The North American metalcasting industry is part of a connected world, and exploring global mega trends is important when strategizing your company’s future. World mega trends include globalization, climate change, urbanization, scarce resources, population growth, electrification, communications/big data, and an aging population. These trends point to transportation, food, infrastructure, power, water and health as key markets for the future in which foundries should try to position themselves.

For example, Figure 1 shows how power generation has evolved over the last 40 years and how it is expected to change in the future. The share of coal, oil, gas and natural resources use is shrinking every year while renewables are going up. The world is seeking renewable ways of power generation and foundries can be a part of this change.

Looking at the automotive industry, the main trends have and will continue to be on the reduction of fuel consumption, emissions and vehicle weight and the development of electric and hybrid cars, as well as car connectivity and autonomy. The industry is pressing to develop and use new materials that are lighter weight with more wear-resistance to accomplish these goals. 

The drivers for vehicle weight reduction include oil price increases plus horsepower increases plus emission reduction regulations (Fig. 2). Since 1975, horsepower has increased greatly while vehicle weight has not increased as much. The relation of power to weight is not that high. To continue this trend, OEMs need lighter and more resistant materials.

We have also witnessed how electric vehicles are growing rapidly. Figure 3 is a projection of market share growth. Battery electric passenger light vehicles and plug-in hybrid electric vehicles are expected to expand significantly in the next decade. Foundries might consider offering more alloyed products to meet the changing goals from the automotive customer.

At the same time, the materials used in automotive are also changing significantly. Figure 4 shows the share of different materials used in the aviation, wind, and automotive markets. The makeup of aviation and wind equipment between 2010 and 2030 does not show much of a change compared to automotive. In automotive, the portion of high-strength steel used is trending from 15% in 2010 to 38% in 2030, while regular steel goes from 52% in 2010 to 13% in 2030. This is important because it’s going to affect the automotive steel scrap that iron foundries use. In the future, this raw material will change from low-alloy steel scrap and will have high contents of chromium, molybdenum, manganese, etc. Foundries will need to learn how to use this new raw material. 

In the end, the market is open for new developments and ways to offer better products. Customers are not buying chemical elements or alloys, they are buying mechanical properties. What the customer wants is performance of the material in terms of durability, heat distribution, damping resistance, strength, etc. The possibilities for new materials and new composites are wide open. Figure 5 is an example of how automotive OEMs identify the need of materials. They are seeking high strength in some areas, ductility in others, and they are open to any material that will achieve this.

Today’s customer is also looking for more than a cheap component. They are looking for suppliers that provide perfect quality and delivery, operational excellence, flexible and cost effective, cost transparency, fully finished parts, support to piece optimization, and integration of components.
If a foundry can accomplish perfect quality and delivery and operational excellence, it is probably considered a reliable source, but the customer wants more. A foundry that is also flexible and cost effective, could be considered a competitive supplier, and one that is willing to also share costs and opportunities is a committed supplier. Foundries that supply fully finished parts are value-added providers, and suppliers that also provide support for piece optimization are considered technically capable. Finally, those suppliers that can offer integration of components are helping the customer with supply chain optimization.

Foundries in North America will continue to have a difficult time competing on price. China, a low-cost casting nation, produces a third of world’s castings (Figs. 6-7), so the market share of low-cost jobs is tight. 

How does a foundry remain competitive and attractive in a changing world, then? The challenges are real. In a typical day, a foundry has 137 variables to control. (This estimate is based on Blackhawk Foundry, an iron foundry in Mexico.) In order to be competitive, you need to be within standard of each of those 137 variables. 

And the breakeven point is very high. Seventy percent of the total cost to operate a foundry goes to direct materials, energy and labor. Overhead is also a fixed cost. That leaves operational efficiency, asset utilization, and management as key factors affecting an iron foundry’s margin and profit (Fig. 8).
In order for a metalcasting facility to be profitable, it must have a high level of efficiency, raw materials purchased at market level, flexibility to volume and lot sizes, high-capacity utilization, and the right mix of products and prices. In order to be profitable a foundry probably has to run at 70%-80% capacity.
Looking at a simplified profit statement, shown in Table 1, if sales equals $100, and $30 of that goes to materials, $25 goes to labor, $15 goes to energy and $20 goes to overhead, you can expect a profit of $10. When there is inefficiency, that profit goes down, and the wiggle room is not great. For example, 3% inefficiency affects the profit by almost one-third. And 12% inefficiency makes the part unprofitable altogether. But it works the other way too—increased efficiency can dramatically improve the profit. 
Foundries need to move out of commodity foundry products—where the customer is willing to buy from whoever who sells it for less. The projected profit is low and extremely sensitive. Instead, metalcasters should be considering a strategy that offers more for the customer. This requires leadership to question and review the business model and the restrictions being given to customers, which are blocking market growth. These restrictions include:

• Minimum wall thickness required.
• Molding pattern and coreboxes required.
• Draft angle required.
• Material hardness cannot be homogeneous throughout the piece.
• Open dimensional tolerances required.
• Surface finish cannot be smooth and perfect.
• Porosity-free castings are not guaranteed.
• Castings must be machined in order to get final working dimensions.
• Delivery time is 4-6 weeks.
• Minimum order quantity.
• Changes in purchase orders not accepted.

These are normal requirements and foundries have listed them out of necessity for many years. Unfortunately, they put up major hurdles for the customer trying to buy castings. It is time to review our standard restrictions and question whether any can be removed. For example, a few years ago, it was not considered possible to make a part without a molding pattern and corebox, but with 3D printing, we can now do that.

According to Hitachi Solutions, a manufacturing consulting company, some manufacturing trends in the coming years include Internet of Things, predictive maintenance, shifting focus from B2B to B2B2C, leveraging supply chain for competitive advantage, ERP systems to streamline processes, greater visibility into Big Data, virtual and augmented reality, 3D printing/additive, reshoring, finding and retaining tech-savvy employees.

These manufacturing trends are not just for OEMs—foundries should also be looking to implement them. As customer demands and needs are changing rapidly, metalcasters need to understand the entire supply chain and how they can play a more important role in the chain. The customer is moving to smaller production lots and more grades of materials. If a foundry can provide more of those, it might become more valuable to the customer. Reducing total cycle time from order to delivery is also very important. Finding ways remove customer restrictions, reduce time to develop new castings and minimize pattern investment will help a foundry be more competitive. 

Ultimately, remaining profitable is critical for sustainability because it allows you to support new investments in technology that are necessary to keep your business relevant. Take the time to identify the key technology that is critical to your business and implement it. Find ways to be flexible in these changing times to secure a strong future.     

This article is based on the Cast Iron Honorary Lecture presented by Patricio Gil at the 2021 Metalcasting Congress.

Click here to view the article and figures in the digital edition of November 2021 Modern Casting.