Metalcasting is timeless, and permanent. No one can say with certainty when the process began, but the industry we know today has been in development for hundreds of years. Today’s high-tech, dynamic, and service-oriented enterprises are the result of decades of work and ingenuity. How well these operations perform from day to day or year to year is not merely a matter of chance: it’s the work of skilled workers and determined managers.
But the external factors matter too. We assess our circumstances and grade our results on an annual basis – and so that’s how we take up the work of assessing the metalcasting industry in 2020 and its prospects for 2021.
Sometimes a year ends with a bit of relief, or a tinge of nostalgia, but there will be no regrets when 2020 ends. The new year cannot arrive soon enough, for manufacturers, developers, commercial and financial enterprises, distributors, or consumers. Metalcasters are certainly among those anxious for the change. If no other lesson has been learned this year it is that a dynamic economy depends on strong and functioning supply chains – and that some disruptions in the supply chain may not be simply or satisfactorily corrected. Metalcasters are part of that industrial supply chain, and their prospects are inextricable from the broader economic outlook.
Reporting on metalcasting and metalcasters our particular vocation, and as we strive to understand the industry our new year starts in October. Each year, FM&T surveys readers to learn the current insights, concerns, and expectations of men and women working in North America’s foundries and diecasting plants. It’s an effort to understand not only the present circumstances of these operations, but also the underlying conditions shaping those businesses, and how these are received and understood by metalcasting decision-makers. We want their assessments of current conditions and we want to record the issues that concern them, in their own operations, in their supply chains and markets, and in the economy. We want to learn what decisions they face in the business cycle just ahead, and to understand better their expectations for the future of their enterprises.
We surveyed readers by email over a period of four weeks. We are confident that the 2021 Outlook respondents reflect the metalcasting industry we cover, and reliably represent the range and variety of operations included in it.
For the purposes of this report, the 2021 Outlook survey respondents represent the overall metalcasting industry: This cohort consists of steel foundries (23.4%), aluminum foundries and diecasters (22.4%), ductile iron foundries (14.0%), brass/bronze casting operations (7.5%), gray iron foundries (6.5%), and producers of multiple and/or other metals and materials (26.2%). Other metals cast by survey respondents include stainless steels, magnesium, high-chrome iron, and nickel-based super-alloys.
Similarly, and as in the past, the 2021 Outlook survey is based on the responses of individuals working in metalcasting operations of all sizes. Among these, 18.7% of respondents are affiliated with operations employing more than 250 people; and 17.8% represent operations with 100 to 249 employees. Another 24.3% of respondents are employed by metalcasting operations with 50-99 employees; and 17.8% are with businesses that have 20 to 49 workers. The remaining 21.5% of respondent represent metalcasting businesses that have 20 or fewer employees.
By their products and the scale of their organizations, it is realistic to see our respondents as representative of the metalcasting industry during 2021.
Figuring it out -- The first portion of the Outlook survey is designed to reveal metalcasters’ sense of current business conditions — using 2020 casting shipment volumes (tonnage) as a frame in which to characterize their assessments and expectations. The results confirm our expectations.
Asked how they expect 2020 casting shipments to compare with the corresponding 2019 total, 64.8% of respondents confirm that shipments will decline for the year, an inevitable outcome following the disruptions to operations and supply chains during COVID-19 pandemic. 20.9% feel confident in predicting that the current year’s shipments will “remain the same” as last year; and 14.3% expect tonnage volumes to increase for 2020.
The degree to which shipments will rise or fall for 2020 bears some attention. Among the respondents who expect a year-over-year increase, 37.5% of these respondents project shipments to rise 26-50% over 2019; and 20.8% expect an increase in the 10-25% range. One-third (33.3%) of this cohort foresee an increase of 10% or less than the 2019 total.
On the other side, among that portion who expect a decline in 2020 shipments, 45.3% foresee a decrease in the range of 10-25%; 29.3% expect a 26-50% year-over-year drop; 5.3% anticipate a drop of 51-75%; and 1.3% expect the drop to be in the 76-90% range. Apart from these, 18.7% of respondents expect the decrease in 2020 shipment volume to be in the 0-10% range.
While multiple issues have influenced casting shipment levels during 2020, the overriding factor has been the COVID-19 pandemic. Asked how many days of production were lost due to shutdown related to the virus, 11.3% of respondents report that their operation lost 60 days or more of production; 9.4% lost 40-60 days of work; 16.0% lost 30-40 days of work; and 13.2% lost 15-30 days of work. But, 27.4% of respondents lost 15 days of work or less due to virus-related shutdown.
Among all respondents, 49.0% estimated that their operations’ shipments were reduced by 10,000 tons or less, but 26.5% lost 10,000-50,0000 tons of expected shipments; 2.94% lost 50,000-100,000 tons of shipments; and 1.96% lost 100,000 tons or more of shipments due to the pandemic.
Next, the Outlook survey seeks to gauge respondents’ expectations for future shipments – in 2021, specifically. An impressive 59.1% of all respondents expect their operations’ casting shipments to rise from the 2020 total, and 29.5% expect next year’s outcome will “stay the same.” 11.4% foresee a year-over-year decrease in casting shipments for 2021.
Breaking out these projections, among the nearly 60% of respondents anticipating rising shipment volumes in 2021, close to half (47.8%) project that increase will range from 10% to 25%; and 25.4% project it the rise to be 10% or lower. The rest have even more encouraging projections: 19.4% expect an increase in casting shipments in the 26-50% range; 4.5% expect a rise of 51-75%; and 2.99% expect a 78-90% increase in shipment volumes for 2021.
Among the smaller portion of respondents – those who anticipate a decrease for 2021 casting shipments – 30.4% expect that decrease to be 10% or less than the current year’s tonnage. Slightly more, 34.8% expect next year’s decrease to be in the 10-25% range; and 21.7% expect the decrease to be in the 26-50% range. A further 8.7% expect shipments to be 51-75% lower; and 4.35% are preparing for the decreases to be in the 75-90% range.
Financing the future -- The FM&T Business Outlook survey also strives to evaluate the state of metalcasting by identifying the needs and concerns of metalcasters. It does this first by examining their capital spending plans. Capital-spending plans are a reliable indicator of respondents’ confidence in their business prospects, and also offer a window into the different ways that metalcasters will seek to improve or extend their current business fortunes.
We asked respondents how their business’s 2021 capital expenditures will compare with the corresponding figure for 2020. Among all respondents, 44.9% will maintain the CapEx levels they have set for the current year, but 35.5% will increase investment totals in the year ahead. Less than 20% of respondents, 19.6%, plan to decrease their capital spending totals in 2021.
Among those respondents who will raise capital investment in 2021, 21.4% are planning increases of 21.4%, and a comparable 21.4% will increase spending by 26-50% of this year’s total. In between, 47.6% will increase 2021 capital investments by 10-25% over 2020 totals. A further 2.4% will increase investment by 51-75%; 4.8% will raise CapEx by 46-90%; and 2.4% will increase investment by 90% or more of the 2020 total.
Among the respondents planning to lower capital spending totals during 2021, 14.8% plan to cut the 2020 value by 10% or less; 29.6% will reduce spending by 10-25%; 33.3% will cut by 26-50%; 11.1% will cut by 51-75%; 7.4% will reduce by 76-90%; and 3.7% will lower CapEx by 90% or more of the 2020 total.
Asked to characterize their 2021 capital investment programs, 6.5% of all respondents indicated plans to invest in new metalcasting plants during 2021, and 25.9% noted plans to expand or add to their existing plants.
Meanwhile, 24.1% of respondents indicated they have no capital spending plans for 2021.
Of those 2021 capital spending plans, 32.0% of respondents estimate they will invest less than $100,000 during the year ahead; 20.0% will invest $101,000-$250,000; 14.0% will invest $251,000-$500,000; 12.0% will spend $500,000-$1 million; and 16.0% of all respondents will invest $1 million-$5 million during 2021.
Among all survey respondents, 6% have capital-investment plans totaling more than $5 million for 2021.
Metalcasters’ financing plans for 2021 also bear some consideration: Among all respondents, 7.6% indicate they will increase the total of debt they will carry during 2021, and 44.8% note that their debt levels will remain unchanged. 12.4% of respondents plan to retire their debt levels during the coming year; and 35.2% report their organizations have no current debt.
Spending strategies -- More telling than metalcasters’ investment strategies are their spending plans. What types of machinery or technologies have they made in the current year – and what will they be purchasing to improve or enhance their performances in the months or years ahead?
The Outlook survey asked respondents to describe how they have directed their purchasing programs during 2020, a multiple-choice question, meaning the sum of all response exceeds 100%. The most popular choice among metalcasting respondents is “Cranes/hoists”, purchased by 31.6%; followed closely by “Testing/inspection equipment” (30.6%) and “Lab equipment” (24.5%). Other popular purchases include “Grinding equipment” (21.4%), “Air compressors” (20.4%), “Melting equipment” (20.4%), and “Machine tools” (19.4%).
The purchasing plans for 2021 show some continuity of purpose for metalcasters: “Lab equipment” (25.3%) ranks first among their upcoming plans, followed by “Testing/inspection equipment” (20.9%), “Grinding equipment” (18.7%) and “Cranes/hoists” (18.7%). New spending targets for the months ahead are “Robots/manipulators” (16.5%) and “Conveyors” (15.4%.)
Managing expectations -- The Outlook survey is not only an effort to anticipate or interpret investment plans. It also seeks to gain insights on the subjects that occupy metalcasters’ thinking, planning, and decision-making. (To maintain continuity, this series of questions did not address the COVID-19 pandemic. That issue is treated separately in the Outlook survey.)
We asked respondents to identify the issues that have presented challenges to their business’s competitiveness or success during 2020. The leading issue for survey respondents is the “Lack of orders” (49.5%), followed by the “Labor shortage” (30.8%) and, relatedly, “Human resources” (29.9%). Other widely identified issues are “Medical/insurance costs” (18.7%) and the “Availability of capital” (17.8%.)
Metalcasting business conditions during 2020 have been severely impacted by the pandemic and its follow-on effects. But the long-standing issue of global trade remains a concern for foundries and diecasters. Asked how casting imports have affected their businesses during 2020, 46.7% of respondents indicated that imported castings remain a competitive factor for their operation; 38.1% indicate the opposite, that imports have “no effect” on their business’s competitiveness.
The effect of the pandemic (numerically detailed above) is not only in the days of production time lost, nor in the shipment tonnages lost; there are lingering effects in the manufacturing supply chain of which metalcasting is an essential part.
“Most of what we lost was due to customers being shut down,” one respondent explained, while another noted that the “orders decrease in the aerospace field has reduced the production volumes we require to meet orders and customer demand.”
Another effect of the pandemic has been to complicate further the long-developing problem of training and retaining skilled workers: “We haven’t been able to hire back enough people to run at full capacity,” a respondent explained. “It is hard to find skilled, blue collar workers.”
Above and beyond -- The Outlook survey takes seriously the insights gained by individuals with close involvement in metalcasting: about the market conditions, about business needs and challenges, and about the risks and opportunities they recognize in the industry.
Asked to report the capacity utilization for their metalcasting operations during 2020, only 3.0% of respondents indicated they have operated at full capacity; 18.2% have operated at 50.0% or less of their nominal capacity; 21.2% have operated at 51-60% of capacity, 28.3% have operated at 60-75% capacity; just 18.2% have operated at 76-90%; and only 11.1% of metalcasters have operated at 91-100% of capacity.
The survey asked respondents for their sense of the overall U.S. economy in 2021: 23.1% expect a significant improvement over 2020’s conditions; and 47.1% expect conditions to “improve somewhat.”
The remainder are less positive: 14.4% of respondents expect economic conditions to “remain about the same” as in 2020, 8.6% expect conditions to “decline somewhat”, and 6.7% expect conditions to “decline dramatically.”
A critical indicator of economic performance is employment levels: 58.65% of Outlook survey respondents indicate they intend to increase their business’s employment totals during 2021, while 41.35% will not be hiring during the year ahead.
The link between individuals and their business is critical to metalcasters – and critical to the industry’s past and future. Filling skilled positions and locating dedicated and capable workers and managers is a long-standing concern. Asked what would do the most to address such problems, 48.0% of respondents called for additional and/or alternate training programs (at colleges, trade schools); while 26.5% hope for more active involvement by metalcasters themselves – e.g., with trade associations, universities, etc. A further 15.7% call for additional professional scholarships and internships, and 9.8% endorsed more activity by professional associations to coordinate talent recruitment and development.
Where foundries and diecasters may or should look to grow their business opportunities are a further matter of discussions, a matter that metalcasters themselves should understand and explore. Nearly a quarter (24.0%) of respondents identified “Infrastructure and construction” markets for growth; 16.35% noted automotive castings (other than engines and cylinder heads); and 12.5% pointed to oil-and-natural gas markets. Among other target markets 14.42% offered specific market goals, such as mining, hydro systems, pumps/valves, and heavy-duty electric trucks.
The end of 2020 will bring very little regret and much hope for improved market conditions and business opportunities. The almost impossible challenge presented by a global pandemic will seem to be in the past. But metalcasters know that business is more than assessing opportunities and managing problems. They have made their commitment to share in the work of maintaining and extending the ideas and values that have established and strengthened their industry year after year.