At the end of every year, I spend too much time in airport newsstands perusing and purchasing magazines shouting stock market predictions for the upcoming year. Reading the articles between these covers - for me - is almost as scary as flying.

This year was no different. My goal was to find information on the industrial sector, but my luck was lacking. Either this sector is a large secret or it's too weak for words. My determination led me to find some words of my own on this subject.

In order to simplify the process, let's look at 13 key sub sectors in the industrial sector. Each sub sector has its own energy efficiency figure, which will change as new methods are implemented to meet constantly changing energy standards. These sub sectors include agriculture, mining, construction, food (mainly feedstock), paper, chemicals, glass, cement, steel, primary aluminum, petroleum refining, metals-based durables, and "other manufacturing."

Most of these sub sectors are heavily tied into each other. For example, the steel and cement industry are - of course - tied into construction. I wasn't aware they're both also tied into mining. The common material in both steel and cement is limestone. The carbon dioxide produced during calcinations of limestone to produce clinker for cement is one of the highest in manufacturing CO₂ emissions. Solutions include the use of volcanic ash and other lightweight materials to substitute for limestone. However, these changes can only be implemented with retrofitting or retiring older plants. Look to alternatives to extraction, such as companies using cellulose materials, as mentioned last week.

Steel industries are also converting to meet a need to make steel lighter and stronger while eliminating various exorbitant costs in the bottom line. Look for companies retrofitting their plants to include scrap preheating in an electric arc furnace and thin slab casting. The latter process consists of casting steel to the near-finished product, rather than flat rolling and shipping. Will this eliminate the need for some assembly plants for many products?

Construction is seasonal and flows with economics. Construction is responsible for a mid-range of energy consumption at 7%, and 6% of CO₂ emissions. Changes in this sub sector would include all the above, and our needs as the population continues to increase. I continue to muse about lack of space to build anything as historic societies succeed in claiming more property and as graveyards continue to expand. Look to more variety in recycling building materials to save on construction costs, if possible.

The feedstock sub sector is going through massive change, as it is responsible for a whopping 16% of industrial sector energy on a global basis. Most of this ends up as CO₂, but most of it is also tied into bulk chemicals. Once again, watch biomass projects and the progress made in the various economic analysis of the feedstock supply chain. Keep a close eye on the amount of money President Bush is allocating for research in this area. We'll take a closer look at biomass when we study the energy sector.

When hemp was outlawed, so was the need for machines that manufactured plant products into paper products. You might hear of some hemp or kenaf manufacturing, but trees are still the preferred sacrifice for paper products. The paper industry isn't going away, and you can find some companies that are trading at pre-April 2001 figures in the forestry industry. There is still need to retrofit plants to more energy conscious levels. This is happening as old equipment becomes worn and needs to be replaced.

The paper sub sector is also highly involved in biomass projects, as they see it as one way to justify their manufacturing processes. Companies conscious of chemicals used in some paper manufacturing processes will be worth watching, as this will be part and parcel of the success and downfall of many companies in years to come. Those companies that can't afford the changes in clean-ups and new equipment will be those who falter and fall through the cracks. Ok - so this is common sense, but?

The area of clean-ups and ignoring the environment is also where politics plays a huge part in the investment process. We often think of Washington when it comes to politics; however, take a close look at regional and local politics when you invest in a company. I've made the unfortunate mistake of following a company only to find the local government was turning a collective head from a horrid river pollution problem. When the issue became a statewide disaster, that particular company was singled out for blame. Huge losses of revenue for reparations are not preferred ingredients for a successful investment recipe.

Don't be lulled into thinking some industry sub sectors are immune from energy and pollution problems. The western U.S. construction industry is often notorious for riparian destruction, and many companies are finally being held accountable for loss of waterfowl and fish habitats. Sometimes the damage is beyond repair. In this case, the company is often instructed by courts to go into other areas to construct new habitats. I have an idea of the cost of this mis-adventure, and the bottom line isn't pretty for the company involved.

Perhaps no one wants to write about the industrial sector this year due to problems inherent with ethics, bottom lines, and the expense of experimental solutions for emissions and energy use. Of course, not every company is created equal; therefore, not every word here applies to all companies within this sector. However, I would look for companies with a penchant for reduction in capital and operating costs, reductions in emissions and energy consumption, and improved work conditions.

The keyword for this sector is innovation, and we'll look at a few of the inventive processes next week when we tie this sector into our daily lives.

Until then,
Linda Goin