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Metal market memo.

It's looking more and more like a mixed year--both for basic metals and the products they go into. Lest there be any doubt, refer to the chart. Culled from more than 200 manufacturing industry forecasts just released by Uncle Sam, it suggests wide variation, with 1985 demand gains (all in physical volume or real terms) ranging from +28 percent down to -5 percent. Here's a more detailed rundown on the thinking behind many of these projections by Washington's top industry analysts.

Steel. Although prospects for consuming industries are good, consumption may reach only 100-million tons this year--just 5.3 percent over last year. True, shipments by the domestic industry may hit 83-million tons, but only if imports moderate significantly. And even with shipments at that level, the industry would still be operating at only about 80 percent of current reported capacity. This, in turn, should keep prices from firming. So should the threat of increased imports, despite the effort to aggressively enforce trade law.

As for the balance of the decade, expect moderate growth in consumption, with totals rising to 105- to 110-million tons/year by 1989. While this merely restores levels to prior decade averages, steel should remain a basic industrial material. But, it will be used in a more sophisticated manner, in a bigger economy, and will have to be engineered carefully to satisfy end-user requirements.

Ferrous castings. Continued recovery from 1982's severe recession is expected this year, although gains will be at a lower rate than '84. With expected increases in output of autos and other key industries, shipments are likely to reach 13-million tons (about 4 percent above last year).

Looking further ahead, growth during the rest of the decade will depend greatly on changing production levels and technologies in user industries. In any event, ferrous castings producers must find ways to satisfy increasing demand for lighter weight, higher performance products by the auto industry. They must also turn up new markets to offset those lost by substitution, plus find a replacement market for declining sales of ingot molds (the steel industry is rapidly moving to continuous castings).

Given these factors, expect shipments of ferrous castings to increase 4 percent annually, reaching 16-million tons by 1990.

Copper. Overall refined metal consumption should increase about 3 percent this year to about 2.4-million tons, with greatest strength during the first six months. Although prices will increase, the boost isn't expected to bring quotes much above production costs. Such an unprofitable scene could lead to further production cutbacks, with primary refined copper output decreasing 7-percent during 1985.

Looking beyond that, declines should continue throughout the '80s, but at a lower rate. Replacement of the red metal by aluminum in auto radiators will contribute to about a 7 percent dip in refined copper consumption by 1989. Fiber optic substitution also will have an impact, but probably not a major one until the early '90s.

Aluminum. Shipments will increase about 3 percent this year (to 16-billion lb), establishing a new record for the second year in a row. Improved demand is expected in all major consuming markets, including autos and housing. Nevertheless, the rate of increase will be well under last year's level, particularly in the transportation sector.

Longer term, shipments are forecast to increase at a compound annual rate of 3.5 percent through 1989. One big plus: Use of the metal in motor-vehicle production should reach about 200 lb/vehicle by 1990 (up from 137 lb currently). Substantial quantities of aluminum will be used for radiators, displacing copper. Increased use in wheels, body structures, engine components and other parts also is a certainty.

Moreover, aluminum has captured more than 90 percent of the beverage can market, making containers and packaging the metal's largest end-use. A potentially large market exists for food containers as well; however, increasing aluminum's current 4-percent market share may be a lengthy, difficult task.

Lead. The combined effects of a moderating economy, a substantial decline in leaded gasoline, and less lead per battery, are taking their toll, causing a 2.5 percent drop in 1985 lead consumption to about 1.24-million tons. The negative impact of less lead in batteries is seen by the fact that purchases by this key user industry will be off 1.7 percent (to only 870,000 tons), despite unit demand for batteries increasing a percentage point or so.

Over the longer pull, the industry won't show much improvement. At best, consumption should grow less than one percent annually. Thus, total use should rise to only about 1.26-million tons by 1989. Lead use in batteries will continue to be the largest end-use sector, growing as other end uses shrink. Nonetheless, the trend toward less lead per battery will continue as producers vie to increase performance per pound of battery.

Zinc. Moderating economic growth should slow the recent surge in slab zinc demand. A projected decline in residential construction, offset by modest increases in nonresidential building and motor vehicle output, should result in a one-percent increase in use to an estimated 970,000 tons this year.

Sustained growth is still likely over the longer haul with consumption expected to advance at a bit more than two percent a year. In 1989, for example, usage could approach the 1.1-million ton mark, equalling 1979's peak. Galvanizing will continue as the single largest application, although competition from other protective coatings should intensify.

Titanium. Total shipments of mill products in '85 should grow to 46- to 48-million lb, or up about 12 percent from '84. Military aircraft demand, accounting for over 40 percent of this, will remain strong as material continues to be delivered for the B-1 bomber. The demand from the industrial sector also should hold firm this year, with a possible pick-up in the desalination market.

Meantime, demand for civilian aircraft, which increased last year, is expected to continue through the rest of the decade as fleets of commercial aircraft are replaced by more fuel-efficient, quieter planes. Supplies look to be more than adequate, though, with the recent expansion of global capacity of sponge ensuring price moderation. This should help titanium compete with alternate materials.

Nickel. Domestic consumption will be up about 10 percent this year, to around 160,000 tons. Continued improvement in consumer demand should encourage more capital spending, and hence increase demand for machinery--a major user of nickel and its alloys.

Long-term prospects aren't bad either. From a 1984 base, primary nickel consumption should rise about 2.6 percent annually to about 187,000 tons by 1989. During the next 5 to 10 years, promising sources of demand will come from new plant and equipment, pollution abatement needs, and aerospace and defense industries.

Tungsten. Consumption should be sustained at near prerecession levels, with about a 5-percent gain seen for this year. Long-run growth, however, will slow because of reduced needs in some applications and stagnant end-use industries. Carbide use in machining applications, for example, is slowing because recent technological breakthroughs prolong tool life, increasing efficiency of tool use.

No problems with supplies, though. Current world mine output is substantially below capacity, and several large mine projects (in Canada, China, Bolivia, and the UK) also could help meet sustained demand increases.

Nonferrous castings. Continued recovery is anticipated, though at a lesser rate than '84. Because of increased auto production and a higher percentage of lightweight nonferrous castings used in each car, this industry will be the most significant market for nonferrous castings. Overall casting shipments should rise 8 percent this year, to 2.9-billion lb.

Long-term prospects are good. Shipments are predicted to increase at a 5-percent annual rate through the remainder of the decade. But, strong global competition for the US castings market is expected during the next few years, and imports may increase to the extent that domestic output will suffer.

Metalworking equipment. The combined shipments of several subindustries making up this group will grow about 6 percent this year. The machine-tool and accessories segment will share this growth, but continue operating well below capacity because of imports (expected to show still another rise in '85).

Looking at each metalworking subgroup, here's what to expect in real 1985 shipment gains: Metalcutting machine tools (5.5 percent); metalforming machine tools (6.2 percent); tools, dies and jigs (9.6 percent); power-driven hand tools (7.0 percent); foundry equipment (10.3 percent); industrial heating equipment (8.6 percent); and welding apparatus (4.8 percent).

General industrial machinery. An overall real growth is anticipated, which is a bit under last year's 5-percent advance. Individual subgroups shape up as follows: Construction machinery (5.0 percent), pumps and compressors (5.0 percent), combustion engines (7.0 percent), and refrigeration and heating equipment (3.0 percent).

Special industrial machinery. Figure on a 5-percent real-shipment advance--a bit more than last year's 4.3 percent increase. Exports will grow about 11 percent, accounting for about 25 percent of total shipments. Imports will grow about the same, which is less than last year's 25-percent jump.

More detail on subgroup shipping gains follows: Farm machinery (5.0 percent), mining machinery (6.7 percent), oil field machinery (6.7 percent), food products machinery (3.2 percent), textile machinery (3.2 percent), paper industries machinery (3.6 percent), and printing trades machinery (4.0 percent).

Metal components. A 6.4-percent real-growth rate is projected for '85, down slightly from the 6.9-percent figure last year. Imports will expand by almost 19 percent, following a jump of 35 percent in '84. As with other areas, subgroup-by-subgroup growth trends show significant variation, with '85 gains estimated as follows: Screw machine products (10.0 percent), industrial fasteners (3.0 percent), valves and pipe fittings (7.1 percent), and ball and roller bearings (6.0 percent).
COPYRIGHT 1985 Nelson Publishing
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Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Author:Richard, Robert S.
Publication:Tooling & Production
Date:Mar 1, 1985
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