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January 13 2024

Biden Demands “Serious Scrutiny” Of US Steel Sale

k999content News acquisition, risk, steel, supply chain, USA 0

President Joe Biden believes “serious scrutiny” is warranted for the planned acquisition of U.S. Steel by Japan’s Nippon Steel, the White House said Thursday after days of silence on a transaction that has drawn alarm from the steelworkers’ union. Lael Brainard, the director of the National Economic Council, indicated the deal would be reviewed by the secretive Committee on Foreign Investment in the United States, which she participates in and includes economic and national security agency representatives to investigate national security risks from foreign investments in American firms. She said in a statement that Biden “believes the purchase of this iconic American-owned company by a foreign entity — even one from a close ally — appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.” “This looks like the type of transaction that the interagency Committee on Foreign Investment Congress empowered and the Biden administration strengthened is set up to carefully investigate,” she said. “This administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”

Under the terms of the approximately $14.1 billion all-cash deal announced Monday, U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan and Andrew Carnegie. It will become a subsidiary of Nippon. The combined heavy steel fabrication company will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association. Chaired by Treasury Secretary Janet Yellen, the CFIUS screens business deals between U.S. firms and foreign investors and can block sales or force parties to change the terms of an agreement for the purpose of protecting national security. The committee’s powers were significantly expanded in 2018 through an act of Congress called the Foreign Investment Risk Review Modernization Act, known as FIRRMA. Last year, U.S. Steel had dropped a National Labour Relations Board complaint against United Steelworkers. In September, President Biden issued an executive order that expands the factors that the committee should consider when reviewing deals — such as how the deal impacts the U.S. supply chain or risks to Americans’ sensitive personal data. It has on some occasions forced foreign companies to divest their ownership in American firms.

United Steelworkers International, which endorsed Biden’s 2020 presidential campaign, swiftly opposed the new transaction. The union “remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” said David McCall, president of United Steelworkers, in a statement after the transaction was announced, adding that the union was not consulted in advance of the announcement. “We also will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers,” he added. Political allies of Biden in Pennsylvania — a presidential battleground state that is critical to his re-election campaign — also objected to the sale this week, and released statements pressing Nippon to make commitments to keep U.S. Steel’s workers, mining plant and equipment, and headquarters in the state. Democratic U.S. Sen. Bob Casey said it appeared to be a “bad deal” for the state and workers, while Democratic U.S. Sen. John Fetterman — who lives across the street from U.S. Steel’s Edgar Thompson plant just outside Pittsburgh — said he will attempt to prevent the sale based on national security issues.

Logistics Isometric Flowchart Composition

August 8 2023

Future-proofing Supply Chains

k999content Blog economy, manufacturing, materials, supply and demand, supply chain 0

As discussed in a previous blog on post-pandemic fabrication supply chain, the COVID years were harrowing for supply chains with the imminent threat of lockdowns creating volatility in demand and supply patterns. With the return to normalcy, the future of global logistics has become significantly brighter — however there are lessons to be learnt during the pandemic and which should be avoided in case of a similar situation in the future. There is a gradual realization that many forces need to be considered when creating truly resilient, dynamic supply chains. So, what are these forces and how should they be leveraged correctly? This writeup looks to decode this subject in greater detail.

Supply-Demand Mismatch

In a perfect world, supply and demand sync evenly but in the real world, often one outpaces the other – such as the shortage of certain consumer goods of 2020. Oversupply can also cause issues which can pile up and quickly eat through a business’ bottom line. A common issue is where to store the overstock and how to continue to sell it and profit, and this can cause issues up and down the supply chain of heavy steel fabrication companies. These pockets of exponential demand will continue to exist as will moments of oversupply. Both need to be built into forecasts to help stakeholders better manage inventory and adapt as forces shift the balance.

Commodity Shortages

Commodities like lithium and cobalt are in high demand but not always easy to procure. Producers that need hard-to-replace materials must factor in forces such as potential tariffs, weather patterns, upcoming environmental regulations, and variable pricing of mining plant and equipment to ensure production does not suffer. The emergence of innovative design is a trend which can be used to resolve shortages. Engineers are using smaller geometries, so the required amount of the given commodity is reduced without sacrificing product capability. An example would be the small size of computers today compared with earlier days when they were the size of a room and exponentially less powerful.

Economy and Pricing

The state of the economy is a major factor which is a bell weather for consumption trends, such as using local steel companies in Australia. With rising inflation, consumers are looking to spend less but still get that bang for their buck — and that translates all the way up the chain. At the same time, between labour, the rising cost of materials, tariffs, and more, suppliers are getting squeezed on cost. While there will never be a perfect model for economic forecasting, knowledge of known forces and their impact on consumer behavior can be built into pricing projections.

Labour Shortages

Forces such as labour shortages always impact product availability. For instance, Japan needs more than 200,000 engineers in the next couple of years to maintain current production levels. In 2030 it is expected that Japan will not be able to fill 270,000 artificial intelligence and IoT jobs. One of the drivers of this trend is ageing populations. The engineers who have been designing and building components worldwide are now retiring and there are fewer people available to fill those gaps. Not only is there an inverted population pyramid at play here, but the increased need for these products is driving up the demand and exacerbating this skill gap. Consider how many things require technologies that did not exist even 10 years ago. The demand is going to skyrocket, which means even more engineers and IT professionals will be needed going forward.

Final Thoughts

In the context of future planning for supply chains, none of these forces are new but the need to accurately build them into supply chain forecasts is increasingly important. The pandemic helped highlight the need to take all these forces into account to ensure that disruptions are limited when a black swan event occurs. Hence, supply chains are ever-evolving and it is up to us to keep pace with its evolutionary development!

connected-logistics-and-supply-chain-concept-tabl-2022-11-10-20-03-35-utc

July 11 2023

Post-Pandemic Fabrication Supply Chain

k999content Blog COVID-19, manufacturing, metal, operations, supply chain 0

The COVID-19 pandemic had led to the disruption of the fabrication and manufacturing supply chain. First came the supply shock, where many fabricators dealt with canceled orders not from lack of demand but because manufacturers could not get other needed parts for the final product. Then came the second punch, this time on the demand side, as unemployment spiked dramatically. manufacturers reacted by reducing or halting orders altogether. Now that the severity of the pandemic has considerably diminished, there is expected to be an evolution of the metal fabrication supply chain. There may be new trends and factors coming up in this regard, and this blog will look to deep-dive into this topic.

Transparency

Supplier management and optimization is a critical requirement in supply chain management since one would want the plumbing set up for multiple supply chains so that one can turn on the faucet here or there, depending on the timing. To do that in some cases, manufacturers reduced the number of faucets (suppliers) to just a few large, highly reliable ones. This in part has helped make some of the largest heavy steel manufacturing companies even larger. The COVID-19 crisis might spur more dual sourcing. If the disease reemerges in a certain locale and everyone at a certain plant needs to go home, will another supplier elsewhere be able to pick up the slack? Such dual sourcing might add a bit of supply chain complexity which is a challenge facing the metal fabrication industry. It goes back again to supply chain transparency, not just between a fabricator and its customer, but also wherever value is added within the entire supply chain. Manufacturers might accomplish this in various ways, one of them being by contracting directly with the lower-tiered suppliers, including metal fabricators. Fabricators might still send welded components to an assembler, which then sends them on to the manufacturer. But the assembler might act simply as a toll processor. In this sense, the supply chain would evolve into a kind of network.

Reshoring and Tracking Financial Health

Overseas work has been coming back from Asia for years, and the steel tariffs of 2018 and the COVID-19 pandemic have accelerated those efforts. According to a survey, 64% of manufacturing and industrial companies are likely to nearshore or reshore because of pandemic-related concerns. In that same survey, 53% of businesses reported difficulty receiving COVID-related supply chain information from their Chinese suppliers. A change in geography does change the risk level, however, supplier location is only a piece of the puzzle. Transparency is still the name of the game. An opaque supplier relationship can have negative consequences, whether that supplier is down the street or an ocean away.

Transparency will include information related not only to where components are in the supply chain, but also the financial health of suppliers. An audit might give a snapshot of a supplier’s liquidity, leverage, efficiency, savings due to process automation, and access to cash. But how will this financial situation change over time? Again, demand for such transparency has been building for years, especially in certain industries.

Make vs. Buy

The COVID-19 pandemic is likely to enable more make-versus-buy analyses and evaluations. The variables in the make-versus-buy decision will remain the same, including available suppliers, shipping logistics, and the nature and mix of products being manufactured. But the potential of disease outbreaks or other external shocks around the globe will lead more companies to further scrutinize their decisions. It is likely that the pandemic will not lead to some massive vertical-integration movement. Bringing in a process that is too far outside a manufacturer’s wheelhouse still will not be practical in many cases. This will be particularly true with processes that require certain expertise, like high-end welding and other specialty fabrication processes such as development of pressure vessels.

The Last Chapter

COVID-19 has tested the agility of industrial supply chains. As the economy picks up in a post-pandemic world, it is essential to ensure that the lessons learnt during those hard times are not lost, but used to drive innovations in supply chains going forward. As the saying goes, a chain is only as strong as its weakest link and supply chains need to iron out their shortfalls to emerge stronger in the long run!

May 17 2022

Challenges Facing Metal Fabrication Industry

k999content Blog fabrication, metal, mining, supply chain 0

At any point in time, metal and steel fabrication work is ongoing with raw metal materials being cut, burned, welded, machined, formed or assembled by companies to meet industry requirements. Whether it is hardware, structural metal, or manufacturing products like hand tools or even handrails, companies in this industry play a significant role. That’s partially why the industry is steadily growing at about three percent annually. To know more about the applications of fabrication in the mining and oil and gas industries click here and here respectively. But even with steady growth, the metal fabrication industry is not without its challenges. This blog will discuss some of the major challenges facing this industry today.

Increasing customer demands

customer demands

Customers are living in a world where things happen on demand. Increasingly, they expect an expedited experience in an industrial setting as well. Customers want their products with best quality as soon as possible, at an affordable price, with insight into where things stand and when they’ll be delivered. Heavy steel fabrication companies would need to be competitive and meet quality expectations. Customers expect shorter lead times and more accurate job costing and estimating. Customers are also increasingly looking for product-as-a-service options.

Supply chain management

As operations grow in complexity, the supply chain becomes more complex, too. Like many other industries, metal fabrication is becoming increasingly outsourced which gives rise in the number of channels to bring a product to market. To save money and to meet increasing demand for a variety of products with shorter delivery times, many companies send some processes or components out to other plants or locations around the world. While this gets products (e.g. pressure vessels) to the end-stage faster and at a lower price, it also means businesses must work harder to synchronize their demand forecasts, supply capacity, and their inventory quantities.

Increased costs

A common challenge pertaining to metal fabrication is the rising costs of materials and capital projects, alongside inefficiency in operational standards and silo-like decision-making. With the increase in labor costs in the US, moving production offshore hasn’t always increased profits as transportation and quality assurance costs have also been on the rise. Global inflation is also presenting new difficulties to the manufacturing world. Tariffs and trade wars, as well as the intricacies of various economies, contribute to increased costs and diminished profits for the metal fabrication industry. Another major factor was the impact of the COVID-19 pandemic which disrupted the steel industry leading to rising raw material prices and decreased demand due to construction halts and high transportation costs of mining plant and equipment.

Demand for New and Specialized Skills

Manufacturing companies rely on a workforce that is declining. There tend to be misconceptions within the younger workforce that most manufacturing jobs lack competitiveness, higher wages, or clean and safe work environments. There are also many jobs available that require a specific skill set, such as that of a highly specialized civil engineer, which can lead to recruiting challenges. To attract new labor, companies need to communicate opportunities well, use intuitive, innovative, and enjoyable systems, and ensure that skillsets are a good fit for the company.

Final Remarks

In an increasingly competitive market, it is anticipated that the right Operations Technology and Information Technology set-ups would help metal fabricators stay ahead. Metal fabrication projects are also beginning to pick up in Asian countries like India, Vietnam, Thailand etc. and resolving the above challenges will be beneficial for the metal fabrication industry in the long run. At the end of the day, metal fabrication is held in high regard – however slight course corrections are required to ensure that headwinds are converted to tailwinds!