Global Casting Report: Past, Present & Future.
Metalcasters worldwide are beginning to understand that innovative technology alone will not keep metalcasting at the forefront of metal component use. Instead, technology in addition to an innovative and cooperative program of market research and development is required if the industry is to move ahead during this new century.
This thinking led to the organizing of the 1st International Forum on Casting Markets of the 21st Century, which was held in Paris in September. Organized by the European Foundry Assn. (CAEF) and the European Foundry Equipment Suppliers Assn. (CEMAFON), this conference brought foundry executives from around the world together to consider cooperative efforts to build current and new casting markets, to reflect on the future markets for metal castings, and to explore the challenges facing the business of metalcasting.
The forum featured representatives from the major casting producing regions of the world--David P. Kanicki, AFS, for the U.S.; Liang Miao, China Foundry Assn., for China; Klaus Urbat, Committee of Associations of European Foundries (CAEF), for Europe; Taemon Okamoto, Japan Cast Iron Foundry Assn. (JCIFA), for Japan; and Jose Aoad Raya, Associacao Brasileira de Fundicao (ABIFA), for Brazil--who provided reports on the state of their metalcasting industries. Following are individual summaries of these reports.
The U.S. metalcasting industry has undergone dramatic changes during the past 20 years. While much of it has been market and technology driven, government-mandated regulations have produced equally significant shifts in casting production. Most recently, the rapid and continuing consolidation of both foundries and the major markets that metalcasting serves has changed the structure of the industry.
The number of operating foundries has declined from a high of 6150 plants in 1955 to less than 3000 today. Of those 2900 foundries operating today, 1900 are nonferrous operations, with the rest comprised of iron and steel plants. Most American foundries remain small businesses, as 80% of all operating plants employ less than 100 people and only 6% employ more than 250 people.
Despite the declining number of plants, the U.S. metalcasting industry remains one of the 10 largest in America. In 1999, the nearly 15 million tons of castings shipped by U.S. foundries represented more than $29 billion in sales. It is estimated that the industry currently is operating at 82% capacity.
Iron castings represent more than 70% of total shipments, aluminum castings represent 13% and steel 11% (Fig. 1). In terms of total sales and value of shipments, iron castings represent 39% of total sales, aluminum castings 26% and steel castings 13%.
The largest user of U.S.-produced castings is the car and light truck industries. This market alone uses nearly 33% of all castings produced. The pipe and fittings market is the next highest utilizing 15% of U.S.-made castings.
As far as the significant trends in U.S. casting, gray iron production has dropped from more than 12 million tons in 1979 to 6 million tons in 1998. At the same time, ductile iron production has grown from 3 million tons to slightly more than 4 million tons in 1998. In the long term, cast iron shipments are expected to remain stable, growing at an average of 0.8% per year. With the growth of ductile iron at an average of 2.4% per year, the total production of cast iron is expected to reach 12 million tons by 2009.
The most significant factor in the decline of gray iron production has been the switch from iron to aluminum castings by U.S. automakers. In 1980, cars produced in the U.S. averaged 600 lb of cast iron. This has dropped to an average of 325 lb/vehicle. Within the next 7 years, this is expected to decline further to an average of 230 lb/vehicle. Recently, Ford Motor Co. announced its goal to produce an all-aluminum engine by 2005.
Malleable iron production in the U.S. has nearly disappeared. The peak year for malleable iron production was 1965 when more than 1 million tons were shipped. In 1998, production dwindled to less than 200,000 tons. This is expected to decline to 50,000 tons within the next few years.
The peak year for steel casting shipments in the U.S. was 1974 with 2 million tons. During the first part of the '90s steel casting production was sluggish due to volatility in the railroad industry. In 1979, 90,000 rail cars were shipped. Just 4 years later this had dropped to 6000 cars. In 1999, this figure was 55,000. In 2000, between 45,000 and 48,000 cars are expected to be built. Overall, steel casting shipments are projected to grow at a modest 0.8% annually during the next several years.
The most exciting area in today's U.S. metalcasting industry is aluminum. Since the early 1990s, aluminum casting shipments have shown continuous and significant growth. In 1987, 1 million tons of aluminum castings were shipped. This reached 1.8 million tons by 1999. It is projected that aluminum foundries will ship nearly 3 million tons by 2008. Growth will come in all major casting processes including diecasting, permanent mold and sand casting.
Total aluminum casting shipments are expected to grow at a rate of more than 4% per year during the next decade. Permanent mold and sand-cast aluminum are projected to grow at a rate of more than 6% annually, while diecast parts are expected to increase at a rate of 4% per year. As mentioned previously, this growth will occur because of the switch from cast iron to cast aluminum for lighter weight cars. Currently, 25% of U.S.-produced engine blocks are aluminum. By 2007, this is expected to increase to 55%. On the other hand, it is important to note that 70% of all intake manifolds currently are made in aluminum. This is expected to decline to 40% by 2007 due to the switch to plastics.
Copper-alloy casting production has remained fairly stable during the last decade, and this is not expected to change during the next 10 years. Brass and bronze casting producers have been affected significantly by the onset of plastics, An annual growth rate for copper-alloy castings is expected to run at 1% during the next decade.
As U.S. automakers continue to seek ways to take more weight out of their vehicles, cast magnesium production is expected to grow rapidly during the next decade. Driven almost entirely by the automotive industry, magnesium casting is expected to grow from 64,000 tons in 1999 to 263,000 tons by 2009. This is an annual growth rate of 15.4%.
In a survey of U.S. metalcasting executives taken last year, the three most significant threats confronting the U.S. industry are increasingly stringent government regulations, imported castings and the lack of skilled workers.
China is one of the first countries to develop metallurgical and casting techniques. A bronze sword, unearthed in the northwestern province of Gansu, was produced 4800 years ago and is believed to be the earliest Chinese bronze casting. The earliest iron casting was discovered in the Jiangsu and Hunan provinces and dates back to 600 BC.
Despite this long history, significant advancement of foundry production and technology was not seen till the last part of the 20th century, according to Miao. During this period, casting output rose from less than 10,000 tons/year to 11 million tons today. China is now producing automotive engine castings in aluminum and gray iron, turbo engine blades by the investment casting process and spun ductile iron pipe, said Miao.
China's casting shipments from 1992-99 are listed in Table 1. Despite the decline of total output during the past few years, shipments of ductile iron, steel and aluminum alloy castings are steadily increasing, reflecting the growth in production of ductile iron pipe, automobiles and household electric appliances (Table 2).
The number of foundries in China is estimated to be 12,000 (although it is difficult to give a precise estimate because many small shops have opened up since the government announcement of the reform and open policy), according to Miao. The largest geographic distribution of foundries in China places 35% in the eastern (Shanghai, Jiangsu, Zhejiang, Shandong, Anhui, Jiangxi, Fujian), 22% in the mid-southern (Henan, Hubei, Hunan, Guandong, Guangxi, Hainan) and 17% in the northern (Beijing, Tianjin, Hebei, Shanxi, Neimenggu) provinces. The greater concentration in the eastern region is because this is the leading area in the development of modern industry and agriculture, said Miao.
The number of foundries by production capacity shows that casting plants below 300 tons/year still occupy 33% of the total foundries in China, cited Miao. Production capacities between 301-5000 tons/year account for 53.3% of the total number of foundries, with 5000-10,000 tons/year production capacity accounting for 12%.
At present, there are two kinds of foundry ownerships in China--state owned and collectively or privately owned foundries. In the next few years, state-owned foundries will gradually become corporations, with the state becoming one of the shareholders, according to Miao. Most of these foundries are already mechanized in their production processes.
Due to the rapid growth in size of Chinese cities during the last two decades, most of the state-owned foundries were established in the urban areas of the country. These foundries are now faced with either moving out for environmental reasons or are shifting their casting production to other collectively or privately owned foundries in the countryside, according to Miao. These foundries are now producing 50% of the total output of Chinese metal castings. In the foreseeable future, the privately or collectively owned foundries will outgrow the state-owned in both number and output, said Miao.
Currently, according to Miao, China has an excess of production capacity. Therefore, investment will be aimed at new equipment and technology in existing foundries to upgrade casting quality and environmental protection. The future investments will be concentrated in the private sector since the majority of these foundries are still using hand labor.
Miao believes the biggest change in the next 5-10 years will be in the molding department of the collectively or privately owned foundries where hand molding of green sand dominates. The majority of the shift will be to jolt-squeeze machines with some operations incorporating medium-sized flasks or flaskless automatic molding machines together with automatic lines. In addition, sand preparation plants complete with efficient sand mixers and sand cooling systems also will become critical.
The nobake molding process also will be incorporated on a large scale, especially in the medium-to-heavy weight jobbing iron foundries, said Miao. The coldhox process will gradually grow in the automotive sector, and shell cores will find a wider application in general engineering fields. The lost foam process, coupled with vacuum technology, may become a favorite technology for Chinese foundrymen devoted to thin wall iron castings.
Miao forecasts that total casting shipments for China in the next 5-10 years will steadily increase with ductile iron and light alloy castings increasing dramatically due to higher automobile and ductile iron pipe demands. Gray iron shipments are expected to gradually decrease while steel will linger at its present level.
Before 2010, according to Miao, 50% of foundries will have merged or been eliminated, leaving about 6000 plants. The existing number of 200 or more joint ventures or foreign proprietary foundries will be doubled by 2010. Miao believes most captive foundries will shut down or become specialized to form commercial casting operations for economic reasons. Existing collectively and privately owned foundries will become an important force for the Chinese industry, especially in the small-to-medium areas.
The combined European foundry industry is the third largest producer of ferrous castings worldwide and ranks second in nonferrous casting production. Currently, the total volume of iron and steel castings produced by the foundries in the CAEF member states is 11 million tons/year (Fig. 2). Production is dominated by Germany, France, Italy and Great Britain, which share 76% of the total output in Europe.
In terms of ferrous casting, the market is dominated by gray iron with a 50% share. In recent years, according to Urbat, competition among ferrous casting materials has led to a marked increase in the market share of ductile iron castings (an average of 35% across all nations) in Europe. In the short term the market share of ductile iron will level off between 40-45%.
At present, between 40-80% of the total output of iron castings are absorbed by both the motor vehicle and mechanical engineering industries. In the case of ductile iron castings, this proportion may rise to 90% or more, said Urbat. The proportion of gray iron castings used in motor vehicle production is highest in Germany, France and the Netherlands where it exceeds 50%. With regard to ductile iron castings, the share of castings produced for the motor vehicle industry is highest in Portugal (68%) and Hungary (73%).
The mechanical engineering industry claims the lion's share of more than 70% of the total weight of gray iron castings produced in Finland. The remaining producer countries are bunched fairly close together, with output shares ranging between 25-40%.
Steel has established itself for special casting applications at an average production share of 6% in Europe, stated Urbat. In the countries that dominate casting production, like France, Germany and Italy, the share of steel castings of total production is between 4.5-6.5%. Looking ahead 10 years, it is to be expected that the production of steel castings will range between 3-4%. Like malleable iron, steel castings will become a niche product for heavy-duty industries like mining equipment and power generation. Despite this, steel castings have a chance to find new applications, said Urbat, especially in the building industry, where steel structures match perfectly with cast components and substitute welded knots and other joints.
In terms of nonferrous casting, both aluminum and magnesium are rapidly growing segments of the industry, according to Urbat. Europe produces 2.5 million tons of nonferrous castings annually in the CAEF member states. Germany and Italy claim 70% of the total market volume and France, Great Britain and Spain produce 27% of this market share.
The production of aluminum castings in Europe is dominated by Germany and Italy at more than 600,000 tons/year each, according to Urbat. These two countries are followed by France with a production volume of 300,000 tons/yr and Great Britain, Spain and Austria with production from 70,000-120,000 tons/yr.
For magnesium production, German foundries cast more (16,000 tons) than all the other European producers combined. The second biggest manufacturer, Italy, has a production volume of less than 8000 tons.
Within the last 10 years, Europe has successfully increased its nonferrous casting capacity. As a result, it is unlikely that the output of nonferrous metal castings will grow dynamically in the years to come, said Urbat. It is interesting to note that the main substitutions for aluminum are expected to be in automobile chassis systems but not in the powertrain. In addition, as the share of diesel engines increases and new generations of engines with direct gasoline injection require a higher combustion pressure and operating temperature, there will be a technical renaissance of cast iron, especially modified cast iron materials and ductile cast iron, according to Urbat.
The overall foundry industry in Europe will continue to undergo substantial restructuring, said Urbat. It will increase productivity, it will develop modified tailor-made materials, and it will focus on value-added services. Furthermore, castings will gain new applications and volumes at a rate of 1-1.5% per year.
The foundry industry of Japan recovered with considerable speed after World War II, and production reached a record high in 1990 of more than 8 million tons (Table 3). With the collapse of the "bubble" prosperity of Japan, however, the trend changed, according to Okamoto. Domestic demand for metal castings turned down due to the depressed Japanese economic conditions and the tendency for customer industries to move their base of production overseas to utilize foreign sources for their casting needs. Total production of the Japanese foundry industry hit the bottom in 1999 at less than 6 million tons produced, but signs for recovery began to appear gradually in the latter half of the year.
For iron casting production, which comprised 73% of the total production of the Japanese foundry industry in 1999, the record peak year was 1990 with production of more than 6 million tons. The lowest production year was 1999 when shipments slipped 30% from 1990 totals.
The main end-use markets for Japanese iron castings are automotive, industrial machinery, metal working machinery, machine tools, electrical machinery, pipe fittings and cast iron pipe, said Okamoto. The share of the three top sectors, taken together, used 70% of the total production of Japanese iron castings in 1999.
Competition for the Japanese foundry industry has become increasingly severe for various reasons, said Okamoto. First, domestic demand has been declining. Second, foreign companies in the Asian region have been gaining a competitive advantage due to lower production costs. Third, Japanese automobile companies, the biggest customers for the foundry industry, have established their production bases overseas, purchasing more machine tools from overseas and switching purchasing from affiliates to non-affiliates to reduce costs. In addition, the substitution of die castings and aluminum alloy castings for iron castings is a growing trend in the industry, as well as the substitution of other materials, such as resin and plastics, for iron castings, said Okamoto.
Japan also is suffering from the problems of a decreasing birth rate and an aging population. The foundry industry is no exception, according to Okamoto. Skilled workers who previously were strong proponents of the Japanese foundry industry are now retiring. Recruiting young workers capable of developing the expertise and skill of the older generation is becoming more and more difficult. The disappearance of skilled workers is accelerated as foundries close and individuals lose their jobs, according to Okamoto.
In the automotive industry, depressed domestic demand, decreased exports and "reverse" imports (imports of cars produced by Japanese companies in foreign countries) are making growth difficult, said Okamoto. It is estimated that Japanese automakers can maintain a level of 10 million vehicles during the next several years.
For industrial machinery production, in the long run, a significant increase in equipment investment is not expected. Further, Japanese imports of cast components are increasing with unexpected speed, according to Okamoto. Thus, the iron foundry industry of Japan is confronting severe business conditions. As for the industrial machinery industry, in contrast to the automobile industry, production will remain in Japan because castings for industrial machinery tends to be of lower volumes unlike that of the automotive industry, said Okamoto.
According to Okamoto, industries related to the environment, recycling, medicine, health, nursing, security and information are emerging. Future demand in these fields will grow on a large scale.
The total annual production of the Japanese iron foundry industry is expected to be 4 million tons for the next 5-10 years.
The foundry industry in Brazil currently employs 38,000 workers and reports total revenues of $2.3 billion! yr, said Raya. It shipped more than 1.5 million tons of castings in 1999 and expects to ship 1.8 million this year (Fig. 3). The industry is comprised of nearly 1000 companies, most of which are Brazilian-owned. Brazil occupies the 10th position in terms of global foundry production (based on 1998 numbers).
Fifty percent of casting production in Brazil is consumed by the automotive industry, including cars, buses and tractors (Fig. 4). The automotive segment also shows the greatest potential for growth as new investments are being made by foreign manufacturers such as assemblers from Europe, Asia and the U.S. who are expanding their business in Brazilian territory, according to Raya. In addition, a measure that will further fuel the domestic market will be the fleet renewal program, which is tax incentives and other stimuli to push Brazilian consumers to replace their vehicles if they are more than 10 years old. (Brazil has the eighth largest vehicle fleet in the world at 16.8 million vehicles). This growth in automotive production will spur the total investment in the foundry industry in coming years to a projected $20 billion, said Raya.
Other customer segments that deserve mention include the capital goods industry, steel and railways. The capital goods industry, which was deeply affected by the real (Brazilian currency) devaluation, has an opportunity now to resume its activities in the wake of the new investments by the automotive industry and the more favorable exchange rate, said Raya. The steel industry, following privatization, went through a process of modernization that made it the seventh largest steel producer in the world. Likewise, the railway sector, after being privatized, has been gradually recovering. In 1999, it invested $309, million and the forecast through 2003 is that investment will total $787 million.
In regard to foreign markets for Brazilian castings, exports of metal castings in 1990 were valued at $180 million. This is expected to reach $355.8 million this year, representing an average annual growth rate of 8%. The industry remained competitive even during the period of overvaluation of the real. As of 1990, the export mix increased in value due to the growing share of nonferrous cast products (especially automotive components), said Raya.
The production needed to supply future demand can be calculated based on the performance of cast parts consumer sectors, said Raya. It is forecast that by 2004, domestic and export demand for Brazilian castings will reach 2.5 million tons.
The Brazilian foundry industry, however, like other segments of the economy, is trying to adjust to the new realities brought about by the fall of tariff barriers and the global economy, said Raya. Major efforts are aimed at improving productivity through a more rational use of human resources and mechanization. This has become fundamental for companies to retain their share of the market.
The foundry sector had 66,000 employees in 1990. This has been reduced to 38,000 in 1999. It is believed that this figure will remain stable, said Raya. As a result of increased mechanization and investment in employee training, productivity for the industry has been on the rise. In the '80s the figure remained around 20, in the current decade it is closer to 41.2.
Building a Global Vision for the Future
The 1st International Forum on Casting Markets of the 21st Century one-day conference was organized to facilitate the flow of information on casting markets worldwide. The organizers-- Klaus Urbat, secretary general, CAEF, Francois Delachaux, president, CAEF, Gabriele Galante, president, CEMAFON, and Gutmann Habig, general secretary, CEMAFON--called on industry leaders to form a partnership between the parties of the foundry world to develop a common aim and find answers to the challenges of globalization and competition.
Galante believes that foundries worldwide are confronted with challenging and immediate situations, including competition from other alternative materials and technologies and the rapid migration of manufacturing to different geographical areas. Galante called for a collective effort on the part of all foundry associations to develop solid data on which their members and others in the casting community can rely to produce solid management decisions. By establishing cooperative work agreements and programs, foundries worldwide can develop what Galante calls "knowledge management."
In addition to the five regional reports covered in this modern casting special report, speakers from three major casting end-use markets also addressed the meeting.
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|Comment:||Global Casting Report: Past, Present & Future.|
|Author:||Kanicki, David P.|
|Article Type:||Industry Overview|
|Date:||Dec 1, 2000|
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|Next Article:||34th Annual Census of World Casting Production -- 1999.|