Focus on Copper

Sam Fulton

March 23, 2017

Focus on Copper

Did you know?

Copper is man’s oldest metal, dating back more than 10,000 years. A copper pendant discovered in what is now northern Iraq goes back to about 8700 B.C.

 

There are 1.6 billion tons of Copper reserves known in the world – it seems a lot, but when it’s gone, it’s gone.

 

Twenty mines account for about 99% of production – that makes for 20 very influential mines!

 

Pure copper’s melting point is 1,981°F (1,083°C, 1356°K). Its most important properties include superior heat transfer, electrical conductivity and corrosion resistance.

 

Copper and Fero

An everyday metal

Copper is a mineral and an element essential to our everyday lives. It is a major industrial metal because of its high ductility, malleability, thermal and electrical conductivity and resistance to corrosion. It is an essential nutrient in our daily diet. And, its antimicrobial property is becoming increasingly important to the prevention of infection. It ranks third after iron and aluminum in terms of quantities consumed in the USA.

 

Copper wiring

Due to it’s unique conductivity properties copper is essential in electrical wiring. Copper wire price fluctuates heavily due to many different factors including the supply and demand of copper globally, the emergence of different types of wire and even seasonal conditions.

 

The price of Copper

Copper, until recently one of the worst performing commodities of the past two years, experienced a sustained spike of 33% at the end of 2016, posing several questions as to the direction of the market as we move into 2017.

 

The biggest single cause of the price rise has been a pick-up in Chinese imports, responsible for almost 50% of global copper demand. This is seen a good omen for the industry’s health.

 

There are some who claim it will be short-lived, but in my opinion this is short sighted.

Copper And Fero

In reality I, and many others, feel the market has the potential be driven higher this year and next, if not by outright supply tightness then by the perception the market is moving in that direction.

 

Put simply we’re seeing more demand from China and only 20 mines to extract it, added to the fact that it is a finite resource.

 

The general trend over the long term has been that copper prices have fallen since a high in 2011. These falling costs have helped offset a strengthening US Dollar against the RMB, and have resulted in a neutral outcome in the market.

Fero and the Copper story

Suffice to say the price of copper has a big effect on our business, with much of our wiring containing copper. We watch the London Metal Exchange with interest, and will continue to do so. As a business, have already seen some significant increases in raw material costs coming through. Our hope is that we will see a smoothing out of the pricing and that we will be able to absorb the extra cost without being forced to pass it on to our customers.

 

We will monitor the market and keep you updated on how copper performs over the next few months.

 

Sam Fulton

February 19, 2017

Why manufacturing is so important to NZ

Typically New Zealanders do not think of themselves as living in a manufacturing economy. But New Zealand’s manufacturing industries make an important contribution to the national economy. In the year ended September 2015, the manufacturing sector output accounted for around 10% of real GDP and 11% of the labour force.

Manufacturing NZ

But this misperception can have a detrimental effect on the growth of NZ manufacturing and we as kiwi’s should be aware and proud of how important manufacturing is to our country.

Skills

 

If we do not have the skills, talent and training coming into the industry then this could undermine the potential for growth. It is not surprising that some high- growth manufacturing firms emphasise skill shortages and other constraints on talent- driven growth as being much more important than any effects of costs or exchange rates.

It’s interesting when you look at surveys that highlight the traits of NZ manufacturing firms. Typically these firms are:

 

  • Largely export oriented

 

  • Predominantly locally owned

 

  • Mostly privately held

 

  • Vertically integrated in the domestic market and in offshore markets where they have a large presence.

 

  • Still manufacturing in New Zealand where it makes sense for the entire or part of the production process to do so, and engaging in research, design and the provision of services.

 

So what makes us competitive?

 

Well, sometimes being a small country does have its advantages and the architecture of NZ firms can be seen as an advantage. By being local, privately owned companies we can be more specialised and therefore more focused on innovation rather than cost-minimisation.

 

A country of our size creates nimble companies that need to adapt to changes offshore, both political and economic. Take Donald Trump in the USA. Should we fear what’s happening in that market and how it will affect NZ manufacturing? I believe not. NZ companies are nimble enough to adapt – we’ve had to for years. We’ll either find a way to provide the USA with the solutions it wants or we’ll look to other markets like China, Europe, even the Commonwealth.

 

At Fero we feel we are small enough to care but big enough to deliver and we really stand by this. We are growing as a company but we do have very strong values and beliefs. We are always looking for ways to improve our processes and we are constantly building stronger ties with China. This relationship allows us to manage the processes and get some cost down but most importantly monitor quality and consistency.  

 

Sam Fulton

February 8, 2017

2016 was a positive year – how will 2017 fair?

2016 was a positive year for NZ manufacturing and saw consistent expansion throughout the year. Catherine Beard, Business NZ’s executive director for manufacturing, said that the results were encouraging.

 

The activity in the manufacturing sector over 2016 averaged out at 56.0. This showed an increase from 54.2 in 2015, but interestingly the same result as both 2014 and 2013. Overall, this shows how consistent and how positive the activity has been for the sector over the last few years.

 

There is also a very positive feeling around the manufacturing sector and positive comments stood at 70% for December, with seasonal factors (particularly Xmas) having a strong influence.

 

BNZ Senior Economist, Craig Ebert, said “the December result caps off a positive year for the manufacturing sector.  Indeed, since the survey started in 2002, last year’s average has only been surpassed by 2004’s 57.5”.

 

So what can we expect for the new year?

The general consensus is that the NZ Manufacturing sector is in good shape and that 2017 will continue to expand at a steady rate. However, Economist Doug Steel does feel that there could be a few warning signs that should not be ignored.

NZ Manufacturing Index

 

In December PMI new orders fell to 52.6 in December, which still indicates growth but it is the lowest level of new orders for nearly two years. Therefore this is worth watching over the next quarter as an indicator of sale growth ahead. The industry’s new orders also slowed a bit in the QSBO (qrtly survey of business opinion).

 

Having said that it appears that manufacturers in the QSBO are more confident this year than last. A net 23% expect better economic conditions over the coming six months. This compares to a net 4% expecting improvement in the previous survey. It’s a decent lift and sets confidence well above long-term norms, of -6.

 

So, let’s continue doing what we are doing NZ and make our country proud of what we add to the economy and the manufacturing sector around the world.

Sam Fulton

September 12, 2016

PRO-FORM : From Prototype to Production.

At Fero, we are not just about manufacturing.

 

It is important to us that we understand and help our partners grow within their business. A prime example of this is when PRO-FORM came to us with a request to add more functionality into their product.

 

PRO-FORM is a NZ family-run plastics moulding company that make bed liners, canopies and sports lids for a range of utes throughout the world. With the design of the new SLT sport lid came a request to modernise these products with an auto opening system which lifts the lid and activates a light. This was something our R&D team could certainly help with.

 

Prototype with Fero

At Fero we are lucky enough to have an in-house design and development team who understand vehicle looms and who can create a prototype quickly. Having an open source environment has enabled the partnership between Fero and PRO-FORM to develop quickly and it’s this understanding that has enabled the whole design process to evolve. This evolution has given us the knowledge to develop ideas and come up with solutions that make the functionality of the product second to none.

 

The PRO-FORM team understand their product very well and because more and more farmers and tradesmen are using utes they recognised a need for this modernisation. There were 3 main requirements that we needed to build into the design:

 

  1. A lid that automatically opens
  2. An automatic light which comes on when the lid is opened
  3. A central locking system that included the lid of the ute

By working together, our R&D team came up with a solution that met all requirements and has even given the PRO-FORM team the option of opening the lid by remote control or by touch button. The prototype was a big success and we started producing the looms and lights locally at our factory in Auckland.

Pro-form tray and lid with Fero

Due to this success we have begun to look into options for taking some of the production to China. For many NZ companies this would not be a feasible option but because we have such strong relationships with our chinese partners we are able to benefit from the cost downs and pass these on. Currently we are getting samples approved so manufacturing and production can begin.

 

The product has really taken the market by storm and PRO-FORM are now selling this system all over the world, they are even exhibiting at the world’s leading auto trade fair ‘Automechanika’ in Frankfurt this month.  

At Fero we like to think of ourselves as a company that can make things happen and we get excited about helping companies design and build a better product. It’s especially exciting when it’s a New Zealand owned, family run business like ourselves. We are proud that we can help put NZ on centre stage. We know that relationships are key and without such an open and honest environment with PRO-FORM we could never had developed something so quickly.

 

This is what Nick Smith from PRO-FORM had this to say about Fero:

 

Fero and Pro-form

“The whole team at Fero worked hard to develop this solution. They were great at simply listening, and then coming back with a sensible response, on budget, on spec and on time. That’s the beauty of working with a local NZ owned business that share the same goals as ourselves.”

 

So if you have an idea and would like some help bringing it to market then we would love to hear from you.

Sam Fulton

May 3, 2016

NZ still stands out on the economic stage

We always like to follow what is happening on the world stage when it comes to manufacturing and our PMI (Performance of Manufacturing Index). Since 2012 NZ manufacturing has been in continued expansion and although we saw a slower rate of expansion in March, according to the latest BNZ – BusinessNZ PMI of 54.7 it is still well above the 50.0 mark (which indicates a declining market).

 

BusinessNZ’s executive director for manufacturing Catherine Beard said that the dip in expansion for March was across all the sub-indices, with employment in slight contraction for the second month running.

 

On a three month average basis, NZ’s PMI still stands head and shoulders above similar indicators from major economies around the world. Until last month, NZ’s PMI has consistently out-paced Australia’s for several years. However, the 3.4 index point gap in March is the largest in Australia’s favour since mid-2010. Analysts say that this is not necessarily a bad thing.

Sam Fulton at Fero tends to agree and believes that this might well be a good thing for NZ if it indicates positive growth in the Australian economy as a whole.

international results _ BMIFero - Industry update

He believes “There are many benefits from trans-Tasman trade for both countries. A growing Australian market offers many opportunities for NZ companies and solves a lot of problems for Australian businesses. We would love to see more customers from Australia in the near future”.

Sam Fulton

May 2, 2016

Escea expands international supply chain into China

We have been lucky enough to work with Escea for a number of years and have witnessed their company grow and develop over this time. Escea has become a well-established industry leader in the design, manufacture and export of leading-edge indoor and outdoor gas and wood fireplaces.

 

Fero works with Escea in China

 

Fero supplies the electronic components and wiring looms that go into the fires, enabling them to function – we like to call it the stuff where the magic happens! Historically we have always kept Escea’s production within NZ, until recently when we took the joint decision to migrate some of this work to China. It’s a reflection of the growth in their business and of the relationship we have with our Chinese partners that we are able to switch sourcing. It’s also an indication of the quality of our relationship with this client that they allowed us to look at alternative supply, and help them to reduce their costs.

 

Unfortunately it’s not as simple as stopping production in NZ and then starting production in China. We have a detailed process that ensures material, quality, and form are exactly the same as we deliver from our local plant. Drawing approval, alternate material specification approval, and sample check and sign off are all required before we place orders on China. Once this process has been approved, then production can start. It may seem a long and lengthy process (and it is) but for Escea we were able to provide a cost down for them of up to 35% in some cases. We have maintained the quality, and maintained the lead time guarantees, whilst reducing the cost – a win win situation for this client.

 

Fero partnerships in China

 

As well as the cost savings that Escea have realised in offshore production, they also have the security to do short runs here in NZ if they have spikes in demand. This not only provides them with a security blanket it also enables us to free up some capacity in our manufacturing plant in NZ for other lines.

 

So with a cost saving of 35% why aren’t more companies doing this?

 

Well, China is not a place you can just walk into and expect quality and lead times straight away. You have to build relationships with factories and suppliers and be able to vouch for the quality. This is where Fero’s knowledge of the market and our strong ties with our suppliers is imperative to a company’s success. We are more than happy to let valued companies such as Escea piggy-back on our efforts in China because without the knowledge and trust that we have built up over the years they would never be able to reap these rewards.

 

Here’s what Steve, Procurement at Escea had to say about working with us:

 

Escea and Fero partnership“Fero has been a valued partner of ours for a number of years now and instrumental in creating a cost down of around 35%. I have no doubt that had we approached Chinese factories direct, we would have been unable to guarantee quality, on-time supply, or provide the volume of work that is required for a reputable Chinese manufacture to deal with us. Using Fero has reduced the risk of off-shore production for us, whilst still delivering all the benefits. And we can relax knowing that there’s always a fall-back of producing through them in Auckland, at a moment’s notice and shorter runs”

Sam Fulton

March 10, 2016

Economic Update for NZ Manufacturing

New Zealand’s manufactured exports make up around 85% of all merchandise exports from this country.

The manufacturing sector in NZ has once again shown a strong growth pattern for the start of 2016. According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI) the figure for January reached 57.9 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 0.9 points up from December, and the highest level of expansion since October 2014. The sector has now been in continued expansion since October 2012.

 

BusinessNZ’s executive director for manufacturing Catherine Beard said that the January result has started the new year off to a healthy start, with the key indicators of production (60.3) and new orders (59.8) showing strong growth. “Over two-thirds of manufacturers provided positive comments regarding their main influence on business activity, with increased sales both on a domestic and international basis. Other comments outlined the general positive sentiment occurring in the New Zealand economy.”

 

Fero - NZ Manufacturing

There is also is an indication that the manufacturing industry is steadily moving towards more innovative and specialised goods and services. Some of these specialized services earn higher export revenues and are becoming very important for the overall NZ economy.

 

“Over the last couple of months our business has certainly seen an increase in orders, and we are delighted to hear customers talk of a good start to the year. We’re proud to play our part in a strong NZ manufacturing sector”

Sam Fulton, Sales and Marketing Director

 

 

Sam Fulton

August 26, 2015

An Economic Update on NZ Manufacturing

At Fero we are passionate about making the the manufacturing sector in NZ great, so it’s fantastic to see how important this industry is and the contribution it provides to the national economy. In the year ended September 2014, the manufacturing sector output accounted for 11% of real GDP and the proportion of the labour force employed in manufacturing was around 12%. These figures are increasing throughout 2015 with employment up by 10% compared to this time last year.

According to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI), the outlook is still remaining positive for the continued expansion of this sector for July.

Fero - PMI

 

BNZ reported that the seasonally adjusted PMI for July was 53.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). Although this was 1.6 points lower than June, it was still the second highest result for the last four months. The sector has now been in expansion for 34 consecutive months. The rate of progress has slowed a bit from last year, with the PMI averaging 53.5 in 2015 to date compared to the 56.0 average through 2014. But growth seems to be solidifying. July’s PMI result exactly matches the average in the first half of the year.

There are other influences that effect the industry, and for some manufacturers the recent fall in the NZ dollar has been seen as a positive, whilst the negative influences were mainly from the dairy sector. The recent crash on the Chinese stock market is definitely a concern for all of NZ and analysts are warning that we may see a slower rate of growth in NZ manufacturing due to the impact on consumer confidence and potential consumption. That said, China is still a massive consumer and I don’t see them going away.

Despite some of these negative influences the manufacturing industry is still very positive, and the fact the official figures show employment growth coming primarily from the manufacturing sector indicates that we are certainly holding our own. Buoyant production and the balance of new orders to inventory are encouraging signs for further expansion.

It should be an interesting second half of the year!Fero - PMI New Zealnd