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Latest News – May 2, 2013

Energy & Diesel Fuel & Other Commodities – EIA

Diesel prices are down for ninth straight week. The average price per gallon fell 3.6 cents to $3.851 per gallon.

TODAY IN ENERGY: Thursday, May 2, 2013

U.S. exports of liquefied petroleum gases projected to continue through 2040

In 2012, the United States became a net exporter of liquefied petroleum gases (LPG) for the first time. LPG includes the natural gas liquids (NGL) components ethane, propane, butanes, and marketed refinery olefins. In its Annual Energy Outlook 2013 (AEO2013), EIA projects that the United States will continue to be a net exporter of LPG through 2040, mainly because of continued increases in natural gas and oil production

TODAY IN ENERGY: Thursday, April 18, 2013

Lower residential energy use reduces home energy expenditures as share of household income

Consumers spent 2.7% of their household income on home energy bills last year, the lowest percentage in 10 years. Aggregate home energy expenditures by U.S. households fell $12 billion in 2012 from the 2011 level. In 2012, prices for residential natural gas decreased 3% from the previous year, while household electricity prices stayed about the same. Warmer weather contributed to lower energy consumption in 2012, and because household energy expenditures reflect both prices and consumption, these changes resulted in lower household energy expenditures.

Commerce – Regulatory & Compliance

Chemistry Council lends support to class action rail suit

American Shipper | 04/30/2013

A federal appeals court will soon rule on whether an antitrust case against four railroads that allegedly engaged in price-fixing can be tried in the courts as a class action suit. Dakota Granite Co., Zinifex Taylor Chemicals and 11 other shippers brought a suit

U.S. trade deficit fell in March

The U.S. trade deficit fell by nearly $5 billion from February to March, ending the month at $38.8 billion, according to the Commerce Department. Last month, the United States exported $184.3 billion in goods, but imported $223.1 billion in cargo.

Economic Growth to Continue Throughout 2013

World Trade/WT 100 | May 2, 2013

Economic growth is expected to continue in the United States throughout the remainder of 2013, say the nation’s purchasing and supply executives in their spring 2013 Semiannual Economic Forecast. Expectations for the remainder of 2013 continue to be positive in both the manufacturing and non-manufacturing sectors. These projections are part of the forecast issued by the Business Survey Committee of the Institute for Supply Management (ISM).


From the panel of manufacturing supply management executives, 66 percent of respondents predict their revenues will be 9.9 percent greater in 2013 compared to 2012, 12 percent expect a 14.6 percent decline and 22 percent foresee no change. This yields an overall average expectation of 4.8 percent revenue growth among manufacturers in 2013, which is a slight increase of 0.2 percentage point from December 2012 when the panel predicted a 4.6 percent increase in 2013 revenues.

With operating capacity at 80.2 percent, an expected capital expenditure increase of 9.1 percent, prices paid expected to increase a modest 0.9 percent from now through the end of 2013, and employment expected to grow only 0.9 percent for the balance of 2013, manufacturers are positioned to grow revenues while containing costs through the remainder of the year.

“With 17 out of 18 industries within the manufacturing sector predicting growth in 2013 over 2012, U.S. manufacturing continues to demonstrate its broad-based strength, efficiency and leadership in the world economy,” said Holcomb.

The 17 industries reporting expectations of growth in revenue for 2013, listed in order, are:

  • Wood Products;
  • Furniture and Related Products;
  • Nonmetallic Mineral Products;
  • Petroleum and Coal Products;
  • Electrical Equipment, Appliances and Components;
  • Miscellaneous Manufacturing;
  • Printing and Related Support Activities;
  • Food, Beverage and Tobacco Products;
  • Paper Products;
  • Plastics and Rubber Products;
  • Textile Mills;
  • Computer and Electronic Products;
  • Machinery;
  • Primary Metals;
  • Chemical Products;
  • Apparel, Leather and Allied Products;

Logistics: Carriers, All Transportation Modes & International

Tonnage of Trucking Industry Surges in United States

Procurement Leaders | May 02, 2013

Trucking freight tonnage has increased in four of the last five months across the U.S., research reveals. The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index gained 0.9 percent in March after decreasing 0.7 percent in February.

In March, the SA index equaled 123.5, after the highest level was recorded in December 2011 at 124.3. Compared with March 2012, the SA index was up a “solid” 3.8 percent, beating February’s 3.1 percent year-over-year gain. Year-to-date, compared with the same period in 2012, the tonnage index is up 3.9 percent. Since November 2012, the index is up 7.6 percent. The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 125.2 in March, 11.5 percent above the previous month.

“Fitting with the expectation for solid gross domestic product growth in the first quarter, tonnage was strong in March and the quarter overall,” ATA chief economist Bob Costello said. “At 3.9 percent year-over-year growth, the first quarter increase was the best since the final quarter 2011. Expect freight tonnage will slow in the months ahead as the federal government sequester continues and households finish spending their tax returns,” he added.

The 3PL & 4PL World

UPS to acquire pharma logistics company, announces major LNG transportation plans

Logistics Management | April 29, 2013

Parcel bellwether UPS made inroads on other fronts, too, including its planned acquisition of CEMELOG, Zrt., a pharmaceutical logistics company based in Hungary, and rolling out its plan to purchase roughly 700 liquefied natural gas (LNG) vehicles and build four refueling stations by the end of next year. CEMELOG: As an active player in healthcare logistics, UPS said that adding CEMELOG to its portfolio in this sector boosts its presence in Europe, coupled with the fact that it will help to enable comprehensive and compliant services to pharmaceutical, biotech, and medical device shippers for emerging markets in Central and Eastern Europe. This acquisition is expected to be completed during the second quarter and is subject to customary closing conditions, according to UPS.

Supply Chain News

Report: U.S. manufacturing costs are now equal to Mexico and will be equal to China by 2015

Alix Partners | April 29, 2013

Four out of five executives surveyed say nearshoring will be an important decision in coming year. In another sign that America is becoming more competitive in manufacturing, the U.S. is now equal to Mexico in “attractiveness” as a source for manufacturing operations and is on track to achieve cost parity with manufactured imports from China by 2015. These are among the findings from new research released by Alix Partners, a global business consulting firm.

According to the survey, 37% of manufacturing executives said they would choose the U.S. as their preferred location for nearshoring. An equal percentage of respondents cited Mexico as the most attractive nearshoring locale, but in the firm’s survey just two years ago, 63% chose Mexico, while only 19% said they would choose the U.S.

Foster Finley is managing director at Alix Partners and director of its Supply Chain Practice. In a recent interview, Finley spoke with Modern about the research and what it says about nearshoring and reshoring efforts among global manufacturers. He stressed the report’s statements on the attractiveness of various regions for the production of U.S.-bound goods is a projection – not a prediction – based on straight-line extrapolations from 2013 trends.

“If the United States reaches parity with China in 2015, that would be more about luck than any statistical certainty,” said Finley. “A lot could happen in the next few years.”

The cost gap with China has on average been closed by approximately 70% for the products Alix Partners analyzed. If current trends remain in place, on average, by 2015 the cost of importing manufactured products from China will be about the same as manufacturing them in the U.S, said Finley. However, other key low-cost countries, such as Mexico and India, will remain highly competitive.

With a resounding 84% of the C-level executives saying that the decision to nearshore their manufacturing would be an important one during the next year (versus just 53% who said the same last year), it is clear that nearshoring and reshoring decisions are moving to the front burner in 2013. Approximately 58% of the respondents said for production that has either already been nearshored or is being considered for nearshoring, they have either reduced or expect to reduce their total “landed cost” by 5% to 20%.

The third annual survey captures the sentiments of executives, but Alix Partners has also been tracking the raw macroeconomic data in seven key factors related to global manufacturing costs. They are:

  • Direct Labor
  • Direct Material
  • Overhead
  • Territory (time in transit between place of manufacture and destination market)
  • Harmonized tariffs
  • Transportation
  • Exchange rates

Generally, the raw numbers line up very well with the sentiments expressed by survey respondents, but Finley was careful to note that there are no direct lines between any one of these costs in a given country and the advantage of manufacturing there.

“Some of the less sophisticated companies are almost entirely focused on labor,” he said. “Depending on the product or mix of products made in a facility, labor could be inconsequential. It’s about an analysis of the products, not the facility, that will make the justification for relocation.”

For example, while the “China cost” for items analyzed such as machined aluminum parts, plastic molded parts, non-denim slacks, and knit apparel and sweaters is indeed on the rise, that cost is still lower than Mexico’s in each case – and is forecast to remain lower through at least 2015.

The one-time costs associated with a move are also critical to such a decision. Tax incentives, utility incentives and other governmental programs might help ease the transition to the U.S. or ensure a company doesn’t leave, but the U.S. is not alone in considering and implementing such incentives. “We think China will get into that as well, as they realize they need to get competitive to grow manufacturing or keep it in China,” said Finley. “China has its work cut out for it, because it has to deal with an export-based economy with a rising wage rate and a small consumer market.”

Automation will continue to play a big role as manufacturing welcomes what Finley called the “democratization of robotics.” In the list of economic factors above, automation seeks to transfer labor costs to overhead, which improves predictability. As the costs for automated technologies fall to the point where more small manufacturers can afford them, it increasingly places control of the labor costs in their hands.