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2005 Outlook Renewed Confidence

Dec. 10, 2004
At last, the changes that roiled the metalcasting industry over recent years have turned into some positive indicators for business during the coming year.

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%


25% 66% 9% +9.4%

Ductile Iron

12% 76% 12% +11.3%


26% 56% 18% +8.4%


8% 81% 11% +17.4%
Employment Size About Same Increase Decrease Net % Change

Under 20

28% 53% 19% +4.2%


14% 79% 7% +16.7%


13% 83% 4% +13.3%


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%


53% 41% 6% +4.3%

Ductile Iron

18% 82% 0% +9.9%


59% 27% 14% +2.1%


19% 73% 8% +11.3%
Employment Size About Same Increase Decrease Net % Change

Under 20

55% 41% 4% +5.3%


45% 48% 7% +7.9%


23% 70% 7% +6.5%


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





New Equipment

Additions to Plant

New Plant






Less than $1 Million

$1 - 5 million

$5 -10 million

$10 - 20 million

$20 - 50 million

$50 - 100 Million

Over $100 Million








2005 Capital Expenditures
Major Metal About Same Increase Decrease Net % Change

Gray Iron

43% 42% 15% +8.0%


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%


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


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


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



Lost Foam Equipment 8 0.4%
Investment Casting Equipment 55 3.0%

Major Problems

% of plants reporting


Medical Insurance Cost 80% 81%
Imported Castings 50%


Workers Compensation Cost 47% 49%
Lack of Orders 29% 23%
High Raw Material Cost 79% 80%

High Labor Cost



Trained Labor 40% 41%
Capital Availability 27% 23%


21% 21%
E.P.A. 28% 28%
General Labor Shortage 31% 29%

Product Liability


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



Becoming more of a factor 65% Gray Iron


Becoming less of a factor 11%


Ductile Iron 79.0%

Expected State Of Overall
Economy in 2005

Brass/Bronze 72.0%
Steel 72.0%
% of respondents

Employment Size

Greatly Improve 6% Under 20 69.0%
Improve Somewhat 58%


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 2005

Many 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:

  • "The state of the foundry industry is good. However, it is only because there are so few of us left."
  • "2004 has been a good year. The best in the last 10 despite the fact that material costs have skyrocketed."
  • "With China buying aluminum scrap the cost of aluminum has gone up."
  • "The only way that domestic foundries cn compete with off shore companies is through increased automation and complete integration of lean manufacturing techniques."
  • "Our future is very bright due to our small facility size, markets we serve, our management, and people. Automotive and other high volume markets exposed to imported castings and complete products are not going to fare well."
  • "We need help from the U.S. government to help stop the un fair advantage that foreign foundries have with respect to labor cost, workers' compensation costs, and all other compliance costs. We need to implement a tax on foreign castings coming into the U.S."
  • "Who in Congress voted for NAFTA and Favorite Trade Status for China?"
  • "Material shortages and surcharges will continue to plague the foundry industry, possibly forcing additional companies into Chapter 11."
  • "We need lower electricity costs so foundries can melt on the day shift. No one wants to work the off-shift."
  • "We benefited from a lack of export capacity in China. They will solve that problem faster than we can figure out how to compete with a country that provides cheap labor and has no environmental laws to contend with."
  • "Business was good the last three quarters. Our major customers are reporting their 2005 of OEM is about booked for the year."
  • "Forecasts look good."
  • "Due to attrition, all foundries should be busy. The largest threat to the industry is the cost of raw materials."
  • "This year was better than last year!"
  • "Anti-dumping laws need to be enforced!"