SIC 3321
GRAY AND DUCTILE IRON FOUNDRIES



This classification covers establishments primarily engaged in manufacturing gray and ductile iron castings, including cast iron pressure and soil pipes and fittings.

NAICS Code(s)

331511 (Iron Foundries)

Industry Snapshot

According to a late 1990s Foundry Management and Technology magazine survey of 110 industry executives, gray iron castings shipments rose 2.1 percent in 1997, and ductile castings shipments increased by 3.7 percent. However, many of those queried responded that they experienced a slowdown in the late 1990s, or, "some type of leveling off in the industry." They prepared to enter the twenty-first century with cautious anticipation, with 37 percent of gray iron producers staying their increase of debt, 8 percent increasing debt, 18 percent retiring debt, and 37 percent carrying no debt. Of the ductile castings producers, 42 percent carried the same debt, while 27 percent carried no debt, 19 percent retired debt, and 12 percent anticipated accruing more debt.

The survey called for capital expenditure increases of 8.6 percent for gray iron producers and 5.1 percent for ductile castings producers, though 53 percent of both categories kept their expenditures at the same level in the late 1990s. These conservative approaches slowed production, with only 81.4 percent of gray iron plants and 82.7 percent of ductile iron foundries working at capacity. Industry executives responded that they worried less about general labor shortages in 1999, though they worried a bit more about medical insurance costs, decreasing orders, and overseas competition. They worried much less about on-time deliveries.

Organization and Structure

This industry is heavily engaged in manufacturing pipes and pipe fittings; however, other segments of the industry are growing in response to changing market demands. For example, the automotive industry has switched most engine components to aluminum in response to consumer demands for lighter, more fuel efficient cars. While this move has hurt some gray and ductile iron foundries, it has forced them to find alternative markets. This is readily apparent, since 52.6 percent of product share is claimed by other gray iron castings and 19.9 percent is claimed by other ductile iron castings. Only 3.9 percent of product share is due to cast iron pressure, soil pipe, and fittings, whereas 14.0 percent is attributed to ductile iron pressure pipe and fittings.

Historically, the automotive and aerospace industries were the largest customers for gray and ductile iron foundries. When demand was at its highest, each of the Big Three automakers owned several foundries. In mid-1980s, the poor financial performance of both the domestic automotive and aerospace industries forced closings of many self-contained foundries. Companies in these industries found that outsourcing the casting business was a cheaper alternative than under-utilizing plant and labor capacities.

In the 1980s and 1990s, the corporate average fuel economy (CAFE) standards mandated that automobile manufacturers produce lighter, more fuel efficient cars. As a result, the 650 pounds of iron casting found in a 1981 automobile was reduced to 350 pounds of gray iron per vehicle by 1995 and is expected to fall another 40 percent by 2005. Ductile iron, on the other hand, has experienced some growth in the automotive industry as the mechanical properties of the metal make it an attractive alternative to heavier cast components.

Background and Development

Humans have been casting metals for at least 5,000 years. This is evidenced by the progression of early societies from the Stone Age to the Bronze Age, when people started extracting ores and shaping them by melting or hammering methods. The Iron Age began in Europe circa 1100 B.C. Cast iron came into commercial use in the early 1700s when a mechanic named Abraham Darby and some Dutch workmen established a brass foundry in Bristol, England. It was there that Darby and his men started experimenting with iron as a replacement for brass. Because brass and iron are completely different pouring mediums in terms of their reaction with sand and solidification patterns, Darby faced many technical difficulties in his early experiments. With the help of John Thomas, a boy working in his shop, Darby succeeded in casting a complete iron pot. For proprietary reasons, Darby and Thomas entered into an agreement in which the boy was to remain his servant to keep the secret.

Ductile iron was not discovered until after World War II. Laboratory metallurgists at International Nickel Company noticed that the addition of a higher content of magnesium than is normally required for gray iron produced a structurally different material. When observing the material at a microscopic level, researchers noticed that the graphite particles had taken on a spheroidal shape, thus coining the name "nodular iron" in the United States and "spheroidal graphite cast iron" in Great Britain. The recognition of nodular iron's mechanical strength—and its ability to provide more ductility than other metals in its class—provided it with its more commonly accepted name, ductile iron. Since its release to the marketplace in 1949, ductile iron has gained acceptance as an important engineering material and has replaced many of the previous applications formerly reserved for steels and other irons. The discovery of ductile iron was one of the greatest achievements in the engineering materials community in the twentieth century.

The metal casting industry was wounded severely in the 1980s. During the 1970s, the industry was filled with back orders that exceeded annual capacity, providing a seller's market. The pricing strategies reflected this, as did profit margins. However, shipment volume—not quality—was the key issue during the 1970s. During the 1980s, foreign competitors who offered timely delivery of better quality castings at lower prices emerged. During the recession of the late 1980s and early 1990s, consumers turned to overseas suppliers, leaving the domestic producers behind. Consequently, U.S. foundries were operating at no more than 50 percent capacity by the mid-1980s.

By 1995, the foundry industry had been cut in half from 1955 levels, when the number of establishments involved in ferrous and nonferrous casting across the country was 6,000. Only 3,100 establishments remained in 1995, with approximately 700 engaged in casting gray and ductile iron. However, due to technological advancements and capacity gains through consolidations, output per remaining producer rose.

Gray and ductile iron foundries rely on the health of the U.S. economy to spur growth within their industries. With the increase in new housing during the late 1990s, there will also be a corresponding increase in the demand for gray iron needed for boiler and radiator castings, valves and fittings, and pumps and compressors. This industry is also being aided by an increased volume in exports of heavy equipment, such as diesel engines and farm and construction equipment. At the same time, plastics are replacing gray iron; this substitution is also being seen in the refrigerant and air conditioning markets.

The automobile market is expected to sustain ductile iron growth into the twenty-first century as the preferred replacement for forged gears and shafts in power transmissions. Specialty industrial machinery—such as those used for paper, printing, and plastic manufacturing and for farm and construction equipment—will maintain the demand for ductile iron. The recent development of austempered ductile iron (ADI) allowed this metal to challenge forgings and cast steels in operations requiring strength and durability.

The foundry industry has also increased its worldwide marketability by certification through the International Organization for Standardization. This series of certifications, referred to as ISO 9000, offered distinct competitive advantages for those who qualified and passed the certification audit. Although the audit was intensive, the result was the receipt of an internationally recognized benchmark standard, which signified the recipient was paying attention to details and distinguishing itself as a manufacturer of quality castings, engineered with integrity.

In 1995, total industry shipments were at only 33 percent of the tonnage shipped in 1978. Gray iron suffered a huge decline between 1978 and 1982, dropping from approximately 18.5 million tons to 9.5 million tons. Throughout the remainder of the 1980's, gray iron shipments continued to decrease. In the mid-1990s, they finally leveled off at approximately 6 million tons per year. Ductile iron, however, has shown growth in shipments since 1982, continuing a trend that started in 1966. In 1994, shipments of ductile iron surpassed 4 million tons for the first time since the metal was invented; ductile tonnage is expected to surpass gray metal by the turn of the century. The growth of ductile iron was largely due to its increasing recognition as being more economical and structurally sound than gray and malleable irons; in some cases, it can replace steel forgings and weldments.

Current Conditions

In the late 1990s, the industry consisted of 668 gray iron foundries. These firms shipped $12.4 billion dollars worth of goods in 2000. The industry also saw total capital expenditures exceed $5.1 billion that year.

For all its rhetoric of improving industry standards, in practice the industry shrugged off the ISO 9000 accreditation initiative as unnecessary unless customers required it—which they didn't, making the issue moot. Only 13 percent of companies in the gray iron industry and 33 percent in the ductile iron industry had bothered to get ISO 9000 accreditation by the late 1990s, and only 20 percent of gray iron producers anticipated seeking accreditation in the future, while half of the ductile iron industry felt compelled to seek future certification.

Industry Leaders

Industry leader AMSTED Industries Inc., which acquired Varlen Corp. for $790 million in a late-1999 merger, generated $1.4 billion in 1999 sales. Memphis-based Mueller Industries Inc., which owned its own railroad in the west and its own gold mine in Alaska, garnered $1.2 billion in 1999 sales. Birmingham, Alabama-based Citation Corp. posted $724 million in fiscal 1998 sales. Additionally, revenues increased 8.6 percent in the first quarter of fiscal 1999 to $184.9 million, as compared to $170.2 million for the first quarter of 1998. Grede Foundries Inc. generated $633 million in 1998 sales.

Workforce

In general, most labor-intensive occupations in the gray and ductile iron foundries experienced continued work force reductions through the 1990s. The occupations facing the most substantial reductions—30 percent and more—included worker supervisors, plastic and metal machine workers, plastic and metal grinding machine operators, maintenance, electricians, and machine tool cutting operators. Other occupations facing reductions—20 to 30 percent—included fabricators, assemblers, hand workers, general laborers, precision workers, molding machine operators, inspectors, welders, truck and tractor operators, and mechanists. The only occupations expecting to gain employment levels were hand grinders and polishers.

Hourly compensation in this industry was, on the average, substantially higher in comparison to other forms of manufacturing. In 1994, the industry's average hourly wage was $15.22, while the average hourly wage of all other manufacturing concerns was $12.09. In 1994 Ohio and Illinois offered the highest hourly compensation in the industry, paying hourly wages of $19.19 and $18.20, respectively. Ohio and Pennsylvania have the highest concentration of gray and ductile iron foundries. In 1997, more than 30 percent of the entire shipment activity in the United States was due to the combined efforts of the states of Ohio and Wisconsin. In 2000, the industry employed 80,899 people, over 80 percent of which were production workers. The average hourly wage for production workers was $18.58.

America and the World

The foundry industry faced tremendous challenges in the global marketplace in the 1990s. During the five-year period from 1991 to 1995, there was a shift in metal cast production from the Pacific Rim to North America. The United States and Canada increased 63 and 56 percent respectively, while Japan dropped 12 percent. The five largest gray and ductile iron producers in 1995 were: the United States, 20 percent; China, 16 percent; the Commonwealth of Independent States (CIS), 15 percent; Japan, 10 percent; and Germany, 6 percent. With the demise of communism in the former Soviet Union, much of that region's production capacity remained underutilized. For example, Ukraine produced 6 million tons of casting in 1985 and reported a little less than 1 million tons in 1995.

The financial impact of environmental and safety regulations continued to beleaguer foundries throughout the 1990s. For example, Mexico was being pressured by the United States to install air pollution control devices in the early 1990s. However, Mexican laws included a loophole that did not require the devices for companies to operate. In Korea, foundry workers were not provided with safety equipment, such as eye protection, hard hats, respiratory devices, or earplugs. Additionally, workman's compensation and minimum wage levels were much higher in the United States. The benefits enjoyed by American workers added significantly to U.S. companies' costs. In financial terms, foreign competitors legally had an edge when it came to earning profits during the 1990s.

Research and Technology

Conditions in the iron foundry industry—in particular ductile iron operations—have improved during the 1990s. The U.S. government was interested in replacing many forged steel components with cast ductile iron. Specifically, the U.S. Navy was researching the increased lethality of ductile iron projectiles over those made from steel. Other contractors were looking for less expensive alternatives to forged steel components—in lower stress applications, the mechanical properties of ductile iron suffice. However, more research and development was needed for this material because other, lighter weight materials were replacing ductile iron in lower stress applications. Ductile iron's low production price tag was enticing to both manufacturers and consumers and served as one of the primary incentives for its use.

Cast thermal analysis—also called numerical modeling/simulation—was used to improve quality and productivity in the foundry through pattern design optimization. The benefits of using numerical modeling were substantial, especially in relation to cost savings associated with time and material waste. Computer technology displaced the standard "pour and pray" method of metal casting and helped engineers optimize casting designs.

For the foundry industry as a whole, the advent of rapid prototyping technology was perhaps one of the most exciting advancements of the 1990s. Rapid prototyping is a computer-integrated method of accelerating the step between design and manufacture of the part. Under normal circumstances, a foundry would take weeks to construct a pattern (and core boxes if necessary) from an original design. With rapid prototyping, this process took only days, in some cases only hours, to create a limited production pattern. The competitive edge this technology offered was substantial, especially considering the accuracy it lent to the price quoting process.

Further Reading

Cahill, Virginia D. "Outlook '99: Holding Steady." Foundry Management & Technology, December 1998.

Darnay, Arsen J., ed. Manufacturing USA. 5th ed. Farmington Hills, MI: Gale Group, 1996.

"Dividends and Earnings." Crain's Detroit Business, 19 July 1999.

Hoovers Company Capsules, 20 March 2000. Available from http://www.hoovers.com .

Infotrac Company Profiles, 7 January 2000. Available from http://web6.infotrac.galegroup.com .

"Citation's First Quarter Fiscal 1999 Exceeds Estimates." Foundry Management & Technology, February 1999.

United States Census Bureau. "Iron Foundries," 11 February 2000. Available from http://www.census.gov/prod/www/abs/97ecmani.html .

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .



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