U.S. casting shipments expected to increase 6.3% in '03. (Cover Story: AFS 2003 Metalcasting Forecast).

A study of end-use markets shows a moderate expansion in casting shipments next year, with considerable gains projected for aluminum, ductile iron and steel.

Despite better than average production of light vehicles and some growth in other market sectors, most consumers of metal castings experienced back-to-back years of decline in sales and profits. Plant closings, import pressures and low utilization of capacity has hurt most metalcasters and forced changes for the future.

Though some market sectors held up in the recessed economic conditions, many dropped to new lows, causing many foundries to close or mothball facilities. Continued interviews with casting buyers and analyses of the econometric forecasts, however, support optimism that the casting shipments as a whole will expand moderately in 2003 and grow annually for the next five years.

The forecast for consumption of castings for each metal is based on technological changes and the predicted peak spending years of the baby boomers and immigrant populations in the U.S., which are expected to drive the economy in the coming years.

Though the production of light vehicles decreased to near-1993 levels in '01 and rose only slightly in '02, casting consumption by this market sector remained fairly stable. Conversely, other market sectors--including medium-to-heavy trucks, refrigeration and air conditioning, machine tool and other heavy machinery, diesel engines, pumps and compressors, and railroad equipment--declined in production over the last two years and dropped the consumption of castings to record low levels. Most of these sectors are forecast to make significant gains in '03.

The increase in demand in '03, coupled with expected recoveries in Europe and Asia, are forecast to boost imports as well as exports. Both will greatly affect the shipments of castings in the individual market sectors.

METAL CASTING SHIPMENTS

Casting shipments are forecast to increase 6.3% to 13,974,000 tons in '03, and increase at a long-term annual rate of 1.2% from the '02 low to 14,865,000 tons in '12, as shown in Fig. 1.

Subsequent to the forecasted growth in '03, expansion of casting consumption in the U.S. is predicted to rise slowly each year to a peak of 16.4 million tons in '08 and '09, a level 1 million tons higher than 1999. Casting sales, which dropped to a low of $27.7 billion in '01, are forecast to rise to $31.3 billion in '03 and to $41.2 billion by '07.

FERROUS CASTING SHIPMENTS

Shipments of ferrous castings are forecast to rise from last year's 10.2 million tons to 11.1 million tons in '12 (an annual growth rate of 0.9%). Ferrous casting sales are forecast to grow to $18.1 billion in '12.

Gray Iron

After two record low years, gray iron casting shipments are expected to show little or no gain in '03. A long-term decline of 0.3% per year is forecast. Gray iron sales fell to $4.9 billion last year and are expected to show a slight gain to $5.1 billion in '03. Iron foundry capacity utilization is forecast for below 80% in '03, despite a loss of over 200,000 tons in capacity due to closings in '02.

The long-term forecast summary for gray iron is summarized in Table 1.

Ductile Iron

Ductile iron casting shipments are forecast to rise 7.2% in '03 to 4,074,000 tons, and grow in the long-term at a rate of 1.8% annually to 4,869,000 tons in '12. Sales are predicted to increase to $5.5 billion in '03 and grow in the long-term to $7.8 billion by '09. Despite plant closings last year, utilization of capacity is not expected to exceed 80% until '04.

Table 2 lists the long-term forecast summary for ductile iron.

Cast Steel

Steel casting shipments are forecast to rise 17% in '03 to 11.13 million tons, spurred by a slight increase in railroad freight car deliveries (railroad freight cars can represent up to 50% of the market for steel castings) to 28,000 units. Peak years for shipments of steel castings are forecast in '05 and '06 as railroad production continues to expand. Despite closings of some operations, capacity utilization is expected to be at 75%.

Table 3 summarizes the reasons for casting growth in some special market sectors.

NONFERROUS CASTING SHIPMENTS

Shipments of nonferrous castings are forecast to rise at an annual rate of 2.3%, from 2,830,000 tons in '02 to 3,550,000 tons in '12. Nonferrous casting sales are forecast to grow from last year's $12 billion to $19 billion in '12.

Aluminum

Casting shipments are forecast to grow 9.8% this year to 2,263,000 tons, while growing 2.4% annually to 2.6 million tons in '12. A peak year of 2.9 million tons is forecast for '08. Sales are expected to rise to nearly $10 billion this year and capacity utilization is predicted to rise to 83% in '03.

The rates of growth and decline for specific cast aluminum market sectors are provided in Table 4.

Brass & Bronze

Shipments of brass and bronze castings are forecast to grow 4% in '03 to 314,000 tons. Long-term growth is forecast at 0.5% annually to 318,000 tons, with sales at $1.5 billion.

Table 5 summarizes the growth and decline in specific market sectors.

FORECAST BY END-USE INDUSTRIES

The end-use industries that consume castings are classified by the new North American Industry Classification System (NAICS), which has replaced the Standard Industrial Classification System (SIC).

The macroeconomic forecasts, which are used as a basis for all shipment forecasts, are based on the analysis information supplied by econometric specialists, government agencies and other major institutions throughout the country. These forecasts are based on estimates of individuals, and unforeseen occurrences and happenings in the world can be responsible for major changes. Stratecasts' model attempts to define the economical and technical basis for individual forecasts and continually updates the forecasts to respond to changes.

Casting shipment forecasts are based primarily on the individual analysis of each end-use industry from both an economic and a technology viewpoint. Each individual category has its own distinct forecast based on individual input/output analysis, as well as economical and technological analysis.

Market outlooks, and the respective casting shipment projections, are included for the major markets listed below.

Motor Vehicles

The production of light vehicles in the U.S., which includes both passenger cars and light trucks, dropped 11% in '01 to 11,040,000 vehicles. Light vehicle production was expected to finish at 11,700,000 last year. Production is expected to continue to increase to 12,400,000 in '03 and rise at an annual rate of 0.8%. Peak production of 14,200,000 light vehicles is forecast in '07.

Environmental regulations may be the key factor that dictates how castings are used for different parts of the vehicles. Clean air standards in most states are expected to become more stringent, requiring lighter vehicles. Following are some factors influencing the automobile industry now and in the future:

* percentage of light trucks to remain high but drop slightly from 55% to 51% by '05 as passenger cars rebound;

* foreign transplants expected to gain in market share and replace the share of imports;

* transplants to increase production of light vehicles in the U.S. from 2.3 million in '02 to 3.5 million in '06 with much of this coming at the expense of imports;

* growth of light vehicle production in the U.S. at a normal 0.8% per year for the long-term, coupled with transplant replacement of about 600,000 imports, predicted to increase light vehicle production to 14 million vehicles;

* imports expected to decrease as the Yen and Euro strengthens against the dollar;

* new highway construction to increase;

* baby boomer and immigrant spending to peak in '05-06;

* worldwide economic recovery;

* worldwide overcapacity of automobile manufacturing;

* proposed more stringent emission and safety regulation and corporate average fuel economy (CAFE) regulations;

* new types of fuel leading to powertrain changes.

2003 Casting Shipment Outlook--Gray Iron: 1.18 million tons (13% drop); Ductile Iron: 1.07 million tons (3% gain); Malleable Iron: 50,000 tons (23% drop); Carbon & Low-Alloy Steel: 60,000 tons (9% gain); Aluminum: 1.41 million tons (11% gain); Magnesium: 70,000 tons (11% gain).

Internal Combustion Engines 

This classification includes diesel and small gasoline engines primarily engaged in manufacturing diesel, semi-diesel, gasoline and other internal combustion engines for stationary, marine, tractor and other uses, but does not include engines used in aircraft and light vehicles. This market also includes turbines and turbine generator sets and is predominately a market for steel castings.

The diesel engine market consumes 90% of the gray and ductile iron castings shipped to this classification. The small gasoline engine market consumes only 10% of the iron casting market but constitutes nearly 90% of the aluminum casting market.

2003 casting Shipment Outlook--Gray Iron: 460,000 tons (18% gain); Ductile Iron: 110,000 tons (37% gain); Carbon & Low-Alloy Steel: 17,000 tons (60/a gain); Aluminum: 112,000 tons (12% gain).

Agricultural Implement Manufacturing

After increasing 3% in '00 and 9% in '01, shipments of farm machinery experienced a slight decrease last year. A 7% increase is anticipated for '03.

2003 Casting Shipment Outlook--Gray Iron: 310,000 tons (8% gain); Ductile Iron: 117,000 tons (7% gain).

Construction Machinery/Equipment

Construction machinery and equipment is composed of establishments primarily engaged in manufacturing heavy machinery and equipment used by the construction industries, such as bulldozers, concrete mixers, cranes, payers, dredgers and power shovels. Forecasts are normally based on growth in housing starts, building construction and public works, including highway, airports, and water and sewer projects.

After two consecutive years of declining shipments of construction machinery, a 4% gain is forecast this year.

2003 Casting Shipment Outlook--Gray Iron: 237,000 tons (2% gain); Ductile Iron: 190,000 tons (5% gain); Carbon & Low-Alloy Steel: 177,000 tons (4% gain).

Mining Machinery/Equipment

After a drop last year, shipments of mining machinery are expected to rise 5%. A long-term annual growth of 2% per year is forecast.

Exports of mining machinery (50% of the total shipments and 2.5 times imports) have decreased in the past few years. Since coal mining is expected to see little or no growth in the future, exports will be required to sustain growth in casting demand.

2003 Casting Shipment Outlook--Steel: 130,000 tons (9% gain). About 70% of these shipments are carbon and low-alloy steel castings, with manganese steel representing about 18%.

Oil Field Equipment

Predictions of rising oil prices are expected to spur the manufacture of oil field machinery and equipment. An increase of 5% in production is forecast this year, followed by a long-term growth of 2% annually.

2003 Casting Shipment Outlook--Ductile Iron: 70,000 tons (4% gain); Carbon and Low-Alloy Steel: 42,000 tons (no gain).

Valves & Fittings

Valves and fittings in this classification are primarily composed of establishments engaged in the manufacture of valves for controlling the flow of liquids or gases in pipes and mains. Industrial valve shipments declined 5% in '01, the third consecutive year of decline. Industry shipments are projected to show an average annual increase of 2.9%.

The total industry shipments in '03, measured in constant dollars, are expected to increase as housing starts rise. The strongest increase is expected to come from the energy-related industry sector, such as the growing chemical industry and the power generation industry. Residential construction is expected to increase this year.

Industry demand is projected to show an average annual increase of 2.9% though '12. Imports, however, are forecast to increase 40%. The shipment/demand ratio is thus forecast to drop below 1.0 to 0.8, dropping the average growth to 2.3% per year.

2003 Casting Shipment Outlook-Gray Iron: 280,000 tons (4% gain); Ductile Iron: 238,000 tons (8% gain); Malleable Iron: 36,000 tons (10% drop); Steel: 102,000 tons (6% gain); Brass & Bronze: 105,000 tons (3% gain); Nickel-Base & High-Alloy Castings: 13,000 tons (8% gain); Investment Castings: 51,000 tons (4% gain).

Pressure Pipe

Despite some losses to plastic products, pressure pipe is expected to grow annually at a rate of 2.3% based on application growth and minor growth in exports.

2003 Casting Shipment Outlook--Ductile Iron: 2 million tons (6% gain). Utilization of capacity is forecast at 84% this year.

Metalworking Machinery & Equipment

Beginning in '96, the decline of the machine tool industry in the U.S. began to accelerate. A decline of 28% in the value of shipments occurred in '99, followed by successive declines of 4%, 30% and 15% in subsequent years. The U.S. machine tool industry has thus lost its base and is not expected to ever return to its former levels. The bottom is believed to have been reached and the industry is expected to grow slightly over the next 10 years at an annual rate of 2.3%.

2003 Casting Shipment Outlook--Gray Iron: 75,000 tons (25% gain); Ductile iron and steel castings formerly used in rollmaking operations have declined to 10,000-15,000-tons, but are projected to stablize at these levels.

Power Hand Tools

The use of castings in power hand tools dropped 15% in '01 and is only expected to grow at a 1% annual rate in the future.

2003 Casting Shipment Outlook--Aluminum: 39,000 tons (5% gain); Magnesium: 11,000 tons (22% gain).

Special Industry Machinery

The five industries that have the most impact on this market sector are the food products, paper, printing, textile and packaging machinery. The classification also includes establishments producing plastic, wood products, rubber glass and other types of machinery not classified under machine tools.

2003 Casting Shipment Outlook--Gray Iron: 204,000 tons (3% gain); Ductile Iron: 100,000 tons (5% gain); Corrosion-Resistant Steels: 16,000 tons (8% gain); Heat-Resistant Steels: 7000 tons (8% gain).

Pumps & Compressors

Shipments by the U.S. pump and compressor industries declined in '01 with the downturn in the economy. This industry is affected by the process industries where pumps and compressors are primarily used to control the flows and pressures of many liquids and gases. They also are vital in chemical, petrochemical, and pulp and paper production. A forecast increase in highway construction, bridge repair and public works is expected to assist the demand for pumps and compressors in late '02 and '03. Oil field growth this year also could spur pump growth.

Shipments are forecast to increase about 10% in '03. A long-term annual growth of 2.5% is forecast.

2003 Casting Shipment Outlook--Gray Iron: 234,000 tons (5% gain); Ductile Iron: 90,000 tons (13% gain); Steel: 35,000 tons (9% gain); Investment Castings: 17,000 tons (13% gain).

Gears, Speed Changers & Power Transmission Equipment

The industry is forecast to grow from the poor year of '02 at an annual rate of 2.4% based on usage in pumps, compressors, machine tools and other machinery applications. The equipment includes such applications as gears, sprockets, sheaves, pulleys and other parts that transmit power.

2003 Casting Shipment Outlook--Gray Iron: 109,000 tons (7% gain); Ductile Iron: 27,000 tons (8% gain).

Refrigeration, Air Conditioning, & Heating Equipment

The long-term growth of this industry is dependent on housing starts, commercial construction, gross domestic product, exports, industrial growth, automotive production and other factors. After a 12% dropoff in '01, this sector grew 2% last year and is expected to expand by another 2% this year.

2003 Casting Shipment Outlook--Gray Iron: 142,000 tons (4% gain); Ductile Iron: 42,000 tons (8% gain); Aluminum: 50,000 tons (8% gain).

Electrical Equipment 

The constant dollar value of shipments by the electrical transmission, distribution and industrial equipment industries was expected to increase about 7% last year after five continuous years of decline, with a continued gain of 5% in '03 based on growth in housing and public works.

2003 Casting Shipment Outlook--Iron Castings: 77,000 tons (4% gain); Aluminum: 39,000 tons (3% gain); Zinc & Lead Die Castings: 42,000 tons (7% gain).

Household Appliances

The growth in housing starts expected in the next few years is forecast to spur growth of appliances at a rate of 2.5% annually.

2003 Casting Shipment Outlook--Gray Iron: 50,000 tons (16% drop); Aluminum: 68,000 tons (6% gain).

Railroad

Spurred by the late 1990s' resurgence of the coal mining industry and increased grain shipments, the railroad industry responded in 1998 and 1999 with near-record purchases of freight cars and locomotives. After a drop to 56,000 freight car deliveries in '00, deliveries plummeted in '01 and '02 to 34,000 and 18,000 cars, respectively. A rebound to 28,000 cars is expected this year, with a 40,000-car year projected for '04.

Carbon steel railroad castings declined by nearly 500,000 tons from the 1998 highs to last year's lows, causing extremely low utilization and closing of operations. Utilization of capacity is to remain below 60% this year.

2003 Casting Shipment Outlook--Carbon & Low-Alloy Steel: 390,000 tons (44% gain).

Instruments

This classification includes those establishments engaged in the manufacturing of engineering and scientific instruments, measuring and controlling instruments, optical and analytical instruments, and photocopying and photographic equipment. Long-term growth of 3.5% per year is forecast.

2003 Casting Shipment Outlook--Aluminum: 109,000 tons (10% gain).

This article was abstracted from the 2003 AFS Metalcasting Forecast & Trends published by AFS. The larger report contains additional detail on each market sector and casting projections, forecasting assumptions, supply and utilization, historical trends and imports/exports. The report may be purchased from AFS Publications (www.afsinc.org/estore, 800/537-4237, ext. 241) for $50 off the $300 list price prior to February 1.

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Table 1

Long-Term Market Summary for Gray Iron Castings

NAICS   Industry             AGR *

234110  Municipal            + 0.6%

234910  Soil Pipe            -3.8%
331511  Ingot Molds          -4.6%

332998  Sanitary/Radiator    -4.3%
33291   Valves/Fittings      +1.0%

333618  Internal Combustion  +1.9
        Engines
33311   Farm Equipment       +1.7%

333120  Construction         +1.6%
        Equipment
333512  Machine Tool         +2.3%

33329   Special Industry     +1.7%
        Machinery
33391   Pumps, Compressors   +2.0%
3334    Refrigeration/AC     +1.5%
33512   Electrical           -3.2%
3352    Household Appliance  -6.7%
33611   Light Vehicles       -2.7%
33612   Medium-to-Heady      +2.9%
        Truck

NAICS   Forecast Factors

234110  Growth in Housing Starts (+2.5%),
        Imports of 30%
234910  Replacement by Plastic
331511  Continuous Casting of Steel at 98%,
        Brazilian Imports
332998  Replacement by Plastic
33291   Growth in Housing Starts, Loss to Plastics,
        Imports, Ductile Iron
333618  Growth in Diesel Engine Demand,
        Imports (+30%)
33311   Increase in Equipment Sales,
        Replacement with Ductile Iron
333120  Housing Starts Up

333512  Up From Low of '02, Loss of 40% of Peak
        Demand, Consumers Move Overseas
33329   Loss to Ductile Iron

33391   Parallels Industry Growth
3334    Loss to Imports
33512   Loss to Imports, Aluminum
3352    Loss to Plastics, Light Metals
33611   Loss of Blocks, Heads, Loss to Light Metals
33612   Growth From Extreme Low in '02,
        Return to Normalcy

* Annual Growth Rate (Estimated)

Table 2

Long-Term Market Summary for Ductile Iron Castings

NAICS     Industry             AGR *  Forecast Factors

33291     Valves/Fittings      +2.4%  Replacement of Steel Castings,
                                      Malleable Iron
332996    Pressure Pipe        +2.3%  Exports to Increase, Growth
                                      with Housing Starts, Loss to PVC
33361     Internal Combustion  +2.5%  Replacement of Malleable and
          Engine                      Gray Iron
33311     Farm Equipment       +3.0%  Industry Growth, Replacement of
                                      Gray Iron
333120    Construction         +3.0%  Replacement of Steel, Gray Iron
          Equipment
33329     Special Industry     +3.0%  Replacement of Steel, Gray Iron
          Machinery
33391     Pumps/Compressor     +2.3%  Replacement of Steel
333612    Gears, Power         +2.5%  ADI Growth,
          Transmission                Replacement of Forgings
336111,2  Light Vehicles       -0.6%  Loss to Aluminum in Suspension
                                      & Differential Castings, Growth
                                      in ADI
336212    Medium-to-Heavy      +5.0%  Growth from '02 Lows,
          Truck                       Replacement of Steel, Malleable

* Annual Growth Rate (Estimated)

Table 3

Long-Term Market Summary for Steel Castings

NAICS   Industry             AGR *  Forecast Factors

33291   Valves/Fittings      +2.3%  Growth in Oil Field, Petroleum,
                                    Power Generation & Chemical,
                                    Growth in Corrosion-Resistant
                                    Applications
333120  Construction         +1.3%  Some Loss to Ductile Iron
        Machinery
333131  Mining Machinery     +1.6%  Parallels Industry Growth
333132  Oil Field Equipment  +1.8%  Expected Growth with Higher
                                    Oil Prices
333911  Pumps                +2.3%  Growth in Stainless &
                                    Oil Field Applications
33612   Trucks               -0.9%  Loss to Ductile Iron
3365    Railroad             +5.6%  Gain From Extremely Low '02
                                    Freight Car Deliveries

* Annual Growth Rate (Estimated)

Table 4

Long-Term Market Summary for Aluminum Castings


NAICS   Industry             AGR *  Forecast Factors

33361   Internal Combustion  +3.0%  Growth in Lawn/Garden,
        Engines                     Sport Vehicles

333991  Power Tools          +1.0%  Loss to Magnesium, Plastics

33341   Computer/Office      -2.1%  Loss to Plastics
        Machinery

3334    Refrigeration/AC     +2.7%  Replacement of Gray Iron

334514  Meters & Regulators  +1.8%  Growth in Housing Starts

3352    Household Appliance  +1.9%  Replacement of Gray Iron,
                                    Loss to Plastics

3361    Motor Vehicles       +2.7%  Conversion of Gray Iron
                                    Blocks & Heads, Ductile Iron
                                    Suspension & Differential
                                    Parts, Growth to 270 lb per
                                    Vehicle, Die Castings to
                                    Rise to 1 Million Tons

3364    Aircraft & Parts     +1.8%  Some Loss to Titanium

3345    Instruments          +3.0%  Parallels Industry Growth

* Annual Growth Rate (Estimated)

Table 5

Long-Term Market Summary for Copper-Base Castings

NAICS   Industry           AGR *  Forecast Factors

332913  Plumbing/Sanitary  -3.0%  Loss to Plastics, Imports
332911  Industrial Valves  +0.5%  Housing Start Growth,
                                  Loss to Plastics & Imports
332510  Marine             +1.6%  High Industry Growth, Loss to Plastic

* Annual Growth Rate (Estimated)

For More Information

Visit www.moderncasting.com for "Casting Imports: What to Expect in 2003," (K. Kirgin), originally published in the special "Examining Trade" edition of MODERN CASTING, September 2002.

RELATED ARTICLE: Imports Still Rising in 2003

Imports of castings are forecast to increase to 2,163,000 tons in '03 to 16% of casting shipments in the U.S. Imports of gray iron are expected to rise to 1.1 million tons, or 23% of the total forecast of casting shipments. Aluminum die casting imports are forecast to increase to 19% of shipments. Each of the other major metals are seeing penetrations in the high teens. The market sectors most vulnerable to imports are municipal/construction, valves and fittings, motor vehicle and diesel engines.

Castings (particularly for diesel engine, valves/fittings and motor vehicles) are being exported to the U.S. at delivered prices that can be classified as less than normal value, or "dumped" value. This practice is occurring through export and trading agents and through alliances with U.S. foundries and casting consumers. Practices of this type have caused injury to the U.S. foundry industry and are illegal and protected under anti-dumping laws.

Asiatic countries have been allegedly subsidizing foundries and assisting in the exporting of municipal castings into the coastal regions of the U.S. for many years, at prices below than what can be sold in the exporting country. The municipal casting industry in the U.S. has constantly fought this practice and has been rewarded with imposition of anti-dumping duties on the foreign competitors.

Capacity Utilization

The U.S. casting industry is expected to contract to 2620 sites this year, representing a 500-site loss over the last 10 years. Despite some new and expanded facilities, it is estimated that a net loss of supply of 230,000 tons is to occur in '03 vs. '01. The table below lists the '03 forecast capacity and utilization rates. A total of 3 million tons of surplus supply is forecast for '03, with 2 million tons of that in iron foundries.

Capacity and Utilization Forecast for '03

Metal             Capacity    % Utilization

Iron              11,990,000  79
Steel             1,670,000   75
Aluminum          2,720,000   83
Copper Base       380,000     82
Magnesium         130,000     82
Zinc              430,000     80
Other Nonferrous  70,000      73
Investment        210,000     79

TOTAL             17,600,000  79

About the Author:

A 50-year foundry industry veteran, Ken Kirgin has held executive posts at foundries, foundry suppliers and consulting organizations. He founded Stratecasts in the early 1980s to provide domestic and international forecasting and trends analysis and strategic planning. He has handled market consulting duties for AFS since 1993.