Robust demand stretches leadtimes
PRICE INDEX FOR METAL FORGINGS has risen almost 6% over the past 18 months because of strong demand and tightening supply for some nonferrous forging billets. This is atypical, however, as the pricing indices from the Bureau of Labor Statistics for all metal parts covered in this report have risen only 0.02% since January of 1997.; MECHANICAL CLUTCH PRODUCTS manufactured by Centrix Clutch subsidiary of Boston Gear are precision-engineering metal castings, as are numerous other power transmission, motion con
By Tom Stundza -- Purchasing, 8/13/1998 6:00:00 AM
Buyers expect to maintain the sustained growth in purchasing that has extended leadtimes for castings, forgings, extrusions, and powder metal parts. That's because purchasers reckon that metal-parts purchasing has yet to peak in this economic cycle.
Similarly, suppliers are convinced the production and shipment records that were set in 1996, and then broken in 1997, will be eclipsed again in 1998. This might foreshadow a sellers' market in pricing for these parts, except that costs for most key raw materials have showed virtually no inflation for months.
Purchasing's most recent reader surveys find that buyers of these specially engineered component parts expect to remain among the busiest of sourcing professionals well into 1999. That's because the invigorated global competitiveness of North American manufacturing has fostered a wave of capital spending on new and modernized machinery that makes, processes, and fabricates raw materials into the downstream parts that are assembled into industrial, commercial, and consumer products for domestic and international markets.
"Increased demand for the various metal parts used to make industrial, construction, electrical, non-electrical, and transportation machinery is way ahead of expectations," agrees analyst Joshua Billings at The Freedonia Group. "Manufacturers just keep retooling to make end-product improvements and to attain even higher manufacturing productivity." Other economists point out that domestic demand for metals-bearing products is firm, and export demand lately has been generating a trade surplus despite the recent appreciation of the dollar and the collapse of several Asian economies.
Another reason for the sustained healthy forecasts for sales of metal parts is that their quality and ability to handle new end-use requirements is better than ever, according to Billings at Freedonia. He points out that extreme competition among the metal-parts manufacturing processes and external pressure from plastics and other materials "have caused traditional part makers to develop new alloys, increase metal strength while lowering weight, and generally modernize manufacturing."
GM strike may stunt castings
Open market sales of ferrous and nonferrous metal castings and nonferrous die castings have grown for six straight years and jumped by a solid 6% last year to 14.5 million tons. Reason: Sustained high production by automotive, aircraft, major appliance, machine tool, and heavy machinery makers. So far this year, demand for foundry products has remained healthy enough to keep leadtimes stretched out as much as one year for some specialty metal investment castings. On average, castings are taking about a week longer to get delivered than this time last year; ferrous and nonferrous foundry castings take nine full weeks and nonferrous die-cast parts take seven weeks.
However, these leadtimes may slip back to year-ago rates this summer. That's because the recent strike shutdowns at some General Motors parts and assembly plants and some production adjustments by non-electrical machinery manufacturers are allowing foundries and die casters to catch up with first-half bookings. The strike and a gradual slowdown in second-half manufacturing may cut into shipments for the year, reckon the mavens, who suggest the foundries and die casters will ship 2% less at 14.2 million tons this year. Next year, they think the industrial economy will stay healthy enough for cast-part sales to creep back up to 14.3 million tons.
Pouring liquid metal into steel molds or dies to make component parts is believed to be the most economical way to shape certain metal products. Today, there are 1,500 foundries pouring gray, ductile, and malleable iron, steel, and nonferrous castings in North America, and about 200 die casters producing aluminum, zinc, and magnesium cast parts. Last year, they sold close to $25 billion worth of products in the open market. Also note that for the past three years, the foundries and casters have been exporting about twice what has been imported. That's because the domestic casting firms have become globally competitive.
The iron castings industry in particular has experienced considerable attrition. The surviving companies have spent more than a decade cutting production costs and investing in new-generation induction-melting furnaces, high-pressure casting machines, thin-wall casting systems, investment casting equipment, hot-chamber technologies, computer-aided die and mold design, statistical process controls, deburring machinery, and part-inspection devices. That's been pushed by materials substitution with parts made from aluminum castings, powder metal compactions, steel forgings, or magnesium castings.
Two decades ago, 85% of all castings were ferrous--gray iron, ductile iron, malleable iron, and steel. A decade ago, the ferrous share was 77%. Today, iron and steel castings are closer to 70% of the mix. Last year, iron and steel foundries shipped 10.3 million tons into the open market, the highest one-year level in two decades. However, nonferrous foundries shipped a record 3.2 million tons of copper, aluminum, magnesium, and zinc foundry products. And the die casters shipped a record 964,000 tons of parts.
High-quality castings are used throughout industrial plants and power-generation facilities, and even in the machinery used to make compact discs, laser discs, and optical lenses. The key end-use market for foundry castings remains transportation. New-technology developments in ductile iron castings to make lighter, stronger, and cheaper cast parts have reenergized the use of castings for industrial equipment, but especially in motor-vehicle manufacturing--particularly ferrous castings for axles, crankshafts, and camshafts.
Business also has been brisk in the titanium castings market because of the huge backlog in commercial jetliner and general aircraft orders. Little wonder that some buyers question whether supply will be sufficient this year and next for non-aerospace castings. They point to the fact that Titanium Metals Corp. has shut down its Pomona, Calif., castings facility and folded its Albany, Ore., casting operations into those of Wyman-Gordon Co. in a new joint venture. Since Timet has a 10-year supply agreement with Boeing Commercial Aircraft, the single-largest end user of titanium castings, most of the joint venture's product will go to Boeing.
Aluminum castings are gaining wide acceptance by automakers for other items ranging from engine blocks and cylinder heads to brake calipers and rotors, and from pump bodies to compressor parts. Thomas K. Walker, president of Amcast Automotive in Dayton, Ohio, also sees permanent-mold and squeeze-cast aluminum parts for such automotive undercarriage structural applications as crossmembers, supports of various kinds, and subframes. Stainless steel castings have been replacing carbon steel castings for industrial valves, pumps, and fittings.
"The automotive industry is, and will remain, the primary end-use market for aluminum die castings," says a Business Trends Analysis report. Die castings are made by forcing molten metal under high pressure into reusable metal dies. The process is often described as the shortest distance between raw material and finished product. Die-cast parts are lightweight, offer good corrosion resistance, good mechanical properties, and dimensional stability. They usually are nonferrous--aluminum, zinc, and magnesium being the most widely used, followed by hybrid zinc-aluminum alloys, copper, tin, and lead. These light-metal castings are going into numerous near-net shape applications that formerly were machined-metal components for electrical equipment, appliances, office equipment, computing machinery, toys and sporting goods, household and contractors' products, and powered hand tools.
Throughout North America, die-cast parts use was 1.66 billion lb last year, but it may slip to 1.63 billion lb this year, the North American Die Casting Association cautions. That's because of mid-year uncertainties about second-half demand from appliance makers and automotive and off-road-vehicle parts producers. Still, these U.S. and Canadian demand totals are at record levels. That's because of all the new uses for die-cast parts. As determined by the Die Casting Development Council, these include baffles and covers for automobile cylinder heads and seat stanchions, bases for airline ticket-printing machines, heat sinks for microprocessor chips, jacks for telephone switching stations, tensioning tools for steel strapping, automotive cross members, motor-vehicle engine bearing beams, and 'ruggedized' housing for laptop computers used in outdoor commercial and industrial applications.
Forgings growth exceeds forecasts
North American sales of forged steel, aluminum, titanium, and high-temperature alloys exploded by 18.7% last year to a record $6.2 billion, says the Forging Industry Association. That sales growth by the 250 custom-forging firms in the U.S. and Canada was better than three times the 6% growth forecast initially. And it was caused largely by an unexpected $4.6 billion in shipments of custom impression die forgings to the automotive, commercial aviation, and aerospace industries. This year's still-strong demand from makers of aircraft engines, internal combustion engines and turbines, heavy machinery, machine tools, off-road equipment, railroad hopper cars, and even large freighters looks to keep forgings sales in excess of $6.5 billion.
Leadtimes from almost 60% of the independent impression-die and open-die forgers are out between 20 to 24 weeks. So it's little wonder that buyers have been hammering service centers for standardized forgings. (A forging is a piece of metal that has been hammered, pressed, or rolled under great pressure--the technical term is "plastically deformed"--into a specified shape that will maintain strength, toughness, and reliability when subjected to loads and stresses.)
A decade ago, the industry had 40% excess and inefficient capacity. Not anymore. Forgers have trimmed inefficient capacity, cost-control measures for raw materials have been introduced, new-technology processes have been installed, productivity has improved, and firms have begun to emphasize niche marketing (concentrating either on high-volume work or on specialized low-volume products). Also helping the industry has been the boom in capital spending by North American manufacturing and the pickup in production of freighters and barges, tractor trailers, and jetliners. Note that Wyman-Gordon, the world's largest supplier of titanium forgings and a major producer of nickel-alloy forgings, had 78% of its total business in aerospace and 36% of its total revenues in aircraft engines, according to filings with the Securities and Exchange Commission.
The chief competition for forgings is from such substitute materials as powder metal parts, castings, plastics, and ceramics. These materials all are used in the same end-use markets as forgings. And there had been some earlier suggestions that forging sales would start a steep decline in 1998 and beyond. But this assumption no longer holds. Most of the metals mavens surveyed estimate that 1998 sales will rise to $6.76 billion. Part of the reason is the apparent steep slippage in ferrous and nonferrous forgings from offshore. Since the domestic forging shops have completed major quality-improvement, production-efficiency, and value-added machining expansions, the heavy forged parts out of North American mills are globally competitive. Furthermore, such technological advances as computer-aided design and manufacturing are becoming widespread.
In fact, the Forging Industry Association now sees long-term growth in domestic sales from commercial aviation parts, aircraft engines, and another round of new-business opportunities from the second wave of automotive "transplants" as the European-owned domestic auto plants are accelerating the purchase of powertrain (engine and transmission) components from domestic forgers. There also seems to be solid sales to makers of the very large turbines and other forms of machinery for power-generation projects.
According to industry insiders, heavy industry itself is providing some impetus for custom open-die forging sales. About 16% of these forgings go into the equipment used to build steel mills, metal-finishing plants, cement and mining operations, pulp and paper mills, petrochemical plants, and material handling systems.
Even these larger forgings are profiting from the strong output of such transportation products as passenger cars, trucks, buses, trailers, ships and barges, airplanes, trains, guided missiles, and space vehicles. Custom impression and custom open-die forgings also have been in demand from makers of stationary engines, off-highway vehicles, heavy construction vehicles, and mining equipment.
Automotive fuels powder metallurgy
The powder metal industry "enjoyed another great year in 1997'' and a "repeat performance" is expected in 1998, says Donald G. White, executive director of the Metal Powder Industries Federation in Princeton, N.J. In his recent state-of-the-industry report on powder metallurgy, he says that "the success of powder forging, hot isostatic pressing, rapid prototyping, spray forming, high-temperature sintering and injection molding has propelled North America, the world's largest powder metal market, into new growth levels."
Total North American shipments of metal powders last year amounted to 485,617 tons, up 11.9% from 1996, when the total volume was 433,875 tons. Shipments of iron and steel powders in North America increased for the sixth straight year in 1997, at an 11% growth rate, to 389,379 tons from 350,603 tons in 1996. Shipments of stainless steel powders established a record of 5,246 tons in 1997, up 7.3% from 1996. Shipments of aluminum powders increased by about 30% to 44,417 tons in 1997 over 1996, while shipments of copper and copper-based metal powders rose by 6.7% to 24,444 tons. Last year's nickel powder volume amounted to 11,536 tons, up 7.9% from 1996, and shipments of tungsten carbide powders in 1997 amounted to 6,371 tons, a slight improvement of 0.5% over 1996. Molybdenum powder shipments in 1997 were about the same (2,500 tons) as they were in 1996, but tungsten powder shipments declined by 11.8% to 687 tons in 1997. Tin powder shipments improved 2.6% in 1997 to 1,037 tons.
Based on Purchasing computations, that means that parts made from compacted iron, steel, and various nonferrous powders rose by almost 12%--well ahead of forecasts--to a new record at 405,648 tons. This year, if the mavens are accurate, powder-metal-parts use will grow another 6.5% and reach 432,013 tons. White agrees that "all indicators point to continued growth in 1998."
Iron/steel powders regularly account for 80% of all metal powder shipments. So although regional capacity for these powders already is 550,000 tons/year, current and projected strong future demand has North American ferrous powder producers investing heavily in new capacity, says White. In fact, new capacity overall is needed, says Richard Mason, VP/metal powder sales and marketing at Ametek Inc.'s specialty metal products division in Eighty Four, Pa. Mason projects total powder metal shipments rising 15% to 556,000 tons/year by 2001.
"The ability to produce powder metal components near to net-shape requirements, with a reduction in manufacturing costs" are among the reasons he cites for demand growth. He expects specialty metal powders--especially stainless steel--to "contribute significantly" to rising use of powder metal parts because of expanding demand for parts made from these powder materials in automotive components, including exhaust-system flanges, sensor bosses, sensor rings, and engine camshaft lobes.
Mason adds that his forecast could be conservative if powder metal producers and parts manufacturers "do a good job of meeting users' requirements in such areas as material property improvements, new alloy developments, densification, and cost control."
The automotive parts market continues to dominate the powder metal parts industry in North America with 70% of the business in automotive applications. White thinks this will continue, and projects the average North American-built family vehicle made in the year 2000 will contain 50 lb of powder metal parts, compared to 32.5 lb in 1998. Light trucks already use about 45 lb each of powder metal parts. In fact, parts made by powder metallurgy now are found in connecting rods, cam drive sprockets, camshaft bearing caps, valve guides and valve seats, clutch assemblies, transmission components, ignition systems, and shock absorbers. More parts are contemplated as more producers switch to such next-technologies as metal injection molding and powder forging to make automotive fuel injection systems, anti-lock brakes, and airbags.
Not long ago, nothing bigger than an engine connecting rod or a bearing cap was made from powder metallurgy. But now, powder metal parts can be as large as the small forgings and castings they are trying to replace in cars, trucks, off-road equipment, tractors, lawn and garden equipment, major household and commercial appliances, and power tools. White says new parts are being developed for builders' hardware, industrial motors and controls, hydraulics, and recreation products.
So, even if overall end-product output stalls in 1998-1999, marketers expect these and other new uses for nonferrous and specialty-metals powder metal parts to drive increased longer-term demand. These will offset any market losses to plastics and die castings in the business machines, hardware, and hand tools sectors. A study by Business Trend Analysts points out that not only is demand strong for traditional iron, steel, aluminum, and copper metals, but there also has been strong growth in shipments of beryllium, tantalum, and other specialty metal powders. White adds that powder metal tool steel is rising in use by 10% annually and the aviation/aerospace industry, jet engine, oilfield, and petrochemical markets are using more and more nickel-cobalt and other superalloy parts made from metal powders.
Modern powder metallurgy began with the tungsten filament for electric light bulbs in the early 1900s. Later developments: tungsten carbide cutting tools in the '20s, self-lubricating bronze bearings in the '30s, automotive parts in the '60s, jet aircraft engine parts in the '80s. Powder metal parts are made by compacting powder into precise forms (much like squeezing the powder into rigid precision dies at pressures up to 50 tons per square inch) at room temperature, and then sintering the molded component in a high-temperature, controlled-atmosphere furnace to bond the metal particles together. This last step metallurgically fuses the metal powder particles without melting them.
Powder metallurgy is a $2-billion market in the U.S. and Canada, and suppliers are spending well over $200 million annually in new equipment installations or old equipment upgrades. "There is a continuing trend toward more sophisticated controls and higher temperature furnaces, all capable of providing higher-strength and more reliable parts," says White. He adds that part makers using metal injection molding "are turning out amazing product designs." All this, ironically, has extended leadtimes. These days, it takes an average of seven weeks to get most powder metal parts, or as long as 20 weeks for the specialty-metal parts that require distinctive processing.
Variety of uses help extrusions defend their turf
Aluminum extrusion shipments set a record at 3.5 billion lb last year, partly because extruded parts have gained credibility in making numerous consumer durables. And, according to industry insiders, sustained strong growth is expected through 1999 from the key end-use markets of building and construction, transportation, and consumer durables. Note that extrusion leadtimes jumped out to a month or more some months ago and have stayed there for some time.
Extruded aluminum is not impaired by exposure to low temperatures but actually gains strength as temperature is reduced, making it an appropriate material for frigid, space, or cryogenic applications. Thus, there has been recent expanded use in the production of air conditioners, freezers, and refrigerators. Also, since solid aluminum alloys are non-toxic, extrusion-based parts are used in food preparation and chemical processing. And there has been steady growth in the use of light-metal extruded parts in numerous commercial equipment and light machinery products.
Despite pesky competition in traditional construction-product markets from polyvinyl-based plastics, extrusion shipments for electrical applications continue to show a healthy increase. Aluminum extrusions also now are used to make truck, trailer, trash hauler and railroad car bodies, patio furniture, office furniture and equipment, coaxial cable and electrical conduits.
And then there is the automotive market. There has been a serious marketing effort by extruders to increase use by automakers by using the light metal for suspension crossmembers, rear ends, and heat exchangers. Extruded aluminum components now include subframe parts, door safety beams, drive shafts, radiator tubing, luggage racks, engine mounts, bumper beams, seat and headrest hardware, and air conditioning parts. The Chevrolet Silverado and GMC Sierra models for 1999 will use 18 lb of aluminum enclosure extrusions in each truck, and General Motors expects to build about 700,000 of those trucks this year. These enclosure assemblies represent what many aluminum industry executives regard as the most important new application for extrusions in years.
"There has been a big push by the aluminum industry in cooperation with automotive producers and governmental agencies to make lighter cars, and the result has been the use of more aluminum extrusions per vehicle," notes Jay M. Linard, senior VP of Alumax Semi-Fabricated Products Group (which includes extrusion operations). Over the next decade, GM expects to use 20 million lb/year of aluminum extrusions for these enclosures on the Silverado and Sierra models and the Suburban, Tahoe, and Yukon sport-utility vehicles. "Passenger cars, rail cars, and aircraft are new major-volume targets of opportunity for extruded aluminum firms," says Keith Carruthers, chairman of the Aluminum Extruders Council (who also is president of the Cradon Extrusion Group in Mississauga, Ont.)
Aluminum extrusions are pure or alloyed aluminum billets or ingots pushed through a die into such specific near-net products as rod, solid structural shapes, hollow shapes, semi-hollow shapes, drawn tubing, and coiled tubing. Few commercial metals can be extruded in as wide a variety of configurations with desirable combinations of physical properties as aluminum. Aluminum extrusions provide a high strength-to-weight ratio, close tolerances, ease of joining, good machinability, excellent corrosion resistance, high electrical conductivity, and excellent thermal properties, says Donn Sanford, president of the extruders' council.
The extrusion supply sector--roughly equivalent to the steel and brass industry's bar, rod, light structural, and seamless tube mills--has been beset with excess capacity and alternative-materials competition for some time. The shakeout, which started when demand slumped early this decade, appears over with the survivors installing new and more efficient production equipment. There now are fewer than 80 extruders (several integrated aluminum firms, some major extrusion specialists, and numerous small-press shops) operating less than 400 presses throughout North America. For about a year now, many of these extruders who use aluminum for parts in electrical building products have seen the same hectic sales pace being reported by extruders of copper and brass. And lately, extruders of white and red metal parts for electronics products welding systems and air conditioning and refrigeration systems have been rising at a 10% annualized rate.
More than a third of extruded aluminum shapes are bought for use in the building and construction sector. Uses for aluminum profiles in the building and construction industry cover a wide range of products, from residential windows and high-rise curtainwall to decorative fencing and non-slip stair treads to structural members for bridges. Extrusions often are the parts of choice, says Sanford, because the integrity of an extrusion is much more consistent than, for example, castings.
Annual rate-of-growth for extruded parts has been more sluggish than sales of castings, forgings, and powder metal parts. This can be explained, for the most part, by the marketplace assault from such alternative materials as roll-formed steel, metal matrix composites, fiberglass-reinforced plastics, extruded coppermetals, aluminum and magnesium die castings, special-alloy steel precision castings, molded plastics, polyvinyl chloride plastic shapes, and wood products. However, long-term fundamentals are sound, insists Sanford. And the analysts seem to agree. They project growth in demand this year to be a solid 10% to 3.8 billion lb, and to climb another 5% in 1999 to a once only dreamed about 4 billion lb.
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