May 31, 2013
A little historical perspective, beginning in the 1970s: higher costs for raw materials and labor, among others, were significant factors that prompted many American manufacturers to move their operations overseas in order to remain globally competitive. But new supplies and availability of raw materials has shifted in our favor and manufacturers are looking at the United States once again. Today, due to the cost advantage of energy and raw materials, and manufacturing facilities and infrastructure already in place, many companies are beginning to move their operations back within our shores.
In Youngstown, Ohio, for instance, V&M Star is building a $650-million steel mill 34 years after the iron and steel industry left the region. Just last year, General Electric began building appliances previously made in China and Mexico in its long-deserted Appliance Park manufacturing plant in Louisville, Kentucky. Nucor Corp. is opening a new plant in Louisiana this summer. In Houston, Texas, the number of employees in the manufacturing industry has increased from 165,000 to 250,000 since 2009, as companies grow to keep up with the demand for parts needed in the hydraulic manufacturing process. These are just a few examples of the millions of dollars in planned investments as a result of the increased availability of natural gas and NGL.
May 30, 2013
Andy Hall, who is known as God in the oil markets, says the increased production from shale is temporary
If you want to know what will happen to the oil market from shale drilling, I think you could do worse than to look at what it did to the natural gas market. The boom in drilling eventually reduced prices to the point where it no longer made sense to drill new wells. Obviously, we aren’t there yet with the oil market but inventories are not exactly lean right now. When the drilling slowed down sufficiently to reduce new supplies, nat gas recovered rapidly. It is certainly hard to bet against God, but my guess is that prices will have to fall first before another run higher. How low is hard to say but the estimates I’ve seen are that shale production in most areas is not profitable below about $65. That’s a long way down from here but certainly not out of the question with the global economy in a soft patch.
Future Demand for steel Castings
At the SFSA lunch meeting at the AFS CastExpo in St Louis this year, the members asked if we could develop a more timely and current indicator of economic activity related to steel casting demand.
Steel mill production appears to lead, at least in the extreme market conditions of 2008 to 2010, steel casting activity. AISI not only publishes monthly steel mill shipments and production but also weekly mill production. The weekly production could provide an insight into future market conditions for steel casting producers.
The increases in steel mill production for the past six months suggest that steel casting demand should begin to improve in the near future.