The Foundry Industry

Introduction:

As the case with many US manufacturing industries, the metal casting industry has gone through many changes and challenges over the years, including major changes form the 1980’s onward.  Today’s business climate, tight credit and lack of consumer confidence have impacted the metal casting industry as hard, if not harder, as other companies in the manufacturing sector.  Contraction continues in the industry and projections indicate that a recovery for the foundry industry is still in the future. In spite of these issues the foundry industry is still a key element of US manufacturing and continues to survive to support its many end users, including the military market.

Evolution of the foundry industry:

The basis for the foundry industry goes back thousands of years.  The oldest surviving casting is a copper frog art casting dating to approximately 3200 BC from Mesopotamia.  In the 1400’s castings of bells for churches became a major output of foundries.  Cannons were a prevalent bronze casting product at the end of the 15th century. In more recent times, foundrymen were very active in the still-to-become United States, with seven foundrymen signing the Declaration of Independence.  In the 1700’s and later, castings were employed in numerous areas in the developing United States, from railways to cookware.  Looking at the history of the foundry industry, it could be found that the metalcaster was always a recycler, reusing metals from old castings in order to recapture the valuable raw material.  Today, reuse of metals by the foundry industry is a key to it survival and profitability, with more than 15 million tons of scrap used by the US foundry industry per years.

The U.S. foundry industry in 2007 shipped approximately 13.4 million tons of castings valued at $32.3 billion.  This output was produced by about 2200 foundries.  The foundry industry today consists of many small businesses (less than 100 employees in size) with estimates that 80% of foundries fall into the small business category.  As might be expected, the transportation sector (car, light truck and engine) represents a major customer of the foundry industry, representing about 36% of total sales in 2007.

During the last business turndowns in the 1980’s, the foundry industry also suffered, with financially weaker foundries (both the smaller and larger sized businesses) falling by the wayside.  Those foundries with stronger and more diversified business activities survived into the 1990’s only to be faced with new challenges from off-shore producers and customers who became global buyers.  Coupled with several years of zero to only moderate business growth and cost pressures, the industry continued a slow contraction.

The following graphic shows the trend in the number of operating foundries in the U.S. since the last major contraction in the 1980’s when over 25% of operating foundries did not survive. 

 

 

 

 

 

 

 

 

 

It should be noted that in the 1950’s during the development and early procurement of many of the US military’s current weapon systems that there were over 6100 operating foundries, which gave OEM's the opportunity to obtain cost-effective castings from a broad population of foundries who provided military castings.   As military procurements lessened in the 1980's with decreased defense budgets, surviving foundries found it necessary to diversify and not depend on military casting sales to be the largest portion of their business. Today’s (2009) business climate is apt to take its toll on the 2100 remaining foundries.  It has been estimated that the industry will see another contraction in the 2009-2010 timeframe which could reduce the number of operating foundries by up to 10%, leaving less that 2000 foundries in operation in the US.  As the number of foundries has continued to decrease over the years, it is interesting to note that productivity has, howerver,also continued to improve, with foundries in the 1991 through 2007 timeframe actually seeing growth (aluminum foundry shipments increased about 80% during this time, while magnesium casters saw business up almost 300%).

Foundry Industry Demographics

Today’s approximately 2100 foundries can be broken down into 1400 who are primarily non-ferrous (aluminum, magnesium, copper and specialty Titanium and superalloy) focused and 700 who concentrate on iron-based (steel, stainless steel, iron) alloys.  Employment figures indicate that more than 200,000 Americans are employed directly by metalcasters.  The foundry industry is dominated by small businesses, with over 70% of foundries having less than 100 employees. 

As a whole, the industry generated some $31 billion sales in 2008, with almost 13 million tons of castings shipped.   However, the US is now #2 in world production, trailing China.  Looking at current industry capacity and utilization, capacity will be reduced via plant closures, mergers and consolidations.  Utilization of available capacity is more difficult to gauge in light of decreasing casting demand from late 2008 through mid 2009.  However, it is anticipated that with a recovery in the economy, capacity will be strained, leading to extended lead times for castings.

2008-09 Capacity & Utilization

Metal	Capacity (Tons)	Utilization (%)
Iron	11,100,000	78
Steel	1,650,000	80
Aluminum	2,550,000	80
Copper Base	370,000	85
Magnesium	170,000	76
Zinc/Lead	350,000	85
Other Nonferrous	70,000	87
Investment Casting	190,000	76
TOTAL	16,470,000	79

The military market still represents a small percentage of the overall volume of castings sold, being some 3% of total tonnage.  With the downsizing of the US auto industry, we can expect that change to have a profound impact on the foundry industry through 2010, with the 30+% of castings shipped in the car/truck market decreasing significantly.   The number of foundries who specialize in the military marketplace, especially those who produce aviation-quality castings and have the required quality systems in place are a small fraction of the total foundry industry.  Factoring in the anticipated reduction in overall industry capacity in 2009 and 2010 capacity, those foundries that specialize in military castings will see their order books filled and casting delivery times extended.  Thus there is the real need for contractors who require castings to support military procurements to take all the steps, up-front, to properly identify and communicate needs to the foundries they choose to retain as sub-contractors.

There are also indications that foundries not currently pursuing military business may seek entry into this market in the near future, seeking to replace other lost business. However, these foundries may be faced with a longer learning curve before fully ready to properly service the military market.

 Casting End-Use Markets
 

 

 Industry Projections

Historically, sales in the foundry industry are cyclic and are usually leading indicators of overall US business health (at least in terms of commercial and industrial markets). Thus the foundry industry is one of the first to show recessionary trends and the effects of inventory reductions by downstream manufacturers. Foundries conversely are also the first to see the signs of upturns in the economy. Currently, in mid-2009, most foundries are near or at what is perceived as the bottom of the market.  The beginnings of recovery are still 3 to12 months way for many.  The bright spots in the end use markets currently are the military and medical sectors.  This is not to say that foundries specializing in these areas are booming, but they have seen less of a down-turn in activity.  However, confidence in the industry, even among those producing military and medical items, is still not yet high.  This lack of confidence will preclude major investments in additional capacity, as will the current tight money situation.  Thus, for the foreseeable future, casting procurements will need to factor in the state of the foundry industry and prepare for long lead times, fewer sources and cost increases.

 

Things to remember:

1. The foundry industry has been hard hit in the 2008-2009 economic downturn and more facilities are apt to close before an economic upturn
2. Loss of capacity in the foundry industry will lead to greater lead times
3. Military applications are a very small percentage of the US foundry market
4. Foundries specializing in military components are specialists whose order books are typically better than other commercial foundries
5. Insure that both a business and technical fit are there before committing to a foundry