Rio Tinto Iron & Titanium America
The face of the U.S. foundry industry continues to change. The change in mix by metal types can be seen in Figures 1 and 2.
The Changing Foundry Mix
The Shipment Mix - 2002
As can be seen from the chart, the casting market by metal type continues to grow in aluminum and Ductile Iron castings while gray iron and malleable iron castings continue to shrink. Steel castings remain relatively constant at about 10% of the entire market (by volume).
In terms of sales dollars, the U.S. foundry industry had $28.5 billion in sales in 2002. This represented 13.14 million tons of castings shipped. This level of shipments was virtually flat from 2001, but marked the first time in history that the U.S. was not the world leader in casting shipments. The People’s Republic of China (PRC) reported casting shipments of over 14 million tons for 2002. The U.S. does remain the global leader in casting application.
U.S. foundries experienced demand and expansion during the 1990’s. Historical trends point to the fact that casting shipments tend to peak in the mid decade years, and drop of at or near the end of each decade (See Figure 3). The current climate is one of fierce price compression and competition, not only within the U.S., but with more foreign competition than ever.
Cast Shipments 1943-02
Gray iron shipments totaled 4.9 million tons in 2002, slightly less than 2001. The largest markets for gray iron castings remain automotive castings, municipal castings, and internal combustion engines. The shipment high for gray iron occurred in the mid 1960’s to early ‘70’s when gray iron shipments totaled over 15 million tons annually. Tonnage is forecast to remain flat or decrease over the next five years.
Ductile Iron shipments totaled 4.1 million tons in 2002, exhibiting a slight increase over 2001. The largest markets for Ductile remain pressure pipe, automotive castings and valves and fittings. The forecast for Ductile Iron is for growth each year. Sales dollars of Ductile Iron surpassed gray iron for the first time in 2002 and shipped tonnage is forecast to surpass gray iron near the end of this decade.
The practice of using imported castings in U.S. built equipment has been in place for over 20 years. Many of the early imported castings were directly supported by U.S. firms. The 1990’s saw the tonnage of imported castings increase dramatically. In 2003, 15% of the entire U.S. demand for castings was filled by imports. This is more than double the amount of imported castings from 1998. These imports are valued at $4 billion and are felt across the board. That is to say, it is no longer the case that only inexpensive gray iron castings or simple to make parts are being imported.
Several factors fueled the increase in imported castings. A strong U.S. dollar gives U.S. residents a great deal of buying power on an international basis. Strong currency has a downside for manufacturers in that domestically produced goods are very expensive to economies with weaker currencies (e.g. South Korea, PRC, UK, and the EU). The expected result is a trade deficit. Secondly, labor rates are much lower in the countries that export heavily to the U.S. (PRC, Mexico, India, Brazil). In addition, subsidies, tax incentives and governmental policies may encourage, or even make possible, export or import situations that would not normally
occur. Finally, corporate greed and a “flywheel effect” can also fuel imports. By “flywheel effect”, a casting consumer may feel that since large corporations are placing casting orders into low labor rate economies, they will be left with limited choices if they aren’t quick to join the ranks of “global sourcing”.
As a first attempt to measure the effect of imported castings on the U.S. foundry industry, Modern Castings Magazine conducted a confidential trade survey in 2002. Of the foundries surveyed, over one third reported sales losses to exports in excess of 16%. Sixty percent of the respondents reported that imported pricing was 20-50% under the domestic sales price. The countries identified as sources for these low cost castings were PRC, India, Brazil and South Korea. As a result of this survey, the AFS Trade Commission was formed in April 2002 under the direction of Chuck Kurtti. The commission has 15 members and is committed “to facilitate an
understanding of the full impact of global competition on the metalcasting industry and identify and create a roadmap of actions available for future consideration.”
The domestic foundry industry can take several steps in an attempt to curb the flow of imported castings. First and foremost is to take a marketing approach to the sale of castings. An examination of the major casting end use markets (See Figure 4) reveals that although cars andlight trucks consume a high proportion of the castings produced, the margins on these castings.
are the smallest. An alternative approach is to identify markets that are not represented on the pie chart. There are thousands of applications for castings in components that are currently forged, fully machined from bar stock, or fabricated from metal. Conversions from these other forming methods offer cost savings to the end user and may offer profitable casting opportunities to the metalcaster.
Major Casting End-Use Markets - 2002
A second action to increase domestic casting sales is the use, transfer, and communication of technology. There has been sufficient research performed on the steps necessary to produce thin wall (less than 3mm) Ductile Iron castings and implementation can and should now take place. Through the use of predictive modeling and casting simulation, cast iron has become and is a “high tech” material. Austempered Ductile Iron continues to grow at a double digit rate. All of the above technical advantages of castings, and specifically Ductile Iron castings, must be effectively communicated to the design community and the materials acquisition
sectors. An even more specific illustration is the following comparative analysis:
||$ Cost per Unit of Yield Strength (Newtons)
Finally, foundry management must continue to evaluate productivity improvements, responsiveness to customer demands, and partnership opportunities with value added operations such as machining or surface hardening.
(The author is indebted to Mr. Mike Lessiter of Modern Castings and Mr. Ken Kirgin of Stratecasts Inc. for their invaluable data and insight.)