Shifts In Global Casting In 1999

CastingTrade.com

Last week, in "The Changing Profile of World Foundry Production," we discussed the perspective one can gain on the world foundry industry when one can look at 30+ year accumulation of census data from Modern Casting all at one time, and we've been swamped with requests for a free poster of the graphic that accompanied that article. People really were really interested in the conclusions that could be drawn from total tonnage figures for producing countries worldwide.

Besides overall tonnage, there is another aspect of the data in provided in the "Annual Census of World Casting Production" which has been published faithfully by Modern Casting for the past 34 years. Each year, the data tables also contain breakdowns of each country's production by metal type. I, for one, have puzzled long and hard over those data tables, trying to figure out the story that they are trying to tell.

One thought that occurred to me is that, at least at a gross level, the relative amount of various metals cast can provide an idea about the monetary value of that output. Of course, this ignores many other important variables. However, in looking at large aggregates (e.g. an entire national industry), the results are still meaningful enough to make several kinds of comparisons. In particular, they can indicate whether, over time, the industry in a country is trending toward a more or less valuable mix. That information, in combination with information about changes in total national tonnage, can be very instructive.

Let's look at a specific example. Portugal reported total casting tonnage of 119,000 in 1999, compared to 116,000 in 1998. A respectable increase, but not remarkable. However, if you dig a little deeper, you find that Portugal experienced a disproportionate increase in non-ferrous production in 1999, especially in copper-base castings. According to our calculations, the composition of Portugal production in 1999 represented an 11% more valuable mix! (For an in-depth discussion of the industry in Portugal, click here.)

Number Crunching

The significance of tonnages of different types of metal can be difficult to sort out; it's a little like comparing apples and oranges. It helps a great deal to correct for the relative value of these different metals. We have constructed an index, calculated on aggregate production numbers, as follows:

This is based on aggregates for tonnage and value, for finished castings industry-wide. We believe this provides a more accurate measure than an index based on raw metal prices.

One way this index can be used is to compare the relative value of the output of two different countries. For instance, the United States and Canada are close neighbors, but they have significantly different value indexes: .98 vs. .81, respectively. The differences in the indexes is caused by the fact that more of the United States production is in higher-value aluminum and zinc; Canada is relatively heavier in iron and steel.

Another, perhaps even more useful, way this data can be used is to compare changes over time. In the '98-'99 period, for instance, major economies like the U.S., Canada, and Japan were virtually unchanged. There were, however, several interesting shifts among the European countries, and in Asia.

Europe: Subtle Shifts in the Value Equation

Most European countries continued to produce a mix of castings of about the same value in 1999 as they did in 1998: Austria, Belgium, Denmark, France, Germany, Italy, Norway. Spain had a decrease of approximately 10% in the value of its casting mix. Conversely, there were three cases in which the value of the mix increased by about 10%: in addition to Portugal, mentioned above, Sweden and Switzerland also saw improvement.

Our profile of the foundry industry in Sweden touched on the reason for the improvement there: the big growth area is telecom and related components. As for Switzerland . . . we'll be covering that in a profile next week!

As for the decrease Spain, it was actually caused by a massive increase in production of gray iron and ductile iron castings. Steel and aluminum castings also increased, but not nearly as much as the iron.

Putting China in Perspective

The big story this year, at least in terms of tonnage, is China. Production exploded, with growth of 24%. Given the overall level of new foreign investment and economic growth in China, this is not surprising.

What is noteworthy, however, is that China shipped a somewhat poorer mix of castings in 1999 than it did in 1998 -- by about 4%. As a result, the growth in the overall value of its shipments was diminished, ending up at 19%.

Growth of 19% is nothing to sneeze at. But it is important to view it in the context of the value mix.

Getting the Whole Picture

If you put all these different producers together side by side, you can quickly get an idea of the relationship between the proportions of various metals cast and the overall value of casting output in each country.

Where is the value mix the lowest? Denmark, India, Korea, and Brazil, where the industry remains in the iron age.

And the highest? Would you believe Mexico, Italy, Austria, and Norway? That white segment stripe on the chart tells a big part of the story: aluminum.

To read the related article, "The Changing Profile of World Foundry Production," click here.

To add your comments on this analysis of the world market situation to our World Foundry Forum, click here.

NEXT WEEK: A look at a parallel data set -- World AUTO Production.

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