Malleable Iron Foundries

SIC 3322

Industry report:

This industry is made up of establishments primarily engaged in the manufacturing of malleable iron castings.

Industry Snapshot

Casting molten metal is one of the most efficient and economical ways of shaping metal products. Malleable iron foundries are typically large plants in which workers make metal products called castings by pouring molten metal into molds that then are left to harden. Malleable iron is made from white cast iron by annealing it at temperatures from 1500 to 1850 degrees Fahrenheit over several days. When annealed, the iron carbide breaks up, producing rosettes of graphite. The iron is known for its shock resistance, strength, machinability, and ductility. Products such as engine blocks, iron ornaments, and valves can be made from malleable iron castings. The automotive, railroad, construction, agricultural implement, and hardware industries have wide uses for malleable iron castings.

According to the U.S. Census Bureau, total ferrous metal foundries employment fell to 84,056 in 2008, down from 85,961 and 94,600 workers in 2007 and 2006, respectively. The total value of shipments for the iron foundry industry was $10.3 billion, down from $10.8 billion and $12.5 billion in 2007 and 2006, respectively. Several distinct categories of foundries are identified by the U.S. Census Bureau. The largest industry segment was gray iron (33.4 percent of industry's shipments), followed by ductile iron pressure pipe and fittings (24.5 percent) and other ductile iron castings (28.5 percent). Cast iron soil pipe and fitting, cast iron pressure pipe and fittings, standard malleable iron castings, and molds and stools for heavy steel ingots made up smaller segments of the industry.

Organization and Structure

Castings are used in 90 percent of all durable goods. As of 2008, there were 2,336 operations in the U.S. metalcasting industry, down from 2,950 metal foundries in the United States in 1999. In 1995, there were more than 3,100 U.S. metal foundries making more than 100,000 distinct products. Malleable iron casting production represented approximately 1.7 percent of the total U.S. casting output. Capacity utilization in 1990 for malleable iron foundries was 78 percent, just slightly better than the 75 percent average for the entire foundry industry. This reflected the high rate of disinvestment in plants and equipment that occurred during the 1980s.

As an indication of the decline of this industry, government statisticians classify malleable iron foundries as job shops. These foundries generally operate on a job or order basis by manufacturing castings for sale to others, or for interplant transfer. In the 1970s, half of all malleable iron foundry castings came from in-house or captive plants. In the 1980s, however, a major shift occurred when large, independent manufacturers of railroad cars, oil-drilling equipment, heavy machinery, automobiles, trucks, and major appliances sold off, shut down, or consolidated their captive operations. Near the end of the century, upward of 75 percent of all malleable iron castings came from independent or custom casters. These foundries produce two types of malleable iron: standard malleable iron and pearlitic malleable iron. Most of the malleable iron foundries are found in the Midwest.

Background and Development

Cast iron was first made by the Chinese around the eighth century B.C. It was not until the invention of the blast furnace by the Europeans in the fourteenth century, however, that large quantities of cast iron were produced. North America's first operational foundry was built in 1642 along the Saugus River, near Boston. About eight tons per week of gray iron castings were produced at the site.

Malleable iron, also called American blackheart iron, replaced gray iron as the standard cast-metal around 1820, when the commercialization of secondary heat treating of the metal was first used. In 1966, malleable iron castings production in the United States accounted for 50 percent of the total malleable iron cast in the world. The year 1967, however, saw ductile iron castings production surpass malleable iron castings production in the United States. U.S. malleable iron castings production accounted for roughly 12 percent of the world's total production in 1995.

During the 1960s, average yearly production of malleable iron castings reached its peak at around 983,300 metric tons (mt). Production during the decade of the 1970s remained at respectable average yearly production levels of 854,900 mt. The 1980s, however, reflected the difficult economic times for the industry, with average yearly production levels shrinking to 346,100 mt.

The foundry industry still ranks within the top ten manufacturing segments in the United States. Still, it has been battered by technological and competitive forces since the 1980s. The high inflation rates, high interest rates, high value of the dollar, and deep recession during the early 1980s hurt this industry tremendously. The largest customers of malleable iron castings, the domestic heavy equipment manufacturers, realized that these economic conditions favored offshore sources of malleable iron castings. Foreign competitors not only had lower prices when compared to American malleable iron sources, but they also had high quality manufacturing capabilities. Consequently, the value of castings shipments in the United States dropped 55 percent from the 1977 level of $721.9 million to $323.2 million in 1982.

The high interest rates also raised the industry's cost of capital, which is the price to finance and replace existing operations. This situation halted any new capital expenditures on plants and equipment in the United States. Capital reinvestment dropped 85 percent between 1978 and 1983. Again, the high dollar, high interest rates, and high cost of capital made it very expensive to reinvest in the business of producing malleable iron castings. The lower rates of reinvestment by American malleable iron casters at a time when foreign competitors were raising their levels of casting quality put U.S. foundries at a technological disadvantage. In 1986, the Reagan Administration's decision not to sanction import restrictions further hurt the industry.

To illustrate the damaging effects of adverse economic conditions and increased foreign competition, total shipments of 1.17 million metric tons (mmt) of malleable iron castings in 1969 fell to production levels of 284,000 mt in 1982. A small recovery in the industry occurred in 1984 when production increased to 380,000 mt, but production soon slid back to 299,000 mt in 1989 and hit the all-time low of 207,000 mt in 1991. Production then increased to 260,000 mt in 1994 before slipping yet again to approximately 226,000 mt in 1996.

Malleable iron foundries faced an ironic dilemma in late 1999, as demand from the booming auto industry surpassed expectations, pushing foundry capacity to the limit. Auto sales of 17 million units far exceeded predictions of 15 million, leaving foundries flat-footed in the race to keep up with auto-part needs. A production line operation running 24 hours a day took its toll: machinery had no down time for maintenance; workers burnt out on overtime; and companies had to payroll this overtime as well as pay premium rates for just-in-time shipments. Instead of profiting from this increased demand, foundries lost money.

An increase of imported castings hurt the entire metalcasting industry in the United States in the early 2000s. Foreign foundries were meeting 20 percent of the metalcasting demand in the United States by late in the first decade of the twenty-first century. The production of malleable iron castings in the United States in 2005 was less than 75,300 mt.

In 2006, U.S. metalcasting production fell 3.4 percent to 12.5 mmt. While the outlook appeared to improve for other segments of the industry as the decade neared an end, malleable iron foundries still faced many challenges.

Demand for Cheaper, Lighter, and Stronger Components.
Many U.S. end use manufacturers are substituting plastics, ceramics, composites, lighter alloys, and nonferrous castings for malleable iron in appliances, aerospace equipment, builder's hardware, and automotive components to help them compete in a global economy and to meet government regulations.

Changing Markets.
Changes in plumbing fittings and electrical standards could further erode an already dwindling demand for malleable iron castings. According to the U.S. Census Bureau, California, Ohio, Pennsylvania, Michigan, Indiana, and Wisconsin were the only states with more than 30 iron foundries in 2005. Illinois and Texas each had 29 of the 572 iron foundries in the nation.

Replacement by Ductile Iron Castings.
Related to the need for lightweight and high-strength components and parts is the growth in the replacement rate of ductile iron castings for malleable iron castings. Malleable iron competes with ductile and gray iron in the traditional light and heavy industrial manufacturing markets, but ductile iron is lighter than malleable iron. Ductile iron doubled its share of the market since the 1990s because of its unique compatibility with casting techniques called"near-net-shapes." This method of casting allows for thinner-walled castings with intricate and complex shapes and sizes. Secondary finishing like blasting and sanding are virtually eliminated through the use of this process. In the automotive industry, ductile iron engine blocks are increasingly replacing malleable iron engine blocks. In the housing industry, ductile iron valve castings are expected to continue to replace malleable iron valve castings because of their superior resistance to shock and impact. Ductile castings are also replacing malleable castings in the farm equipment, electrical fittings, and plumbing fittings markets. As a result of all these factors, the production of ductile iron castings in the United States had risen to 4.13 mmt by 2006, almost as much as gray iron castings (4.26 mmt).

Current Conditions

According to the World Foundry Organization's annual survey, global casting production, including ferrous and nonferrous metals, fell in 2008 by 1.5 percent, from 94.9 mmt in 2007 to 93.5 mmt in 2008. The United States reported its third consecutive year of decline and a general overall trend toward reduced capacity. However, with 564 iron casting foundries in 2008, the United States remained a global leader in cast iron production, topped only by such countries as Turkey with 774 facilities, Brazil with 566 facilities, and China, which dwarfed all nations with 18,000 foundries (data were unavailable for Russia and India).

In 2008, the United States produced 3.502 mmt of gray iron, 3.597 mmt of ductile iron, and 60,000 mt of malleable iron. As such, among the countries surveyed by the World Foundry Organization, the United States was the world's third largest producer of gray iron (following China and India), the second largest producer of ductile iron (following China), and fifth largest producer of malleable iron (following Brazil, China, Russia, and India).

The iron foundry industry suffered from the effects of the recession that hit the U.S. economy beginning in the last quarter of 2008 and extended through 2009, with slow recovery occurring into 2010. The recession, combined with rising costs of raw materials, was expected to drive further consolidation within the industry. In addition, the industry was expected to continue to trend away from gray iron in favor of ductile iron. Based on the depressed demand of 2009, the American Foundry Society anticipated that U.S. metalcasting would increase by over 12 percent between 2010 and 2016.

Industry Leaders

Milwaukee, Wisconsin-based Grede Foundries Inc. generated 2007 sales of $604.7 million, including production of gray iron, ductile iron, and steel castings. However, in late 2009, Grede expanded its presence in the foundry industry by merging with Citation Corporation to create Grede Holdings LLC. The new company, which operated 13 foundries (six Grede and seven Citation) plus two machine shops around the country, employed 3,200, had about 575,000 tons of capacity, and had the ability to generate roughly $700 million in sales, making it one of the largest iron foundry conglomerates in the industry.

Neenah Foundry Company of Neenah, Wisconsin, posted revenues of $333 million in 2009. Its parent company, Neenah Enterprises, emerged from Chapter 11 bankruptcy in July 2010.

America and the World

China was the largest metalcasting producer in the world, accounting for 36 percent of all metalcasting in 2008. According to the Census of World Casting Production, China had 18,000 iron foundries in 2008 (Turkey was second with 774). China produced 16.4 mmt of gray iron, 8.2 mmt of ductile iron, and 500,000 mt of malleable iron. China's facilities tend to be small and inefficient. China's average production per plant in 2008 was 1.117 mmt, compared to 4.97 mmt per plant in the United States and 9.64 mmt per plant in Germany, the highest efficiency rating.

The top 10 casting countries (including ferrous and nonferrous metals) in 2008 were, in descending order, China (33.5 mmt), the United States (10.8 mmt), Russia (7.8 mmt; based on 2007 numbers), India (6.8 mmt), Germany (5.8 mmt), Japan (5.7 mmt), Brazil (3.4 mmt), Italy (2.6 mmt), France (2.4 mmt), and Korea (2.1 mmt).

Research and Technology

Many industry observers regard exotic materials and thin-walled castings as the wave of the future. Some of the rapid technological changes occurring around malleable iron casters are new mold designs; new metal casting techniques; new computerized casting, finishing, and monitoring; and new purchasing procedures by domestic consumer and industrial product manufacturers. The industry is under attack by new technology parts-making processes, and it has been slow to change to compete with these more efficient casting processes.

For future survival, American malleable iron foundries must keep up with the technological changes in the industry. New investments in operations to improve melting, alloying, metal flow, die and mold filling temperature control, and lubrication will all help in this regard. Today's global marketplace also demands stronger quality control, price restrictions, and tighter specifications. Casting has moved from an art to a science. The days of testing sand moisture by hand are over, because computer controls are now what create the most exacting tolerances. Partnership arrangements between foundries and their customers and suppliers will help to promote future growth. Pricing, quality assurance, service, and the consolidation of suppliers using just-in-time production practices to keep costs low and response time to customers high will help protect domestic malleable iron casting operations from further market declines.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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