it lasts. Unfortunately, those so-called trends are only a small part of what’s prevailing in the auto industry — and the global economy generally: there is not enough money coming in from consumers to justify all the bright ideas and long-range ideals of the designers and strategists.

Meanwhile, at the other end of the supply chain, the costs of doing business are skyrocketing. The greatest cost is the price of the metal itself. The domestic-market price in China for a metric ton of primary magnesium is jumping around the $5,000.00 mark. Transportation, tariffs, and other costs add to that price for metal imported to North America, where some traders foresee prices of $8,800/metric ton.

Most of the primary magnesium in North America comes from overseas — China, mainly — because diecasters and others who buy it can’t source enough metal domestically (or regionally.) Lately, the supply has become very uneven because of high demand globally. And, Chinese smelters are expected to close down to comply with environmental regulations during the Olympics later this year.

Energy, labor, regulatory, and other costs have reduced North America to one primary magnesium producer. This week, in fact, there was another auction: the equipment once housed in Hydro Magnesium’s Quebec smelter went on the block, two years after the operation closed because it could not compete against the operating cost advantages of Chinese and Russian smelters.

Alcoa has encouraged reports that it may restart its magnesium smelter in Washington. The Northwest Alloys plant closed in 2001, but an Alcoa spokesman attributes the company’s interest in magnesium to its internal supply needs, ie., for making aluminum alloys.

Even if Alcoa aimed to become a commercial supplier, there would remain a strange and unmanageable imbalance in the magnesium supply chain. It’s hard to see how all the lofty expectations about the light-metal’s prospects stay afloat.

Inconvenient truths

2008-05-30T17:25:00Z

A few weeks ago I described a presentation by well-respected environmental specialist at work in the domestic metalcasting industry. He outlined the ongoing agendas of the current Congress and the Environmental Protection Agency, and the gloom this portends for domestic metalcasting operations. Most dispiriting to me, though, was his characterization of the federal-level debate about the role of manufacturing in “global climate change.”

There is no debate, the expert concluded. With regard to the metalcasting industry, he said, their allies in Congress and the Administration, the lobbyists and attorneys paid to represent them, and even for the most part the manufacturers themselves, are resigned to federal action that will address “the problem” of climate change.

And so, this week, the U.S. Congress will take up discussion of the America's Climate Security Act (S. 2191 / S. 3036), the so-called Lieberman-Warner bill, which is a “cap and trade” scheme offered in the belief that setting limits on carbon emissions will improve the earth’s atmosphere, … improve it, that is, according to standards set by alarmists and idealists who believe humanity itself is a problem to be overcome.

I make no excuses for my “anti-environmentalism.” It is “anti” only in the sense that I refute contentions that human development is a bad thing, and that human enterprises can impact the extraordinary power and diversity of nature.

It’s ludicrous to assume that a law imposing limits on emissions by electric utility, transportation, and manufacturing industries, and paying people with federal funds for the damage these limitations will cause in terms of jobs, income, and opportunities, will have any “benefits” to the nation, or "the Earth."

But this is “the world” that climate-change believers inhabit. And there are lots of believers. The Republican nominee for president proposes capping carbon emissions “incrementally,” so as to return to 1990 levels of carbon emissions by 2020. The apparent Democrat nominee promises to cut carbon emissions to 80% below 1990 levels by 2050, beginning with a mandated return to 1990 emissions levels by 2020.

The game seems to be over, as the expert described, but at least now the AFS and various state cast-metal associations have begun urging members to agitate against Lieberman-Warner. Better late than never, I suppose.

It is never too late to acknowledge truth, which is that “cap and trade” schemes are an impossible gambit to achieve unrealistic goals, and will lead to undesirable consequences. Targeting industry punishes productivity. Paying producers to curtail output rewards idleness. Both efforts, and much more, will fuel calamity in a global economy.

Coal hard truth

2008-05-23T14:12:00Z

There was a lot of excitement and enthusiasm at CastExpo ’08 in Atlanta last week. No surprise there: metalcasters enjoy each others’ company, and the agenda is always filled with award ceremonies and other celebrations.

But, now that the show is over it’s important to recognize that there’s a lot of anxiety beneath the surface of all that is positive and encouraging for foundries and diecasters these days. Several of these "troubles" were brought to my attention as I wandered the Georgia World Congress Center, and one seems likely to emerge with some force in the coming weeks.

I’ve been writing about the rising costs for iron ore and steel scrap for months. The changing global landscape in those sectors is part of the story: ownership is consolidating, and high-volume consumers are locking up assets.

The other factor is demand. Unprecedented increases in raw steel production over the past four years have crowded the market for those inputs, making ferrous foundries compete with even wealthier buyers.

So, it was inevitable that coal would be the next commodity to present a crisis, and for U.S. ferrous foundries the coal crisis is underway. Perhaps it has been developing for years, with the number of domestic suppliers declining in the face of rising environmental obligations.

Now, the remaining foundry coke manufacturers claim to be pinched by global demand for coal. There’s evidence of that, but it’s not persuasive to the steel casters I met, who’ll tell tales of upward price adjustments (“not surcharges,” they insisted) that are “out of track” with changes in coal supply. There are tariffs on imports of Chinese coke, which only strengthens the hand of the domestic suppliers. Some of my correspondents plainly believe there is price-fixing going on by the coke suppliers, … a charge they’d rather not have to say out loud with so few suppliers available to them.

Some metalcasters have begun implementing their own surcharges in recent weeks, and that’s the advice of coke suppliers, too. “Pass it on.” They can’t do it, the steel founders tell me: not in a market where demand for finished castings is fairly tenuous.

The coal and coke dilemma will soon mirror the iron ore and steel scrap markets, as steelmakers and speculators begin to stockpile ownership stakes, so this is a problem to watch closely. Who will do the watching? My contacts tell me they have some ideas for drawing attention to the situation, but that they’d appreciate more help from the American Foundry Society. Well, perhaps now that the show is over …

None of our business?

2008-05-15T15:12:00Z

About 15 years ago a major engineering firm developed an alternative ironmaking technology that was supposed to help steelmakers overcome the inherent costs and liabilities of their front-end processes. It would have allowed electric furnace operators to wean themselves from scrap steel, and allowed oxygen furnace operators to produce iron without depending on coke. More important at that time was that it was seen as a cost-effective, clean alternative to blast furnaces, which are expensive to operate and maintain.

The process I'm describing works perfectly well, by the way, and it has been adopted by a handful of big steelmakers overseas. But, despite lots of talk it was never adopted in the U.S., and the reason is that it produced too much surplus natural gas.

Mind you, that gas was supposed by the process developers to be an advantage. Their proposals involved co-generating plants to convert the gas to heat and/or electricity, but domestic steelmakers didn’t see the advantage. Too much trouble handling all that "surplus energy." Perhaps they would have a different reaction today, but the've moved on. Their blast furnaces are still operating, mostly very efficiently thanks to other approaches.

I thought of all this when I read this article in a so-called "mainstream" outlet, which makes some assumptions and takes a few whacks at industrial operations for wasting energy. A follow-on blogger theorized, interestingly, that regulatory hassles inhibit manufacturers from adopting more energy-recovery tactics.

Without conceding the premise that "energy recovery" is not happening, I can think of several more immediate reasons why foundries and steelmakers don’t engage in more of it:
• It’s not the business they’re in, and they don’t have the capital resources to devote to what amounts a secondary line of business. If they have that capital, there is a long list of more pressing needs.
• Likewise, foundries and steelmakers typically don’t have the human resources to devote to a secondary business line.
• Finally, there’s no certainty that the utilities with which foundries and steelmakers work will want to buy the energy that may be generated (to them, it’s a comparatively small amount, and not always reliable), or credit it back to their industrial customers.

Defining wasted process energy as a problem because of some environmental concern is no way to get manufacturers to effectuate solutions. They have a different perspective on "the problem."

There is a lot to be accomplished in optimizing energy usage, however — we’ve covered that subject, by the way — which is a much more direct approach to a perceived problem. More to the point, there are companies working on this, and when there are partners willing to work with manufacturers to recover and or convert process energy in responsible and efficient ways, they’ve shown a willingness to do it. But, everyone ought to understand what business they are in.