A positive start for foundries.

Foundries supplying key market sectors experienced a good first quarter in 1997 according to interviews with casting end users. Led by the automotive sector, our earlier forecasts for growth in major markets have been reinforced.

Light vehicle production by U.S. carmakers improved over 1996 by 3.8%, as car production rose 0.6% and light truck production by 7%. We continue to forecast a 1% growth rate for 1997, followed by a 6% increase in '98.

Our original forecasts for many markets were based on a 5% increase in housing starts in 1997. We now expect housing starts to decline 2% after a good year in '96. This decline could affect the production of valve and construction castings during 1997.

The strengthening of the U.S. dollar against the Yen, D-mark and French Franc is expected to have a pronounced weakening effect on casting shipments during the next few years. Imports are expected to increase with corresponding decreases in exports for major industries that use castings. These industries include automotive, construction equipment and farm machinery.

Gray Iron

During the first quarter of 1997, construction increased 1% and sales by equipment manufacturers improved over the first quarter of '96. However, it is expected that higher interest rates will lower housing starts during the next two quarters, while lowering casting sales from the highs of 1996.

Motor Vehicles - Production of light vehicles in the U.S. is projected to reach 11,480,000 vehicles in 1997, a 1% increase over 1996. Light truck production is expected to peak at 5,350,000 units, or 47% of the total number of light vehicles produced. Gray iron casting production in light vehicles is expected to reach 2,001,000 tons, an increase of 22,000 tons over 1996.

Ingot Molds - Gray iron for ingot molds hit a new low in 1996 as continuous cast steel production reached 97% of the total steel made in the U.S. Mold and stool shipments are expected to remain low in 1997 at 130,000 tons.

Machine Tool - Machine tool production in the U.S. continues strong and gray iron casting use is expected to exceed 1996 levels and grow to 134,000 tons in '97.

Valves - Gray iron castings for valve parts are expected to decline 2.8% in 1997 as housing starts decline.

Household Appliances - Consumption of gray iron castings in appliances is expected to hit a new low in 1997 at 78,000 tons. This projection is based on the redesign of parts to plastics.

Ductile Iron

Total shipments of ductile iron are expected to decrease 1% in 1997 based on a 3.8% loss in pipe production.

Pipe - Based on the forecast for lower housing starts in 1997, it is expected that ductile iron pipe production will be reduced to 1,750,000 tons. Greater competition from overseas, as a result of favorable currency exchange rates, could reduce pipe exports.

Motor Vehicles - Ductile iron consumption in medium to heavy trucks is estimated to approach 1000 lb per vehicle in 1998. The overall use of ductile iron in light vehicles is forecasted at 1,042,000 in 1997.

Engines - Shipments of 96,000 tons of ductile iron are projected during 1997 for use in nonautomotive engines. The increased use of ductile iron for heavy diesel engine blocks is also expected in the future.

Special Machinery - It is forecast that 99,000 tons of ductile iron will be consumed in special machines and equipment in 1997. This is spurred by the expected increase in the use of ductile iron in plastic, paper and printing machinery.

Austempered Ductile Iron - It is expected that the major use of ADI could be in shells, projectiles and track shoes for the military to replace steel forgings. Shipments of ADI are now estimated to be approaching 50,000 tons.

Steel Castings

Original estimates of steel castings for railroad use in 1996 were based on the consumption of 612,000 tons of castings in freight cars and locomotives. These projections were based on the manufacture of 45,000 freight cars in 1996. Actual production of rail cars was near 55,000 units, which required 674,000 tons of steel castings.

Construction - Consumption of steel castings in the construction market is expected to drop slightly in 1997, but will bounce back by 7% in 1998 as follows (in thousands of tons):

Carbon/Low Alloy                165
Wear/Abrasion Resistant          18
Manganese                         4
Total                           187

Corrosion Resistant Steels - Shipments of corrosion resistant steels are expected to reach record highs of 80,000 tons in 1998 and 1999 based on forecasts for increased expansion in valve and pump use in corrosive media.

Aluminum Castings

It is forecast that aluminum diecasting shipments in 1997 will exceed 1996 by a small margin, based on a 1% increase in motor vehicle production.

Aluminum die casting consumption for motor vehicles is projected to grow in the long term at a 3.3% annual rate. A slower short term growth is forecast because of the high percentage of light trucks produced.

Aluminum permanent mold and sand castings are forecast to grow 1% in 1997 compared with 1996.

Much of the expected conversion of iron engine blocks to aluminum has been pushed back to the end of the century because of the high percentage of light trucks produced in the U.S. It is expected that more rapid conversion could take place in 2002 and push the shipments of permanent mold aluminum to over 1 million tons per year.

Brass & Bronze

Shipments of brass and bronze plumbing and industrial valve and fittings peaked in 1996 as a result of the large increase in housing starts. A decrease of 3.8% is expected in 1997.