I read something recently that scared the crap out of me and it should strike fear into the heart of every U.S. based manufacturing firm.
China controls 11 rare earth mines and has recently committed to reducing exports by 10% per year. That in itself might not make you cringe, but there’s more. By 2014 China will be investing over $100 million in metal mines around the world. They are buying up mines throughout Africa and investing in places like Brazil and Venezuela.
One of the biggest recipients of Chinese mining investment is the African nation of Zambia, particularly the country’s copper mines, which are a huge contributor to its overall economy. The metal accounts for 75% of Zambia’s total exports and two-thirds of the central government’s revenue. To date, China’s mining firms have invested $1 billion in Zambia’s copper sector. That has helped the country boost its copper production and create jobs. China is also making a concerted effort to forge relationships with African regimes, especially corrupt ones. In 2007, when the government of the Democratic Republic of the Congo seized two mining permits held by Toronto-listed Katanga Mining (TSX:KAT) they handed them over to Sicomines Company, a joint venture partly owned by a Chinese firm.
Why does this scare the crap out of me? Imagine a world where every U.S. Manufacturing firm starts at a disadvantage.
If China controls the world’s metal resources…gee do you think Americans will be able to buy at the same price as Chinese manufacturers?
Last month I wrote about the new tax of 2.3 percent on medical device manufacturing. Most of these guys are working on a 5% margin, so the government has effectively taken 50% of their profit. Add to this all of the Obama-care taxes, increased income tax, etc. Now think about what our government is doing compared to China’s. The former is so busy digging their hands in the pockets of its citizens that it doesn’t bother to notice that the other is playing a pretty slick game of monopoly…and they are playing to win!
The U.S., Europe and Japan all filed complaints to the World Trade Organization over what is claimed to be a deliberate attempt by China, which produces 90% of the world’s supply of rare earths, to drive prices up. U.S. trade representative, Ron Kirk says,
These materials are key inputs in a multitude of U.S. Manufacturing sectors and American-made products, advanced electronics, automobiles, petroleum and chemicals. It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO.
The average Chinese export price of rare earth oxides, a subset of rare earths, sored 537% in 2011 from 2010 and was 10 percent higher in the first five months of 2012 than a year earlier, according to data reported by Global Trade Information Services, Inc., and compiled by Bloomberg Government. Chinese exports of rare earth oxides fell 56% in the first five months of 2012, Bloomberg Government data show.
As I write this, four F-16 fighter jets left the U.S. this week, bound for Egypt as part of a foreign aid package critics say should have been scrapped when the nation elected it’s new “president.” Also sixteen F-16s and 200 Abrams tanks are scheduled to be given to the Egyptian government before the end of this year, under a foreign aid deal signed in 2010 with then Egyptian President Hosni Mubarak, a long time U.S. ally. All of this aid going to a country that violated our embassy, sovereign U.S. ground and tour down our flag. No one in the media seems too upset about this.
The paradigm through which I see the world is one in which EVERYTHING is viewed by how it affects small business owners and especially manufacturing. I can’t help but compare what our government is doing with its citizens’ hard earned money, and its manufacturing job creators, versus what China is doing to ensure the success of its manufacturing sector. Am I the only one that sees the danger in this? I can’t be the only one who draws these same conclusions. I know I can’t be the only one that thinks OUR money could and should be spent more wisely.
We, as people and a nation, need to wise up! We must ensure our self-sufficiency and the ability of our manufacturing sector to create products that the world consumes. The end of U.S. manufacturing means the end of the United States of America, as we know it. Our economy needs manufacturing! It’s been instrumental in every U.S. come back, and we cannot survive without it.
I encourage EVERY U.S. citizen to demand more of our elected officials. Tell them how important manufacturing is to our economy. Let them know that decisions they make that negatively impact manufacturing will be the end of their political careers. WE the people need to watch closely what is happening on this issue. Stay informed and be vocal!
Although I had a completely different Rave scheduled for this month… I can’t help but relate to my Rant above and continue the conversation. This is a testament to what business can accomplish while government is spinning its wheels in self-absorbed idiocy and confusion. I am talking about the boldest of ventures. I am talking about Planetary Resources! Planetary Resources, Inc., formerly known as Arkyd Astronautics, is an American company, which was formed in November 2010, and reorganized and renamed in 2012. Planetary Resources’ mission, as stated on their website, “To apply commercial, innovative techniques to explore space. We will develop low-cost robotic spacecrafts to explore the thousands of resource rich asteroids within our reach. We will learn everything we can about them, and then develop the most efficient capabilities to deliver these resources directly to both space-based and terrestrial customers. Asteroid mining may sound like fiction, but it’s just science.”
Is this just a pipe dream? Is this just a bunch of rich guys trying to get richer? Maybe… but, through my Paradigm, this is forward thinking business going where our government can’t. If the Chinese are playing a mean game of Monopoly, Planetary Resources is planning to say “checkmate” before America lands on a Chinese owned boardwalk loaded with hotels! That, my manufacturing friends, is truly something to RAVE about!
This month’s recommendation is for a book I just finished reading, “Econovation,” by Steve Faktor, “The Red White and Blue Pill for Arousing Innovation.” Steve says that the nations and communities that will do well are the ones that will have the ability to create jobs in the next decade. The book is a unique look at the problems facing the American economy with thought provoking remedies to cure what ails us. Steve advocates a society based on “producerism,” not consumerism. And my favorite quote from the book is, “If your daughter doesn’t own a hacksaw by the age of seven, I’ll feel like a failure.” Hey Stanley, can we get them in hot pink please? I am highly recommending the book and would say that EVERY U.S. business owner and especially manufacturers should take the time to read it!
The Bonus Recommendation:
I was reminded by my social media manager that it’s February, and I should really recommend something for you guys to do for your sweethearts on Valentine’s Day, (thanks Therese). My first thought is, don’t go out to eat on Valentine’s Day! That usually sucks because you are being rushed through dinner so the restaurant can accommodate more “seatings.” Even some of the best places screw it up that day because of the volume. Opt for cooking at home. (Throat clearing…) that means you guys cooking, not your honey. There is nothing sexier than a man trying to get it done in the kitchen. There are plenty of online recipes and tutorials to help you out. It doesn’t matter if it’s gourmet, it’s the effort that counts! Try http://www.foodnetwork.com. The recipes on this site have difficulty ratings, which I find pretty accurate, so you can pick a recipe based on your skill level… or lack thereof. If you want to go out to dinner… do it the weekend before or after. That doesn’t mean ignore the day… dear Lord; I am not trying to get you killed here!
Next, some great conversation is in order. Most men are visual creatures… but girls are cerebral! You have to encourage the brain if you have any hope of reaching the other parts with any level of success. “Foreplay” starts days earlier for the girls. It’s what you say, it’s whether or not you took the garbage out and made sure your underwear wasn’t left on the bathroom floor. It’s all about thoughtfulness. Gifts? That will depend on your particular sweetheart. Some chicks are more materialistic than others, and gifts are important. For most that I know, time, attention, thoughtfulness and a kick ass card with thought behind it work nicely. And… here’s a tip guys, the spit better be dry on the card sealing glue! Why? That shows forethought. It tells her that you didn’t just throw anything together in the last possible second… (stop laughing now).
And if you know your sweetheart won’t be happy without a gift, make sure that it’s American-made! Here are some fun sites that Therese put together for your shopping pleasure.
Fran’s Rants and Raves and Recommendations – a place to get lucky in business… and lucky in love – I love my job and it’s SO much fun being me! Till next month… thanks for reading and I wish you a VERY Happy Valentine’s Day.
Perhaps I’ll extol the virtues of Irish whiskey for St. Patrick’s Day!
Fran Brunelle is an industrial auctioneer with almost 20 years experience, a manufacturing business broker, licensed real estate broker specializing in industrial properties, a real estate auctioneer, certified appraiser and author. Fran has established several corporations that provide services to the manufacturing industry. The “Accelerated Group of Companies” provides tools and services to help manufacturers grow and exit strategies to maximize dollars when they are ready to retire or sell their manufacturing business. The group of companies that Fran Brunelle has established includes:
www.AcceleratedBuySell.com – Provides Online Industrial Auction Services, Used Equipment Auctions, Capital Equipment Auctions, Plant Liquidations, Industrial Plant Cleanout Services, Used Machinery Location Services, Certified Machine Tool and Equipment Appraisals, and more.
www.AcceleratedMfgBrokers.com – Specializes in Manufacturing Business Brokerage and Mergers and Acquisitions. We help manufacturers develop exit strategies to maximize retirement dollars, and successful manufacturers expand through acquisition of other manufacturing companies, product lines and customer lists. Manufacturing Companies for sale throughout the United States are listed on this site.
www.AcceleratedRE.com – Provides Industrial Real Estate Brokerage Services, Online Real Estate Auctions, Sealed Bid Real Estate Auctions and complete industrial facility cleanout services.
www.IgniteMfg.com – Provides funding for products made in the USA, and engineering/manufacturing educational needs through Crowd Funding.
www.MfgWebSolutions.com – Provides web development and social media services for manufacturers at under-market rates.
Fran Brunelle is a contributing author to:
blog.AcceleratedBuySell.com - A site that provides the latest manufacturing news, statistics and opinion. It also provides information on how to grow a manufacturing business, and what to do if you are a manufacturing company that needs to close.
MFGWebSolutions.com/blog - Provides the latest information on social media and web development for manufacturers. It gives manufacturers tips and tricks for boosting their web presence.