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Significant events affecting the AWE markets in the past week include the following:

Many AWE products made outside China depend on Chinese parts. A number of international suppliers export from manufacturing plants in China. AWE products are also being sold to Chinese manufacturers of chemicals, semiconductors, and power plants. The continued lockdown in China is having significant impact on these markets. The chances that COVID can be controlled by the lockdown are minimal. The cases are temporarily reduced. But as soon as the lockdown is lifted there will be high rates of transmission of this virus. China does not have effective vaccines.

With a highly transmissible virus you need a vaccine which is 95% effective. The basic principle is that you have to reach a level where one infected person causes less than one transmission. The lockdown does this temporarily. However, China is interfacing with the world. New sources are introduced from individuals outside the lockdown area.

The only lockdown strategy which will work is permanent isolation of China from the world. China should quickly acquire mRNA vaccines and reach the levels of immunity being achieved in the U.S. and Europe.

Chinese masking policy has been inconsistent. Workers in the lockdown areas have the latest in masks and PPE but masking requirements have not been adequate. In fact, masking can be an extremely effective option. What is lacking is understanding, measurement, and use, based on fitted filter efficiency. McIlvaine was in constant contact with ASTM committee members creating the mask standard which is now available. Agreement was available to standardize on a way to rate efficiency and pressure drop but not fit.

Efficient N95 masks, which have a loose fit, will only filter a portion of the incoming air. The more efficient and resistant the media, the more air will flow around rather than penetrate.

There are very accurate ways to test fitted filter efficiency. These are individual tests and very expensive. McIlvaine proposed that tests be made on five head shapes using plastic molds. This approach creates a stand for ASTM similar to efficiency and pressure drop but much more meaningful. If any live additional testing is needed it can be done with iPhones which will show if masks are improperly worn.

China will need to rely on masking until they can vaccinate everyone with more effective vaccines. The Chinese impact on the world economy will depend on alternative lock down options.

Putin did not discuss a war declaration in a May Day speech. He spent time as usual painting Ukrainians as Nazis in partnership with the West to invade Russia. But he did not threaten a full scale mobilization. Some pundits believe that there would be significant resistance to drafting conscripts. At the same time, Russia is demonstrating a lack of success in the Ukrainian offensive. Poorly maintained equipment, poor leadership, and poor morale all have been evident in the new campaign in the East. Longer term Russia has 2% of the capability of the West to provide equipment and ammunition. The U.S. howitzers have a longer range than the Russian. The U.S. shoulder-fired drones have had lethal effect. There are more than 10 million Ukrainian men and women willing to risk their lives. By contrast the 200,000 Russian troops have been reduced by 25% due to injury or death.

The question is now whether Ukraine should strive to completely remove Russia from its soil or settle for a return to the February 24 status.

President Macron of France favors a settlement which would eventually bring Russia into a European community. He points out that the UK is not part of the EU. Therefore it is not imperative to grant Ukraine EU membership. He proposes a European community which includes the EU countries plus aspiring members and others such as the UK. Russia could be encouraged to adopt a non-aggressive pledge, draw back out of eastern Ukraine, and gain the benefits of community membership.

This might not happen under a Putin regime, but he is mortal and is even rumored to have cancer.

The various scenarios for ending the war range from nuclear devastation to a prosperous European community. The outcome will have major impacts on AWE suppliers.

Inflation is tied into the balance between supply and demand. There is a pent-up demand which is backed up by high levels of available cash for homeowners and businesses. The semiconductor demand has outstripped supply. This has caused delays in automobile production. AWE suppliers are unable to obtain all the parts they need. Prices for parts are rising. So AWE product prices are also increasing. The most valuable group would be scrubber and precipitator suppliers.

Most of the revenue comes from large units which are fabricated by local metal fabrication companies rather than the designer. So essentially all the hardware and components are outsourced. Contracts for large systems take months or even years to execute.

It is common for suppliers to provide variable rather than fixed price proposals which allow price adjustments commensurate to the inflation rate.

There is core inflation which is in contrast to temporary factors such as oil prices. Core inflation includes wages and other factors which are not likely to be reversed.

The high level of savings will be changed if there is a recession. Increases in interest rates will increase the cost of mortgages and will have some effect on demand. In the U.S., the Federal Reserve is increasing rates in 0.5% increments and hopes to slow down inflation without leading the U.S. into a recession.

Europe is greatly impacted by the Russian invasion. Alternative energy supplies are needed. The cost and availability will be major economic factors.

The impact of COVID and new variants remains an unknown variable. Africa and much of Asia remain vulnerable with low vaccination rates. Hundreds of millions of new COVID cases means many new variants. So far, the variants have been more transmissible but so far not more deadly.

Technische Textilien Lörrach Supplies Media for Aluminum Secondary Smelting Plant

A filter medium made of meta-aramid and PPS fibers is successfully being used in the aluminum industry.

In order to guarantee the requested dust emission level fine fibers have been used for the needlefelt.

The warranty term of 24 months was fulfilled and the filter bags continue to work to the satisfaction of the plant operator.

Example of the use of a MA+PPS mix felt, 550 g/m², fine fibers

Gas volume:	104.000 Bm³/h
Filtration surface:	2271 m²
Cleaning:	reverse air
Clean gas dust load:	< 1 mg /Nm³
Temperature:	120 / 170 °C

Tenova, a leading developer and provider of sustainable solutions for the green transition of the metals industry, was recently awarded a contract for the supply of a new Electric Arc Furnace (EAF) at the Tosyali Bethioua plant, located in Algeria. This will be the second EAF that Tenova has supplied to this site and is a key component of the current expansion project of Tosyali.

The new EAF will be designed to be almost identical to the current EAF that has been consistently operating on a line steadily producing more than two million tons of billets per year. The first EAF supplied to the plant in 2016 achieved the highest productivity levels on record for a DRI-processing furnace.

The new equipment, powered by a 240MVA AC transformer, will process 2.5M per year of DRI pellets to produce Hot Rolled Coil (HRC). Same as the existing EAF, this new furnace will be equipped with an innovative charging system that allows charging and melting of more than 12 tons of HDRI (hot-DRI) per minute, setting an absolute productivity record for DRI-processing furnaces.

The existing furnace has been fed with a wide range of reduced iron sources including HBI. In addition, the composition of the DRI produced and processed in the Bethioua site is adjusted by blending iron concentrates from different sources to achieve the most profitable balance between cost of raw materials and energy. The advanced EAF Process Control System compensates for the variations of the raw materials and optimizes the process to reach the optimal yield and consumption figures.

Atlantic Products Mexico SA de CV provided the details of a very successful replacement of bags in a plant in Mexico.

New pleated bags of 4.60 meters of length (15.1 feet) to allow one-piece cages calculated to reduce air to cloth ratio to 3.68/1 and can velocity to 231 ft/min from over 300 ft/min.

This dust collector has been working trouble free since start with only 98 bags replaced in one of the small compartments at the end of the dust collector.

Differential pressure is under 4” of water column and emissions under 15 mg/Nm3.

Increase of bottom space creates a “drop-off chamber effect” and allow heavier particles to drop before the bags’ nest.

Space between discharge system and inlet plus lower upward velocity in that same space reduces re-entrance of dust to the filter bags area.

ADFLO has a 2.50” bottom disc for all cell plate diameters, which increases the free area at the bottom nest of the bags resulting in drop of can velocity and because the bags are not cylindrical and have wide pleats the void volume of the dust collector also increases reducing the interstitial velocity.

Lower can velocity, lower interstitial velocity and lower air to cloth ratio result in

Everything without modifying the basic structure of the dust collector. The only system that seldom has to be modified to improve capacity is the discharge system since most times will have more dust to be removed.

The supplier and exclusive distributor in North America is Atlantic Products Mexico SA de CV.

Donaldson Company, Inc. reported third quarter 2022 net earnings of $83.0 million, a decrease of 1.8% from $84.4 million in 2021. Earnings per share (EPS)1 for the third quarter 2022 increased to $0.67 from $0.66.

“Our record third quarter sales were driven by pricing actions offsetting persistent inflation, as well as continued high levels of demand,” said Tod Carpenter, chairman, president and chief executive officer. “Undeterred by the macro challenges, our team maintained a strong commitment to providing technology-led filtration to customers as global demand for our products and services remained at record highs.

“Looking ahead, we anticipate ongoing inflation and supply chain constraints. However, the successful execution of pricing actions by the Donaldson team throughout this fiscal year is expected to drive fourth quarter sequential sales and gross margin improvement. As we close out the year, we remain focused on delivering on our customer commitments, implementing pricing actions to offset cost pressures and investing for the future.”

Third quarter 2022 sales increased 11.5% to $853.2 million from $765.0 million in 2021, including a negative impact of 2.9 percentage points from currency translation.

Third quarter Industrial Products segment (Industrial) sales rose 7.8%, led by Gas Turbine Systems (GTS) and Industrial Filtration Solutions (IFS). GTS sales increased 19.4% versus the prior year due to higher new equipment sales in EMEA and the U.S. IFS sales growth of 9.1% was the result of overall strength in the industrial dust collection business and double-digit growth in Process Filtration sales. Special Applications sales declined 3.6% compared with 2021. Within Special Applications, Disk Drive sales were negatively impacted by the COVID-19 shutdown in China

Third quarter 2022 operating income as a percentage of sales (operating margin) decreased to 13.0% from 14.3% in 2021. Gross margin decreased to 31.5% from 33.7% in the prior year as inflation headwinds from raw materials, freight, energy and labor costs persisted.

Third quarter 2022 operating expenses as a percentage of sales were 18.5%, an improvement from 19.4% in 2021 due to leverage on higher sales.

Third quarter 2022 interest expense was $3.8 million compared with $3.2 million in the prior year. Other income, net was favorable by $0.6 million versus the prior year. Third quarter 2022 effective tax rate increased to 25.4% from 23.9% in 2021 due to a reduction in net discrete tax benefits.

Year to date, the Company has paid $81.8 million in dividends and repurchased approximately 2% of its outstanding shares for $153.7 million.

In the third quarter, Donaldson took the following actions in response to the events that unfolded in Ukraine:

1. Complied with all sanctions, including those from the European Union, Great Britain and the United States

Fiscal 2022 sales are expected to increase 14.5% to 16.5% over prior year, up from previous guidance of 11% to 15%, and driven primarily by strength in Engine sales. Currency translation is forecast to negatively impact sales by approximately 3%. Fiscal 2022 generally accepted accounting principles (GAAP) EPS is now expected to be between $2.67 and $2.73, versus a previous range of between $2.66 and $2.76. GAAP and adjusted EPS2 in 2021 were $2.24 and $2.32, respectively.

Fiscal 2022 Industrial sales are expected to increase between 10% and 12% compared with 2021, narrowed from 9% to 13% previously.

Babcock & Wilcox North American Parts and Services Business Sees Growing Demand with Contracts Totaling More Than $23 Million in April

Babcock & Wilcox (B&W) announced it has booked more than $23 million in orders for parts and services for utility and industrial customers in North America in the month of April, as overall demand for these services has returned to pre-pandemic levels.

Significant orders include environmental aftermarket parts and services for electrostatic precipitators and other equipment, pulp and paper upgrades and services, pulverizer mill parts, B&W’s Diamond Power ash-handling and boiler cleaning product lines and more.

“Overall parts and services demand in North America is returning to pre-pandemic levels and beyond,” said B&W Executive Vice President and Chief Operating Officer Jimmy Morgan. “We had a very strong level of demand in the first quarter of 2022 and that has continued in April. This is the highest level of activity we’ve seen in North American parts and services since 2019, and we expect it to continue in the coming months.”

Donaldson Company, Inc. announced the acquisition of Purilogics, LLC (Purilogics). Purilogics is an early-stage biotechnology company that leverages a novel technology platform for the development of best-in-class membrane chromatography products. The company offers a broad portfolio of purification tools for a wide range of biologics, including mRNA, plasmid DNA, viral particles, monoclonal antibodies and proteins. Purilogics’ proprietary formulations and processes create membranes that have significant competitive advantages, enabling faster and more cost-effective production of increasingly complex biologic drugs.

Founded in 2013 by Jinxiang Zhou, Ph.D and Scott Husson, Ph.D., Purilogics is headquartered in Greenville, South Carolina. Donaldson acquired Purilogics for an initial purchase price of approximately $20 million as well as milestone-based earnout payments over the next five years. Once commercialized, revenue from Purilogics’ products will be reported within the Donaldson Industrial Filtration Solutions business in the Industrial Products segment.

CECO Environmental Corp., a leading environmentally focused, diversified industrial company whose solutions protect people, the environment, and industrial equipment, today announced it has acquired Compass Water Solutions, Inc. ("Compass") a leading global supplier of membrane-based industrial water and wastewater treatment systems that help customers achieve regulatory compliance of water discharge at the lowest lifecycle cost. The transaction adds to CECO's growing industrial water technologies, which is anchored by its Peerless-Skimovex® brand.

Compass generated approximately $11 million of revenue in 2021 with double-digit EBITDA margins. The total purchase price was $12.5 million and funded by a mix of cash and debt. Approximately 70 percent was paid at closing with the balance to be paid over a two-year period. CECO expects the acquisition to be accretive to total company EBITDA margins, earnings per share, and free cash flows in 2022.

With this acquisition, CECO expands its addressable industrial water technology market by over $250 million, with expected growth rates over six percent CAGR through 2025 for industrial oily-water and seawater reverse osmosis applications. CECO expects the Compass acquisition to unlock greater value by leveraging CECO's international sales resources, existing US Navy expertise, and global engineering and production footprint. In addition to market growth rates, the expected stricter water discharge regulations coupled with hard-to-attain international certifications are expected to drive higher sales. Compass' installed base of over 8,000 systems worldwide has created a robust aftermarket parts and services business that represents approximately 40 percent of current revenues. Finally, with an average order size of less than $250,000, Compass increases CECO's short-cycle business mix to approximately $100 million, or 30 percent, of total company 2021 revenue.

"Compass adds critical engineered solutions, and an experienced leadership team, to our growing industrial water capabilities, and we are excited to welcome them to the CECO organization," said Todd Gleason, CEO of CECO Environmental. "CECO has completed three industrial water acquisitions in 2022 and each share our common mission to protect people, the environment, and industrial equipment. We expect that these businesses, when coupled with our global footprint and leading brands, will continue to drive strong revenue and income growth in this strategic market," added Mr. Gleason.