Steel casting market improving.

North American steel foundries are facing the best economic climate most have seen in nearly a decade. The demand for nearly every type of steel casting has risen dramatically during the past two years and is expected to approach 1.3 million tons this year.

In 1979, U.S. steel shipments topped more than 2 million tons. In 1994, steel foundry capacity is only about 1.5 million. While the outlook for steel castings is bullish in the short term, significant concerns remain about the longer-term vitality of the industry.

Held in Santa Fe, New Mexico, September 17-20, the Steel Founder's Society of America 1994 Annual Meeting drew 108 attendees. In opening the program, SFSA president Michael Gwyn, Pelton Casteel, reviewed the society's new strategic plan.

"The purpose of SFSA," Gwyn said, "is and will continue to be to promote the use and manufacture of steel castings as well as the development of technology to sustain the growth and vitality of cast steel components."

A significant aim of the SFSA strategic plan is to recapture the high regard steel castings held with casting users in the 1960s. A variety of factors led these users to move away from cast steel in the 1970s. According to the Gwyn, these factors included delivery, quality, machinability, cosmetics and the general perceptions of design engineers that steel castings were heavy and bulky.

The overriding goal of the plan, explained Gwyn, is to balance the needs of SFSA's members and their customers by developing new techniques that can improve the castability of carbon and low-alloy steels. Gwyn pointed to gains made in castability through the SFSA's ongoing clean steel research programs.

Steel Casting Markets

While the SFSA Strategic Planning Committee grapples with the organization's long-term prospects, the group's Marketing Committee reported a short-term forecast for steel castings. Chairman Dennis Lauber, Grede Foundries, reported that 1994 far exceeded expectations and growth in '95 looks like it will continue at a healthy pace.

Much of the unexpected growth during this past year was buoyed by high demand for steel castings from two of its largest users--the railroad and construction equipment industries.

Steel casting shipments to railroad car manufacturers rose 20% in 1994, while demand from construction equipment producers rose between 15-20%, fueling the dramatic rise in steel castings shipped during the year. These levels of growth will not continue, Lauber reported, projecting shipments to railroad manufacturers will grow only about 1% and 3-5% in the construction equipment area.

The mining industry and military cutbacks provided the downside of the 1994 boom for U.S. steel foundries. Shipments of castings to mining equipment manufacturers slipped 5% during the year, although cast steel replacement parts grew 5-6%. The real drop came in the military, as demand dropped by nearly 25%. This scenario is expected to repeat itself in '95.

Most other major markets for cast steel are expected to continue stable growth during the coming year: trucks: +3-5%; valves: +3%; pumps: +5%; energy: +3%. "Overall, steel casting shipment grew by 13% in 1994," said Lauber, "and we expect to increase by 2% in 1995."

Costing and Pricing

With the boom conditions confronting most North American metalcasters, an underriding sentiment seems to be that "if foundries can't make money now, they probably never will." Thus, the timing couldn't have been better for R. Conner Warren's presentation on costing and pricing castings.

"Profitability can be increased by lowering production costs and general overhead, or by raising prices," said Warren, executive vice president, Citation Corp. "But most foundries focus on lowering production costs, which they should do at all times, but fail to properly focus on price management. Implementing an effective costing and pricing management system will add 2-4% to the bottom line performance of the typical foundry."

He discussed 20 common pricing traps and more than two dozen pricing traps experienced by foundries. (See August and September 1994 issues of modern casting).

"The management of good systems will provide the information to manage profits through operation costs and general overhead reductions along with price management," Warren concluded. "With effective systems and top management involvement, no foundry can expect to maximize profits that are necessary to continue as a reliable supplier of quality castings."