Near future to hold minimal change for casting shipments: material conversions will have a significant effect on individual casting markets in the next two years, but overall, only a 0.2% decrease in shipments is forecast.

A slight economic expansion will cause a general increase of casting shipments to many end markets in 2007, according to interviews with consumers of metal castings and econometric experts. However, significant material conversions in other, major market sectors are expected to reduce shipments to those markets, resulting in a possible 0.2% decline in overall casting consumption (Table 1).

Though sales of passenger cars are expected to rise, high energy costs are expected to cause drops in production of light trucks and sport utility vehicles (SUVs). Freight car deliveries and medium to heavy truck production also are expected to decrease from their highs of 2006.

The automotive industry is expected to accelerate conversion of castings to light metals in 2007 and actually spur large gains in demand for specific producers of aluminum and magnesium castings. Also, the specification of compacted graphite iron, aus-tempered ductile iron, powdered metals and plastics for specific applications in cars and light trucks are to affect shipments for many metalcasting facilities.

Housing starts and construction activity are expected to improve slightly in 2007, spurring another good year for the metalcasting industry in those markets.

Imports of castings and parts using castings are expected to rise in 2007 as currencies abroad weaken and make foreign manufacturers more competitive in specific market sectors.

ANALYSIS OF MAJOR CASTING END-USE MARKETS

Motor Vehicles

Light trucks and SUVs should drop to 55% of light vehicle production in 2007, and the conversion of engine blocks to aluminum is expected to accelerate.

Passenger car production is expected to increase in 2006 by 9.5% and again in 2007 by 10%. However, light truck production is forecast to drop 5.1% in 2006 and 4% the next year, falling from its high of 64% of total light vehicle sales. Though sales of light vehicles are predicted to rise in both 2006 and 2007, imports of light vehicles are expected to rise to 5% of sales, despite a continued weak dollar versus the yen and euro.

The conversion of iron engine blocks and cylinder heads to aluminum is expected to accelerate in 2007, spurring investment into new casting facilities by captive and non-captive producers. Most OEMs are expected to concentrate on the production of strategic light metal parts and increase outsourcing of other components. For example, Ford has contracted with Nemak to produce blocks in Canada.

The average weight of aluminum castings per vehicle is expected to reach 260 lbs. in 2006 and increase to 280 lbs. in the next five years. Despite the increase in casting cost in some instances, lighter vehicles mean lower cost vehicles. The consumption of die, permanent mold and sand cast aluminum is forecast to increase to more than 1.4 million tons in the motor vehicle industry for the first time. However, both gray iron and ductile iron castings are decreasing because of the conversion to light metals (Table 2).

The consumption of compacted graphite iron in automotive vehicles is expected to reach 44,000 tons in 2006 and grow to 46,000 tons by 2007. Applications such as bed plates for light trucks have spurred the use of this material in the industry.

Applications of austempered ductile iron continue to be researched and developed, spurring a potentially significant increase in consumption next year.

Magnesium diecasting applications also continue to increase. The 2006 consumption of magnesium die castings in light vehicles is expected to reach 95,000 tons, which should grow to 120,000 tons by 2007 and hit 150,000 tons per year by 2009 (Table 2).

Powdered metal consumption also is expected to grow significantly, replacing parts formerly cast in iron. Applications such as the connecting rod, camshaft and bearing cap are expected to be designed in powdered metal, reducing malleable and gray iron usage.

Plastic, polymer-based components are forecast to replace cast intake manifolds, fuel rails, oil pans and valve covers in more than 30% of light vehicles.

Domestic supply shortages could be a major problem in 2007 for high production ductile iron and some aluminum castings. Increased demand by transplants for domestically produced cast parts has placed a greater demand on the domestic casting supply. Transplant sales of light vehicles in the U.S. have replaced 50% of the imports in the last 10 years.

Medium to heavy truck production will continue to grow to a peak level in 2006 and is expected to reach 450,000 vehicles. A slight drop to 420,000 vehicles is forecast for 2007, leading to a slight overall drop in casting consumption for this end market.

Internal Combustion Engines

The diesel engine sector of the engine market again is suffering from lack of casting supply in the key strategic casting applications of blocks and heads. In order to meet the growing demand in the U.S., 50% of the gray iron demand requirements are supplied by imports from Europe, Brazil and Mexico.

The major engine producers who also produce vehicles and have captive gray iron engine facilities are Deere, Cater pillar and International. Others, such as Cummins, Detroit Diesel, Mack and Consolidated Diesel, must depend on imports for supply.

Based on the expansion of truck production in 2005 and 2006, diesel engine growth was near 20%. A decline of 5% is predicted for 2007 as truck production decreases. Approximately 58% of the diesel engine production in the U.S. is consumed in medium to-heavy trucks, with construction and farm vehicles consuming another 25%.

Gray iron engine casting shipments are forecast to drop slightly to 440,000 tons in 2006 and continue to decrease to 409,000 tons in 2007. Ductile iron is forecast to decline 7%. The use of compacted graphite irons in engine castings is expected to increase to 46,000 tons in 2007.

Valves and Fittings

The valve and fitting business continues to suffer from imports, primarily from Thailand, Taiwan and other Asian countries, but demand for castings in many metals continues to increase (Table 3).

Approximately 37% of the total demand for gray iron valves and fittings in the U.S. are supplied from imports, with much of this supply categorized as dumping. Further weakening of the currencies in the Asian countries could increase imports in 2007.

Though some malleable iron applications have been converted to ductile iron, most threaded pipe fittings are specified under ANSI B1.3 as malleable iron and are expected to continue as malleable parts in the near future.

The demand for carbon, low alloy, corrosion resistant and high alloy steel valve parts continues to be strong in the power generation, refinery, pulp and paper, food product machinery and chemical plant market sectors. The usage of cast valve parts in wastewater and water treatment facilities also has increased. Overall, a growth of 3% in valve shipment value is forecast for the end-use markets listed in Table 4.

Pressure Pipe

The pressure pipe end market is expected to grow despite some loss of castings to PVC pipe.

Ductile iron pipe production is expected to rise to a high of 2.5 million tons in 2007 based on the expected continued rise in housing starts. Exports of pipe continue to increase and are now estimated at 8% of the shipments.

The continued erosion of the marketplace by PVC pipe increases annually, and the yearly loss of ductile iron pipe to PVC is estimated at 2.5% of the demand.

Metalworking Machinery

The metalworking machinery end market has seen a permanent loss of 60% from its peak years, and it has suffered additional temporary losses. However, those temporary losses are currently in the process of recovery.

After 10 years of losses through 2004, a continued growth of gray iron casting shipments of machine tool castings is expected, reaching 63,000 tons in 2007. Aluminum casting usage in power hand tools is expected to increase 2% in 2007.

Construction and Mining Equipment

Both the construction and mining machinery markets should continue to expand in 2007.

Building is expected to continue its climb in 2007 and, together with a rise in exports, spur a 4.5% rise in shipments of construction machinery. New road, bridge and public works construction is predicted to reach high levels in the next two years. These two factors will contribute to an increase in ferrous casting shipments (Table 5).

Mining machinery shipments also are expected to rise in 2006 and continue to increase in 2007. Steel castings are expected to rise 1% in both years (Table 6).

Exports of mining machinery and equipment are three times imports and affect the industry growth significantly, especially in coal mining machinery. Based on the fact that 50% of the equipment is to be exported, long term growth in equipment used for crushing, pulverizing and mining of coal is expected to be up 2% per year.

Farm Machinery & Equipment

The manufacture of farm machinery and equipment is expected to have a minimal expansion in 2006 followed by a slight rise in 2007. Reported farm wheel tractor and combine sales for the first five months of 2006 indicated a 1.6% and 3.6% rise, respectively, despite a 15% drop in four-wheel drive tractor sales.

Both gray and ductile iron shipments increased to 310,000 and 130,000 tons in 2005. Shipments of gray iron are expected to drop by 5,000 tons in the next two years, while ductile iron rises by 2,000 tons in 2006 and 3,000 tons in 2007.

Railroad

Freight car deliveries will continue at high levels in the coming years, though 2007 is not likely to duplicate the peak achieved in 2006.

It is projected that 75,000 freight cars are to be delivered in 2006, and steel casting consumption in all railroad applications will exceed 750,000 tons. Another good year is expected in 2007, though freight car shipments are forecast to decline to near 60,000 car sets.

Aircraft

The market for cast aircraft parts will continue to be strong through 2007.

The aircraft industry expanded in 2006 and is expected to grow 4% in 2007. Aluminum castings are forecast to peak in 2007 at 102,000 tons.

Shipments of investment cast super-alloys for blades and vanes are estimated at 14,000 tons in 2007, or over $700 million in sales.

Special Industry Machinery

The long term growth of the special machinery industry, based on its individual categories listed in Table 7, is estimated at 2.3% per year.

The forecast shipments for metal castings in this industrial category as a whole are listed in Table 8.

Instruments

This niche market is forecast to grow in the coming years, with significant gains shown by aluminum castings.

The instrument industrial category includes those establishments engaged in manufacturing engineering and scientific instruments, measuring and controlling instruments, optical and analytical instruments and photographic equipment. This industrial group has become a sizeable market for light metal castings. Table 9 shows the forecast for the use of aluminum die castings, permanent mold and sand castings in this market sector.

Refrigeration, Air Conditioning & Heating Equipment

The U.S. has near 50% of the world's air conditioning and refrigeration market, consisting of unitary air conditioners, heat pumps, chillers, commercial refrigeration equipment, compressors and others. The industry markets its products globally, with many large manufacturers having subsidiaries in primary foreign markets such as Asia, Europe, Latin America and the Middle East. However, imports in this market are forecast to affect casting growth in the future.

Imports of gray iron castings are up to 25% of demand, and conversion to aluminum in some applications is expected to reduce growth. The long term growth of this industry in the U.S. is 2% per year, and it offers significant growth potential for some metal castings. The forecast for the industry's short term shipments is shown in Table 10.

Household Appliances

Household appliance castings continue to be converted to light metals and plastic. And the key factors utilized to forecast the casting consumption in this industry are housing starts and conversion of individual parts to plastic.

Housing starts are expected to grow 2.8% per year in the long term; however, only aluminum castings are expected to show growth. Gray iron usage is expected to decline 5.8% per year from 40,000 tons in 2006 to 22,000 tons in 2016.

Aluminum castings are expected to grow to 76,000 tons, while zinc castings drop to 13,000 tons in 2007.

ANALYSIS OF CASTING PROCESSES

Magnesium die castings, as shown in Fig. 1, are forecast to grow in shipments in the U.S. at a long term annual rate of 8.5% per year, led by growth in automotive applications. Nearly 30 new parts have been designed for magnesium use in the next few years.

[FIGURE 1 OMITTED]

Investment castings, spurred by growing usage in pumps, valves and aircraft parts are expected to grow from 162,000 tons in 2004 to 200,000 tons in 2008, as shown in Fig. 2.

[FIGURE 2 OMITTED]

For More Information

"Casting Sales Forecast to Grow 15% by '08," K. Kirgin, MODERN CASTING, Jan. 2006, p. 20-25.

A 50-year metalcasting veteran, Ken Kirgin founded Stratecasts in the early 1980s to provide domestic and international forecasting and trends analysis and strategic planning.

Ken Kirgin, Stratecasts Inc., Fort Myers, Florida 

Table 1. 2007 Casting Forecast

Metal                          2007       Percent
                            Shipments      Change
                            (000 tons)   (from 2006)

Gray Iron                    4,730          -1.0%
Ductile Iron                 4,800           0.8%
CGI                            120           7.7%
Malleable Iron                  75          -5.1%
Carbon & Low Alloy Steel     1,125         -10.3%
Corrosion Resistant Steel      100           3.0%
Heat Resistant Steel            40           2.7%
Manganese Steel                 45           2.3%
Other Alloy Steels              37           2.8%
Aluminum                     2,380           2.2%
Brass/Bronze                   330           2.5%
Zinc                           340          -0.3%
Magnesium                      150         +20.0%
Other Non Ferrous               60           5.3%
Investment Cast                200           4.2%
Total                       14,532          -0.2%

Table 2. Light Vehicle Casting Shipments (000 tons)

Metal          2005    2006    2007    2008

Gray Iron       995     975     953     926
Ductile Iron    981     959     951     938
Aluminum       1,359   1,367   1,390   1,414
Magnesium       78      95      120     140

Table 3. Valve/Fitting Casting
Shipments (000 tons)


Metal                    2005   2006   2007

Gray Iron                 280    282    289
Ductile Iron              226    232    239
Malleable Iron             37     36     36
Carbon/Low Alloy Steel     62     60     56
Corrosion Res. Steel       29     31     33
Brass/Bronze              104    106    108
Investment Castings        51     54     55

Table 4. Market Share for Major Valve/
Fitting End Markets

Valve                      Market
Type                       Share

Pipeline Valves            11%
Water & Wastewater         20%
Power Generators           9%
Oil Field & Petroleum      10%
Chemical                   10%
Commercial & Residential   11%
Export                     27%
Other                      2%

Table 5. Construction Machinery Ferrous
Casting Shipments (000 tons)

Metal                    2005   2006   2007

Gray Iron                 255    260    262
Ductile Iron              213    220    224
Carbon/Low Alloy Steel    163    165    167
Wear Resistant Steel       24     25     25

Table 6. Mining Machinery Steel
Casting Shipments (000 tons)

Metal                    2005   2006   2007

Carbon/Low Alloy Steel    69     70     71
Manganese Steel           24     24     25
Wear Resistant Steel      13     13     14

Table 7. Special Industry Machinery
Casting Growth Rates

                            Growth
Industry                    Rates

Food Products Machinery      3.0%
Textile Machinery            2.0%
Packaging Machinery          2.5%
Paper Machinery              2.0%
Printing Machinery           2.4%
Other Machinery *            2.3%

* Including plastic, refining, cement, woodworking,
smelting, clay, glass, paint, rubber and
shoe machinery.

Table 8. Special Industry Machinery
Cantina Shipments (000 tons)

Metal                       2005   2006   2007

Gray Iron                    215    220    226
Ductile Iron                 107    112    115
Corrosion Resistant Steel     17     18     18
Heat Resistant Steel           7      8      8

Table 9. Aluminum Instrument
Casting Shipments (000 tons)

Process                     2005   2006   2007

Diecast                       54     56     57
PM & Sand                     66     69     71

Table 10. Refrigeration, AC & Heating
Casting Shipments (000 tons)

Metal                       2005   2006   2007

Gray Iron                    124    125    125
Ductile Iron                  41     42     42
Aluminum                      50     52     55