EGS COMMODITY REVIEW
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EGS COMMODITY REVIEW February 26, 2007 Steven Call Commodities Steel Non-Ferris Metals Stampings PowerPoint PPT Presentation


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EGS COMMODITY REVIEW February 26, 2007 Steven Call Commodities Steel Non-Ferris Metals Stampings. Steel Market Update. USA Market Current Q1 prices down 17% from 2006 Q4 high Inventories have increased with automotive and housing markets soft Capacity at 84%

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EGS COMMODITY REVIEW February 26, 2007 Steven Call Commodities Steel Non-Ferris Metals Stampings

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Egs commodity review february 26 2007 steven call commodities steel non ferris metals stampings

EGS COMMODITY REVIEW

February 26, 2007

Steven Call

Commodities

Steel

Non-Ferris Metals

Stampings


Steel market update

Steel Market Update

USA Market

  • Current Q1 prices down 17% from 2006 Q4 high

    • Inventories have increased with automotive and housing markets soft

    • Capacity at 84%

  • Industry consolidation continues

    • The big four, Mittal-Arcelor, US Steel, Nucor & AK, controls 80% of the market

  • New business model seen recently

    • Esmark – a distributor – working to purchase two mills and a galvanizer

  • Future forecast uncertain – steel producers trying to reduce capacity to retain pricing

  • US government continues to be protective with imported steel

Miscellaneous 20%

Mittal 32%

AK 9%

Nucor 16%

US Steel 23%

Top 4 Suppliers Control 80% of Market


Steel market update1

Steel Market Update

Global Market

  • General

    • Global consolidation continues

      • Mittal (Europe): MMK (Russia) / Sicartsa (Mexico) / Worthington (US)

      • Tata (India) : Corus (EU)

      • Nucor (US): Harris (Canada)

  • China

    • China manufacturers advantage to US price for Cold Roll Galvanized Steel

      • 2004-2006 20%

      • 2007-2009 12%

    • Pricing has increased 1Q07 with higher value added tax and iron ore costs

    • China is rolling back incentives to export steel as consumption is coming closer to equaling supply

  • Mexico

    • Maintains US pricing

    • Net importer of steel – only 3 manufacturers within Mexico

  • Europe

    • Now a price leader pulling in imports


Steel market update2

Steel Market Update

Forecast

  • Global steel demand increasing

    • 3.7% five year growth forecast

  • Production increasing in developing regions

    • Brazil, China, Eastern Europe and India are expanding production

  • Consolidations to continue

  • Potential destabilizing effects exist

    • China

      • Supply / demand balance

      • Raw material costs

      • Inflation

    • USA

      • Weakening currency

    • Eastern Europe

      • Oil & Gas Market

15% Demand Growth next 5 years

CIS, Brazil & India Will be the Dominant Low-Cost Source of Steel

China’s Demand Growth Expected to Balance Supply Expansion


Lamination duo core market update

Lamination/Duo-Core Market Update

Energy Star Transformer – Duo-Core Launch

  • Three suppliers

    • Lakeview / Electro-core / Tempel

  • Cores consist of a material blend of

    • M-4 GO $2.23 / lb 6 Month Lead Time

    • M-12 NGO $1.22 / lb 4 Month Lead Time

  • Material Status

    • M-4

      • 12 Suppliers worldwide – limited spot tons available

      • AK & Allegany – North America – sold out until 2009

    • M-12

      • About 15 suppliers worldwide – very limited spot tons available

      • AK & Allegany – sold out until 2009


Steel commodity overview

Steel Commodity Overview

  • Market Opportunities

    • Leverage global sourcing options

    • Use long term agreements for price stabilization

    • Align stamping moves to Mexico with the steel team to ensure flat roll supply

    • Improve overall logistics costs through supply chain management


Steel supplier overview

Steel Supplier Overview

  • Opportunities

    • US Steel – 220 tons/week - renegotiate if market drops below contract

      • Current contract at $696/ton - February market price is $710/ton

    • All distributor costs - evaluate for more cost effective ways to manage the buy

      • Review utilizing long term agreements or purchasing direct from mills

    • Sorrel and Busheling

      • Review if logistic costs can be reduced

    • Inventory

      • Review current inventory and sell excessive stock to distributors


Steel projects

Steel Projects

  • Distributor Steel – Purchase price savings

    • Resource distributor steel direct from the mill – US Steel

      • US Steel will maintain the galvanizing and shipping adders that are part of the current contract

      • Low volume steel will be included in the next long term agreement

  • Sorel -– Logistics and purchase price savings

    • New supplier to ship FOB South Milwaukee with a cost reduction

      • Savings includes

        • Purchase Price -$5K

        • Shipping -$28K


Base metals market overview

Base Metals Market Overview


Base metals commodity overview

Base Metals Commodity Overview

  • Opportunities

    • Continue hedging program for zinc, aluminum and copper

    • Review contracts for long term opportunities


Raw material supplier overview

Raw Material Supplier Overview

  • Issues

    • Limited domestic supply base

    • Payment terms not at 5th 3rd prox across all suppliers

    • 2 suppliers for aluminum

      • Wabash Alloys, Custom Alloy Light Metals

    • 4 suppliers for zinc can service EGS

      • Allied Metals, Ritchey, Imperial Zinc, Eastern Alloys

  • Opportunities

    • Extend payment terms for all suppliers


Stamping commodity overview

Stamping Commodity Overview

  • 992 different part numbers purchased FY06

  • 146 Suppliers

    • 113 suppliers below $40K / year

  • Atizapan, MX

    • Only 8 out of 42 suppliers are located in Mexico

      • A total of $ 1,127K in spend comes from outside of Mexico

  • Stamping supplier consolidation becomes a prime focus this year


Stamping supplier overview

Stamping Supplier Overview

  • Opportunities

    • Reduce number of suppliers

      • 113 suppliers under 40K spend

    • Improve supply chain costs – transportation, duty, inventory and manufacturing costs

      • Review global options

    • Improving ordering process

      • Utilize blanket orders and forecasting methods


Stamping project summary

Stamping Project Summary


Stamping projects

Stamping Projects

  • Electrical Gang Boxes and Covers

    • Re-sourcing the manufacture and packaging to UMI located in China

      • Stephenville currently purchases from a competitor and repackages

    • Timing

      • To complete final agreement and issue purchase order early March 2007

        Parts to start arriving May 2007


Stamping projects1

Stamping Projects

  • Electrical Box Knockouts – Delivery and Logistics Savings

    • Current supplier delivery at 40% on time.

    • Re-sourcing to Apple Industries in India.

    • Total savings $25K per year

      Labor & packaging -$10K Logistics -$6K Part Cost -$4K Timing

      • To issue purchase order February 2007, Parts to arrive May 2007


Stamping projects2

Stamping Projects

  • Ferrules - Duty and Transportation Savings

    • Current supplier is located in China – shipping to Atizapan, MX

      • Total savings:

        Duty savings on completed assemblies -$116K

        Logistics -$5K

    • Assuming no piece part savings

    • Timing

      • Submitting information for April E-souring event


Stamping projects3

Accurate Metal Prod.

Connector Mfg Co.

Cookson Group

Deringer-Ney

Gilbert Spring

Griffiths Corp

Line Tool & Stamp

Manor Tool & Mfg

Nu-way Ind.

Stanley Spring

Clampco

Jones Metal

Progressive Die

Auto-form

Gem Mfg

Hessels

Howard Eng

Taco

Platt Brothers

Dex M Corp

Wire Products

A.L.P Lighting

NC Automated

Rummel Ind.

Topco

Blazer Mfg

Chief Ind.

Superior Metal

Mohrmann Tool

Deaver

Artmark

Dayton Rogers

Atizapan

Stamping Projects

  • Mexico Product Relocation

    • To review the current $1,127K buy outside of Mexico

      • Logistics, inventory and DPO opportunities

  • Timing

    • Will plan on reviewing projects and having multiple E-Sourcing events.

      • May and July 2007

    • Will work with Mechanical Components team to combine like parts with other Emerson E-Sourcing events


Stamping projects4

Stamping Projects

  • Potential supplies to be identified

    • Emerson divisions have had success using Monterey, Mexico based suppliers

  • To review total supply chain costs

    • Review any additional value add that may be appropriate

    • Transportation - enclosures are low density / high logistics costs

      • Mode product is being shipped from Wisconsin to Alabama

  • Determine strategy for sourcing

    • Monitoring current conditions that could be detrimental to e-sourcing event

      • Steel prices will be a major driver for the success of the event

  • Timing

    • Plan for June E-sourcing event

      • E-sourcing event planned for

        • Mode Industries - $686K

          • June’07 E-source event – Sept’07 Completion

        • MPC – $1,472K

          • Sept’07 E-source event – Dec’07 Completion


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