Steel founders' goal: deeper market penetration.

Steel foundries expect a market recovery of about 5% during the next three to four years, reflecting a rising demand for steel castings from the industry's traditional customer base, Raymond Monroe, executive vice president of the Steel Founders' Society of America (SFSA), reported at the organization's recent annual meeting in Williamsburg, Virginia.

He cautioned, however, that enthusiasm for recovery from a recession that seriously eroded domestic and foreign demand for steel castings is somewhat guarded. Much of this gain depends on how aggressively steel foundries pursue existing markets and add new ones, Monroe told the 80 attending foundrymen.

"Steel casting demand in end-use markets is down and perhaps will never recover some of the losses, despite higher orders for stainless steel parts and steel castings for transportation and mining equipment," he said.

Stratecasts, Inc., a major market forecasting firm, projects a market share rise in 1994 for steel castings of 3.3%, compared to the 2.2% SFSA forecast. However, Monroe said it also reported near-term demand for steel castings as stagnant and looks for a gradual decline in the long term.

To slow or even reverse weakening markets, he said steel foundries must be more aggressive in expanding services to customers. Monroe endorsed a developing trend among some steel founders to increase value-added services to casting buyers. He noted four successful initiatives that have raised profit margins:

* Increase the number and variety of castings bought from a single steel foundry as a way to serve buyers with "one-stop" shopping for better pricing and faster delivery. Forming partnerships with other foundries widens the scope of services offered, shares skills, confines the customers' vendor list, avoids production bottlenecks and increases buying power.

* Educate uninformed buyers about steel casting procurement, price advantages, range of alloys and other information.

* Seek concessions for jobs delivered prior to delivery date.

* Encourage customers to rely on foundries for value-added work such as machining, heat treating and painting.

Market Forecast

Monroe said new and reconditioned domestic railcars use 40-50% of steel castings made in the U.S. This demand will rise by about 5% in 1994, due largely to increased numbers of cars needed for coal trains shuttling between mining areas and power generating stations. The demand for new cars to transport grain is also up due to the curtailment of barge traffic during the spring floods.

Demand for parts for new and reconditioned mining and earth-moving equipment is down due to less demand, but that could change if the national highway construction bill kicks in. Then the market could shift from flat to a gain of 7.8% by 1997. The construction equipment field should gain about 3% next year, but the needed repairs to the nation's badly eroded infrastructure could boost that gain considerably.

Monroe said the single bright spot is truck manufacturing, where strong demand will mean a 10% rise in steel casting in 1994. This is a market, however, that is losing market share to ductile iron and aluminum castings. The gains in transport and mining will be partially offset by a flat oil rig demand and a falling military market, expected to be off by 25%.

Citing a "reality deficiency" among congressmen, Diana Waterman of Waterman & Assoc., the Washington representative of AFS, told steel founders they should take every opportunity to acquaint their representatives and senators with issues that affect the industry's survival. Most congressmen, she said, haven't a clue as to the size and importance of the foundry industry.

There is strength in unity, and the more foundries that make their positions known, the better the chances are that legislation biased against the industry will not succeed, Waterman said.