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Feb11

Is EFCA Around the Corner?

With cabinet nominees to confirm and a stimulus package to negotiate, one of the most contentious upcoming fights in Congress has, temporarily, been put on the back burner; The Employee Free Choice Act (EFCA). Labor unions, and their Democratic allies in the Senate, will need 60 votes to avoid a Republican filibuster and make “card check” the law of the land.

Democrats have a 58-41 seat advantage in the Senate, with the Minnesota Senate race still tied up in the courts. If Al Franken, who leads by 225 votes, prevails in that race, then the 59 Democratic Senators would only need one Republican to pass the EFCA. That one Republican who might break ranks is Pennsylvania’s Arlen Specter, a longtime ally of organized labor in the Keystone State. Specter is up for re-election in 2010, and some anticipated that he might have to vote with the rest of his party in order to avoid a primary challenge on his right. In 2004 Specter narrowly defeated Club for Growth President Pat Toomey 51%-49% in the GOP Senate primary. But recently Toomey decided to run for Governor in 2010 instead. That means that Specter might be free to vote with the Democrats without fear of alienating his base. But odds are some other Pennsylvania Republican will step up in the coming months.

But even if Specter votes for the EFCA and Franken gets seated, there’s still hope. There’s one Democratic Senator who has refused to say where he stands on the issue, and that’s freshman Sen. Mark Warner (D-VA). NAM President John Engler spoke very highly of the Senator when Warner addressed the association last month. On Jan. 19 Warner spoke to NAM members about the importance of lean manufacturing. The former Governor has a reputation as a savvy business man and under his leadership, Virginia flourished economically from 2002-2006.

The other Democrat who’s expressed some reservations over card check is Sen. Blanche Lincoln (D-AR). But if Maine’s two GOP Senators, who voted with Specter and the Democratic Caucus on the stimulus package, once again cross party lines, even Warner and Lincoln won’t stop the EFCA from being signed into law.

Nov23

Commodity Prices in a Slump

 

 

The world economic paroxysms since October have more than upset the prices of commodities. These had begun to sink before the major U. S. banking crisis but since have slumped into steep decline. The Commodities Metals Price Index was around 192 in May and 132 in October. Such shifts have caused headaches. The mining company Rio Tinto announced it is moving away from long-term contracts with customers and instead selling iron ore through the spot market or hybrid securities contracts. The commodities drop brings relief to purchasers of metals, but no one is saying we are entering months of good fortune.

Indeed, one of the reasons given for the drop in commodities prices is the prediction of world recession, meaning lower demand, meaning lower prices. But metals prices, and commodities in general, are still high by historic standards, and analysts are divided on where they think commodities   prices are headed from here. The Economic Times was reporting that analysts believed if copper dropped under $3,100/tonne - the average cost of production -- then the "the copper economy around the globe would go into a tailspin." The London Metal Exchange price on Nov. 19 was $3,500/tonne. Much of last year, and as recently as July, copper was trading at close to $9,000/tonne. Gayle Berry, base metals analyst for Barclays Capital, predicted that base metals prices will continue to slide into the first quarter of next year, but that there they might find a bottom.

David Croson, associate professor of strategy and entrepreneurship at the Cox School of Business at Southern Methodist University, believes the drop in metals prices does not bode well for U. S. valve makers - in two ways. "The drop owes to a decline in demand, which means there will be less demand for valves, which means lower revenue. Second, lower metals prices means valve purchasers will be looking for lower prices, which will tend to lead them to offshore producers whose labor and overhead costs are lower than those of U. S. manufacturers. It's a psychological but very real effect on how buyers make decisions."

Where are prices headed? A posting on Mineweb early in November noted that most analysts believed the world economy would continue to grow, even if just barely [the "western" economies in recession being offset by the "developing country" economies growing] and that this being the case, "when the real picture is understood, there could be a fast and dramatic rise in commodity prices - perhaps not back to the recent bubble-driven highs, but high enough to pull the mining sector out of the current gloom."

Frank Hemsley writing in the Contrarian Profits believes commodities are merely in a correction that is part of a secular bull market. He believes much of the selling of commodities was forced owing to the need to "finance the mess in other sectors." He sides with legendary commodities investor Jim Rogers, who he says, believes this sell-off will only make the commodities bull market longer.

Ultimately, much depends on the Chinese and Indian economies. And China recently announced a two-year $586 billion economic stimulus plan to boost domestic demand. If China can keep growing despite a fall-off in exports to the United States, then commodities prices will remain under pressure to stay high.

 

Nov11

Introducing Pete Cleaveland

pete cleaveland.jpgpete cleaveland.jpgI’d like to introduce you to Peter Cleaveland, who you’ll be hearing from on a regular basis. Pete is a new contributing editor to Valve Magazine and ValveMagazine.com. Some readers may recognize Pete’s byline—he was a senior technical editor with Instrumentation & Control Systems (which later changed its name to Control Solutions) from 1982 to 2002. Since then he’s written articles for magazines including Chemical Processing, Control Engineering, Food Engineering, Food Manufacturing, IAN, Industrial Maintenance and Plant Operation, In MFG, Medical Design Technology, Pharmaceutical Processing and Product Design & Development. Before embarking on a writing career, Pete was an engineer in defense electronics and later in industrial (CNC) control manufacturing.

Feel free to post comments about Pete’s articles in our Valve Industry Blog, or contact editor This email address is being protected from spambots. You need JavaScript enabled to view it. if you have ideas for topics you’d like us to explore on this website and in the pages of Valve Magazine.

Nov10

Looking for the Economic Light

There seems to be plenty of bad news to go around. The fall 2008 issue of Valve Magazine had several predictions of an economic downturn, and it seems to have arrived. The Institute of Supply Management’s October Report on Business put the PMI at 38.9%, a sharp drop from September’s 43.5%.

It didn’t help the valve industry that the only two industries that showed growth were not big users of valves: Apparel, Leather & Allied Products; and Computer & Electronic Products. Click here for more details.

The Federal Reserve reports that industrial production and capacity utilization had been flat to down on a month-to-month basis for most of 2008, with the decline accelerating in September. The car companies have gone hat in hand to Washington to beg for money, and consumer spending is down.

Yet not all companies are reporting bad news. For example, Flowserve Corp. announced record third-quarter performance including earnings per share, sales and bookings. On Oct. 10, Frank Vargo, Vice President for International Economic Affairs of the National Association of Manufacturers (NAM), said that the trade figures released by the Commerce Department showing that manufactured goods exports continued a rapid growth pace in August, up 15% over August 2007, offers “a positive counterpoint to the otherwise grim economic news from Wall Street.”

And so far things aren’t all that bad for valve makers. The VMA State of the Economy Survey for October 2008 reported that 84.6% of respondents to the latest member survey report an increase in shipments over the previous month, and 65.4% expect to see more business this year.

And remember that the price of crude oil is down, which may help reduce some manufacturing costs, and seems to have changed its relationship to the stock market. When crude was above $100/bbl the Dow tended to follow it in an inverse way, falling as crude rose and rising as it fell. Now the two numbers run in the same direction, perhaps showing that crude has reverted to being a commodity, rather than the plaything of the speculators and hedge funds.

Predictions of how long it will take for the economy to begin growing again vary from 2009 to 2010 and beyond, but we’ve been through rough patches before ,and we’ll do it again. And right now would be a fine time to look for ways to save money in normal operations. We’ve been asking executives at VMA member companies for suggestions on that very topic. We’re putting their responses into an article for the winter 2008 issue of Valve Magazine, so keep an eye out for it.

Oct22

You Don't Want to Meet Bill

'You Don't Want to Meet Bill' is the name of a new ad paid for by the U.S. Chamber of Commerce that's airing in key states during the runup to election day.

In addition to trying to influence the presidential race, the CoC is also worried about the numbers of votes they'll have in congress next year. Most everyone agrees that the GOP has virtually no chance of taking back the majority until 2010 at the earliest, but now Democrats are increasingly optimistic about achieving a 60 vote "filibuster-proof" majority in the Senate.

Many agree that 57 or 58 seats is the likeliest scenario for the Democrats next year, but more and more races have become competitive in recent weeks. In Minnesota, Al Franken has been maintaining a narrow lead over incumbent Norm Coleman according to Real Clear Politics average. Jim Martin and Saxby Chambliss are neck-and-neck in Georgia. The race in Mississippi between Ronnie Musgrove and Roger Wicker is very close (Wicker was appointed to the seat following Trent Lott's retirement late last year). Even Senate Minority Leader Mitch McConnell is having a tough time fending off businessman Bruce Lunsford in the heavily-Republican state of Kentucky.

For a long time, political analyst Charlie Cook scoffed at the notion that the Demcrats could control 60 seats after the '08 elections. But these days, he's singing a different tune:

National Journal (09/27/08):

The bottom line is that things have gotten worse for Senate Republicans over the past few weeks, so much worse that a magnitude of losses that seemed impossible just a few months ago now seems entirely possible.

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