Archive for the ‘Industrial’ Category

China’s New Growth Sector: The Internal Logistics Market

Wednesday, August 8th, 2012

The country’s economy — still powering along at 7.6% GDP growth in the second quarter, even after a much-talked-about slowdown — and especially its gradual shift toward domestic consumption and a burgeoning e-commerce market, is fueling a long boom in the sector.

China’s industrial sector has fallen to an 8-month low.  The Purchasing Managers’ Index (PMI) dropped to 50.1 from 50.2 in June, official data showed. A reading above 50 indicates an expansion in activity, while below 50 means a contraction. Exports also contracted.  While China’s slowdown was inevitable given its reliance on exports to an ailing European and American economy, all of the news need to be placed in context: China’s GDP still grew by an annualized 7.6% in the last quarter (it’s a 3 year low for them but all of us on this side of the Pacific would take those numbers gladly)

Furthermore, while exports have taken a tumble, logistics are still important because domestic retail demand is becoming more important; with sales up over 14% year on year in the first half of 2012 (e-commerce is a key driver). Global Logistic Properties Ltd., one of the market leaders in Chinese logistics space, said it sees significant opportunities in extending supply chain lines from Chinese coastal cities to serve the rapidly growing inland economies.  The transportation market is highly fragmented, with tens of thousands or even hundreds of thousands of small businesses conveying freight in different parts of the country, according to KPMG. As domestic production picks up, we should start to see consolidation with opportunities both for 3PLs and industrial developers.

Peter Zhang, director of industrial consulting in China at Cushman & Wakefield, estimates that 60% to 70% of companies no longer do logistics functions in-house. Still, the real estate stock is uneven.  There remains a long way to go in replacing basic warehouses, designed for manual handling, with state-of-the-art storage space. The China Association of Warehouses and Storage estimates that the country has 7.4 billion square feet of warehouse space, 10% less than the U.S., while 75% of facilities do not meet modern standards.

GE Enters the Solar Power Business

Wednesday, June 29th, 2011

The nation’s largest conglomerate – General Electric – is getting into the solar business in a big way with the firm’s announcement that it is investing $600 million to build a new solar-panel manufacturing plant as it pursues what it thinks could be a $3 billion business by 2015.  The firm, already a leader in renewable energy, has designed a thin-film solar panel that converts sunlight to electricity more efficiently than any other product currently on the market.  The firm, a leading manufacturer of wind- and natural gas-powered electric turbines, plans to open a factory in an as-yet unknown location by 2013.  The facility will employ 400 workers and produce enough solar panels annually to power 80,000 homes.

“The biggest challenge today for the mainstream adoption of solar is cost, and the way you move cost is efficiency,” said Victor Abate, vice president of GE’s renewable energy unit.  “We see ourselves continuing to push that and continuing to move efficiency and as a result the costs of solar continue to come down.”  According to Abate, a decision on where to locate the factory will be made within the next three months.  The decision will be based on criteria including proximity to GE’s research centers, available space, and state and local government incentives, Abate said.  GE expects to make a decision before the end of the year at the latest.

GE’s entry into the solar business comes at an excellent time.  Solar panel installations are expected to surge in the next two years as the cost of generating electricity from the sun approaches that of coal-fueled plants. Large photovoltaic projects would cost $1.45 a watt to build by 2020, half the current price, according to Bloomberg New Energy Finance estimates.  Solar is feasible against fossil fuels on the electric grid in sunny regions such as the Middle East.  “We are already in this phase change and are close to grid parity,” said Canadian Solar chief executive Shawn Qu.  “In many markets, solar is already competitive with peak electricity prices, such as in California and Japan.”

Solar photovoltaic system installation has the potential to nearly double to 32.6 gigawatts by 2013 from 18.6GW last year, according to New Energy Finance.  Manufacturing capacity worldwide has quadrupled since 2008 to 27.5GW annually; 12GW of production will be added in 2011.  Canadian Solar had about 1.3GW of capacity and is expected to reach 2GW in 2012, Qu said.


Writing in Time’s “Ecocentric” column, Bryan Walsh says that the new plant is “Good news for solar advocates and bad news for competitors — General Electric is ready to break into the solar cell business in a major way.  The $218 billion company announced today that it had built a solar module with the highest-ever efficiency rate for cadmium-telluride thin film — the most popular low-cost solar technology — at 12.8 percent, according to independent testers at the National Renewable Energy Laboratory.  That announcement came as GE told reporters that it intends to manufacture those solar modules at a 400-MW factory — in what would be the biggest such facility in the U.S. — that is set to open in 2013.  GE also completed the acquisition of PrimeStar Solar, the Colorado-based thin-film manufacturer, which will complement its recent acquisition of the power conversion company Converteam.”

Bernanke Press Conferences Shedding Light on the Fed’s Inner Workings

Monday, May 9th, 2011

Ben Bernanke’s first-ever press conference is important because the unprecedented move gives the world a look at the inner workings of the often arcane Federal Reserve.  As a general rule, the Fed’s chairman avoids press conferences.  Typically they issue statements that are worded with extreme care.  Since the economic meltdown, however, the Fed’s increased role in crafting the nation’s fiscal policy has been under the microscope.  As a result Bernanke decided to start holding press conferences every few months “to further enhance the clarity and timeliness of the Federal Reserve’s monetary policy communication”

Veteran Fed watchers say Bernanke will avoid make any unexpected observations about the economy.  The Fed almost certainly won’t raise interest rates or change the course of the Quantitative Easing 2 (QE2) program to boost economic recovery.  What makes the event important is that it is a new chapter in the history of U.S. central banking, one that brings transparency that allows the Federal Reserve to make its case for monetary policy directly to the American people.  The press conference, “whose ostensible purpose is to add more transparency regarding Fed policy, is really designed to help repair its image with the general public, a process that began when Bernanke first appeared on ’60 Minutes,'” writes Bernie Baumohl, chief economist at The Economic Outlook Group.  “The press conference serves multiple purposes.  It helps explain the Fed’s role in the economy, improves public trust in the central bank, and can be used discreetly as a platform to place more pressure on Congress to reduce the swelling budget deficits.”  During the financial crisis, some criticized the Federal Reserve’s role in the economy, with conservative Tea Party movement members calling for a dissolution of the Fed or a Congressionally-mandated opening up of the once-secretive central bank.  The press conference is intended to silence the critics by providing certain details that were previously denied.

The Fed is notoriously tight lipped Until 1994, the Fed never notified’ the public of policy changes, leaving an army of Wall Street “Fed watchers” to figure them out for themselves. The Federal Open Markets Committee (FOMC) did not release statements on a regular basis until 1999.  The majority of Fed chairmen have shied away from the cameras.  Now, Bernanke is welcoming them.  Although Bernanke excels at not saying anything newsworthy, the timing of the first press conference comes at a particularly sensitive time: shortly before the end of the controversial QE2 monetary policy program, and during an argument over inflation.  Bernanke and other FOMC members, such as Fed Vice Chairwoman Janet Yellen, argue that inflation remains subdued: Demand is slack, and core inflation below-target.  But not everyone shares that view. More hawkish Fed officials, such as Thomas Hoenig of the Kansas City Fed, have pointed to frothiness in oil, food, and commodities markets to make loud calls for tightening.

Writing in the Atlanta Journal Constitution Washington Insider columnist Jamie DuPree says that “Ben Bernanke starts what will be the first of four annual news conferences about the work of the Fed.  The job of Fed Chairman has always been a little mysterious, feeding a variety of conspiracy theories about its work and ties to other groups like the Trilateral Commission and more.  The news conferences will take place four times a year, after the Fed meets for its quarterly policy-making meeting, where announcements are made on interest rates and economic policy.  Bernanke is no stranger to the limelight, as he testifies regularly on Capitol Hill, taking questions from lawmakers.  But Fed Chairs usually don’t do press conferences – and you don’t have to have much of an imagination to wonder if there could be some odd questions thrown his way.  In fact, Fed Chairs often don’t do interviews either, making his twice-per-year testimony before the Congress a big story to cover.  Because the insight of the Fed Chairman is so important to the markets, the Federal Reserve does not want the testimony leaked early, for fear that someone could use it to manipulate trading in some way.”

Facebook May Breach the Great Firewall of China

Tuesday, May 3rd, 2011

Social networking could gain 1.3 billion new users if a deal goes through that will introduce Facebook to ChinaFacebook Inc. has signed an agreement with Baidu, Inc.  a search engine company, to create a social-networking website in China.  “We are currently studying and learning about China, as part of evaluating any possible approaches that could benefit our users, developers and advertisers,” Palo Alto, CA- based Facebook said.

The arrangement follows several recent meetings in China between Facebook CEO Mark Zuckerberg and Baidu CEO Robin Li.  The Baidu website would not be incorporated with Facebook’s international service, and a potential launch date is “not confirmed.”  Facebook said it is “currently studying and learning about China, as part of evaluating any possible approaches that could benefit our users, developers and advertisers.”  By entering the Chinese market, where the world’s most popular social-networking service is currently banned, Facebook would gain access to the nation’s nearly 500 million Internet users.

According to Pascal-Emmanuel Gobry of MSNBC Business Insider, “The deal makes sense for both sides. On Facebook’s side, it needs a big local partner to break into the huge Chinese market. On Baidu’s side, it is threatened by social network juggernaut Tencent, and it might be a safer bet to build a social network with one of the most successful social companies in the world than to try to build its own.”

Baidu, which is China’s largest search engine, wants to provide more social networking opportunities in China.  The impediment has been the Chinese State, which owns the “Great Firewall of China” and has blocked sites like Facebook, Twitter and YouTube.  Google removed its search engine last year.

Writing on the website Digital Trend, Molly McHugh is curious about how Facebook can compete if it enters the Chinese market.  “Facebook has been blocked in China since 2009, when riots in the country’s Xinjiang region led to severe crackdowns on Internet use.  Since then, statements from Chinese officials and Facebook CEO Mark Zuckerberg have hinted at the possibility of cooperation between the two, if a compromise between the nation’s overbearing censorship and Facebook’s ‘openness’ can be reached.  Now it looks as though something is going on.  What exactly that may be is still up in the air, but numerous reports say Facebook is working with China to come up with a solution.

“According to Marbridge Consulting, as well as a few blogs,” according to McHugh, “a post on Sina Weibo from Hu Yan Ping, the founder of a Chinese market research firm claims that Facebook will be collaborating with Baidu to build an entirely new social networking site.  Ping wrote, ‘Facebook really is about to enter China, the agreement is signed.  A domestic website will work with Facebook to create a new site.  This new site is not interlinked with Facebook.com.  The question is, will this live or die in China?'”

Signs of Confidence Sprouting in the Construction Industry

Tuesday, April 12th, 2011

The recent construction industry mantra of “Wait until next year” may be coming to fruition in 2011, according to a recent survey conducted by ENR.  The 1st quarter of 2011 Construction Industry Confidence Index (CICI) survey soared to 51 on a scale of 100, a significant increase from the 43 percent reported in the 4th quarter of 2010.  The rise marks the first time the CICI has risen above 50 since March of 2009 and provides hints of a market that is stabilizing.  The survey of 679 construction and design executives suggests that the market has hit bottom and should improve throughout the year.

The uptick in market confidence is in step with the most recent CONFIN-DEX survey conducted by the Construction Financial Management Association.  This survey of contractors, general contractors and civil contractors spiked to 131 from 117 on a scale of 200, said Mike Verbanic, the organization’s director of marketing.  The most encouraging statistic is the increase that measures current business conditions, which rose to 145 from 129, again on a scale of 200.  “What makes these indices doubly reassuring is that our members are not wild gamblers, so their responses are measured and based on conditions they see,” according to Verbanic.  CFMA’s survey found some bad news in the financial conditions index, which rose to 116 from 105.  “These indices show that CFMA members expect demand to increase, but that credit and project financing may lag,” said Anirban Basu, CEO of Sage Policy Group, Inc., an economic consulting firm.

Although relatively few survey respondents plan to start office construction projects anytime soon, the strongest sectors are hospitals and healthcare facilities; distribution centers and warehouses; multi-family residential; retail; hotels and hospitality; and entertainment.  Fully 27.6 percent of respondents said client access to credit is an ongoing problem, while 51.8 percent said that access to credit is easier now than just a few months ago.  An additional 20.7 percent believe that access to credit is easing.

Construction companies are concerned about the price of materials.  A significant 80.3 percent of respondents said they are experiencing pressure on the cost of materials and equipment.  The cost of steel, copper and gas were mentioned most often.  According to Basu, the Producer Price Index has shown substantial price pressure recently.  “The dollar has been softening recently and there is evidence that commodity speculators have become more active in the metals markets,” he said.

The Fed’s 2010 Profit? A Cool $81.7 Billion

Tuesday, April 5th, 2011

The Federal Reserve made some serious money in 2010. The central bank’s profit soared to $81.7 billion, a record high, primarily from growing interest earnings on federal agency and government-sponsored enterprise mortgage-backed securities.  The Fed’s balance sheet — which also can be monitored monthly — ballooned to $2.43 trillion, up $193 billion from 2009, as holdings of the Treasury Department and mortgage-backed securities increased. The Fed gave back $79 billion to Treasury in last year, an 68 percent increase over $47 billion the Fed returned in 2009.  The Fed’s previous record high earnings was $53.4 billion.

In reaction to the financial crisis, the Fed acquired securities whose value had collapsed due to fear and uncertainty in markets.  Additionally, the Fed created emergency lending programs for banks and firms, which further boosted its balance sheet.  The central bank came under attack for taking too many risks with taxpayer money and putting itself in a position to endure losses.  So far the Fed’s crisis-lending programs have earned handsome profits.  The 2010 income rise primarily resulted from $24 billion in interest earnings from the $1.0 trillion mortgage-backed securities and agency bonds it bought to stabilize the housing market.  As of last week, the Fed held a virtually identical quantity of such securities.

The Treasury Department plans to slowly sell its $142 billion portfolio of mortgage-backed securities.  Although there’s no direct implication for Fed policy, the market reaction to the Treasury sale provides valuable input into how the central bank may go about selling its own significantly larger holdings, which analyst expect to take place early in 2012. That’s a significant increase over the $907 billion it held in August 2008, just before the financial crisis.  To help the nation’s economy recover, the Fed has created massive amounts of credit to support the banking system and buy bonds.

Writing in the Christian Science Monitor, Doug French notes that “Amongst the assets Mr. Bernanke and Co. are shepherding include sub-prime mortgage bonds that once belonged to American International Group (AIG).  The Wall Street Journal reports that AIG would like to repurchase these bonds as a part of its attempt to break free from government control through a public stock offering.  ‘Ahead of that, AIG wants to be able to show investors it is putting its cash to work and boosting investment income in its insurance units,’ reports the WSJ’s Serena Ng.  The rub is that AIG is offering 53 cents on the dollar for the mortgage bonds.  Maybe the Fed can do better in the marketplace.”

Where to Cut: Public Union Benefits or Defense?

Wednesday, March 16th, 2011

Wisconsin Governor Scott Walker’s war on public-sector unions is being brought to the national stage by Senator Tom Coburn (R-OK). Coburn challenged members of Congress following the release of an exhaustive study by the Government Accountability Office that found many overlapping and duplicate programs from education to defense that cost taxpayers billions of dollars each year.  The study found 82 federal programs to improve teacher quality, 47 for job training and employment, as well as hundreds of military clinics that could gain from consolidating administrative, management and clinical functions.

According to Coburn, a physician who some call “Dr. No” in the Senate because he places holds on legislation that he considers to be unconstitutional, “Government employees, although they’re fabulous and they overall do a great job, they produce no net economic benefit in our country.  Matter of fact, they produce a net negative economic benefit.  So if you take the drag off the economy by nonproductive implementation of capital what you’re going to see is that capital is then going to be put to use in something that is productive.  We’re not talking about letting go hundreds and thousands of employees — we’re talking about streamlining things.  Even if it were hundreds of thousands of employees, if we’re not borrowing another $300 billion additional next year because we streamlined some programs, that has some tremendous benefit to the economy as well.”

In particular, Coburn challenges federal job-training programs. “Job training is wasteful.  We put ‘help wanted’ on our government website and we’re getting people who have been through these programs who say they are a total joke and a total waste of time.  I want a job-training program that actually trains somebody to do something that they get a job for.  Why should we have 47 different separate job training programs?  Nobody understands them all.  If it’s a federal role — which I question – -then any job-training program ought to be designed so that you can measure its effectiveness.  None of the 47 has any metrics on it to measure effectiveness.”

Senator Coburn’s position could have an impact on his popularity, much as Wisconsin’s Scott Walker’s controversial stance on public-employee unions has lowered his ratings. A Rasmussen poll reveals that almost 60 percent of likely Wisconsin voters now disapprove of their governor’s performance, with 48 percent strongly disapproving.  The poll also finds that the state’s public school teachers are very popular with their fellow Badgers.  With 77 percent of those polled holding a high opinion of their educators, it is not particularly surprising that only 32 percent among households with children in the public school system approve of the governor’s performance.

“The Terminator” Wants to Create Green Solutions

Tuesday, March 15th, 2011

Former California Governor Arnold Schwarzenegger recently called for the end of false debate over climate science, saying that we should not assume that China will create green technologies that Americans can adopt and to admit that global warming will impact the globe in coming years. In a speech at the APRA-E Energy Innovation Summit in Washington, D.C.,  Schwarzenegger said that changing to a green economy, fixing the environment and ending the political stalemate over carbon legislation are well within the power of today’s technology.

“We want a new era of energy independence, a new era of green technology and green jobs, a new era of better health from a cleaner environment, and a new era of American inventiveness,” Schwarzenegger said.

Schwarzenegger connected the green economy of the future to the current unrest in the Mideast. He said that the overthrow of foreign dictators seemed impossible a month ago but now seems inevitable.  At the same time, he believes that defeatism about the ability of a green revolution to transform America will soon look incongruous.  The former California governor also pointed to the recent volatility in oil prices resulting from upheaval in the Middle Eastern as a clear example of why the United States needs to wean itself off foreign oil.  “Why should a dried-up desert country with a crazy dictator like Libya play havoc with America’s energy future?” Schwarzenegger asked.

Schwarzenegger pointed out that California offers a model for tech companies that can help vitalize the economy and cut greenhouse gases, while helping the country reduce its imports of oil. As governor, he signed a global-warming law that mandates reductions in greenhouse gases; California also has a renewable-energy mandate that has resulted in almost 20 percent of electricity coming from renewable sources.

He lamented the national discussion on clean energy, saying too much of it is stuck in the debate over the science of global warming.  Instead, people should focus on immediate benefits from investing in green technologies, including improved health, economic growth, consumer savings from efficiency, and reduced dependence on foreign oil.

“Think about what it means that in the Central Valley of California, one in six children has to walk around with an inhaler.  I know we can change the debate and win the debate,” he said.  “We can’t talk about global warming, because people can’t relate to that.”  Instead of creating “forward-looking policies” for energy use, elected officials are debating the science of global warming.  “There is a disconnect between what is happening and what is being debated,” Schwarzenegger concluded.

Gridlocked Chicago: There’s Some Disagreement

Tuesday, February 1st, 2011

Gridlocked Chicago:  There’s Some DisagreementChicago is # 1!  Unfortunately, this is not good news because the Windy City has been ranked by one study as having the worst traffic congestion in the nation.   The news was one finding of the Urban Mobility Report (UMR),  conducted by the Texas Transportation Institute, the United States’ largest university-affiliated transportation research agency.  Earlier TTI studies had ranked Chicago in second or third place.  Washington, D.C., and its suburbs currently occupy second place.

The study of 2009 driving conditions found that Chicago’s roadways have increasing gridlock, at virtually any hour of the day.  In addition to the normal time it takes to get from Point A to Point B by car, commuters in metropolitan Chicago and northwest Indiana spent 70 extra hours behind the wheel in 2009, according to the study.  Chicago’s earlier record was 64 hours of extra driving reported in 2008; 55 hours in 1999; and 18 hours in 1982.  The national average of time wasted stuck in traffic was a more manageable 34 hours.  The fact that Chicago is a nationwide shipping hub and has some of the nation’s heaviest truck traffic – plus two of the top bottleneck areas – also impacts congestion.  Additionally, Illinois has approximately 10.4 million registered vehicles, and a population of around 12.9 million, according to 2009 Census Bureau statistics

“In terms of the delay for each auto commuter, Chicago now tips the scales at No. 1, where in the last report, Los Angeles was locked in that spot,” said David Schrank, one of the report’s authors.  The average cost to each commuter is $1,738.  Nationally, traffic congestion cost $115 billion in 2009; additionally, consumers drove 4.8 billion additional hours and had to purchase an extra 3.9 billion gallons of gas.

Alter NOW finds that the report has its detractors:  Smart Growth America takes issue with some of the UMR’s findings.  “It assumes, for example, that everyone should be able to speed as rapidly down the highway during rush hour as they could in the middle of the night.  American taxpayers will never stand for being asked to turn over their wallets and their neighborhoods in order to build that kind of highway capacity“.

A June 30, 2010 study by IBM actually disputes the rankings, placing Los Angeles, New York and Houston as the U.S. cities with the worst traffic.  Topping the international list of cities notorious for congestion are Beijing, Mexico City, Johannesburg, Moscow and New Delhi.  Chicago doesn’t appear on IBM’s 20-city list.

Another mid-year 2010 study by Seattle-based INRIX, places Chicago in third place nationally.  “Between 5 and 6 p.m. Thursday is now the most-congested travel hour of the week in the Chicago area,” according to the INRIX National Traffic Scorecard.  “Last year, it was the 5-6 p.m. hour on Fridays.  The reason for the change?  It could be that more people are working part-time or ‘flex-time’, and Friday is a frequent day for flex-timers to take off or work from home,” said Chicago traffic expert Joe Schwieterman of DePaul University.  “Chicago doesn’t have a long-term plan to do much about congestion, we’re adding some lanes to the Tri-State, some work on I-80, but there’s not the construction in the works to relieve some of the worst bottlenecks“.

Will Mayor Daley’s Successor Be Hit With Economic Reality When Contemplating Landmark Public Improvements?

Wednesday, January 12th, 2011

Will Mayor Daley’s Successor Be Hit With Economic Reality When Contemplating Landmark Public Improvements?As Chicago’s longest serving mayor leaves his post in May of 2011, Richard M. Daley leaves a legacy that includes the iconic Bean in Millennium Park to the flower-filled planters that ornament 85 miles of the city’s streets.  Whoever fills his post will find that budget shortfalls resulting from the Great Recession will collide with reality; the bottom line is that it will be difficult for whoever succeeds Mayor Daley to extend his vision to beautify Chicago.

Writing in the Chicago Tribune, architectural columnist Blair Kamin says that “This was a mayor with a passion to build.  By combining the roles of chief politician and chief planner, Daley became the ultimate shaper of Chicago’s cityscape.  There was no denying his authority over the cityscape — just as there is no denying the deep anxiety his departure has spawned among the city’s architects and builders.  Chicago, they worry, will go from being a city in overdrive to a city on hold.”

“I hope the intensity remains,” said Chicago developer Dan McCaffery, who is planning to turn the 580-acre former U.S. Steel plant on the southeast lakefront into a mixed-use community. “People in City Hall knew that when the mayor had endorsed something, it was aggressively pursued. You could feel the difference.  It was palpable.”  “Any new mayor has got to realize that being a green city has become a part of Chicago as much as hot dogs,” said Ben Helphand, president of the Friends of the Bloomingdale Trail, which is pushing to develop an elevated park, nearly three miles long, on a long-disused railroad spur on the city’s Northwest Side.

A 2010 survey conducted by the Trust for Public Land revealed that Chicago has a mere 4.2 acres of parkland per every 1,000 residents, according to Erma Tranter, president of the advocacy group Friends of the Parks.  “We do not have sufficient park space for a healthy community,” Tranter said.  “It’s an absolutely critical issue in neighborhoods where children don’t have places to play.  That correlates to obesity, health problems and higher costs for future health issues.  There are children who are bombarded with all these electronic games.  They don’t have land anywhere near for them to go to.”

“Daley’s done a great job and he led the city very strongly. But if we’re going to move where we need to be, we need to engage the community in a different way,” said Peter Nicholson, executive director of the Foresight Design Initiative, a nonprofit devoted to sustainability issues. “It can’t be command and control.”