First quarter improvement seen, 5-6% growth expected by year's end. (Casting Market Trends).

Recent interviews with casting consumers indicate that most market sectors experienced a production increase during the first quarter of 2003. While housing starts grew only slightly in the quarter, they are expected to continue to grow as interest rates remain low.

Though the production of passenger cars in the U.S. dropped 8% in the first quarter, light truck production was up 9.3%, resulting in an overall gain in light vehicle production of 1.2% over the same period in '03. An overall production increase of 4.6% (12.63 million light vehicles) is forecast for '03.

Medium-to-heavy truck and trailer production was up 15% in the first quarter. The rebound from last year's poor levels continues to be forecast at 25% for the year.

Orders for freight cars continued to grow in the first quarter, resulting in an increase in backlog over the same period in '02. Deliveries, which dropped to 18,000 last year, are expected to rise slower than originally expected, but still giving hope for a sizeable gain in steel casting shipments.

Based on these first quarter results and on interviews with casting users, a slightly revised 5-6% gain in casting tonnage continues to be forecast for '03. Casting imports continue to rise, although increases in shipping charges and the weakness of the U.S. dollar could raise prices of imported castings.

Table 1 provides actual shipments for '02 and revisions to the figures originally appearing in the 2003 AFS Metalcasting Forecast & Trends published last December. The sections that follow examine each of the major cast metals groups.

Gray Iron

Gray iron shipments are forecast to fall 1% from last year's total to 4,956,000 tons.

Motor Vehicles--The conversion of blocks and heads to aluminum is expected to accelerate this year, dropping the average weight of gray iron per vehicle to 210 lb. While trucks normally utilize gray iron blocks, aluminum blocks are forecast to reach 45% of the total engines in 2004 with heads at 90%.

Gray iron casting consumption in light vehicles is forecast at 1,230,000 tons in '03, a 200,000-ton reduction from '02.

As the rebound in medium-to-heavy truck production continues, gray iron production (primarily rotors and drums) is expected to rise to 164,000 tons.

Diesel Engines--The decline in truck and trailer production in '01 and '02 dropped the demand for gray iron castings. This loss, coupled with a 38% import-to-demand ratio, has reduced gray iron shipments to 389,000 tons in '02. A 14% increase to 443,000 tons is forecast in '03, as truck production rises.

Machine Tool--Gray iron consumption in machine tools fell to a new low last year at 56,000 tons. A 5% increase is forecast for '03. The movement of machine tool manufacturers offshore is expected to keep demand for iron castings low in the future.

Valves--An import-to-demand ratio of 35% continues to hold gray iron shipments down. Despite increases in demand in '03, only 1% growth (to 263,000 tons) is forecast for the year.

Pumps & Compressors--Growth in oil field equipment, construction and general industrial usage is expected to spur an increase of 5% in gray iron casting shipments in '03.

Ductile Iran

Total shipments of ductile iron are expected to increase 6.4% in '03 to 4,349,000 tons based on gains in pipe and truck production.

Pipe--Based on the expected increase in housing starts and construction, ductile iron pipe shipments are forecast to increase to 1.98 million tons in '03.

Motor Vehicles--Despite the high percentage of light truck production, ductile iron's use per vehicle has dropped to 185 lb due to the loss in suspension and differential castings to aluminum. The trend is expected to continue to drop to 160 lb. Shipments in '03, however, are expected to increase 6.2% to 1,121,000 tons as light truck production increases. Austempered ductile iron applications continue to grow as a replacement for forgings in some applications.

Some crankshafts have been converted to forgings in some aluminum engines.

Ductile iron consumption in medium to heavy trucks is forecast to rise 19% based on the increase in truck production.

Special Industry Machinery--Ductile iron casting consumption in the special industry machinery category is expected to increase 5.3% in '03. Most market sectors, including textile, packaging, plastic and papermaking machinery, are beginning to rebound and should return to an average annual growth rate of 2.5%.

Farm Machinery--Though farm machinery sales increased 7% last year to $17.9 billion, the equipment using the most castings, such as four-wheel-drive tractors, fell 3%. The anticipated increase in tractor production this year should spur a ductile iron casting consumption growth of 5%.

Steel

Original steel casting shipments forecasts for '03 were based on 35,000 freight car deliveries. This forecast has been reduced to 28,000 based on fewer first-quarter orders and an improved backlog. Nevertheless, steel casting shipments are forecast to rise 185,000 tons this year (20.4%).

Railroad--With the forecast for the delivery of 28,000 freight cars, steel casting consumption in railroad cars, locomotives and track work is expected to reach 390,000 tons this year and continue to expand in 2004.

Corrosion-Resistant Steel--Despite the increase in imports to 20% of total demand, shipments are forecast to grow 12% in '03 as valve and pump applications increase. This growth is spurred by demand in oil field equipment and food product machinery.

Aluminum

Aluminum casting shipments are expected to grow 8.4% to 2,244,000 tons this year. Nearly two-thirds of this tonnage is used by the motor vehicle sector.

The average weight of aluminum castings per motor vehicle has grown to 235 lb and is expected to continue to grow to 260 lb in the next five years. Die castings represent about 55% of the total of aluminum consumed in vehicles. Shipments produced by the diecasting process are expected to grow 7% in '03.

The accelerated conversion of iron engine blocks and heads to aluminum has spurred the growth of sand and permanent molded aluminum. Shipments produced via this process are expected to rise 10.6% this year.

Copper Base

Copper-base castings, primarily used for industrial plumbing valves and fittings, are forecast to see a 3% increase over last year to 305,000 tons.

Actual 2002 Casting Shipments, Original & Revised Forecast for 2003
(Thousands of Tons)

Metal         2002 Actual  Original 03  Revised '03

Gray Iron        5004         5002         4956
Ductile Iron     4085         4368         4349
Steel             907         1238         1092
Aluminum         2069         2263         2244
Copper Base       296          314          305

Closing of Foundries Reduces Capacity

The following table revises the '03 estimated forecast of capacity and
utilization rates for the cast metals industry in the U.S.

Metal                Capacity (Tons)  % Utilization

Iron                      11,790,000       80
Steel                      1,530,000       72
Aluminum                   2,720,000       83
Copper Base                  380,000       80
Magnesium                    130,000       82
Zinc, Lead                   430,000       80
Other Nonferrous              70,000       73
Investment Castings          210,000       79
TOTAL                     17,260,000       78

Led by a 3% reduction in iron casting capacity and an 8.4% reduction in
steel casting capacity, a loss of 340,000 tons of metal casting capacity
is anticipated this year, as a result of the closing of major casting
facilities in the U.S.

This article was adapted from the Summer 2003 edition of AES Member Connections newsletter distributed to AFS Corporate Members.