Batteries/Lead acid/Business01



BCI  Looks Forward to a Positive Economy with Opportunities for Lead-acid
by Shirley Georgi
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.

Adobe Photoshop ImageMichael Cox, keynote speaker,  told the BCI audience that he believes that  today’s economy is transitioning into a  new era where the development of the microchip and the  economic growth of  China are the two key drivers in change. His book, Myths of Rich and Poor, which battles economic forecasters of doom and gloom, was nominated for a Pulitzer prize. +

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.   

China exported 25% of its GDP in 2001.  China is the leading exporter to the U.S. Given the labor rates, it is easy to see why companies are shifting manufacturing to China. (Information was stated  in Mr. Cox’s presentation.  Original sources are the Bureau of Labor Statistics, China Yearbook and National Bureau of Statistics.) +

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.

Adobe Photoshop ImageThe total growth in the Industrial Battery Market was projected to be only 3 percent.  However, the actual totals show that growth had an astounding 7.7 percent rise. (Information is from “Industrial Battery Forecast Report” by Bob Cullen, BCI Convention, 05/04/04.) +

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.   

Adobe Photoshop ImageBob Cullen, Vice President, Sales & Marketing- Battery Separator Products Group at Hollingworth & Vose, happily reported that the North American Telecom Market turned up in 2003; sales were 6% higher in 2003 than 2002.  In the Stationary Market, sales had even a larger increase, being 9% higher in ‘03 than in ‘02.  Based on his interviews, data collection  and surveys, he forecasts  a 6% growth for the  overall Industrial Battery Market.  +

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.

Challenges

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.

Adobe Photoshop ImageIn 1996, China  produced  less than one million vehicles and by 2003 their production rose to three million -an astounding growth rate of 20 percent. CHR Metals has projected a rapid rise for the rest of the decade.  New vehicle production in China is destined for both the export market (mainly Asia)  as well as satisfying Chinese demand. (Information is from “2003 Battery Shipment Review & Five-Year Forecast Report” by Richard L. Amistadi, BCI Convention, 05/05/04.) +

Going forward

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.                


BD