TOTAL U.S. CASTING DEMAND FORECAST TO CONTRACT In 2000.

U.S. casting shipments are expected to slip below 14 million tons this year as imports increase and demand slows in most market sectors.

Continuing surveys of econometric forecasters and economists support an original forecast for a short-term contraction of the economy. In the long-term, however, the forecast continues to be bullish, calling for a 10-year average annual growth rate of 1.5% for U.S. casting shipments. Among the trends affecting casting shipments are:

* Production of light vehicles is forecast to decline to near the 11 million vehicle level after experiencing average annual production levels of 11.7 million vehicles for 6 years. Light trucks again appear to be heading for a good year. A rebound in passenger car sales is forecast in the long-term. Medium-to-heavy truck production is expected to return to the 320,000-unit level after a big year in '99.

* Freight car production also is expected to drop to the 50,000-car level after 2 years at 70,000, leading to an overall decline in steel casting demand.

* Continuing declines in machine tool, farm equipment and special machinery manufacturing also are expected to reduce casting use in these sectors.

* Imports from China, Mexico, Brazil and the Asiatic countries are flooding many casting markets, reducing domestic casting shipments and depressing prices.

After recording total shipments above the 14-million-ton mark in each of the last 6 years, U.S-produced casting shipment levels are expected to dip 6% to 13.9 million tons (sales will decrease only 3% due to high aluminum production in the automotive sector). In addition to positive growth over the next 10 years, peak production is expected for 2004-2009.

FERROUS CASTING SHIPMENTS

Gray Iron

Gray iron shipments are forecast to decline 8% this year and 0.2% per year during the next 10 years as conversion to light metals in some market sectors accelerates. A low of 5.2 million tons is forecast for 2001 before boom-economy years boost production in some market sectors.

Light Vehicles--Production of passenger cars and light trucks exceeded 12 million vehicles in '99 for only the second time and achieved record levels for domestic shipments. A drop in demand will result in I million fewer vehicles in 2000 as a total of 5.2 million passenger cars and 6.1 million light trucks (now 56% of all light vehicles) are forecast to be shipped from U.S. automakers in '00.

Consumption of gray iron in light vehicles is forecast to decline 14% to 1.5 million tons this year. Usage is expected to drop at an annual rate of 2.9% over the next 10 years as conversion to aluminum (blocks, heads and other parts), other light metals and plastics will accelerate and cause gray iron weight per light vehicle to fall 100 lb to 180 lb. Despite the negative price differentials between iron and light metal parts, this trend will continue due to lower total costs and regulatory compliance issues.

Medium-to-Heavy Trucks-After a boom year in '99, production of medium-to-heavy trucks is expected to decline to 320,000 units this year while trailer production declines to 210,000 units, resulting in a loss in gray iron shipments to 210,000 tons.

Municipal Castings--Based on a forecast decline in housing starts, municipal casting production is expected to drop 1% to 485,000 tons this year. A long-term annual growth rate of 1.8% is forecast, despite the continued loss of 60,000-70,000 tons (25% of demand) to imports. Conversions to ductile iron in the U.K. and Europe continue to grow, however, and eventually could replace some gray iron in the U.S. market.

Soil Pipe--While most applications of pipe and fittings are specified in plastic, nearly 270,000 tons of gray iron is expected to be shipped this year. The continued erosion of the market by PVC will force a 3.6% annual long-term decline in gray iron use for pipe, causing a loss of 70,000 tons over the next 10 years.

Ingot Molds--About 95% of the steel made in the U.S. is now continuously-cast, and the ratio of ingot mold and stool consumption is down to 20 lb/ton of steel produced. Mold shipments are expected to drop to 93,000 tons in '00. Brazilian imports are estimated at 27,000 tons.

Sanitary & Radiator--U.S. gray iron shipments to this market are forecast to fall 20,000 tons to 290,000 tons this year. A 4% annual rate of decline is forecast over the next 10 years as plastics increase and imports grow.

Valves & Fittings--Gray iron valve casting shipments are expected to decrease this year to 294,000 tons as imports increase to 108,000 tons. A long-term annual growth rate of 1.6% is expected through '09.

Internal Combustion Engines--The expected reduction of truck/tractor production following last year's peak truck year will lower the demand for diesel engine castings in '00 Based on an expected 9% decline in U.S. diesel engine production, gray iron casting production for the total internal combustion engine sector is expected to decline 10% to 480,000 tons from last year's peak. In the long-term, gray iron casting production is forecast to grow at a 1.5% per year rate while imports are forecast to grow to near 30% of the total demand.

Farm Machinery & Equipment--After 5 strong years, farm machinery/ equipment production fell in '99 and is expected to drop another 5% in '00. Gray iron consumption is forecast to decline to 325,000 tons. Over the long-term, gray iron shipments are forecast to grow 1.8% annually, a slower annual rate than is forecast for this market.

Construction Machinery & Equipment--Imports of gray iron continue to grow and could reach 15% of this market in '00. Gray iron shipments are forecast at 215,000 tons this year, with an expected 10-year annual growth rate of 2%. The market is growing at an annual long-term rate of 3.2%.

Mining Machinery--After 4 growth years in the mid-90s, mining machinery shipments have dropped each of the last 3 years. Gray iron shipments are expected to decrease slightly this year.

Machine Tools--The bottom fell out of this market in '99 and is expected to decline again this year. Gray iron shipments for machine tools are expected to drop to 113,000 tons in '00. In the long-term, a 10-year average growth rate of 2% is forecast, despite losses in dies and rollmaking equipment castings.

Special Industry Machinery--Gray iron demand for textile, paper and printing machines dropped in '99 and is expected to continue to decline slightly in '00 to 209,000 tons.

Pumps & Compressors--Shipments fell in '99 and are expected to continue to drop in '00 to 246,000 tons as the demand for compressors decreases. The market for abrasion-resistant iron castings for use in slurry pumps and pumps for coal pulverizing and phosphate plants is expected to grow in the next few years.

Refrigeration & Air Conditioning--Based on a reduction in auto production and housing starts, casting consumption is expected to fall to 138,000 tons in '00. Long-term growth is forecast at 2% per year, despite some loss to light metals and plastics.

Electric Motor & Other Electric--Though demand for electric parts remains relatively strong, casting imports are causing U.S. shipments to decline. A 3% annual decline in shipments is forecast; however, surges in imported castings easily could double these losses.

Household Appliances--Casting shipments are expected to fall 5.4% per year based on material substitutions from aluminum and plastic parts.

Ductile Iron

Shipments of ductile iron are expected to fall 4% this year, as the economy weakens and automotive production slows down. Shipments are expected to increase long-term, however, from last year's 4,252,000 tons at a 2.4% annual rate through '09.

Pressure Pipe--Pipe represents 43% of all ductile iron shipments. Based on the decrease in housing starts, a drop in ductile iron pipe shipments is expected this year, although exports will remain strong. Shipments are expected to reach 1.8 million tons for the 5th consecutive year before falling in '01.

In the long-term, a 2.6% annual growth rate is expected, despite a continued loss to PVC pipe in residential markets. Growth of pipe sales is dependent on the expected increase in housing starts of 3% per year and an increase in exports. The latter, however, is dependent on currency exchange rate variations that can affect the competitiveness of U.S. pipe producers. The use of PVC and prestressed concrete pipe also continues to grow and can cut into the growth potential, especially in the southern states.

Motor Vehicles--Based on the expected reduction in passenger car and light truck production this year, ductile iron casting shipments are expected to drop 6% to 1,037,000 tons. Long-term consumption in light vehicles should increase 1.9% per year, although ductile iron per light vehicle could fall to 180 lb. The possible elimination of malleable iron at GM may spur ductile iron conversions.

The expected reduction of truck production in '00 also may reduce ductile iron production to 210,000 tons, a 14% loss vs. the '99 peak year. Ductile iron consumption in medium-to-heavy trucks should grow at an annual long-term rate of 1.3% per year. Continuous replacement of some steel applications and other technological changes may increase ductile iron use per truck to 1100 lb.

Valves and Fittings--The increase of imports to 34,000 tons and the weakened economy is expected to reduce U.S. casting production for valves and fittings this year to 220,000 tons, a 10,000-ton loss from last year. A 3% annual long-term growth rate is expected, as ductile iron is forecast to begin to replace more malleable iron threaded pipe fittings and small electrical parts. AWWA valves, formerly specified in gray iron, now are being specified in ductile iron.

Special Industry Machinery--Shipments fell last year to 100,000 tons, with only food products and packaging machinery markets showing growth. A continued loss of demand for this year and next is forecast. Long-term, ductile iron casting shipments should see a 3.6% annual growth rate, based primarily on growth in food, packaging and printing machinery segments.

Farm Equipment--Ductile iron consumption in this market should continue its decline in '00 and '01 to 115,000 tons and 110,000 tons, respectively. A long-term annual growth rate of 3% is forecast, exceeding the expected industry growth by 0.5%, because of continued substitution for malleable and gray iron and carbon steel castings.

Construction Machinery & Equipment--Based on the expected drop in construction activity in the U.S. this year, ductile iron shipments are forecast to drop 2% to 168,000 tons. A long-term annual gain of 3% is forecast, primarily for such parts as pump housings, differential cases and carriers, bearing cases, wheels, hubs and other housings. Austempered ductile iron (ADI) use is expected to grow in the future as well.

Power Transmission--A 7% loss in production is forecast for '00. The long-term growth rate is forecast at 3% per year. ADI use as a substitute for forged gears and shafts could spur total growth in the early 2000s.

Oil Field Machinery--After starting last year down 30-40%, the oil field casting sector has turned around (finished at 20% below '98) and should continue to grow in '00. An increase to 55,000 tons is forecast for '00 as oil prices increase, and ductile iron castings use in this market should grow at an annual rate of 2.5%.

Compacted Graphite Iron

Demand for compacted graphite iron (CGI) castings this year is projected to be 45,000 tons, consumed mostly by the light vehicle bedplates and engine applications (20,000 tons) and internal combustion engines (15,000 tons). Long-term demand is expected to grow to 248,000 tons, with light vehicle consumption growing to 54,000 tons by '09.

Malleable Iron

Bolstered in '99 by GM's Saginaw operation, malleable iron casting shipments are expected to fall about 18% to 165,000 tons in '00 as automotive production decreases and valve and fittings are sourced offshore.

Pipe Fittings--Major fittings manufacturers have made conversions to ductile iron, while imports have contributed to fewershipments from domestic foundries. A 10% drop in shipments is expected this year to 46,000 tons, followed by a long-term decline of 3.4% per year.

Motor Vehicle--The overall picture still is controlled by GM as it makes up nearly 50% of all malleable shipments. The remainder is in valves, electrical fittings and other castings made by a handful of domestic foundries. Malleable iron shipments are expected to drop to 69,000 tons in '09.

Steel

Steel castings are forecast to decline in '00 by 12% to 1,353,000 tons, based on losses in major market sectors. In '09, shipments are expected to nearly match last year's 1,538,000 tons. Mining, pumps, special industry machinery, construction equipment and valves all are expected to see annual average growth rates that are greater than 2%.

Carbon & Low-Alloy Steel

Shipments of carbon and low-alloy (C&LA) steel castings are forecast to decline in '00 to 1,177,000 tons, based on projected losses in specific market sectors. A long-term decline of 0.4% per year is forecast because of the expected decline in freight car production from the peak years of '98 and '99.

Railroad--After reaching a 19-year high in '98, U.S. freight car production notched another big year last year, estimated at 69,000 cars. A drop to the 50,000-53,000 range is expected this year and next, with an equivalent drop in locomotive and other railroad equipment. Levels of the 70,000-car range are not expected again until '04 and '05, affecting C&LA as well as manganese steel production. C&LA steel production for railroad applications is forecast to decrease to 637,000 tons in '00 before rising to 770,000 tons in '05.

Construction Machinery--Despite some export problems, production of construction machinery, led by tractor shovel loaders, scrapers, graders, power cranes and other off-highway equipment, saw good years in '98 and '99. Preliminary manufacturer sales estimates indicate that U.S. production could drop 1-3% this year and next before growing at a 3% rate or better in the long-term. C&LA steel casting construction applications may decline to 160,000 tons and 150,000 tons this year and next before rebounding in '02. A long-term growth rate of 2.5% per year is forecast.

Mining Machinery--After 3 straight years of decline, mining machinery equipment is expected to rebound slightly in '00 and achieve a long-term annual growth of 2.5%. C&LA steel use in this market is expected to reach 72,000 tons in '00 and grow to more than 100,000 tons/year beginning in '04. Equivalent growth in manganese and wear-and abrasion-resistant steels also is expected.

Valves--Shipments are expected to fall to 70,000 tons in '00. Despite increasing imports, however, C&LA casting consumption in valves is forecast to grow 2% per year.

Trucks--C&LA steel shipments for commercial and military truck applications had a big year in '99; however, a short-term drop to 90,000 tons this year and a long-term decline of 4.5% per year is forecast based on increased imports and some ductile iron conversions.

Corrosion-Resistant Steels

A 5% loss to 75,000 tons is expected for corrosion-resistant steel castings this year as valve/pump production decreases slightly. Shipments are forecast to grow 3.1% annually in the long-term to 107,000 tons.

Heat-Resistant Steels

Heat-resistant steel casting shipments are expected to grow from last year's 32,000 tons to 41,000 tons in '09 as industrial process furnace applications increase.

Manganese, Wear-Resistant and Other Steel Castings

Expected consumption of manganese steel and martensitic wear-resistant steels for mining applications this year is 20,000 and 12,000 tons, respectively. Manganese steel casting shipments are forecast to grow to 52,000 tons in '09 based on increases in mining and railroad machinery applications. Wear- and abrasion-resistant and other steels are expected to grow to 34,000 tons this year and at a 1.4% annual long-term rate.

NONFERROUS CASTING SHIPMENTS

Aluminum Castings

Aluminum casting shipments in '00 are expected to be just 19,000 tons off from last year's totals at 1,905,000 tons. In the long-term, an annual growth rate of 4.9% is expected.

Aluminum Die Castings

Aluminum die castings are expected to nearly match '99 levels of 1,130,000 tons in '00, while growing at a long-term annual rate of 3.7%. Markets expected to achieve the highest long-term annual growth rates are motor vehicle (4.3%), refrigeration & A/C (4.0%), power hand tools (3.7%), instruments (3.4%), toys & sporting goods (3.4%), internal combustion engines (3.3%), and electrical(3.2%).

Aluminum Permanent Mold & Sand Castings

Aluminum castings produced in permanent molds and sand are expected to decline over the next 2 years from last year's 794,000-ton level, but should begin to grow rapidly in '02 as conversion of automotive castings accelerate. Long-term growth of 6.2% per year is expected.

Motor Vehicles-Aluminum castings for autos is expected to grow this year and next as the conversion of blocks and heads accelerate. A long-term growth rate of 5.9% is expected through '09, when aluminum casting weight per vehicle is expected to reach 250 lb (when 60% of engine blocks and 96% of heads will be cast in aluminum). Permanent mold and sandcast aluminum is expected to grow 7.7% per year in the long-term and will surpass diecasting in total shipments.

Internal Combustion Engines-- The makeup of aluminum castings in the engine classification are primarily divided into lawn and garden (62%), outboards (8%) and diesel-nonautomotive (30%) engines. Their respective annual growth rates are 2.3%, 4% and 5%. With the expectation that imports will grow more rapidly than exports, cast shipments are expected to increase 3.4% annually from last year's 107,000 tons through '09. Shipments are forecast to drop to 105,000 tons and 100,000 tons in '00 and '01 before rebounding in '02.

Refrigeration & Air Conditioning--A 4% loss in shipments is forecast for this year followed by a 9% rebound in '01. The replacement of iron with diecast compressor parts and squeeze castings is expected to spur growth at a 3.8% annual rate through '09.

Aircraft--Consumption of aluminum castings in aircraft applications is expected to decline 10% and 5% in '00 and '01, before rebounding and growing at a long-term annual growth rate of 2.9%.

Instruments--This growth market includes instruments for engineering and scientific, measuring/controlling, optical/analytical, and photographic equipment markets. Die (45,000 tons) and permanent mold/sand (54,000 tons) shipments should match last year's total of 99,000 tons. A 3.5% per year long-term growth rate is forecast.

Brass, Bronze & Copper-Alloy Castings

Shipments of U.S. brass, bronze and copper-alloy castings are forecast to fall 6% this year to 301,000 tons but grow in the long-term to 349,000 tons in '09.

Plumbing & Sanitary Fixtures/ Fittings-Shipments for bronze plumbing fixtures/fittings should decline 2% this year to 55,000 tons with the expected decrease in new housing starts and plastic substitutions. Brass and bronze castings are forecast to decrease at an annual long-term rate of 1.8%, based on replacement by plastic and wrought parts.

Industrial Valves/Fittings-Increased Asian imports will slow the growth of bronze valves and fittings to 0.9% per year over the long-term and lower shipments by 2% this year and next.

Zinc Die Castings

A 6% short-term loss in zinc die casting shipments to 345,000 tons is expected this year. Shipments will continue to decline 1% per year.

Magnesium Castings

The use of cast magnesium continues to rise at high growth rates in both automotive and other applications because of the material's high strength-to-weight ratio and light weight. Spurred by new automotive applications, shipments are expected to increase 15% to 74,000 tons this year and by another 15% annual growth rate through '09.

Other Nonferrous Castings

Other nonferrous (nickel, cobalt-base, etc.) castings are expected to grow 2.8% per year, as use of high-alloy pump and valve castings grow. Monel and Hastelloy alloys are used in valves and pumps for offshore drilling and chemical plant applications, and 70/30 copper-nickel alloys are being used in overseas desalination plants. Consumption of these nonferrous alloy parts are expected to grow from last year's 47,000 tons to 62,000 tons in '09.

INVESTMENT CASTINGS

The major markets for commercial investment castings continue to be corrosion-resistant stainless steel pumps and valves for use in chemical plants, petrochemical applications, food products and for other corrosive environments.

A decline in investment casting shipments from last year's 170,000 tons to 164,000 tons is expected in '00, followed by a further drop to 149,000 tons in '01, based on decreases in valve and pump demand for corrosive applications. Long-term, a 2.8% annual growth rate is expected through '09.

Investment cast blades and vanes make up 20% of the dollar value of the industry. Superalloy shipments for blades and vanes are expected to grow 23% per year to 15,000 tons.

   Change in U.S. Metal Casting Shipments 1998-2000 (Thousands of Tons)
                                              FORECAST
                          1999    Change from   2000     Change
                        Shipments    1998     Shipments from 1999
Gray Iron                 5894       -2.3%      5441      -7.7%
Ductile Iron              4252       +1.5%      4095      -3.7%
ADI [*]                     80       14.3%        80        --
Compacted Graphite Iron     42      +31.3%        45      +7.1%
Malleable Iron             203      -10.6%       165     -18.7%
Steel                     1538       -3.5%      1353       -12%
Aluminum                  1924       +6.9%      1905        -1%
Copper-Base                319       -2.7%       301      -5.6%
Magnesium                   64       +6.7%        74     +15.6%
Zinc                       368       -3.9%       345      -6.3%
Other Nonferrous            47       -4.1%        46      -2.1%
Investment Castings        170       -1.2%       164      -3.5%
TOTAL                   14,821       -0.3%    13,934        -6%
(*.)austempered ductile iron is included within ductile iron totals
                    Gray Iron--Leading Gray Iron Growth
                        and Decline Rates 1999-2009
Growth Markets--Gray Iron
Pumps/Compressors            (+2.4%)
Internal Combustion Engines  (+2.1%)
Refrigeration & A.C.          (+2%)
Construction Machinery        (+2%)
Mining Machinery              (+2%)
Machine Tool                  (+2%)
Special Machinery             (+2%)
Declining Markets--Gary Iron
Household Appliances         (-5.4%)
Sanitary Radiator             (-4%)
Soil Pipe                    (-3.6%)
Electric Motors               (-3%)
Light Vehicles               (-2.9%)
Ingot Molds                  (-1.5%)
Roll Machinery               (-1.3%)
                     Ductile Iron--Major Growth Markets
Industry                      Annual
                            Growth Rate
Special Industry Machinery     +3.6%
Pumps & Compressors            +3.0%
Farm Machinery                 +3.0%
Construction Machinery         +3.0%
Valve & Fittings               +3.0%
Power Transmission             +3.0%
Internal Combustion Engines    +3.0%
Pressure Pipe                  +2.6%
Oil Field Equipment            +2.5%
Light Vehicle                  +1.9%
               Trends for Steel Castings (Thousands of Tons)
Type of Steel       1999 2000 2009
Carbon & Low Alloy  1356 1177 1298
Railroad             790  637  670
Other C&LA           566  540  628
Corrosion Resistant   79   75  107
Heat Resistant        32   32   41
Manganese             37   35   52
Other Steel [*]       34   34   39
Total Steel         1538 1353 1537
(*.) The "Other Steel" category is comprised of
mostly martensitic wear-resistant steels.
Aluminum Castings as a Percent of Total Light Vehicles Produced in the U.S.
Part              2000 2002 2009
Engine Block        30   40   70
Cylinder Head       77   90   96
Intake Manifold     65   55   40
Transmission Case   95   98   99
Wheels              60   70   80
Brakes &
Suspension Parts     2    8   17