Overall, the results from Foundry Management & Technology's annual Business Outlook Survey are positive. Most of the respondents reported having a better year in 2004 than expected and hope to continue building on that success in the coming year.
However, part of the upswing in business does seem to be the result of so many foundries closing in recent years. So, while most of our 150+ survey respondents reported good numbers, those better numbers may have come at the expense of another foundry closing down. A sobering thought, to say the least.
Shipments pick up
Comparing 2004 shipments to last year's data, the numbers are very positive. In 2003, 26% of metalcasters saw their shipments decrease. This year that number was roughly cut in half. In fact, an impressive 67% reported an increase in shipments in 2004.
Like last year, steel foundries posted the best numbers with a whopping 81% reporting an increase in shipments. Ductile iron foundries were a close second (76%), although all the major metal sectors performed well. Aluminum metalcasters saw an increase of 9.4%, followed by gray iron and brass/bronze, both sectors seeing shipments jump 8.4%
Size did not seem to be a factor either. Even the smaller foundries put up very impressive numbers. Of those employing 50-99 people, 83% reported an increase in shipments and 79% foundries with 20-49 employees saw an increase in their shipments. In fact, of the very largest foundries-those employing more than 250-47% reported a jump in their shipments, a somewhat surprising, but still healthy number. Big or small, aluminum, steel, or iron, no one reported a decrease in shipments over last year and the industry in general saw a net change in shipments of 10.5%.
Looking ahead to 2005, most survey participants are expecting to improve on their numbers from this year, although perhaps not in as dramatic a fashion. Ductile iron metalcasters are the most optimistic with 82% expecting to increase shipments. Steel foundries slip to second place, with 73% expecting to improve. The other sectors expect the next year to bring positive results, but are slightly more cautious in their outlook with gray iron foundries expecting a change of 7.3%, aluminum (4.3%), and brass/bronze (2.1%). Both big and small plants are anticipating bettering their numbers in the upcoming year, although again, the largest foundries expect to see the least improvement-only a 1.8% increase. The industry overall expects a net increase of 6.3%, not quite as strong as 2004 numbers, but a substantial increase nonetheless.
Shopping list
Looking ahead to capital expenditures planned for 2005, shows that the industry as a whole, 56%, expects they will spend at about the same rate as this past year. Melting equipment tops the list this year at 22% of plants planning to buy this type of equipment, nudging last year's frontrunner, grinding equipment, into second place with 19%. Rounding out the top five are lift truck and loaders (16%); pollution control equipment and cranes and hoists are in a tie for the number four spot with 15% of the plants surveyed planning to buy in those areas respectively; and in the number five spot is testing and inspection equipment with 14% of foundries expecting to invest.
Who's doing the shopping? This year it looks like ductile iron metalcasters will be spending the most, with 53% planning to increase capital expenditures in 2005. Steel and gray iron founders are right behind, with 42% of each market reporting they expect to increase capital expenditures. Only 9% of brass/bronze foundries foresee an increase in capital expenditures, and in fact, this sector was the only sector to predict that it would see spending drop off, with a predicted net change of -1.9%.
In terms of debt metalcasters are willing to take on, only 8% plan to take on more debt in 2005. Most, in fact, are not carrying any debt at all at the present time (34%) and 26% predict they will retire some of the debt they are carrying in the new year.
Capacity utilization increases
Capacity utilization levels in 2004 jumped dramatically, 76%, compared to last year's 68.6%. Aluminum and ductile iron casting producers were above industry average at 79%, respectively. However, the remaining sectors also reported strong numbers: gray iron (74%) and steel and brass/bronze tying at 72%.
In this area, the larger foundries definitely did better with those employing more than 250 at an impressive 87% capacity utilization. Nonetheless, even the smallest of foundries (69%) saw their capacity utilization numbers go up over last year.
China syndrome
More than half the metalcasters surveyed (65%) said that imports, mainly from China, were affecting business more and more. Only 24% report that they have not been hurt by this import issue. Looking at the comments submitted, (see p.15) many respondents are insistent that the federal government intervene in some manner to level the playing field. Whether that will come to pass is certainly open to debate.
What other problems are making for sleepless nights? The cost of medical insurance is a big problem for many, with 80% reporting it was a major problem this year and 81% predicting it will be an even bigger problem in 2005. Higher raw material costs also caused headaches this year, with 79% saying it was a major problem and 80% still expecting it to be a major problem next year. Rounding out the top five problems metalcasters have been worrying about this year are workers' compensation costs (47%), general labor shortage (31%) , and lack of orders (29%).
In terms of the quality of the castings being made, U.S. metalcasters seem proud of their work with only 17% reporting quality being a problem this year and only 12% expecting it to be a problem in the coming year.
Bittersweet success
Manufacturing, and metalcasting specifically, has certainly seen some economic recovery during the past twelve months. And it looks like 2005 should see the recovery continuing. Nonetheless, while that is good news for many, as mentioned before, the renewed success has come at a high cost, with many foundries closing their doors for good. Some may argue this has been a natural realignment of the market in view of the global nature of business today, but certainly it is cause for alarm. As imports continue to flood our shores, the challenge will be for the remaining foundries to find the means to remain competitive so that our industry that helped build our country stays in our country.
2004 Shipments vs. 2003 | ||||
Major Metal | About Same | Increase | Decrease | Net % Change |
Gray Iron | 26% | 59% | 15% | +8.4% |
Aluminum | 25% | 66% | 9% | +9.4% |
Ductile Iron | 12% | 76% | 12% | +11.3% |
Brass/Bronze | 26% | 56% | 18% | +8.4% |
Steel | 8% | 81% | 11% | +17.4% |
Employment Size | About Same | Increase | Decrease | Net % Change |
Under 20 | 28% | 53% | 19% | +4.2% |
20-49 | 14% | 79% | 7% | +16.7% |
50-99 | 13% | 83% | 4% | +13.3% |
100-249 | 30% | 65% | 5% | +11.4% |
Over 250 | 24% | 47% | 29% | +6.1% |
Total Industry | 21% | 67% | 12% | +10.5% |
Expected 2005 Shipments vs. 2004 | ||||
Major Metal | About Same | Increase | Decrease | Net % Change |
Gray Iron | 48% | 48% | 4% | +7.3% |
Aluminum | 53% | 41% | 6% | +4.3% |
Ductile Iron | 18% | 82% | 0% | +9.9% |
Brass/Bronze | 59% | 27% | 14% | +2.1% |
Steel | 19% | 73% | 8% | +11.3% |
Employment Size | About Same | Increase | Decrease | Net % Change |
Under 20 | 55% | 41% | 4% | +5.3% |
20-49 | 45% | 48% | 7% | +7.9% |
50-99 | 23% | 70% | 7% | +6.5% |
100-249 | 35% | 61% | 4% | +7.9% |
Over 250 | 59% | 29% | 12% | +1.8% |
Total Industry | 44% | 50% | 6% | +6.3% |
Borrowing Plans for 2005 | Types of Capital Expenditures Planned for 2005 | Value of 2004 Shipments | |||
(% of Plants) | % of Respondents By Value Of Shipments | ||||
More Debt About Same Retire Debt Not Carrying Debt | 8% 32% 26% 34% | New Equipment Additions to Plant New Plant None | 73% 6% 1% 27% | Less than $1 Million $1 - 5 million $5 -10 million $10 - 20 million $20 - 50 million $50 - 100 Million Over $100 Million | 22% 31% 19% 12% 5% 7% 4% |
2005 Capital Expenditures | ||||
Major Metal | About Same | Increase | Decrease | Net % Change |
Gray Iron | 43% | 42% | 15% | +8.0% |
Aluminum | 59% | 32% | 9% | +6.4% |
Ductile Iron | 41% | 53% | 6% | +3.1% |
Brass/Bronze | 70% | 9% | 21% | -1.9% |
Steel | 58% | 42% | 0% | +16.5% |
Employment Size | About Same | Increase | Decrease | Net % Change |
Under 20 | 72% | 19% | 9% | +4.6% |
20-49 | 57% | 36% | 7% | +5.1% |
50-99 | 43% | 47% | 10% | +6.9% |
100-249 | 48% | 43% | 9% | +9.7% |
Over 250 | 41% | 35% | 24% | +12.4% |
Total Industry | 56% | 34% | 10% | +6.8% |
Equipment Purchase Plans 2005 | ||
# of plants planning to buy | % of plants planning to buy | |
Molding Machines | 205 | 9.0% |
Core Machines | 215 | 10.0% |
Melting Equipment | 482 | 22.0% |
Automatic Pouring | 161 | 7.0% |
Pollution Control Equipment | 316 | 15.0% |
Continuous Mixers | 106 | 5.0% |
Sand Preparation Equipment | 154 | 7.0% |
Laboratory Equipment | 183 | 8.0% |
Heat Treating Equipment | 151 | 7.0% |
Permanent Mold Equipment | 37 | 2.0% |
Sand Reclamation Equipment | 160 | 7.0% |
Blast Cleaning Equipment | 243 | 11.0% |
Design Software | 131 | 6.0% |
Diecasting Machines | 65 | 3.0% |
Rapid Prototyping | 77 | 4.0% |
Shakeout/Punchout | 108 | 5.0% |
Grinding Equipment | 413 | 19.0% |
Machine Tools | 350 | 16.0% |
Cutoff Machines | 134 | 6.0% |
Testing & Inspection Equipment | 306 | 14.0% |
Air Compressors | 136 | 6.0% |
Conveyors | 211 | 10.0% |
Cranes/Hoists | 331 | 15.0% |
Robots & Manipulators | 233 | 11.0% |
Lift Trucks & Loaders | 355 | 16.0% |
Process Controls | 177 | 8.0% |
Lost Foam Equipment | 8 | 0.4% |
Investment Casting Equipment | 55 | 3.0% |
Major Problems % of plants reporting | ||
2004 | 2005 | |
Medical Insurance Cost | 80% | 81% |
Imported Castings | 50% | 49% |
Workers Compensation Cost | 47% | 49% |
Lack of Orders | 29% | 23% |
High Raw Material Cost | 79% | 80% |
High Labor Cost | 28% | 38% |
Trained Labor | 40% | 41% |
Capital Availability | 27% | 23% |
OSHA | 21% | 21% |
E.P.A. | 28% | 28% |
General Labor Shortage | 31% | 29% |
Product Liability | 10% | 11% |
Energy Shortage | 8% | 8% |
Quality of Castings | 17% | 12% |
Material Shortage | 25% | 28% |
On-Time Delivery | 18% | 11% |
Interest Rates | 3% | 6% |
Effect Of Imports | Capacity Utilization | ||
No Effect | 24% | MAJOR METAL | |
Becoming more of a factor | 65% | Gray Iron | 74.0% |
Becoming less of a factor | 11% | Aluminum | 79.0% |
Ductile Iron | 79.0% | ||
Expected State Of Overall | Brass/Bronze | 72.0% | |
Steel | 72.0% | ||
% of respondents | Employment Size | ||
Greatly Improve | 6% | Under 20 | 69.0% |
Improve Somewhat | 58% | 20-49 | 76.0% |
Stay About The Same | 25% | 50-99 | 77.0% |
Decline Somewhat | 10% | 100-249 | 78.0% |
Decline Dramatically | 1% | Over 250 | 87.0% |
Total Industry | 76.0% |
The 411 on 2005Many survey respondents took time to add more in-depth views on the state of the industry and the U.S. economy. Here is some of what they had to say:
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