1998 shaping up as 7th good year.

Recent interviews with U.S. casting users indicate that foundries supplying most market sectors experienced continued growth in the first quarter of 1998. Housing starts and new construction are reported to be up 3% over the same period of '97.

Though production of passenger cars by domestic manufacturers slipped by 6%, light truck production is up 6%, leaving total light vehicle production equal to last year's first quarter. Overall, a 1.5% decline in light vehicle production is now projected for '98. Production of medium to heavy trucks was up 7% over the first quarter of '97.

Orders for railroad freight cars continue to exceed deliveries and the backlog has reached 63,500 cars. In all likelihood, this should be the biggest year for steel railroad castings since 1980.

Based on these events along with interviews with casting users in other market sectors, Stratecasts expects total '98 metalcasting shipments to slightly exceed '97 shipments.

On the international scene, solid growth in the European market and other Third World regions will be offset by the poor markets in Asia. This will weaken overall casting exports into some market sectors.

Gray Iron

Based on recent discussions with econometric organizations, the original forecast for housing starts in '98 has been reduced from 8% to 3.4%. Projected construction activity has also been reduced accordingly. The estimates on increases in the GDP vary from 2% to 3.5%. Our fore, casts are based on a 3% increase.

Motor Vehicles - U.S. light vehicle production is projected to reach nearly 11.7 million units in '98, slightly below last years levels. Nevertheless, it looks like another above-average year. Light truck production is expected to peak at just over 6 million, or 51.5% of total light vehicles. Though light trucks continue to contain mostly gray iron engine blocks, new CAFE legislation probably will hasten their conversion to aluminum. The switch of the iron head continues at a more rapid rate than the block, however, the conversion of the block to aluminum is expected to accelerate in '99.

Table 1. Revised Overall Casting Forecast

Metal             1998 Actual   Forecast 1998   Reforecast 1998

Gray Iron(*)        6,147,000       6,372,000         6,178,000
Ductile Iron        4,072,000       4,250,000         4,187,000
Steel               1,349,000       1,381,000         1,483,000
Aluminum            1,706,000       1,773,000         1,765,000
Copper Alloy          313,000         327,000           326,000

* includes compacted graphite iron

Transplant production is holding its share at about 22% of the light vehicles produced.

Gray iron casting consumption in light vehicles is expected to reach 2 million tons, slightly under original estimates. The medium to heavy truck market, which increased 7% in the first quarter, is forecast to consume 232,000 tons in '98.

Ingot Molds - Domestic ingot mold shipments continue to decline as continuous casting grows, despite the increase in U.S. steel production. Imports have grown to take 25% of demand, while shipments from domestic sources will decline to 115,000 tons this year.

Machine Tool - Gray iron shipments to manufacturers of machine tools continue to grow. Projections call for 137,000 tons of shipments this year.

Valves - Valve and fitting growth is dependent on the growth of various individual market sectors, including pipeline valves, water and waste water, power generation, oil field and petroleum, commercial and residential housing starts, chemical plant construction and exports. All except oil field are expected to have solid growth this year. Therefore, a 3.5% increase in casting shipments to 300,000 tons is expected in '98.

Table 2. Revised Steel Casting Forecast

                      1997 Actual   Forecast 1998   Reforecast 1998

Carbon/Low Alloy        1,172,000       1,198,000         1,402,000
Corrosion Resistant        74,000          79,000            78,000
Heat Resistant             30,000          33,000            31,000
Manganese Steel            38,000          36,000            39,000
Other Steels(*)            35,000          35,000            35,000

TOTAL                   1,349,000       1,381,000         1,585,000

* includes wear- and abrasion-resistant steels
Table 3. U.S. Forecast Capacity and Utilization

Metal                          Capacity             % Utilization

Iron                         12,750,000                   84
Steel                         1,760,000                   90
Aluminum                      2,100,000                   84
Copper Alloy                    400,000                   81
Magnesium                        50,000                   80
Zinc                            420,000                   86
Other Nonferrous                 50,000                   92
Investment Casting              210,000                   79

TOTAL                        17,740,000                   85

Household Appliances - The conversion of iron castings to aluminum and plastic continues to keep the expected gray iron shipments at 81,000 tons, despite an increase in appliance production.

Ductile Iron 

Total shipments of ductile iron are expected to increase 2.8% in '98 to nearly 4.2 million tons. Table 1 shows last year's shipments, the original shipments forecast and the new '98 reforecast.

Pipe - based on an expected 3% increase in housing starts, '98 ductile iron pipe shipments are forecast to increase to nearly 1.9 million tons. The long-term growth rate of 2.1% per year is based on a 2.5% forecast of annual growth in demand, a 0.4% increase in exports per year and an estimated loss of 0.8% per year to PVC pipe.

Motor Vehicles - The continued growth in light truck production has contributed to ductile iron consumption reaching 180 lb per light vehicle. Contributing to this increase are:

* growth of the use of differential carriers and cases (based on truck sales);

* continued use of ductile iron as the major crankshaft material;

* austempered ductile iron's replacement of forgings;

* potential replacement of malleable iron by GM;

* growth in suspension and brake applications despite the long-term loss of knuckles and calipers to aluminum (an estimated 17% of the knuckles and other suspension applications could be converted to aluminum by 2007);

* growth of light truck applications.

Ductile iron consumption in light vehicles is expected to grow 1% in '98 despite a no-growth year for light vehicles. Ductile iron use in medium to heavy truck applications is forecast to increase 9% in '98 to 209,000 tons. The estimated consumption per vehicle is expected to increase to 1000 lb.

Internal Combustion Engine - Shipments are forecast to increase 4% in '98 to 98,000 tons, based on the increase in diesel engine production and growth in crankshaft production for small gasoline engines. Diesel engine applications include bearing caps, exhaust manifolds, crankshafts and flywheels.

Special Machinery - Spurred by growth in printing and plastic machinery applications, ductile iron consumption in this market is expected to grow 3% to 102,000 tons in '98.

Steel Castings 

Original estimates of steel casting shipments in 1997-98 were based on the production of 45,000 and 50,000 freight cars, respectively. Freight car shipments increased to 48,000 units in '97 and are forecast to grow to 75,000 in '98. As a result, steel casting use is forecast to grow in '98 to roughly 1.6 million tons.

Table 2 shows the breakdown of the revised forecast for all steel casting shipments for '98.

Railroad - A total of 75,000 freight cars are projected to be produced in '98, up from 48,000 in '97. As a result, steel casting consumption in railroad cars, locomotives and track work is expected to hit 850,000 tons in '98.

Corrosion-Resistant Steels - Shipments of corrosion-resistant steels are expected to reach a record high of 78,000 tons in '98. This growth is spurred by expansion of valve and pump use in corrosive media and by growth in food products machinery and oil field drilling equipment applications.

Nonferrous Castings

Aluminum Die Castings - Aluminum diecasting shipments in '98 are expected to exceed '97 totals by 3%. It also is expected that diecasting use on each domestically produced vehicle will reach nearly 100 lb.

Aluminum diecasting consumption for motor vehicles is projected to grow in the long term at 2.7% per year. Consumption of aluminum die castings in automobiles is expected to reach 546,000 tons in '98.

Aluminum Permanent Mold & Sand Casting - Aluminum permanent mold and sand castings are forecast to grow to 719,000 tons in '98. In '98, 43% of the aluminum castings consumed in the U.S. will be produced in permanent or sand molds. based on the forecast of engine block and cylinder head growth, this percentage is expected to reach 53% by 2006.

CAFE regulations for light trucks are expected to become more stringent during the next two years. This will accelerate the growth of aluminum permanent mold castings in motor vehicle applications.

Brass & Bronze-Shipments of brass and bronze plumbing and industrial valve castings are expected to grow to 170,000 tons in '98 as a result of the continuing growth in U.S. housing starts.

Casting Capacity

Table 3 indicates the '98 estimated forecast capacity and utilization rates for the U.S. A total of 175,000 tons casting capacity has been added in '98, with most of the new installations providing added iron and steel casting production capabilities. The planned closing of more captive facilities in '99, however, will reduce ductile iron capacity, although aluminum capabilities are reported to be increasing at GM and other companies.