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US manufacturing activity improves: Fed

Keywords: Tags  Federal Reserve, manufacturing activity, energy market, automotive, steel, iron ore, specialty metals, heavy equipment corinna petry

CHICAGO — American manufacturing, drilling and mining activity has improved in spots in the second quarter vs. the first three months of this year, but steel shipments have faltered due to lower demand, customer inventory reductions and weak pricing.

The findings were published June 5 in the Federal Reserve Board’s "Beige Book," which surveys each bank district’s commercial sources for regional trends.

Steel producers and service centers in the Cleveland district, which stretches east to Pittsburgh, said that shipping volumes were stable but below levels seen early in the first quarter. Several survey respondents were concerned about the amount of steel imports arriving on U.S. shores.

Ports in the Atlanta district, which includes much of the Southeast and the Gulf states, reported solid growth in containerized traffic and general cargo, including imported steel. An increase in steel imports displaced domestic production in the Chicago district, which includes much of the upper Midwest east of Minnesota, sources told the bank. Nonetheless, the industry also reported that capacity utilization gradually increased over the past two months.

Chicago-district specialty metal manufacturers reported small increases in new orders, but customers are ordering only as necessary with very short lead times and are reassessing supply chains in an effort to cut costs.

Regional heavy equipment makers said that their retail dealers continue to reduce their inventories and most mining companies have trimmed their orders due to cutbacks in mining investment.

Motor vehicle production at Cleveland-district assembly operations rose at a robust pace in April vs. the previous month and a year earlier. Raw material and finished goods prices were flat or trended lower, and survey respondents said their ability to raise prices during 2013 would likely be limited.

Manufacturing activity in the St. Louis district, which stretches from northern Missouri to the middle of Mississippi, grew in recent months. Several manufacturers plan to add workers, expand operations or open new facilities, especially automakers and auto-parts suppliers but also steel companies that saw business improve.

Manufacturing activity in the Minneapolis district, which covers the upper Midwest from Michigan’s Upper Peninsula to western Montana, expanded moderately in April and May. A tractor manufacturer and a vehicle producer each announced significant capital projects.

The energy sector remained strong. In North Dakota, construction has started on a $400-million oil refinery and a 120-car rail terminal is in the works to handle crude oil. Exports of coal from Montana’s Powder River Basin hit record levels even as domestic demand dwindled, but spring production at Minnesota iron ore mines fell by about 5 percent from a year ago.

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