This May, the Battery Council International (BCI) celebrated its 116th Convention in the California desert community of Indian Wells at the Renaissance Esmeralda Resort and Spa. The setting was beautifully orchestrated with palm trees, multicolored gardens and unblemished radiant sunshine. Thus was the setting that created that ambiance for a conference of 450 participants from 17 countries - a conference that was to celebrate successes and positively approach the challenges that lie ahead.
To kickoff the conference, a suppliers’ reception with its carnival theme was held on the Rose Lawn near poolside at the hotel. Being well attended by global representatives, the setting provided an opportunity to meet new people and network on an informal basis. On the next evening, Hollingsworth & Vose Company and Daramic, Inc. hosted another outdoor reception with strolling violinists on a beautiful green carpet of grass, thus providing a peaceful background for comfortable conversation.
Economic boom - not doom
Selecting a keynote speaker is a crucial assignment because the presenter’s message sets the tone for the conference. To take on this task , BCI asked Michael Cox, Sr. Vice President and Chief Economist of the Federal Reserve Bank of Dallas and Professor of Economics at Southern Methodist University, to energize the audience by reminding attendees of the great progress that has been made in the global business community. Mr. Cox discussed the world economy and its massive restructuring, but he reported the news as a prophet of boom, not doom - a descriptor initially given to him by Wired magazine. He emphasized how the GDP growth has rebounded for the past 10 quarters. He discussed the paradigm shift in how the U.S. and other countries look at the global business and the world economy. Mr. Cox believes that the massive restructuring of the economy revolves around two important factors -- the microchip and China. Not since the invention and implementation of electricity has there been such a shift.
The microchip - the key to technological advancement
The microchip, having begun its commercial life in the early ‘70s, has been the catalyst to bring on the computer age, and a mobile world. Genomes which can alter life sciences, and nanotechnology, are perhaps the keys to both economic development and developments in power sources of the future.
Although Mr. Cox did not have statistical evidence of the growth of dc power, he commented that mobile and portable power are on a rise worldwide, and batteries are making it happen. He interestingly noted that portable power demands a premium, implying that the cost per kWh is greater when coming from a battery than from a grid.
The awakening tiger - China
An awakening China has caused the world to look at the activities of this Asian country of 1.3 billion people. In 1978, China was the world’s 9th largest economy, but today in 2004, it has gained position to rank second. Its GDP has escalated so fast that the latest figure shows it is now proportional to one half of the U.S. and 60 % of Japan. Of its 763 million people in the labor force, 23% are involved in manufacturing. Production not only includes toys and clothing but also high technology items such as computers which are topping the list. In fact, high-tech products make up about 23 percent exports today.
Although the battery market for the automobile industry in the United States remains relatively flat, China’s automobile ownership (and thus battery needs) is rising. “The United States has not six autos per 1000 people, as does China, but 475 cars per 1,000 people. Raising China’s ownership rate to just a fifth of U.S. levels would require production of 114 million more vehicles - nearly as many as are already operating in the United States.”
Because of the paradigm shift with China’s global prominence in world markets and the technological explosion of microchips in new communication advancements, some people are uncomfortable with change - the potential unknown in moving at a fast pace. But, Mr. Cox assured the audience that change is a good thing and has brought about a quality of life in the United States which is unsurpassed anywhere on earth. This quality has come not from government intervention or policy but from the mechanism of the market which emphasizes people skills in imagination, creativity, and new designs for product and business models.
Mr. Cox emphasized that much of the economic news is positive. The U.S. economy grew at a healthy 4.2 percent from January -March 2004. (Since Mr. Cox’s presentation, the annual first quarter results were revised to 4.4%.) During this same time period, companies boosted output at a 4.9 percent rate, a gain of 0.7 points from the last quarter in 2003. Productivity rose, too, and during the first quarter of 2004, the Labor Department reported a 3.5 percent rise whereas the previous quarter’s figure was 2.5 percent.
And the good news is that many economists expect the economy to expand at 4.5 percent to 5 percent in this second quarter of 2004. Mr. Cox’s message shows faith in improving the U.S. economy where there is a constant churning of new technologies, products and services that are being researched, developed and commercialized to improve the well-being of society.
Industrial Battery Sales - better than expected
“The Recovery is beginning!” stated Bob Cullen as he gave his yearly North American Industrial Battery Forecast to the attendees at BCI. This was a definite turnaround from the report given the previous year where he said, “Don’t shoot the messenger!” because of weak 2003 Lead-acid battery market performance.
The economic climate definitely shows improvement. U.S. gross domestic product which was in negative territory in 2001 reached a high growth rate of 8.2% in the first quarter of 2004, and since that time has ranged around 4%. U.S business investment growth has ranged in the 10% category since the fourth quarter of 2003 and is expected to remain steady through 2004. Two key industries which are showing gains are travel & tourism and high tech/telecom - both areas which will certainly be positive for the Lead-acid industry.
Because of the upturn in the economy later in 2003, the total Industrial Battery Market was up by $66 million. This category includes both Motive Power and Stationary Power. Motive Power (industrial trucks, mining vehicles and railroad locomotives) gained 5% or $22 million while stationary power (mainly telecommunications and UPS) had an increase of 9.8% or $44 million.
North American Industrial Battery sales are closing in on $1 billion. This past year Stationary sales brought in $493 million while Motive power had a total of $437.
In future issues of BD, we will take a closer look at the forecasted trends and factors that influence this market.
The tone of the conference was very positive, but as in all businesses, there are challenges the industry must face. Perhaps the greatest challenge discussed was the price of lead. From August 2003 to March 2004 the London Metal Exchange (LME) reported lead prices rose from $0.225/lb. to over $0.40/lb. This bullish run of lead in the world market has impacted the Lead-acid battery industry. To fully explain its significance requires a separate article which BD will publish in an ensuing issue.
In addition, imports of SLI (Starting, Lighting and Ignition) batteries continue to impact the North American production. Richard Amistadi, Vice President of Sales & Marketing for The Doe Run Company, discussed the situation in his report on the shipment review and forecast. He said, “The decline in U.S. battery manufacturing is a result of trends that have impacted all manufacturing industries: globalization and the movement of manufacturing from high- labor cost countries to low-labor cost countries. Very few U.S. industries have been sheltered from this trend.”
OEM sales of SLI batteries to the automakers are flat in the U.S. No significant growth is anticipated in this mature industry in the next five years. The growth for automobiles is in China where automobile manufacturing (and thus the need for batteries) is escalating.. Each North American battery manufacturer will need to consider this factor as they decide on their direction for U.S. Lead-acid battery production in the next decade.
The members of the Battery Council International are neither sitting on their laurels of the past nor complaining about the status quo. They have been taking a positive approach to keeping Lead-acid a state-of-art, cost-effective technology by not only monitoring the global market to explore their future initiatives, but they are also constantly working toward technical excellence. Their continual work on new materials, deep cycling, product safety and improved batteries for vehicle and industrial applications is commendable.
Their synergistic efforts have built a North American industry which shipped over 107 million OEM and replacement batteries for cars, light commercial and heavy duty vehicles and marine applications in 2003. They have reason to celebrate their industry which started and ignited the transportation industry over more than a century ago and has kept it positively lit.