U.S. International Trade Commission

Robert A. Rogowsky

Director of Operations

COMMISSIONERS

Address all communications to

Secretary to the Commission

United States International Trade Commission

Washington, DC 20436

Deanna Tanner Okun, Vice Chairman

Marcia E. Miller

Jennifer A. Hillman

Charlotte R. Lane

Daniel R. Pearson

Karen Laney-Cummings

Director, Office of Industries

Stephen Koplan, Chairman
U.S. International Trade Commission

Washington, DC 20436

May 2005

www.usitc.gov

Publication 3771

Foundry Products: Competitive Conditions

in the U.S. Market

Investigation No. 332--460
This report was prepared principally by the Office of Industries

Project Leaders

Judith--Anne Webster

judith--anne.webster@usitc.gov; (202) 205--3489

Deborah A. McNay

deborah.mcnay@usitc.gov; (202) 205--3425

David Lundy

david.lundy@usitc.gov; (202) 205--3439

Primary Reviewers

John Benedetto

Laura Bloodgood

Contributing Authors

Vincent DeSapio, Queena Fan, Dennis Fravel, Gerald Houck, Harry Lenchitz, Christopher Mapes,

Heather Sykes, Craig Thomsen, Alan Treat, Karl Tsuji, Norman VanToai, and Linda White

With special assistance from

John Ascienzo, Diane Bennett, Joanna Bonarriva, Phyillis Boone, Robert Carr, John Fry,

Sharon Greenfield, John Kitzmiller, Kenneth Kozel, Ruben Mata, Seamus O’Connor,

Cynthia O. Payne, Joyce Prue, Frederick Ruggles, Tracy Quilter, Monica Reed, and Janice Wayne

Under the direction of

Larry Brookhart, Chief

Natural Resources and Metals Division
i

ABSTRACT

This investigation provides an overview of the global foundry industry and U.S. market during 1999-

2003, including principal metals and casting methods, production steps, technology, and factors of

competition affecting the industry’s performance and competitiveness. A profile of the U.S. foundry industry

examines business trends and practices, financial performance, factors of production, and policies that affect

domestic producers. Purchasing patterns and practices of downstream industries are addressed and the

principal metal foundry industries are examined together with analysis of 10 selected iron-, steel-, aluminum-,

and copper-based foundry products used by downstream industries. Significant foreign industries in Brazil,

Canada, China, India, Korea, Mexico, and Taiwan are also examined.

The economic slowdown in 2000 and 2001 adversely affected the domestic foundry industry.

Additionally, many high-volume commodity-type castings are increasingly sourced from foreign suppliers.

Moreover, U.S. import statistics show increasing imports of downstream products containing the foundry

product groups during 1999-2003, which suggests that purchases of downstream products containing foreign

metal castings replaced use of U.S. foundry products.

 Demand for metal castings is largely influenced by trends in the automotive industry, which accounts

for more than one-third of reported total U.S. castings shipments. Despite an 8-percent decline in motor

vehicle production during the period, a shift from iron to aluminum castings for certain automotive

applications favorably affected U.S. foundry producers in these markets. Markets for ductile iron soil and

pressure pipe were also reported as strong. Steel castings principally used in the railway equipment,

construction, and power generation industries benefitted from an upturn in domestic manufacturing, but faced

an overall decline in shipments because U.S.-based castings producers have expanded foreign operations to

supply major customers that have moved manufacturing offshore. Copper castings lost market share to lowercost PVC for valves and fittings. 

U.S. purchasers of foundry products responding to the Commission questionnaire principally

represented the motor vehicle, industrial machinery, mining and oil/gas field machinery and equipment, valve

and pipe fittings, and construction machinery and equipment industries. In addition to quality, price is

considered a significant factor in purchasing decisions, with nearly one-half of responding purchasers

indicating that they usually buy castings at the lowest price. Although U.S. purchasers indicated that

domestic castings producers have lowered prices, improved product quality, and shortened lead times to

improve competitiveness, about one-third of reporting U.S. purchasers significantly increased their purchases

of foreign castings at the expense of U.S. castings, primarily because of lower foreign pricing.

Aside from intense global competition, the foremost problem of domestic producers is their inability

to adequately increase prices to compensate for significantly rising business costs, in part because purchasers

can source castings from lower-cost foreign producers and often have pricing leverage in the market. Further,

U.S. foundries are less able to absorb low product prices because they have higher costs relative to the

foundries in developing countries. Of all metal types, the aluminum and copper foundries have a more

favorable financial picture, whereas gray iron foundries face the most difficult financial condition. Despite

the overall profitability of rough metal casting operations, the number of establishments experiencing

operating losses doubled or tripled for gray iron, ductile iron, and steel foundries, and increased by over onethird for aluminum and copper foundries.

CONTENTS

Page

iii

Abstract ......................................................... i

Executive summary ............................................... xxvii

Chapter 1: Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

Purpose and scope of the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-1

Product and industry coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Study approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2

Questionnaire responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-3

Supplemental information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

Previous Commission investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-4

Chapter 2: Industry overview and factors of 

competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Overview of the castings industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Metal types . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-1

Iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-2

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-3

Malleable iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

Compacted graphite iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-4

Copper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

Casting methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

Sand casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

Shell-mold casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-5

Investment casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Lost-foam casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Permanent-mold casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Centrifugal casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-6

Die casting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Production steps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Mold making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Metal melting and pouring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-7

Shake-out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Final processing of rough castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Machining of castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8
CONTENTS–Continued

Page

iv

Chapter 2: Industry overview and factors of 

competition—Continued

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Melting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Molding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-8

Computer technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9

Other advanced technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10

Factors of competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-10

Chapter 3: U.S. foundry industry . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-1

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-3

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4

Capacity, production, and shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-5

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-6

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-9

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-11

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12

Business practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-12

Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-13

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-14

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-14

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15

Trade and monetary policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16

Federal/State programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-16

Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-19

Chapter 4: Purchasing practices of U.S. purchasers and

downstream industries . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

 

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

Purchaser characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-1

Contract process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-2

Castings origin issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3

Insurance, standards, and trademark issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-4

Purchasing decision factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-5

Pricing and cost issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-7

Import competition and industry responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9
CONTENTS

Page

CONTENTS–Continued

v

Chapter 5: U.S. iron foundry industry . . . . . . . . . . . . . . . . . . . . 5-1

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-2

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-2

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-4

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6

Capacity, production, inventories, and shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-7

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-9

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10

Rough iron castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-10

Machined iron castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-14

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-14

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-14

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-15

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-18

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-19

Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-20

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-21

Product profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25

Ductile iron crankshaft/camshaft castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-25

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-27

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-27

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-28

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-28

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-28

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-30

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-30

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-32

Price- and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-32

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-32

Gray iron motor vehicle gearbox castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-35

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-35

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-35

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-35

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-37

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-37

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-38

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-38

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-39
CONTENTS

Page

CONTENTS–Continued

vi

Chapter 5: U.S. iron foundry industry—Continued

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-39

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-41

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-42

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-42

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-43

Ductile iron bearing housing castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-45

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-45

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-45

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-45

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-47

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-47

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-47

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-48

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-48

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-50

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-50

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-52

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-52

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-53

Gray iron compressor housing castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-55

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-55

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-55

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-55

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-56

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-56

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-58

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-58

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-59

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-59

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-61

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-62

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-62

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-64

Gray iron pump castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-65

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-65

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-65

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-65

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-67

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-67

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-68

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-69

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-70

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-70

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-70
CONTENTS

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CONTENTS–Continued

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Chapter 5: U.S. iron foundry industry—Continued

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-73

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-73

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-74

Gray iron non-motor vehicle gearbox castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-77

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-77

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-77

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-77

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-79

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-79

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-80

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-80

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-81

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-81

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-83

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 5-84

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-84

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-85

Chapter 6: U.S. steel foundry industry . . . . . . . . . . . . . . . . . . . . 6-1

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-1

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-4

Capacity, production, inventories, and shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-4

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6

Machined castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-9

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11

Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-12

Product profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15

Steel valve castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-15

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-16

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-17

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-17

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-18

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-18
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Chapter 6: U.S. steel foundry industry—Continued

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-19

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-21

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-21

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 6-22

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-22

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-24

Chapter 7: U.S. aluminum foundry industry . . . . . . . . . . . . . 7-1

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-1

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-1

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-2

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-3

Capacity, production, inventories, and shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-3

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-5

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-6

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-6

Machined castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-6

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-9

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-10

Investment and debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-11

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-11

Product profiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13

Aluminum engine component castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-13

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-15

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-15

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-15

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-16

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-17

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-17

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-17

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 7-20

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-20

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-21

Aluminum suspension and steering parts castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-23

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-23

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-23

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-23

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-25

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-25
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Chapter 7: U.S. aluminum foundry industry—Continued

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-26

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-27

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-27

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-29

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-29

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 7-31

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-31

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-32

Chapter 8: U.S. copper foundry industry . . . . . . . . . . . . . . . . . . 8-1

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-1

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-1

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-2

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-3

Capacity, production, inventories, and shipments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-3

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-4

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-5

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-5

Machined castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-7

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-7

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10

Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-11

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-11

Product profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13

Copper valve castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13

Industry structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13

Demand characteristics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-13

Producer trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14

Production and inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-15

Producers' shipments and exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-15

Financial condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-16

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-16

Purchaser trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-18

Competitive assessment of price- and product-related factors . . . . . . . . . . . . . . . . . 8-19

Price and non-price factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-19

Producers' response to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-21
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selected foreign countries . . . . . . . . . . . . . . . . . . . . . . 9-1

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-1

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-3

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-3

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-5

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-5

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-6

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-7

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-7

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-8

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-8

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-10

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-11

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-12

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-13

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-13

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-14

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-14

Tax structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-14

Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-15

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-15

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-16

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-19

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-19

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-21

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-22

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-22

Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-23

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-24

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-25

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-25

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-26

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-26

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-26

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-27

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-28

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-28

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-31

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-31

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-34

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-34

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-35

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-35
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Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-36

Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-37

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-37

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-37

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-38

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-38

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-39

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-40

Management ability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-40

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-40

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-40

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-41

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-41

Tax structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-41

Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-41

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-41

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-42

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-43

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-43

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-45

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-45

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-46

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-46

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-47

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-47

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-47

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-48

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-49

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-49

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-50

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-50

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-51

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-52

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-52

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-53

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-55

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-55

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-56

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-56

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-57

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-57

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-57
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Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-58

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-59

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-59

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-59

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-60

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-60

Tax structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-60

Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-61

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-61

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-62

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-63

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-63

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-65

Production and employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-65

Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-66

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-66

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-67

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-67

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-67

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-69

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-70

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-70

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-71

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-71

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-72

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-72

Tax structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-73

Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-73

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-74

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-74

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-75

Industry profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-75

Business trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-75

Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-75

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-76

Factors of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-77

Raw materials and energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-77

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-78

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-78

Domestic policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-78

Federal/regional programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-78

Monetary/tax policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-79
CONTENTS

Page

CONTENTS–Continued

xiii

Chapter 9: Profiles of the foundry industry in

selected foreign countries—Continued

Exchange rates and interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-79

Tax structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-79

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-80

Worker health and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-80

Chapter 10: Competitive conditions in the U.S. foundry

market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-1

Summary of U.S. foundry industry condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-2

Competitive comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-5

Competitive advantages for foreign producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-9

Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-9

Labor costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12

Environmental regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13

Worker health and safety regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-13

VAT rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14

Competitive advantages for domestic producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14

Lead times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-14

Technical advice and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-15

Competitive concerns for both foreign and domestic producers . . . . . . . . . . . . . . . . . . . . . . 10-15

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-15

Product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-16

Labor availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-16

Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-16

Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-17

Outlook for the U.S. foundry products industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-17

Appendixes

A. Request letter from the House Committee on Ways and Means . . . . . . . . . . . . . . . . . . . A-1

B. Federal Register notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1

C. Hearing participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1

Figures

2-1. The Disa molding principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2-9

9-1. Production of foundry products in selected countries, 1999 and 2003 . . . . . . . . . . 9-1

9-2. Brazilian foundry industry: 2003 production, by metal type (based on weight) . . . 9-5
CONTENTS

Page

CONTENTS–Continued

xiv

Figures—Continued

9-3. Canadian foundry industry: 2003 production, by metal type (based on weight) . . 9-22

9-4. China foundry industry: 2003 production, by metal type (based on weight) . . . . . 9-34

9-5. Indian foundry industry: 2003 production, by metal type (based on weight) . . . . . 9-45

9-6. Korean foundry industry: 2003 production, by metal type (based on weight) . . . . 9-56

9-7. Korean foundry industry: Environmental regulatory framework . . . . . . . . . . . . . . . 9-62

9-8. Mexican foundry industry: 2003 production, by metal type (based on weight) . . . 9-64

9-9. Taiwan foundry industry: 2003 production, by metal type (based on weight) . . . . 9-76

10-1. U.S. foundries: Percent of responding establishments with operating losses, by

metal type, 1999 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-3

10-2. Indexes of hourly compensation costs for production workers in 

manufacturing, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-12

10-3. Exchange rates: Quarterly indexes of the real values of the Brazilian real,

Canadian dollar, Indian rupee, Korean won, and Mexican peso relative to the

U.S. dollar, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-18

Tables

2-1. A comparison of the characteristics of castings irons with casting steel . . . . . . . . . 2-3

3-1. U.S. foundry industry: U.S. foundries that closed operations, 2001-2005 . . . . . . . 3-2

3-2. All foundries: Responding U.S. producers' capacity, production, and shipments for 

their rough casting operations,1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4

3-3. All metal foundries: Responding U.S. producers' employees and related 

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 3-5

3-4. All metal foundries: Responding U.S. producers' financial results for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-7

3-5. All metal foundries: Responding U.S. producers' financial results for their 

machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 3-8

3-6. U.S. foundry industry: U.S. foundries that filed for Chapter 11 bankruptcy 

protection, 1999-2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-8

3-7. U.S. foundry industry: Internal issues impacting viability of establishment’s 

operations and ranking in terms of importance . . . . . . . . . . . . . . . . . . . . . . . . . 3-9

3-8. U.S. foundry industry: Average annual prices for metallic raw materials, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-10

3-9. U.S. foundry industry: Average annual prices for energy, 1999-2003 . . . . . . . . . . 3-10

3-10. All metal foundries: Responding U.S. producers' employee costs and capital 

expenditures for their rough casting operations, fiscal years 1999-2003 . . . . . . 3-11

3-11. U.S. foundry industry: Pricing methods identified by producers . . . . . . . . . . . . . . . 3-13

3-12. U.S. foundry industry: Domestic producers’ comparison of relative price changes

of domestic castings in the U.S. market, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 3-13

3-13. U.S. foundry industry: Environmental legislation cited by U.S. foundry producers 

as affecting their business performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-15

3-14. U.S. foundry industry: Government programs received by the U.S. foundry

industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-17
CONTENTS

Page

CONTENTS–Continued

xv

Tables—Continued

3-15. All metal types: Total reported U.S. purchases of domestic and foreign castings, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-19

3-16. All metal foundries: Responding U.S. producers’ imports of rough and machined

castings, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3-20

4-1. U.S. purchasers of foundry products: Purchase method for domestic and foreign

castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-3

4-2. U.S. purchasers of foundry products: Ranking of factors when purchasing 

domestic and foreign castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-6

4-3. U.S. purchasers of foundry products: Pricing methods . . . . . . . . . . . . . . . . . . . . . . 4-7

4-4. U.S. purchasers of foundry products: Comparison of relative price changes of 

domestic and foreign castings in the U.S. market, 1999-2003 . . . . . . . . . . . . . . 4-8

4-5. U.S. purchasers of foundry products: Methods to lower purchasing costs of 

domestic and foreign castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

4-6. U.S. purchasers of foundry products: Reasons for significantly increased purchases 

of foreign castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-9

4-7. U.S. purchasers of foundry products: Reported changes in domestic producers’

business practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4-10

5-1. Gray and ductile iron foundries: Establishment activities of responding 

producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3

5-2. Gray and ductile iron foundries: Responding U.S. producers' average net sales 

shares, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-3

5-3. Gray iron foundries: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-4

5-4. Ductile iron foundries: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5

5-5. Gray iron foundries: Responding U.S. producers' shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-5

5-6. Ductile iron foundries: Responding U.S. producers' shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-6

5-7. All iron foundries: Responding U.S. producers' capacity, production, and 

inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 5-7

5-8. Gray iron foundries: Responding U.S. producers' domestic shipments and exports 

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8

5-9. Ductile iron foundries: Responding U.S. producers' domestic shipments and exports 

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-8

5-10. Gray and ductile iron foundries: Responding U.S. producers' employees and related

 information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . 5-9

5-11. Gray iron foundries: Responding U.S. producers' financial results for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-11

5-12. Gray iron foundries: Selected financial unit values for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 5-12

5-13. Gray iron foundries: Selected financial information for U.S. producers' rough 

casting operations for specified classes, fiscal years 1999-2003 . . . . . . . . . . . . 5-12
CONTENTS

Page

CONTENTS–Continued

xvi

Tables—Continued

5-14. Ductile iron foundries: Responding U.S. producers' financial results for their rough

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-13

5-15. Ductile iron foundries: Selected financial unit values for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 5-14

5-16. Ductile iron foundries: Selected financial information for U.S. producers' rough 

casting operations for specified classes, fiscal years 1999-2003 . . . . . . . . . . . . 5-15

5-17. Gray iron foundries: Responding U.S. producers' financial results for their 

machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-16

5-18. Ductile iron foundries: Responding U.S. producers' financial results for their 

machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-17

5-19. Gray and ductile iron foundries: Share of total metal raw material costs for 

responding U.S. producers' rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-17

5-20. Gray and ductile iron foundries: Share of total energy costs for responding U.S. 

producers' rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . 5-18

5-21. Gray and ductile iron foundries: Responding U.S. producers' employment costs for 

their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . 5-19

5-22. Gray and ductile iron foundries: Responding U.S. producers' capital and R&D 

expenditures for their rough casting operations, fiscal years 1999-2003 . . . . . . 5-20

5-23. Gray and ductile iron foundries: Other financial information for responding U.S. 

producers' rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . 5-21

5-24. All iron castings: Total reported U.S. purchases of domestic and foreign castings, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-22

5-25. All iron product groups: Total reported U.S. purchases of domestic and foreign 

castings, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-23

5-26. Ductile iron crankshaft/camshaft castings: End market for responding U.S. 

producers' shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-26

5-27. Ductile iron crankshaft/camshaft castings: Responding U.S. producers’ shipments,

by channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-26

5-28. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' production 

and inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . 5-28

5-29. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' employees 

and related information for their rough casting operations, 1999-2003 . . . . . . . 5-28

5-30. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' domestic 

shipments and exports for their rough casting operations, 1999-2003 . . . . . . . 5-29

5-31. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' financial 

results for their rough casting and machining operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-29

5-32. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' capital and 

R&D expenditures for their rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-30

5-33. Ductile iron crankshaft/camshaft castings: Purchases of domestic and foreign 

castings by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 5-31
CONTENTS

Page

CONTENTS–Continued

xvii

Tables—Continued

5-34. Ductile iron crankshaft/camshaft castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 5-31

5-35. Ductile iron crankshaft/camshaft castings: Price comparison by responding U.S. 

producers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . 5-32

5-36. Ductile iron crankshaft/camshaft castings: Price comparison by responding U.S. 

purchasers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . 5-33

5-37. Ductile iron crankshaft/camshaft castings: Responding U.S. producers' responses 

to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-33

5-38. Gray iron motor vehicle gear box castings: Responding U.S. producers’ shipments,

by channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-36

5-39. Gray iron motor vehicle gear box castings: End market for responding U.S. 

producers' shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-36

5-40. Gray iron motor vehicle gear box castings: Responding U.S. producers' production 

and inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . 5-37

5-41. Gray iron motor vehicle gear box castings: Responding U.S. producers' employees 

and related information for their rough casting operations, 1999-2003 . . . . . . . 5-38

5-42. Gray iron motor vehicle gear box castings: Responding U.S. producers' domestic 

shipments and exports for their rough casting operations, 1999-2003 . . . . . . . 5-39

5-43. Gray iron motor vehicle gear box castings: Responding U.S. producers' financial 

results for their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . 5-40

5-44. Gray iron motor vehicle gear box castings: Responding U.S. producers' capital and 

R&D expenditures for their rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-40

5-45. Gray iron motor vehicle gear box castings: Purchases of domestic and foreign 

castings by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 5-41

5-46. Gray iron motor vehicle gear box castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 5-42

5-47. Gray iron motor vehicle gear box castings: Price comparison by responding U.S. 

producers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . 5-43

5-48. Gray iron motor vehicle gear box castings: Price comparison by responding U.S. 

purchasers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . 5-44

5-49. Gray iron motor vehicle gear box castings: Responding U.S. producers' responses 

to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-44

5-50. Ductile iron bearing housing castings: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-46

5-51. Ductile iron bearing housing castings: Responding U.S. producers’ shipments,

by channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-46

5-52. Ductile iron bearing housing castings: Responding U.S. producers' production 

and inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . 5-47

5-53. Ductile iron bearing housing castings: Responding U.S. producers' employees 

and related information for their rough casting operations, 1999-2003 . . . . . . . 5-48

5-54. Ductile iron bearing housing castings: Responding U.S. producers' domestic 

shipments and exports for their rough casting operations, 1999-2003 . . . . . . . 5-48
CONTENTS

Page

CONTENTS–Continued

xviii

Tables—Continued

5-55. Ductile iron bearing housing castings: Responding U.S. producers' financial 

results for their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . 5-49

5-56. Ductile iron bearing housing castings: Responding U.S. producers' capital and 

R&D expenditures for their rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-50

5-57. Ductile iron bearing housing castings: Purchases of domestic and foreign 

castings by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 5-51

5-58. Ductile iron bearing housing castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 5-51

5-59. Ductile iron bearing housing castings: Price comparison by responding U.S. 

producers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . 5-52

5-60. Ductile iron bearing housing castings: Price comparison by responding U.S. 

purchasers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . 5-53

5-61. Ductile iron bearing housing castings: Responding U.S. producers' responses 

to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-53

5-62. Gray iron compressor castings: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-56

5-63 Gray iron compressor castings: Responding U.S. producers’ shipments, by channel 

of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-57

5-64. Gray iron compressor castings: Responding U.S. producers' production and 

inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 5-57

5-65. Gray iron compressor castings: Responding U.S. producers' employees and related

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 5-58

5-66. Gray iron compressor castings: Responding U.S. producers' domestic shipments 

and exports for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 5-59

5-67. Gray iron compressor castings: Responding U.S. producers' financial results for 

their rough casting and machining operations, fiscal years 1999-2003 . . . . . . . 5-60

5-68. Gray iron compressor castings: Responding U.S. producers' capital and R&D 

expenditures for their rough casting operations, fiscal years 1999-2003 . . . . . . 5-60

5-69. Gray iron compressor castings: Purchases of domestic and foreign castings by 

responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-61

5-70. Gray iron compressor castings: U.S. imports for consumption of downstream 

products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-62

5-71. Gray iron compressor castings: Price comparison by responding U.S. producers of 

domestic and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . 5-63

5-72. Gray iron compressor castings: Price comparison by responding U.S. purchasers 

of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . 5-63

5-73. Gray iron compressor castings: Responding U.S. producers' responses to import

competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-64

5-74. Gray iron pump castings: Responding U.S. producers’ shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-66

5-75. Gray iron pump castings: End market for responding U.S. producers' shipments, 

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-67
CONTENTS

Page

CONTENTS–Continued

xix

Tables—Continued

5-76. Gray iron pump castings: Responding U.S. producers' production and inventories 

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 5-68

5-77. Gray iron pump castings: Responding U.S. producers' employees and related 

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 5-69

5-78. Gray iron pump castings: Responding U.S. producers' domestic shipments and 

exports for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . 5-69

5-79. Gray iron pump castings: Responding U.S. producers' financial results for their 

rough casting and machining operations, fiscal years 1999-2003 . . . . . . . . . . . 5-71

5-80. Gray iron pump castings: Responding U.S. producers' capital and R&D 

expenditures for their rough casting operations, fiscal years 1999-2003 . . . . . . 5-72

5-81. Gray iron pump castings: Purchases of domestic and foreign castings by 

responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-72

5-82. Gray iron pump castings: U.S. imports for consumption of downstream products, 

by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-73

5-83. Gray iron pump castings: Price comparison by responding U.S. producers of 

domestic and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . 5-74

5-84. Gray iron pump castings: Price comparison by responding U.S. purchasers of 

domestic and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . 5-75

5-85. Gray iron pump castings: Responding U.S. producers' responses to import 

competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-76

5-86. Gray iron non-motor vehicle gear box castings: Responding U.S. producers’ 

shipments, by channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-78

5-87. Gray iron non-motor vehicle gear box castings: End market for responding U.S. 

producers' shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-78

5-88. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' 

production and inventories for their rough casting operations, 1999-2003 . . . . 5-79

5-89. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' 

employees and related information for their rough casting operations, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-80

5-90. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' 

domestic shipments and exports for their rough casting operations, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-81

5-91. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' 

financial results for their rough casting and machining operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-82

5-92. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' capital 

and R&D expenditures for their rough casting operations, fiscal years 

 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-83

5-93. Gray iron non-motor vehicle gear box castings: Purchases of domestic and foreign 

castings by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 5-83

5-94. Gray iron non-motor vehicle gear box castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 5-84

5-95. Gray iron non-motor vehicle gear box castings: Price comparison by responding 

U.S. producers of domestic and foreign castings in the U.S. market . . . . . . . . . 5-85
CONTENTS

Page

CONTENTS–Continued

xx

Tables—Continued

5-96. Gray iron non-motor vehicle gear box castings: Price comparison by responding 

U.S. purchasers of domestic and foreign castings in the U.S. market . . . . . . . . 5-86

5-97. Gray iron non-motor vehicle gear box castings: Responding U.S. producers' 

responses to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5-86

6-1. Steel foundries: Establishment activities of responding producers . . . . . . . . . . . . . 6-2

6-2. Steel foundries: Responding U.S. producers' average net sales shares, fiscal years

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-2

6-3. Steel foundries: End market for responding U.S. producers' shipments, 2003 . . . . 6-3

6-4. Steel foundries: Responding U.S. producers' shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-4

6-5. Steel foundries: Responding U.S. producers' capacity, production, and inventories

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 6-5

6-6. Steel foundries: Responding U.S. producers' domestic shipments and exports for

their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-5

6-7. Steel foundries: Responding U.S. producers' employees and related information for 

their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-6

6-8. Steel foundries: Responding U.S. producers' financial results for their rough casting

operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-7

6-9. Steel foundries: Selected financial unit values for responding U.S. producers' rough

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-8

6-10. Steel foundries: Selected financial information for U.S. producers' rough casting

operations for specified classes, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . 6-8

6-11. Steel foundries: Responding U.S. producers' financial results for their machining

operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-10

6-12. Steel foundries: Share of total metal raw material costs for responding U.S.

producers' rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . 6-10

6-13. Steel foundries: Share of total energy costs for responding U.S. producers' rough

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11

6-14. Steel foundries: Responding U.S. producers' employment costs for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-11

6-15. Steel foundries: Responding U.S. producers' capital and R&D expenditures for

their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . 6-12

6-16. Steel foundries: Other financial information for responding U.S. producers' rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13

6-17. All steel castings: Total reported U.S. purchases of domestic and foreign castings,

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-13

6-18. Steel valve castings: Responding U.S. producers’ shipments, by channel of

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-16

6-19. Steel valve castings: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-17

6-20. Steel valve castings: Responding U.S. producers' production and inventories for

their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-18

6-21. Steel valve castings: Responding U.S. producers' employees and related 

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 6-19
CONTENTS

Page

CONTENTS–Continued

xxi

Tables—Continued

6-22. Steel valve castings: Responding U.S. producers' domestic shipments and exports

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 6-19

6-23. Steel valve castings: Responding U.S. producers' financial results for their rough 

casting and machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . 6-20

6-24. Steel valve castings: Responding U.S. producers' capital and R&D expenditures for

their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . 6-22

6-25. Steel valve castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-22

6-26. Steel valves castings: U.S. imports for consumption of downstream products, by

leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-23

6-27. Steel valve castings: Price comparison by responding U.S. producers of domestic 

and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-23

6-28. Steel valve castings: Price comparison by responding U.S. purchasers of domestic

and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-24

6-29. Steel valve castings: Responding U.S. producers' responses to import 

competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6-25

7-1. Aluminum foundries: Establishment activities of responding producers . . . . . . . . . 7-2

7-2. Aluminum foundries: End market for responding U.S. producers' 

shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-3

7-3. Aluminum foundries: Responding U.S. producers' shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-4

7-4. Aluminum foundries: Responding U.S. producers' capacity, production, and 

inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 7-4

7-5. Aluminum foundries: Responding U.S. producers' domestic shipments and exports 

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 7-5

7-6. Aluminum foundries: Responding U.S. producers' employees and related 

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 7-5

7-7. Aluminum foundries: Responding U.S. producers' financial results for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-7

7-8. Aluminum foundries: Selected financial unit values for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 7-8

7-9. Aluminum foundries: Selected financial information for U.S. producers' rough 

casting operations for specified classes, fiscal years 1999-2003 . . . . . . . . . . . . 7-8

7-10. Aluminum foundries: Responding U.S. producers' financial results for their 

machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 7-9

7-11. Aluminum foundries: Share of total metal raw material costs for responding U.S.

producers' rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . 7-10

7-12. Aluminum foundries: Share of total energy costs for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 7-10

7-13. Aluminum foundries: Responding U.S. producers' employment costs for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-10

7-14. Aluminum foundries: Responding U.S. producers' capital and R&D expenditures for

their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . 7-11
CONTENTS

Page

CONTENTS–Continued

xxii

Tables—Continued

7-15. Aluminum foundries: Other financial information for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 7-11

7-16. All aluminum castings: Total reported U.S. purchases of domestic and foreign 

castings, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-12

7-17. All aluminum product groups: Total reported U.S. purchases of domestic and 

foreign castings, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-12

7-18. Aluminum engine component castings: Responding U.S. producers’ shipments, by 

channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-14

7-19 Aluminum engine component castings: End market for responding U.S. producers'

 shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-14

7-20. Aluminum engine component castings: Responding U.S. producers' production and

 inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 7-15

7-21. Aluminum engine component castings: Responding U.S. producers' employees and 

related information for their rough casting operations, 1999-2003 . . . . . . . . . . 7-16

7-22. Aluminum engine component castings: Responding U.S. producers' domestic 

shipments and exports for their rough casting operations, 1999-2003 . . . . . . . 7-16

7-23. Aluminum engine component castings: Responding U.S. producers' financial results 

for their rough casting and machining operations, fiscal years 1999-2003 . . . . 7-18

7-24. Aluminum engine component castings: Responding U.S. producers' capital and 

R&D expenditures for their rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-19

7-25. Aluminum engine component castings: Purchases of domestic and foreign castings 

by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-19

7-26. Aluminum engine component castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 7-19

7-27. Aluminum engine component castings: Price comparison by responding U.S. 

producers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . 7-20

7-28. Aluminum engine component castings: Price comparison by responding U.S. 

purchasers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . 7-21

7-29. Aluminum engine component castings: Responding U.S. producers' responses to 

import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-22

7-30. Aluminum suspension/steering part castings: Responding U.S. producers’ shipments, 

by channel of distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-25

7-31. Aluminum suspension/steering part castings: End market for responding U.S. 

producers' shipments, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-25

7-32. Aluminum suspension/steering part castings: Responding U.S. producers' production 

and inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . 7-26

7-33. Aluminum suspension/steering part castings: Responding U.S. producers' employees 

and related information for their rough casting operations, 1999-2003 . . . . . . . 7-26

7-34. Aluminum suspension/steering part castings: Responding U.S. producers' domestic

shipments and exports for their rough casting operations, 1999-2003 . . . . . . . 7-27

7-35. Aluminum suspension/steering part castings: Responding U.S. producers' financial 

results for their rough casting and machining operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-28
CONTENTS

Page

CONTENTS–Continued

xxiii

Tables—Continued

7-36. Aluminum suspension/steering part castings: Responding U.S. producers' capital 

and R&D expenditures for their rough casting operations, fiscal years 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-29

7-37. Aluminum suspension/steering part castings: Purchases of domestic and foreign 

castings by responding U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . 7-30

7-38. Aluminum suspension/steering part castings: U.S. imports for consumption of 

downstream products, by leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . 7-31

7-39. Aluminum suspension/steering part castings: Price comparison by responding U.S. 

producers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . . 7-31

7-40. Aluminum suspension/steering part castings: Price comparison by responding U.S.

 purchasers of domestic and foreign castings in the U.S. market . . . . . . . . . . . . 7-33

7-41. Aluminum suspension/steering part castings: Responding U.S. producers' 

responses to import competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-33

8-1. Copper foundries: Establishment activities of responding producers . . . . . . . . . . . 8-2

8-2. Copper foundries: End market for responding U.S. producers' shipments, 2003 . . . 8-2

8-3. Copper foundries: Responding U.S. producers' shipments, by channel of 

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-3

8-4. Copper foundries: Responding U.S. producers' capacity, production, and

inventories for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 8-4

8-5. Copper foundries: Responding U.S. producers' domestic shipments and exports for 

their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-4

8-6. Copper foundries: Responding U.S. producers' employees and related information 

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 8-5

8-7. Copper foundries: Responding U.S. producers' financial results for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-6

8-8. Copper foundries: Selected financial unit values for responding U.S. producers' 

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 8-8

8-9. Copper foundries: Responding U.S. producers' financial results for their machining

operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-8

8-10. Copper foundries: Share of total metal raw material costs for responding U.S. 

producers' rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . 8-9

8-11. Copper foundries: Share of total energy costs for responding U.S. producers' rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9

8-12. Copper foundries: Responding U.S. producers' employment costs for their rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-10

8-13. Copper foundries: Responding U.S. producers' capital and R&D expenditures for 

their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . 8-10

8-14. Copper foundries: Other financial information for responding U.S. producers' rough 

casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-11

8-15. All copper castings: Total reported U.S. purchases of domestic and foreign castings, 

1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-11

8-16. Copper valve castings: Responding U.S. producers’ shipments, by channel of

distribution, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14
CONTENTS

Page

CONTENTS–Continued

xxiv

Tables—Continued

8-17. Copper valve castings: End market for responding U.S. producers' shipments, 

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-14

8-18. Copper valve castings: Responding U.S. producers' production and inventories for

their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-15

8-19. Copper valve castings: Responding U.S. producers' employees and related 

information for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . 8-15

8-20. Copper valve castings: Responding U.S. producers' domestic shipments and exports

for their rough casting operations, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . 8-16

8-21. Copper valve castings: Responding U.S. producers' financial results for their rough 

casting and machining operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . 8-17

8-22. Copper valve castings: Responding U.S. producers' capital and R&D expenditures 

for their rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . 8-18

8-23. Copper valve castings: Purchases of domestic and foreign castings by responding 

U.S. purchasers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-19

8-24. Copper valves castings: U.S. imports for consumption of downstream products, by

leading suppliers, 1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-19

8-25. Copper valve castings: Price comparison by responding U.S. producers of domestic 

and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-20

8-26. Copper valve castings: Price comparison by responding U.S. purchasers of domestic

and foreign castings in the U.S. market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-21

8-27. Copper valve castings: Responding U.S. producers' responses to import 

competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-21

9-1. Brazilian foundry industry: Number of firms and industry revenue, 1999-2003 . . . 9-4

9-2. Brazilian foundry industry: Casting production, by metal, 1999-2003 . . . . . . . . . . 9-6

9-3. Brazilian foundry industry: Project production and installed capacity, 

2003-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-6

9-4. Brazilian foundry industry: Employment and productivity, 1999-2003 . . . . . . . . . 9-6

9-5. Brazilian foundry industry: Exports by metal type, 1999-2003 . . . . . . . . . . . . . . . . 9-7

9-6. Brazilian energy production by selected sources, 1999-2002 . . . . . . . . . . . . . . . . . 9-9

9-7. Average prices of selected Brazilian energy sources, 1999-2002 . . . . . . . . . . . . . . 9-9

9-8. Canadian foundry industry: Foundry establishments, by metal type, 1993 and 

1999-2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-20

9-9. Canadian foundry industry: Leading foundry producers, by country of ownership,

and major products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-21

9-10. Canadian foundry industry: Number of employees and production and related 

workers, 1999-2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-23

9-11. Canada: Imports, by principal sources, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . 9-23

9-12. Canada: Exports, by principal markets, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . 9-24

9-13. Canada: Exports, by principal products, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . 9-24

9-14. China foundry industry: Selected joint ventures and wholly foreign-owned 

operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-33

9-15. China foundry industry: Production, imports, exports, and employment, 

1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-35

9-16. Indian foundry industry: Foundry clusters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-44
CONTENTS

Page

CONTENTS–Continued

xxv

Tables—Continued

9-17. Indian foundry industry: Production by metal types, 1999-2003 . . . . . . . . . . . . . . . 9-45

9-18. Indian foundry industry: Financial rates, 1999-2004 . . . . . . . . . . . . . . . . . . . . . . . . 9-52

9-19. Korean foundry industry: Casting production, by metal types, 1999-2003 . . . . . . . 9-56

9-20. Mexican foundry industry: Production by metal type, 1999-2003 . . . . . . . . . . . . . . 9-65

9-21. Mexican foundry industry: Number of employees and production and related

workers, 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9-66

9-22. Taiwan foundry industry: Casting production, by metal type, 1999-2003 . . . . . . . . 9-76

10-1. Domestic producers’ and purchasers’ comparison of relative price changes for

domestic and foreign castings in the U.S. market,1999-2003 . . . . . . . . . . . . . . 10-3

10-2. All foundries: Selected financial results for responding U.S. producers by metal

type, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-4

10-3. Product groups: Selected financial results for responding U.S. producers for their

rough casting operations, fiscal years 1999-2003 . . . . . . . . . . . . . . . . . . . . . . . 10-6

10-4. Domestic producers’ comparison of the factors of competition . . . . . . . . . . . . . . . . 10-7

10-5. Domestic purchasers’ assessment of competition between U.S. and foreign

foundry products producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-8

10-6. Domestic producers’ assessment of factors of competition considered most

important when competing against U.S. and foreign foundries, and domestic 

purchasers’ assessment when purchasing domestic and foreign castings . . . . . 10-10

10-7. Domestic producers’ and purchasers’ assessment of relative price levels of castings

in the U.S. market for all product groups, 1999-2003 . . . . . . . . . . . . . . . . . . . . 10-11

OMB No.: 3117--0188

05/05

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Foundry Products:

Competitive Conditions in the U.S. Market

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Foundry Products: Competitive Conditions in

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xxvii

EXECUTIVE SUMMARY

Introduction

Following receipt on May 4, 2004, of a request from the Committee on Ways and Means of the U.S.

House of Representatives (Committee), the U.S. International Trade Commission (Commission) instituted

investigation No. 332-460, Foundry Products: Competitive Conditions in the U.S. Market, under section

332(g) of the Tariff Act of 1930. The purpose of this investigation is to provide a report analyzing

competitive conditions facing the U.S. foundry industry in the U.S. market during the most recent 5-year

period, including an overview of the industry together with a detailed analysis of selected key iron-, steel-,

aluminum-, and copper-based foundry products which are representative of major segments of the foundry

industry. 

Specifically, the Committee requested the Commission to provide:

1. A profile of the U.S. foundry industry.

2. Trends in U.S. production, shipments, capacity, consumption, and trade in foundry products,

as well as financial conditions of domestic producers.

3. A profile of major foreign industries including, but not necessarily limited to, Brazil and

China. 

4. A description of relevant U.S. and foreign government policies and regulations affecting

U.S. and foreign producers as identified during the investigation by the producers and

consumers of foundry products, including appropriate investment, tax, and export policies;

environmental regulations; and worker health and safety regulations.

5. A comparison of various factors affecting competition between U.S. and foreign

producers–such as the availability and cost of raw materials, energy, and labor; level of

technology and changes in the manufacturing process; pricing practices; transportation costs;

technical advice and service; and an analysis of how these factors affect the industry.

6. An analysis of the purchasing patterns and practices of downstream industries.

The primary sources of information for this study were responses to the Commission’s producer and

purchaser questionnaires. Responses to the producer questionnaire represented 75 percent of total 2003

castings production, as reported by the American Foundry Society. These responses were supplemented by

information collected through Commission hearing testimony, fieldwork interviews with domestic producers

and foreign competitors, telephone discussions with domestic and foreign industry sources, literature review,

and information obtained by the Commission from other sources, including U.S. and foreign embassies and

consulates and the U.S. and Foreign Commercial Service. 

Competitive Conditions in the U.S. Foundry Market

The information gathered during the course of this investigation indicates the difficulties faced by

the U.S. foundry industry. Most foundries remain profitable, but the number of foundries reporting losses

has increased substantially for all metal types. In general, aluminum foundries are in the best competitive
xxviii

condition and have a more favorable financial position relative to the other metal segments, whereas gray iron

foundries face the most difficult financial and competitive conditions.

U.S. producers responding to the Commission questionnaire overwhelmingly rate developing

countries such as China, Brazil, and India as having an advantage in overall competitiveness in the U.S.

market, citing low prices as the major reason. U.S. purchaser respondents agree for the most part that

developing countries have a major price advantage in the U.S. market. This advantage derives in part from

the lower production costs of these countries, mostly the result of a wide disparity in foundry wage rates

between U.S. and foreign foundries. 

The key production cost advantage in foreign countries is lower labor rates. This advantage is further

compounded by other costs, including health benefits and pension costs, that are often higher for U.S.

foundries than for their foreign competitors. Additionally, lower energy costs and lax enforcement of worker

health and safety and environmental laws provide foreign foundries in China, India, and Brazil with a

competitive advantage in these areas.

Raw material costs, generally the largest component of total production costs, are comparable among

all countries in most cases. Product quality, labor availability, technological advancement, and exchange rates

remain competitive concerns for foundries worldwide and key competitor countries do not have a clear

advantage in these areas. 

Competitive advantages which U.S. foundries currently maintain include strengths in complex

castings, lead times, transportation, and technical advice and services. Additionally, U.S. producers have

responded to competition with a broad array of initiatives, such as implementing lean manufacturing,

improving customer service, and increasing automation. 

U.S. Foundry Industry

The economic slowdown of 2000 and 2001, the shift from iron to aluminum castings in certain

automotive applications, rising competition with polyvinyl chloride (PVC) for copper valves in household

applications, and the downturn in the trucking industry starting in late 2000 significantly affected the U.S.

foundry industry during 1999-2003. Additionally, there was reduced demand for domestic castings because

of competition from lower-cost producing countries, particularly China. The overall loss of sales resulting

from these market conditions was compounded by higher regulatory, worker benefit, and raw material costs,

which reduced cash flow for the U.S. foundry industry. The financial condition of the U.S. foundry industry

deteriorated from 1999 to 2003, as operating income declined for both rough and machined castings

operations.

Purchasing Patterns and Practices

Price is a significant factor in purchasing decisions, with nearly one-half of responding purchasers

indicating that they usually buy castings at the lowest possible price. Although U.S. purchasers indicated that

domestic castings producers have lowered prices, improved product quality, and shortened lead times to

improve their competitiveness, about one-third of reporting U.S. purchasers significantly increased their

purchases of foreign-produced castings at the expense of U.S.-produced castings, primarily because of lower

foreign pricing.

U.S. purchasers of foundry products responding to the Commission questionnaire principally

represented the motor vehicle, industrial machinery, mining and oil/gas field machinery and equipment, valve
xxix

and pipe fitting, and construction machinery and equipment industries. U.S. purchasers largely share similar

purchasing practices for castings, despite differences in the customers and markets that they serve.

U.S. Iron Foundry Industry

Iron is the most commonly cast metal because of its relatively low cost, ease of casting into complex

shapes, ease of machining, and desired physical properties. Hence, iron foundries are highly integrated into

the supply chain for a wide range of downstream products, particularly the automotive, various machinery

and equipment, and pipe and valve industries. However, wide dissemination of production technology renders

iron foundries particularly vulnerable to foreign price competition. 

Pressure to meet demands for lower prices and loss of some downstream markets from decades of

material substitution efforts and more recent shifting to offshore production by certain customers have

squeezed profit margins for iron foundries in recent years. This situation has been exacerbated by escalating

costs for raw materials, energy, and employee benefits. 

Foundries producing rough castings in the more specialized ductile-iron segment are in somewhat

better financial condition than those in the more competitive gray-iron industry. Operating income for

ductile-iron respondents declined by 67 percent during 1999-2003, but remained positive. Declining

operating income for gray-iron respondents, however, deteriorated into losses by 2002.

Although ductile iron crankshaft/camshaft castings are generally less expensive to produce than

forged steel crankshafts, they have been increasingly replaced by forged steel crankshafts in engine

applications because of steel’s perceived superior attributes regarding noise, vibration, and harshness (NVH)

as well as longevity, strength, resistance, and smaller size. Operating income for the sector declined by onehalf during 1999-2003, and two leading producers of these products recently filed for Chapter 11 bankruptcy

reorganization.

U.S. producers of gray iron motor vehicle gear box castings principally produce housings for

transmissions used primarily on trucks and agricultural and construction machinery. U.S. producers’

shipments have been subject to price pressures from end-users, competition from imported machined castings,

a shift from gray iron to aluminum and ductile iron by end-users, and imports of finished transmissions.

However, reporting producers of gray iron motor vehicle gear box castings generally posted positive financial

results during 1999-2003.

During 1999-2003, a drop in demand from U.S. motor vehicle manufacturers (the dominant

consumers) combined with increased import competition resulted in significant decreases in production and

employment in the domestic ductile iron bearing housings industry, particularly among producers of

machined castings. Although many performance indicators for the industry rebounded in 2003, financial

performance declined throughout the period, with operating income showing a loss in 2003. Forty percent

of reporting firms operated at a loss in 2003.

U.S. producers of gray iron compressor housing castings reported steady declines in net sales

quantities, net sales values, and operating income during 1999-2003, which are largely attributed to a decrease

in production of products incorporating compressor housings in the United States. 

U.S. foundries maintain a competitive advantage in specialized gray iron pump castings due to

relative difficulties in sourcing these castings overseas. For high volume, price-sensitive, commodity-type

castings, China has made competitive inroads because of labor cost advantages. Operating income for

responding foundries declined 65 percent during the period, and by 2003, 18 of the 29 producers reporting

financial data had operating losses.
xxx

U.S. producers of gray iron non-motor vehicle castings primarily produce housings for transmissions,

construction machinery, material-handling machinery, and stationary applications at steel mills, paper mills,

mines, power plants, and other industrial plants. U.S. gear box producers have in some instances used foreignproduced castings, but have not shifted to imports to a significant degree. Some U.S. producers of these

castings have noted a decline for their product, in part because of imports of finished products incorporating

gear boxes. Operating income for this industry declined by one-half from its 2000 level and over 40 percent

from its 1999 level.

U.S. Steel Foundry Industry

Railway equipment, which dominates industry shipments, and construction, industrial, and mining

and oil/gas field machinery and equipment account for approximately 90 percent of domestic steel foundry

shipments, by quantity. Typical products made from steel castings include compressors, mechanical

components, pumps, tools, and valves.

Operating income for reporting producers’ rough steel castings operations decreased by 54 percent

as the ratio of costs to net sales for raw materials, direct labor, and energy increased. Energy costs, in

particular, affected this sector, with an average increase of 39 percent per ton during 1999-2003. Steel

foundries also reportedly face an overall contraction in domestic demand partly because an increasing share

of global manufacturing is performed outside the United States resulting in expanded foreign steel casting

operations by U.S.-based producers. 

Foreign producers of both rough and machined steel valve castings increased U.S. market presence

through consistently lower prices and high quality that matched U.S.-produced castings during 1999-2003.

The domestic industry has consolidated, with a few U.S. producers accounting for a majority of domestic

production. In response to competitive pressures from foreign producers, U.S. producers have increasingly

focused on higher value-added machined castings. In light of this competition, U.S. firms will likely focus

on productivity gains and innovation, as well as on niche markets for machined steel valve castings to

maintain a competitive position.

U.S. Aluminum Foundry Industry

Production, capacity, and shipments of aluminum castings by questionnaire respondents increased

during 1999-2003 (by 15 percent, 35 percent, and 20 percent, respectively), reflecting growing worldwide

demand for aluminum products, particularly in automotive applications. Consequently, reported aluminum

foundry profitability recovered from lows in 2001, as operating income rebounded in 2003 to surpass 1999

levels by 12 percent. The impact of the 2001 economic downturn is reflected in the sharp increase in firms

reporting operating losses, which increased from 25 percent of reporting firms in 2000 to 36 percent in 2001.

Responding foundries that also machined aluminum castings exhibited stronger financial performance than

those with solely rough casting operations.

The U.S. market for aluminum castings used as engine components is primarily influenced by trends

in the motor-vehicle industry, particularly North American motor-vehicle production levels and Corporate

Average Fuel Efficiency (CAFE) and emissions standards. Aluminum engine components are increasingly

used in motor-vehicle engine applications because of their light weight, relative strength, and good recycling

characteristics. Despite price pressures in the motor vehicle industry, responding U.S. producers of rough

and machined castings recorded profits throughout the period. 

U.S. foundries maintain a competitive edge in aluminum castings for use in automobile suspension

and steering systems because of U.S. superiority in the design and manufacture of these castings. This design
xxxi

and manufacturing expertise is a result of longer U.S. experience in manufacturing aluminum castings for

automobiles, largely attributable to greater use of aluminum by U.S. automakers compared with foreign

manufacturers. Operating income for reporting producers of rough castings rebounded from a loss in 2001,

but declined irregularly for foundries reporting on machined castings operations.

U.S. Copper Foundry Industry

The copper castings industry was negatively affected by the economic downturn during 2000 and

2001 and the rise in interest rates that slowed housing starts in 2000. The rough copper foundry industry

recovered in 2002 and 2003 from lows in 2001. Operating income rebounded just short of 1999 levels in 2002

as firms found process efficiencies through automation, began to offer fully machined and finished products,

took on niche product lines, and shortened lead times. 

Operating income for the machining operations declined at a faster rate than for rough casting

operations. Operating income for rough copper castings remained high (11 percent of net sales in 2003),

whereas machined castings operations posted an operating margin about one-half of that of the rough castings

producers. Ease of casting and wide dissemination of production technology make copper foundries

vulnerable to foreign price competition.

Demand for copper valves is dependent upon investment in new capital goods, replacement of valves

in existing piping systems, and the residential construction industry. Copper valves compete with PVC for

many household and low-pressure applications, and the market share of copper has been declining because

of advantages of PVC in cost and ease of installation. Purchases of U.S.-produced machined copper valve

castings fell by 56 percent during 1999-2003, whereas purchases of imported castings rose by 70 percent,

with China accounting for most of the increase. Although operating income on sales of rough copper valves

decreased while operating income increased on sales of machined castings during the period, the positive

return on net sales for each operation remained virtually unchanged.

Country Profiles

Brazil

The resurgent Brazilian economy has generated increased demand for foundry products from leading

markets, such as the motor-vehicle industry. Despite concerns about high interest rates, an overburdened

transportation infrastructure, and the ability to hire and retain skilled employees, the Brazilian industry

anticipates that domestic demand for foundry products will continue to increase as major end-use markets

benefit from the improved economy, greater consumer spending, and infrastructure investments. Brazilian

foundries are characterized by extensive use of domestically produced raw materials, which accounts for the

dominance of cast iron in its product mix, and output of labor-intensive cast products. An estimated 70

percent of Brazil’s exports are destined for the United States. Engine blocks and cylinder heads of gray iron

(for diesel engines) and aluminum are among the leading Brazilian foundry exports to the United States.

Additional investment in the Brazilian foundry industry is needed to meet projected increased demand

and maintain its position as a net exporter of foundry products. By 2009, Brazilian castings demand is

expected to outstrip installed capacity. The significant deficit in projected domestic supply may result in

increased imports into the Brazilian market, particularly for the growing motor vehicle industry.
xxxii

Canada

Canadian metal casting is a small but well established industry that is responding to an increasingly

competitive global market with value-added products and customer support services. The industry responded

to rising production costs and a tighter labor market with education and advanced technology, thus increasing

the average annual output value per production worker by almost $16,000 in 2002. 

Despite relatively constant shipment values, Canada recorded growing exports whereas increased

imports supported domestic demand for lower-priced, commodity-type castings. The United States has long

been Canada’s major export market, accounting for 87 percent of total exports in 2003.

China

China is now the world’s largest producer of foundry products (surpassing the United States in 2002),

with total output of 20 million metric tons and employment of over 1.2 million people in 2004. The industry

includes up to 25,000 producers, although 20,000 of these are small-scale enterprises. Industry concentration

is high, with the 1,400 members of the Chinese Foundry Association accounting for 70 percent of total

production by weight.

China's rapidly expanding foundry industry reflects burgeoning demand from the country's fastgrowing manufacturing sector and foreign direct investment (FDI), which has increased the number of joint

ventures with foreign partners and, to a lesser extent, wholly foreign-owned foundry operations. Foreign

investment is also a source of technological and management advancement for the industry.

Chinese foundries typically produce low-quality castings, use older equipment, are inefficient, and

cause significant harmful environmental effects. The Chinese industry’s proportion of high-value castings

is less than for developed countries, its overall level of technology and productivity are low, and energy

consumption is high. Chinese foundries also produce a large amount of basic, low-value castings of relatively

simple metallurgy. Moreover, management skill and technical expertise overall are average by world

standards. However, certain operations are among the most advanced in the world, producing high quality

castings using state-of-the-art machinery and modern management techniques.

India

India’s metal foundry industry is expected to grow steadily, as its exports amounted to only 1 percent

of total global consumption in 2003. India’s ability to produce almost any type of casting at any quality level,

at a competitive price, together with its annual capacity of 7.5 million metric tons, makes it a world leading

outsourcing destination for casting products. In 2003, India was the sixth-largest metal casting producer in

the world with total output of 4.0 million metric tons, employing 500,000 in 5,000 foundries. Approximately

500 foundries (10 percent of the total) account for 70 percent of India’s total production. These are large,

modern, and globally competitive metal foundries.

Gray iron is currently the predominant metal type cast in India. However, faced with intense and

growing competition from China, the Indian foundry industry has shifted from its low-wage competitive

strategy to the higher value-added and more capital-intensive segments of the industry. India’s metal casting

industry has benefitted from government support and export-oriented industrial policies since the 1991 trade

reforms. 
xxxiii

Korea

Despite an economic downturn, the Korean foundry industry has gradually increased metal castings

production during 1999-2003. Expansion can be attributable to a number of factors, such as the presence of

large domestic consumers, particularly the Korean automobile industry. In 2003, almost 86 percent of

production was concentrated in iron castings. Primary export markets for Korean castings in 2003 were Japan

and the United States.

The foundry industry faces many government regulations in Korea that are similar to those in the

United States. However, the Korean Government has some general industrial policies that benefit the foundry

industry, particularly lower energy prices for the industrial sector.

Mexico

Metal foundries are well established in Mexico, having benefitted from extensive FDI during the

1970s and 1980s, particularly by U.S., European, and Japanese automobile and automotive parts

manufacturers that sought out Mexico as an export platform for production-sharing operations. Despite being

well integrated in the North American production chain, with the automotive sector consuming roughly threefifths of all Mexican-produced castings, Mexican foundries have been overshadowed since the late 1990searly 2000s by rising production in China and India. 

Mexican foundries cast mostly gray iron and aluminum. The industry consists of both Mexican and

foreign-owned firms, with most being small and medium-size operations. Top-end foundries are tier-1

automotive parts producers or casters of other engineered components. Mid-range foundries tend to be job

shops that produce less-sophisticated products for both automotive and non-automotive applications. The lowend foundries cast simple shapes in large-volume runs, which renders them vulnerable to rising competition

from lower-cost, foreign competitors with similar capabilities.

Considered high-tech by North American standards, Mexican foundries are highly regarded for their

casting technologies and capabilities, along with highly skilled pattern-making and lost-foam molding. Labor

costs are low but rising. Other factors driving up production costs for Mexican foundries are an unevenly

developed transportation network; shortage of technically skilled labor, technicians, engineers, and managers;

high import dependency for ferrous scrap and aluminum; high-cost electricity and natural gas; and limited

and expensive domestic bank credit.

Taiwan

The foundry industry in Taiwan has experienced fluctuations in production levels during 1999-2003.

The number of foundries has declined significantly in the past decades, which can be attributed to the shift

to overseas production of many downstream consuming industries. Production of iron castings accounted

for nearly 71 percent of the industry’s total output in 2003. 

 1

 A copy of the request letter is included in app. A.

 2

 This notice is included in app. B.

 3

 A list of hearing participants is included in app. C. 

1-1

CHAPTER 1

INTRODUCTION

Purpose and Scope of the Report

On May 4, 2004, the U.S. International Trade Commission (USITC or Commission) received a letter

from the Committee on Ways and Means of the U.S. House of Representatives (Committee), requesting that

the Commission conduct an investigation, under section 332(g) of the Tariff Act of 1930 (19 U.S.C. 1332(g)),

of the current competitive conditions facing producers in the U.S. foundry industry with respect to the U.S.

market.1

 In response, the Commission instituted investigation No. 332-460, Foundry Products: Competitive

Conditions in the U.S. Market on June 3, 2004. The Committee asked the Commission to provide its report

within 12 months of the receipt of the request, or by May 4, 2005.

The Committee requested that the Commission provide an overview of the industry, together with

a detailed analysis of selected key iron-, steel-, aluminum-, and copper-based foundry products which are

representative of the major segments of the foundry industry. The Committee requested that the Commission's

report provide information for the most recent 5-year period, to the extent possible, regarding:

1. A profile of the U.S. foundry industry.

2. Trends in U.S. production, shipments, capacity, consumption, and trade in foundry products,

as well as financial conditions of domestic producers.

3. A profile of major foreign industries including, but not necessarily limited to, Brazil and

China. 

4. A description of relevant U.S. and foreign government policies and regulations affecting

U.S. and foreign producers as identified during the investigation by the producers and

consumers of foundry products, including appropriate investment, tax, and export policies;

environmental regulations; and worker health and safety regulations.

5. A comparison of various factors affecting competition between U.S. and foreign

producers–such as the availability and cost of raw materials, energy, and labor; level of

technology and changes in the manufacturing process; pricing practices; transportation costs;

technical advice and service; and an analysis of how these factors affect the industry.

6. An analysis of the purchasing patterns and practices of downstream industries.

Public notice of this investigation was posted in the Office of the Secretary, U.S. International Trade

Commission, Washington, DC 20436, and published in the Federal Register (69 F.R. 33402).2

 A public

hearing, in which all interested parties were permitted to present testimony regarding this investigation, was

held on October 14, 2004, in Washington, DC.3

 A copy of the transcript of the hearing, as well as written

statements submitted in conjunction with this investigation, may be found at the Commission’s Internet site

http://www.usitc.gov under the dockets section.
 4

 A grinding step is usually necessary to remove filling passages and other excess metal adhering to the rough

casting.

 5

 For some products, such as manhole covers, only a minor amount of machining is necessary.

1-2

Product and Industry Coverage

Foundry products are near net shape (i.e., close to final dimension) cast parts (or simply castings) of

various metal types and their alloys. To produce a casting, molten metal is poured or injected into a mold.

When released from the mold, the resulting product is a rough casting.4

 Typically, these castings are further

processed by machining, which entails smoothing surfaces, drilling holes, cutting threads for fasteners, and

other steps necessary for incorporation into an assembly.5

For the purposes of this investigation, the Commission considers the foundry industry to be composed

of establishments that produce rough castings of the specified metal types. These establishments, in some

cases, also produce machined castings and assembled products that incorporate castings. Machining and

assembly operations that are not performed at foundry establishments are not included in the scope of this

investigation.

Virtually every piece of machinery and equipment contains a cast metal part. Typical castings

include engine blocks, ship propellers, faucet valves, and differential housings. Applications include motor

vehicles of all types; agricultural, construction, mining, refrigeration, and railway equipment; pipes and

valves; and aircraft parts.

Organization

The report is divided into 10 chapters. Chapter 1 sets forth the scope of analysis on foundry products

by defining the industry, products, and time period under study, and describes the data-gathering efforts for

this study. Chapter 2 identifies the metal types, casting methods, and manufacturing process, and explains

casting technology and the factors of competition affecting the foundry products industry. The last part of

this chapter explains the analytical framework of the investigation. Chapter 3 provides a profile of the U.S.

foundry industry, including trends in business indicators, trade, factors of production, and financial

performance, and discusses government programs and policies that affect domestic producers. Chapter 4

describes purchasing practices in the U.S. market. Chapters 5-8 examine the four metal types of castings

together with analysis of selected key iron-, steel-, aluminum-, and copper-based foundry products used in

downstream industries. Chapter 9 provides information on the foundry products industry in countries that

were identified during the course of the investigation as significant competitors in the U.S. market. This

chapter includes separate industry profiles and a discussion of business trends, factors of production, and

government policies and regulations affecting foreign producers in Brazil, Canada, China, India, Korea,

Mexico, and Taiwan. Finally, chapter 10 summarizes the condition of the U.S. foundry industry and assesses

factors affecting competition between U.S. and foreign producers in the U.S. market.

Study Approach

This report assesses competitive conditions faced by the U.S. foundry products industry, and

compares it to selected foreign industries that supply the U.S. market. The foreign countries selected were

identified during the course of the investigation as the major competitors in the U.S. market and include

Brazil, China, India, Korea, Mexico, and Taiwan. Canada also was included because its industry is integrated

to a significant extent with the U.S. industry. Most of the data presented in this investigation cover 1999-

2003, but the report also includes additional information for 2004 and part of 2005, as available. 
 6

 Questionnaires requested data for 1999-2003 from U.S. producers and purchasers. Because questionnaires were

mailed during late summer/early fall of 2004, the latest year that data could be gathered was 2003.

 7

 The only available information indicating the size of individual establishments was employment data from AFS. 

Based on these data, those establishments with 50 or more employees represent over 90 percent of the total

employment of the U.S. industry, suggesting that industry coverage, with respect to total output, was high.

 8

 The 10 groups include cast products used in the following downstream products: ductile iron

crankshafts/camshafts; aluminum engine components; aluminum suspension/steering systems; gray iron motor

vehicle gear boxes; copper valves; steel valves; ductile iron bearing housings; gray iron compressor housings; gray

iron pump parts; and gray iron non-motor vehicle gear boxes.

 9

 Foundry products are not specifically provided for in the HTS in most cases, and are typically classified in a

category that includes finished assemblies or parts of finished assemblies. Therefore, U.S. import classifications

provide aggregate data that do not specifically identify castings. Consequently, questionnaires had to be used to

gather trade data.

 10 The producer and purchaser questionnaires were issued sequentially so that information gathered from the

producer questionnaires could be used in the purchaser questionnaire phase.

1-3

The Commission determined that detailed data on U.S. producers and purchasers were not available

at the level of detail necessary to evaluate competitive conditions in the U.S. market. Therefore, the

Commission developed both producer and purchaser questionnaires that served as the principal data source

for the investigation. The aggregated data for the 1999-2003 time period provided the basis for a trend

analysis of U.S. producer and market conditions.6

 Publicly available data from trade journals and the U.S.

Department of Commerce and other government agencies were also used as data sources.

There are more than 2,000 foundry establishments producing all metal types in the United States,

according to information provided by the American Foundry Society (AFS), a U.S. trade association

representing the foundry industry. AFS maintains a database listing all U.S. foundries known to them. USITC

staff used this database, supplemented by an additional list of foundries identified using other company

directories and Internet searches, to compile a mailing list for the producer questionnaire. AFS indicated that

small foundries would have difficulty completing the questionnaire because they lack resources or data

systems to retrieve the necessary information. Therefore, USITC staff sent producer questionnaires only to

the 1,250 establishments with 50 or more employees.7

 Questionnaires were also available on the

Commission’s website to allow firms to voluntarily participate in the information gathering activities, if they

so desired.

Purchasers of foreign foundry products in the United States likely number in the tens of thousands

because the use of metal castings is so common in manufacturing industries. Sending a questionnaire to all

purchasers to gather data necessary for an examination of U.S. purchases of foreign foundry products was

not feasible within the 1-year time frame of this investigation. Therefore, the Commission, in consultation

with the Committee and AFS, selected 10 product groups, believed to be representative, for a detailed

competitive evaluation.8

 The Commission identified the Harmonized Tariff Schedule of the United States

(HTS) classifications for all the items in these 10 product groups,9

 and compiled a list of the importers of such

products from U.S. Customs and Border Protection records. A list of purchasing companies was also gathered

by requesting producers to provide customer lists.10 USITC staff developed a sample of nearly 1,600

purchasers of both domestic- and foreign-origin castings using these two sources. These purchasers were

requested to provide data regarding their purchases of castings classified in the product groups and, in

addition, their total purchases of all iron-, steel-, aluminum-, and copper-based castings.

Questionnaire Responses

Questionnaire responses provided the Commission detailed information on shipments, domestic and

foreign purchases, exports, employment and wages, financial performance, investment, and U.S. market

conditions for 1999-2003. Producer questionnaire responses were received from 680 establishments out of
 11 Thirty-nine questionnaires were returned by the U.S. Postal Service as undeliverable, which may indicate that

these firms have gone out of business.

 12 USITC, Competitive Assessment of the U.S. Foundry Industry, investigation No. 332-176, USITC publication

1582, Sept. 1984.

 13 The 1982 production amount is from the Commission's 1984 report. The 2003 production amount is from “38th

Census of World Casting Production–2003,' Modern Casting, Dec. 2004, p. 25.

1-4

1,246 mailed (55 percent response rate).11 Most non-respondents are believed to be small producers, based

on information from the AFS database. Of the 680 establishments responding, 422 reported production of

iron-, steel-, aluminum-, or copper-based castings. Although the Commission extended the cutoff date for

questionnaire receipt by over 5 months, questionnaire responses were not provided by several large

establishments. Purchaser questionnaire responses were received from 651 companies of 1,591 mailed (41

percent response rate), with 470 firms indicating they purchased the castings specified within the scope of

the investigation.

A significant number of questionnaires were returned bearing incomplete or internally inconsistent

data. Most of these questionnaires were completed or corrected through the efforts of Commission staff by

telephone and e-mail follow-up. A small number remained incomplete, and any data provided were used to

the extent possible. The information compiled from the producer questionnaires is likely representative of

the foundry industry as a whole; aggregate shipments from the producer questionnaire represent almost 75

percent of total shipments in 2003, as reported by AFS. There was no similar basis of comparison for

information from the purchaser questionnaire, so it is not possible to determine the extent to which these data

are representative of total purchases of the specified product groups.

Supplemental Information

The data in the questionnaire responses were supplemented by testimony presented at the

Commission’s public hearing and by written submissions filed with the Commission by interested parties.

Information also was obtained from field interviews, trade associations, contacts with industry representatives

(producers, suppliers, and purchasers), trade literature, and Internet sites. Domestic fieldwork included

interviews and plant visits in Alabama, Maryland, Michigan, Pennsylvania, and Ohio. For information on

the foundry industries of other countries, interviews and plant visits were conducted with government and

trade association representatives, producers, and purchasers in Brazil, China, and India.

Many foundries ceased operating during 1999-2003 and did not complete a producer questionnaire.

Therefore, aggregate data from the producer questionnaire, although believed to be representative, may not

fully reflect trends in the foundry industry. To compensate for missing data and to account for trends since

2003, USITC staff relied on interviews with domestic and foreign producers and purchasers, and secondary

sources as available.

Previous Commission Investigations

In 1984, the Commission, at the request of the U.S. Trade Representative, conducted an investigation

to examine the competitive position of the U.S. foundry industry in domestic and world markets. In

September 1984, the Commission issued its report, covering the period 1979-83.12 Since that time, there have

been key changes in the industry and markets including the emergence of less-developed countries as leading

world producers. Another notable trend is the growth in global foundry production since the early 1980s,

from 52 million short tons in 1982 to over 73 million short tons in 2003.13
 1

 U.S. industry official, telephone interview with USITC staff, Mar. 2005.

 2

 Ibid.

 3

 U.S. Census Bureau, Economic Census 2002. Other metals commonly produced as castings include zinc,

magnesium, lead, and nickel.

2-1

CHAPTER 2

INDUSTRY OVERVIEW AND FACTORS

OF COMPETITION

Overview of the Castings Industry

The metal castings industry is diverse, ranging from small operations that specialize in low-volume

specialty products to large establishments producing thousands of tons of castings per year. Individual

castings range from less than one ounce to many tons. Each establishment has specialized equipment that

is suited to a particular metal, casting size, and order volume for its target market. In many cases, foundries

are categorized as either job shops or captive operations. Job shops tend to produce short runs for a broad

range of customers, and typically accrue the higher costs that are associated with changing production lines

and maintaining large inventories of patterns for their many customers. Although job shops have the

flexibility to adapt to changing market needs, they typically lack the capital resources of a captive operation

to invest in plant modernization.1

 Captive shops are internal units of companies that supply castings for their

affiliated manufacturing operations. Because these foundries generally supply one customer, their success

largely reflects the performance of their affiliated manufacturing facility and its market. Captive operations

typically have access to financial resources of the affiliated manufacturing operations to carry them through

difficult operating periods, and often have a guaranteed line of business.2

 In addition to these categories,

foundries are also grouped by those that offer a broad range of products to a small customer base and those

that produce a limited number of products for a large group of customers. Foundries with a small customer

base are often more vulnerable to cyclical industry declines.

The global market is increasingly segmented into commodity and specialized castings. Commodity

castings are generally less sophisticated, simpler castings that can be produced by most producers because

limited technical skill and technology levels are required. Specialized castings, however, generally require

more complex designs and manufacturing technologies, and may be proprietary in nature. They generally

must meet higher standards, such as closer tolerances and tighter material specifications, than commodity-type

castings. As a result, these castings typically command a higher price and are often sourced from more

sophisticated foundry operations.

Metal Types

Cast iron, steel, aluminum, and copper accounted for 92 percent, by value, of metal castings produced

in the United States in 2002, with cast iron alone, in its several variations, accounting for about 38 percent;

steel for 17 percent; aluminum for 32 percent; and copper for 5 percent.3
 4

 “Understanding Cast Irons,” Engineered Casting Solutions, summer 2000, pp. 28-29, found at

http://www.castingsource.com/tech_art_understanding.asp, retrieved July 22, 2004.

 5

 C.R. Loper, “Foundry Practice and Equipment,” Mark’s Standard Handbook for Mechanical Engineers (New

York: McGraw Hill, 1985).

 6

 Compiled from “Mechanical Properties of Gray Iron,” Engineered Casting Solutions, summer 2000, pp. 30-33,

found at http://www.castingsource.com/tech_art_grayiron.asp, retrieved July 22, 2004; and D.E. Krause, The Gray

Iron Research Institute, Inc., “Gray Iron, a Unique Engineering Material,” Iron Casting Research Institute, found at

http//www.ironcasting.org/Gray%20Iron%20A%20Unique%20Material.htm, retrieved July 22, 2004.

 7

 The physical properties of gray iron are reflected in its microstructure with carbon occurring in the form of a

network of graphite flakes throughout the silicon-iron matrix.

2-2

Iron

Cast iron and steel are alloys of the metallic element iron, but they differ in important ways. Cast iron

contains over 2 percent by weight of carbon, and as a result has a lower melting temperature and requires less

refining than does steel, which has a typical carbon content of 0.5 percent. Iron castings can therefore be

produced with less costly and less specialized equipment than steel castings. Because cast iron shrinks less

when solidifying than does steel, it can be cast into more complex shapes; however, iron castings do not have

sufficient ductility to be rolled or forged (table 2-1).4

Iron is the most commonly cast metal in the foundry industry, being not only relatively less costly

to produce than cast steel, but also easily cast, readily machinable, and suitable for a wide range of cast metal

products that do not require the superior strength and malleability of steel.5

 The iron foundry industry

comprises establishments that produce both rough and machined iron castings. Metal foundries produce

molten iron by melting scrap iron, pig iron, and scrap steel in a traditional coke-fired cupola furnace, or in

electric-induction or electric-arc furnaces. Molten iron is refined by adding alloying metals into either the

furnace or a ladle. It is then moved to a pouring station for pouring into molds. Molten iron is cast by most

molding processes, but is less suited for permanent molding and injection molding (die casting) because its

high melting temperature increases wear on the casting surfaces of cast-iron permanent molds and steel dies.

There are several important types of cast iron, each of which has physical properties that make it

suitable for specific applications.

Gray iron.6

—Gray iron is the most widely cast metal and is easier to cast and less costly to produce

than other types of cast iron because it does not require special alloy additions necessary to produce ductile

iron or compacted-graphite iron nor does it require annealing (heat treatment) of the rough castings as is

necessary to produce malleable iron.7

The largest end use for gray iron castings is the motor vehicle industry. Gray iron is ideal for engine

blocks because it can be cast into complex shapes at relatively low cost. Gray iron also is preferred for engine

blocks because of its high strength-to-weight ratio, ability to withstand high pressures and temperatures,

corrosion resistance, and greater wear resistance compared to aluminum. Gray iron is suitable for brake drums

and disks because of its dimensional stability under differential heating. It is suitable for internal-combustion

engine cylinders because of its low level of surface-friction resistance. It is suitable for gear boxes, differential

housings, power-transmission housings, and speed changers in both automotive and non-automotive

applications because of its high vibration-dampening capability. Other casting applications for gray iron

include compressor housings for appliances and other equipment; construction castings and fittings (e.g.,

man-hole covers, storm grates and drains, grating, fire hydrants, lamp posts, etc.); utility meter box covers;

soil pipe and fittings; parts for pumps for liquids; and rolls for rolling mills, among other cast products.
 8

 Compiled from “Mechanical Properties of Ductile Iron,” Engineered Casting Solutions, pp. 34-35, found at

http://www.castingsource.com/tech_art_ductile.asp, retrieved July 22, 2004; “Introduction,” Ductile Iron Data for

Design Engineers, Ductile Iron Society, found at http://www.ductile.org/didata/Section2/2intro.htm, retrieved July

22, 2004; and “Designing with Ductile Iron,” Ductile Iron Data for Design Engineers, Ductile Iron Society, found at

http://www.ductile.org/didata/Section10//10intro.htm, retrieved July 22, 2004.

 9

 The chemicals contained in soil react with variables such as moisture and level of aeration to corrode metals.

Corrosion in Soils, found at http://www.corrosion-doctors.org/SoilCorrosion/Frames.htm, retrieved Apr. 26, 2005.

2-3

Table 2-1

A comparison of the characteristics of casting irons with casting steel1

Characteristic Gray iron Ductile iron Malleable iron Carbon steel2

Carbon content (percent) . . . . . . . . . . . . . . 2.5 - 4.0 3.0 - 4.4 2.0 - 2.7 0 - 2.1

Silicon content (percent) . . . . . . . . . . . . . . . 1.0 - 3.0 1.5 - 2.8 1.1 - 1.6 0 - 2.0

———————————— Ranking ————————————

Castability .......................... 4431

Ease of machining . . . . . . . . . . . . . . . . . . . 4331

Vibration damping . . . . . . . . . . . . . . . . . . . . 4331

Surface hardenability ................. 4441

Elasticity modulus (stiffness) ............ 1434

Impact resistance . . . . . . . . . . . . . . . . . . . . 1324

Corrosion resistance . . . . . . . . . . . . . . . . . . 4431

Strength to weight .................... 1423

Wear resistance . . . . . . . . . . . . . . . . . . . . . 3421

Production cost ...................... 4321

1

 Characteristics are ranked from 4 (best) to 1 (least/worst) as comparisons among various types of casting irons

and a selected casting steel, and should not be interpreted relative to all types of ferrous and non-ferrous (e.g.,

aluminum and copper alloys, among others) casting metals. 2

 Carbon and silicon ranges reflect all types of casting steels. In contrast, for ranking purposes, characteristics of

casting irons are compared to those of a 0.3-percent carbon steel. Castings produced from alloy steel may have

higher strength relative to ductile iron.

Source: Ductile Iron Society, “Ductile Iron Data for Design Engineers,” figure 2.7: Comparison of the engineering

characteristics of Ductile iron versus competitive ferrous cast metals, found at

http://www.ductile.org/didata/Section2/figures/pfig2_7.htm; and figure 2.3: Approximate ranges of carbon and silicon

for steel and various cast irons, found at http://www.ductile.org/didata/Section2/figures/pfig2_3.htm, retrieved July

22, 2004.

Ductile iron.8—Ductile iron (also called “nodular iron”) combines many of the engineering qualities

of steel with the processing capabilities of iron. To produce ductile iron, magnesium is added to molten iron,

which increases the ductility, stiffness, impact resistance, and tensile strength of the resulting castings. Ductile

iron also offers flexibility in casting a wide range of sizes, with sections ranging from very thin to very thick.

Ductile iron is a growth metal in the casting industry to the point of approaching gray-iron production levels.

Ductile iron is primarily used for pipes, tubes, and fittings, and for automotive parts. Pressure pipe and fittings

are cast with ductile iron primarily to resist fracturing from ground movement, shocks, and soil corrosion;9

these products are common in municipal water and sewage systems. For the automotive industry, ductile iron

is cast into camshafts and crankshafts for internal-combustion engines. Other end uses for ductile iron castings

are bearing housings, machinery components, construction and utility applications, and electric and electronic

equipment components.
 10 Compiled from “Mechanical Properties of Malleable Iron,” Engineered Casting Solutions, summer 2000,

pp. 40-41, found at http://www.castingsource.com/tech_art_malleable.asp, retrieved July 22, 2004.

 11 Compiled from “Mechanical Properties of Compacted Graphite Iron,” Engineered Casting Solutions, summer

2000, pp. 38-39, found at http://www.castingsource.com/tech_art_graphite.asp, retrieved July 22, 2004.

 12 “Nonferrous Castings: 2002,” U.S. Census Bureau, July 2003, table 2.

2-4

Malleable iron.10—Malleable iron is cast iron with properties similar to those of ductile iron, however,

malleable iron castings are produced by a method that requires a lengthy period of annealing in a special

furnace to induce characteristics of increased strength, durability, and ductility; ease of machining; and high

resistance to atmospheric corrosion. The lengthy annealing period increases the relative cost of producing

castings of malleable iron compared to those of gray or ductile irons. In addition, technical requirements limit

the thickness of a casting that can practically be produced of malleable iron. Malleable iron use declined,

particularly for automotive parts, after widespread adoption of the ductile-iron process in the early 1970s. A

major use for malleable iron is pipe fittings, particularly for applications that require resistance to shock and

vibration or rapid temperature changes.

Compacted graphite iron.11—Compacted graphite iron (CGI) exhibits properties that are intermediate

between those of gray and ductile iron, and results from the addition of certain rare-earth elements and

titanium to molten iron. Recent growth in CGI use was made possible by the development of advanced

sensors and controls for the precise metallurgical additions to molten iron. CGI exhibits unique properties

of medium to high strength, good thermal conductivity, low shrinkage, and medium dampening capacity

while retaining much of the castability of gray iron to produce complex shapes and intricately cored passages.

CGI also provides a better machined finish than gray iron. CGI exhibits slightly higher thermal conductivity,

more dampening capacity, and better machinability than is possible with ductile iron. A drawback of CGI

castings is the close metallurgical control necessary to obtain successive castings with consistent properties.

The largest end use for CGI is internal-combustion engine blocks for both motor vehicles and other

applications.

Steel

Steel castings are produced in a wide range of chemical compositions and physical properties. Steel

castings are, in general, of higher strength and ductility than cast iron. Castings of alloy steel have high

strength, and those of stainless steel are highly resistant to corrosion. 

Steel castings are used extensively in the agricultural, construction, manufacturing, power generation,

processing, and transportation industries. Typical products made from steel castings include bridge and

building supports, compressors, mechanical components, pumps, tools, and valves. The railway rolling-stock

industry is the largest consumer of steel castings in the United States, by volume. Because of their high

strength and low cost, highly engineered lightweight steel castings are increasingly used in high-volume

automotive chassis and drive-train applications.

Aluminum

Cast aluminum and aluminum-based alloys dominate the nonferrous castings market, accounting for

74 percent ($6.0 billion) of total U.S. nonferrous casting shipments in 2002.12 Aluminum-alloy castings

contain varying amounts of silicon, copper, magnesium, tin, and zinc.

The strength-to-weight ratio of aluminum is among the highest of all metals, which has enabled lighterweight aluminum to find a niche in almost every segment of the transportation industry—particularly in

aerospace where aluminum castings are used for such applications as engine and airframe parts. Motor

vehicle use of aluminum has tripled to 250 pounds per vehicle in the past three decades, with the major cast
 13 Ducker Research, from presentation by Andrew M. Sherman, “Trends in Automotive Applications for

Aluminum,” Manufacturing and Vehicle Design Research Laboratory, Ford Motor Company, 7th International

Conference on Aluminum Alloys, Charlottesville, Virginia, Apr. 10, 2000, found at

http://www.cs.virginia.edu/icaa7/trends.pdf, retrieved Aug. 2, 2004.

 14 NEMA 4X-rated electronic enclosures by Bud Industries, found at

http://www.automationtechies.com/store/pid11710.php, retrieved Aug. 2, 2004.

 15 Sand molds may be either "green sand" in which the sand is moistened with a water-based binder, or

"dry-sand" in which the sand is treated with an organic binder and then baked hard to remove moisture and increase

strength. 

2-5

components (200 pounds per vehicle) being cylinder heads, intake manifolds, engine blocks, wheels, shock

towers, and front knuckles.13 Other automotive applications for aluminum castings are pistons and connecting

rods, die-cast electrical-switch boxes,14 and power heads.

Copper

Copper castings include those of copper-based alloys, such as brass (copper with zinc as the primary

alloying metal) and bronze (a large family of copper alloys with tin, aluminum, manganese, or another metal

as the primary alloying metal). Copper castings have high corrosion resistance, good electrical and thermal

conductivity (especially pure or near pure copper castings), and good tensile and compressive strength

(certain alloys are nearly as strong as many stainless steel alloys), are non-sparking, and exhibit low friction

and good wear resistance when in contact with other metals and materials. In addition, they maintain these

properties at extremely low temperatures. Copper castings are especially amenable to post-casting operations

such as machining, brazing, soldering, polishing, and plating.

Typical applications for copper castings include valves that control the flow of liquids and gases;

plumbing fixtures such as faucets; power plant water impellers; architectural applications (e.g., door

hardware); ship propellers; bearing sleeves; and electrical circuit parts (e.g., circuit breakers).

Casting Methods

Sand Casting

Sand casting is the most common method of metal casting, accounting for approximately 75 percent

of all metal cast. It consists of forming a cavity in sand with a pattern,15 filling the cavity with molten metal,

allowing it to cool and solidify, and then releasing the casting by breaking away the sand. Patterns are fullsize models having the shape of the exterior of the casting to be produced and may be made of wood, brass,

aluminum, or other material. The choice of material for a pattern depends on the expected number of times

it will be used and the cost of producing it. If the casting has features such as a hollow interior or internal

holes, inserts (“cores”) made of sand (with resin binder) are placed in the impression before the two parts of

the mold are joined.

Shell-Mold Casting

Shell-mold casting is a variation of sand casting in which sand containing a resin binder is cured by

heat. The pattern is heated and impressed into sand. The sand cures in contact with the hot pattern, after which

excess sand is removed, leaving a shell mold. Shell molding castings can be used for any metal, and the

process generally produces castings of greater dimensional accuracy at a higher rate of production than greenor dry-sand casting. Typical parts produced by shell casting include connecting rods, gear housings, and lever

arms.
2-6

Investment Casting

Investment casting is a process also known as the “lost-wax” process, or “precision” casting. The

process is suitable only for small castings and is capable of producing castings of very-close dimensional

tolerance, with excellent surface finish and detail. Typical parts made by the investment casting process

include golf-club heads, orthopedic implants, costume jewelry, dentures, and turbine-engine blades.

In this process, an expendable wax pattern is made for each casting to be produced by using a special

wax that is melted and injected, under pressure, into a metal mold. The patterns are assembled onto wax

pieces that will form runners and channels for molten metal to enter the mold cavity. The wax pattern

assembly is dipped into a slurry of a refractory coating material that will produce a uniform coating after

drying. The precoated assembly is placed in a flask and a fluid aggregate containing an inorganic binder is

poured around it. The molds are allowed to air set. After setting, the flasks are heated in an oven, at which

time the wax is melted out and may be reclaimed and reused. The heating process completely eliminates the

wax and gas-forming material from the mold. When the mold is at a suitable temperature, molten metal is

poured into the mold. After cooling and solidifying, the mold material is broken away from the castings. The

individual castings, each an exact metal replica of the wax pattern, are broken or cut from the central runners,

and, because of the precision of the process, often require very little finishing.

Lost-Foam Casting

Lost-foam casting is a technique similar to investment casting in that it uses an expendable pattern,

one made of polystyrene foam rather than wax. The pattern is coated with a refractory material and then

encased with sand, forming a one-piece sand mold. As molten metal is poured into the mold, the foam

vaporizes and metal takes its place. This process can produce complex shaped castings without any partingline flash. However, the cost of the expendable patterns adds to the processing cost. Such parts as pump

housings, manifolds, and auto brake components may be produced by this method.

Permanent-Mold Casting

 The permanent mold process involves the pouring of molten metal into reusable metal molds of a

higher melting temperature than the metal being cast. The process is used primarily for nonferrous (e.g.,

aluminum or copper) castings. The advantage of permanent mold casting is that rather than making a new,

expendable mold for each casting, the mold can be used many, often thousands, of times. Shapes and sizes

are limited in this method, however, and initial tooling costs are high. The process is economical only for

high-volume production. Typical products of this process include gears, splines, wheels, and auto engine

pistons.

Centrifugal Casting

Centrifugal casting involves the pouring of molten metal into a rotating cylindrical mold. Centrifugal

force causes the metal to flow to the outer wall of the mold, where it is held until it solidifies. Typical

products produced by centrifugal casting include cast-iron pipe, propeller shafts and mill rolls. (Cast-iron pipe

is one of the most significant applications of metal castings, accounting for about 25 percent, by weight, of

all cast-iron production.)
2-7

Die Casting

Die-casting is similar to permanent mold casting except that the molten metal is injected into the mold

under high pressure, resulting in very uniform parts with good surface finish and dimensional accuracy. Die

casting molds, which are called “dies” in the industry, are costly because they are made from hardened steel

and often require a long cycle time and technical expertise for their production. Die casting is limited to the

nonferrous metals; harder, higher-melting-point metals (e.g., iron and steel) would destroy the dies.

Production Steps

Design

The customer or user of a casting is normally responsible for its design. The foundry may provide

assistance in the design, through its practical knowledge of casting limitations and requirements, and often

through application of computer simulation of metal flow and solidification characteristics.

Pattern Making

Once a design has been received, the casting producer must design and build the necessary tooling to

produce the casting. For a sand casting, the tooling consists of dies for any required cores and patterns to

make sand molds. The patterns incorporate placement of cores and include shapes forming channels in the

mold through which molten metal flows to completely fill every cavity of the finished mold. The size, shape,

and location of these channels, called sprues, gates, and risers, are essential parts of the pattern design process.

The design process is aided by computer simulation programs that are used to predict the flow of metal in the

mold. Separate patterns (these are usually called molds) are manufactured to produce cores. Some casting

producers have in-house pattern-making capabilities, while others outsource such services. The production

of patterns requires significant capital investment and skilled labor.

Mold Making

The mold-making process is one of the key production steps in a sand foundry, usually occurring in

the area where molten metal is poured. The extent of automation of mold making depends upon the size,

complexity, and number of castings to be produced. For U.S. and foreign foundries producing high-volume

production runs, molding machines are fully automated. These machines feed sand into a flask around a

pattern, automatically remove the pattern, position the mold for insertion of cores, close the mold, and convey

it to the metal-pouring station.

Metal Melting and Pouring

Another key production step is metal melting. The type of melting furnace depends upon the type of

metal to be cast and the volume of molten metal required. Raw materials, consisting of scrap, including

significant amounts of internal scrap; virgin materials such as pig iron (in iron or steel foundries) or ingot (for

copper or aluminum foundries); and alloy materials are placed in a melting furnace. Any necessary refining,

such as oxidizing unwanted contaminants in the metallic charge, or dissolving such contaminants through the

use of slags, is done in the melting furnace. Molten metal is then poured from the melting furnace into a ladle

and moved to a pouring station, where it is poured into molds.
2-8

Shake-out

After the casting has solidified, the mold is broken away and the casting is removed. At this point,

various cleaning methods, such as shaking or shot blasting, may be used to remove all of the sand or other

molding material, including that which was in the cores and the internal parts of the casting. Metal that has

solidified in the sprues, gates, and risers is broken or cut off of the castings and returned to the melting area

for remelt. Sand is recovered and processed for reuse.

Final Processing of Rough Castings

Unwanted protrusions, such as those where the casting was broken away from the gates and risers, and

thin flash, where separate parts of the mold abutted, are cut or ground away. After such limited processing,

a rough casting is ready for shipment or further processing. If a large number of a single casting are to be

produced, the producer may invest in special tooling, e.g., a die, to cut off the flash, thereby automating the

process and reducing the direct-labor input while also increasing the uniformity of the rough castings.

Machining of Castings

Some castings are used as rough castings and require no further processing. However, many castings

are extensively machined or ground. Such machining may include drilling of holes and machining of surfaces

to closer dimensional tolerance or smoother surface finish than can be achieved in a rough casting. Some

foundries perform these finishing operations in-house while others may outsource the finishing. In many

cases, however, rough castings are shipped to customers who perform the finishing operations.

Technology

Melting

A variety of technologies are available to produce molten metal. Iron foundries often use cupola

furnaces, which are fueled with coke, as their primary melting facility. Cupola melting is an old technology,

but one that has seen incremental improvements over the years. Cupolas are most suited to high-production,

continuous operations. Other iron foundries, as well as steel foundries, choose either electric-arc or electricinduction furnaces, which are more suited to batch-type and intermittent operations. Nonferrous foundries

may use electric-induction furnaces and, due to the lower melting temperature of the metals, have additional

options in gas- or oil-fired reverberatory (open-flame) furnaces. Typically, a foundry will also use an

electrically heated holding furnace to maintain temperature in molten metal, transferring large amounts of

molten metal from the melting furnace to the holding furnace, then taking smaller amounts to the pouring

location as needed so that a constant pouring temperature can be maintained for all similar castings.

Molding

In the sand-casting-molding process, there are many opportunities for application of automation and

robotic technology. Since the production of molds can be very labor-intensive, foundries, especially those

in the developed world, invest heavily in mold-making technology to remain competitive, particularly for the

production of high-quantity orders, such as those for automotive applications. An example of recently

developed molding technology is the Disamatic molding machine, which produces machine-made molds in

which the plane separating the two halves of the mold are vertical, rather than horizontal (figure 2-1). Each
 16 Listed as number one by multiple industry sources. U.S. industry officials, telephone interviews with USITC

staff, Aug.-Sept. 2004.

 17 “SFSA: Overview of the Casting Process,” Steel Founders' Society Of America, May 2001, found at

http://www.sfsa.org/sfsa/cstintcp.html#prcint2.1, retrieved Sept. 25, 2003.

 18 A computer analyzes a CAD model to determine what needs to be made and then slices the model into thin

cross-sections, which are reproduced to form a 3-dimensional object. Terry Wohlers, “Rapid Prototyping,” Foundry

Management & Technology, Jan. 2002, Vol. 130, no. 1, pp. 92-95; and “Foundry Execs Share Viewpoints on

Casting Technology Trends,” Modern Casting, Dec. 2002, found at

http://www.moderncasting.com/archive/WebOnly/1202/Essay_1202.asp, retrieved Apr. 30, 2003.

 19 The Cast Metals Coalition, found at http://cmc.aticorp.org/products.html, retrieved Sept. 23, 2003.

2-9

mold has an impression on each side, and two molds together form a mold

cavity. The molds are pushed along a conveyor with the back of each mold

and the front of its following mold forming a mold cavity. Metal is poured

into the molds almost immediately after forming the molds. Thus, the

entire casting process is simplified and automated, and production is

increased.

Computer Technology

The greatest technological advances occurring in the castings

industry are those associated with electronic computing advances.16 The

application of process control to the industry has revolutionized everything

from predictive design to process sensing and control to on-line quality

testing. Computers play a major role in reducing the time needed to

produce castings and increasing the efficiency with which foundries

interact with their customers. An increasing number of customers are

sending part geometry to foundries via the exchange of computer-aided

design (CAD) files, whereas traditionally, casting geometry was obtained

from blueprint drawings.17 Technologies such as rapid prototyping allow

foundries to make 3-D models and patterns directly from CAD data,

reducing both time and costs, as well as increasing dimensional

consistency.18 Several computer modeling and software design programs

predict metal shrinkage, cooling rate, and resulting physical metallurgy

properties without the need to cast a test model. These advancements can

transform what could have been an 18-month design process that included

multiple drawings and mold models into a few weeks, and help reduce the

cost of actual pattern-making and molding. Further, new software versions

allow users to “tune” the predictive program to actual results, thus

allowing the effects of natural process inconsistencies, hindrances,

impurities, or other unknowns to be factored in. The installation of sensors

and controls linked to computer monitors and analysis tools, which can

improve metal casting productivity and quality by continuously

monitoring output, is another use of computers in castings facilities.19

Similar modeling power is enabling cupola production to become

Source: Disa Group, found at 

www.disagroup.com

Figure 2-1

The Disa molding principle
 20 Kevin L. Moore et al, “Feedback Control of a Cupola – Concepts and Experimental Results,” 1998 AFS

Cupola Conference, Cincinnati, OH, Oct. 1998, found at http://www.csois.usu.edu/publications/pdf/pub013.pdf,

retrieved Aug. 17, 2004.

 21 Based on early results of the U.S. Department of Energy’s Office of Industrial Technology’s primary

application of the integrated I3PSC system, found at http://www.oit.doe.gov/sens_cont/factsheets/fact-cupola.pdf,

retrieved Aug. 17, 2004.

 22 “AMT Market Forecast,” Technical Insights’ Advanced Manufacturing Technology, Vol. 24, No. 9, 2003, 

p. 11.

 23 The Cast Metals Coalition comprises the three leading technical societies of the foundry industry: American

Foundry Society, North American Die Casting Association, and Steel Founders’ Society of America.

 24 “Foundry Execs Share Viewpoints on Casting Technology Trends,” Modern Casting.

 25 Sintercast Supermetal CGI, found at 

http://www.sintercast.com/default.asp?groupid=20043514927705&firstlevelid=200435133835739, retrieved 

Aug. 18, 2004.

2-10

predictable. Models that incorporate both the chemistry and physics of the process20 have allowed average

waste rates of cupola melts to decrease by as much as half.21

Much of the computer-related research that is being done in the metal casting industry is occurring at

universities rather than at the foundries themselves.22 Working through the Cast Metals Coalition,23 the U.S.

metal casting industry is able to attract public and private investment in technology development. The U.S.

Department of Energy is a key cosponsor of this research, through its Office of Energy Efficiency and

Renewable Energy. Technologies that are developed in the United States are available to anyone in the world

that has the capital to invest in them.24

Other Advanced Technologies

An important use of technology in some foundries is x-ray spectrography during the testing phase to

determine strengths and weaknesses of castings. Automated machines also are playing an increasing role in

performing repetitive tasks, which can reduce the cost of labor.

Another example of advanced technology is the SinterCast process for the production of compactedgraphite iron castings. Real-time thermal analysis determines the solidification behavior of each small amount

of molten iron to be treated. The results enable the control system to calculate proper addition rates of

magnesium and other additives prior to the casting. The key was development of patented thermal analysis

Sampling Cups which quickly and automatically determine the required additions, practically eliminating

casting process variation, and delivering consistent product.25

Factors of Competition

Labor, raw materials, and energy are key production factors of the global foundry industry, with labor

and raw materials typically the leading production cost factors. Labor accounts for a large share of

manufacturing costs. Direct labor cost and availability are of particular concern to the industry, as well as

the cost of worker benefits such as health care and pensions. Hourly labor rate differentials between work

forces in developed and developing countries are large, and contribute to the competitive advantage of

developing countries. Attracting and retaining skilled technical and managerial labor in the industry is a task

reportedly made more difficult by the “dirty” image of the industry. This issue is more prevalent in developed

countries and urban areas where the foundry industry must compete for workers with industries offering

higher wages and more attractive work environments.
 26 U.S. industry official, telephone interview with USITC staff, Mar. 2005.

 27 Ibid.

 28 ISO 9000 and ISO 14000 - in brief, International Organization for Standardization, found at

http://www.iso.org/iso/en/iso9000-14000/index.html, retrieved Apr. 5, 2005.

2-11

The availability and price of foundry raw materials are major concerns of the global industry. Because

most raw materials are sold on the global market, foundries throughout the world generally pay comparable

prices for their raw materials, with an allowance for transportation cost differentials. Significant increases

in these costs in recent years, driven in large part by global supply and demand forces, have led foundries to

pursue cost-reduction activities such as material substitution and increased recycling.

Metal casting is an extremely energy-intensive process. As such, energy expenditures can account for

a large portion of the cost of a casting. Foundries take great care in selecting which type of furnace to install

for their individual casting needs, since the purchase of a furnace is a long-term commitment that requires

a significant capital investment. With increasing energy costs, many foundries have put more effort into

mitigating these costs through hedging energy costs in financial markets; utilizing curtailment programs, in

which foundries consume the most energy during lower-priced, off-peak hours to reduce energy costs;

forming cooperative buying groups to leverage purchasing power to obtain lower energy prices; and selfsupplying energy via energy co-generation.

The way in which technology is applied in the production process is critical to global competitiveness

as a means to maintain product quality and consistency. The use of technology may also be influenced by

the type of castings produced and relative wage rates. Low-value, low-quality castings, for example,

generally require a lower level of technology and relatively more semi-skilled labor than foundries producing

more complex castings. To lower labor costs, foundries in developed countries with higher wage rates may

install more automation and technological improvements, whereas foundries in developing countries with

relatively lower wage rates may substitute labor for relatively high-cost capital investments. Capital

availability and profitability play crucial roles in determining the amount and type of technology and

equipment that can be purchased to upgrade the manufacturing process, the introduction of new products,

investment in research and development, and the size and extent of capacity expansions. The interest rate

available to foundries is also an important determinant of what projects can be undertaken. Higher interest

rates raise the costs of projects, and thus may reduce profitability and/or extend the time frame for recovering

investment expenditures.

Technical services are another aspect to manufacturing that may confer competitive advantage. These

services include casting design and selection, material specifications, manufacturing simulation, product

testing, machining, and assembly. The number of services offered by foundries largely reflects the type of

castings manufactured (i.e., commodity castings or more specialized castings) and the size of the foundry

operation. Larger firms, and foundries in developed countries, are more likely to have a unit dedicated to

providing technical services to customers.26 Although technical services are being added by a number of

foundries in developing countries, their capabilities in this area are reportedly more limited.27

Certification to certain global standards is often required of foundries by their customers to ensure that

tasks are being performed in a way that makes the development, manufacture, and supply of products and

services more efficient, safer, and cleaner. A number of domestic and foreign foundries, typically the larger,

modern facilities, are certified by the International Organization of Standardization (ISO). The ISO 9000

standards family, for example, is a worldwide series of quality management and assurance standards for

inspecting production processes, updating records, maintaining equipment, training employees, and handling

customer relations.28 The QS-9000 standard was developed by Ford, GM, and Chrysler to establish consistent
 29 QS-9000 is a much more difficult standard to implement than ISO 9001, and is imposed mainly on Tier 1

suppliers, who can also require it of their suppliers. “What is QS-9000?,” found at

http://www.iso9000system.com/qs9000.html, retrieved Sept. 8, 2004.

 30 “ISO 14001: Why It’s Important to Die Casting,” North American Die Casting Association, found at

http://www.diecasting.org/environment/iso14000.htm, retrieved Sept. 8, 2004.

 31 “Cost Management in Lean Manufacturing Enterprises and the Effects upon Small and Medium Enterprises,”

Proceedings of the Fourth SMESME International Conference, found at

http://iprod.auc.dk/sme2001/paper/creese.pdf, retrieved Aug. 31, 2004; and “Nonprofit Group Helps Manufacturers

to Go ‘Lean’,” Snohomish County Business Journal, May 2004, found at

http://www.wamfg.org/pages/press_scbj_thomas.html, retrieved Aug. 31, 2004.

 32 Six Sigma Definition, found at http://www.sixsigmasurvival.com/SixSigmaDefinition.html, retrieved Mar. 30,

2005.

 33 See discussions of transportation infrastructure for selected countries in Ch. 9, Profiles of the Foundry Industry

in Selected Foreign Countries.

2-12

quality standards for their suppliers, and is based on ISO 9001:1994 standards.29 ISO 14000 certifications

provide a systematic approach to addressing environmental concerns and performance that offer additional

benefits, such as cost control, customer assurance, reduced insurance premiums, increased employee

efficiency and involvement, and an improved public image.30 However, foundries often incur recurring costs

in the form of audits and compliance inspections to maintain certification.

Lean manufacturing and Six Sigma are manufacturing philosophies that have been adopted by many

foundries in both developed and developing countries. The goal of lean manufacturing is to cut costs by

reducing waste, shortening lead times, and improving employee performance, satisfaction, and skills.31 The

“Six Sigma” manufacturing technique strives for near perfection by reducing product variation to no more

than 3.4 defects per million.32 Very tight process controls limit defects by reducing errors and waste, which

can, in turn, increase profits.

The ability of foundries to deliver their cast products to customers on schedule and at a competitive

price is another important competitive factor. Largely at the request of their customers, many foundries work

from a just-in-time inventory system to reduce the costs of storage. Because proximity to purchasers and end

users facilitates this inventory management system, foundries located at a distance from their customers may

maintain just-in-time deliveries by warehousing castings in nearby storage or providing reliable scheduled

supplies by means of established transportation routes. Shipments from developing countries may require

longer lead times than those from developed countries, as the transportation infrastructure in many

developing countries is reportedly inadequate.33 Moreover, foundries that are closer to their purchasers are

generally able to give more competitive final delivered prices than those that are located farther away because

of reduced transportation costs.

A variety of federal and regional government programs and policies affect the foundry industry. A

country’s tax structure, rates, and provisions, for example, may influence a foundry’s investment decisions.

Tax and investment policies may attract new foundry operations by offering favorable financing and tax

deferments or deter new investment by increasing corporate tax rates or enacting new tax provisions. Tax

treatment of research and development expenses and equipment purchases, such as depreciation schedules,

allowances, and tax credits, may also influence decisions in these areas. Taxes on production inputs, such

as energy, also have an effect on foundry operations, as do more indirect policies such as the amount of

regulation of the electricity utility sector. Governments may also offer grants to firms, for example, to ease

the financial burden of establishing a new manufacturing site or provide employee training.

Because foundry manufacturing processes produce a significant amount of waste, both hazardous and

non-hazardous, many countries and regions have established environmental regulations that typically set

limits on air, water, and soil contaminants, and/or encourage sustainable development policies. Although
2-13

most developed and developing countries have enacted strict environmental standards, enforcement of these

regulations is often variable and may be lax, particularly within many developing countries. Although many

foundries, especially the most modern ones, recycle a number of the resources used in making castings, the

casting process still generates byproducts that must be reduced or eliminated. To achieve these standards,

many foundries have invested in costly cleansing and purifying systems that are often incorporated into the

manufacturing process, as well as recycling programs that recover reusable materials, such as sand and water.

Foundries’ working environment subjects workers to a variety of hazardous conditions, such as

extremely high temperatures, chemical additives, and repetitive motion, that can result in harmful, if not

lethal, accidents and exposure. Consequently, federal and regional agencies in most countries regulate worker

health and safety and impose industry standards to protect the labor force, although enforcement is variable

and may be relatively weaker in certain developing countries. These standards may require the installation

of exposure-control technologies such as ventilation fans, and require workers to wear full environmental

suits or fire-resistant clothing and use air-purifying respirators.

Exchange rates can play a role in determining international competitiveness in terms of both costs and

revenue, as castings markets are becoming increasingly global. A fixed exchange rate pegs a country’s

currency to one or more foreign currencies, such as the Chinese yuan to the U.S. dollar, so that the relative

value between the two is constant. With a floating exchange rate, two currencies are free to be traded for any

amount relative to each other, based on each country’s currency’s supply and demand in the market. Most

currencies trade under this regime.

 1

 As some foundries pour multiple metal types, the total does not add to 465 respondents.

 2

 AFS, “38th Annual Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 3

 Establishments may use more than one type of process, so the casting methods exceed the aggregate of reporting

foundries. 

 4

 U.S. industry officials, various fieldwork by USITC staff, and U.S. Environmental Protection Agency (EPA),

Office of Compliance, “Sector Notebook Project: Profile of the Metal Casting Industry,” Feb. 1998, found at

http://www.epa.gov/compliance/resources/publications/assistance/sectors/notebooks/metcstsnapt1.pdf, retrieved

Oct. 14, 2003.

 5

 “Foundries Industry Report,” Harris Infosource, p. 4, found at 

http://www.harrisinfo.com/purdue/Foundries.pdf, retrieved Feb. 7, 2005.

3-1

CHAPTER 3

U.S. FOUNDRY INDUSTRY

This chapter provides a general overview of the U.S. metal foundry industry as a whole, based on

responses to the USITC producer and purchaser questionnaires, fieldwork, and interviews with leading

industry participants. The chapter begins with a discussion of the structure of the industry and factors driving

demand. Next, various business trends, production factors, and domestic policies are presented, with

emphasis on their relevance to U.S. metal casters. The chapter concludes with a discussion of purchasing

trends. Subsequent chapters provide similar analysis for 4 segments of the foundry industry and for foreign

foundry industries. 

In the course of the investigation, the Commission collected information from 465 foundries

operating in the United States during 1999-2003. Of 465 producer questionnaire responses, 250 firms reported

producing iron castings, 195 made aluminum castings, 87 manufactured steel castings, and 49 produced

copper castings during 1999-2003, with a substantial number reporting that they produce more than one type

of metal casting.1

 The American Foundry Society also collects information on the foundry industry by metal

types. Data collected by the USITC account for 82 percent of iron, 75 percent of aluminum, 65 percent of

steel, and 32 percent of copper production, as reported by the AFS in 2003.2

Industry Profile

Industry Structure

The U.S. foundry industry is characterized by a high degree of concentration and a large proportion

of small producers. The top 10 responding producers collectively accounted for 32 percent, by quantity, of

the industry's total production in 2003. Approximately 50 percent of responding producers have 100 or fewer

production workers. An average responding firm produced about 24,000 short tons of castings and employed

184 production workers in 2003. 

A majority of foundries indicated that they were job shops producing a broad number of products in

low quantity runs. Sand casting was the predominant method of casting (352 foundries), whereas 120

foundries were die casters.3

Historically, metal casting establishments generally have been located close to raw materials, energy

sources, and waterways.4

 Most firms are located around the Great Lakes, with a high concentration in states

such as Ohio, Michigan, Pennsylvania, and Illinois.5

 However, the geographic concentration of the industry

is shifting, as facilities are built where scrap metal and electricity are available at a reasonable cost or a local
 6

 U.S. Environmental Protection Agency, Office of Compliance, “Sector Notebook Project: Profile of the Metal

Casting Industry,” Feb. 1998, found at http://www.epa.gov/compliance/resources/publications/assistance/

sectors/notebooks/metcstsnapt1.pdf, retrieved Oct. 14, 2003.

 7

 “Bemco Spends $1-Mil on Expansion,” Platts Metals Week, May 19, 2003.

 8

 “Ross Al Expands Casting Operations,” Platts Metals Week, Dec. 8, 2003.

 9

 “Gray Iron Foundry Planned in Alabama,” Foundry Management & Technology, found at 

http://www.foundrymag.com, retrieved Jan. 3, 2005. 

3-2

market for the cast products exists.6 The Southern states, for example, are becoming a production center for

aluminum castings because of nearby automotive manufacturers.7

The number of foundries in the United States has declined since 1999 as firms consolidated and

closed. Although the USITC was unable to compile comprehensive information on the number of firms that

have gone out of business since 1999, this was a continuing trend, according to domestic producers, as 25

known foundries closed during the period. One industry source estimates that approximately 50 foundries

close in the United States each year. Information on key firms that have closed since 2000 is presented in

table 3-1. However, new plants have also been added. For example, a new Ross Aluminum Foundries plant

began operations in 2004 in Piqua, OH.8

 North Vernon Industry Corporation, a division of Toyota Motor Co.,

plans to build a new gray-iron casting operation in Cullman, AL to begin production by the end of 2005.9

Table 3-1

U.S. foundry industry: U.S. foundries that closed operations, 2001-2005

Date of closure Name Location

January 2001 . . . . . . . . . . . . . . . . . PrimeCast, Inc. Beloit, WI and South Beloit, IL

April 2001 . . . . . . . . . . . . . . . . . . . . Hayes-Lemmerz Howell, MI

September 2001 . . . . . . . . . . . . . . . Empire Steel Castings Reading, PA

October 2001 . . . . . . . . . . . . . . . . . American Racing Equipment Warsaw, KY

February 2002 . . . . . . . . . . . . . . . . Wheland Foundry Chattanooga, TN and Warrenton, GA

June 2002 . . . . . . . . . . . . . . . . . . . . Hayes-Albion Corp. Albion, MI and Jackson, MS

September 2002 . . . . . . . . . . . . . . . Buckeye Steel Castings Co. Columbus, OH

October 2002 . . . . . . . . . . . . . . . . . Kingsport Foundry Kingsport, TN

June 2003 . . . . . . . . . . . . . . . . . . . . U.S. Pipe & Foundry Co. Anniston, AL

June 2003 . . . . . . . . . . . . . . . . . . . . Tecumseh Products Co. Sheboygan Falls, WI

August 2003 . . . . . . . . . . . . . . . . . . Excelsior Foundry Belleville, IL

September 2003 . . . . . . . . . . . . . . . Pemco Die Casting Corp. Bridgeman, MI

December 2003 . . . . . . . . . . . . . . . Intermet Corp. Radford, VA

January 2004 . . . . . . . . . . . . . . . . . Campbell Foundry Harrison, NJ

July 2004 . . . . . . . . . . . . . . . . . . . . Intermet Corp. Havana, IL

November 2004 . . . . . . . . . . . . . . . Lester Precision Die Castings Bedford Heights, OH

December 2004 . . . . . . . . . . . . . . . Kurdziel Industries Sparta, MI

December 2004 . . . . . . . . . . . . . . . Production Pattern & Foundry San Leandro, CA

May 2005 .................... General Aluminum Cedarburg, WI

December 2005 ............... Dana Corp. Muskegon, MI

2005 . . . . . . . . . . . . . . . . . . . . . . . . Lexington Die Casting Lakewood, NY

2005 . . . . . . . . . . . . . . . . . . . . . . . . Intermet Corp. Sturtevant, WI and Decatur, IL

Note.–This list is not exhaustive. Buckeye Steel reopened as Columbus Steel Castings in March 2003. Production

Pattern & Foundry reopened in Carson City, NV.

Source: Compiled by the Commission from various industry sources.
 10 Multiple producer and purchaser questionnaire responses; various staff interviews of industry officials; and

Economic Report of the President, Transmitted to the Congress Feb. 2002, found at

www.gpoaccess.gov/usbudget/fy03/pdf/2002_erp.pdf, p. 42, retrieved Mar. 17, 2005. 

 11 “The NBERs Recession Dating Procedure,” Business Cycle Dating Committee, National Bureau of Economic

Research, Oct. 23, 2003, found at http://www.nber.org/cycles/recessions.html, retrieved Mar. 17, 2005. According to

NBER, “a recession is a significant decline in economic activity spread across the economy, lasting more than a few

months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” 

 12 Economic Report of the President, Transmitted to the Congress Feb. 2003, found at

www.gpoaccess.gov/usbudget/fy04/pdf/2003_erp.pdf, p. 27, retrieved May 2, 2005. 

 13 Alfred Spada, Marketing Director, AFS, cited in Tony Reid, “Auto Supply Company Announces Closure of

Decatur, Ill., Foundry” Herald & Review, Decatur, IL, Mar. 30, 2005, p. A1.

 14 End market determined by share of 2003 shipments of castings by quantity.

 15 “North American Car & Truck Production, 1954-2003,” 2004 Ward’s Automotive Yearbook, p. 117.

 16 David Hare, “TRUCKIN’,” Las Vegas Business Press, Jan. 14, 2002, Vol. 19, Issue 2, p. 2, and Gail

Kachadourian, “Class 8 Sales Plunge in ‘01,”Automotive News, Jan. 28, 2002.

 17 Multiple producer questionnaire responses, and U.S. industry official, telephone interview with USITC staff,

Feb. 2, 2004.

 18 Hare, p. 2, and Kachadourian, p. 1. 

 19 See chapter 7: U.S. Aluminum Foundry Industry for more detailed information.

3-3

Demand Characteristics

In general, the foundry products industry was affected by the U.S. economic slowdown beginning

in the summer of 2000 and continuing into 2001.10 The decline in economic activity became a recession by

March 2001 and the downturn lasted until November 2001.11 According to responding producers, the

slowdown reduced demand for foundry products and negatively affected sales. The economic recovery

starting in 200212 spurred demand in certain markets, particularly for aluminum foundry products, leading

to higher forecasted production for many foundries through 2008.13

Principal markets for cast products in 200314 include motor vehicles (47 percent) and soil/pressure

pipe (20 percent), according to respondents to the USITC producer questionnaire. Thirty-six percent of metal

castings are shipped to the automotive market, and an additional 11 percent of U.S. producers’ shipments

went to the truck market, specifically large highway trucks (Class 8 trucks). U.S. foundry producers supply

key motor vehicle components such as camshafts and crankshafts, steering systems, transmissions, and engine

blocks, and demand for these and other components is a key factor affecting castings shipments for

responding foundries within the United States.

An 8 percent decline in motor vehicle production during 1999-2003, to 16.2 million vehicles,

adversely affected demand for metal castings. The period low was reached in 2001, when vehicle output

totaled 15.8 million units.15 A significant reduction in Class 8 truck production in 200116 following the 1999

peak also directly affected casting producers,17 as build rates fell by at least one-half because of high prices

for fuel and an oversupply of used trucks in the market.18 Another demand change has been the shift from

iron to aluminum castings for automotive applications.19 Additionally, rising demand for certain vehicles,

such as sport utility vehicles and pickups, favorably affected aluminum castings producers as automotive

manufacturers designed and launched vehicles for this market segment.

Soil and pressure pipe, specifically pipe made of cast iron used in water and sewer systems for

commercial buildings, is also a leading market for metal castings (20 percent market share). According to

producers, the market for soil and pressure pipe remained strong from 1999-2003 because of suburban

growth. 
 20 For more details on the iron and steel foundry industries, see chs. 5 and 6, respectively.

 21 For more details, see chapter 7: U.S. Aluminum Foundry Industry.

3-4

Producer Trends

Capacity, Production, and Shipments

Both total production and shipments of U.S. foundry products reported by U.S. foundries declined

during 1999-2003 (table 3-2). According to multiple responses to producer questionnaires, site visits, and

company interviews, this decline was attributable to an 8 percent decline in domestic motor vehicle

production (including the reduction in demand in the Class 8 truck market in 2001), the economic downturn

in 2001, and reduced demand for domestic castings because of competition from low-cost producing

countries, particularly China. The ferrous metals segment, the industry’s largest, was the most negatively

affected by these trends, as production and shipments declined by over 10 percent.20 However, production

and shipments of aluminum foundry products grew along with demand for cast aluminum products,

particularly for automotive applications.21 Total U.S. foundry capacity rose by 3 percent during 1999-2003

to 13.1 million short tons, largely attributable to a rise in aluminum casting capacity that increased by 35

percent.

Table 3-2 

All foundries: Responding U.S. producers' capacity, production, and shipments for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Capacity:

Iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,687,985 9,722,389 9,620,048 9,744,415 9,360,928

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928,834 938,160 936,923 927,816 928,614

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,984,306 2,059,350 2,168,378 2,460,681 2,676,496

Copper .............................. ————————————————————————————— 158,790 159,123 165,372 176,483 175,313

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,759,159 12,876,046 12,886,373 13,305,001 13,136,989

Production:

Iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,320,927 8,323,187 7,407,860 7,554,569 7,461,348

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713,175 611,943 558,926 534,006 618,815

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,271,861 1,448,825 1,241,855 1,409,842 1,458,699

Copper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,016 98,291 88,874 89,628 87,223 —————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,404,979 10,482,246 9,297,515 9,588,045 9,626,085

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,026,920 7,748,331 6,819,025 6,678,797 6,599,966

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,710 1,346,992 1,248,566 1,109,013 1,191,829

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,821,176 5,340,710 5,096,981 5,658,193 5,797,773

Copper .............................. ————————————————————————————— 325,628 331,703 317,985 348,807 333,407

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,499,434 14,767,736 13,482,557 13,794,810 13,922,975 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 22 Based on questionnaire responses. For details on trends in each foundry industry, see chs. 5-8.

 23 See, e.g., “Metal Casting Industry Profile,” The Cast Metals Coalition, found at 

http://cmc.aticorp.org/industryprofile.html, retrieved Aug. 30, 2004, and AFS Metalcasting Forecast & Trends 2004,

p. 34.

 24 Multiple producer questionnaire respondents; Albert Lucchetti, President, Cumberland Foundry, hearing

transcript, p. 33; and Larry Comunale, Vice President and General Manager, Doncaster Southern Tool, hearing

transcript, p. 49.

 25 U.S. industry officials, interview with USITC staff, June 2004; and Randall Lawton, President, Bay Engineered

Castings, hearing transcript, p. 45.

3-5

Employment

Total employment by respondents in the U.S. foundry industry declined by 12 percent during 1999-

2003 to 89,230 workers (table 3-3); all types of foundries operated with fewer employees by the end of the

5-year period.22 Iron foundries experienced the greatest absolute loss in employment at close to 9,000

employees. However, the greatest percentage drop occurred in steel foundries, which lost 21 percent of their

workforce.

Overall wages paid decreased along with the decline in employment. However, hourly wages for U.S.

foundry workers grew by almost $2 per hour and, at $17.57 per hour, ranked among the highest foundry wage

rates in the world.23 To some degree, the decline in workforce was offset by an increase in productivity.

Productivity increased over the period as U.S. foundries automated facilities to use less labor to help contain

labor costs.24

Table 3-3 

All metal foundries: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees .............. 101,169 101,653 94,413 91,158 89,230

Production and related workers:

Average number . . . . . . . . . . . . . . . . . . . . . . . 85,134 85,505 78,738 76,025 74,048

Hours worked (1,000 hours) .............. 178,996 181,099 164,669 159,087 157,113

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 2,782,103 2,848,880 2,711,048 2,743,512 2,742,297

Average hourly wages (dollars per hour) . . . . . 15.58 15.78 16.58 17.35 17.57

Productivity (short tons per 1,000 hours) . . . . . 58 58 57 61 62 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Average hourly wages based on establishments that were able to provide both hours worked and wages paid

data. Productivity based on establishments that were able to provide both production quantity and hours worked

data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Respondents to the producer questionnaire indicated that they experienced difficulty in hiring and

retaining workers. Thirty-six percent of respondents said that there was an overall labor shortage for foundry

workers, while 73 percent of questionnaire respondents said that they experienced problems filling higherskilled positions. They attributed the hiring difficulties to the difficult, repetitive nature of foundry work, low

wages compared with other manufacturing positions, and the image of foundries as “dirty.” 

To maintain a skilled workforce, particularly in rural areas, many foundries offer apprentice programs

or pair up with local technical schools in an effort to find and train skilled workers (such as patternmakers

and welders). Additionally, many foundries offer continuous training for workers, often on-site, including

apprenticeship programs for more high-skilled jobs, such as pattern making.25
 26 Multiple producer questionnaire responses; and “Economic Recovery Bypasses U.S. Foundry Industry,”

Manufacturing & Technology News, Nov. 4, 2004, found at 

http://www.manufacturingnews.com/news/04/1104/art1.html, retrieved Feb. 7, 2005.

 27 “Economic Recovery Bypasses U.S. Foundry Industry,” Manufacturing & Technology News, Nov. 4, 2004,

found at http://www.manufacturingnews.com/news/04/1104/art1.html, retrieved Feb. 7, 2005; and U.S. industry

officials, interview with USITC staff, June 2004.

 28 U.S. industry officials, interview with USITC staff, June 2004.

 29 James Mallory, Executive Director, Non-Ferrous Founders' Society, hearing transcript, p. 10.

3-6

Financial Condition

The financial condition of the U.S. foundry industry deteriorated during 1999-2003, as operating

income declined for both rough and machined castings operations (tables 3-4 and 3-5). Rough casting

operations were the most profoundly affected by this trend, as operating income dropped by almost $1 billion

during the period and operating margins declined from 10 percent of net sales to 3 percent. Operating

margins for machined operations declined as well (by 5 percentage points), but remained fairly strong at 8

percent of sales. The most significant indication of the deteriorating financial climate was the increase in the

number of firms producing rough castings that reported operating losses, which nearly doubled during 1999-

2003; 38 percent of U.S. foundries reported operating losses in 2003, up from 21 percent in 1999. Since

2001, numerous foundries, including over one-half of the top 10 foundries in the United States, have filed

for bankruptcy protection (table 3-6).26

Producers cited numerous instances of lost sales as customers sourced castings from foreign sources.

Producers who lost customers to overseas suppliers most frequently cited China as the foreign country where

their former customers were now purchasing castings, particularly those made of iron. According to

respondents, Brazil, India, and Mexico were also supplying products which domestic firms used to furnish.

To compensate for lost business, several industry representatives indicated that they are focusing on

production of more complex, low volume castings because high-volume orders are going overseas to

countries such as China.27 In addition to foreign competition, castings producers mentioned experiencing

more intense domestic competition from foundries facing financial difficulties, as these foundries tend to

move into niche products that may already be produced by other firms or may lower prices in an attempt to

remain competitive.28

While reported producer sales values of rough castings declined by 2 percent and sales of machined

castings grew by 5 percent, profitability was affected significantly by an increase in cost of goods sold,

particularly for energy and raw materials costs and employee compensation. Additionally, implementation

of a more stringent U.S. regulatory environment prior to the study period led to higher initial spending to meet

new mandates for both environmental protection and worker health and safety. Updates to these regulations

have occurred throughout the period. According to one producer, “external costs from taxes, health and

pension benefits, tort litigation, regulation and rising energy prices add approximately 22 percent to U.S.

manufacturers’ unit labor costs, nearly $5 per hour worked, relative to their major foreign competitors.”29
3-7

Table 3-4 

All metal foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) . . . . . . . . . . . . . . . . . . . . . 9,853,876 9,935,643 8,913,411 9,065,311 9,099,913

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,930,587 14,415,274 13,217,612 13,520,790 13,655,176

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 3,944,353 4,208,142 3,787,996 4,117,107 4,267,961

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,654,631 2,731,731 2,565,274 2,583,277 2,622,699

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702,790 840,143 900,856 824,616 870,236

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 4,412,869 4,767,425 4,578,677 4,534,858 4,644,012

Total cost of goods sold . . . . . . . . . . . . . . . . 11,714,643 12,547,441 11,832,803 12,059,858 12,404,908

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,215,944 1,867,833 1,384,809 1,460,932 1,250,268

Selling, general, and administrative .......... 810,574 872,360 853,263 809,766 832,874

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 1,405,370 995,473 531,546 651,166 417,394

Other income and expenses:

Interest expense ....................... 181,242 193,971 173,127 128,802 148,152

All other expenses and income ............ 186,716 86,570 204,387 48,161 100,165

Net income before taxes . . . . . . . . . . . . . . . . . . . 1,037,412 714,932 154,032 474,203 169,077

Depreciation/amortization . . . . . . . . . . . . . . . . . . 582,094 620,064 653,607 716,208 717,716

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 29 29 30 31

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19 19 19 19

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6766

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 32 33 35 34 34

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 84 87 90 89 91

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 13 10 11 9

Selling, general, and administrative .......... 6 6666

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 10 7453

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 95 118 167 168 183

Financial results data . . . . . . . . . . . . . . . . . . . . . 447 465 472 477 477 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
3-8

Table 3-5 

All metal foundries: Responding U.S. producers' financial results for their machining operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) . . . . . . . . . . . . . . . . . . . . . 1,558,756 1,439,563 1,346,137 1,408,701 1,482,936

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,488,405 4,732,866 4,386,197 4,645,413 4,715,872

Cost of goods sold:

Rough castings produced . . . . . . . . . . . . . . . . 2,485,604 2,615,647 2,374,424 2,489,269 2,610,135

Rough castings purchased

 from other companies . . . . . . . . . . . . . . . . 38,812 52,648 107,789 135,442 136,002

In-house machining costs . . . . . . . . . . . . . . . . 1,071,856 1,158,886 1,060,455 1,178,910 1,179,224

Subcontracted machining costs . . . . . . . . . . . 45,327 51,609 52,536 55,279 62,353

Other machining costs . . . . . . . . . . . . . . . . . . 60,975 63,398 74,689 105,726 119,660

 Total costs of goods sold . . . . . . . . . . . . . . . 3,702,574 3,942,188 3,669,893 3,964,626 4,107,374

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,831 790,678 716,304 680,787 608,498

Selling, general, and administrative .......... 220,466 284,848 277,394 227,347 225,398

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 565,365 505,830 438,910 453,440 383,100

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 82 83 84 85 87

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17 16 15 13

Selling, general, and administrative .......... 5 6655

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 13 11 10 10 8

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 39 49 50 55 65

Financial results data . . . . . . . . . . . . . . . . . . . . . 199 209 215 217 222 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 3-6

U.S. foundry industry: U.S. foundries that filed for Chapter 11 bankruptcy protection, 1999-2005

Date Name Location

December 2000 . . . . . . . . . LTV Corp. Cleveland, OH

October 2001 ........... Federal-Mogul Powertrain Systems Malden, MO

November 2001 . . . . . . . . . Wheland Foundry Chattanooga, TN and Warrenton, GA

December 2001 . . . . . . . . . Hayes Lemmerz 22 locations in United States

December 2001 . . . . . . . . . Heick Die Casting Chicago, IL

January 2002 . . . . . . . . . . . Hayes-Albion Corp. Albion, MI

January 2002 . . . . . . . . . . . Fansteel, Inc. Creston, IA

August 2002 . . . . . . . . . . . . Kingsport Foundry Kingsport, TN

April 2003 . . . . . . . . . . . . . . Golden Castings Corp. The Dalles, OR

June 2003 . . . . . . . . . . . . . . Lionheart Industries Foundries throughout United States

August 2003 . . . . . . . . . . . . Atchison Casting Corp. Foundries throughout United States

September 2003 ......... Neenah Foundry Co. Neenah, WI

September 2003 . . . . . . . . . Advanced Cast Products, Inc. Meadville, PA

September 2003 . . . . . . . . . Dalton Corp. Kendallville, IN and Stryker, OH

September 2003 . . . . . . . . . Deeter Foundry, Inc. Lincoln, NE

September 2003 . . . . . . . . . Gregg Industries, Inc. El Monte, CA

February 2004 .......... Auburn Foundry Auburn, IN

September 2004 . . . . . . . . . Citation Corp. 17 foundries

September 2004 . . . . . . . . . Intermet Corp. 17 foundries

January 2005 ........... Lee Brass Anniston, AL

Note.–This list is not exhaustive.

Source: Compiled from various industry sources.
 30 David Sax, "A Hungry Dragon," Dec. 27, 2004, found at http://www.canadianbusiness.com/managing

/article.jsp?content=20041227_64453_64453, retrieved Feb. 18, 2005; “China’s Need for Metal Keeps U.S. Scrap

Dealers Scrounging,” New York Times, Mar. 13, 2004; and “China Effect Convulses Commodity Markets,"

Financial Times, Nov. 15, 2003.

 31 Roy Hanks, Marketing Manager, Waupaca, hearing transcript, p. 39.

 32 U.S. industry official, interview with USITC staff, Mar. 8, 2005.

 33 Producer questionnaires; USITC staff interviews with U.S. industry officials; and George Boyd, President and

CEO, Goldens’ Foundry and Machine, hearing transcript, p. 24.

3-9

When considering the leading issues affecting their firms’ financial condition, producers cited

healthcare costs as having the greatest effect, followed by raw material and labor costs (table 3-7). Although

the cost of energy did not rank as the leading issue, it was the second most frequently cited factor overall.

Government regulations are also important to the viability of an establishment’s operations, and was the third

most cited issue.

Table 3-7

U.S. foundry industry: Internal issues impacting viability of establishment’s operations and ranking in terms

of importance

(Number of responses)

Ranking Total

Issues 1 2 3 4 5 responses

Healthcare costs . . . . . . . . . . . . . . . . . . . . . . . 111 142 85 35 18 391

Raw material costs . . . . . . . . . . . . . . . . . . . . . 98 51 41 43 38 271

Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 58 47 46 36 280

Government regulations . . . . . . . . . . . . . . . . . 38 44 75 63 68 288

Skilled labor availability . . . . . . . . . . . . . . . . . . 29 23 24 34 49 159

Energy costs . . . . . . . . . . . . . . . . . . . . . . . . . . 28 58 62 87 72 307

Other issues . . . . . . . . . . . . . . . . . . . . . . . . . 16 2 2 7 10 37

Cost of capital . . . . . . . . . . . . . . . . . . . . . . . . . 12 7 19 20 28 86

Insurance costs . . . . . . . . . . . . . . . . . . . . . . . . 11 13 35 26 28 113

Employment taxes . . . . . . . . . . . . . . . . . . . . . 4 12 19 24 27 86

Raw materials availability . . . . . . . . . . . . . . . . 4 15 17 26 26 88

Transportation costs . . . . . . . . . . . . . . . . . . . 1 7 8 9 18 43

Training costs . . . . . . . . . . . . . . . . . . . . . . . . . 0 4 8 5 5 22

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Raw Materials

During 1999-2003, global raw material costs for foundry inputs, such as ingot, scrap, coke, and

alloys, rose significantly (table 3-8). One of the key reasons was China’s increased demand for raw materials

to supply its expanding industrial sector.30 Chinese demand is particularly significant in the scrap market;

it became the first country to import more than $1 billion annually in U.S. scrap. U.S. foundries report that

the price of steel scrap has more than doubled; some foundries have reported four-fold increases in steel scrap

prices. Reportedly, demand from China has been so great that it sometimes has led to limited scrap

availability.31 For example, one foundry reported that its supply has been rationed by its raw material

suppliers because of scrap shortages. This shortage of raw materials has led foundries to alter their mix of

alloys in order to meet customer needs.32

Ninety-seven percent of questionnaire respondents indicated that foundry product purchasers share

metal cost increases with foundries, which usually get passed along in the form of a surcharge.33 According

to producers, aluminum cost increases are easier to pass through than those for iron or steel inputs, such as
 34 Historically, aluminum prices have fluctuated more sharply than prices for iron or steel, so purchasers have

been more accepting of surcharges for aluminum than other metals. 

 35 U.S. industry officials, telephone interviews with USITC staff, Mar. 8, 9, 11, and 17, 2005.

 36 U.S. Department of Energy, Energy Information Administration, Natural Gas Monthly, Aug. 2004, table 4.

 37 U.S. Department of Energy, Energy Information Administration, Annual Energy Review 2002, table 8.6; and

Electric Power Monthly, table 5.6.B, found at http://www.eia.doe.gov/emeu/aer/txt/ptb0806.html and

http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.html, retrieved Sept. 2, 2004. 

3-10

Table 3-8

U.S. foundry industry: Average annual prices for metallic raw materials, 1999-2003

(Cents per pound)

Metal 1999 2000 2001 2002 2003

Aluminum:

Scrap . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.41 45.17 42.84 46.79 49.53

Ingot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65.7 74.6 68.8 64.9 68.1

Copper:

Scrap . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.55 75.55 66.55 66.88 76.45

Ingot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.09 83.97 72.65 71.62 80.99

Pig iron1 ............................ 106.43 120.97 107.5 112.35 144.71

Ferrous scrap (composite)2 . . . . . . . . . . . . . . 80.56 79.3 64.14 73.82 116.34

1

 Average unit values, U.S. imports for consumption from Brazil, the major foreign supplier. 2

 Composite average for broker shredded auto bundles, #1 dealer scrap bundles, and #1 dealer heavy melting

scrap.

Source: Statistics of American Metal Market and official statistics of the U.S. Department of Commerce.

pig iron.34 Many suppliers to the automotive industry were locked into long-term contracts with automakers

that made it difficult to pass on cost increases. Some producers felt that this business environment may be

changing as Chapter 11 bankruptcies persuade automakers to provide suppliers relief for raw material price

increases.35

Energy

U.S. foundries use electricity, natural gas, and metallurgical coke for their energy needs. Since 1999,

natural gas prices in the United States have risen considerably. In 1999, the average monthly industrial price

of natural gas was $3.12 per 1,000 cubic feet. It increased irregularly to $5.78 per 1,000 cubic feet in 2003,

roughly twice the price during the 1990s.36 Though electricity prices vary by state, industrial electricity prices

in general were higher in 2003 than in 1999 (table 3-9).37

Table 3-9

U.S. foundry industry: Average annual prices for energy, 1999-2003

Energy source 1999 2000 2001 2002 2003

Electricity (cents per kW-hr)1 . . . . . . . . . . . . . . . . . . . . . . 4.43 4.64 5.04 4.88 4.95

Natural gas (dollars per 1,000 cu. ft.)1 . . . . . . . . . . . . . . 3.12 4.45 5.24 4.02 5.78

Metallurgical coal (dollars per short ton)

2 . . . . . . . . . . . . 32.63 32.70 35.12 39.10 38.09

 1

 Average prices to industrial sector customers.

 2

 U.S. market price not available. Average export price for U.S. shipments of metallurgical coal to North American

destinations used as a proxy.

Source: U.S. Department of Energy (USDOE), Energy Information Administration (EIA), Annual Energy Review 2003,

table 6.8 (natural gas prices by sector), 1967-2003, and table 8.10 (average retail prices of electricity), 1960-2003;

and USDOE, EIA, Quarterly Coal Report, (various tables) average price of U.S. metallurgical coal exports, various

issues.
 38 Multiple responses to USITC producer questionnaires and “Energy and Environmental Profile of the U.S.

Metalcasting Industry,” prepared by Energetics, Inc., for the U.S. Department of Energy, Sept. 1999, p. 14.

 39 U.S. industry officials, interview with USITC staff, June 2004.

 40 Multiple USITC producer questionnaire responses; and Dave Bumbar, President, Aurora Metals, hearing

transcript, p. 65.

 41 U.S. industry official, interview with USITC staff, United States, June 2004.

3-11

In 1999, when natural gas was relatively inexpensive compared to electricity, many foundries

invested in furnaces fueled by natural gas.38 When gas prices began to rise, these producers were unable to

revert to electricity as a fuel source. Owing to rising costs, foundries have begun to use various mechanisms

to manage energy inputs. For example, some foundries have attempted to buy futures contracts to hedge

against price increases in natural gas, whereas others have arranged long-term contracts with energy

companies or paired with other foundries to buy energy in bulk. Several foundries mentioned that they

schedule melting operations at off hours to get the lowest price.39 Only 22 percent of respondents to the

questionnaire stated that energy cost increases could be passed on to customers.

Labor

Despite the decline in employment, total employee costs rose by about $317 million (6 percent) to

$5.2 billion during 1999-2003 (table 3-10). On a per employee basis, costs grew over $10,000 per employee

during the period to $58,568 in 2003. Significant growth in health and pension costs accounted for most of

this increase, as salaries rose by less than 1 percent during the period. Health benefits, for example, increased

by 28 percent ($2,244 per employee) during the period and pension costs grew by 39 percent ($1,041 per

employee). Additionally, producers cited workers’ compensation costs as an area in which high costs affect

their competitiveness.40 One producer, for example, reported that workers’ compensation costs for the facility

had suddenly risen by $15,000, even though there have been no recent accidents.41

Table 3-10 

All metal foundries: Responding U.S. producers' employee costs and capital expenditures for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Employee costs:

Salaries and wages (including overtime) . . . . . 3,771,733 4,047,346 3,814,982 3,796,364 3,791,209

Health benefits ........................ 504,677 575,089 574,614 604,711 645,329

Pension and profit sharing ................ 183,872 184,831 183,586 198,149 255,017

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 410,127 489,692 483,279 478,315 503,950

Employee training . . . . . . . . . . . . . . . . . . . . . . 39,047 38,679 30,667 29,966 30,497

Total employee costs . . . . . . . . . . . . . . . . . . 4,909,456 5,335,637 5,087,128 5,107,505 5,226,002

Capital expenditures:

Machinery, equipment, and fixtures:

Environmentally related . . . . . . . . . . . . . . . . 98,772 58,578 44,423 61,891 31,509

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759,886 768,044 702,863 590,796 469,535

Land, building, and related improvements . . . . 96,667 161,002 138,131 80,555 89,292

Total capital expenditures .............. 955,326 987,624 885,417 733,242 590,336 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 42 U.S. industry officials, telephone interviews with USITC staff, Mar. 8-10, 2005.

 43 Ibid. 

 44 Multiple USITC producer questionnaire responses. 

 45 For more details on certifications, see chapter 2. 

3-12

Investment

Reflecting the impact of declining operating incomes, capital expenditures declined by 38 percent to

$590 million during 1999-2003 (see table 3-10). According to producer questionnaire responses, more than

70 percent of foundries reduced, delayed, or terminated planned capital investments. Despite the decline,

firms were able to embark upon some capital spending, averaging about $1 million per facility. Most firms

(53 percent) indicated they automated their facilities to improve lead times and save on labor costs. Several

firms indicated that they were able to upgrade equipment via auctions and liquidations of foundries that had

gone out of business. To make capital improvements, 94 percent of questionnaire respondents reported that

their establishments used internal cash flow for funding. Secured debt was also a prevalent source of funding

and was used by 52 percent of U.S. foundries during 1999-2003.

Business Practices 

To remain competitive, U.S. foundries adapted and improved many of their business practices during

the 5-year period. According to responses to the producer questionnaire, a majority of firms reported that

they upgraded customer service, introduced value-added services (such as engineering and design), improved

flexibility, and provided faster production times. More than 75 percent of foundries reported that their lead

times decreased. On average, reported lead times declined from 6 weeks to 4 weeks for products with a

pattern and from 14 weeks to 12 weeks for products without a pattern. This reduction was attributed to

productivity improvements accomplished through computer design and logistics management, along with

adoption of lean-manufacturing principles. However, 56 percent of firms attributed the shorter lead time to

declining order levels. 

U.S. foundries also reported assisting customers with technical services, indicating that during 1999-

2003 customers asked for help in these areas more often than in the past. Seventy percent of foundries

reported that they were involved with product design and development. According to producers, providing

technical services can be a competitive selling advantage.42 The level of technical services provided can vary.

Some foundries provide basic information on the various types of castings available and appropriate

application, whereas others assist in component design, selection, and processing. According to producers,

technical services are more of a selling feature for automotive components than other castings, as automotive

customers need to know that the structural casting is designed and processed to meet required specifications

before incorporation into a motor vehicle.43 However, while foundries are willing to use their expertise to

provide value-added services to their customers, producers express concern that their product design and

development suggestions may be used by customers to manufacture castings offshore.44

 In addition to changes that producers implemented to maintain competitiveness, business practices

have changed as purchasers dictate production terms more often than in the past. In response to purchaser

demands, 55 percent of producers indicated that delivery times have become less flexible, and 33 percent

reported less flexibility in product specifications. 

The vast majority (94 percent) of responding U.S. foundries claim that certification is necessary to

compete in the market; 71 percent of questionnaire respondents named ISO 9000 and 19 percent cited ISO

14000 as required certifications. Other customer-specified certifications, noted by 47 percent of producer

respondents, include TS 16949 and various other standards specific to the end-use industry.45
 46 However, there was a significant disparity between the producer and purchaser responses regarding changes in

castings prices over the period. See chs. 4 and 10 for more details.

3-13

Pricing

The price of metal castings sold by U.S. foundries is determined by a variety of methods. Respondents

to the USITC producer questionnaire noted that the most common method of determining price is through

negotiating each job (table 3-11). Negotiating prices with the customer for short-term or long-term contracts

is also a typical method to set prices on foundry products. Sales contracts are common in the foundry

industry, with 29 percent of questionnaire respondents reporting that contracts of one year or less represent

the bulk (76 percent or more) of their sales. Another 15 percent noted the same share for contracts of more

than 1 year. Approximately 22 percent of respondents cited spot sales as their principal sales channel. 

 Many foundries indicated that their profitability was affected by price concessions made to prevent

customers from moving offshore (table 3-12).46 Forty-two percent of responding producers indicated that

prices had decreased during 1999-2003 and 21 percent indicated that prices stayed the same over the period.

Table 3-11

U.S. foundry industry: Pricing methods identified by producers 

Method used to determine price Number of responses

Negotiated between producer and customer for each individual job . . . . . . . . . . . . . . . 250

Negotiated between producer and customer on a contract of 1 year or less . . . . . . . . 124

Negotiated between producer and customer on a contract of more than 1 year . . . . . . 96

Price set by producer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Price set by customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Price set based on imported product price or by imported product offer price . . . . . . . 30

Note.–A total of 403 establishments responded. Many indicated more than one price determination method.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 3-12

U.S. foundry industry: Domestic producers' comparison of relative price changes of domestic castings in

the U.S. market, 1999-2003

Price change in U.S. market Number of responses

Increased:

By 0-10 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

By 11-20 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

By 21-30 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

By 31 percent or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Unspecified amount ............................................. 3

 Total responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Stayed the same . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Decreased:

By 0-10 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

By 11-20 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

By 21-30 percent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

By 31 percent or more . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

 Total responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 47 U.S. industry official, interview with USITC staff, United States, June 2004.

 48 U.S. industry officials, interviews with USITC staff, various dates; foreign fieldwork by USITC staff; multiple

producer questionnaire responses; and Thomas Piwonka, “Employment, Environment, and Energy Issues,” found at 

http://www.wtec.org/loyola/casting/09_01.htm, retrieved Oct. 14, 2003.

 49 U.S. industry official, interview with USITC staff, United States, June 2004.

 50 Multiple producer questionnaire responses; George Boyd, President and CEO, Goldens’ Foundry and Machine,

hearing transcript, p. 23; and U.S. industry officials, interviews with USITC staff, Aug. 2004. 

 51 U.S. industry official, interview with USITC staff, United States, June 2004.

 52 U.S. Environmental Protection Agency, “Economic Impact Analysis of Proposed Iron and Steel Foundries

NESHAP: Final Report,” p. 4-2.

 53 “EPA Iron & Steel MACT Rule Endangers U.S. Metalcasting Industry,” American Foundry Society, found at 

http://www.afsinc.org/Govn/EPAIronSteelMACTRule.h, retrieved Aug. 30, 2004. 

3-14

Producers also stated that they gave their customers other concessions that were not reflected in the

price of the casting. For example, 71 percent of producer respondents extended customer payment terms, 54

percent provided discounts to customers, and 37 percent provided rebates. Forty-three percent of producers

indicated that they accepted smaller minimum orders and 39 percent offered more discounts than they had

in the past. One producer indicated that customers demand rebates of 3 percent, on average.47 Foundries also

reported that they stored inventory for customers, offered lower prices to customers placing larger orders, and

absorbed tooling costs.

Domestic Policies 

The cost of compliance with government regulations decreased profits and made companies less

competitive compared to foundry operations in countries with less stringent regulations, according to

questionnaire respondents. When asked what government policies have the greatest impact on operations,

environmental regulations were cited by 86 percent of responding producers as one of the top three factors

affecting business performance. Nearly three-quarters of respondents placed U.S. Occupation Health and

Safety Administration (OSHA) regulations in the top three, followed by trade policies (63 percent).

Environment

Environmentally-related expenditures spending peaked in 1999, when firms spent over $98 million

on environmentally related capital expenditures. While environmental expenditures declined since then,

spending on environmental issues accounted for approximately 5 percent of capital expenditures in 2003.

According to producers, environmental regulations and enforcement constitute a major problem in

maintaining international competitiveness, especially for smaller firms. Producers allege that leading

competitor countries have less stringent regulations or enforcement than in the United States.48 According

to one U.S. producer, some U.S. foundries have shut down because of compliance costs for environmental

protection. Another foundry estimates that it takes more than 0.5 workyears to handle all environment-related

paperwork.49

Although producers express concerns with a number of U.S. environmental regulations, they

specifically cite the 1990 Clean Air Act, particularly maximum achievable control technology (MACT) and

Title V regulations (as many components of these regulations came into effect from 1999-2003), as having

a significant impact (table 3-13).50 For example, one U.S. producer indicated that it does not expect to see

a new foundry built in the United States, in part because of Title V.51 An economic impact study performed

by the U.S. Environmental Protection Agency estimates that total annualized cost for foundries to comply

with Title V to be $21.7 million.52 However, the American Foundry Society disputes this figure, and has

noted that its estimated cost is closer to $300 million.53
 54 Michael Kerwin, Consultant, Georgetown Economic Services, hearing transcript, p. 69; and responses to

USITC multiple producer questionnaires.

 55 U.S. industry officials, telephone interview with USITC staff, Mar. 8, 2005.

3-15

Table 3-13

U.S. foundry industry: Environmental legislation cited by U.S. foundry producers as affecting their business

performance

Environmental Legislation Main requirements

Clean Air Act Amendments (CAAA):

Title III of CAAA -Maximum

 Achievable Control Technology

 (MACT)

Title V of CAAA

For existing hazardous air pollutant sources, standards must be “at least

as stringent as the average emissions limitations achieved by the top 12

percent of the existing sources in categories with over 30 sources and the

top five of the existing sources in categories with fewer than 30 sources.”

For new hazardous air pollutant sources, standards must be “no less

stringent than the emission control achieved in practice for the bestcontrolled similar source.”

Major hazardous air polluting sources are subject to a national operating

permit program administered by the EPA.

Clean Water Act A National Pollutant Discharge Elimination System (NPDES) permit must

be obtained from the EPA or state environmental agency to discharge

pollutants into the water. Permits contain discharge limits.

Facilities must meet pretreatment standards if discharging to a publicly

owned treatment facility. 

California Proposition 65: Safe Drinking

Water and Toxic Enforcement Act

of 1986 (updated in 2003)

Businesses are not permitted to discharge chemicals known to cause

cancer or reproductive toxicity into water or onto land where chemicals

could find their way into the water supply.

Clear warnings must be given to anyone that could be exposed to a

chemical known to cause cancer or reproductive toxicity.

Sources: “Iron and Steel Foundry MACT Bulletin Revised,” RMT Integrated Environmental Solutions, Mar. 2001,

found at http://www.rmtinc.com/public/docs/i&smact_final.pdf, retrieved Aug. 30, 2004; “What is Title V?” AQMD,

found at http://www.aqmd.gov/titlev/WhatIsTV.html, retrieved July 7, 2004; California Office of Environmental Health

Hazard Assessment, found at http://www.oehha.ca.gov/prop65/law/P65law72003.html, retrieved Feb. 17, 2005; EPA,

Office of Compliance Sector Notebook Project: Profile of the Metal Casting Industry, Feb. 1998, found at

http://www.epa.gov/Compliance/resources/publications/assistance/sectors/notebooks/metcstsnapt1.pdf, retrieved

Feb. 17, 2005; and responses to the USITC producer questionnaires.

Worker Health and Safety

Producers noted that worker safety regulations can be burdensome for the foundry industry,

particularly when leading competitor countries appear to have less stringent regulations or less rigorous

enforcement of worker health and safety regulations.54 Although OSHA regulations have many facets,

depending on the type of metal poured and the process, the most significant component of OSHA

requirements is related to indoor air quality, i.e., managing levels of airborne contaminants, such as asbestos,

carbon monoxide, metal fumes, and silica dust. Both personal air respirators and collectors are often

necessary to maintain compliance with OSHA mandates, along with fire resistant clothing, boots, and gloves.

Representatives of the American Foundrymen’s Society estimated that OSHA regulations cost $6,590 per

employee per year.55
 56 Response to the USITC producer questionnaire. 

 57 U.S. industry official, interview with USITC staff, June 2004.

 58 E.g., extending WTO membership to China and NAFTA to Mexico. 

 59 E.g., workers compensation, leave, and pensions. 

 60 Responses from multiple producer questionnaires.

 61 James Mallory, Executive Director, Non-Ferrous Founders' Society, hearing transcript, p. 13

 62 Eugene Muratore, “A Review of the North American Foundry Industry,” Ductile Iron News, Issue 2, 2003,

found at http://www.ductile.org/magazine/2003_2/north-american-foundry-industry.htm.

 63 Multiple producer questionnaire responses. For more detail, see Chapter 10. 

3-16

According to producers, the safety measures can also be burdensome. For example, one firm noted

that changes to required measures were made on 16 separate occasions between 1999 and 2004.56 Another

foundry reported that the state health inspector is required by law to visit the plant following each complaint

from the local community, which is about every 2 weeks.57 To manage costs, some firms agree to participate

in a voluntary OSHA protection program, which eliminates surprise OSHA inspections.

Trade and Monetary Policies

Producers that listed trade policies among their leading concerns suggested that U.S. trade policy,

in general, benefits foreign competitors, particularly those from China and Mexico, more than domestic

producers. Specifically, producers expressed concern that some foreign countries that benefit from

preferential trade treatment58 do not impose on companies the same environmental and worker health and

safety standards and companies operating in some foreign countries do not offer the same benefits and

wages59 as the United States.60 A few producers indicated that other countries provide incentives for firms

that export castings. Additionally, a few producers said that NAFTA caused production to move to Mexico

where labor was less expensive. 

Finally, many producers that cited trade policies as a leading concern indicated that allowing China

to openly trade with the United States while maintaining a currency that is fixed to the U.S. dollar is unfair

to U.S. foundries.61 During 1999-2001, a strong U.S. dollar gave U.S. residents enhanced buying power, as

foreign goods became less expensive in the U.S. market. However, a strong currency has a downside for

manufacturers, as U.S.-produced goods are more expensive to economies with weaker currencies.62 In

particular, there is considerable concern in the foundry industry regarding the fixed Chinese currency

exchange rate. According to some producers, the Chinese currency is undervalued by up to 40 percent and

producers feel that this gives the Chinese an unfair selling advantage in the U.S. marketplace.63

Federal/State Programs

Among responding foundries, 141 indicated that they had utilized a government program. The

programs most often cited by producers are training grants provided to firms by various states (table 3-14).

Other significant programs available to firms aim to improve casting technologies or reduce environmental

impacts. 
3-17

Table 3-14

U.S. foundry industry: Government programs received by the U.S. foundry industry

Program name Provider Benefits provided

Business and Industry

Guaranteed Loans

U.S. Department of

Agriculture

Loan guarantee program in which loans are made through

private lenders and guaranteed by the USDA. This program is

targeted specifically at non-agricultural sector firms to help

create jobs and stimulate rural economies.

Trade Adjustment

Assistance (TAA)

U.S. Department of

Commerce

The program’s primary goal is to assist domestic

manufacturers and producers injured by increased imports.

Manufacturing Extension

Partnership (MEP)

U.S. Department of

Commerce

A nationwide network of non-profit centers whose primary goal

is to assist small and medium-sized U.S. manufacturers

improve their operations.

OSHA Training Grants U.S. Department of

Labor

Grants awarded to non-profit organizations to develop training

and educational programs in regards to safety and health

hazards in workplaces.

Various types of loan

guarantees

U.S. Small Business

Administration

Loan guarantees for small businesses.

Various state education

and training grants

Various state

governments

Types of assistance provided by different states include items

such as matching training funds, education grants, and state

apprenticeship programs.

Various tax incentives and

loan guarantees

Various state and

local governments

Different types of tax incentives provided include items such

as state tax credits and local property tax abatements.

Employment Training

Panel (ETP)

State of California Provides training funds to businesses that need to train or

retrain workers that face technological advancements or

foreign and domestic competition.

Enterprise Zones State of California This program is aimed at assisting economically distressed

areas of the state by offering incentives to encourage

business investment and the creation of new jobs through tax

incentives.

Skills Enhancement Fund State of Indiana Financial assistance to companies in the form of grants for

training employees that are residents of the state, with

reimbursements of up to $200,000 or up to 50 percent of

eligible training costs.

Training 2000 Grant State of Indiana Training grants awarded to companies to assist in the costs of

training employees in skills needed with capital-investment

projects the company has undertaken.

Community Economic

Betterment Account

(CEBA)

State of Iowa Financial assistance of up to $1 million for businesses to

create or retain employment opportunities.

Kansas Industrial

Retraining (KIR) Program

State of Kansas Funds provided to companies that need to retrain their

employees, companies must show that employees are likely to

be displaced owing to obsolete or inadequate skills and

knowledge. Companies also must show that they are

restructuring their business operations along with the ability to

financially complete the project.

See source at end of table.
3-18

Table 3-14–Continued

U.S. foundry industry: Government programs received by the U.S. foundry industry

Program name Provider Benefits provided

Kentucky Economic

Development Finance

Authority

State of Kentucky A number of financial and tax incentive programs offered to

businesses to encourage economic development, business

expansion, and job creation.

Economic Development

Job Training Program

(EDJT)

State of Michigan Various types of loan guarantees for small businesses.

Michigan Economic

Growth Authority (MEGA)

Grant

State of Michigan Companies in manufacturing are eligible to receive a tax credit

against the Michigan Single Business Tax, providing they

meet all the requirements.

Customized Training

Program

State of Missouri Assistance to companies for the training and retraining of

employees.

Power for Jobs Program State of New York Under this program, the state provides a legislatively set

amount of megawatts of economical electricity for businesses

that have a commitment to create or retain jobs in the state.

Skilled Manufacturing

Resource Training Grants

(SMART)

State of New York Grants available to companies for the advancement of worker

skills.

Strategic Alliance Training

Program

State of New York Assistance to support worker training.

Industrial Training

Program

State of Ohio Provides up to 50 percent of funding for training and materials

for workers, to be used with a project that creates or retains

jobs.

Training for Industry

Program

State of Oklahoma Free customized training to new and expanding companies in

the state that qualify. Types of training include technical skills,

safety training, ISO 9000 training, and various other skills.

Ben Franklin Technology

Development Authority

Programs

State of Pennsylvania Various types of financing opportunities, technical assistance,

and development grants to companies and entrepreneurs.

Workforce and Economic

Development Network of

Pennsylvania (WEDnetPA)

State of Pennsylvania Offers companies that qualify free job training for employees

on basic entry-level and advanced technology skills through

an educational alliance of state universities, community

colleges, and other technical schools.

Customized Job Training

Program (CJT)

State of Pennsylvania Provides grant funds for specialized job training for new and

existing employees.

Wisconsin Department of

Commerce Technology

Zone tax credit

State of Wisconsin Eight designated zones in the state that can provide up to $5

million in tax credits for high-tech companies locating or

expanding business in the technology zone.

Extraterritorial Income Tax U.S. Government Tax benefit offered to ensure competitiveness of products

exported and to assist U.S. exporters in dealing with double

taxation.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission and various government agency websites.
 64 Information reported for total U.S. purchases of all metal types is based on data received from purchasers of the

10 selected product groups.

 65 For more details on factors affecting purchasing decisions, see Chapter 4: Purchasing Patterns and Practices. 

3-19

Purchases

Total reported purchases of domestic and foreign castings by responding U.S. purchasers64 increased

by 26 percent in value during 1999-2003 (table 3-15). Foreign purchases by these firms accounted for 28

percent of total casting purchases, and were mainly concentrated in machined products. Purchases of rough

castings from foreign sources grew the most of any category during 1999-2003 (by 59 percent), although such

purchases accounted for the smallest share (6 percent) of total castings purchases. Purchases of foreign-origin

machined castings increased by 25 percent, and represented 22 percent of total purchases. Purchasers

indicated that their leading reason for increased purchases of foreign castings was price.65 Certain purchasers

noted that machined castings could be purchased from foreign sources for about the same price as

domestically-produced rough castings. Multiple purchasers indicated that lower pattern and tooling costs

made foreign castings more competitive than domestic castings and influenced their purchasing decision.

Finally, a few purchasers noted a limited or non-existent domestic supply of certain cast products, forcing

them to purchase these products from off-shore suppliers.

While purchases of foreign-sourced rough castings exhibited the highest growth rate during the

period, purchases of domestic castings, particularly rough castings, increased the most in value terms (up by

$1.2 billion). According to multiple purchaser questionnaire responses, domestic producers’ shorter lead

times, lower transportation costs, engineering support, and stocking arrangements contributed to increased

purchases of domestic castings. 

Another purchasing trend is that producers are increasingly supplementing production at their

domestic establishment by purchasing foundry products offshore, particularly machined castings. According

to producer questionnaire responses, imports of castings by U.S. foundries increased by $233 million between

1999 and 2003, particularly from Japan (table 3-16). Approximately 72 percent of respondents indicated that

their reason for offshore purchases was to obtain a lower cost than their own production cost.

Table 3-15 

All metal types: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Type 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,850,808 3,360,345 3,515,710 3,463,996 3,511,293

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,297 549,147 552,896 577,870 547,648

Unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,468 13,500 14,397 17,023 22,637

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,205,573 3,922,992 4,083,003 4,058,889 4,081,578

Machined castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,288,757 2,427,903 2,403,019 2,615,098 2,865,352

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,594,912 1,693,496 1,879,500 1,923,846 1,996,157

Unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,942 316 569 228 87

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,886,611 4,121,715 4,283,088 4,539,172 4,861,596 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
3-20

Table 3-16

All metal foundries: Responding U.S. producers' imports of rough and machined castings, 1999-2003

(1,000 dollars)

Country or country group 1999 2000 2001 2002 2003

Rough:

 China . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) 5,311 12,916 12,715 11,110

 All other2 ........................ (1

) 20,656 18,125 28,265 32,674

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . 10,652 25,967 31,041 40,980 43,784

Machined:

 Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,985 45,233 45,275 68,429 123,136

 China . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,727 6,471 11,506 15,938 18,108

 India . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) 4,885 3,506 5,830 6,208

 Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) 1,737 1,912 1,510 2,120

 All other2 . . . . . . . . . . . . . . . . . . . . . . . . 63,656 74,650 75,956 126,129 163,604

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . 112,368 132,976 138,155 217,836 313,176

 1

 Data withheld to avoid disclosure of confidential business information.

 2

 Individual country detail included in “all other” to avoid disclosure of confidential business information. 

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 1

 Hearing submission, American Foundry Society, Sept. 30, 2004, p. 2.

 2

 Ibid.

 3

 Purchasers were asked to identify all final markets that they supply; consequently, those purchasers with

multiple end markets appear more than once. 

 4

 U.S. industry officials, interviews with USITC staff, United States, June 2004.

4-1

CHAPTER 4

PURCHASING PRACTICES OF U.S.

PURCHASERS AND DOWNSTREAM

INDUSTRIES

Overview

Despite operating in diverse industries and markets, U.S. purchasers reported that they largely share

similar purchasing practices for castings. U.S. purchasers report that they are fairly knowledgeable about

their castings sources, both foreign and domestic; infrequently or never change castings suppliers; and

overwhelmingly require the same high product standards of their U.S. and foreign castings. Price is a

significant factor in purchasing decisions, with nearly one-half of responding purchasers indicating that they

usually buy castings at the lowest price. Although U.S. purchasers indicated that domestic castings producers

have lowered prices, improved product quality, and shortened lead times to maintain or gain sales during the

period, about one-third of reporting U.S. purchasers significantly increased their purchases of foreignproduced castings at the expense of U.S.-produced castings, primarily because of lower foreign pricing.

Purchaser Characteristics

The three largest U.S. purchasers of foundry products are the automotive, machinery and equipment,

and other transportation industries.1

 Purchasers include original equipment manufacturers (OEMs), machine

shops and other fabricators, distributors, and other types of customers, such as municipalities,2

 and may be

the castings end user or serve as a middleman/supplier for downstream industries. Although domestic

purchasers often have the flexibility to determine their castings source, those that supply downstream

industries may be directed by their end-use customers to source castings from specified foundries, for

example, because of an existing relationship. U.S. purchasers responding to the USITC questionnaire

generally mirrored this composition, with 61 percent of respondents indicating end uses in the motor vehicle,

industrial machinery, mining and oil/gas field machinery and equipment, valve and pipe fittings, and

construction machinery and equipment sectors.3

 According to U.S. producers, their customers are

increasingly smaller niche manufacturers rather than larger firms that place high-volume orders; the latter

provide greater financial rewards for castings producers.4

U.S. purchasers (or their final customers) generally own the patterns and tooling used to manufacture

castings, but they are nearly always stored at the supplying foundry. If switching sources, purchasers will

likely develop new tooling, patterns, or dies with their new supplier rather than move these items, according

to questionnaire responses.
 5

 U.S. industry official, interview with USITC staff, United States, June 2004, and Roy Hanks, Marketing

Manager, ThyssenKrupp-Waupaca, hearing transcript, p. 38.

 6 Hearing submission, ASC Industries, Oct. 12, 2004, p. 10.

 7

 Larry A. Comunale, Vice President and General Manager, Doncaster Southern Tool, hearing transcript, p. 219.

4-2

Nearly 19 percent of responding U.S. purchasers noted that they have related foreign firms that

produce rough or machined castings and export to the U.S. market. These castings are often destined for the

U.S.-based purchaser’s operation. Thirteen percent of domestic purchasers indicated that they currently

produce rough metal castings in the United States as well as purchase castings.

The most often cited reasons for production changes were cost competition, material substitution,

decreased demand, sourcing from foreign foundries, and manufacturing offshore, either by the castings

purchaser or its final customer. One industry official attributed declining domestic foundry shipments to

bankruptcies and closures within downstream industries.5

 For example, 34 purchasers of castings for motor

vehicles that responded to the purchaser questionnaire indicated that they had reduced or eliminated U.S.

production of 46 product lines during the period. This industry reported the largest number of manufacturers

that adjusted their production volumes as a result of U.S. market shifts. One U.S. purchaser noted that as

“. . . OEM’s look for greater and greater cost savings, it is only a matter of time before [castings]

manufacturers . . . are asked to locate their plant locations in closer proximity.”6

 Industry sources indicate

that the valve industry has also largely moved offshore.7

 According to questionnaire responses, eight

purchasers reduced output levels or closed U.S. production of 17 valve and pipe fittings lines during 1999-

2003. 

Contract Process

When considering the purchase of castings, 386 of 418 responding U.S. purchasers reported that they

typically initiate contact with their suppliers, whether domestic or foreign (table 4-1). According to purchaser

questionnaire responses, U.S. foundries are more likely to initiate direct contact with U.S. purchasers than

are foreign foundries, who appear to work more often through brokers to gain access to U.S. purchasers than

do U.S. foundries. Foreign foundries likely use brokers more frequently because of brokers’ greater

familiarity with U.S. purchasers and U.S. business practices. Customer-directed sourcing is also fairly

common for U.S. purchasers, according to purchaser questionnaire responses. Customers may provide a list

of approved U.S. or foreign vendors or foundries from which the purchasers can select their castings source.

U.S. purchasers may also be directed by a parent company, either domestic or foreign, to purchase castings

from the parent’s in-house operation or a related supplier under the parent’s umbrella of companies.

Purchaser questionnaire respondents indicated that specifying casting sources reduces costs as customers gain

uniform quality and specifications, and eliminate duplication of tooling, pattern making, dies, and

administrative activities. These responses were consistent across downstream industries.

Questionnaire responses indicate that U.S. purchasers in all downstream industries typically contact

3 or fewer foundries before making a castings purchase, with 51 percent of responding purchasers contacting

3 foundries. Nearly all U.S. purchasers also reported never or infrequently (less often than annually)

changing castings suppliers. Supplier loyalty reflects, in part, customer-directed sourcing decisions,

satisfaction with the existing supplier relationship and product, and cost avoidance. Purchaser respondents

indicated that once suppliers are set up and producing castings, switching sources is generally not cost

effective. Changes in casting specifications or product design or customer-directed sourcing shifts, however,

may trigger re-sourcing of castings.
 8

 DaimlerChrysler, Ford, and General Motors.

 9

 U.S. industry official, interview with USITC staff, United States, June 2004.

 10 “U.S. Parts Makers Prefer Honda, Toyota,” Reuters, Aug. 1, 2004, found at

http://asia.search.news.yahoo.com..., retrieved Aug. 2, 2005. 

 11 Lindsay Chappell, “Gulf widens between Big 3, suppliers,” Automotive News, Aug. 2, 2004, found at

http://www.autonews.com..., retrieved Aug. 2, 2004.

 12 U.S. purchaser official, interview with USITC staff, United States, Oct. 2004.

4-3

Table 4-1 

U.S. purchasers of foundry products: Purchase method for domestic and foreign castings

(Number of responses)

Purchase method Domestic castings1 Foreign castings2

Contacted producer directly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 237

Contacted by broker or sales agent . . . . . . . . . . . . . . . . . . . . . . . . . 101 169

Contacted by producer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 97

Purchase/transfer castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 74

U.S. producer sources foreign castings at purchaser request ..... (3

) 20

U.S. producer sources foreign castings at its initiative ........... (3

) 26

 1

 A total of 418 firms responded. Many indicated more than one purchasing method.

 2

 A total of 344 firms responded. Many indicated more than one purchasing method.

 3

 Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

According to one U.S. foundry that supplies the largest end market, the motor-vehicle industry,

Japanese transplant automakers are reportedly more loyal customers and provide better opportunities for

repeat business than U.S. automakers. They also have clearer quality standards that are easier to meet and

maintain. Moreover, the transplant operations work with their suppliers to reduce costs. The Big Three U.S.

producers8

 are not considered to be as loyal to their suppliers; for example, contracts with the Big Three are

easy to break, as many have provisions that can void parts of the contract with just 30-days notice.9

 These

claims are supported by a recent study that found that many U.S. suppliers prefer working with the Japanese

transplant automakers rather than the Big Three because they “are treated as partners rather than adversaries

and stand a better chance of making an acceptable financial return.”10 Consequently, domestic suppliers are

less willing to share technological innovations with the Big Three automakers and are less trusting of their

methods.11

Contracts between foundries and their customers may include quality clauses that allow a purchaser

to drop a supplier if product specifications are not met.12 Purchaser questionnaire respondents note that the

principal changes in contract terms during the period are largely focused on extended payment terms and, to

a lesser extent, longer contracts. 

Castings Origin Issues

Nearly 80 percent of all responding U.S. purchasers indicated that they always know the producer(s)

of the domestic castings they purchase, whereas 53 percent of respondents indicated the same level of

knowledge about the producer(s) of their foreign casting purchases. The better knowledge of U.S. foundries

likely reflects familiarity with the U.S. market and its domestic suppliers.

In contrast, end-use customers are less familiar with the origin of the castings in the products acquired

from U.S. purchasers that serve as their suppliers, according to questionnaire responses. U.S. castings
 13 “Product Liability Coverage, Offshore Solutions: Your Global Sourcing Partner,” found at

http://www.offshoresolutions.com/solutions/liabilityInsurance.htm, retrieved Feb. 1, 2005.

 14 Ken Maisch, “3-D Traceability in the Foundry,” Foundry Management & Technology, Sept. 2000, p. 78.

 15 A trademark is a word, name, symbol or device which is used to indicate the source of goods and to distinguish

them from merchandise produced or sold by others. Trademark rights may be used to prevent the use of a

confusingly similar mark, but not to prevent the manufacture of the same goods or the sale of the same goods or

services under a clearly different mark. “What Are Patents, Trademarks, Servicemarks, and Copyrights?,” General

Information Concerning Patents, United States Patent and Trademark Office, found at

http://www.uspto.gov/web/offices/pac/doc/general/whatis.htm, retrieved Feb. 5, 2005.

 16 “Bulk Metals Qualified Suppliers List for Distributors (QSLD) Home Page with Criteria and Provisions,”

Defense Logistics Agency, Defense Supply Center, Philadelphia, found at

(continued...)

4-4

purchasers indicated that 36 percent of their downstream customers are always aware of or interested in the

country of origin of the castings in their products, with another 17 percent of purchasers noting that customers

are usually aware of their origin. This relative lack of awareness of castings origin likely occurs more often

with end-use customers that are further removed from the manufacturing process and that have less need to

specify castings sources. In this case, the only end-use customers reported by U.S. purchasers to exceed the

50-percent level for always knowing the origin of their castings were those in the motor-vehicle industry.

The extensive globalization, certification requirements, and safety-oriented parts production of this industry

likely contribute to the greater focus on castings origin by U.S. motor-vehicle parts end-users.

Insurance, Standards, and Trademark Issues

Proof of insurance for product liability is not required by most U.S. purchasers for either domestic

or foreign castings suppliers. However, domestic purchasers always require proof from U.S. suppliers more

often than their foreign sources (32 percent compared to 22 percent, respectively). Product liability insurance

covers such issues as product failure resulting from metallurgical or material problems, and is not available

in all countries, most notably China.13

Industries that produce more safety- and performance-related products with the potential for large

liability claims, such as transportation industries, more often demand product liability insurance coverage of

their castings producers. Of 133 responding U.S. purchasers in the motor-vehicle industry, for example, 43

percent reported always requiring insurance from domestic producers, the highest response of all downstream

industries.

Despite claims by U.S. producers that purchasers require less restrictive standards of their foreign

suppliers, nearly 99 percent of responding U.S. purchasers indicated that they require the same (or higher)

quality standards for purchases of foreign castings as for U.S. castings, with no differences among

downstream industries. 

Tracking parts throughout the manufacturing process has become an important element of quality

control for the foundry industry, and is often required by sales contracts.14 The information available from

traceability documentation is critical to establishing material and manufacturing integrity in case of failure.

This documentation, or a trademark,15 has become an essential requirement for U.S. foundries, according to

55 percent of purchaser questionnaire respondents. About 48 percent of U.S. purchasers reported making

similar demands of their foreign castings producers. Another 21-24 percent of purchasers noted that

trademarks/documentation were usually or sometimes required.

Traceability documentation is important to purchasers as it provides documentation throughout the

supply chain for criteria such as heat dates, purchase order numbers, product descriptions, chemical content,

and physical, dimensional, quantity, grade, and type information.16 According to one domestic producer,
 16 (...continued)

http://www.dscp.dla.mil/gi/prod_services/metals.htm, retrieved Feb. 1, 2005.

 17 U.S. industry official, interview with USITC staff, United States, June 2004. Costs associated with traceability

increase with the growth in documentation. Ken Maisch, “3-D Traceability in the Foundry,” p. 78.

 18 U.S. industry official, interview with USITC staff, United States, June 2004.

 19 Jim Keffer, President, EBAA Iron Sales, Inc., hearing transcript, p. 166 and p. 175.

 20 William T. Blackerby, Jr., Chief Operating Officer, ASC Industries, Inc., hearing transcript, pp. 146-148.

 21 U.S. industry official, interview with USITC staff, United States, Oct. 2004.

4-5

traceability documentation is essential to its business relationships. This foundry must develop and document

the processes and material that will be used and allow the customer to audit this information. This is an

expensive and lengthy process that usually lasts at least six months to a year before any sales can be made.17

Downstream industries that most often reported requiring trademarks or documentation included the

mining, motor vehicle, railway, valve, aircraft, and ship industries. Most of these are transportation industries

subject to certification requirements and high liability potential. Motor vehicle producers require of their

foundries a Production Part Approval Record (PPAR), which is a paperwork trail from casting design through

production. Foundries must keep a hard copy of this record as motor-vehicle producers conduct audits of

these suppliers.18 The water works industry also requires casting traceability documentation for product

liability issues such as failure.19

Purchasing Decision Factors

Domestic purchasers were asked to rank the leading factors used to evaluate potential purchases from

domestic and foreign castings suppliers. Purchaser responses indicate that they prioritize the same factors

when considering purchases from both domestic and foreign castings sources, with castings quality and price

the key determinants (table 4-2). Castings quality was the highest ranked factor affecting purchase decisions

for nearly 60 percent of responding U.S. purchasers, for both domestic- and foreign-origin castings; price

(delivered) was ranked highest the second-most frequently. Delivery time was also ranked as an important

factor for purchasing from both U.S. and foreign suppliers. Transportation costs are a more significant factor

for foreign-made castings than for U.S. castings. Technical services were a more significant purchase factor

for domestic castings; its relatively lower importance may reflect a flow of technology and expertise to

purchasers that now have the capability to design their components and outsource tooling requirements.20

 Certain purchasing factors favor U.S. foundries. “Buy American” practices are still evident. As

noted in questionnaire responses, certain purchasers are committed to buying solely U.S.-made castings. One

U.S. foundry official noted that if downstream customers require castings to be made in the United States,

then U.S. foundries are guaranteed that business.21 This situation often occurs when foundries supply castings

for federally funded operations, such as construction projects. Certain purchasers noted that when inventory

management and complex manufacturing skills are required, U.S. foundries excel. U.S. foundries were also

cited by responding U.S. purchasers as manufacturing with a low defect (rejection) rate. Moreover, U.S.

foundries were reported by some U.S. purchasers to have advantages in lead time, low volume manufacturing,

proximity to their customers, product variability, technical expertise, engineering support, and stocking

agreements.
 22 Hearing submission, ASC Industries, p. 11.

 23 Ibid.

 24 One purchaser noted that U.S. pattern-making costs were up to 90 percent higher than foreign sources. 

 25 Foreign tooling costs were estimated to be 50 to 70 percent lower than comparable U.S. tooling, according to

one U.S. purchaser.

 26 A U.S. purchaser indicated that machined castings are 30 to 50 percent cheaper from all foreign sources than

from U.S. producers. 

 27 See chapter 10 for more detail on the competitive effect of currency valuations.

4-6

Table 4-2

U.S. purchasers of foundry products: Ranking of factors when purchasing domestic and foreign castings

(Number of responses)

Domestic castings ranking1 Foreign castings ranking2

Factor 1 2 3 4 5 1 2 3 4 5

Price (delivered) . . . . . . . . . . . . . 113 175 94 17 3 102 151 67 9 3

Delivery time . . . . . . . . . . . . . . . . 26 66 200 74 15 13 51 153 75 24

Quality of castings . . . . . . . . . . . 241 117 31 9 3 97 93 30 10 2

Transportation cost . . . . . . . . . . . 4 6 13 75 84 5 13 25 86 61

Technical services . . . . . . . . . . . 11 11 24 89 86 9 9 16 47 75

Financing terms . . . . . . . . . . . . . 3 1 5 24 35 1 1 6 24 37

Warranty terms . . . . . . . . . . . . . . 4 2 7 10 27 2 5 5 10 21

Historic supplier relationship . . . . 15 16 19 53 92 12 10 14 28 55

Standards certification . . . . . . . . 25 13 22 32 55 23 12 17 33 45

 1

 A total of 404 firms responded. 2 A total of 335 firms responded.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

However, gaps in product coverage and capacity constraints of U.S. producers have led U.S.

purchasers to source offshore, according to responding U.S. purchasers. Aluminum engine blocks and heads,

iron exhaust manifolds, and specialty plumbing items, for example, were cited as products for which there

is limited or no U.S. casting production. One purchaser stated that domestic foundries have been “unwilling

to utilize foreign tooling . . . this has definitely been a factor for companies like ASC in their move offshore.”22 This purchaser also cited experience with the inflexibility and long lead times of the U.S. industry,

claiming these factors have influenced domestic purchasers to source from offshore.23 A number of

respondents also claimed that the U.S. industry has a longer lead time for new products than offshore sources,

in contrast to the reported experience of other U.S. purchasers.

Additional factors also convey advantages to foreign foundries, according to responding domestic

purchasers. Questionnaire respondents reported that foreign producers usually offer lower cost pattern

making24 and tooling25 than their U.S. counterparts, which greatly enhances the competitiveness of foreign

foundries. This factor by itself does not determine a contract award, but is a significant element of the

overall business proposal. A large number of U.S. purchasers cited lower machining costs as another

advantage for certain foreign producers, such as those in China.26 Several purchasers reported that they were

able to buy foreign-origin machined castings for less than the cost of a rough casting produced in the United

States, resulting in increased purchases from foreign sources. Other respondents source from foreign

producers to take advantage of currency differentials.27

U.S. producers have claimed that U.S. purchasers and their downstream customers are increasingly

moving production offshore. U.S. purchasers that supply global industries find an advantage in sourcing from

offshore foundries since it allows them to service their overseas customers, such as the automakers, from a

local base. Just as proximity and its related advantages are important factors when supplying automakers and
 28 U.S. industry official, interview with USITC staff, United States, Aug. 2003.

4-7

equipment manufacturers producing in the United States, local sourcing is also important to U.S. companies

manufacturing overseas.

Moreover, as more competitors source castings from less expensive offshore suppliers to supply their

U.S. operations, U.S. castings producers and purchasers feel pressure to follow the same course to stay

competitive in their market. For example, one domestic foundry indicated that a number of large vehicle and

off-road machinery manufacturers with in-house foundries are buying from offshore sources because of the

intense competition in their industries.28

A few purchasers expressed concerns that they are being asked by their customers to shift operations

offshore to take advantage of lower casting and machining costs. For many companies, establishing a foreign

operation is a costly endeavor with numerous risks that may not withstand a thorough cost-benefit analysis.

Other purchasers noted the risk inherent in long supply lines from foreign sources, as well as concerns about

product quality and piracy. 

Pricing and Cost Issues

The price of metal castings purchased by U.S. purchasers is determined by a variety of methods. The

most common pricing method reported is to negotiate prices with the supplier for each individual job, as

indicated by 163 of 452 responding purchasers (table 4-3). Absent price negotiations, purchasers report little

leverage with their suppliers; 88 purchasers stated that the castings price was set by the producer, whereas

only 7 purchasers reported that they were able to set prices. The majority of downstream industries negotiate

prices for each individual job, but a few industries (e.g., refrigeration, plumbing, and pumps/compressors)

indicated that their prices are established with short-term contracts. The pump and compressor industry also

noted that its prices were largely set by the castings producer.

Table 4-3

U.S. purchasers of foundry products: Pricing methods 

Method used to determine price Number of responses

Negotiated between producer and customer for each individual job . . . . . . . . . . . . . . . 163

Negotiated between producer and customer on a contract of 1 year or less . . . . . . . . 122

Negotiated between producer and customer on a contract of more than 1 year . . . . . . 104

Price set by producer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Price set by customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Price set based on imported product price or by imported product offer price . . . . . . . 15

Note.–A total of 452 firms responded. Many indicated more than one price determination method.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Domestic purchasers were asked to evaluate changes in casting prices during the period. Of 407

responding purchasers, 66 percent indicated that domestic castings prices had generally increased during

1999-2003. About one-half of purchasers reporting increases estimated the price increase to be no greater than

10 percent (table 4-4). A significantly smaller number of U.S. purchasers (13 percent) reported that domestic

casting prices had decreased, with most of this group reporting price declines of less than 10 percent. U.S.

purchasers were fairly evenly split when indicating the price change of foreign castings, with 45 percent

reporting an increase and 40 percent indicating that the price of foreign castings remained the same. For

purchasers reporting a price increase for foreign castings, this increase typically did not exceed 10 percent.
 29 U.S. purchaser official, interview with USITC staff, United States, Oct. 2004.

 30 U.S. industry official, interview with USITC staff, United States, June 2004.

 31 Ibid.; and George G. Boyd, President and CEO, Goldens’ Foundry and Machine, hearing transcript, p. 21.

4-8

Table 4-4

U.S. purchasers of foundry products: Comparison of relative price changes of domestic and foreign

castings in the U.S. market, 1999-2003

(Number of responses)

Price change in U.S. market Domestic castings price1 Foreign castings price2

Increased: 270 151

By 0-10 percent . . . . . . . . . . . . . . . . . . . . . . 137 94

By 11-20 percent . . . . . . . . . . . . . . . . . . . . . 78 38

By 21-30 percent . . . . . . . . . . . . . . . . . . . . . 27 9

By 31 percent or more . . . . . . . . . . . . . . . . . 11 1

Unspecified amount . . . . . . . . . . . . . . . . . . . 17 9

Stayed the same . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 134

Decreased: 53 48

By 0-10 percent . . . . . . . . . . . . . . . . . . . . . . 40 35

By 11-20 percent . . . . . . . . . . . . . . . . . . . . . 6 10

By 21-30 percent . . . . . . . . . . . . . . . . . . . . . 2 1

By 31 percent or more . . . . . . . . . . . . . . . . . 2 1

Unspecified amount ................... 3 1 1 A total of 407 firms responded. 2 A total of 343 firms responded.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Of 440 responding purchasers, less than 4 percent indicated that they always purchase castings at the

lowest price offered. Nonetheless, 49 percent indicated that they usually purchase castings at the lowest price,

and another 36 percent note that they sometimes purchase at the lowest price. This emphasis on lowest price

continues to pressure the foundry industry and likely contributes to deteriorating financial conditions. One

purchaser noted the importance of monitoring suppliers’ financial conditions to avoid unexpected plant

closures and disruptions in castings supply.29

To lower their purchasing costs of U.S. castings, respondents have asked domestic casting producers

to lower their prices to maintain the business and set target prices for U.S. foundries (table 4-5). Casting

suppliers have reportedly been asked to meet target prices based on prices for castings quoted by Chinese

foundries.30 Forty-one percent of U.S. purchasers reported that they shifted purchases to foreign foundries

to lower their purchasing costs. The threat of going offshore is reportedly often used against U.S. foundries

by their customers.31 U.S. producers have also commented on the leverage larger customers have over

castings suppliers, in some cases having the market power to demand 3 to 5 percent annual price reductions.

Similar practices are used to lower purchasing costs of foreign-origin castings, with the imposition of periodic

price reductions emerging as the third leading method for lowering costs of foreign castings purchases.
4-9

Table 4-5

U.S. purchasers of foundry products: Methods to lower purchasing costs of domestic and foreign castings

(Number of responses)

Methods to lower purchasing costs of castings Domestic castings1 Foreign castings2

Request casting producers to reduce price to maintain business . . . . . 221 147

Shift purchases to foreign-origin castings . . . . . . . . . . . . . . . . . . . . . . . 139 (3

)

Request casting producers to meet target prices . . . . . . . . . . . . . . . . . 105 69

Change method to calculate pass-on costs (i.e., surcharges) . . . . . . . 63 32

Impose periodic price reductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 37

Use online reverse auctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 17

Require rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 19

Shift purchases to domestic-origin castings . . . . . . . . . . . . . . . . . . . . . (3

) 22

 1

 A total of 339 firms responded.

 2

 A total of 241 firms responded.

 3

 Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Import Competition and Industry Responses

Nearly one-third of reporting U.S. purchasers increased their purchases of foreign-produced castings

by more than 5 percent (by quantity) at the expense of U.S.-produced castings during 1999-2003. Despite

the higher ranking given to the significance of quality as the leading purchase factor, lower price was the

principal reason given for these increased purchases by 142 of 154 respondents (table 4-6). Only 27

purchasers indicated that better casting quality was an inducement for increased purchases from foreign

sources. U.S. purchasers identified China as the leading major foreign supplier of both rough and machined

castings. Similar reasons for increased purchases of foreign castings were evident in all downstream

industries, with lower price the principal factor in this growth.

To maintain or increase their sales, U.S. purchasers indicated that domestic castings producers have

lowered prices and increased efforts to improve product quality, shorten lead times, offer more flexible

delivery times, and obtain certifications (table 4-7). Other foundry industry initiatives cited by U.S.

purchasers include the implementation of lean manufacturing, adapting to customer inventory requirements,

and offering favorable payment terms.

Table 4-6

U.S. purchasers of foundry products: Reasons for significantly increased purchases of foreign castings

Reasons Number of responses

Lower price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

Closure of domestic castings producers . . . . . . . . . . . . . . . . . . . . 29

Better quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Smaller minimum orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Shorter lead times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

More flexible delivery times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Shorter contract period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

More flexibility in product specification ..................... 4

Note.–A total of 154 firms responded. Many indicated more than one reason.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
4-10

Table 4-7

U.S. purchasers of foundry products: Reported changes in domestic producers’ business practices

Business practice Number of responses

Lowered price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Improved quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

Shortened lead times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Increased flexibility in delivery times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Adopted ISO or similar quality standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Added value to their products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Reduced size of minimum orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Increased flexibility in product specification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Note.–A total of 167 firms responded. Many indicated more than one business practice.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Downstream respondents noted various business practice adaptations by U.S. castings producers.

For U.S. purchasers associated with the motor-vehicle industry, lower prices was the primary response of

domestic producers over the period. U.S. suppliers to the motor-vehicle industry are under considerable

pressure to continually reduce prices to their customers despite increased raw material prices and greater

manufacturing and product development responsibilities. Shortened lead times was the leading change in

business practices for domestic suppliers to purchasers of castings for the farm/garden machinery, industrial

machinery, pumps/compressors, aircraft, and ships/boat industries. The mining industry indicated that

improved product quality was the principal change in business practices for its domestic suppliers. Finally,

more flexible delivery times was the lead response for suppliers to the construction machinery and valve

industries.
 1

 C.R. Loper, “Foundry Practice and Equipment,” Mark’s Standard Handbook for Mechanical Engineers (New

York: McGraw Hill, 1985); and “Understanding Cast Irons,” Engineered Casting Solutions, summer 2000, pp. 28-

29, found at http://www.castingsource.com/tech_art_understanding.asp, retrieved July 22, 2004. See also “Iron” in

ch. 2.

 2

 Of these respondents, 140 cast only various types of iron. Others cast both iron and other metals, including steel

(16), aluminum (15), copper alloys (7), or various combinations of these metals. These figures do not sum to total

number of responding establishments, as the categories are not mutually exclusive.

 3

 Respondents that cast all other types of iron (e.g., malleable, compacted-graphite iron, etc.) (21) or did not

specify the types of iron cast in their facilities (7) are not analyzed further for they represent less than 5 percent of all

reported production of rough iron castings. However, these respondents are included in the database where all types

of iron are specified, i.e., where not otherwise specifically broken out between gray and ductile iron.

 4

 AFS, “38th Annual Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 5

 Of the169 establishments reporting production of iron castings, 11 respondents reported information on ductile

iron crankshafts/camshafts; 20 for gray iron motor-vehicle gear boxes; 18 for ductile iron bearing housings; 37 for

gray iron compressor housings; 31 for gray iron pump castings; and 21 for gray iron non-motor vehicle gear box

(continued...)

5-1

CHAPTER 5

U.S. IRON FOUNDRY INDUSTRY

This chapter provides an overview of the U.S. iron foundry industry, based on responses to the

USITC producer and purchaser questionnaires, fieldwork, and interviews with leading industry participants.

The chapter begins with a discussion of the structure of the industry and leading demand characteristics.

Analyses of various business trends, production factors, and domestic policies follow, and the chapter

concludes with a discussion of purchasing trends.

Iron is the most commonly cast metal because of its relatively low cost, ease of casting into complex

shapes, ease of machining, and desired physical properties.1

 Hence, iron castings are integrated into the

production chain for a wide range of downstream products, with shipments predominantly to the automotive,

various machinery and equipment, and pipe and valve industries. However, low production costs and

widespread technology dissemination render iron foundries particularly vulnerable to foreign price

competition. Moreover, iron castings have also lost market share to other metals, particularly to lighter-weight

aluminum and higher-strength steel, especially in automotive applications. Pressure to meet customer prices

and loss of downstream markets, coupled with escalating costs for raw materials, energy, and employee

benefits, have squeezed profit margins for iron foundries in recent years. Foundries producing rough castings

in the more specialized ductile iron industry are in somewhat better financial condition, despite declining

operating income, than those in the more competitive gray iron industry where declining operating income

deteriorated into losses during 2002-2003.

Of the 465 respondents to the foundry questionnaire, 169 reported producing iron castings in the

United States during 1999-2003.2

 Given that most cast gray iron (116) or ductile iron (109), data for these

two iron industries are presented separately where the similarities and differences can be highlighted.3

 The

American Foundry Society (AFS) also collects information on the foundry industry based on metal types.

Questionnaire data collected by the USITC account for 82 percent of iron foundry production in 2003 as

reported by the AFS.4

 Of the 463 U.S. purchasers responding to the purchaser questionnaire, 271 reported

purchasing iron castings. Results from the producer and purchaser questionnaires are discussed in this

chapter to provide not only an overview of the iron foundry industry, but also more product-specific analysis

of ductile iron crankshaft and camshaft castings, gray iron motor vehicle gear-box castings, ductile iron

bearing castings, gray iron compressor housing castings, gray iron pump castings, and gray iron non-motor

vehicle gear-box castings.5
 5

 (...continued)

castings. Of the 271 purchasers reporting information on iron castings, 13 respondents reported information on

ductile iron crankshafts/camshafts; 43 for gray iron motor-vehicle gear boxes; 24 for gray iron bearing housings; 20

for gray iron compressor housings; 59 for gray iron pump castings; and 32 for gray iron non-motor vehicle gear box

castings. 

 6

 Sixty-three (58 percent) of the 108 gray iron casters and 55 (55 percent) of the 100 ductile iron casters reported

employing fewer than 100 PRWs.

 7

 For example, as a job shop, Golden’s Foundry and Machine Co., of Columbus, GA, casts some 15 to 20

different products in a typical day, in either gray iron or ductile iron with the same green sand molding process on

the same casting equipment. Testimony of George G. Boyd, President and Chief Executive Officer, Golden’s

Foundry & Machine, hearing transcript, p. 19. Another job shop, Cumberland Foundry Co. Inc., of Cumberland, RI,

produces between 40 to 50 different types of castings a day, with average weights ranging from a few ounces to 800

pounds and quantity runs averaging less than 50 pieces each, with most in 1- or 2-piece quantities. Testimony of

Albert T. Lucchetti, President, Cumberland Foundry Co. Inc., hearing transcript, pp. 32-33.

 8

 The extent to which other activities are contracted out reflects both cost differences and degree of technical

sophistication. U.S. industry source, telephone interview with USITC staff, Feb. 5, 2005.

 9

 See also “Sand casting” in ch. 2.

5-2

Industry Profile

Industry Structure

Iron foundries are highly concentrated, with the top-10 responding gray iron casters accounting for

54 percent of all reported gray iron production volumes and the top-10 responding ductile iron casters

accounted for 62 percent of all reported ductile iron production volumes in 2003. Hence, most iron foundries

are small operations, with more than one-half employing fewer than 100 production and related workers

(PRWs).6

 Conversely, only a few respondents that cast gray iron (8 of 108) or ductile iron (8 of 100)

employed 500 or more PRWs.

Responding establishments that cast gray or ductile iron are concentrated primarily in the

industrialized areas of the upper Midwestern states (i.e., Wisconsin, Indiana, Pennsylvania, Ohio, Michigan,

and Iowa), as are their downstream customers (especially the automobile industry), for whom iron foundries

are an integral part of the supply chain. Respondents that cast ductile iron are also clustered in Alabama for

production of soil pipe/pressure pipe and components for various other downstream industries.

Foundries that produce rough iron castings largely consider themselves to be job shops. The majority

of these job shops report significantly higher production of broad numbers of products in low-quantity runs7

than do those that consider themselves to be captive operations. However, larger foundries, whether job-shop

or captive operations, tend to specialize in casting a fewer number of products than do smaller operations.

The most common production-related activities cited by both gray and ductile iron foundries are

building of expended-type molds, followed by pattern-making, and rough-castings design (table 5-1).

Approximately one-third of respondents also report machining their rough iron castings. Only the building

of expended-type molds is performed entirely in-house.8

 Expendable sand molds and cores are most

commonly relied upon by responding establishments for their relatively low cost and high suitability for

casting complex shapes in either gray or ductile irons.9

 More specialized casting alternatives reported by

several respondents for each type of iron include lost-foam and centrifugal casting.
 10 U.S. industry official, telephone interview with USITC staff, Feb. 5, 2005.

5-3

Table 5-1 

Gray and ductile iron foundries: Establishment activities of responding producers, 2004 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Number responding that Average percentage

Activity performed activity performed in-house

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Total establishments reporting = 95

Design of rough castings . . . . . . . . . . . . . . . . . . . . . . 44 45

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 52

Mold making, expended type . . . . . . . . . . . . . . . . . . 74 100

Mold/die making, permanent type . . . . . . . . . . . . . . . 6 91

Machining of rough castings . . . . . . . . . . . . . . . . . . . 36 65

Downstream manufacture . . . . . . . . . . . . . . . . . . . . . 11 60

Ductile iron:

Total establishments reporting = 85

Design of rough castings . . . . . . . . . . . . . . . . . . . . . . 36 53

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 51

Mold making, expended type . . . . . . . . . . . . . . . . . . 59 99

Mold/die making, permanent type . . . . . . . . . . . . . . . 4 94

Machining of rough castings . . . . . . . . . . . . . . . . . . . 30 55

Downstream manufacture . . . . . . . . . . . . . . . . . . . . . 11 51 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Rough castings accounted for about three-quarters of average net sales during 1999-2003 for

respondents that cast either gray or ductile irons (table 5-2). Gray iron casters derived slightly more of their

sales from machined castings than did ductile iron casters, although both increasingly shifted their sales

toward machined castings over the 5-year period. Some respondents shifted sales, in part, as downstream

customers have increasingly subcontracted or sought to reduce their own in-house machining costs.10

Table 5-2 

Gray and ductile iron foundries: Responding U.S. producers' average net sales shares, fiscal years 1999-2003

(Percent of total sales) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . 75 74 73 74 73

Machined castings . . . . . . . . . . . . . . . . . . . . . 13 13 14 14 14

Downstream products containing

 in-house castings . . . . . . . . . . . . . . . . . . . 11 11 11 11 11

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ————————————————————————————— 1111

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100

Ductile iron:

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . 77 76 75 75 75

Machined castings . . . . . . . . . . . . . . . . . . . . . 9 9 10 10 11

Downstream products containing

 in-house castings . . . . . . . . . . . . . . . . . . . 12 12 12 12 12

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ————————————————————————————— 2222

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 11 A recent example occurred in 1996 when General Motors Corp. redesigned parts for its 90-degree, V-6 and V-8

cast-iron engines with aluminum or reinforced plastic-composite intake manifolds, aluminum water pump, and

aluminum cylinder head to replace gray iron components. Testimony of William T. Blackerby, Jr., Chief Operating

Officer, ASC Industries, Inc., hearing transcript, pp. 77-78. See also Al Wrigley, “Big Three Engine Program to

Drive Demand,” American Metal Market, May 10, 2002; Al Wrigley, “DaimlerChrysler Switching to Aluminum,”

American Metal Market, Sept. 21, 2000; Al Wrigley, “Iron Yields to Aluminum in GM Engines,” American Metal

Market, Aug. 18, 2000; and Al Wrigley, “Ford Converts Engines to Aluminum,” American Metal Market, Jan. 31,

2000.

 12 Loper, “Foundry Practice and Equipment.”

5-4

Demand Characteristics

The predominant end markets for gray iron cast components are automobiles, trucks, and other motor

vehicles, which together accounted for 59 percent of all shipments by responding foundries in 2003 (table

5-3), despite a long-term trend dating back to the 1970s of material substitution by the automotive industry.11

Motor vehicles have remained the predominant end-use market because of the desired physical properties,

relatively low cost, and ease of casting gray iron12 into engine blocks, cylinder sleeves, brake drums and discs,

and drive-train component housings. Other notable end uses for gray iron include refrigeration, air

conditioning, and heating equipment; construction and municipal castings; and valves and pipe fittings that

do not require the specialized properties of more costly ductile or other irons, or steel.

Table 5-3 

Gray iron foundries: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

 Other (buses, motor homes, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Farm and garden machinery and equipment .......................................... 4

Mining and oil/gas field machinery and equipment ...................................... 1

Construction machinery and equipment .............................................. 3

Refrigeration, air conditioning, and heating equipment ................................... 8

Industrial machinery ............................................................. 2

Soil pipe/pressure pipe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Valve and pipe fittings ............................................................ 7

Pumps and compressors ......................................................... 2

Household appliances ............................................................ 1

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ––––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

By contrast, the predominant end use market for ductile iron castings is soil pipe/pressure pipe (table

5-4), as ductile iron offers flexibility in casting a wide range of sizes and section-thicknesses, along with

fracture and corrosion resistance. The other major end use markets cited are automobiles and trucks, because

the stiffness, impact resistance, and tensile strength make ductile iron suitable for camshafts and crankshafts.
5-5

Table 5-4 

Ductile iron foundries: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Farm and garden machinery and equipment .......................................... 2

Construction machinery and equipment .............................................. 1

Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Industrial machinery ............................................................. 1

Soil pipe/pressure pipe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Valve and pipe fittings ............................................................ 4

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ––––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Channels of distribution for rough castings largely reflect the supply-chain structures of the major

downstream consuming sectors for each type of iron. Rough gray iron castings (table 5-5) are mostly shipped

to machine shops/other fabricators and original equipment manufacturers (OEMs) (together 62 percent), as

gray iron foundries are an integral part of the tiered OEM supply structure for the automobile, heavy-truck,

machinery, and equipment industries. However, smaller shares of such rough castings are also either retained

for in-house machining or subcontracted to outside machine shops. By contrast, distributors are the

predominant channels for shipping machined castings produced by responding establishments that cast gray

iron components.

Table 5-5 

Gray iron foundries: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 13 Certain data have been withheld to avoid disclosure of business confidential information. These data include

rough castings purchased from other companies and other machining costs.

 14 For example, Anvil International found itself burdened with “excess” foundry capacity for casting malleable-,

non-malleable, and ductile iron pipe fittings, that the company president attributed to loss of market share to lowerpriced fittings from China. To reduce both the “excess” capacity and production costs, Anvil International spent

approximately $20 million to shut down its Statesboro, GA foundry and combine iron casting operations at its

Columbia, PA foundry in 2001. Testimony of Thomas Fish, President, Anvil International, hearing transcript,

Departments of Commerce, Justice, and State; the Judiciary; and Related Agencies Subcommittee of the House

(continued...)

5-6

Distribution channels are less concentrated for rough ductile iron castings (table 5-6). Although

machine shops/other fabricators and OEMs received a combined 40 percent of such castings, predominantly

as automotive and truck components, a combined 52 percent were shipped through other channels (i.e.,

contractors, end-use customers, etc.) and distributors, particularly as soil pipe/pressure pipe, and valve and

pipe fittings. As with machined gray iron castings, distributors are also the predominant channels for shipping

machined castings produced by respondents that cast ductile iron components. However, other channels are

also significant customers for a wide range of machined ductile iron castings.

Table 5-6 

Ductile iron foundries: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining ............................................................ 5

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

In-house for use in downstream products ........................................... 9

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends13

Capacity, Production, Inventories, and Shipments

Reported production capacity for all types of rough iron castings (table 5-7) fluctuated around 9.7

million short tons during 1999-2002 before declining by 4 percent in 2003 as responding establishments

shutdown about 383,000 short tons of production capacity owing to declining downstream market shares,

rising import competition, and continued financial losses.14 Entry of several producers since 2000 was not
 14 (...continued)

Appropriations Committee, Washington DC, May 22, 2003, p. 14.

 15 U.S. industry official, telephone interview with USITC staff, Feb. 7, 2005.

 16 Testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, hearing

transcript, p. 42.

 17 Testimony of George G. Boyd, President and Chief Executive Officer, Golden’s Foundry & Machine, 

pp. 20-21.

5-7

sufficient to maintain previous production levels of rough iron castings as production in subsequent years

declined to a level 10 percent below the 8.3-million short tons levels of 1999-2000. Capacity utilization

slightly improved in 2003 as production capacity was reduced, whereas annual inventory levels tracked

downward after 2000 and inventories as a share of production remained relatively steady thereafter. However,

respondents that cast ductile iron reported higher inventory shares (33 percent) than did those that cast gray

iron (6 percent). Certain ductile iron castings, particularly soil pipe/pressure pipe and valves and pipe fittings,

are seasonal products with demand driven by the cycle of construction activity and extent of public works

projects; hence, producers typically build up inventories throughout the year to maintain a wide range of sizes

in stock to meet customer order requests in a timely manner, particularly during the peak sales months during

the summer.15

Table 5-7 

All iron foundries: Responding U.S. producers' capacity, production, and inventories for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capacity (short tons) . . . . . . . . . . . . . . . . . . . . . . 9,687,985 9,722,389 9,620,048 9,744,415 9,360,928

Production (short tons) . . . . . . . . . . . . . . . . . . . . 8,320,927 8,323,187 7,407,860 7,554,569 7,461,348

Capacity utilization (percent) . . . . . . . . . . . . . . . . 86 86 77 78 80

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 1,307,444 1,548,935 1,535,070 1,478,815 1,478,237

Share of production (percent) . . . . . . . . . . . . . 16 19 21 20 20 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Capacity utilization based on establishments that were

able to provide both capacity and production amounts. Inventory share of production based on establishments that

were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Gray Iron

Domestic shipments, internal consumption, and total shipments of rough gray iron castings (table 5-8)

declined, in both quantity and value terms, in almost every year during 1999-2003. Impacts on the foundry

industry from weaker demand by downstream customers were particularly noticeable in 2001. However,

domestic and export shipments did not recover in 2003 as customer demand started improving, a situation

that U.S. industry sources attribute to rising competition and aggressive pricing by foreign iron casters dating

back to 200016 and to downstream customers moving, or threatening to move, production offshore.17
 18 U.S. industry official, telephone interview with USITC staff, Feb. 10, 2005.

5-8

Table 5-8 

Gray iron foundries: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,323,846 2,226,627 1,935,334 1,955,464 1,918,109

 Internal consumption and transfers . . . . . . . . . 1,609,770 1,518,037 1,319,633 1,325,863 1,308,876

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,675 59,622 49,539 51,414 50,828 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,977,291 3,804,286 3,304,506 3,332,741 3,277,813

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,896,944 1,860,464 1,601,200 1,569,667 1,558,985

 Internal consumption and transfers . . . . . . . . . 1,982,805 1,720,332 1,483,362 1,433,360 1,368,361

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,811 59,835 51,458 50,443 50,691 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,927,560 3,640,631 3,136,020 3,053,470 2,978,037 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Ductile Iron

By contrast, domestic shipments, internal consumption, and total shipments of rough ductile iron

castings (table 5-9) peaked in 2000, in both quantity and value terms, but dropped the following year as

demand by downstream customers declined with the slowdown of U.S. manufacturing activity. These

shipments improved only slightly during 2002-03 as customer demand improved, but increased domestic

shipments in 2002 and 2003 remained below the 2000 level. However, quantities exported rebounded strongly

as the depreciation of the U.S. dollar enhanced the price competitiveness of U.S.-produced ductile iron

castings in foreign markets, enabling several U.S. foundries to sell significantly more abroad with the upturn

of foreign demand.18

Table 5-9 

Ductile iron foundries: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,256,997 3,408,571 3,150,315 3,173,773 3,165,871

 Internal consumption and transfers ......... 551,267 574,878 506,345 487,514 486,104

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ————————————————————————————— 119,810 136,639 117,644 176,797 215,252

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,928,074 4,120,088 3,774,304 3,838,084 3,867,227

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,826,391 2,962,444 2,742,013 2,713,756 2,731,532

 Internal consumption and transfers ......... 808,239 743,591 602,885 619,136 592,210

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ————————————————————————————— 114,684 135,664 117,747 166,287 197,381

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,749,314 3,841,699 3,462,645 3,499,179 3,521,123 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 19 When Anvil International shut down its Statesboro, GA foundry and combined casting of malleable-, nonmalleable, and ductile iron pipe fittings at its Columbia, PA foundry in 2001, 350 jobs were lost at Statesboro.

However, rather than the anticipated addition of 200 jobs, another 100 were lost at Columbia, which the president

attributed to loss of market share to cheaper Chinese castings. Testimony of Thomas Fish, President, Anvil

International, pp. 14-15.

 20 Testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, p. 42; and

testimony of George G. Boyd, President and Chief Executive Officer, Golden’s Foundry & Machine, pp. 20-21.

 21 Testimony of Albert T. Lucchetti, President, Cumberland Foundry Co., Inc., p. 33.

5-9

Employment

Employment in responding establishments that produce rough gray iron or ductile iron castings (table

5-10) declined during 1999-2003 for all workers and for PRWs. Job losses were particularly noticeable

beginning in 2001 concurrent with both declining domestic shipments and weaker downstream customer

demand.19 However, employment levels, much like shipments, did not recover even as demand began to

rebound in 2003, which U.S. industry sources attributed to loss of markets owing to price and import

competition along with movement of downstream customers offshore.20 Likewise, hours worked by PRWs

at responding gray iron foundries fell each year during the 5-year period, unlike at ductile iron foundries, to

mirror the declining trends in both PRW employment and shipment quantities, owing to the weaker financial

condition of firms in the more competitive gray iron industry. Productivity generally rose during 1999-2003

at responding establishments, albeit slightly more at those that cast gray iron (by 9 percent) than at those that

cast ductile iron (by 7 percent), a reflection of industry efforts to reduce the labor intensity and enhance

production efficiency of foundry operations.21

Table 5-10 

Gray and ductile iron foundries: Responding U.S. producers' employees and related information for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Average number of employees . . . . . . . . . . . . 26,201 25,397 22,760 21,508 20,615

Production and related workers:

 Average number . . . . . . . . . . . . . . . . . . . . . . 21,557 20,820 18,372 17,322 16,480

 Hours worked (1,000 hours) . . . . . . . . . . . . . 45,089 43,760 37,858 34,645 34,318

 Wages paid (1,000 dollars) ............. 737,987 715,035 642,310 627,945 617,723

 Average hourly wages (dollars per hour) . . . 16.42 16.39 17.03 18.20 18.08

 Productivity (short tons per 1,000 hours) . . . 89 88 88 98 97

Ductile iron:

Average number of employees . . . . . . . . . . . . 20,363 20,297 19,039 18,751 18,635

Production and related workers:

 Average number . . . . . . . . . . . . . . . . . . . . . . 17,355 17,256 16,116 15,864 15,690

 Hours worked (1,000 hours) . . . . . . . . . . . . . 39,993 40,952 36,549 36,931 36,298

 Wages paid (1,000 dollars) ............. 548,622 564,527 531,447 533,467 543,480

 Average hourly wages (dollars per hour) . . . 13.87 13.96 14.81 14.77 15.34

 Productivity (short tons per 1,000 hours) . . . 99 100 103 106 106 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid data. Productivity based on establishments that were able to

provide both production quantity and hours worked data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 22 Net sales declined, despite four additional establishments that reported sales of rough gray iron castings over

the 5-year period.

 23 Testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, p. 42;

testimony of Roy Hanks, Marketing Manager, ThyssenKrupp-Waupaca, hearing transcript, p. 38; and testimony of

George G. Boyd, President and Chief Executive Officer, Golden’s Foundry & Machine, pp. 20-21.

 24 A notable exception is the case of Intermet Corp., which was able to reach agreement with its automotivesector customers in January 2005, to amend purchase orders and supply contracts with more favorable cost recovery

terms for ferrous scrap and other raw materials. “Intermet Reaches Agreements with Customers to Amend

Contracts,” Modern Casting, Jan. 3, 2005, found at http://www.moderncasting.com, retrieved Jan. 21, 2005.

 25 According to one U.S. industry source, even captive foundries must successfully bid for gray iron castings

orders as the parent company shops around for lowest-cost bids and wants its foundries to be as competitive as

outside domestic and foreign sources. U.S. industry source, interview with USITC staff, June 24, 2004.

 26 Net sales declined, despite three additional establishments that reported sales of rough ductile iron castings over

the 5-year period.

5-10

Financial Condition

Rough Iron Castings

Gray iron.–Responding foundries that produced rough gray iron castings reported sharply

deteriorating operating incomes, which declined by $506 million (148 percent) during 1999-2003, and turned

into losses by 2002 (table 5-11). Similarly, a growing share of responding establishments reported operating

losses in each successive year since 1999, to exceed one-half by 2003. Moreover, respondents’ total net sales

declined in both quantity and value terms throughout the 5-year period,22 despite rebounding customer

demand in 2002-03. These declining financial trends reflect the highly competitive nature of gray iron

casting, concurrent with the loss of downstream customers that transferred production offshore,23 as evident

in their declining sales unit values (table 5-12). Although the cost of goods sold (COGS) irregularly declined

throughout the 5-year period, respondents reported that each cost component, particularly raw materials,

direct labor, and other factory costs, generally rose as shares of net sales through 2003 (see table 5-11). These

cost escalations drove down gross profits, in terms of both value and unit value, and as a share of total net

sales, with net sales-to-costs margins being particularly squeezed in 2003. Moreover, gray iron foundries were

generally unable to pass along the cost increases for raw materials and energy.24 Gray iron foundries that

consider themselves to be job shops or producers of a broad number of products fared better with declining

but positive operating incomes through 1999-2003 (table 5-13), as job shops were apparently better able to

moderate the cost-price squeeze by diversifying among multiple products and downstream markets. By

contrast, captive producers and those producing a limited number of products have experienced operating

losses since 2000 because of ongoing price pressures25 and constraints of servicing specific downstream

markets.

Ductile iron.–By contrast, responding foundries that produced rough ductile iron castings

experienced less severe financial deterioration than did those that produced rough gray iron castings. Ductile

iron casters’ operating incomes declined less, by $417 million (67 percent), and remained positive throughout

the 5-year period (table 5-14). Although a rising share of responding ductile iron establishments also reported

operating losses during the period, this share was lower than for gray iron establishments, reaching 43 percent

in 2003. Similarly, casters of ductile iron indicated that their total net sales declined, but to a lesser degree

than for those that cast gray iron, in both quantity and value terms during 1999-2003.26 Net sales rebounded

in 2003 as ductile iron foundries experienced somewhat less pricing pressures as producers of a
5-11

Table 5-11 

Gray iron foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Net sales:

Commercial domestic and export sales . . . . . . 2,480,884 2,398,884 2,119,128 2,158,369 2,141,496

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 1,242,293 1,166,498 968,770 926,169 872,986

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 187,373 211,807 190,814 217,331 228,147

 Total net sales quantities . . . . . . . . . . . . . . . 3,910,550 3,777,189 3,278,712 3,301,869 3,242,629

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . . . 2,091,325 2,066,958 1,774,565 1,746,496 1,730,096

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 1,181,603 966,732 805,489 763,214 745,986

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 627,385 593,701 557,215 550,129 497,787

 Total net sales values . . . . . . . . . . . . . . . . . 3,900,313 3,627,391 3,137,269 3,059,839 2,973,869

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 938,502 949,914 758,568 760,199 783,766

Direct labor ........................... 894,900 895,313 794,971 785,145 792,823

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,797 237,074 236,341 213,687 220,575

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 1,329,097 1,299,623 1,154,291 1,128,782 1,154,056

Total cost of goods sold . . . . . . . . . . . . . . . . 3,363,296 3,381,924 2,944,171 2,887,813 2,951,220

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537,017 245,467 193,098 172,026 22,649

Selling, general, and administrative .......... 194,420 191,313 187,981 173,329 185,591

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 342,597 54,154 5,117 -1,303 -162,942

Other income and expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . 46,296 46,464 48,474 46,116 50,571

All other expenses and income ............ 109,181 58,647 84,125 47,103 51,232

Net income before taxes . . . . . . . . . . . . . . . . . . . 187,120 -50,957 -127,482 -94,522 -264,745

Depreciation/amortization . . . . . . . . . . . . . . . . . . 170,972 181,969 172,239 197,810 180,004

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 26 24 25 26

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 25 25 26 27

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7877

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 34 36 37 37 39

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 86 93 94 94 99

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 7661

Selling, general, and administrative .......... 5 5666

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 9 1 (1

) (1) -5

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 20 27 41 47 51

Financial results data . . . . . . . . . . . . . . . . . . . . . 97 98 100 102 101 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-12

Table 5-12 

Gray iron foundries: Selected financial unit values for responding U.S. producers' rough casting operations,

fiscal years 1999-2003

(Dollars per short ton) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total sales unit value . . . . . . . . . . . . . . . . . . . . . 997 960 957 927 917

Raw material cost . . . . . . . . . . . . . . . . . . . . . . . . 240 251 231 230 242

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . 229 237 242 238 245

Energy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 63 72 65 68

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 340 344 352 342 356

Total cost of goods sold . . . . . . . . . . . . . . . . . . . 860 895 898 875 910

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 65 59 52 7

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. For each of the above items, unit values calculated only

where establishment provided both value and quantity data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-13 

Gray iron foundries: Selected financial information for U.S. producers' rough casting operations for specified

classes, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Class/item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Job shops:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,270,942 1,250,116 1,083,234 1,030,046 1,004,933

Operating income . . . . . . . . . . . . . . . . . . . . . . 99,672 89,065 38,196 46,299 23,914

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,636 49,775 2,439 10,303 -16,960

Captive producers:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,960,602 1,708,676 1,451,346 1,419,763 1,339,163

Operating income . . . . . . . . . . . . . . . . . . . . . . 141,075 -99,898 -76,352 -93,009 -200,510

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,525 -163,527 -169,953 -146,297 -260,503

Limited number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,275,193 2,000,422 1,667,907 1,680,035 1,572,376

Operating income . . . . . . . . . . . . . . . . . . . . . . 167,397 -97,457 -86,415 -73,599 -212,154

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,029 -170,180 -190,266 -131,061 -273,289

Broad number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,029,618 1,046,683 950,703 874,457 883,150

Operating income . . . . . . . . . . . . . . . . . . . . . . 117,963 98,451 56,131 25,076 12,892

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,004 73,340 35,065 -2,015 -19,594 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-13

Table 5-14 

Ductile iron foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Net sales:

Commercial domestic and export sales . . . . . . 3,356,317 3,518,879 3,251,975 3,329,489 3,350,682

Internal consumption for production of

 machined castings .................. 208,680 190,297 174,899 175,641 173,051

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 312,596 345,813 302,531 278,444 294,911

 Total net sales quantities . . . . . . . . . . . . . . . 3,877,593 4,054,989 3,729,405 3,783,574 3,818,644

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . . . 2,990,055 3,136,954 2,899,401 2,881,185 2,919,063

Internal consumption for production of

 machined castings .................. 330,599 319,940 305,335 316,214 305,568

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 540,225 482,062 372,268 368,362 361,501

 Total net sales values . . . . . . . . . . . . . . . . . 3,860,879 3,938,956 3,577,004 3,565,761 3,586,132

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 1,014,628 1,052,364 938,446 967,090 1,006,653

Direct labor ........................... 512,211 522,912 489,514 487,198 487,508

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,527 294,727 311,213 292,543 307,235

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 1,234,907 1,314,542 1,247,975 1,237,137 1,345,944

Total cost of goods sold . . . . . . . . . . . . . . . . 3,016,273 3,184,545 2,987,148 2,983,968 3,147,340

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844,606 754,411 589,856 581,793 438,792

Selling, general, and administrative .......... 222,660 234,150 224,415 219,533 233,720

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 621,946 520,261 365,441 362,260 205,072

Other income and expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . 38,615 46,609 41,268 33,847 28,905

All other expenses and income . . . . . . . . . . . . 24,507 1,139 16,621 30,397 32,927

Net income before taxes . . . . . . . . . . . . . . . . . . . 558,824 472,513 307,552 298,016 143,240

Depreciation/amortization . . . . . . . . . . . . . . . . . . 126,309 134,256 141,190 164,706 173,116

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 27 26 27 28

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 13 14 14 14

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7989

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 32 33 35 35 38

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 78 81 84 84 88

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 19 16 16 12

Selling, general, and administrative .......... 6 6667

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 16 13 10 10 6

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 10 20 27 31 37

Financial results data . . . . . . . . . . . . . . . . . . . . . 84 85 85 87 87 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 27 U.S. industry official, telephone interview with USITC staff, Feb. 4, 2005.

 28 Increased net sales also reflected, in part, five additional establishments reporting sales of machined gray iron

castings over the period.

 29 Increased net sales also reflected, in part, four additional establishments that reported sales of machined ductile

iron castings over the period.

5-14

more specialized product than gray iron,27 particularly in the most recent years when unit sales values

declined less during 2002-03 (table 5-15). Each COGS cost component, but particularly other factory costs,

rose as shares of net sales through 2003 (see table 5-14). These cost escalations drove down gross profits, in

terms of both value and unit value and as a share of total net sales, and hence, operating income over the 5-

year period. Unlike the foundries that cast gray iron, ductile iron job shops experienced greater declines in

operating income (nearly 100 percent) than captive producers (64 percent) throughout 1999-2003 (table 5-16).

However, financial performance was less affected by product diversity as respondents that cast a limited

number of products experienced only a somewhat marginally larger decline (65 percent) in operating income

than did those that cast a broader number of products (62 percent).

Machined Iron Castings

Gray iron.–Unlike the rough gray iron castings sector, foundries that also machined gray iron

castings enjoyed positive operating income that rebounded in 2003, after three consecutive years of decline

(table 5-17), as downstream demand revived. Net sales also rebounded from the low level of 2000, to exceed

the 1999 level throughout 2001-03.28 Total COGS rose over the 5-year period, but not as a share of net sales

in 2003, which eased the squeeze on net sales-to-costs margins in that year. However, the share of

establishments reporting operating losses increased in each successive year since 1999 to 30 percent by 2003.

Ductile iron.–Unlike the rough ductile iron castings sector, foundries that also machined ductile iron

castings reported operating income that peaked in 2001 (table 5-18). Although net sales and total COGS rose

at roughly the same pace (27 percent and 28 percent, respectively) during 1999-2003,29 COGS rose as a share

of net sales since 2001 which squeezed net sales-to-costs margins in successive years. Responding

establishments appeared able to hold down the costs of in-house machining, which declined as a share of

COGS since 2000. However, controlling various machining costs was not sufficient to offset the rising cost

share of rough castings produced. The share of establishments reporting operating losses increased since 2001

to reach 29 percent by 2003.

Table 5-15 

Ductile iron foundries: Selected financial unit values for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

(Dollars per short ton) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total sales unit value . . . . . . . . . . . . . . . . . . . . . 996 971 959 942 939

Raw material cost . . . . . . . . . . . . . . . . . . . . . . . . 262 260 252 256 264

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . 132 129 131 129 128

Energy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 73 83 77 80

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 318 324 335 327 352

Total cost of goods sold . . . . . . . . . . . . . . . . . . . 778 785 801 789 824

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 186 158 154 115

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. For each of the above items, unit values calculated only

where establishment provided both value and quantity data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 30 See also “Iron” in ch. 2.

 31 Price escalations for ferrous scrap are attributed to rising U.S. scrap exports as the weaker dollar provided

lower prices for foreign buyers, export restrictions by Russia and Ukraine, rising Chinese demand, resumed demand

by U.S. steelmakers, and fewer scrap generators as U.S. manufacturing moves offshore, among other factors dating

back to 2002. Alfred T. Spada, “Ferrous Scrap Pricing, a Case of Supply and Demand,” Modern Casting, Apr. 2004,

pp. 18-20; Kyle Bauer, “Surviving the Scrap Crisis, What Can You Do?,” Modern Casting, Apr. 2004, pp. 21-23;

and Kevin O’Shaughnessy, “Don’t Scrap the Issue, the Points and Counterpoints of Government Intervention,”

Modern Casting, Apr. 2004, pp. 24-26. For more details on ferrous-scrap price trends, see “Raw materials” in ch. 3.

 32 David Borsuk, Sadoff Iron and Metal, cited in Gene Muratore and Joe Ward, “Gaining Insight into Ferrous

Raw Material Trends,” Modern Casting, Nov. 2002, pp. 30-32.

 33 Price escalations and supply limitations for pig iron are attributed to forward selling, production problems at a

major Russian producer, limited shipments from Brazil, rising Chinese demand, and reduced production by U.S.

integrated steel mills in favor of higher value-added steel mill products. Spada, “Ferrous Scrap Pricing.” For more

details on pig-iron price trends, see “Raw materials” in ch. 3.

 34 U.S. industry official, telephone interview with USITC staff, Feb. 11, 2005.

5-15

Table 5-16 

Ductile iron foundries: Selected financial information for U.S. producers' rough casting operations for

specified classes, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Class/item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Job shops:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,921,815 2,067,490 1,853,505 1,775,024 1,795,917

Operating income . . . . . . . . . . . . . . . . . . . . . . 165,824 154,249 106,139 68,666 118

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,068 120,914 78,214 34,822 -31,530

Captive producers:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,127,571 1,043,630 895,705 899,743 897,178

Operating income . . . . . . . . . . . . . . . . . . . . . . 344,131 242,707 156,141 167,097 123,452

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,439 231,562 149,307 160,309 114,835

Limited number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,060,538 2,050,765 1,790,963 1,821,601 1,806,685

Operating income . . . . . . . . . . . . . . . . . . . . . . 448,670 351,569 252,211 256,750 158,439

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 416,364 329,984 217,665 225,230 129,441

Broad number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 872,866 891,953 836,015 821,468 816,940

Operating income . . . . . . . . . . . . . . . . . . . . . . 94,051 90,678 71,198 61,202 36,093

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,291 68,548 53,259 39,167 17,612 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Raw Materials and Energy

As the primary furnace input for producing molten iron,30 ferrous scrap accounts for the predominant

raw-materials cost share for both gray and ductile iron foundries (table 5-19). Despite escalating scrap prices

in recent years,31 substitution among scrap types is less feasible for iron foundries than for steelmakers

because of their tighter composition specifications and size requirements.32 Iron foundries that sought pig iron

to offset some ferrous scrap cost increases also encountered escalating prices and limited availability.33

Nevertheless, shifts were slight for the cost shares among these raw materials over 1999-2003, despite a

certain degree of substitution among raw materials possible (between scrap and pig iron, rather than alloys)

with the installed melting technologies.34
 35 Prices rose for electricity because of escalating domestic demand, for natural gas from constrained global

supplies, and for metallurgical coke attributable to export cut-backs by China to meet rising domestic consumption,

and growing consumption in India and other countries, after a prolonged period of coke oven capacity closures with

far fewer additions worldwide. Nancy E. Kelly, “US, EU Protest Chinese Coke Export Controls,” American Metal

Market, May 28, 2004; and Scott Robertson, “Summit Speakers Warn of Crisis in the Coke Market,” American

Metal Market, Oct. 8, 2003. For more details about energy price trends, see “Energy” in ch. 3.

 36 Ibid.

5-16

Table 5-17 

Gray iron foundries: Responding U.S. producers' financial results for their machining operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) ..................... 271,260 269,005 264,058 273,272 282,995

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 471,463 469,747 488,220 489,695 520,112

Cost of goods sold:

Rough castings produced ................ 271,416 266,393 277,361 273,167 278,424

Rough castings purchased

 from other companies . . . . . . . . . . . . . . . . 21,162 25,856 35,734 43,677 50,790

In-house machining costs . . . . . . . . . . . . . . . . 77,513 77,901 77,104 84,465 86,506

Subcontracted machining costs . . . . . . . . . . . (1

) (1) 2,532 1,891 2,141

Other machining costs . . . . . . . . . . . . . . . . . . (1

) (1) 7,360 8,850 8,670

 Total costs of goods sold ............... 374,081 374,961 400,091 412,050 426,531

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,382 94,786 88,129 77,645 93,581

Selling, general, and administrative . . . . . . . . . . 28,122 30,969 30,279 30,072 29,187

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 69,260 63,817 57,850 47,573 64,394

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 79 80 82 84 82

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 20 18 16 18

Selling, general, and administrative .......... 6 7666

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 15 14 12 10 12

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 5 7 8 9 10

Financial results data . . . . . . . . . . . . . . . . . . . . . 28 28 30 31 33 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Prices have also risen for electricity, natural gas, and metallurgical coke,35 but not to the same degree

as those for ferrous scrap and pig iron. Electricity accounts for the largest share of energy costs for iron

foundries (table 5-20), both for melting iron in electromagnetic-induction and electric-arc furnaces, and for

powering the mold-making, casting, grinding, and other production equipment. Differing price escalations

were reflected somewhat in slight shifts for the respective cost shares among these energy sources during

1999-2003. Both respondents that cast gray iron and those that cast ductile iron report slight natural gas cost

share increases, for which the price increased the most among these fuels. Respondents that cast ductile iron

also have higher reliance on natural gas to control the cooling and annealing of ductile iron castings. Hence,

switching among fuels at iron foundries is constrained by the installed melting and casting technologies.36
5-17

Table 5-18 

Ductile iron foundries: Responding U.S. producers' financial results for their machining operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) ..................... 144,018 143,920 152,152 150,186 157,440

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269,900 284,516 320,613 320,450 343,040

Cost of goods sold:

Rough castings produced ................ 151,668 147,135 152,703 164,748 201,716

Rough castings purchased

 from other companies ................ (1

) (1) (1) (1) (1)

In-house machining costs . . . . . . . . . . . . . . . . 67,747 79,604 83,054 75,640 69,174

Subcontracted machining costs . . . . . . . . . . . 7,859 6,396 6,974 7,811 9,644

Other machining costs . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total costs of goods sold ............... 234,392 241,250 258,748 268,180 300,074

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,508 43,266 61,865 52,270 42,966

Selling, general, and administrative . . . . . . . . . . 17,934 20,560 21,952 22,659 23,610

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 17,574 22,706 39,913 29,611 19,356

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 87 85 81 84 87

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 15 19 16 13

Selling, general, and administrative .......... 7 7777

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 7 8 12 9 6

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 3 5267

Financial results data . . . . . . . . . . . . . . . . . . . . . 20 21 22 23 24 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-19 

Gray and ductile iron foundries: Share of total metal raw material costs for responding U.S. producers' rough

casting operations, fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Primary metals in scrap form . . . . . . . . . . . . . . 75 72 72 73 73

Primary metals in other forms . . . . . . . . . . . . . 16 16 16 17 17

Other metal . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 12 10 10 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100

Ductile iron:

Primary metals in scrap form . . . . . . . . . . . . . . 68 69 68 70 70

Primary metals in other forms . . . . . . . . . . . . . 13 12 12 12 12

Other metal . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 18 19 18 18 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 37 Testimony of Albert T. Lucchetti, President, Cumberland Foundry Co., Inc., p. 33.

 38 Regional variations in prevailing wage rates is more relevant than degree of labor organization since the

workforce in the foundry industry tends to be highly unionized across the United States. U.S. industry source,

telephone interview with USITC staff, Feb. 4, 2005.

 39 See e.g., testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, 

p. 45.

5-18

Table 5-20 

Gray and ductile iron foundries: Share of total energy costs for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 52 50 52 51

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 16 20 16 20

Metallurgical coke . . . . . . . . . . . . . . . . . . . . . . 32 29 27 28 27

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ————————————————————————————— 3343

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100

Ductile iron:

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 54 52 57 53

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 24 27 21 25

Metallurgical coke . . . . . . . . . . . . . . . . . . . . . . 17 17 15 16 16

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ————————————————————————————— 5576

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Labor

Aggregate salaries and wages, including overtime, for all employees at responding establishments

generally fell from their 2000 peak and leveled off thereafter (table 5-21) because of the declining number

of employees (see table 5-10). At least one industry official attributed higher wages at least in part to the

limited availability of foundry labor.37 Average hourly wages for PRWs rose more at ductile iron foundries

(up by 11 percent) than at gray iron foundries (up by 10 percent) over the 5-year period (see table 5-10). At

responding establishments that cast ductile iron, average hourly wages were approximately 84 percent of

those that cast gray iron, a reflection of a higher portion of the ductile iron respondents’ employees located

in lower-wage areas outside the industrialized portions of the upper Midwest.38

Health benefits, pensions, and other non-salary and wage costs (excluding employee training) borne

by iron foundries continued to rise in nearly each successive year after 2000. Among these non-salary and

wage costs, pension expenses rose the most during 2001-03 for both casters of gray iron (by 47 percent) and

ductile iron (by 94 percent).

Industry officials cite the importance of employee training to maintain a highly skilled workforce to

remain competitive, particularly to replace talented foundry employees leaving the industry.39 However,

increases in various non-salary and wage costs appear to have left shrinking amounts that responding

establishments could expend for employee training, which fell during 1999-2003. Hence, respondents that

cast ductile iron spent more on training than those that cast gray iron, reflecting this group’s somewhat better

financial condition.
 40 Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, pp. 43-44.

 41 Testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, p. 42;

testimony of Roy Hanks, Marketing Manager, ThyssenKrupp-Waupaca, p. 38; testimony of George G. Boyd,

President and Chief Executive Officer, Golden’s Foundry & Machine, pp. 20-22; and testimony of Albert T.

Lucchetti, President, Cumberland Foundry Co., Inc., p. 33.

 42 An illustration of the time-frame, size, and risks of capital investment for iron foundries is one operation that

was able to obtain financing from a local bank to adopt the latest technology for large green-sand molding, as part of

a multi-year plan to upgrade the core-making equipment and iron-melting furnaces. This $4-million investment was

undertaken, largely based on indications by an established large-OEM customer that the foundry could anticipate

receiving a significant increase in sales ranging from $3 million to $6 million. However, this investment came online in 2001as the U.S. economy turned down. Testimony of George G. Boyd, President and Chief Executive

Officer, Golden’s Foundry & Machine, p. 21.

5-19

Table 5-21 

Gray and ductile iron foundries: Responding U.S. producers' employment costs for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Salaries and wages (including overtime) . . . . . 1,005,758 1,166,894 997,806 970,403 960,359

Health benefits ........................ 147,857 178,840 163,378 169,288 179,561

Pension and profit sharing . . . . . . . . . . . . . . . . 63,214 69,113 65,787 76,283 96,525

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,948 162,477 152,073 152,239 158,297

Employee training . . . . . . . . . . . . . . . . . . . . . . 10,752 10,262 6,795 6,781 6,328 —————————————————————————————

 Total employee costs . . . . . . . . . . . . . . . . . . 1,335,529 1,587,586 1,385,839 1,374,994 1,401,070

Ductile iron:

Salaries and wages (including overtime) ..... 921,524 965,351 925,750 905,127 902,639

Health benefits ........................ 121,357 137,529 141,523 152,431 162,798

Pension and profit sharing . . . . . . . . . . . . . . . . 32,980 30,114 28,843 38,288 56,062

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,274 123,937 119,314 116,544 124,608

Employee training . . . . . . . . . . . . . . . . . . . . . . 16,465 16,369 13,927 13,499 14,455 —————————————————————————————

 Total employee costs . . . . . . . . . . . . . . . . . . 1,204,600 1,273,300 1,229,357 1,225,889 1,260,562 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Both the availability and skill level of labor are of concern to U.S. foundries that produce iron

castings. Of particular concern is the exodus of technically skilled workers from the industry as foundries

shutdown.40 Moreover, some respondents reported concerns regarding the quality (especially the skill levels

and work ethics) of applicants. Reasons for the difficulties mentioned by respondents in retaining existing

employees and attracting new ones include the difficult work environment and physical labor required, and

also the deteriorating financial condition of many iron foundry operations.

Investment

Capital investments to enhance future competitiveness were either limited or put on hold at iron

foundries owing to lower production levels in 2001 and shrinking profit margins as a result of foreign price

competition, pressure to meet customer-specified prices, and market losses as customers moved production

offshore.41 Hence, deteriorating financial conditions generally limited respondent to investing less in each

successive year after 2000 for machinery, equipment, and fixtures (table 5-22). Exceptional aggregate

increases in certain years reflected a small number of respondents that were financially capable of significant

investments.42 Generally, iron foundries reported funding capital expenditures from corporate cash flows and

secured debt rather than unsecured debt or issuance of equity. Most capital investments were for incremental

enhancements, automation, or energy savings with existing production equipment rather than purchases of
 43 U.S. industry official, telephone interview with USITC staff, Feb. 11, 2005.

5-20

Table 5-22 

Gray and ductile iron foundries: Responding U.S. producers' capital and R&D expenditures for their rough

casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Capital expenditures:

Machinery, equipment, and fixtures:

 Environmentally related . . . . . . . . . . . . . . 59,216 21,304 13,670 10,425 5,500

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,765 154,601 168,251 99,880 81,360

Land, building, and related improvements . 13,059 32,899 26,761 11,412 11,852

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 243,040 208,804 208,682 121,717 98,712

Research and development expenditures . . . . 726 712 1,213 1,691 2,685

Ductile iron:

Capital expenditures:

Machinery, equipment, and fixtures:

 Environmentally related . . . . . . . . . . . . . . 20,196 20,710 17,987 38,056 17,622

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,344 201,463 169,305 163,262 85,111

Land, building, and related improvements . . 21,752 22,617 23,326 27,352 14,697

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . 189,292 244,790 210,618 228,670 117,430

Research and development expenditures . . . . 7,453 6,544 8,107 9,357 7,268 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

new equipment. By contrast, research and development (R&D) expenditures generally rose in each successive

year for gray iron foundries. Such investments reflected both production process improvements and costcutting measures, not only for enhanced competitiveness, but also in an attempt to survive financial

downturns.43

Debt

Responding iron foundries generally accumulated rising total debt loads over the 5-year period (table

5-23), although they were able to reduce their indebtedness by cutting back on capital investments in 2003.

Increased debt reflects collateralized borrowing to finance new capital investment in production assets

(property, plant, and equipment) owing to the deteriorating financial condition of many iron foundries.

Respondents that cast gray iron were increasingly less financially able to invest in future production

capabilities, as reflected by their original cost of property, plant, and equipment rising during 1999-2001 but

subsequently falling by $194 million (6 percent) over the next 2 years to slightly below the 1999 level.

Likewise, the book value of these assets declined by $183 million (13 percent) over the 5-year period.

Respondents that cast ductile iron were in better financial shape to augment the original cost of their property,

plant, and equipment by approximately $734 million (about one-third) from 1999 to 2003. However, the book

value of these assets only increased by about $254 million (26 percent) over this same period. For both gray

iron and ductile iron foundries, these trends indicate that their production assets were depreciating faster than

they were being replaced. Hence, consistent with limited and declining capital spending previously discussed,

the production assets were likely closer to the end of their expected useful lives in 2003 than in 1999.
 44 Testimony of Randall W. Lawton, President and Chief Executive Officer, Bay Engineered Castings, p. 42;

testimony of Roy Hanks, Marketing Manager, ThyssenKrupp-Waupaca, p. 38; and testimony of George G. Boyd,

President and Chief Executive Officer, Golden’s Foundry & Machine, pp. 20-21.

 45 See also “Mexico” in ch. 9.

5-21

Table 5-23 

Gray and ductile iron foundries: Other financial information for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron:

Total debt (1,000 dollars) ................ 668,904 680,831 690,135 736,725 682,431

Property, plant, and equipment:

 Original cost (1,000 dollars) . . . . . . . . . . . . . 3,338,303 3,525,474 3,532,085 3,391,183 3,337,774

 Book value (1,000 dollars) . . . . . . . . . . . . . . 1,376,462 1,457,927 1,432,322 1,304,778 1,193,499

Ductile iron:

Total debt (1,000 dollars) ................ 599,922 645,764 588,757 670,124 636,573

Property, plant, and equipment:

 Original cost (1,000 dollars) . . . . . . . . . . . . . 2,242,068 2,366,793 2,560,239 2,833,974 2,975,851

 Book value (1,000 dollars).............. 959,463 1,012,007 1,058,473 1,259,197 1,213,578 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Purchaser Trends

U.S. downstream customers that responded to the USITC purchaser questionnaire reported that their

purchases of rough iron castings recovered as downstream demand rebounded after 2001, for a net gain of

$439 million (24 percent) over the 5-year period (table 5-24). Although domestic foundries are the

predominant source of rough iron castings, their share of the total declined from 87 percent to 83 percent over

the 5-year period, which is consistent with concerns expressed by domestic foundry industry representatives

about rising import competition and loss of domestic customers.44 By contrast, downstream customers

reported wider sourcing of machined iron castings, with domestic sources providing from 52 percent to 57

percent of all machined castings purchased annually during this 5-year period. As purchasers sought less

expensive sources of machined iron castings, domestic iron foundries appeared somewhat successful at

meeting price competition from foreign castings during 2003 compared to the previous year, as the market

share for foreign sources fell from 48 percent to 45 percent.

According to data of foreign purchases aggregated across the six specific cast iron products and

further analyzed in this chapter, Mexico was the predominant foreign source for rough iron castings

throughout the 5-year period (table 5-25), reflecting the Mexican foundry industry’s lower production costs

and integration into the North American supply chain for cast components purchased by the automotive,

machinery, and equipment industries.45 However, Mexico’s share of total foreign purchases declined

significantly during the period, reflecting increased penetration from competing foreign sources. By contrast,

foreign-origin machined iron castings were increasingly purchased from China, as imports rose in each
 46 Testimony of Randall Lawton, President, Bay Engineered Castings, pp. 42-44; see also “China” in ch. 9.

5-22

Table 5-24 

All iron castings: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Type 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,606,325 1,786,201 1,757,761 1,789,459 1,880,352

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,168 329,707 293,389 327,916 375,757

Unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,466 12,494 13,386 17,023 22,636

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,839,959 2,128,402 2,064,536 2,134,398 2,278,745

Machined castings:

Domestic1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,156,680 1,194,433 1,131,999 1,166,700 1,308,409 

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 933,255 914,925 991,981 1,063,460 1,070,935 

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,089,935 2,109,358 2,123,980 2,230,160 2,379,344 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Includes data for purchases of castings from unknown sources to avoid disclosure of confidential business

information.

Note.–These data do not indicate all purchases of castings in the United States. See ch. 1 for additional information

on data coverage.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

successive year, by nearly 3-fold over the 5-year period to $59 million, to account for 49 percent of all

imports in 2003. A hearing witness noted increased price competitiveness for machined iron castings from

China and other developing countries since 2001. According to one industry source, more large-volume

castings are being imported from China, whereas many U.S. iron foundries are concentrating on more

specialized, smaller-production volume castings that are less susceptible to relocating production abroad or

sourcing from foreign competitors.46
5-23

Table 5-25 

All iron product groups: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Country or region1 1999 2000 2001 2002 2003 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 423,557 453,394 426,994 427,478 418,256

Foreign:

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2

) (2) (2) (2) (2)

Japan .............................. (2

) (2) (2) (2) (2)

EU15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,103 1,347 1,563 3,777 3,770

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492 1,544 2,117 2,975 2,948

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 844 985 1,355 2,276 2,544

All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,080 2,082 2,661 2,824 3,528

—————————————————————————————

Total, foreign purchases . . . . . . . . . . . . . . 13,902 17,870 19,708 29,171 30,725

Machined castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,227 187,576 192,975 220,648 223,661

Foreign:

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,956 27,192 37,792 43,067 59,187

Canada ............................ (2

) (2) (2) (2) (2)

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,864 14,110 15,085 14,950 14,887

Japan .............................. (2

) (2) (2) (2) (2)

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,152 6,588 7,332 6,240 3,301

EU15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,404 2,121 1,897 2,732 2,719

All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,001 7,919 6,654 6,449 8,641

—————————————————————————————

Total, foreign purchases . . . . . . . . . . . . . . 81,109 80,667 93,899 96,883 121,445 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Countries and regions are mutually exclusive.

2

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. Includes purchases of ductile iron crankshafts/camshafts,

gray iron motor vehicle gear boxes, ductile iron bearing housings, gray iron compressor housings, gray iron pumps,

and gray iron non-motor vehicle gear boxes. Product group data combined to avoid disclosure of confidential

business information.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
5-24
 47 The description and uses for this section was largely gathered from the Dictionary of Automotive Terms, found

at http://100megsfree4.com/dictionary/ and How Stuff Works, found at http://auto.howstuffworks.com.

 48 Crankshafts manufactured from bar steel were expected to account for 60 percent of the market by mid-2002

because of the material's capability to improve engine performance and reduce weight. The growth would largely be

at the expense of cast iron, which accounted for 60 percent of the crankshaft market in 2000. “Steel to Gain Market

Share in Engine Crankshaft Applications, Reports American Iron and Steel Institute,” Oct. 10, 2000, found at

http://www.amm.com.

 49 Alan P. Druschitz et al, “Influence of Crankshaft Material and Design on the NVH Characteristics of a Modern,

Aluminum Bock, V-6 Engine,” SAE Technical Paper Series, 1999-01-1225, 1999.

5-25

Product Profiles

Ductile Iron Crankshaft/Camshaft Castings47

Industry Profile

Industry structure.—Eleven U.S.

manufacturers reported production of ductile iron

castings for camshafts and crankshafts, one of

which dominated production for the period. These

plants are largely located in the Midwest near their

leading customers, the automakers, to facilitate justin-time inventory and delivery. Several of these

foundries are large captive operations

manufacturing camshaft and crankshaft castings for

their vehicle-making parent. Many of these

manufacturers concentrate in only one metal type –

iron – although two companies also reported

producing one other metal type (either aluminum or

steel). Sand casting is the leading method used to

produce these products because of its low overall

cost and ability to produce large iron castings.

Most of these foundries are large, multi-product

companies, nearly all of which manufacture their

own molds but perform significantly fewer

additional activities related to the production of

these castings. The majority of reporting producers

indicated that their customers required certification

of their establishments, with ISO9000/14000 the

most common certifications.

Demand characteristics.—U.S. producers’ shipments of ductile iron crankshafts and camshafts

are used almost exclusively in the manufacture of motor vehicles, which accounted for 95 percent of

shipments (table 5-26). These products are largely shipped directly from U.S. producers to original

equipment manufacturers (i.e., motor vehicle producers) for further processing and incorporation into motorvehicle engines (table 5-27). 

Forged steel crankshafts have increasingly replaced cast ductile iron crankshafts in engine

applications48 because of their perceived superior attributes regarding noise, vibration, and harshness (NVH)49

Product Description and Uses

Camshafts and crankshafts are integral components of

internal combustion spark-ignition and compressionignition (diesel) engines, most notably for motor vehicle

applications. The basic function of the camshaft is to

push on valve lifters to open and close the engine valves

by means of the cam lobes incorporated into the

camshaft. This movement provides for the intake of air

and fuel into the cylinder and the release of exhaust

gases from the cylinder through the opened valves. An

engine may have one or two camshafts, depending on its

design. The camshaft is driven by gears, a belt, or a

chain from the crankshaft, and turns at one-half of the

speed of the crankshaft. The crankshaft is the main

rotating shaft running the length of the engine to which

connecting rods from the pistons are attached. The

crankshaft is usually counterweighted to take into

account the weight of the pistons, connecting rods, and

crankpin. The connecting rods, which link the engine

pistons to the offset, but interconnected, segments of the

crankshaft, convert the up-and-down movement of the

pistons into crankshaft rotation. This motion is

transmitted to the transmission and eventually to the

driving wheels.
 50 Al Wrigley, “New GM engines will use imported steel,” American Metal Market, Feb. 7, 2003, found at

http://www.amm.com, retrieved Jan. 12, 2005.

 51 David Anderson, “Growth seen in power train, suspension systems,” American Metal Market, Nov. 15, 1999,

found at http://www.amm.com, retrieved Jan. 12, 2005.

 52 Al Wrigley, “New GM engines will use imported steel.”

 53 Al Wrigley, “GM picks forged steel crankshaft for global V-6,” American Metal Market, Jan. 17, 2003, found

at http://www.amm.com, retrieved Jan. 12, 2005.

5-26

as well as longevity, strength, resistance,50 and smaller size.51 Ductile iron crankshafts, however, are generally

less expensive to produce than forged steel crankshafts. Japanese and European transplant automakers have

traditionally used forged steel crankshafts in their engines, whereas the so-called “Big Three” U.S.

automakers (Ford, General Motors, and DaimlerChrysler) have generally incorporated ductile iron crankshafts

in their engines.52 General Motors, however, decided in 2002-03 to shift to forged steel crankshafts for

several of its new engine programs, such as its global V-6 engines.53

Table 5-26 

Ductile iron crankshaft/camshaft castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . 92

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Farm and garden machinery and equipment ................................... 3

Construction machinery and equipment ....................................... 1 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-27 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' shipments, by channel of

distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Machine shop/other fabricators ................................................... 5

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 54 John E. Sacco, “Universal completes upgrade,” American Metal Market, Jan. 10, 1997, found at

http://www.amm.com, retrieved Jan. 12, 2005.

 55 Al Wrigley, “Tougher competition seen in auto mart,” American Metal Market, Apr. 14, 2000, found at

http://www.amm.com, retrieved Jan. 12, 2005.

 56 Ford, DaimlerChrysler, Subaru, Mazda, Porsche, and Volkswagen report using assembled camshafts in their

engines. “2004 Light Vehicle Engines,” Ward’s Engine & Vehicle Technology Update.

 57 Motor vehicle production declined by 8 percent overall during 1999-2003, to 16.2 million vehicles. The period

low was reached in 2001, when vehicle output totaled 15.8 million units. “North American Car & Truck Production,

1954-2003,” 2004 Ward’s Automotive Yearbook, p. 117.

 58 Certain data have been withheld to avoid disclosure of business confidential information. These data include

inventories, exports, breakouts of domestic shipments and net sales by commercial vs. internal, operating income

and related ratios, and imports.

5-27

Engines are also being developed that incorporate multiple camshafts, such as dual overhead camshaft

engines (DOHC), which directly affects the volume of camshafts demanded in the market.54 However,

alternative metals, particularly steel, are also commonly found in camshaft applications. Camshafts produced

from steel tubing rather than steel bar, for example, have become increasingly popular.55 Moreover, a large

number of automakers56 incorporate assembled camshafts into their engines. These camshafts are

manufactured from steel or powdered metal lobes that are heated and then mounted on a ground, hollow steel

tube. These camshafts reportedly have advantages of greater stiffness, lower weight, near net shape, and

overall lower cost.

Demand for these products reflects not only the number of motor vehicles produced,57 which directly

impacts the level of demand for engines that incorporate crankshafts and camshafts, but also reflects the

engine characteristics desired by the automaker, which determines the metal and manufacturing process

required. Trends in engine production closely correspond to those of motor vehicle output, with a resulting

upstream effect on the demand for camshafts and crankshafts as inputs for their manufacture. Since the Big

Three are the principal consumers of ductile iron crankshafts, their recent loss of U.S. market share also may

reduce demand for North American-produced engines and components, including crankshafts. One U.S.

producer indicated that at least one customer was shutting down production and/or sourcing its requirements

from foreign sources. Another U.S. foundry noted the emergence of new suppliers in the marketplace,

including Yasunaga (Japan), Abromex (Mexico), and Teksid (Poland).

Producer Trends58

Production and inventories –Because of material substitution, most respondents reported declines

in production over the period, which fell by 36 percent to 221,679 short tons in 2003 (table 5-28). Although

data on inventory levels are confidential, these levels remained low during the period, reflecting the shift to

just-in-time inventories adopted by most motor-vehicle manufacturers and their suppliers.

Employment.—Reflecting the decline in U.S. production, reported average annual employment by

U.S. producers of these castings fell by 40 percent during 1999-2003 to 1,232 workers (table 5-29). As a

result, most other employment indicators exhibited commensurate declines. Productivity, however, peaked

in 2002 before declining by 5 percent in 2003 to 102 short tons per hour. The 5-percent overall increase in
 59 See table 5-10, Gray and ductile iron castings: Responding U.S. producers’ employees and related information

for their rough castings operations, 1999-2003, p. 5-12.

5-28

Table 5-28 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) .................... 345,903 307,151 236,771 244,839 221,679

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Share of production (percent) ............. (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-29 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' employees and related information

for their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 2,048 1,742 1,343 1,322 1,232

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,845 1,541 1,164 1,143 1,038

Hours worked (1,000 hours) . . . . . . . . . . . . . . 3,611 3,361 2,284 2,298 2,231

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 59,402 55,932 42,841 44,249 43,278

Average hourly wages (dollars per hour) . . . . . 16.46 16.65 18.77 19.27 19.42

Productivity (short tons per 1,000 hours) . . . . . 97 92 104 107 102 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

productivity during 1999-2003 trails slightly the same index for the overall iron foundry industry, which rose

by 7 percent during 1999-2003. Reported average hourly wages increased steadily during 1999-2003 to

$19.42 in 2003. This average hourly wage exceeds the reported ductile iron industry average of $15.34 in

2003,59 which may reflect the influence of the higher-wage motor-vehicle industry on this product’s

producers.

Producers’ shipments and exports.—Because of the increased use of alternative metals in

camshaft/crankshaft applications, responding U.S. producers’ shipments of these products fell by 36 percent

during 1999-2003 to 220,367 short tons (table 5-30). Shipment value declined by a slightly larger margin,

totaling $341.7 million in 2003. The decline occurred largely in commercial shipments. U.S. exports

declined throughout the period and accounted for a small share of reported domestic shipments. Such exports

are believed to be largely directed to NAFTA partners Canada and Mexico for use in the regional motor

vehicle market.

Financial condition.–Because of confidentiality considerations, much of this sector’s financial

results cannot be disclosed. However, as total net sales quantities and net sales values declined, sector

operating income also fell by more than 50 percent during 1999-2003 (table 5-31). Two of eight responding
5-29

Table 5-30 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' domestic shipments and exports for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346,610 305,439 236,331 244,121 220,367

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592,673 487,258 317,879 352,473 341,699 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-31 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' financial results for their rough

casting operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... 196,197 156,364 103,205 97,739 82,687

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............. 346,522 305,341 236,248 244,074 219,994

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... 190,739 164,688 96,282 94,768 93,052

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 584,911 483,471 318,590 353,531 342,463

Operating income . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 0 1112

Financial results data ................... 7 8888 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission.
 60 U.S. industry official, interview with USITC staff, United States, June 2004.

5-30

producers reported operating losses in 2003. Two large U.S. foundries, Intermet and Citation, produce ductile

iron crankshafts and camshafts, and both are currently in bankruptcy. Most financial indicators for this sector

display significant declines.

Investment.—Capital expenditures in this sector fell by 67 percent during 1999-2002 to an estimated

$3.4 million, in step with the decline in operating income (table 5-32). Capital expenditures nearly tripled

in 2003, however, to $9.1 million. No expenditures for research and development were reported during the

period. According to one U.S. foundry, many U.S. companies have reduced or eliminated R&D expenditures

to save money.

60

Purchaser Trends

Respondents’ purchases of both rough and machined ductile iron crankshaft and camshaft castings

more than doubled during 1999-2003, with purchases fairly evenly split between the two categories during

most years of the period (table 5-33). The U.S. industry maintained its dominance of the rough castings

sector after inroads by U.S. imports during 2000-2001, and increased its hold of the machined castings sector

by the end of the period. Because limited purchasing data were provided by U.S. purchasers of these castings,

specific country details cannot be provided to protect business confidentiality. However, imports from Japan

dominated the rough castings sector, and were also a significant source of machined castings for U.S.

purchasers. The Japanese vehicle component sector retains significant links with the large base of Japanese

transplant automakers and parts producers manufacturing in the United States. Mexico was the leading source

of machined castings during the period, in large part because of the closer integration of the Mexican industry

into the North American motor-vehicle industry since the implementation of NAFTA.

Imports of finished engines, which incorporate ductile iron cast crankshafts and camshafts as well

as other types of crankshafts and camshafts, rose by 18 percent during 1999-2004 to $7.1 billion (table 5-34).

Canada and Mexico remained the leading suppliers of engines to the U.S. market because of their extensive

integration into the U.S. motor vehicle industry, whereas Japan was surpassed by Germany in 2004 as the

Table 5-32 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' capital and R&D expenditures for

their rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 10,157 5,517 3,586 3,354 9,145

Research and development expenditures ...... 0 0000 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission.
5-31

Table 5-33

Ductile iron crankshaft/camshaft castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,302

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,983

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,540

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,365

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,185

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,036

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,246

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,084

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,939

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,426 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-34

Ductile iron crankshaft/camshaft castings: U.S. imports for consumption of downstream products, 1999-

2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Canada . . . . . . . . . . . . . . . . . . 2,780,661 2,708,311 2,081,575 2,133,041 2,379,929 2,869,822

Mexico . . . . . . . . . . . . . . . . . . 1,471,621 1,416,037 1,254,197 1,197,325 1,328,201 1,806,325

Germany . . . . . . . . . . . . . . . . . 390,574 908,114 855,169 1,003,626 1,104,624 990,703

Japan . . . . . . . . . . . . . . . . . . . 1,212,129 1,424,922 1,463,912 1,511,961 1,178,639 939,439

Brazil . . . . . . . . . . . . . . . . . . . . 27,572 25,500 16,791 179,928 268,809 180,147

Sweden . . . . . . . . . . . . . . . . . . 54,975 64,861 49,182 50,324 89,719 174,416

Italy . . . . . . . . . . . . . . . . . . . . . 4,147 3,648 27,005 48,619 65,945 90,776

United Kingdom . . . . . . . . . . . 69,548 79,200 101,335 257,796 183,778 45,369

Singapore . . . . . . . . . . . . . . . . 5,187 483 1,203 9,252 9,766 7,580

Korea . . . . . . . . . . . . . . . . . . . 2,256 1,783 2,828 5,329 9,441 7,213

All other . . . . . . . . . . . . . . . . . 16,535 16,120 16,376 9,886 21,470 15,357

 Total . . . . . . . . . . . . . . . . . . . 6,035,205 6,648,981 5,869,572 6,407,083 6,640,320 7,127,149

Note.–Downstream products include spark-ignition and compression-ignition engines for motor vehicles (HTS

classifications 8407.34.18, 8407.34.48, and 8408.20.20). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

third largest supplier of these products to the U.S. market. In addition to Mexico and Germany, Brazil,

Sweden, and Italy recorded the most significant gains during the period. Other notable increases occurred

in imports of engines from Korea. Firms from many of the countries have corporate links with motor-vehicle

manufacturers located in the United States.
5-32

Table 5-35 

Ductile iron crankshaft/camshaft castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 35

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

Machined castings:

Japan ............................... About the same 1 (1

) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.—Based on questionnaire responses, U.S. producers consider China the

leading competitive concern for this sector. The price of imports of rough ductile iron castings for camshafts

and crankshafts from China is believed by responding U.S. producers to be on average 35 percent lower than

 the U.S. price for comparable goods (table 5-35). Other countries identified as competitive concerns for

rough castings include Korea, Mexico, and Brazil, all of which reportedly supply castings at prices less than

those of the U.S. industry. Japan was cited by U.S. producers as the only competitive concern for machined

castings, which are estimated to be comparably priced to U.S. products.

In contrast, U.S. purchasers’ price experience is largely with machined castings. They report that

foreign-produced machined castings are comparably priced or priced lower than U.S. ductile iron camshafts

and crankshafts (table 5-36). In particular, China and India are believed to supply these products at prices

30 percent below the U.S.-origin casting. Only castings from Japan were noted as being priced higher, with

a 20-percent premium, according to one purchaser.

When asked for the leading countries from which they have increased imports, responding U.S.

purchasers cited China, Japan, and India. Of these three countries, Japan is the only source cited by

responding domestic purchasers as improving its U.S. delivered price. Both U.S. purchasers reporting on

Japan indicated that all other competitive factors were as important as price in their purchase decisions.

Increased metal castings purchases from China and India were largely attributable to the same factors —

better availability, design, range of products, warranty terms, and packaging, and lower transportation costs

— rather than a better price.

Producers’ response to import competition.—Cost/price adjustments were the leading response to

import competition by U.S. producers responding to this question (table 5-37). These foundries indicated that

they lowered prices or suppressed price increases and implemented cost-reduction efforts to improve their

competitive position vis-à-vis their foreign competitors. Responding U.S. producers of ductile iron camshaft

and crankshaft castings largely agreed that their prices for these products remained the same or dropped

during the period, with price declines ranging up to 10 percent. Five firms reacted by improving product

quality. Cost-reduction and quality improvement programs such as lean manufacturing, Six Sigma, and total

quality management have been widely adopted by automakers and their suppliers to reduce waste and product

defects and improve product quality.
5-33

Table 5-36 

Ductile iron crankshaft/camshaft castings: Price comparison by responding U.S. purchasers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

Machined castings:

Canada .............................. About the same 1 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 16

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Eastern Europe2 ....................... About the same 1 (1

)

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Japan ............................... About the same 1 (1

)

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 11

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

1

 Not applicable.

2

 Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland,

Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro).

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 5-37 

Ductile iron crankshaft/camshaft castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Took no or few actions because:

Had already shifted production to other lines of castings ............................... 1

Lacked capital funds to counter foreign competition ................................... 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Took the following actions:

Lowered prices or suppressed price increases ....................................... 8

Reduced or dropped plans to expand capacity ....................................... 3

Cut back or eliminated production ................................................. 4

Shifted to other cast products .................................................... 3

Implemented cost-reduction efforts ................................................ 8

Improved product quality ........................................................ 6

Opened a plant in a foreign country ............................................... 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-34

To a lesser extent, responding producers indicated that they cut back or eliminated production, which

is clearly demonstrated in the industry data presented. Four firms indicated that they took no action against

import competition because they lacked the capital to implement such activities. Raising capital for

investments is particularly difficult in the U.S. motor vehicle parts industry because of the unfavorable

financial condition of many firms in the industry. Suppliers to the U.S. motor-vehicle industry are largely

unable to raise prices to their customers to cover significantly higher raw material prices, and many firms are

consequently experiencing financial difficulties.
 61 CNH Global N.V., “CNH Announces Tentative Decision to Close Foundry,” press release, found at

http://www.cnh.com/media/detail.asp?id=1452362132003, retrieved Jan. 13, 2005. The foundry and adjacent

assembly factory were demolished for housing developments. CNH Global N.V., “CNH to Recycle Shuttered

Racine Tractor Plant, Clearing the Way for Development of 100 Acre Lakefront Property,” press release, July 27,

2004, found at http://www.cnh.com, retrieved Jan. 21, 2005.

5-35

Gray Iron Motor Vehicle Gear Box Castings

Industry Profile

Industry structure.–Based upon questionnaire

responses, the U.S. foundry industry producing gray iron

motor vehicle gear box castings had 20 firms in 2003,

operating 25 foundries. The industry is dominated by two

firms that accounted for 86 percent of the quantity of

production in 2003. Three firms produce over 20,000 tons

annually, and the remainder produce less than 2,000 tons

annually. Two firms have captive foundries. Since 1999,

one medium-size producer has entered and exited

bankruptcy and one captive foundry was closed and

demolished. In May 2004, CNH Global N.V., closed its

foundry at Racine, WI, where CNH, a large producer of

agricultural and construction machinery, had produced

housing, drive train component, axle, and other castings.61

One firm opened a foundry during this period. In 2001, a

major U.S. foundry ceased operations, and one of its

foundries was purchased and restarted operations in early

2002. 

The foundries producing gray iron motor vehicle

gear box castings principally are located in the Midwest.

The majority of producers indicated that they produce both gray and ductile iron castings. Two reported

producing other iron castings, and one also reported producing aluminum castings. Sand molding was the

method of production reported. Less than one-half of the firms reported that they design castings or produce

patterns, with most indicating that they produce molds, and only a handful performing machining. Slightly

over one-half of the larger foundries produce a high volume of gear box parts primarily for the truck and offhighway market. Smaller foundries produce in limited volume production runs. For this industry, production

of gray iron motor vehicle gear box castings represented only 2 percent to 3 percent of production, as these

foundries make other products. Both U.S. producers and purchasers indicated that certification by purchasers

is required, and most foundries are certified to ISO9000 or higher, or to automotive standards.

Demand characteristics.—U.S. foundries reported that approximately 71 percent of shipments in

2003 were to machine shops or fabricators in which they had no ownership interest (table 5-38). A small

percentage of gray iron gear box castings were machined by the foundries themselves. An even smaller

percentage of shipments were to OEMs. During 1999-2003, the trend has been for foundries and OEMs not

to invest in machining of gray iron castings for gear boxes. No U.S. producer reported shipping machined

castings. The general trend is for OEMs to seek foundries that can reduce their costs. This has resulted in

OEMs asking vendors to perform more operations so that the OEMs do not have to use funds to invest in and

maintain machining, assembly, and related operations and therefore not be burdened by corresponding labor

costs. As discussed later, OEMs are purchasing foreign machined castings.

Product Description and Uses

Gray iron motor vehicle gear box castings are

primarily housings or other internal parts of

transmissions, differentials, transfer cases, and

power take-off units (auxiliary gear boxes that

transfer power from the transmission through a

gear box to an output shaft to power non-motive

applications) found on medium- and heavy-duty

trucks and agricultural tractors. Transfer cases are

auxiliary gear boxes that may be or are located

adjacent to the transmission or one of the axles.

Housings for automatic transmissions include

elaborate passageways, cast into one of the

housing halves, that route the automatic

transmission fluid to control the operation of the

transmission. Gray iron castings principally are

used in transmissions for trucks, particularly

medium- and heavy-duty trucks, tractors, and

construction machinery. Traditionally, gray iron

has been used for such gear boxes because of its

strength, machinability, ability to handle heat and

dampen noise and vibration, and low cost. 
 62 This industry includes Allison Transmissions, a subsidiary of General Motors; Arvin-Meritor, Inc.; Eaton

Corp.; Roadranger (a joint venture between Eaton Corp. and Dana Corp.), Transmission Technologies Corp., and ZF

Transmissions. 

 63 U.S. industry official, telephone interview with USITC staff, Feb. 18, 2005.

5-36

Table 5-38 

Gray iron motor vehicle gear box castings: Responding U.S. producers' shipments, by channel of

distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Original equipment manufacturers .................................................. 6

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ––– Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

The principal end-use markets for gray iron motor vehicle gear box castings were automobiles,

principally light duty trucks, SUVs, and vans, that accounted for 46 percent of the market and trucks that

accounted for 38 percent (table 5-39). Farm, garden, and construction machinery accounted for most of the

remainder. Some automobile and agricultural tractor and construction machinery producers have captive

foundries and therefore may produce parts to their needs. The industry producing transmissions for heavy

vehicles is dominated by a handful of companies62 that sell to major automobile, truck, and agricultural and

construction machinery OEMs. Other agricultural or construction OEMs, particularly those related to foreign

parent companies, may import finished transmissions.63

Table 5-39 

Gray iron motor vehicle gear box castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

 Other (buses, motor homes, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Farm and garden machinery and equipment .......................................... 5

Construction machinery and equipment .............................................. 2

Refrigeration, air conditioning, and heating equipment ................................... 1

Industrial machinery ............................................................. 2

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 –––

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 64 The Aluminum Association, Inc., “Aluminum Revving Up for More Auto Gains,” press release, July 30, 2001,

found at http://www.aluminum.org, retrieved Feb. 15, 2005.

 65 U.S. industry official, telephone interview with USITC staff, Jan. 21, 2005.

 66 Ibid.

 67 Ibid., and U.S. industry official, email to USITC staff, Mar. 31, 2005.

 68 Certain data have been withheld to avoid disclosure of business confidential information. These data include

certain shipments, sales, capital expenditures, and purchases of foreign-produced castings.

 69 Data provided U.S. producers for gray iron castings for motor vehicle gear boxes include some figures for

brake parts, as U.S. producers were not able to breakout data solely for gear box castings.

5-37

As a result of regulatory demands and market expectations for improved fuel economy stemming

from vehicle weight reductions, end-users have sought to reduce weight in transmissions and therefore have

increased their use of metals besides gray iron. Gray iron motor vehicle gear box castings have been replaced

by aluminum castings and powder metal components. For example, in 2001 it was announced that for 2002,

General Motors Co., including Allison Transmissions, was replacing gray iron with aluminum on a number

of applications, including transmissions for trucks.64 Most producers of transmissions for medium- and

heavy-duty trucks offer transmissions with aluminum housings. According to one large U.S. automobile

producer, many U.S. producers of gray iron motor vehicle gear box castings increasingly have moved to

producing certain transmission components in ductile iron because it is more profitable.65 Gray iron castings

continue to be used in older model transmissions that are used on vehicles currently being produced.66

However, newer model transmissions and transmission components are almost entirely being produced from

aluminum, ductile iron, or other materials.67 Gray iron castings are still used in applications where properties

such as tensile strength or machined surface qualities are required.

Producer Trends68 69

Production and inventories.—U.S. production of gray iron motor vehicle gear box castings increased

by approximately 3 percent during the period (table 5-40). However, the volume of production fell by almost

13 percent in 2001 from its peak in 2000, but rebounded by 17 percent by 2003. Several responding producers

reported that their production peaked in 1999 or 2000, and subsequently fell, by as much as 73 percent in one

instance. For those responding foundries that reported decreases in consumption of their production, seven

cited material substitution, three noted that customers had shut down production, seven noted reduced demand

for the final product, and seven noted increased imports of the downstream product. These declines were

offset by other foundries increasing production for the agricultural and truck markets.

Table 5-40 

Gray iron motor vehicle gear box castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) . . . . . . . . . . . . . . . . . . . . 1,071,096 1,086,250 945,872 1,072,903 1,107,964

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 26,688 27,486 24,781 25,335 28,957

Share of production (percent) ............. 2 3 3 2 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 70 See table 5-10, Gray and ductile iron castings: Responding U.S. producers’ employees and related information

for their rough castings operations, 1999-2003, p. 5-12.

 71 Eaton Corp. closed a heavy-duty transmission plant in Shelbyville, TN, because of “depressed conditions in the

truck industry during 2002 and 2001,” and the company’s efforts to rationalize manufacturing operations. Eaton

Corp., Form 10-K, March 2004, found at http://www.sec.gov, retrieved Feb. 23, 2005.

 72 Association of Equipment Manufacturers, U.S. Ag Flash Reports, various issues.

5-38

Employment.—During 1999-2003, employment in this industry declined by 7 percent, as did the

number of production workers, by almost 13 percent (table 5-41). Average hourly wages for production

workers producing gray iron motor vehicle gear box castings rose by 5 percent compared with average hourly

earnings of production workers for the overall U.S. gray iron foundry industry which rose by 10 percent, from

$16.42 to $18.08.70 Worker productivity rose from 225 short tons per thousand hours in 1999 to 281 short

tons per hour in 2003, or by 25 percent, and corresponds to the decline in the number of production workers

and also continual capital investments at these foundries.

Table 5-41

Gray iron motor vehicle gear box castings: Responding U.S. producers' employees and related information

for their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 3,121 2,969 2,703 2,825 2,888

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,107 1,944 1,696 1,772 1,837

Hours worked (1,000 hours) . . . . . . . . . . . . . . 4,768 4,368 3,372 3,726 3,936

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 72,862 65,456 51,552 61,620 63,248

Average hourly wages (dollars per hour) . . . . . 15.28 14.99 15.29 16.54 16.07

Productivity (short tons per 1,000 hours) . . . . . 225 249 281 288 281 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals shown because of rounding. Average hourly wages based on establishments

that were able to provide both hours worked and wages paid. Productivity based on establishments that were able to

provide both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ shipments and exports.—Reported U.S. producers’ shipments of gray iron motor vehicle

gear box castings generally followed the automobile and truck markets, which in turn moved with the overall

economy, declining from 1999 through 2001and then recovering into 2003.71 The trend in agricultural

equipment, however, was different with a continual rise in sales during 2000-2003.72 Several U.S. producers

noted in their questionnaire responses that the war in Iraq resulted in increased consumption of heavy-duty

transmissions and differentials over the last 18 months.

Reporting U. S. producers’ total shipments fell by 17 percent by quantity from 1999 to 2001, and then

rebounded by 17 percent by 2003 (table 5-42). Total shipments by value declined by 18 percent between 1999

and 2001, and then rebounded by 17 percent by 2003. For two mid-sized producers and a small number of

other producers, the value of shipments declined by up to 46 percent between 1999 and 2000. The decline

in shipment value was attributable to price pressure, import competition, and a shift from gray iron to

aluminum or ductile iron for certain applications. Other producers, however, had shipment values that were

approximately equal to or slightly above their 1999 levels. 

Some responding U.S. producers indicated that prices have for their product have declined by up to

10 percent. In contrast, about 60 percent of U.S. purchasers reported that prices have risen, with purchasers

reporting almost equal price increases of 0 to 10 percent, 11 to 20 percent, and 21 to 30 percent. Most of the

remainder of purchasers surveyed stated that prices have remained the same. A few purchasers reported

declines in prices paid, most less than 10 percent.
 73 Pat Kinney, “John Deere Foundry Wins Award,” WCFCourier.com, found at http://www.wcfcourier.com,

retrieved Feb. 10, 2005.

5-39

Table 5-42 

Gray iron motor vehicle gear box castings: Responding U.S. producers' domestic shipments and exports for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,057,179 1,006,029 877,644 996,751 1,026,098

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601,228 593,607 490,160 548,885 572,183 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Financial condition.—The generally positive financial results reported by producers of gray iron

motor vehicle box castings from 1999 to 2003 were nonetheless affected by declining net sales and operating

income (table 5-43). Net sales quantities and values for the rough castings segment both declined from 1999

to 2001 but then rebounded, and by 2003 they were not far below their 1999 levels. The vast majority of

operating income, which was positive, was accounted for by three firms. For the industry as a whole,

operating income fell by 33 percent between a peak in 2000 to a bottom in 2001, before rising again in 2002

and declining in 2003. Overall, the industry’s operating income declined by 31 percent between 1999 and

2003. The number of firms reporting operating losses doubled from 4 in 1999 to 8 in 2003 and, whereas the

operating income margin never dipped below double digits, it did decline from 14 percent to 10 percent.

Reported data on machined castings for this industry were minimal.

Investment.—Capital expenditures for machinery, equipment, and fixtures declined by over 60

percent during 1999-2003 (table 5-44). The types of capital expenditures included multi-million dollar

expenditures on furnaces and new casting lines. For example, Deere & Co., a major producer of agricultural

and construction machinery, reportedly installed induction melting furnaces to replace 30-year old arc melting

furnaces in 2000 for approximately $20 million.73 Responding U.S. producers noted some expenditures for

robotics. The high level of capital expenditures in 1999 and 2000, along with other improvements to

manufacturing processes, have resulted in increased productivity as noted above. No foundries reported any

expenditures on research and development.
5-40

Table 5-43 

Gray iron motor vehicle gear box castings: Responding U.S. producers' financial results for their rough

casting operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities . . . . . . . . . . . . . 1,057,320 1,006,156 882,536 996,661 1,026,449

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... (1) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 601,452 593,990 488,242 548,670 572,243

Operating income . . . . . . . . . . . . . . . . . . . . 86,010 87,960 (1

) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 14 15 (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 4 3 7 9 8

Financial results data . . . . . . . . . . . . . . . . . . . 18 19 19 21 21 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-44 

Gray iron motor vehicle gear box castings: Responding U.S. producers' capital and R&D expenditures for

their rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 22,267 19,219 (1) 12,047 (1)

Research and development expenditures ...... 0 0 0 0 0 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 74 For machined castings, reported quantities and values may not correspond because some purchasers did not

report quantities.

5-41

Purchaser Trends

A small majority of foreign-produced castings purchased by U.S. purchasers are machined castings

(table 5-45).74 Because of the limited number of responses from purchasers of these castings, volume and

value data cannot be published without revealing the operations of the firms supplying the data. Canada was

the leading source of purchased foreign-produced machined castings, followed by Mexico. Machined castings

from China rose by over 1,800 percent from a small base, with most of the increase occurring in 2002,

becoming a significant source of supply. Purchases from Eastern Europe and Brazil also rose. Purchases of

rough castings from Korea entered the U.S. market in 2002.

Table 5-45 

Gray iron motor vehicle gear box castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 ....................................................................... 147,108

2000 ....................................................................... 171,886

2001 ....................................................................... 190,431

2002 ....................................................................... 188,295

2003 ....................................................................... 173,098

Machined castings:

1999 ....................................................................... 189,861

2000 ....................................................................... 193,122

2001 ....................................................................... 196,227

2002 ....................................................................... 212,026

2003 ....................................................................... 213,847 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Imports of motor vehicle gear boxes, which include transmissions, that incorporate gray iron castings

as well as those of aluminum and other metals, rose by 68 percent during 1999-2004 to $5.1 billion (table 5-

46). Japan was the leading supplier, with Canada and France being a distant second and third leading

suppliers, respectively. Imports from Japan, France, and Germany showed the largest gains during the period.
 75 Chinese industry official, interview with USITC staff, China, Nov. 2004.

5-42

Table 5-46

Gray iron motor vehicle gear boxes castings: U.S. imports for consumption of downstream products, by

leading suppliers, 1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Japan . . . . . . . . . . . . . . . . . . . . 1,164,158 1,454,083 1,262,582 1,647,949 2,029,531 2,849,247

Canada ................... 935,784 1,002,929 923,093 988,948 813,785 861,371

France . . . . . . . . . . . . . . . . . . . 442,918 500,873 650,934 716,347 753,348 807,287

Mexico . . . . . . . . . . . . . . . . . . . 155,484 142,510 113,713 128,516 119,374 202,544

Germany . . . . . . . . . . . . . . . . . . 67,786 96,774 94,769 87,972 137,131 173,683

Brazil . . . . . . . . . . . . . . . . . . . . . 69,661 50,756 40,988 44,089 41,245 65,722

Italy . . . . . . . . . . . . . . . . . . . . . . 16,419 16,684 21,786 38,570 55,801 47,895

Hungary . . . . . . . . . . . . . . . . . . 19 489 2,102 50,328 145,525 18,475

United Kingdom ............ 136,956 122,181 55,264 7,584 10,050 14,170

Sweden . . . . . . . . . . . . . . . . . . . 18,614 10,960 3,977 3,019 1,662 9,764

All other . . . . . . . . . . . . . . . . . . 16,504 17,068 20,223 25,288 32,902 27,792

 Total . . . . . . . . . . . . . . . . . . . . 3,024,303 3,415,307 3,189,431 3,738,610 4,140,354 5,077,950

Note.–Downstream products include transmissions and other gearboxes for motor vehicles, and may include those

where the housings and other castings are aluminum and other metals (HTS classifications 8708.40.10, 8708.40.20,

8708.40.30, 8708.50.10, 8708.50.50, and 8708.50.80). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.–For both rough and machined castings, U.S. producers reported that

foreign prices were significantly below those reported by U.S. purchasers; this was particularly so with regard

to machined castings (tables 5-47 and 5-48). Responding U.S. producer and purchaser perceptions of price

differentials were almost the same with regard to castings supplied by China and India. Rough Chinese

castings were priced approximately 27 percent to 30 percent below the price of U.S. castings, and machined

castings were 28 percent to 38 percent lower. Castings from India also commanded low prices. As noted

earlier, the majority of imports were from Canada and Mexico, where the price differential ranges from 18

percent below the U.S. price to 10 percent above the U.S. price. The difference in the prices for machined

castings is largely the result of high U.S. labor costs for programming and operating the machining of a part,

as the cost of a machine tool and tooling are relatively the same in both countries.75

U.S. purchasers reported that factors such as improved product availability and lead times, rather than

price improvements, influenced their decisions to increase purchases from China. Similarly, purchasers rated

other factors as more important than price for increased purchases from other leading sources, including

Canada, Korea, and Mexico.
5-43

Table 5-47 

Gray iron motor vehicle gear box castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 14

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 8

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 9 26

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 18

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 18

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 38

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 40

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ response to import competition.—In response to U.S. import competition, most U.S.

producers reported that they have lacked the funds to counter such competition, whereas two reported that

they had shifted to production of more advanced types of castings (table 5-49). The lack of funds to respond

corresponds to the deteriorating financial condition of this industry as noted earlier. U.S. producers also

reported implementing cost-reduction efforts and lowering prices, raising product quality, and scaling back

on production or capacity expansions. Other producers closed production lines or shifted to other cast

products. 
5-44

Table 5-48 

Gray iron motor vehicle gear box castings: Price comparison by responding U.S. purchasers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 18

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 7

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 8

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 3

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 8 28

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 5

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Eastern Europe2 . . . . . . . . . . . . . . . . . . . . . . . Lower 2 11

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 8

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

1

 Not applicable.

2

 Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland,

Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro).

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 5-49 

Gray iron motor vehicle gear box castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 1

Had already shifted production to other lines of castings ............................... 2

Lacked capital funds to counter foreign competition ................................... 7

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Reduced or dropped plans to expand capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Cut back or eliminated production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Closed production lines ......................................................... 4

Shifted to other cast products .................................................... 9

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Imported product instead ........................................................ 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission
 76 The description and uses for this section were largely gathered from the following sources: U.S. Customs

Ruling NY I87872, Oct. 22, 2002, found at http://rulings.customs.gov, retrieved Aug. 3, 2004; “Bearings,” Motion

System Design, Dec. 2000, p. A55; e-mail correspondence from U.S. industry official to USITC staff, Nov. 23, 2004;

“The Bearing Housing,” NTN Bearing Corporation of America, found at

http://www.ntnamerica.com/Knowledge/Mounted_Units/Housing.htm, retrieved Aug. 13, 2004; “About Pillow Block

Bearings,” GlobalSpec.com, found at

http://bearings.globalspec.com/LearnMore/Mechanical_Components/Bearings_Bushings/Pillow_Block_Bearings/,

retrieved Aug. 13, 2004; and “Heavy Duty C-Clamp Mixer, Model 400-500-DD-VARI,” Grovhac, Inc., found at

http://www.globalspec.com/FeaturedProducts/Detail?ExhibitID=17996, retrieved Jan. 11, 2005.

 77 International Organization for Standardization (ISO), “Business Plan ISO/TC 4, Rolling Bearings,” found at

http://isotc.iso.ch/livelink/livelink/fetch/2000/2122/687806/ISO_TC_004__Rolling_bearings_.pdf?nodeid=852512&

vernum=0, retrieved Jan. 20, 2005.

5-45

Product Description and Uses

A bearing housing consists of a frame or block designed to

house a complete bearing. The main purpose of a bearing

housing is to hold the bearing and to provide support to the

load that is transferred to the bearing from the shaft. Many

general purpose types of bearing housings are constructed as

a single piece, primarily consisting of ductile iron, and are a

part of a bearing mounting, surrounding the bearing. The use

of metals such as ductile iron provide benefits such as

strength, increased machinability of the casting, and improved

shock resistance.

Primary types of bearing housings include the pillow block and

the flange type. In the case of the pillow block housing, it is

mounted to a surface that is parallel to a shaft axis. The

flange bearing housing can come in many different types,

such as the two-bolt, three-bolt, and four-bolt flange. The

number of bolts varies depending on the use of the housing,

and the shape and fastening support needed for the bearing.

Shapes of the flange housing can differ from square (fourbolt) to elliptical (two-bolt). Different shapes and sizes of

bearing housings contribute to their use in a wide variety of

items, from clamp mixers to automobiles.

Ductile Iron Bearing Housing Castings76

Industry Profile

Industry structure.—Eighteen

companies reported U.S. production of ductile

iron bearing housings. Collectively, the top

five respondents accounted for the majority of

the reported U.S. production. U.S. bearing

housing producers tend to be located in the

midwestern and eastern United States,

providing access to major customers,

particularly motor vehicle manufacturers. With

the exception of one company, all of the large

producers identified themselves as job shops.

Respondents that produced only ductile iron

castings accounted for the bulk of bearing

housing production. Those companies that

produced other castings, in addition to ductile

iron castings, tended to produce gray iron

castings. Essentially all reporting producers

reported sand casting as the method of choice.

All of the large foundries reported making their

own molds, and in particular the expended

variety. 

Demand characteristics.– The primary end-use market for bearing housings is the bearing industry.

In turn, bearings are found in a wide array of products, including motor vehicles, industrial equipment and

tools, and aerospace industry parts. Reportedly, motor vehicles is the dominant bearing-consuming industry

worldwide.77 Questionnaire responses from producers indicate that the domestic motor vehicle industry

consumes approximately 85 percent of U.S. bearing housing shipments (table 5-50).
 78 “FY 2003 10-K Report,” Trinity Industries Inc., p. 12, Dec. 31, 2003, found at

http://www.trin.net/invsrela/finance.html, retrieved Dec. 17, 2004.

 79 “North American Car & Truck Production, 1954-2003,” 2004 Ward’s Automotive Yearbook.

 80 Elena Murphy, “Mixed automotive demand slows recovery,” Purchasing, vol. 132 issue 2, p. 41, Feb. 6, 2003.

5-46

Table 5-50 

Ductile iron bearing housing castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Farm and garden machinery and equipment .......................................... 1

Construction machinery and equipment .............................................. 1

Railway equipment .............................................................. 4

Industrial machinery ............................................................. 3

Valve and pipe fittings ............................................................ 2

Pumps and compressors ......................................................... 1

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

During 1999-2003, there were mixed trends in many industries that are bearing consumers. Some

industries that use bearings in their final products, such as the railway equipment industry, experienced

improved industrial and manufacturing activity, which led to an overall increase in new railcar orders

industry-wide in 2003 after “several years of decline.”78 Meanwhile, the motor vehicle sector realized an 8-

percent decrease in U.S. production of cars and trucks during 1999-2003.79 Overall demand for bearings

decreased over the period, partially attributed to mixed automotive demand in the United States.80

Questionnaire respondents indicated that they performed very little machining in-house. As such,

the vast majority of rough castings were first shipped to machining subcontractors or machine shops (table

5-51).

Table 5-51 

Ductile iron bearing housing castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 81 Certain data have been withheld to avoid disclosure of business confidential information. These data include

U.S. imports, U.S. exports, inventory, internal consumption, operating income, and equipment expenditures.

 82 U.S. industry official, telephone interview with USITC staff, Jan. 21, 2005.

 83 See table 5-10, Gray and ductile iron castings: Responding U.S. producers’ employees and related information

for their rough castings operations, 1999-2003, p. 5-12.

5-47

Producer Trends81

Production and inventories.—Responses to the Commission’s questionnaire indicate that U.S.

production of ductile iron bearing housings decreased significantly between 1999 and 2003; production was

at its lowest level of the period in 2002, and then rose in 2003 (table 5-52). Production in 2003 was

approximately 29 percent lower by quantity, than in 1999. Meanwhile, reported total inventory levels, by

quantity, declined more than 35 percent between 1999 and 2003. One industry official indicates that

production in the bearing industry, the main customer for bearing housings, has gradually declined in the past

few years, but increased in late 2003. According to the industry official, the bearing industry lags behind

growth trends experienced by its customers, and often will increase production only after its customers have

nearly used up producer inventories, thus accounting for a production increase in 2003 after an economic

upswing and a draw down in inventories during 2002.82

Table 5-52 

Ductile iron bearing housing castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) . . . . . . . . . . . . . . . . . . . . 25,834 25,347 15,705 14,120 18,334

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 1,390 (1

) (1) 440 898

Share of production (percent) ............. 5 (1

) (1)35 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Employment.—Employment indicators have followed a trend similar to that for bearing housing

production, declining through 2002 before increasing in 2003. The average number of employees declined

from 1999-2002 by approximately 34 percent to 372 workers (table 5-53). From 2002 to 2003, however,

employment in the industry rose by 21 percent, coinciding with the increase in production. The number of

hours worked by production and related workers decreased by 41 percent from 1999-2002, only to rise in

2003 to approximately 295,000 hours, an increase of 21 percent from 2002. Productivity levels declined by

21 percent during 1999-2002 before increasing by 7 percent to 62 short tons per 1,000 hours in 2003, largely

reflecting production growth in that year. The reported average hourly wage rose by nearly $2.00 during

1999-2003, to $16.32 per hour. This increase in hourly wages was greater than that reported for the overall

U.S. ductile iron foundry industry, which rose from $13.87 in 1999 to $15.34 in 2003.83
 84 No responding producers to the Commission’s questionnaire reported machining operations for this product

group.

5-48

Table 5-53 

Ductile iron bearing housing castings: Responding U.S. producers' employees and related information for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 470 419 348 308 372

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389 343 280 244 296

Hours worked (1,000 hours) . . . . . . . . . . . . . . 412 379 276 244 295

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 5,929 5,631 4,204 3,874 4,824

Average hourly wages (dollars per hour) . . . . . 14.38 14.84 15.22 15.87 16.32

Productivity (short tons per 1,000 hours) . . . . . 73 67 57 58 62 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ shipments and exports.–Between 1999 and 2003, U.S. producers’ total shipments of

bearing housings decreased by more than 26 percent, to 17,649 short tons in 2003 (table 5-54). A significant

decline in shipments occurred between 1999 and 2002; thereafter, commercial shipments increased by more

than 65 percent (by quantity), largely reflecting improved market conditions in 2003 in downstream

industries.

Table 5-54 

Ductile iron bearing housing castings: Responding U.S. producers' domestic shipments and exports for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,330 18,576 9,950 10,151 16,762

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,923 23,728 14,427 13,925 17,649

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,492 31,486 18,514 17,717 30,441

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,609 44,213 29,536 27,089 35,589 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Financial condition.

84–Despite reporting increased net sales value during 1999-2003, the ductile

bearing housing industry reported an overall decrease in total net sales quantities. Net sales quantities

declined slightly to 7,387 short tons in 2003 (table 5-55), with the largest relative decrease from 2000-2001
 85 The reported figures for the financial information in this product group differ from figures in production and

shipments because many establishments were unable to report financial results.

 86 John Sacco, “Timkin revamping Ohio bearing unit to cut costs,” American Metal Market, Sept. 4, 2003, found

at http://www.amm.com, retrieved Jan. 20, 2005.

5-49

Table 5-55 

Ductile iron bearing housing castings: Responding U.S. producers' financial results for their rough casting

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales . . . . 7,629 13,050 8,232 9,244 7,387

Internal consumption for production of

 machined castings .................. 0 0 0 0 0

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0

 Total net sales quantities . . . . . . . . . . . . . 7,629 13,050 8,232 9,244 7,387

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . 10,596 18,061 12,939 15,341 12,196

Internal consumption for production of

 machined castings .................. 0 0 0 0 0

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 0

 Total net sales values . . . . . . . . . . . . . . . . 10,596 18,061 12,939 15,341 12,196

Operating income . . . . . . . . . . . . . . . . . . . . (1

) (1) 122 437 -2

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) 1 3(2)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 2 1 1 2 4

Financial results data . . . . . . . . . . . . . . . . . . . 9 10 10 10 10 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information. 2 Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

(a decrease of nearly 37 percent).85 Operating income reported by firms on their sales of ductile bearing

housings declined irregularly over the period, and showed a loss in 2003. Forty percent of reporting firms

operated at a loss in 2003, compared to the range of 10-22 percent in prior years in the period examined.

The declining financial results of producers of ductile iron bearing housings may be due in part to

restructuring of operations by bearing manufacturers, their primary customers. For example, an article in the

trade press noted efforts by bearing manufacturers such as Timken Industrial Group to restructure operations

to increase profitability. In the article, Timken noted that many of its bearing customers (equipment

manufacturers) have moved production overseas and that bearing manufacturers are unable to profitably gain

new contracts.86 
 87 Certain data have been withheld to avoid disclosure of business confidential information. These data include

purchases of rough castings and machined castings of U.S. and foreign producers by U.S. purchasers.

5-50

Investment.—Questionnaire respondents in this product category indicated no expenditures for

research and development from 1999-2003. Several establishments reporting data for ductile iron bearing

housings also indicated they manufactured other products, possibly resulting in no breakouts of research and

development expenditures just for this product group. Further, producers reported a decline in investment for

equipment of 22 percent from 1999-2003, after reaching a high in equipment expenditures in 2001(table 5-

56).

Table 5-56 

Ductile iron bearing housing castings: Responding U.S. producers' capital and R&D expenditures for their

rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures 768 491 (1) (1) 602

Research and development expenditures 0 0 0 0 0

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Purchaser Trends87

Respondents’ purchases of rough castings declined by 31 percent whereas purchases of machined

castings increased by 35 percent during 1999-2003 (table 5-57). Despite decreases in purchases of U.S.-

produced rough bearing housing castings, purchasers continued to source such products domestically, with

foreign sources accounting for a small fraction of the market. However, U.S. purchasers increased purchases

of machined bearing housing castings from foreign sources, whereas purchases of U.S. machined castings

declined. Because limited purchasing data were provided by U.S. purchasers of these castings, specific

country details cannot be published without revealing the operations of the firms that furnished the

information. However, U.S. purchasers of ductile iron bearing housings indicated in the Commission’s

questionnaire that China and Brazil were the primary foreign sources from which they purchased rough and

machined castings.

The decline in purchases of U.S.-produced rough castings may be attributable to an increase in

imports of intermediate and finished goods incorporating bearing housings. Over the period, U.S. imports of

downstream products increased by 59 percent to $438 million in 2004 (table 5-58).
5-51

Table 5-57 

Ductile iron bearing housing castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,397

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,430

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,850

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,424

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,375

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,926

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,668

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,427

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,384

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,314 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-58

Ductile iron bearing housings: U.S. imports for consumption of downstream products, by leading suppliers,

1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Japan . . . . . . . . . . . . . . . . . . . . 65,275 79,617 73,219 80,579 81,933 107,026

Germany . . . . . . . . . . . . . . . . . . 33,518 30,360 30,944 36,944 43,583 55,529

Canada . . . . . . . . . . . . . . . . . . . 21,350 25,728 26,826 29,226 36,500 44,790

Mexico . . . . . . . . . . . . . . . . . . . 34,426 44,469 37,156 33,886 32,053 43,911

Brazil . . . . . . . . . . . . . . . . . . . . . 20,706 22,840 20,595 25,457 26,549 34,552

United Kingdom . . . . . . . . . . . . 27,013 27,254 23,435 27,429 25,634 30,976

China . . . . . . . . . . . . . . . . . . . . 12,538 14,707 14,587 14,931 16,927 29,896

France . . . . . . . . . . . . . . . . . . . 12,032 13,525 11,439 14,435 18,523 18,566

Taiwan . . . . . . . . . . . . . . . . . . . 4,138 7,438 8,200 7,216 8,395 9,713

Austria . . . . . . . . . . . . . . . . . . . 5,575 8,057 7,117 6,790 6,598 9,029

All other . . . . . . . . . . . . . . . . . . 39,677 42,787 37,419 42,948 41,352 54,438

 Total . . . . . . . . . . . . . . . . . . . . 276,251 316,782 290,937 319,841 338,047 438,426

Note.–Downstream products include bearings and housed bearings (HTS classifications 8483.30.40 and

8483.30.80). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.
 88 More respondents indicated that China was the leading country with the largest average price difference than

Mexico or Turkey.

5-52

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.–Responses to the Commission’s producer questionnaire showed China,

Brazil, and India to be the leading foreign sources of rough and machined castings. They also identified

China, Brazil, and India as the leading competitors. U.S. producers identified China88 as the primary foreign

competitor, with an average rough castings price 36 percent lower (table 5-59) than comparable U.S. products.

Further, China was identified by U.S. producers as the foreign competitor for machined castings with the

lowest price, approximately 43 percent below prices for comparable U.S. products.

U.S. purchasers also identified China, Brazil, and India as the primary foreign competitors of U.S.

producers. These three countries provided U.S. purchasers with rough castings priced from 20-34 percent

lower than comparable U.S. products (table 5-60). For machined castings, one responding U.S. purchaser

indicated that India was the primary competitor, with prices averaging 40 percent lower than comparable U.S.

products. However, more respondents identified China as the primary competitor, with prices averaging 30

percent lower.

Responding U.S. purchasers identified China, Brazil, Taiwan, Finland, and Germany as likely sources

from which to increase foreign purchases. By far, China was the country that was cited most frequently.

With few exceptions (price, availability, and lead time), China was perceived by the majority of respondents

as having improved in nearly all competitive factors. In particular, all respondents noted improvements in

delivery times and declines in transportation costs. 

Table 5-59 

Ductile iron bearing housing castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 35

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 36

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 31

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 50

South America . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 35

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 40

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 28

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 43

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 35

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 27 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-53

Table 5-60 

Ductile iron bearing housing castings: Price comparison by responding U.S. purchasers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 34

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 32

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 30

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 40

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 19 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Producers’ response to import competition.–Responses to the Commission’s questionnaire showed

that leading actions taken by U.S. producers to deal with import competition included lowering prices or

suppressing price increases, implementing cost-reduction efforts, and improving product quality (table 5-61).

For example, one firm stated that it looked further into methods to obtain higher mold quality. Another firm

indicated that it did not increase prices during 2001-2003. Several producers stated that they took fewer or

no actions due in part to a lack of funds or because they had already shifted production toward more advanced

types of castings.

Table 5-61 

Ductile iron bearing housing castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 2

Had already shifted production to other lines of castings ............................... 1

Lacked capital funds to counter foreign competition ................................... 2

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Reduced or dropped plans to expand capacity ....................................... 8

Cut back or eliminated production ................................................. 8

Closed production lines ......................................................... 3

Shifted to other cast products .................................................... 4

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-54
 89 Aluminum is another type of metal often used to cast compressor housings. The description and uses for this

section were largely gathered from the following sources: “Gray Iron Casting FAQs,”Atlas Foundry Company, 

found at http://www.atlasfdry.com/grayironfaqs.htm, retrieved Dec. 17, 2004; “AC Compressor Function,” 

Autoswalks, found at http://www.autoswalk.com/accomfun.html, retrieved Aug. 13, 2004; “Mobile Air Conditioning

System Technology Assessment,” California Air Resources Board, Apr. 2004, found at

http://www.arb.ca.gov/cc/042004workshop/appendix-c-1.pdf, retrieved Aug. 13, 2004; “What is a Turbo charger?,”

TurboNation, found at http://www.turbonation.com/turbo.htm, retrieved Aug. 13, 2004; “Powerstroke Turbine,” Free

Auto Advice, found at http://www.freeautoadvice.com/diesel/psdturbo.html, retrieved Dec. 15, 2004; and “Wide

World of Turbo,” Super Street, found at http://www.superstreetonline.com/techarticles/36542/index.html, retrieved

Sept. 16, 2004.

 90 “Facility Finder,” Whirlpool, found at

http://www.whirlpoolcorp.com/about/facilityfinder/region_detail.asp?region=na, retrieved Jan. 19, 2005. 

 91 From 2002-2003, consumer disposable income drove demand for the household goods that contain most gray

iron compressor housings. Standard and Poors indicates that “lower mortgage rates supported housing demand and

left consumers with cash to spend on furnishing or decorating their homes. In addition, lower interest rates made the

(continued...)

5-55

Gray Iron Compressor Housing Castings89

Industry Profile

Industry structure.—Based on

responses to the Commission’s producer

questionnaire, 37 companies reported

production of gray iron compressor housings.

The majority of respondents identified

themselves as job shops, with four identifying

their companies as captive foundries. Further,

responses indicate the expended type of the sand

casting method as the most often used

production method. 

Collectively, the top five reporting

companies accounted for a large portion of U.S.

production. The majority of the respondents

are located in the midwestern and eastern

sections of the United States, primarily in

Indiana, Pennsylvania, and Wisconsin. This

provides access to manufacturing facilities of

several large corporations that use compressor

housings in their products on the East Coast.

For example, Whirlpool, one of the world’s

leading manufacturers of home appliances, has

all of its U.S. manufacturing facilities located in

the eastern part of the United States.90 A number

of corporations have either captive foundries or

subsidiaries dedicated to producing compressors

and compressor parts such as housings, which

ultimately are placed into their products. 

Demand characteristics.—The primary downstream market for compressor housings is the

refrigeration, air conditioning, and heating industry (table 5-62).91 Responses to the Commission’s

Product Description and Uses

The primary function of a compressor is to aid the movement

and compression of fluid, gas or vapors between internal

portions of a machine. Compressor housings are generally

made out of gray iron, and are an integral part of a

compressor. The use of metals such as gray iron provide

benefits such as the dampening or controlling of vibration,

increasing the machinability of the casting, dimensional

stability and/or high strength to weight ratios. The size of a

compressor housing can vary, depending on the final product,

whether it is a supermarket refrigerator, a commercial airconditioning unit, or a pneumatic tool. Compressor housings

are found in various types of items, ranging from refrigeration

products and air conditioners to turbochargers used in

vehicles. 

While the purpose of the compressor varies depending on the

product, the compressor housing’s purpose remains the

same, to house and aid the function of the compressor. In

refrigerators and air conditioners, the compressor works by

moving liquid refrigerant around in a pipe. In the air

conditioner of an automobile, the compressor housing is

assembled with seals that assist in controlling leakage of the

refrigerant from the compressor. In the case of

turbochargers, the function of the compressor housing is to

convert the speed-energy of air coming from a compressor

turbine into pressure-energy that can be used by the engine.

The compressor housing “contains the impeller wheel used to

compress the flow of air into the manifold.” The size of the

housing determines the volume of air that can flow through.
 91 (...continued)

financing of consumer durables purchases more affordable.” Standard and Poor’s Industry Surveys, “Household

Durables,” May 6, 2004, found at http://www.netadvantage.standardandpoors.com/, retrieved Oct. 13, 2004.

 92 Standard and Poor’s Industry Surveys, “Household Durables,” May 6, 2004., found at

http://www.netadvantage.standardandpoors.com/, retrieved Oct. 13, 2004. The figures from the table are from the

Association of Home Appliance Manufacturers, found at http://www.aham.org. Please note that this number includes

all shipments to the U.S. market, imported or domestically produced, and excludes export shipments.

 93 Based on responses to the Commission’s questionnaire, the refrigeration industry is the largest end market for

gray iron compressor housings. A number of major downstream product manufacturers such as Electrolux and

Matsushita have closed U.S. production in the past years.

 94 Certain data have been withheld to avoid disclosure of business confidential information. These data include

U.S. imports, U.S. exports, internal consumption, and commercial domestic and export sales.

5-56

questionnaire indicate that the vast majority of rough castings are sold directly to the OEM (table 5-63).

According to the Association of Home Appliance Manufacturers, U.S. shipments of refrigerators increased

2.8 percent from 2002 to 2003 and room air conditioners increased 33.5 percent during the same time period.92

Despite increasing demand for downstream products that incorporate compressor housings, U.S. production

of compressor housings declined each year between 1999 and 2003. This can be attributed at least in part to

the decline of U.S. production of air conditioners and other products that incorporate compressor housings.93

Table 5-62 

Gray iron compressor housing castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Refrigeration, air conditioning, and heating equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Industrial machinery ............................................................. 1

Pumps and compressors ......................................................... 6

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends94

Production and inventories.—Despite steady increases in sales by many major end-use markets for

compressor housings during the period, U.S. production of gray iron compressor housings decreased by

approximately 26 percent to 116,051 short tons in 2003 (table 5-64). This can be partially attributed to the

increasing trend of end-use manufacturers moving production overseas. For example, between 2001 to 2004,

many large corporations such as Matsushita, GE, Whirlpool, and Electrolux closed U.S. production facilities

for products that consume compressor housings.
 95 U.S. industry official, telephone interview with USITC staff, Feb. 11, 2005.

 96 “Matsushita Discontinues Operations At Its U.S. Air Conditioner Compressor Factory,” Panasonic Press

Releases, Jan. 13, 2001, found at http://ir-site.panasonic.com/relevant/en010113-1/en010113-1.html, retrieved Jan.

18, 2005.

 97 “Matsushita Closes Refrigerator Compressor Company in the U.S.,” Panasonic Press Releases, Jan. 30, 2002,

found at http://ir-site.panasonic.com/relevant/en020130-2/en020130-2-1.pdf, retrieved Jan. 18, 2005.

 98 Ibid.

5-57

Table 5-63 

Gray iron compressor housing castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining ......................................................... (1)

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Machine shop/other fabricators ................................................. 6

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-64 

Gray iron compressor housing castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) .................... 156,860 153,196 144,454 116,178 116,051

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Share of production (percent) ............. (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

A number of multinational manufacturers of compressors or end products using compressors either

closed down production in the United States, decreased production, or are planning to reduce production. At

least one industry official attributes this to severe competition in the end market for compressors, which in

turn has affected component producers.95 In 2001, Matsushita Electric Industrial Company closed its air

conditioner compressor factory in North Carolina, citing declining production in the United States by U.S.

home air conditioner manufacturers.96 Additionally, Matsushita closed its refrigerator compressor company

in the United States in 2002, citing “intensified price competition in the U.S. refrigerator compressor

market.”97 Further, Matsushita indicated that it restructured its refrigerator compressor production operations

in light of its global operations, and shifted production from the United States to many facilities in Asia.98

Others, such as Whirlpool and Electrolux, expanded operations in Mexico by relocating some or all of their
 99 Jack Lyne, “Whirlpool Eyeing Mexico after $100M Investment in U.S. Manufacturing,” Conway Data Inc.,

Dec. 1, 2003, found at http://www.conway.com/ssinsider/pwatch/pw-031201.htm, retrieved Jan. 18, 2005.

 100 “Electrolux Closing U.S. Refrigerator Factory,” Appliance Magazine, found at

http://www.appliancemagazine.com/news.php?article=5813&zone=0&first=1, retrieved Jan. 18, 2005.

 101 “GE Announces Job Cuts at U.S. Refrigerator Plant,” Appliance Magazine, found at

http://www.appliancemagazine.com/latin/news.php?article=7202&zone=32&first=1, retrieved Jan. 18, 2005.

 102 U.S. industry official, telephone interview with USITC staff, Feb. 11, 2005.

 103 “Suppliers stifle air-conditioner firms Industry turns to India as compressor producers fall behind,” Global

Manufacture.net, Nov. 2, 2004, found at

http://www.globalmanufacture.net/home/communities/production/compresor.cfm, retrieved Jan. 17, 2005.

 104 See table 5-10, Gray and ductile iron castings: Responding U.S. producers’ employees and related information

for their rough castings operations, 1999-2003, p. 5-12.

5-58

production of appliances.99 Electrolux, a Swedish appliance maker, plans to discontinue production of

refrigerators at its Michigan facility in 2005.100 GE announced job cuts in 2004 at its U.S. refrigerator plant

in Indiana, citing competitiveness issues.101 Additionally, one U.S. producer indicated that foreign

competitors of the compressor end markets are gaining market share, impacting the volume of compressors

produced in the United States.102 According to an industry trade publication, China supplies “two-thirds of

the world’s air-conditioners and 47 percent of its compressors.”103

Employment.—Employment reported by producers of gray iron compressor housing castings showed

a 17-percent decrease in the average number of employees between 1999 and 2003, with wages paid declining

around 13 percent (table 5-65). The average number of employees fell each year between 1999 and 2002, and

then increased slightly in 2003. A few establishments that reported increases in production from 2002-2003

hired additional workers that year. Generally, productivity levels fluctuated during the period, mostly due

to overall decreasing production levels, but were 9 percent lower in 2003 than in 1999. 

The increase from 2002-2003 in the number of employees was reflected in an increase in the number

of hours worked and wages paid to employees during the year. Average hourly wages reported rose from

$13.65 per hour in 1999 to $14.64 per hour in 2003. These wage levels were lower than those reported for

the overall U.S. gray iron foundry industry, which ranged from $16.42 per hour in 1999 to $18.08 per hour

in 2003.104

Producers’ shipments and exports.—During 1999-2003, U.S. producers’ reported total shipments

of compressor housings, as measured in quantity, decreased each year and were 26 percent lower in 2003 than

in 1999 (table 5-66). Meanwhile, U.S. exports fluctuated from 1999 to 2003, with a total overall

Table 5-65 

Gray iron compressor housing castings: Responding U.S. producers' employees and related information for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 1,956 1,923 1,834 1,575 1,623

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,376 1,348 1,272 1,044 1,089

Hours worked (1,000 hours) . . . . . . . . . . . . . . 2,915 2,875 2,522 2,142 2,363

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 39,796 40,898 37,440 32,581 34,600

Average hourly wages (dollars per hour) . . . . . 13.65 14.23 14.85 15.21 14.64

Productivity (short tons per 1,000 hours) . . . . . 54 53 57 54 49 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 105 No responding producers to the Commission’s producer questionnaire reported machining operations for this

product group.

5-59

Table 5-66 

Gray iron compressor housing castings: Responding U.S. producers' domestic shipments and exports for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,152 150,818 135,881 117,289 113,375

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,705 151,786 137,001 118,192 113,852

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,494 151,054 135,875 117,978 116,847

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,048 152,188 137,244 119,004 117,416 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

decrease of 8 percent by volume in the 5-year period. However, U.S. exports were small relative to production

throughout the period. Responses to the Commission’s questionnaire also show that exports of gray iron

compressor housings account for a small share of shipments, with the majority of shipments destined for the

U.S. commercial market.

Financial condition.

105—U.S. producers of rough compressor housing castings reported steady

declines in net sales quantities, net sales values, and operating income during 1999-2003. Total net sales

quantities decreased each year during the period and were 26 percent lower in 2003 than in 1999. Total net

sales values declined in all but one year, and fell by 22 percent between 1999 and 2003 (table 5-67).

Operating income reported by responding firms has decreased each year since 2000, from $9.1 million in

1999 and $9.7 million in 2000 to $152,000 in 2003. The number of establishments reporting operating losses

rose throughout the period. The declining profitability and sales of the industry during the period is reflected

by a 98 percent decline in operating income. At the end of the reporting period almost one-half of the

companies had operating losses. 

Investment.—Questionnaire responses for this product category showed a decline in investment in

machinery and equipment in each year of the period, for a decline of 79 percent between 1999 and 2003.

Respondents reported little or no research and development expenditures (table 5-68). 
5-60

Table 5-67 

Gray iron compressor housing castings: Responding U.S. producers' financial results for their rough casting 

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. 0 0 0 0 0

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............. 154,240 151,225 136,875 118,408 113,405

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. 0 0 0 0 0

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 150,746 151,590 137,348 119,167 117,636

Operating income . . . . . . . . . . . . . . . . . . . . 9,101 9,699 3,798 419 152

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 6 6 3 (2

) (2)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 5 5 9 12 12

Financial results data . . . . . . . . . . . . . . . . . . . 25 26 26 26 25 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information. 2

 Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-68 

Gray iron compressor housing castings: Responding U.S. producers' capital and R&D expenditures for their

rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 5,479 4,124 3,421 2,597 1,132

Research and development expenditures ...... 0 0 0 (1

) 0 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 106 Certain data have been withheld to avoid disclosure of business confidential information. These data include

purchases of rough castings and machined castings of U.S. and foreign producers by U.S. purchasers.

 107 “ TCL-Rechi fully loaded with orders for compressors to be filled in 2005,” Manufacturing.net, Dec. 24, 2004,

found at

http://www.manufacturing.net/article/NEa1222460.4iw.html?vertical=News&verticalid=486&industry=Top+Storie

s&industryid=1922, retrieved Jan. 18, 2005.

5-61

Purchaser Trends106

U.S. purchasers indicated that Taiwan was the leading source of imports of rough gray iron

compressor castings whereas China was identified as the leading source of machined compressor housing

purchases throughout 1999-2003. Taiwan is home to large consumers of compressor housings, with

manufacturers such as TCL-Rechi Refrigeration Equipment Company. TCL-Rechi is also Taiwan’s largest

manufacturer of refrigeration compressors, and along with its parent company TCL, is one of China’s top-five

manufacturers of air conditioners. TCL-Rechi plans on adding a compressor production line in Taiwan which

would increase annual output of compressors in 2005, thus becoming one of the world’s top-three

manufacturers of the product with around 10 million units.107

In response to the Commission’s questionnaire, U.S. purchasers indicated that they purchased

machined compressor housings from both U.S. producers and foreign producers. U.S. purchasers opted to

import significant quantities of machined castings, whereas a majority of rough castings purchases were

produced domestically. Overall, U.S. purchasers responding to the Commission’s questionnaire decreased

total purchases of rough castings by almost 26 percent and increased purchases of machined castings by 492

percent during 1999-2003 (table 5-69).

U.S.-produced rough compressor housing castings accounted for the majority of such purchases, with

foreign-produced castings gaining ground, particularly after 2000. In regards to machined castings, foreignproduced castings continually increased from 1999-2003, eventually accounting for a large share of total

machined castings purchases.

Table 5-69 

Gray iron compressor housing castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,817

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,954

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,934

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,615

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,539

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,465

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,273

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,778

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,541

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,592 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 108 U.S. industry official, telephone interview with USITC staff, Feb. 11, 2005.

5-62

Over the past few years, an increasing number of manufacturers have increased production of

compressors and components overseas, then shipped fully assembled components back into the United

States.108 U.S. imports of downstream products increased by 120 percent from 1999-2004 (table 5-70), as

imports from Japan, Mexico, China, and Canada increased significantly. The greatest increase in imports

were compressors for refrigerating equipment, various types of air compressors, and parts.

Table 5-70

Gray iron compressor housings: U.S. imports for consumption of downstream products, by leading

suppliers, 1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Japan .................... 241,262 325,160 316,206 546,327 658,545 708,349

Mexico . . . . . . . . . . . . . . . . . . . 226,414 267,806 271,233 433,697 502,395 607,089

Brazil . . . . . . . . . . . . . . . . . . . . . 217,435 220,265 211,203 291,157 286,195 298,679

China . . . . . . . . . . . . . . . . . . . . 48,135 64,022 59,722 97,860 143,561 221,841

Canada . . . . . . . . . . . . . . . . . . . 16,506 35,724 52,770 145,528 123,059 172,651

Germany . . . . . . . . . . . . . . . . . . 85,286 86,025 79,155 91,884 102,133 133,127

United Kingdom . . . . . . . . . . . . 67,648 40,792 33,057 69,533 92,238 105,892

Korea . . . . . . . . . . . . . . . . . . . . 131,279 141,046 130,313 99,510 108,479 85,963

Belgium . . . . . . . . . . . . . . . . . . . 67,481 94,856 76,068 60,067 63,271 71,841

Singapore . . . . . . . . . . . . . . . . . 15,848 24,214 18,603 68,001 53,477 65,855

All other . . . . . . . . . . . . . . . . . . 215,397 236,380 262,484 330,158 357,818 466,248

 Total . . . . . . . . . . . . . . . . . . . . 1,332,691 1,536,290 1,510,814 2,233,722 2,491,171 2,937,535

Note.–Downstream products include compressors (HTS classifications 8414.30.40, 8414.30.80, 8414.40.00,

8414.80.05, 8414.80.15, 8414.80.16, and 8414.80.20). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.—Responding U.S. producers indicated that China, Brazil, and India

provided lower prices for rough and machined castings of compressor housings. On average, U.S. producers

reported that rough castings from China were priced 35 percent lower than similar castings from U.S. sources,

those from Brazil were priced 26 percent lower, and those from India were priced 25 percent lower (table 5-

71).

U.S. purchasers reported similar price differences between U.S. and foreign machined castings. U.S.

purchasers indicated that machined castings from China were priced 38 percent lower than similar castings

from U.S. sources, those from India were priced 31 percent lower, and those from Taiwan were priced 25

percent lower (table 5-72). One respondent indicated that the average price difference for a comparable

product from Korea was approximately 40 percent, while another respondent stated that castings from Eastern

Europe were priced 40 percent lower than a similar casting from U.S. sources.
5-63

Table 5-71 

Gray iron compressor housing castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 8 26

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 14 35

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 6 25

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 13

South America . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 35

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 32

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 29

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 11 35

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 32

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 19

Singapore ............................ About the same 2 (1

)

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-72 

Gray iron compressor housing castings: Price comparison by responding U.S. purchasers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 5

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 20

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 6 38

Eastern Europe1 . . . . . . . . . . . . . . . . . . . . . . . Lower 1 40

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 31

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 40

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 25 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland, Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro).

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
5-64

However, U.S. purchasers’ responses regarding price comparisons of U.S.- and foreign-produced

rough compressor housing castings were somewhat different than producers’ responses. U.S. purchasers

reported that rough castings from Mexico were priced approximately 20 percent lower than those from

comparable U.S. sources. Respondents differed regarding China’s pricing. One purchaser indicated that

Brazil’s prices for rough castings are 25 percent lower than those of U.S. producers, which is similar to

estimates provided by U.S. producers.

U.S. purchasers that provided responses to the Commission’s questionnaire cited China, India, France,

Taiwan, and Mexico as sources from which they increased foreign purchases. With the exception of U.S.

delivered price, most U.S. purchasers indicated that improvements in all competitive factors influenced their

decisions to increase purchases from these foreign countries.

Producers’ response to import competition.–A majority of firms reported that they responded to

import competition by reducing prices or suppressing price increases of their castings (table 5-73). Firms did

this in several ways. One firm stated that it paid for the tooling costs while another firm said that it absorbed

the price increases. Other establishments said they shifted production to more types of castings. Many firms

said that they improved product quality, or implemented cost-reduction efforts. Others changed their product

mix or reduced or eliminated production entirely. The industry’s decline in sales and production is reflected

in a high number of firms that said they took little or no action to respond to import competition because of

insufficient capital.

Table 5-73 

Gray iron compressor housing castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 2

Had already shifted production to other lines of castings ............................... 3

Lacked capital funds to counter foreign competition ................................... 7

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Reduced or dropped plans to expand capacity ....................................... 8

Cut back or eliminated production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Closed production lines ......................................................... 8

Shifted to other cast products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Imported product instead ........................................................ 1

Opened a plant in a foreign country ............................................... 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 109 U.S. industry officials, telephone interviews with USITC staff, Jan. 27-Feb. 8, 2005.

 110 Ibid.

 111 Ibid.

 112 Ibid.

 113 Ibid.

5-65

Gray Iron Pump Castings

Industry Profile 

Industry structure.—A total of 33 firms

responded indicating that they produced gray iron

pump castings. Most foundries producing castings

for the pump industry are presently located in the

Midwest United States, where most foundries were

located originally to take advantage of proximity to

raw materials such as lake sands and proximity to

industrial customers.109 Newer foundries have been

established in regions of the country that offer

inexpensive access to supplies of electrical energy

and in states that offer savings in the form of tax

incentives.110 According to industry contacts,

foundries producing pump castings for industrial

uses tend to specialize in a narrow range of products

serving a limited number of end-users because such

foundries are limited in the type of castings they

produce by the type of molding equipment that the

foundry possesses.111 Other foundries that produce

for the residential sump pump market tend to

produce multiple cast components that make up the

pump because it is more economical for the

customer to have all pump items produced, and

possibly assembled, in the same location rather than

dispersed among multiple locations and assembled

in a single location.112

Demand characteristics.—-U.S. demand for gray iron castings for use in pumps is dependent on

demand for pumps by both the industrial and residential U.S. markets. Demand for pump castings for the

industrial market is highly dependent on the construction, agricultural mining, petrochemical, and municipal

markets. Another important demand factor for pumps are natural disasters such as hurricanes and floods

which create a demand for pumps to evacuate standing water. The substitution of alternative materials, such

as plastics and ceramics, is more common in the market for residential pump casting components, where price

competitive factors are more likely to dictate the use of materials used in the pump.113

The leading outlet for rough gray iron castings in 2003 was OEMs who machined 62 percent of these

rough castings shipped by U.S. foundries (table 5-74). Nearly 27 percent of the subject rough castings

shipped were machined by other machine shops or subcontractors whereas 10 percent were machined in-house

in 2003. Nearly 94 percent of machined gray iron pump castings were sold directly to OEMs in 2003.

Foundries producing gray iron castings for the pump market are increasingly being asked by customers to

Product Description and Uses

A pump is a device used to raise or transfer fluids,

typically at a constant flowrate or at constant pressure.

The two main categories of pumps are positive

displacement pumps and dynamic pumps. A positive

displacement pump has an expanding cavity, or area, on

the suction side and a decreasing cavity on the discharge

side. Liquid flows into the pump as the cavity on the

suction side expands and the liquid flows from the pump

on the discharge side as the cavity decreases. A positive

displacement pump will produce the same flow at a given

speed, regardless of discharge pressure. A dynamic

pump operates by developing a high liquid velocity and

converting the velocity to pressure in a diffusing flow

passage. The most popular type of dynamic pump is a

centrifugal pump which consists of an impeller and an

intake at its center. When the impeller rotates, liquid is

discharged by centrifugal force into a casing surrounding

the impeller. A dynamic pump will produce varying

flowrates at a given speed. The centrifugal pump

accounts for at least 80 percent of the world’s pump

production because its is more suitable than positivedisplacement pumps for handling large capacities of

liquid. Principal pump components using gray iron

castings may include the pump casing, cover, impeller,

bearing housing, seal plate, flanges, and volute castings.
 114 U.S. industry official, telephone interview with USITC staff, Feb. 8, 2005.

5-66

Table 5-74 

Gray iron pump castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

machine the rough castings they produce and even to do some final assembly of the final product. Customers

increasingly find it more economical to have the casting, machining, and some assembly done at a single

location rather than being dispersed among multiple locations.

The major end-use market for gray iron pump castings in 2003 was manufacturers of pumps and

compressors, which accounted for 54 percent of all such shipments by these foundries, followed by

manufacturers of construction machinery and equipment (14 percent) and manufacturers of farm and garden

machinery and equipment (9 percent) (table 5-75). A number of respondents have indicated efforts to broaden

their product mix by selling to a wider range of end-users to avoid dependance on a single end-use industry.

Within the broad market for pump castings, it appears that two separate markets have emerged.

Commodity-type castings are simpler in design, are less highly engineered, tend to be more labor-intensive

to produce, and are less subject to delivery schedules that place a premium on timely delivery of the product.

As a result, commodity-type castings tend to be more vulnerable to imports from low-wage countries with

abundant supplies of less-expensive labor and sufficient engineering skills to produce simple castings. For

such castings, price is the principal competitive factor. According to industry responses, an estimated 90

percent of gray iron pump castings tend to be commodity-type castings.114 
 115 Specialized castings include larger castings for use in municipal applications and certain high-pressure

castings for the petrochemical industry.

 116 U.S. industry official, telephone interview with USITC staff, Feb. 8, 2005.

 117 U.S. industry officials, telephone interviews with USITC staff, Feb. 15, 2005.

 118 U.S. industry officials, telephone interviews with USITC staff, Feb. 8, 2005.

 119 U.S. industry officials, telephone interviews with USITC staff, Feb. 15, 2005.

5-67

Table 5-75 

Gray iron pump castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) .............................. 5

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Farm and garden machinery and equipment .......................................... 9

Mining and oil/gas field machinery and equipment ...................................... 4

Construction machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Refrigeration, air conditioning, and heating equipment ................................... 1

Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Industrial machinery ............................................................. 3

Valve and pipe fittings ............................................................ 2

Pumps and compressors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

More specialized pump castings tend to be sourced domestically because these castings require a

higher value-added technical and engineering component.115 Specialized castings contain more intricate cores,

are more detailed in their shape and size, are produced to closer tolerances, and require tighter material

specifications. In specialized applications, liability considerations alone often preclude the use of cheaper

castings.116 In addition, many specialized castings are made using proprietary designs supplied by the

customer. Many of these customers are reluctant to share these designs with foreign foundries who may, in

turn, sell the design to a third party.117 Specialized castings often serve markets operating with tighter delivery

schedules, and imported castings, according to purchasers, generally have more difficulty reaching customers

on time.118 The greater need for product feedback between the customer and the foundry while the part is

being cast also limits the amount of imported specialized castings in the U.S. market.119 Larger pump castings

are typically not sourced from overseas because of their complex design and because it is often not costefficient to ship these items over long distances.

Producer Trends

Production and inventories.—U.S. production of rough gray iron pump castings by responding

foundries declined 11 percent during 1999-2003 (table 5-76) because of a combination of factors. The pump

industry was affected by the worldwide economic downturn and subsequent declining demand by a number

of the major end-users of pumps beginning in 2001. Sectors of the U.S. market for pumps particularly

affected were the construction, chemical, machine tool, and machinery markets. A number of questionnaire
 120 U.S. industry officials, telephone interviews with USITC staff, Jan. 27-Feb. 8, 2005.

 121 U.S. industry officials, telephone interviews with USITC staff, Jan. 27-Feb. 8, 2005.

 122 According to producer questionnaire respondents, between 1999-2003 four U.S. customers moved pump

production facilities from the United States to China and India, representing a loss in sales of domestically-produced

castings to these pump producers. 

 123 U.S. industry officials, telephone interviews with USITC staff, Jan. 27-Feb. 8, 2005.

 124 Ibid.

5-68

Table 5-76 

Gray iron pump castings: Responding U.S. producers' production and inventories for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) . . . . . . . . . . . . . . . . . . . . 65,816 76,717 64,058 60,062 58,751

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 1,617 1,753 1,532 1,601 1,823

Share of production (percent) ............. 2 2 2 3 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

respondents have indicated that the decline in demand by end-users bottomed out in 2003 and that producers

have begun to experience rising demand and production since then.120

Other factors reported as adversely affecting production during 2001-2003 include the role of both

imported castings and imported pumps. A number of pump castings formerly sourced from U.S. companies

are now being replaced by less-expensive “commodity” castings from foreign sources.121 Production of pump

castings has also been adversely affected by U.S. pump customers’ movement of their production facilities

from U.S. to foreign locations, and the subsequent replacement of their U.S. casting suppliers with foreign

suppliers.122 These foreign produced pumps are then either sold to foreign customers or are exported to the

U.S. market. U.S. production appears to have also been negatively affected by imports of less-expensive

foreign pumps. A number of questionnaire respondents have alleged that the price of certain assembled

foreign pumps sold in the U.S. market is less than the cost of the pump castings produced in the United

States.123 In addition, producers of gray iron castings for use in many consumer-oriented pumps cite increased

substitution of plastic components for gray cast iron components as a reason for their decreased production.

Employment.—The average number of production and related workers for responding rough gray

iron pump castings foundries declined 24 percent during 1999-2003 (table 5-77), reflecting declining

production of castings beginning in 2001 and efforts to increase productivity of foundry operations. Total

number of hours worked declined 23 percent and total wages paid declined 13 percent. Average hourly wages

for the industry rose to $13.92/hour in 2003 from $12.38/hour in 1999. Productivity in the industry rose from

27 short tons per 1,000 hours in 1999 to 30 short tons per 1,000 hours in 2003. Productivity increased as

foundries sought to increase the automation of their facilities, particularly in material handling and finishing

operations where the labor content is high, through the use of robotic technology. In addition, questionnaire

respondents have indicated that productivity has been improved through product redesign to permit reduced

labor content of certain castings.124
5-69

Table 5-77 

Gray iron pump castings: Responding U.S. producers' employees and related information for their rough

casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 1,945 1,962 1,807 1,661 1,556

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,396 1,409 1,284 1,154 1,067

Hours worked (1,000 hours) . . . . . . . . . . . . . . 2,531 2,702 2,262 2,079 1,953

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 31,329 34,682 29,368 28,180 27,183

Average hourly wages (dollars per hour) . . . . . 12.38 12.84 12.98 13.55 13.92

Productivity (short tons per 1,000 hours) . . . . . 27 28 28 29 30 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ shipments and exports.—Total U.S. producers’ commercial shipments (by quantity) by

responding foundries producing rough gray iron pump castings declined 12 percent during 1999-2003 (table

5-78) because of declining demand for both cast iron pumps and pump castings beginning in 2001 and

increased substitution of imported pumps and pump castings for domestically produced products. U.S.

exports of the subject rough castings were small (3 percent or less of total U.S. shipments) throughout the

period.

Table 5-78 

Gray iron pump castings: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,767 71,107 59,609 56,314 54,424

Internal consumption and transfers . . . . . . . . . 4,005 4,031 3,480 2,700 (1

)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 960 1,471 1,254 1,015 (1

)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,732 76,609 64,343 60,029 58,507

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,991 95,826 79,294 72,300 72,633

Internal consumption and transfers . . . . . . . . . 6,868 10,794 8,751 (1

) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,330 2,149 1,936 (1

) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,189 108,769 89,981 82,381 83,409 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Some responding foundries indicate that U.S. production dedicated for the export market during

1999-2003 was adversely affected by the weakness in Asian agricultural and construction markets during this

period. These Asian markets suffered lingering effects of the Asian currency crises of 1997 which negatively

affected the ability of these nations to import pumps from the United States.
 125 U.S. industry officials, telephone interviews with USITC staff, Jan. 27-Feb. 3, 2005.

 126 U.S. industry official, telephone interview with USITC staff, Jan. 27, 2005.

 127 U.S. industry officials, telephone interview with USITC staff, Jan. 27-Feb. 3, 2005.

 128 U.S. industry official, telephone interview with USITC staff, Jan. 27, 2005.

 129 Ibid.

 130 Ibid.

5-70

Financial condition.–The financial results of responding gray iron pump castings foundries

deteriorated during 1999-2003 as net sales quantities and value and operating income for all gray iron castings

declined during 1999-2003 (table 5-79). At the same time, operating income as a percentage of net sales also

declined for rough and machined castings during this period, reflecting higher expenses beginning in 2001

because of rising raw material costs. Operating income for responding foundries declined 65 percent during

this period with operating income as a percent of sales declining to 2 percent in 2003. By 2003, 18 of the 29

producers reporting data had operating losses. Both sales and operating income have been negatively

affected by a decline in shipments to traditional end-users beginning in 2001 and by a rise in prices paid for

certain key raw materials, principally pig iron, steel scrap, and coke.125 According to one industry officials,

raw material costs increased by an average of nearly 10-15 percent between 2001-2003, and foundries found

it difficult to pass these cost increases on to customers because of price competition in end-use markets.126

Operating income for producers of machined gray iron castings, which represent a small share of responding

producers’ total castings shipments, returned to profitability in 2003 after three consecutive years of losses.

Investment.—Capital expenditures on machinery, equipment, and fixtures by responding gray iron

pump castings producers declined 71 percent during 1999-2003 (table 5-80) with declines beginning in 2001

due principally to declining sales and profits. As industry sales declined, profits and cash generation

declined, and capital projects were postponed.127 Other factors affecting changes in capital expenditures

include limited access to capital, anticipated demand by customers for castings, and normal replacement of

capital equipment because of wear and tear.128 Research and development expenditures by the reporting

foundries during this period were nil or negligible and showed no discernible trend. According to one

industry official, research and development expenses tend to be low because many of these markets are

mature, the technology is often well-established, and there is less product innovation relative to other

industries.129 Most research and development expenditures appear to be oriented toward the use of automation

in the casting finishing process.130

Purchaser Trends

U.S. purchases of domestic- and foreign-produced rough gray iron pump castings by responding

purchasers increased 16 percent in quantity during 1999-2003 (table 5-81). The U.S. industry’s share of the

rough gray iron pump castings market declined during 1999-2003 reflecting rising imports from China,

whereas the U.S. industry’s share of the machined castings market rose during the same period. Imports from

China and Canada provided most of the import increase during this period. U.S. imports from Mexico and

India declined during 1999-2003. Machined gray iron pump castings increased by quantity during 1999-2003

with imports from China and Brazil increasing during this period whereas imports from India declined. 
5-71

Table 5-79 

Gray iron pump castings: Responding U.S. producers' financial results for their rough casting and machining

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales . . . . 60,265 69,799 59,535 56,406 53,852

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities . . . . . . . . . . . . . 64,534 73,366 62,957 59,582 56,084

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . 86,711 96,106 78,603 72,565 70,610

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 98,108 110,800 92,397 85,299 82,191

Operating income . . . . . . . . . . . . . . . . . . . . 4,407 4,244 2,163 2,201 1,527

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 4 4 2 3 2

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 8 7 13 15 18

Financial results data . . . . . . . . . . . . . . . . . . . 29 30 30 31 29

Machined castings:

Net sales (short tons) ................... (1

) (1) (1) (1) (1)

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 0 1 1 1 0

Financial results data ................... 1 1 1 1 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-72

Table 5-80 

Gray iron pump castings: Responding U.S. producers' capital and R&D expenditures for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . . . . 5,967 7,981 5,565 2,667 1,711

Research and development expenditures ......... (1

) (1) 0(1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of business confidential information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-81 

Gray iron pump castings: Purchases of domestic and foreign castings by responding U.S. purchasers, 1999-

2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,225

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,771

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,784

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,331

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,913

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,669

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,273

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,687

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,834

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,238 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

China was the leading foreign supplier of rough and machined gray iron pump castings, as reported

by U.S. purchasers in 2003. Imports from China generally consist of highly price-sensitive commodity-type

castings where Chinese castings often have a competitive advantage because of low labor costs in China.

For commodity-type castings, China’s distance from the U.S. market is a less important competitive factor

as timely delivery of the product and feedback between the foundry and the customer are not as critical as for

specialized castings.

Mexico was the second leading supplier in 2003 of rough gray iron pump castings. Since the

implementation of NAFTA, Mexico has played an important role as a supplier of basic commodity type

castings because of lower labor costs relative to the United States and close geographical proximity to the

U.S. market.

U.S. imports of downstream products produced using gray iron pump castings increased 59 percent

during 1999-2004 (table 5-82). Mexico accounted for the largest absolute import increase during this period

whereas Germany, Canada, and Japan were the largest suppliers of these imports to the United States in 2004,

accounting for 18 percent, 15 percent, and 12 percent, respectively, of imports.
5-73

Table 5-82

Gray iron pump castings: U.S. imports for consumption of downstream products, by leading suppliers,

1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Germany . . . . . . . . . . . . . . . . . . 548,734 578,074 499,827 483,243 535,758 687,550

Canada ................... 368,543 415,906 444,189 475,986 494,494 566,525

Japan .................... 363,587 397,938 356,536 335,307 383,115 467,494

Mexico . . . . . . . . . . . . . . . . . . . 187,377 218,961 250,276 353,714 417,321 462,338

China . . . . . . . . . . . . . . . . . . . . 100,194 133,266 140,463 177,358 222,567 328,668

Italy . . . . . . . . . . . . . . . . . . . . . . 158,022 160,143 148,338 176,951 249,044 285,217

United Kingdom ............ 180,597 184,470 167,368 182,372 182,753 198,125

Taiwan . . . . . . . . . . . . . . . . . . . 44,385 58,348 60,459 63,600 79,871 101,535

Brazil . . . . . . . . . . . . . . . . . . . . . 41,702 43,978 38,973 37,942 44,725 74,935

France . . . . . . . . . . . . . . . . . . . 70,452 62,082 64,500 62,920 69,044 72,634

All other . . . . . . . . . . . . . . . . . . 350,146 415,277 415,183 441,736 488,512 597,555

 Total . . . . . . . . . . . . . . . . . . . . 2,413,741 2,668,443 2,586,109 2,791,126 3,167,203 3,842,578

Note.–Downstream products includes various pumps for liquids (HTS classifications 8413.11.00, 8413.19.00,

8413.20.00, 8413.30.10, 8413.30.90, 8413.40.00, 8413.50.00, 8413.60.00, 8413.70.10, 8413.70.20, 8413.81.00,

8413.91.10, 8413.91.20, and 8413.91.90). Figures may not add to totals because of rounding. 

Source: Compiled from official statistics of the U.S. Department of Commerce.

Competitive Assessment of Price- and Product-related Factors 

Price and non-price factors.–According to foundry respondents, U.S. producers consider China to

be the leading foreign competitor in the U.S. market in terms of price for both rough and machined pump

castings (table 5-83). Questionnaire respondents reported that prices of imported rough and machined gray

iron pump castings from China are on average 26 percent and 42 percent lower, respectively, than the price

for the same castings from U.S. producers. Other countries identified as competitive in both rough and

machined castings include Brazil and India, with prices, on average, ranging from 21 percent to 34 percent

lower than U.S. prices. 

U.S. purchasers of gray iron pump castings also list China as a leading foreign competitive source

for both rough and machined castings (table 5-84). According to purchasers, Chinese rough castings are 33

percent lower in price, on average, and Chinese machined castings are 39 percent lower in price, on average,

than comparable U.S. produced castings. Commodity-type castings tend to be more vulnerable to imports

from China.

When asked for the leading countries from which they have increased imports, U.S. purchasers

largely selected China. The 24 respondents that increased purchases from China cited improvements in nonprice factors, such as design, technical support, and packaging, as leading factors influencing their purchase

decisions. Similar response patterns were cited for India, Mexico, and Taiwan, with service, support, and

other non-price factors noted as the leading purchase determinants. 
 131 U.S. industry official, telephone interview with USITC staff, Feb. 8, 2005.

 132 Ibid.

5-74

Table 5-83 

Gray iron pump castings: Price comparison by responding U.S. producers of domestic and foreign castings

in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 9 25

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 17 26

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 21

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 17

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 6 26

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 18 42

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 34

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 15

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 28 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ response to import competition.—According to foundry respondents, cost/price

adjustments were the leading response to import competition offered by U.S. producers responding to this

question (table 5-85). These foundries indicated that they lowered prices or suppressed price increases and

implemented cost-reduction efforts to improve their competitive position relative to foreign competitors.

Cost-reduction efforts consisted primarily of automating their production operations, principally the materials

handling and finishing operations, in order to lower labor costs. 

A significant number of respondents indicated that in the market for commodity-type castings there

is very little that U.S. foundries can do to respond to low prices offered by low-value imports from low-wage

nations like China. According to these producers, no amount of productivity improvements would allow their

castings to compete on a price basis with low value imports when the prices of such imports are priced lower

than the U.S. cost to produce the castings. A number of such foundries shifted production to other, more

specialized cast products, including castings for the air conditioning compressors, motor vehicle (particularly

trucking) and pipe fitting and coupling markets.131 These cast products are similar in shape and material

requirements to castings used in pumps.

Finally, a significant number of respondents indicated that they took no or few actions to respond to

import competition because they lacked the capital funds to counter foreign competition. Many firms have

found it difficult to raise capital funds through borrowing because of the unfavorable outlook for certain

segments of the pump casting industry.132
5-75

Table 5-84 

Gray iron pump castings: Price comparison by responding U.S. purchasers of domestic and foreign castings

in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 33

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 7

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 50

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 5

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 34

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 50

Canada .............................. About the same 1 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 14 39

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (1

)

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 37

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 5

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 28

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 20

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 12

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
5-76

Table 5-85 

Gray iron pump castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 4

Had already shifted production to other lines of castings ............................... 6

Lacked capital funds to counter foreign competition ................................... 9

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Reduced or dropped plans to expand capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Cut back or eliminated production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Closed production lines ......................................................... 9

Shifted to other cast products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Imported product instead ........................................................ 1

Opened a plant in a foreign country ............................................... 2

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 133 Several large producers of gray iron non-motor vehicle gear box castings for construction machinery were

unable to separate their castings production for agricultural machinery, including tractors. Therefore, data for these

producers’ responses have been included in the section on gray iron motor vehicle castings.

 134 American Gear Manufacturers Association official, telephone interview with USITC staff, Feb. 17, 2005.

 135 Some producers that were not able to separate data for gray iron non-motor vehicle castings from gray iron

motor vehicle castings, however, were able to identify end-use markets for their shipments. 

5-77

Gray Iron Non-Motor Vehicle Gear Box Castings

Industry Profile

Industry structure.–Twenty-one firms

reported production of gray iron non-motor vehicle

gear box castings.133 Another 8 firms indicated that

they produced such castings, but were unable to

report production data. For the firms that reported

data, this industry is dominated by 2 large producers

that accounted for 75 percent of production in 2003,

by quantity. Another four foundries, with annual

production of approximately 3,600 tons to 8,300

tons each in 2003 accounted for another 19 percent,

and the remaining foundries, each of which

produced 1,200 tons or less, accounted for almost 7

percent. One producer exited the industry in 2003.

Reporting producers were located in Alabama,

California, Indiana, Iowa, Illinois, Kansas,

Minnesota, Pennsylvania, Texas, and Wisconsin.

All but one firm that reported production are job shops that also produce other types of castings for

other industries; the one exception is a captive producer. Most of these firms produce both gray and ductile

or other iron castings. Two reported also producing aluminum castings, and one also reported producing

copper castings. Sand casting was the method used to produce these products, with two firms reporting that

they also used the lost foam method of casting. Most producers reported making their own molds, with many

also fabricating their own patterns, but foundries were less involved in casting design and machining. The

majority of producers reported that purchasers required certification of their establishment, typically an ISO

9000 certificate or higher.

Demand characteristics.–A large portion of U.S. producers’ shipments were to machine shops or

other fabricators (table 5-86). These fabricators are likely to be gear box producers that manufacture either

standard or custom gear box products, that in turn are sold to end-users or to OEMs. The foundries supplying

gear boxes typically do not perform machining; in general, gear box producers tend to have their own

machining operations.134 

In 2003, the end-use markets for gray iron non-motor vehicle gear box castings were principally for

motor-vehicles,135 farm and garden, mining, oil/gas field machinery, and construction machinery, as well as

refrigeration, air-conditioning, and heating equipment (table 5-87). Each of these industries has different

economic and technical drivers.

Product Description and Uses

Gray iron non-motor vehicle gear box castings are

primarily used in the housings of transmissions,

differentials, transfer cases, and power-take off units

(auxiliary gear boxes that transfer power from the

transmission through a gear box to an output shaft for

applications other than propelling the vehicle) found on

construction equipment and stationary gear boxes. The

stationary gear boxes are used in a variety of industries

such as mining, paper-making, petroleum and natural

gas extraction and pumping, power generation, and other

industrial applications. Gray iron castings, however, are

not used in drive axles for non-motor vehicles, such as

construction machinery. Traditionally, gray iron has been

used for the gear box housings because of its strength,

ability to handle heat, machinability, noise dampening

characteristics, and low cost.
 136 U.S. industry official, telephone interview with USITC staff, Feb. 23, 2005.

5-78

Table 5-86 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' shipments, by channel of

distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining ............................................................ 1

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 5-87 

Gray iron non-motor vehicle gear box castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

 Other (buses, motor homes, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Farm and garden machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Mining and oil/gas field machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Construction machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Refrigeration, air conditioning, and heating equipment ................................... 4

Industrial machinery ............................................................. 9

Pumps and compressors ......................................................... 1

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Small gear boxes frequently have aluminum castings for the housing, rather than gray iron. Housings

for large, custom-made gear boxes are typically fabrications made from steel plate, particularly if the order

size is small (less than 6 units), because the cost of the tooling to make such castings tends to exceed the cost

of producing the fabrications, even though for engineering reasons castings would likely be preferable for

structure and noise dampening.136
 137 Certain data have been withheld to avoid disclosure of business confidential information. These data include

shipments and sales for internal consumption, net sales of machined castings and related data, research and

development expenditures, and purchases of rough castings.

 138 Data for gray iron non-motor vehicle gear box castings provided by responding U.S. producers include data for

other products, such as counterweights for forklift trucks.

 139 Data for U.S. production, shipments, and other indicators are likely to be understated as certain producers did

not supply numerical data and other producers categorized their production as gray iron motor vehicle gear box

castings.

 140 This compares with $80.9 million purchased in 1997. U.S. Census Bureau, 2002 Economic Census, Speed

Changer, Industrial High-Speed Drive, and Gear Manufacturing: 2002, EC02-311-333612 (RV), Dec. 2004.

 141 U.S. industry official, telephone interview with USITC staff, Feb. 17, 2005.

 142 Ibid.

5-79

Responding U.S. producers and purchasers reported that foreign foundries have entered the U.S.

market, but most were not able to identify these competitors. However, Thyssen Krupp Funicoes Ltd., of

Brazil, was identified as a new competitor.

Producer Trends137 138

Production and inventories.–Reported U.S. production139 of gray iron non-motor vehicle gear box

castings in short tons fluctuated during the period, but was lower in 2003 than in 1999; between 1999 and

2003, production declined by 9 percent (table 5-88). Production for particular downstream industries, such

as the oil and gas equipment industry, were particularly robust in 2000 and 2001; production peaked in 2001.

Most producers indicated that the trend in consumption had increased or remained the same. However, five

responding producers reported that market demand declined because of reduced demand for downstream final

products, increased imports of downstream products, instances of material substitution, and a factory closing

by a downstream U.S. customer. For foundries in this industry, inventories as a share of production accounted

for 2 to 3 percent of their total production.

A major consumer of gray iron non-motor vehicle gear box castings is the gear box industry, which

purchased $56.6 million of iron and steel rough and semifinished castings in 2002.140 Since 2002, the gearmaking and gear box industry has grown at about 4 percent to 5 percent annually, as a result of rising demand,

particularly from the mining equipment industry.141 Gear box producers have also been subject to price

competition, as customers have demanded world class prices for this intermediate product.142

Table 5-88 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) .................... 115,731 114,025 116,601 102,936 105,568

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 3,200 2,917 2,563 2,782 2,621

Share of production (percent) ............. 3 3 2 3 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 143 See table 5-10, Gray and ductile iron castings: Responding U.S. producers’ employees and related information

for their rough castings operations, 1999-2003, p. 5-12.

 144 U.S. industry official, telephone interview with USITC staff, Feb. 23, 2005.

5-80

Employment.–Based on questionnaire responses, the average number of employees involved in

producing gray iron non-motor vehicle gear box castings decreased by 271 persons, or 20 percent, between

1999 and 2003 (table 5-89). Average hourly wages reportedly rose by 12 percent over the period, from $13.58

to $15.20. This compares with average hourly wages for production workers at all gray iron foundries, which

rose by 10 percent, from $16.42 to $18.08.143 Productivity fell in 2000, but has risen each year since, with the

largest increases occurring during 2001 and 2002. The increase in productivity since 2000 reflects reductions

by responding U.S. producers in the average number of employees by 22 percent, of production workers by

24 percent, and of hours worked by 28 percent, and a smaller decline in production (7 percent).

Table 5-89 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' employees and related information

for their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 1,364 1,396 1,296 1,150 1,093

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,044 1,084 986 872 826

Hours worked (1,000 hours) . . . . . . . . . . . . . . 2,081 2,336 2,090 1,648 1,695

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 28,256 31,629 28,654 25,181 25,760

Average hourly wages (dollars per hour) . . . . . 13.58 13.54 13.71 15.28 15.20

Productivity (short tons per 1,000 hours) . . . . . 56 49 56 62 62 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ shipments and exports.–Based on questionnaire responses, the quantity and value of total

net sales for this industry fluctuated during 1999-2003. Both indicators were lower in 2003 as compared with

1999–the value of shipments was 8 percent lower, whereas tons shipped were 9 percent lower (table 5-90).

According to one industry official, the large decline in commercial shipments was caused in part by a loss of

business to Chinese imports based largely on price considerations.144 However, U.S. exports, although small

relative to total shipments throughout the period (less than 4 percent) rose each year during the period. 

Reporting U.S. producers that accounted for the majority of U.S. shipments stated that prices in the

U.S. market fell by up to 10 percent during 1999-2003. Several other producers asserted that prices declined

by up to 20 percent. However, other producers reported that prices generally remained the same. Most

reporting U.S. purchasers noted prices increased in the U.S. market by up to 10 percent for both U.S.- and

foreign-produced castings. A few purchasers reported price increases ranging from 11 to 30 percent. Very few

purchasers reported price declines.
5-81

Table 5-90 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' domestic shipments and exports

for their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,512 105,951 90,123 86,882 85,211

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,539 121,724 113,784 100,112 102,455

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,211 103,883 88,167 81,409 80,249

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,329 120,212 111,437 94,476 98,627 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Financial condition.—The financial results of operations reported by gray iron non-motor vehicle

gear box producers declined from 1999 to 2003 (table 5-91). Net sales values and operating income for the

rough castings segment both peaked in 2000 and then declined irregularly. By 2003, net sales values were

down close to 20 percent from their 2000 highs (and down close to 10 percent from their 1999 level) whereas

operating income was down by one-half from its 2000 level and over 40 percent from its 1999 level.

Operating income margins fell from 5 percent in 1999 to 3 percent in 2003, and the number of firms reporting

operating losses doubled from 6 to 13 (and in 2003 accounted for over one-half of industry establishments).

Whereas the firms that reported losses were small- to medium-sized producers, even large producers reported

declining profitability over the period. A few firms reported losses throughout the period, with some of the

losses becoming more severe and some becoming smaller. 

With respect to the machined castings segment, net sales and operating income peaked in 2001 and

2000, respectively, before declining precipitously. By 2003, both had lost about two-thirds of their 1999

values. The operating income margin increased from 2 percent in 1999 to 12 percent in 2000 before settling

back in at the 2 percent level for the remainder of the reporting period.

Investment.—Capital expenditures were made by a handful of firms, and declined by 73 percent over

the period (table 5-92). Such expenditures peaked in 2000, but fell each of the following years. The high level

of expenditures in 2000 and 2001 is attributable to one firm replacing major production machinery. One firm

also conducted a small amount of research and development.
5-82

Table 5-91 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' financial results for their rough

casting and machined operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... 109,487 108,667 93,081 91,403 89,061

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............. 113,091 122,808 114,529 100,960 102,864

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . 99,830 101,225 87,660 82,456 80,054

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 103,653 115,375 108,638 92,342 94,912

Operating income . . . . . . . . . . . . . . . . . . . . 5,388 6,618 3,504 (1

) 3,176

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 5 6 3 (1) 3

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 6 5 10 10 13

Financial results data . . . . . . . . . . . . . . . . . . . 23 22 23 23 23

Machined castings:

Net sales (short tons) ................... (1) (1) (1) (1) (1)

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 0 0 0 0 1

Financial results data ................... 2 2 2 2 3 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-83

Table 5-92 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' capital and R&D expenditures

for their rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 6,834 8,803 7,966 3,896 1,822

Research and development expenditures ...... (1

) (1) (1)00 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Purchaser Trends

The value of U.S. purchases of foreign-produced rough castings rose by 72 percent and the quantity

purchased declined by 8 percent during 1999-2003. Because of limited data from U.S. purchasers, specific

country details cannot be provided so as to maintain business confidentiality. U.S. purchases of foreignproduced machined castings declined in both quantity and value. The leading source of purchases of rough

castings was Mexico, followed by Brazil and the EU15, with minor amounts from China and Canada. In

contrast, the leading source of machined castings was China, followed by Brazil, Mexico, India, Korea, and

a number of other countries. Responding purchasers cited lower costs for machined castings from China,

Brazil, and Mexico as compared with U.S. costs.

During 1999-2003, responding purchasers reported a declining trend in purchases of both rough and

machined castings (table 5-93). Purchases of foreign-produced rough castings rose to account for 20 percent

of reported purchases in 2003, whereas foreign-produced machined castings as a share of purchases fell to

47 percent. The decline in both rough and machined purchases corresponds with U.S. foundry reports that

imports of finished downstream products have been supplanting gear boxes produced or assembled from

imported components in the United States. Further, imports of downstream products that incorporate a gear

box may also have risen.

Table 5-93 

Gray iron non-motor vehicle gear box castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 ....................................................................... 105,610

2000 ....................................................................... 104,240

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,163

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,619

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,871

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,379

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,661

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,671

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,807

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,689 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
5-84

U.S. imports of downstream products (finished gear boxes) rose by 10 percent to $618.4 million

during 1999-2004 (table 5-94). In 2004, Germany was the leading supplier, followed by Italy, Japan, and the

United Kingdom. Imports from Spain rose dramatically in 2004. Imports from China have risen continually

during 1999-2004. Several large European gear box companies produce gear boxes in the United States, and

are likely to import certain products from Europe. Further, European gear box producers are known for their

high quality gear box products and have a reputation for making sophisticated gear boxes. Significant skill

is required in producing the gearing that is incorporated in gear boxes.

Table 5-94

Gray iron non-motor vehicle gear box castings: U.S. imports for consumption of downstream products, by

leading suppliers, 1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Germany . . . . . . . . . . . . . . . . . . 123,421 118,157 120,329 96,882 123,177 132,310

Italy . . . . . . . . . . . . . . . . . . . . . . 99,685 110,468 123,812 137,739 123,222 116,505

Japan .................... 102,986 116,132 93,637 73,555 88,567 97,503

United Kingdom . . . . . . . . . . . . 58,101 68,799 65,915 31,114 38,531 90,490

Canada . . . . . . . . . . . . . . . . . . . 26,743 26,569 33,861 30,501 24,852 24,582

Spain . . . . . . . . . . . . . . . . . . . . 5,942 6,725 5,479 5,915 5,414 23,222

France . . . . . . . . . . . . . . . . . . . 21,510 16,575 26,027 17,799 24,669 22,253

China . . . . . . . . . . . . . . . . . . . . 8,692 12,761 10,769 14,246 17,725 21,763

Belgium . . . . . . . . . . . . . . . . . . . 49,630 30,339 14,026 11,501 12,894 19,305

Mexico . . . . . . . . . . . . . . . . . . . 19,132 17,800 13,430 13,104 11,925 14,697

All other . . . . . . . . . . . . . . . . . . 45,167 46,816 45,542 39,362 44,477 55,736

 Total . . . . . . . . . . . . . . . . . . . . 561,009 571,141 552,827 471,718 515,453 618,366

Note.–Downstream products includes gear boxes for stationary applications such as in factories, mills, oil and gas

fields, as well as gear boxes, including transmissions, differentials, and transfer cases for construction and material

handling machinery, and marine applications (HTS classifications 8483.40.30, 8483.40.50, and 8483.40.70). 

Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.–U.S. producers reported lower prices for foreign-produced gray iron

non-motor vehicle gear box castings, on average ranging from 10 percent to 50 percent below their own prices

(table 5-95). Producers reported much lower prices for foreign machined castings compared with rough

castings. U.S. purchasers reported average prices for foreign-produced castings compared with U.S. castings,

with similarly low prices from most foreign sources (table 5-96). Both U.S. producers and purchasers reported

that the prices of rough and machined castings from China ranged from 30 percent to 39 percent lower than

U.S. prices. Prices for Mexican-produced castings were 15 percent to 20 percent below U.S. prices. However,

U.S. producers reported much lower prices for castings from Brazil (17 percent to 33 percent lower) compared

with U.S. purchasers reporting only a 10-percent lower price.
5-85

Table 5-95 

Gray iron non-motor vehicle gear box castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 17

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 9 36

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 20

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 15

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 33

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 11 38

France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 31

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 20

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 50 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

For U.S. purchasers, other factors were also important in influencing their decisions to increase

purchases of foreign-produced castings. For imports from Canada, purchasers cited factors such as better

delivery times, lower order size, and better design. For Chinese castings, purchasers noted better product

availability, better delivery times, improved product quality and design as some of the reasons they increased

purchases of Chinese castings.

Producers’ response to import competition.–Many responding U.S. producers indicated that they

lacked capital funds with which to counter foreign competition (table 5-97). This corresponds to the

deteriorating financial health of this industry as noted above. Because of foreign competition, the majority

of U.S. producers have lowered prices or limited price increases, implemented cost-reduction efforts, and

improved product quality. Producers have also responded by reducing or eliminating production, closing

production, as well as reducing or eliminating plans to expand capacity in this product. Some producers have

shifted to the production of other cast products.
5-86

Table 5-96 

Gray iron non-motor vehicle gear box castings: Price comparison by responding U.S. purchasers of domestic

and foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 8

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 8

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 4

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 30

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 10

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 3

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 6 39

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 5

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 50

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 15

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 23 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 5-97 

Gray iron non-motor vehicle gear box castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 3

Had already shifted production to other lines of castings ............................... 4

Lacked capital funds to counter foreign competition ................................... 8

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Reduced or dropped plans to expand capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Cut back or eliminated production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Closed production lines ......................................................... 3

Shifted to other cast products .................................................... 9

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Imported product instead ........................................................ 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 1

 Of the 87 identified steel foundries, 55 produce steel castings exclusively. Sixteen foundries produce both steeland iron-based castings, with 4 of these firms also producing non-ferrous castings. The remaining 16 foundries

produce both non-ferrous castings and steel-based castings only.

 2

 AFS, “38th Annual Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 3

 Of the 87 establishments reporting production of steel castings, 12 respondents reported information on steel

valves. Of the 154 purchasers reporting purchases of steel castings, 46 reported information on steel valves.

 4

 In 2003, the median number of employees for domestic steel foundry operations was 76, with one-third of

reporting firms employing 50 or fewer employees in steel foundry operations.

 5

 Steel castings with values of $2,000 per ton or less accounted for two-thirds of steel castings shipments by

volume, but only 20 percent by value in 2003. By comparison, steel castings with values greater than $2,000 per ton

accounted for only one-third of steel castings shipments by volume, but 80 percent by value in 2003.

6-1

CHAPTER 6

U.S. STEEL FOUNDRY INDUSTRY

This chapter provides a general overview of the U.S. steel foundry industry as a whole, based on

responses to the USITC producer and purchaser questionnaires, fieldwork, and interviews with leading

industry participants. The chapter begins with a discussion of the structure of the industry and leading

demand characteristics. Next, producer trends are presented, with emphasis on the financial condition of

respondents to the producer questionnaire, concluding with a discussion of purchaser trends.

Steel castings are used in the agricultural, construction, manufacturing, power generation, processing,

and transportation industries. Typical products made from steel castings include compressors, mechanical

components, pumps, tools, and valves. Steel castings vary significantly in size, chemical and physical

composition, and end-use requirements. Almost two-thirds of rough steel castings are machined in-house,

with a significant portion of the remainder shipped directly to original equipment manufacturers (OEMs).

In 2003, 18 percent of respondents’ purchases of rough steel castings were from foreign producers, compared

with 15 percent in 1999. By contrast, 35 percent of respondents’ purchases of machined steel castings in

2003 were from foreign producers, compared with 48 percent in 1999.

Of the 465 respondents to the foundry questionnaire, 87 reported producing steel castings1

 in the

United States during 1999-2003. The American Foundry Society (AFS) collects information on the foundry

industry based on metal types. Questionnaire data collected by the USITC account for 65 percent of steel

foundry production in 2003 as reported by the AFS.2

 Of the 463 U.S. firms responding to the purchaser

questionnaire, 154 respondents reported purchasing steel castings. Results from the producer and purchaser

questionnaires are discussed in this chapter to provide an overview of the steel foundry industry, and to

perform more product-specific analysis of steel valves.3

Industry Profile

Industry Structure

The U.S. steel foundry industry is concentrated in the Midwest, comprising 40 foundries - a legacy

of the historic aggregation of manufacturing firms along the shores of the Great Lakes. Steel foundry

operations range from fewer than 10 employees to more than 500 at a single plant, with the majority

employing fewer than 100 workers.4

 One-third of the volume of steel castings shipped in 2003 accounted

for 80 percent of total shipment value.5

 The majority of responding foundries were job shops, with fewer than

20 percent identified as captive producers. Typically, both captive producers and job shops produce a broad
 6

 Unit values for steel castings shipped by responding domestic producers in 2003 ranged from slightly more than

$200 to more than $100,000 per ton.

6-2

number of products in low quantity runs, with only 14 responding foundries producing a limited number of

products in high quantity runs. In addition to castings operations, steel foundries perform a range of other

production-related activities, including pattern and mold making (table 6-1). Steel castings are usually

component parts of larger finished products so downstream manufacture is not a major activity for most steel

foundries. Steel foundry products are increasingly cast to precise shapes that require little or no machining

after casting. Largely owing to their relatively high value, rough castings account for a large proportion of

total sales (table 6-2).

Demand Characteristics

Steel castings are used in the agricultural, construction, manufacturing, power generation, processing,

and transportation industries. Typical products made from steel castings include compressors, mechanical

components, pumps, tools, and valves. Steel castings vary significantly in size, chemical and physical

composition, and end-use requirements.6

 By quantity, railway equipment dominates steel castings shipments

(table 6-3). Such equipment, together with construction, industrial, and mining and oil/gas field machinery

and equipment, accounts for 86 percent of domestic steel castings shipments. Almost two-thirds of rough

Table 6-1 

Steel foundries: Establishment activities of responding producers

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Number responding that Average percentage

Activity performed activity performed in-house

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total establishments reporting = 77

Design of rough castings . . . . . . . . . . . . . . . . . . . . . . . 42 75

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 63

Mold making, expended type . . . . . . . . . . . . . . . . . . . . 55 94

Mold/die making, permanent type . . . . . . . . . . . . . . . . . 19 43

Machining of rough castings . . . . . . . . . . . . . . . . . . . . . 49 66

Downstream manufacture . . . . . . . . . . . . . . . . . . . . . . . 18 60 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-2 

Steel foundries: Responding U.S. producers' average net sales shares, fiscal years 1999-2003

(Percent of total sales) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings . . . . . . . . . . . . . . . . . . . . . . . . . . 55 56 56 57 56

Machined castings . . . . . . . . . . . . . . . . . . . . . . . 29 28 28 28 28

Downstream products containing

 in-house castings . . . . . . . . . . . . . . . . . . . 14 13 13 13 13

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 ————————————————————————————— 2222

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 7

 Marybeth Luczak, “Reinventing the Wheel,” Railway Age, Jun. 2004, Vol. 205, Iss. 6, p. 22; Robert E.

Paaswell, “Building Railcars in New York,” Five Borough Institute, found at 

http://www.fiveborough.org/5boroughreport/railcars_paaswell.html; John E Carroll, Jr., “Deja vu All Over Again,"

Railway Age, July 2002; Dan Sandoval, “Foundry Business to Come Back Down to Earth,” June 26, 2001; and

Kenneth H. Kirgin, “Metal Supply and Demand Trends, U.S. Casting Industry Snapshot - 2002,” found at

http://www.castsolutions.com/archive/08.2_01_feature_article.html, retrieved Apr. 22, 2005. 

 8

 Based on the number of rotary rigs in operation. U.S. Department of Energy, Energy Information

Administration, Monthly Energy Review, Feb. 2005, p. 83.

6-3

Table 6-3 

Steel foundries: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) .............................. 1

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Mining and oil/gas field machinery and equipment ...................................... 8

Construction machinery and equipment .............................................. 9

Railway equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Industrial machinery ............................................................. 8

Valve and pipe fittings ............................................................ 2

Pumps and compressors ......................................................... 1

Aircraft (including related engines) .................................................. 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ––––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

steel castings are machined in-house, with a significant portion of the remainder shipped directly to OEMs

(table 6-4). More than 90 percent of machined castings are shipped to either distributors or OEMs. 

Demand for steel castings is to a certain extent dependent on the U.S. railway equipment industry.

According to industry sources, production of railway freight cars and locomotives reached a 20-year high in

1998 when 75,000 cars were produced. Due to railcar surpluses and the economic downturn, production

declined steadily to 18,000 by 2002. Additionally, longer wheel life cycles, owing to improvements in wheel

production process and metallurgy, have also affected demand for rail wheels as wheels are replaced less

frequently.7

 The demand for steel valve castings, another major market, is largely influenced by oil and

natural gas prices, which increased during 1999-2003 and resulted in more U.S. oil and gas development and

production activity.8
 9

 Certain data have been withheld to avoid disclosure of business confidential information. These data include

certain internal consumption and transfer quantities of rough steel castings, net sales quantities of machined steel

castings, and certain production costs of machined steel castings. 

 10 See table 6-15 for additional information on steel castings capitalization. 

6-4

Table 6-4 

Steel foundries: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Machine shop/other fabricators ................................................. 3

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

In-house for use in downstream products .......................................... 4

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends9

Capacity, Production, Inventories, and Shipments

Following a drop in demand during 2000-2002, respondents’ production volume increased by

16 percent in 2003 in response to improved conditions in downstream domestic manufacturing (table 6-5).

Responding foundries produced approximately 619,000 tons of steel castings in 2003, with shipments valued

at more than $1.3 billion. Despite year-to-year changes in production, production capacity largely remained

constant during 1999-2003. This is because relatively high fixed-cost capitalization requirements mitigate

against rapid reductions in production capacity during periods of decreased demand.10 Instead, variable

inputs, such as labor and raw materials, are adjusted downward, resulting in relatively low capacity utilization

rates during these periods.
 11 U.S. industry officials, telephone interviews with USITC staff, Feb. 7 and 10, 2005. Officials represent steel

castings suppliers to a range of industries, and include a Tier 1 automotive supplier. 

6-5

Export shipments for rough steel castings grew during 1999-2003 as domestic consumption

contracted, especially during 2001-2002 (table 6-6). During 1999-2003, exports averaged approximately

5 percent of total respondents’ shipments by quantity, and they averaged 9 percent of total shipments by

value. Despite a drop during 2001-2002, the value of export shipments increased by 19 percent during 1999-

2003, while the value of domestic shipments contracted by slightly more than 10 percent. The contraction

in the value of domestic shipments coincides with an expansion of U.S.-based producers’ foreign steel

castings operations during this period. According to domestic producers, foreign operations are essential for

firms that intend to continue to produce steel castings for the global market, as an increasing share of

manufacturing is performed outside the United States in locations where U.S.- produced castings are not

competitive due to their relatively higher transportation and production costs.11 

Table 6-5 

Steel foundries: Responding U.S. producers' capacity, production, and inventories for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capacity (short tons) .................... 928,834 938,160 936,923 927,816 928,614

Production (short tons) .................. 713,175 611,943 558,926 534,006 618,815

Capacity utilization (percent) . . . . . . . . . . . . . . 80 68 62 60 69

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . 39,645 36,186 35,655 35,614 38,325

Share of production (percent) . . . . . . . . . . . 12 13 14 14 13 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Capacity utilization based on establishments that were

able to provide both capacity and production amounts. Inventory share of production based on establishments that

were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-6 

Steel foundries: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 221,976 214,739 176,463 151,950 163,399

 Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1

—————————————————————————————)

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709,321 609,280 556,421 530,870 613,420

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 909,063 944,605 884,625 745,393 760,570

 Internal consumption and transfers ......... 416,647 402,387 363,941 363,620 431,259

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ————————————————————————————— 111,004 123,193 131,914 119,871 131,759

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,436,714 1,470,185 1,380,480 1,228,884 1,323,588 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 12 U.S. industry official, telephone interview with USITC staff, Feb. 7, 2005. 

6-6

Table 6-7 

Steel foundries: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 13,303 13,089 12,272 10,894 10,490

Production and related workers:

Average number . . . . . . . . . . . . . . . . . . . . . . . 11,240 11,038 10,286 9,028 8,756

Hours worked (1,000 hours) . . . . . . . . . . . . . . 22,612 22,571 20,647 18,018 17,901

Wages paid (1,000 dollars) ............... 293,422 306,489 292,319 266,338 272,188

Average hourly wages (dollars per hour) . . . . . 12.98 13.58 14.16 14.78 15.21

Productivity (short tons per 1,000 hours) . . . . . 31 27 27 30 35 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid data. Productivity based on establishments that were able to

provide both production quantity and hours worked data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Employment

During 2000-2003, responding domestic producers trimmed employment rolls, largely in response

to decreasing demand during 2000-2002 (table 6-7). Despite a 22-percent decline in the number of

production and related workers during 1999-2003, productivity increased by 13 percent. The productivity

increase is largely attributable to efficiency gains as a result of investment in new technology and the

development of employee incentive programs on the part of some firms. One major domestic steel foundry

instituted a 2-tier pay structure, where new hires receive a decreased base wage but are eligible for annual

performance bonuses based on production output. According to management, the results of this incentive

system have exceeded expectations in terms of increased productivity.12

Financial Condition

Rough Castings

During 1999-2003, respondents’ net sales values of rough steel castings decreased by less than 9

percent, while operating income for rough steel castings operations decreased by 54 percent as the costs for

raw materials and energy increased (table 6-8). As a percentage of net sales, operating income declined from

9 percent in 1999 to 4 percent in 2003. The most significant factor in the reduction of operating income in

percentage terms was energy costs, which increased by almost 39 percent on a per ton basis during 1999-2003

(table 6-9). Among responding firms reporting operating losses, unit energy cost increases (as high as 50

percent during 1999-2003) were the most significant drain on operations. Less drastic increases in unit costs

for raw materials also contributed to the decline in operating income.

Captive producers increased both their operating and net income margins during 1999-2003 (table

6-10). By contrast, job shop operating margins fell from 11 percent to 5 percent during the same period,

while net income margins declined from 6 percent in 1999 to 1 percent in 2003. Although respondents with

a limited number of products typically reported higher operating margins than those producing a broad

number of products, both sets of respondents reported similar net income margins, decreasing from 6 percent

in 1999 to 1-2 percent in 2003.
6-7

Table 6-8 

Steel foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Net sales:

Commercial domestic and export sales ...... 231,629 228,982 189,532 165,753 192,143

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............... 587,586 517,856 495,544 463,078 503,118

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales ...... 938,832 986,455 929,983 798,703 843,179

Internal consumption for production of

 machined castings .................. 309,533 306,605 284,856 274,820 305,951

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 53,264 59,279 55,208 45,803 37,185

 Total net sales values . . . . . . . . . . . . . . . . . 1,301,629 1,352,339 1,270,047 1,119,326 1,186,315

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 260,212 270,117 254,999 224,932 261,365

Direct labor ........................... 294,862 309,437 298,926 264,094 276,030

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,290 70,376 77,834 68,648 75,851

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 436,854 451,605 451,591 403,808 399,361

Total cost of goods sold . . . . . . . . . . . . . . . . 1,056,218 1,101,535 1,083,350 961,482 1,012,607

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245,411 250,804 186,697 157,844 173,708

Selling, general, and administrative .......... 129,185 140,475 137,538 123,856 120,554

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 116,226 110,329 49,159 33,988 53,154

Other income and expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . 39,685 39,848 25,964 5,508 32,086

All other expenses and income . . . . . . . . . . . . -1,396 673 -759 450 964

Net income before taxes . . . . . . . . . . . . . . . . . . . 77,937 69,808 23,954 28,030 20,104

Depreciation/amortization . . . . . . . . . . . . . . . . . . 52,559 53,947 57,025 57,753 52,835

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20 20 20 22

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 23 24 24 23

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5666

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 34 33 36 36 34

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 81 81 85 86 85

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19 15 14 15

Selling, general, and administrative . . . . . . . . . . 10 10 11 11 10

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 9 8434

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 14 16 20 21 25

Financial results data . . . . . . . . . . . . . . . . . . . . . 67 71 72 71 71 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
6-8

Table 6-9 

Steel foundries: Selected financial unit values for responding U.S. producers' rough casting operations,

fiscal years 1999-2003

(Dollars per short ton) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total sales unit value . . . . . . . . . . . . . . . . . . . . . 2,215 2,611 2,563 2,417 2,358

Raw material cost . . . . . . . . . . . . . . . . . . . . . . . . 443 522 515 486 519

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . 502 598 603 570 549

Energy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 136 157 148 151

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 743 872 911 872 794

Total cost of goods sold . . . . . . . . . . . . . . . . . . . 1,798 2,127 2,186 2,076 2,013

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418 484 377 341 345

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. For each of the above items, unit values calculated only

where establishment provided both value and quantity data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-10 

Steel foundries: Selected financial information for U.S. producers' rough casting operations for specified

classes, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Class/item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Job shops:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 885,542 929,238 881,085 757,497 789,776

Operating income . . . . . . . . . . . . . . . . . . . . . . 94,792 88,529 45,815 28,969 38,933

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,511 52,679 20,997 26,274 7,826

Captive producers:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 174,566 181,072 169,497 170,222 186,661

Operating income . . . . . . . . . . . . . . . . . . . . . . 8,099 7,226 8,088 10,875 14,612

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,911 5,052 6,799 10,240 14,131

Limited number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 340,257 320,083 267,101 229,617 287,386

Operating income . . . . . . . . . . . . . . . . . . . . . . 48,045 33,048 -3,931 6,552 28,538

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,845 5,556 -16,890 11,773 5,883

Broad number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 935,622 1,003,923 970,412 876,667 884,360

Operating income . . . . . . . . . . . . . . . . . . . . . . 65,911 73,463 49,317 28,576 25,435

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,414 59,656 36,567 15,205 12,949 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 13 U.S. industry officials, telephone interviews with USITC staff, Feb. 7 and 8, 2005. 

 14 Ibid.

 15 Ibid.

 16 U.S. industry officials, telephone interviews with USITC staff, Feb. 7, 8, and 9, 2005. 

 17 Energy Information Administration, Annual Energy Outlook 2005 with Projections to 2025, DOE/EIA-0383

(Washington, DC: U.S. Department of Energy, 2005), pp. 95-99.

6-9

Machined Castings

During 1999-2003, respondents’ net sales values of machined steel castings decreased by a total of

about 4 percent, while operating income for machined steel castings operations decreased by a total of 29

percent (table 6-11). As a percentage of sales value, operating income declined from 15 percent in 1999 to

11 percent in 2003. The most significant factor in the decline in operating income was machining costs,

which increased by more than 27 percent on a per ton basis during 1999-2003. Machined steel castings

producers cite increasing labor costs as another factor in the decline in operating income for machined

castings operations.13

Raw Materials and Energy 

Responding steel foundries purchase scrap steel, primary steel, and alloying metals, in varying

amounts depending on the products manufactured (table 6-12). Although respondents do have some ability

to adjust their relative consumption of scrap steel and primary steel by substituting one for the other, prices

for the grades of scrap required by steel foundries typically move in tandem with prices for primary steel.

Some foundries, particularly those which produce proprietary products for sale directly to end users, are able

to pass raw materials cost increases along to their customers.14 Many foundries, however, are not positioned

to do so. In particular, steel foundries producing commodity products for sale to OEMs are more likely to

be caught in a “cost squeeze” where they are not be able to pass raw materials cost increases along to their

customers. Increasing scrap costs have also led to creative cost-saving arrangements, such as some foundries

purchasing steel scrap directly from their scrap-producing downstream customers.15 

Electricity and natural gas are not directly substitutable in the steel foundry process. Although the

decreasing energy share of electricity costs for responding steel foundries during 1999-2003 is in part a result

of relatively flat electricity prices, the increasing share of natural gas costs during the same period is the result

of price increases (table 6-13). The cost of natural gas is a growing concern to foundry industry officials,

many of whom believe that natural gas prices will increase even further because it is not assured that both

the supply and the delivery system for natural gas will grow as quickly as required by increasing demand.16

On the other hand, Energy Information Administration estimates suggest relatively constant natural gas

prices, with the probability of only modest price increases in the future.17

Labor

Although respondents’ total employment costs decreased as the workforce downsized (table 6-14 and

see table 6-7), per employee costs increased by 22 percent during 1999-2003. Most of the increase was

driven by salaries and wages, which increased by 19 percent on a per employee basis during this period.

However, health benefits, which averaged 11 percent of total employment costs during 1999-2003, increased

by more than 35 percent on a per employee basis to an annual average of more than $5,000 per employee in

2003. Other costs (including unemployment insurance and worker’s compensation), which averaged 9

percent of total employment costs during 1999-2003, increased by 39 percent on a per employee basis, to an

annual average of $4,400 per employee in 2003. Responding producers’ questionnaire data consistently

ranked these cost trends as serious issues impacting the viability of their operations. Industry officials
6-10

Table 6-11 

Steel foundries: Responding U.S. producers' financial results for their machining operations, fiscal years 1999-

2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) ..................... (1) (1) (1) (1) (1)

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822,876 761,990 696,892 668,391 786,256

Cost of goods sold:

Rough castings produced ................ 403,671 373,722 343,694 339,610 390,446

Rough castings purchased

 from other companies ................ (1

) (1) (1) (1) (1)

In-house machining costs ................ 212,014 222,048 207,798 182,898 237,087

Subcontracted machining costs . . . . . . . . . . . 13,817 17,148 15,822 15,216 15,527

Other machining costs . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total costs of goods sold ............... 639,941 622,007 577,599 546,447 653,660

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,935 139,983 119,293 121,944 132,596

Selling, general, and administrative . . . . . . . . . . 59,221 58,866 53,112 44,671 45,033

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 123,714 81,117 66,181 77,273 87,563

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 78 82 83 82 83

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 18 17 18 17

Selling, general, and administrative .......... 7 8876

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 15 11 9 12 11

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 9 12 12 12 14

Financial results data . . . . . . . . . . . . . . . . . . . . . 36 39 40 40 41 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-12 

Steel foundries: Share of total metal raw material costs for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Primary metals in scrap form . . . . . . . . . . . . . . . 61 58 56 59 60

Primary metals in other forms . . . . . . . . . . . . . . . 23 26 28 24 23

Other metal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16 16 17 18 —————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 
 18 U.S. industry officials, telephone interviews with USITC staff, Feb. 7 and 8, 2005. Industry officials cited the

unique labor demands of the steel foundry industry as an inherent constraint. Because the work is relatively arduous,

and working conditions are dirtier and more dangerous than in some other industries, steel foundries have difficulty

attracting a sufficient number of suitable entry-level workers. Also, since steel foundry skills are necessarily

acquired on-the-job, industry officials cited high labor turnover and low retention as a constraint to labor force

development. Finally, the costs of unemployment insurance and worker's compensation are typically higher for the

steel foundry industry than for other industries because premiums are affected by workforce layoffs and workplace

accidents, which, despite diligent avoidance efforts, have occurred within the industry.

6-11

Table 6-13 

Steel foundries: Share of total energy costs for responding U.S. producers' rough casting operations, fiscal years

1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 69 66 72 68

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 30 33 27 31

Metallurgical coke . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1 1 (1

) (1

—————————————————————————————)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-14 

Steel foundries: Responding U.S. producers' employment costs for their rough casting operations, fiscal

years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Salaries and wages (including overtime) ...... 395,018 418,981 389,939 353,490 371,427

Health benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 50,212 54,873 59,252 53,597 53,507

Pension and profit sharing . . . . . . . . . . . . . . . . . 17,277 19,295 15,962 12,827 14,577

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,159 47,409 47,365 44,565 46,081

Employee training . . . . . . . . . . . . . . . . . . . . . . . . 1,085 1,218 1,031 915 873 —————————————————————————————

Total employee costs . . . . . . . . . . . . . . . . . . . 505,751 541,776 513,549 465,394 486,465 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

explained that employment costs are the most difficult manufacturing input to control because the prevailing

costs of labor, health benefits, and other employment costs are set by local markets, and cannot be influenced

by management techniques.18

Investment

Respondents’ fixed-cost capital expenditures decreased from $77 per ton of annual capacity to $62

per ton reflecting the declining financial position of for the steel castings industry (table 6-15). Fixed capital

investments for individual firms range from several million dollars to tens of millions of dollars, with an

industry average of $14 million for steel foundries responding to the producer questionnaire. Increases in

environmentally-related expenditures, especially during 2000-2002, were a particular concern among

responding producers. Responding steel castings producers overwhelmingly cited environmental regulations
6-12

Table 6-15 

Steel foundries: Responding U.S. producers' capital and R&D expenditures for their rough casting operations,

fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capital expenditures:

 Machinery, equipment, and fixtures:

 Environmentally related . . . . . . . . . . . . . . . . 2,128 3,460 7,906 6,031 2,194

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,557 44,196 44,624 37,665 48,374

 Land, building, and related improvements . . . . 8,824 13,690 11,152 2,779 7,116 ––––––––––––––––––––––––––––––––––––––––––––––––––

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,509 61,346 63,682 46,475 57,684

Research and development expenditures . . . . . . 5,118 5,266 5,725 6,883 8,017 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

as the government policy having the greatest impact on their castings business. Producers also stressed the

significance of research and development (R&D) expenditures to their continued competitiveness. During

1999-2003, respondents’ R&D expenditures increased by almost 57 percent, from 4 percent to 15 percent of

their rough casting operating income.

Debt

The ratio of book value to original cost for property, plant, and equipment decreased from 42 percent

to 32 percent during 1999-2003, reflecting the additional investments made by responding producers of steel

castings during that period (table 6-16).

Purchaser Trends

Respondents to the Commission’s purchaser questionnaire sourced 80 percent of their rough steel

castings, by value, from domestic producers during 1999-2003 (table 6-17). However, purchases of rough

steel castings of foreign origin increased by 25 percent during this period. In 2003, 18 percent of

respondents’ purchases of rough steel castings were from foreign producers, compared with 15 percent in

1999. By contrast, respondents’ purchases of machined steel castings of foreign origin were relatively flat

during 1999-2003 (with the exception of 2000), even as purchases of machined steel castings of domestic

origin increased by almost 65 percent in value. In 2003, 65 percent of respondents’ purchases of machined

steel castings were from domestic producers, compared with 52 percent in 1999.
6-13

Table 6-16 

Steel foundries: Other financial information for responding U.S. producers' rough casting operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total debt (1,000 dollars) .................. 246,132 242,064 240,652 268,868 275,676

Property, plant, and equipment:

 Original cost (1,000 dollars)............... 974,690 1,029,380 1,078,468 1,068,540 1,111,132

 Book value (1,000 dollars) ................ 413,707 417,134 406,513 358,187 356,202 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-17 

All steel castings: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Type 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic1 ............................ 256,554 488,405 566,879 356,085 260,707

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,251 106,791 134,947 137,976 56,492

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301,805 595,196 701,826 494,061 317,199

Machined castings:

Domestic1 ............................ 119,815 117,285 141,929 164,964 197,591

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,471 175,705 107,512 92,344 106,333

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,286 292,990 249,441 257,308 303,924 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Includes data for purchases of castings from unknown sources to prevent disclosure of business confidential

information.

Note.–Figures may not add to totals because of rounding. These data do not indicate all purchases of castings in the

United States. See ch. 1 for additional information on data coverage.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
6-14
 19 U.S. industry official, telephone interview with USITC staff, Dec. 17, 2004.

6-15

Product Profile

Steel Valve Castings

Industry Profile

Industry structure.—In response to the

Commission’s questionnaire, 12 foundries in the United

States reported producing steel valve castings. Three

foundries located in Wisconsin, Alabama, and Nebraska

account for approximately 55 percent of the quantity of

steel valve castings reported, and 73 percent of the

production value. Most foundries are multi-product job

shops that produce in low quantity for various industries,

including, for example, the pump, energy, and

transportation industries. Sand casting and investment

casting are the leading methods used to produce steel

valve castings. Most foundries that produce steel valve

castings manufacture their own molds and patterns, as

well as machine rough castings. Establishments that

produce steel valve castings have increased automation

to increase efficiency, as well as to reduce lead times and

operating costs.19 Most U.S. producer respondents

reported that being qualified as an Approved

Manufacturer was an important factor in the marketing of

castings. U.S. producers cited ISO 9000/14000 as the

most common certifications.

U.S. producers of steel valve castings vary in the

channels by which they distribute their products. In

response to the Commission’s questionnaire, U.S.

producers of steel valve castings reported that OEMs are

the most important channel of distribution, with

approximately 80 percent of shipments of rough castings

and 75 percent of machined castings going to OEMs

(table 6-18).

Product Description and Uses

Taps, cocks, valves and similar devices are used to

control the flow of liquids, gases, and solids through

pipes and piping systems. Flow control is attained

by moving a disc, plug, or other flow-controlling

element within the valve assembly to open, close,

or partially obstruct the passageway. Valves come

in a range of sizes and are used with a variety of

pressures; a check valve permits the material in a

system to flow in only one direction. These

generally have no external means of control, but

are opened by the pressure in the system and are

closed automatically when the pressure drops

below the level for which the valves were designed.

A hand-operated valve generally contains a

mechanism that is used to open and close the

valve. A tap is a type of valve that regulates

delivery at the end of the pipe, and is used in

household faucets and in controls on stem and gas

lines. A cock consists of rotating devices that

regulate the flow of a liquid. It is a type of valve

within a valve that controls the flow of material

within a piping system rather than at the terminal

end of the system. Valves are generally produced

according to standards and specifications

determined by a number of U.S. organizations,

including the American Society for Testing and

Materials (ASTM), the American Petroleum Institute

(API), and the American National Standards

Institute (ANSI). Comparable foreign organizations

have also developed standard specifications for

valves. Valves manufactured for pipes with outside

diameters of more than 2 inches are usually

produced from castings; valves made for smaller

pipes are made from forgings. Steel valves are

generally made from steel scrap.
 20 Ibid.

 21 U.S. industry official, telephone interview with USITC staff, Feb. 4, 2005. 

 22 Crane Valves, found at http://www.cranevalve.com/crane1.htm, retrieved July 13, 2004; and “Valve Standards

in the Petrochemicals and Refining Industry,” Valve Magazine, Vol. 8, No. 3, Summer 1996, p. 10.

6-16

Table 6-18 

Steel valve castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Machine shop/other fabricators ................................................... 7

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Demand characteristics.—Demand for steel valve castings is concentrated in the valve and pipefittings segment (41 percent), as well as the construction machinery and mining equipment segment (19

percent) (table 6-19). In the construction and mining segments, increased demand for natural resources such

as copper ore has affected demand for steel valve castings by companies that supply large equipment and

trucks.20 The energy sector is another key consumer of steel valves. According to one industry

representative, oilfield services companies are a major purchaser of steel valve castings within the valve and

pipe-fittings market.21 As oil prices rise, the activities of oilfield services companies increase, as well as the

demand for steel valve castings. The demand for steel valve castings is largely influenced by the price of oil.

Steel hand-operated and check-type taps, cocks, and valves are used in piping systems in the petroleum

refining, oil and gas production, and chemical processing industries. These are also used in waste water

treatment, and pulp and paper manufacturing, as well as by utility companies.22
 23 Certain data have been withheld to avoid disclosure of business confidential information. These data include

internal consumption, operating income, and research and development expenditures.

 24 U.S. industry official, E-mail correspondence with USITC staff, Jan. 18, 2005.

 25 Spot prices are measured FOB. For historical data, see the Energy Information Administration, Department of

Energy, http://tonto.eia.doe.gov/oog/ftparea/wogirs/xls/psw13vdcr.xls, retrieved Feb. 4, 2005.

 26 Upstream activities include extraction and production. Downstream activities include refining. U.S. industry

official, telephone interview with USITC staff, Feb. 4, 2005.

6-17

Table 6-19 

Steel valve castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

 Other (buses, motor homes, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Farm and garden machinery and equipment .......................................... 2

Mining and oil/gas field machinery and equipment ...................................... 3

Construction machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Railway equipment .............................................................. 1

Industrial machinery ............................................................. 6

Valve and pipe fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Pumps and compressors ......................................................... 6

Ships and boats ................................................................ 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends23

Production and inventories.—Questionnaire respondents reported fluctuating production levels

between 1999 and 2003 (table 6-20) that correspond to establishments’ business cycles and the general state

of the economy,24 as well as to fluctuating oil prices throughout the 5-year period. Between 1999 and 2003,

there was a strong correlation between the price of oil and demand for steel valve castings, which spurred

production levels. The production of steel valve castings increased 15 percent from 1999 to 2000, while West

Texas Intermediate (WTI) spot prices more than doubled over the same period.25 According to one industry

representative, higher oil prices during the period created greater demand for steel valve castings for both

upstream and downstream activities of oilfield services companies.26 However, between 1999 and 2003,

operating costs for producers of steel valve castings rose approximately 11 percent because of increasing

materials costs and energy costs from electricity and natural gas usage.

Total inventory levels remained constant at approximately 10 to 11 percent of total production during

the 5-year period, indicating that establishments adjusted production levels to match sales and maintained

adequate inventory levels.
 27 U.S. industry official, telephone interview with USITC staff, Feb. 7, 2005.

 28 U.S. industry official, telephone interview with USITC staff, Feb. 4, 2005.

 29 Ibid.

 30 U.S. industry official, E-mail correspondence with USITC staff, Jan. 18, 2005.

 31 U.S. industry official, E-mail correspondence with USITC staff, Jan. 21, 2005.

6-18

Table 6-20 

Steel valve castings: Responding U.S. producers' production and inventories for their rough casting operations,

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) . . . . . . . . . . . . . . . . . . . . 17,929 20,629 18,994 16,721 17,265

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 1,398 1,746 1,637 1,376 1,562

Share of production (percent) . . . . . . . . . . . . . 10 11 11 11 12 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production calculations do not total

because they are based on establishments that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Employment.—The average number of employees decreased by 16 percent, and production and

related workers decreased by 24 percent over the five-year period (table 6-21). U.S. producers reported

strong growth in employment in the period leading up to 2001. According to several industry representatives,

the number of hours worked increased 24 percent from 1999 to 2000 owing to the strong state of the

economy. From 2000 to 2003, employment levels, hours worked, and wages paid all declined because of a

decrease in demand for steel valve castings, although hours worked and wages paid picked up slightly in

2003. One industry representative said that during this time, more U.S. purchasers were purchasing from

overseas.27

Compared to 1999, the average number of hours worked annually per production and related worker

increased by 24 percent to 1,908 hours per worker in 2003, indicating that employees were working longer

hours annually. One U.S. producer reported that when demand and production increased, companies were

hesitant to hire additional workers, and instead waited to see if the upward trend would continue.28 In the

meantime, existing employees worked more hours. On the other hand, when demand decreased and

production declined, the same U.S. producer reported a reduction of the work week to 32 hours as a substitute

for lay offs, citing the difficulty of finding quality workers and training inexperienced workers as the main

drawbacks to reducing the skilled labor force.29 Productivity measured in short tons per hour experienced

no change throughout the period, which is reflected by the marginal increase in hourly wages from $11.50

to $12.60 per hour. 

Producers’ shipments and exports.—Between 1999 and 2003, the level of domestic shipments and

exports tended to mirror the pattern of production levels. U.S. producer respondents reported that domestic

shipments and exports increased 14 percent from 1999 to 2000 (table 6-22), attributable to rising oil prices

that positively affected the demand for steel valve castings during this time.30 The quantity of domestic

commercial shipments of rough steel valve castings fluctuated downward after 2000 to below 1999 levels,

whereas the downward trend of internal consumption and transfers after 2000 was reversed by a 32-percent

gain from 2002 to 2003 to 2,237 short tons. Much of the recent year’s increase in internal consumption is

attributable to one establishment’s added capacity in 2002 to produce machined castings.31 Export quantities

increased overall by 15 percent during the period, accounting for 7 percent of shipments.
 32 U.S. industry official, E-mail correspondence with USITC staff, Jan. 18, 2005.

6-19

Table 6-21 

Steel valve castings: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees1 . . . . . . . . . . . . . 1,723 1,807 1,622 1,480 1,453

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729 1,861 1,687 1,470 1,312

Hours worked (1,000 hours) . . . . . . . . . . . . . . 2,668 3,107 2,861 2,452 2,504

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 30,679 35,309 33,874 30,057 31,556

Average hourly wages (dollars per hour) . . . . . 11.50 11.36 11.84 12.26 12.60

Productivity (short tons per 1,000 hours)..... 7 7777 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 One producer was only able to provide the number of production and related workers for their establishment,

therefore, this figure understates the actual average number of employees for the responding producers.

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-22 

Steel valve castings: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,794 16,511 15,249 13,445 13,835

Internal consumption and transfers . . . . . . . . . 2,284 2,719 2,114 1,694 2,237

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041 1,405 1,489 1,073 1,195

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,119 20,635 18,852 16,212 17,267

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,301 129,333 122,722 117,158 120,428

Internal consumption and transfers . . . . . . . . . 17,517 24,187 21,824 26,071 26,429

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,401 6,670 7,288 6,131 6,673

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,219 160,190 151,834 149,360 153,530 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

In terms of dollar value, domestic shipments peaked in 2000, then decreased by 7 percent to

approximately $120 million by 2003. During this period, one establishment reported a change in product mix

from smaller valve castings to larger valve product lines,32 which is reflected in higher unit values. 

Financial condition.—U.S. producers reported irregularly decreasing net sales quantities and

irregularly increasing net sales values during 1999-2003 (table 6-23). Throughout the period, and despite

decreasing or increasing sales, operating income remained at approximate break-even levels. Ten U.S.

producers of rough steel valve castings reported a 14-percent increase in net sales from 1999 to 2000. From

this peak, when operating income for the rough castings sector reached $4.6 million in 2000 because of

heightened demand, operating income decreased to $3.0 million in 2003. Over the five-year period,
6-20

Table 6-23 

Steel valve castings: Responding U.S. producers' financial results for their rough casting and machining

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales . . . . 16,179 (1

) 16,192 14,772 15,423

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 2,247 (1

) 2,069 2,073 2,297

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 0 0000

 Total net sales quantities . . . . . . . . . . . . . 18,426 20,911 18,261 16,845 17,720

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 0 0000

 Total net sales values . . . . . . . . . . . . . . . . 151,613 171,818 154,797 154,034 158,718

Operating income . . . . . . . . . . . . . . . . . . . . 2,226 4,600 3,443 (1

) 3,011

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 1 3 2 (1) 2

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 2 1132

Financial results data ................... 9 9999

Machined castings:

Net sales (short tons) . . . . . . . . . . . . . . . . . . . 2,906 3,424 2,854 3,052 3,346

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,758 53,404 49,107 55,482 (1

)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 0 1000

Financial results data ................... 6 6666 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 33 U.S. industry official, E-mail correspondence with USITC staff, Jan. 21, 2005.

 34 Ibid.

 35 Ibid.

 36 U.S. industry official, telephone interview with USITC staff, Feb. 7, 2005.

 37 U.S. industry officials, telephone interviews with USITC staff, Jan. 21, 2005.

 38 Ibid.

6-21

operating margins for rough castings ranged between one and three percent. Of the ten establishments

reporting, between one and three reported operating losses during the period under study. 

U.S. producers reported higher margins for their sales of machined castings. Operating margins for

producers of machined steel valve castings were substantially higher than those of producers of rough steel

valve castings, reflecting the higher value-added component of machined steel valve castings versus rough

steel valve castings and the expansion and growth of one establishment.33 Total net sales in short tons of

machined castings increased 15 percent between 1999 and 2003 despite declines in sales in 2001 and 2002.

In dollar terms, total net sales increased 28 percent over the five-year period. Two establishments reported

operating losses in 1999 and 2000.

Investment.—Questionnaire responses show that capital and research and development expenditures

fluctuated widely from year to year. U.S. producer questionnaire respondents reported a large increase in

capital expenditures from 1999 to 2000, which was mainly because of the expansion of one establishment

(table 6-24).34 Capital expenditures fell in 2001, fell sharply in 2002, and then rose in 2003. One company

official cited eroding profitability as a result of increased foreign competition as the cause of the decline in

capital expenditures during this period.35 Another industry official cited a reluctance on the part of U.S.

producers to maintain or increase capital expenditures based on projected demand and production levels.36

U.S. industry representatives reported that the increase in capital expenditures in 2003 was mostly attributable

to increases in business gained from closed foundries in the United States. Subsequent increases in profits

were channeled into new capital investments.37 Although some high production shops have increased capital

investments and automation to increase efficiency and productivity, industry officials state that capital

improvements for labor-intensive job shops are not as cost effective.38 Research and development

expenditures followed a similar pattern as capital expenditures.

Purchaser Trends

Respondents’ purchases of both foreign-produced rough and machined steel valve castings more than

tripled during 1999-2003, with slightly more purchases of rough steel valve castings than purchases of

machined castings during the period. During 1999-2003, the U.S. industry experienced a steady decline in

the purchases of rough steel valve castings, but increased its hold of the machined castings sector by the end

of the period (table 6-25). Because limited purchasing data were provided by the U.S. purchasers of these

castings, specific country details cannot be provided to protect business confidentiality. However, imports

from Korea and India dominated the rough castings sector, and were also significant sources of machined

castings for U.S. producers. China, however, surpassed both Korea and India as the largest source of U.S.

imports of machined castings. 
6-22

Table 6-24 

Steel valve castings: Responding U.S. producers' capital and R&D expenditures for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 5,639 11,882 9,062 1,286 2,530

Research and development expenditures ...... (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. 

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 6-25 

Steel valve castings: Purchases of domestic and foreign castings by responding U.S. purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 ....................................................................... 135,890

2000 ....................................................................... 221,687

2001 ....................................................................... 271,313

2002 ....................................................................... 140,109

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,021

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,816

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,501

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,710

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,852

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,866 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Overall U.S. imports for consumption of downstream products of steel valve castings exhibited an

upward trend during 1999-2004, increasing approximately 28 percent to over $600 million in 2004 (table 6-

26). Downstream products from Canada continued to dominate U.S. imports for consumption, posting a 38-

percent gain between 1999 and 2004, despite a decline in demand in 2001 and 2002 because of the U.S.

economic downturn. During the same time that Canada and Mexico were experiencing declines in exports

to the U.S. market, Chinese exports of downstream products of steel valve castings to the U.S. market more

than doubled, while Korea and Taiwan exhibited consistent export growth of 37 percent and 10 percent,

respectively, during 1999-2004

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.—U.S. producer questionnaire respondents reported that the prices of

rough castings produced in Brazil, China, India, and Mexico ranged between 34 percent and 57 percent lower

than the price of similar castings produced in the United States (table 6-27). Four U.S. producer respondents

cited China as having the lowest priced rough castings. U.S. producers reported that machined castings

produced in Brazil, China, India, Korea, and Mexico ranged between 40 percent and 65 percent lower than

similar machined castings produced in the United States. U.S. producers cited Brazil and China
6-23

Table 6-26 

Steel valve castings: U.S. imports for consumption of downstream products, by leading suppliers, 1999-

2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Canada . . . . . . . . . . . . . . . . . . . 78,960 96,324 106,460 88,007 97,656 108,666

China . . . . . . . . . . . . . . . . . . . . 40,706 45,319 51,538 53,728 64,567 99,685

Korea . . . . . . . . . . . . . . . . . . . . 44,344 50,086 52,732 53,083 62,288 61,067

Taiwan . . . . . . . . . . . . . . . . . . . 52,557 62,911 59,074 53,813 56,117 57,702

Italy . . . . . . . . . . . . . . . . . . . . . . 37,779 40,380 45,228 51,169 41,172 44,434

Mexico . . . . . . . . . . . . . . . . . . . 49,436 64,302 61,481 40,321 33,217 38,554

India . . . . . . . . . . . . . . . . . . . . . 10,866 15,448 24,019 23,788 25,431 32,119

Romania . . . . . . . . . . . . . . . . . . 6,754 11,722 18,945 9,252 15,974 24,461

Japan . . . . . . . . . . . . . . . . . . . . 32,285 30,230 28,963 23,802 19,666 22,944

Germany . . . . . . . . . . . . . . . . . . 28,593 21,943 22,045 18,454 17,575 19,692

All other . . . . . . . . . . . . . . . . . . 93,480 114,930 104,703 106,538 89,986 98,293

 Total . . . . . . . . . . . . . . . . . . . . 475,760 553,595 575,188 521,955 523,649 607,617

Note.–Downstream products include steel taps, cocks, and valves, and steel parts for these products (HTS

classifications 8481.30.20 and 8481.80.30). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Table 6-27 

Steel valve castings: Price comparison by responding U.S. producers of domestic and foreign castings in the

U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 39

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 57

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 54

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 34

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 65

Canada .............................. About the same 1 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 66

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 57

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 60

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 40

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

as the lowest priced producers. Based on price comparisons, U.S. producers of machined castings are at more

of a competitive disadvantage vis-à-vis foreign producers than are U.S. producers of rough castings.

U.S. purchasers questionnaire respondents reported smaller price differentials for rough steel valve

castings from most suppliers than did U.S. producers, indicating significant differences between perceived

and actual prices (table 6-28). Purchasers reported that prices of foreign-produced rough castings were

between 15 percent and 33 percent lower than similar machined castings purchased in the United States. U.S.

purchasers reported that rough castings purchased in China had the largest price differential (33 percent)

compared to domestic U.S. prices.
 39 U.S. industry officials, telephone interviews by USITC staff, Jan. 21, 2005.

 40 Ibid.

6-24

Table 6-28 

Steel valve castings: Price comparison by responding U.S. purchasers of domestic and foreign castings in the

U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 33

Eastern Europe1 . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 35

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 25

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 15

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23

Machined castings:

Canada .............................. About the same 1 (2

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 12 39

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (2

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (2

)

Eastern Europe . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 50

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 6 42

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 18

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 29

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland, Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro). 2

 Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

U.S. purchaser respondents reported that China is in the best competitive position vis-à-vis India,

Korea, Taiwan, and the EU-15 to influence purchaser decisions to expand purchases from foreign suppliers.

Out of 39 responses, approximately one-third cited better delivery times, better range or variety of products,

better reliability of supply, better warranty terms, better technical support, and lower transportation costs as

the main competitive factors in China that influence purchaser decisions. Competitive positioning of each

country relative to one another does not appear to be based on price, as better U.S. delivered price as a

decisive competitive factor only drew minimal responses.

Producers’ response to import competition.—In response to the Commission’s questionnaire, nine

establishments noted that they had implemented cost-reduction efforts, including plant consolidations,

reductions in capital expenditures, and lean manufacturing processes (table 6-29) .39 Eight establishments

had lowered prices or suppressed price increases for steel valve castings, and seven establishments had cut

back or eliminated production. Six establishments reported reducing or eliminating plans to expand existing

capacity. One industry representative expressed concern that continued downward pricing pressure because

of foreign competition would result in further reduction of capacity and a deterioration of the industry.40
6-25

Table 6-29 

Steel valve castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 3

Had already shifted production to other lines of castings ............................... 2

Lacked capital funds to counter foreign competition ................................... 1

Took the following actions:

Lowered prices or suppressed price increases ....................................... 8

Reduced or dropped plans to expand capacity ....................................... 6

Cut back or eliminated production ................................................. 7

Closed production lines ......................................................... 3

Shifted to other cast products .................................................... 4

Implemented cost-reduction efforts ................................................ 9

Improved product quality ........................................................ 7

Imported product instead ........................................................ 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 1

 AFS, “38th Annual Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 2

 Of the 195 establishments reporting production of aluminum castings, 39 respondents reported information on

aluminum engine component castings and 28 reported information on aluminum suspension/steering component

castings. Of the 184 purchasers reporting information on aluminum castings, 45 respondents reported purchases of

aluminum engine component castings and 24 respondents reported purchases of aluminum suspension/steering

component castings. 

7-1

CHAPTER 7

U.S. ALUMINUM FOUNDRY INDUSTRY 

This chapter provides an overview of the U.S. aluminum foundry industry, based on responses to the

USITC producer and purchaser questionnaires, fieldwork, and interviews with leading industry participants.

The chapter begins with a discussion of the structure of the industry and leading demand characteristics,

followed by an analysis of various business trends, production factors, and domestic policies, and concluding

with a discussion of purchasing trends.

The U.S. aluminum foundry industry provides notable contrasts to other metal-type foundry

industries. Responding foundries vary widely in size but with none large enough to dominate production.

The firms are mostly job shops, and a high portion are die casters. Unlike other metal-type castings, aluminum

castings are sold predominantly as components for the automotive industry, as U.S. aluminum foundries are

integrated into the automotive components supply chain. Moreover, aluminum foundries have benefitted at

the expense of iron from material substitution by the automotive industry’s efforts to reduce overall vehicle

weight and improve fuel efficiency. Responding foundries that also machined aluminum castings exhibited

stronger financial performance than those with solely rough casting operations. Unlike other metal-type

segments, the aluminum foundry industry is also noted for maintaining significant levels of capital investment

not only to convert facilities from iron to aluminum casting, but also to take advantage of advances in

aluminum casting technology.

Of the 465 establishments responding to the foundry questionnaire, 195 establishments reported

producing aluminum castings in the United States during 1999-2003. The American Foundry Society (AFS)

also collects information on the foundry industry based on metal types. Questionnaire data collected by the

USITC account for 75 percent of aluminum foundry production in 2003 as reported by the AFS.1

 Of 463 U.S.

purchasers responding to the foundry questionnaire, 197 firms reported purchasing aluminum-based castings.

Results from the producer and purchaser questionnaires are discussed in this chapter to provide not only an

overview of the aluminum foundry industry, but also more product-specific analysis of aluminum and

aluminum alloy engine parts and aluminum suspension and steering parts castings.2

Industry Profile

Industry Structure

Aluminum foundry firms are diverse in size. There are no firms that account for a significant

percentage of production and the size of firms predominately ranges from less than 100 to fewer than 300

employees. Most of the 35 firms with employment over 300 are captive foundries or dedicated Tier 1

suppliers to the automotive industry. Responding foundries that cast aluminum are concentrated primarily

in Pennsylvania and Indiana.
 3

 “Die Castings End Users - 2003,” Leggett and Platt Aluminum Group, found at

http://www.legaluminum.com/graphics/faq_intro_04.jpg, retrieved Mar. 9, 2005. 

 4

 Aluminum Association, found at http://www.aluminum.org/Content/NavigationMenu/The_Industry/

-Castings/Castings.htm, retrieved Jan. 12, 2005.

 5

 Christina A. Stutovich, Counter Intelligence: Engine Parts, Aftermarket Business, Aug. 25, 2003. 

 6

 U.S. industry officials, interview by USITC staff, United States, June 23 and 24, 2004; and multiple responses

to the producer questionnaire. 

 7

 Multiple producers questionnaires; and U.S. industry officials, telephone interview with USITC staff, Feb. 7,

2005 and Feb. 8, 2005.

 8

 For more detail, see Chapter 3: U.S. Foundry Industry.

 9

 Multiple producer questionnaires; and U.S. industry official, telephone interview with USITC staff, Feb. 2,

2005.

7-2

Establishments reporting production of aluminum rough castings refer to themselves as job shops,

and production is split between those producing a limited number of products in high quantities and a broad

number of products in low quantity runs. Leading products produced are automotive components, such as

engine blocks, wheels, cylinder heads, and manifolds. Production related activities performed at reporting

establishments are not as diverse as those of foundries that cast other metals. Much of the pattern and moldmaking is performed off-site (table 7-1). Over one-half of the establishments reported that they are die casters

whose castings are predominately for the automotive industry, of which over 50 percent are used in power

trains.3

Table 7-1 

Aluminum foundries: Establishment activities of responding producers ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Number responding that Average percentage

Activity performed activity performed in-house

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total establishments reporting = 172

Design of rough castings . . . . . . . . . . . . . . . . . . . . . . . 74 59

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 59

Mold making, expended type . . . . . . . . . . . . . . . . . . . . 43 86

Mold/die making, permanent type . . . . . . . . . . . . . . . . . 60 47

Machining of rough castings . . . . . . . . . . . . . . . . . . . . . 136 71

Downstream manufacture . . . . . . . . . . . . . . . . . . . . . . . 42 68 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Demand Characteristics

About 73 percent of aluminum castings are intended for the automotive industry (table 7-2), which

is the largest market for aluminum castings and cast products make up more than one-half of the aluminum

used in automobiles.4

 Aluminum’s light weight is attractive to auto manufacturers seeking to reduce vehicle

weight to improve fuel efficiency and reduce emissions.5

 According to responses to the USITC producer

questionnaire and staff interviews, the trend toward lighter materials is driving the aluminum casting

industry.6

While there is increased demand for aluminum components in automobiles, producers indicate that

the automotive market is a highly competitive, low-margin segment.7

 If producers can maintain high-volume,

then they can be competitive. However, in times of economic downturn such as 2001, when sales and demand

declined, producers are immediately affected by the shift. For example, the market for large highway trucks

declined in 2001,8

 negatively affecting producers for that market segment.9
 10 U.S. industry officials, telephone interviews by USITC staff, Jan. 12, 2005 and Feb. 7, 2005.

7-3

Table 7-2 

Aluminum foundries: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

 Other (buses, motor homes, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Farm and garden machinery and equipment .......................................... 7

Refrigeration, air conditioning, and heating equipment ................................... 1

Industrial machinery ............................................................. 1

Household appliances ............................................................ 3

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Ships and boats ................................................................ 2

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ––––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Only 46 percent of aluminum foundries indicated that they machine castings in-house (table 7-3), of

which 80 percent are sold to OEMs for incorporation into downstream products. Few aluminum foundries

finish and assemble final products for sale. The share of sales of rough castings to machined castings by

respondents has remained stable over the past five years. 

Producer Trends

Capacity, Production, Inventories, and Shipments

Production, capacity, and shipments of aluminum castings increased during 1999-2003 (by 15

percent, 35 percent, and 20 percent, respectively), reflecting growing worldwide demand for aluminum

products, particularly in automotive applications (tables 7-4 and 7-5). Specifically, producers indicated that

shifts made by the Big Three auto manufacturers (General Motors, Ford, and the Chrysler division of

DaimlerChrysler) directly affected their operations, as production lines were expanded or modified to

accommodate new business. For example, from 1999-2003, Ford reconfigured the F-150 to include more

aluminum components. For a few firms, an increase in the diameter of wheels for Ford and GM vehicles, from

15 inches to 18 inches over the period,10 led to increased production and shipments. In addition, components

such as knuckles and control arms were converted from ductile iron to aluminum. In anticipation of growing

demand, producers increased capacity faster than shipments grew, so capacity utilization dropped over the

period. 

Growth also occurred in the value of internal consumption and transfers as many firms, such as Ford,

set up captive foundries to accommodate new product lines. Additionally, a number of mergers and

acquisitions took place as firms shifted towards aluminum, which expanded pouring capabilities for
 11 Al Wrigley, “Budd Buy Seen Proof of New Merger Wave,” American Metal Market, June 28, 2000, Vol. 108,

Issue 124, p. 16.

7-4

Table 7-3 

Aluminum foundries: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Machine shop/other fabricators ................................................... 5

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

)

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-4 

Aluminum foundries: Responding U.S. producers' capacity, production, and inventories for their rough

casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capacity (short tons) . . . . . . . . . . . . . . . . . . . . . . 1,984,306 2,059,350 2,168,378 2,460,681 2,676,496

Production (short tons) . . . . . . . . . . . . . . . . . . . . 1,271,861 1,448,825 1,241,855 1,409,842 1,458,699

Capacity utilization (percent) . . . . . . . . . . . . . . . . 73 73 59 59 56

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 67,358 80,183 72,550 78,604 77,851

Share of production (percent) ............. 6 6766 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Capacity utilization based on establishments that were able

to provide both capacity and production amounts. Inventory share of production based on establishments that were

able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

downstream producers of products using aluminum castings. For example, Budd, a subsidiary of

ThyssenKrupp, acquired Stahl Specialty and merged it into Waupaca Foundry (ThyssenKrupp’s U.S.

division), one of the largest cast-iron foundry companies in the country. This deal expanded Waupaca’s

aluminum pouring capabilities by over 45 million pounds per year.11
 12 U.S. industry official, telephone interview with USITC staff, Nov. 2, 2005. 

7-5

Employment 

During 1999-2003, employment and hours worked within the aluminum castings industry fluctuated

and was slightly lower in 2003 than in 1999 (table 7-6). The growth in productivity was pronounced from

2001 through 2003, increasing by 4 percentage points to 24 short tons/1,000 hours. At $19.57 per hour, wages

in 2003 were $2 per hour more than the average for all metal types. As many aluminum foundries are leading

Tier 1 suppliers, wages in the industry tend to positively correlate to wages for the automotive industry, which

are commonly union shops. Additionally, wholly owned suppliers for foreign automotive firms, such as

Nissan and Toyota, have stable, long-term arrangements with their parent and can afford to pay higher

salaries than foundries for other metal types.12

Table 7-5 

Aluminum foundries: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 512,837 516,986 497,412 570,947 572,656

 Internal consumption and transfers ......... 677,497 748,046 632,263 721,600 724,003

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,730 65,654 61,394 63,128 65,127 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250,064 1,330,686 1,191,069 1,355,675 1,361,786

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,416,678 2,382,009 2,332,086 2,537,722 2,599,531

 Internal consumption and transfers . . . . . . . . . 2,404,498 2,958,701 2,764,895 3,120,471 3,198,242

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ————————————————————————————— 234,840 281,569 265,302 264,136 275,527

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,056,016 5,622,279 5,362,283 5,922,329 6,073,300 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-6 

Aluminum foundries: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 34,122 35,863 33,755 34,057 33,643

Production and related workers:

Average number . . . . . . . . . . . . . . . . . . . . . . . 28,968 30,528 28,518 28,874 28,338

Hours worked (1,000 hours) . . . . . . . . . . . . . . 59,182 61,886 58,815 59,781 59,029

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 1,008,065 1,072,406 1,076,861 1,160,001 1,153,172

Average hourly wages (dollars per hour) . . . . . 17.04 17.33 18.46 19.43 19.57

Productivity (short tons per 1,000 hours) . . . . . 20 22 20 23 24 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid data. Productivity based on establishments that were able to

provide both production quantity and hours worked data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 13 “Intermet Sees Surge in Raw Materials Prices,” June 24, 2002, found at http://www.intermet.com/latest/2002/

rawmat.html, retrieved Feb. 2, 2004.

7-6

Financial Condition

Rough Castings

The aluminum foundry industry recovered from period lows for many financial indicators in 2001,

as operating income rebounded in 2003 to surpass 1999 levels by 12 percent (table 7-7). The impact of the

2001 downturn is reflected in the sharp increase in firms reporting operating losses, which increased from

25 percent of reporting firms in 2000 to 36 percent in 2001. While total net sales quantities increased

marginally, the overall value increased significantly, by $1.2 billion between 1999 and 2003, as many firms

produced more complex, higher-priced castings for automotive applications. 

Raw materials costs grew significantly throughout the period, and the ratio of raw materials costs to

net sales was comparatively higher than that for other metals (by at least 5-percentage points). This correlates

to the higher relative costs for aluminum than inputs for foundries of other metal types. One component in

the increase of raw materials cost was an increase in the cost of secondary aluminum in 2002, which one

company estimated cost an additional $1.2 million in the second quarter of 2002 compared to the first.13

Energy costs peaked in 2001, before declining by 2003, yet still grew 65 percent between 1999 and

2003 (see table 7-7). Average unit values for energy followed similar trends, reflecting the fluctuating costs

of natural gas and electricity over the period (table 7-8). Labor costs for rough aluminum castings remained

fairly stable through the period, reflecting the high, but more stable union driven wages for aluminum foundry

workers.

Producers making a limited number of products were the most affected by the 2001 downturn,

shifting from profits to a $113 million loss in 2001 (table 7-9). These companies are highly dependent on their

customer, and if the customer has a change in demand, it is reflected in the profits of the foundry. Many of

these firms are captive producers, and, due to company restructuring throughout the captive producer class,

these firms showed a profit by 2002.

Machined Castings

Responding foundries that also machined aluminum castings exhibited stronger financial conditions

than those with solely rough casting operations (table 7-10). While operating income for machined aluminum

castings declined over the period, it did not experience the same fluctuations as operating income for rough

castings. Further, operating income as a percentage of net sales for machined castings was significantly higher

than that for rough operations. 
7-7

Table 7-7 

Aluminum foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Net sales:

Commercial domestic and export sales ...... 443,488 460,058 457,442 527,481 535,864

Internal consumption for production of

 machined castings .................. 524,316 594,552 496,329 572,818 575,017

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 70,058 101,941 86,056 100,882 109,235

 Total net sales quantities . . . . . . . . . . . . . . . 1,037,862 1,156,551 1,039,827 1,201,181 1,220,116

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . . . 2,014,474 2,124,063 2,117,750 2,365,809 2,408,721

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 1,663,512 2,015,184 1,911,239 2,146,721 2,207,483

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 321,499 511,902 461,868 519,307 570,905

 Total net sales values . . . . . . . . . . . . . . . . . 3,999,485 4,651,149 4,490,857 5,031,837 5,187,109

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 1,479,085 1,686,039 1,617,444 1,947,748 1,994,908

Direct labor ........................... 724,937 789,619 795,516 870,095 887,931

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,715 185,160 222,273 201,406 215,938

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 1,206,744 1,480,284 1,534,793 1,569,428 1,566,872

Total cost of goods sold . . . . . . . . . . . . . . . . 3,541,481 4,141,102 4,170,026 4,588,677 4,665,649

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,004 510,047 320,831 443,160 521,460

Selling, general, and administrative .......... 202,192 242,940 243,221 231,579 234,539

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 255,812 267,107 77,610 211,581 286,921

Other income and expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . 51,095 53,002 50,587 37,437 32,045

All other expenses and income . . . . . . . . . . . . 41,129 53,518 97,761 -2,637 31,684

Net income before taxes . . . . . . . . . . . . . . . . . . . 163,588 160,587 -70,738 176,781 223,192

Depreciation/amortization . . . . . . . . . . . . . . . . . . 206,112 222,078 254,808 268,358 284,390

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 36 36 39 38

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17 18 17 17

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4544

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 30 32 34 31 30

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 89 89 93 91 90

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 7 9 10

Selling, general, and administrative .......... 5 5555

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 6 6246

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 35 38 56 47 48

Financial results data . . . . . . . . . . . . . . . . . . . . . 139 150 154 155 156 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-8

Table 7-8 

Aluminum foundries: Selected financial unit values for responding U.S. producers' rough casting operations,

fiscal years 1999-2003

(Dollars per short ton) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total sales unit value . . . . . . . . . . . . . . . . . . . . . 3,854 4,022 4,319 4,189 4,251

Raw material cost . . . . . . . . . . . . . . . . . . . . . . . . 1,425 1,458 1,555 1,622 1,635

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . 698 683 765 724 728

Energy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 160 214 168 177

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 1,163 1,280 1,476 1,307 1,284

Total cost of goods sold . . . . . . . . . . . . . . . . . . . 3,412 3,581 4,010 3,820 3,824

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441 441 309 369 427

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. For each of the above items, unit values calculated only

where establishment provided both value and quantity data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-9 

Aluminum foundries: Selected financial information for U.S. producers' rough casting operations for

specified classes, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Class/item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Job shops:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,097,337 2,342,145 2,096,384 2,238,331 2,245,729

Operating income . . . . . . . . . . . . . . . . . . . . . . 169,809 187,315 127,453 178,064 190,718

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,492 155,307 102,899 154,467 172,047

Captive producers:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 1,459,993 1,614,687 1,742,561 2,106,476 2,189,277

Operating income . . . . . . . . . . . . . . . . . . . . . . 5,810 11,167 -20,750 13,029 53,103

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . -24,733 -46,797 -127,324 17,661 34,994

Limited number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,623,673 2,984,566 2,979,150 3,500,518 3,639,238

Operating income . . . . . . . . . . . . . . . . . . . . . . 155,733 155,743 17,136 114,758 189,637

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,370 62,710 -113,410 99,804 139,333

Broad number of products:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 882,245 948,024 862,140 853,135 861,263

Operating income . . . . . . . . . . . . . . . . . . . . . . 43,543 58,511 26,647 43,337 65,799

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,513 54,823 19,290 34,161 58,494

Die casters:

Total net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,875,479 3,221,402 2,987,273 3,284,961 3,470,216

Operating income . . . . . . . . . . . . . . . . . . . . . . 209,107 238,045 125,127 181,050 212,697

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,769 193,565 92,950 152,201 184,085 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 14 U.S. industry official, telephone interview with USITC staff, Feb. 8, 2005, and for more information, see

Chapter 3: U.S. Foundry Industry. 

 15 U.S. industry official, telephone interview with USITC staff, Feb. 8, 2005. 

 16 Paul Schaffer, “Conn. Foundry Faces $65,750 EPA Penalty,” American Metal Market, Sept. 20, 2004, Vol.

112, Iss. 38, p. 14. 

 17 U.S. industry officials, telephone interviews with USITC staff, Feb. 2 and 7, 2005. 

7-9

Table 7-10 

Aluminum foundries: Responding U.S. producers' financial results for their machining operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) ..................... 499,515 509,627 429,278 495,533 486,760

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,397,938 2,684,394 2,378,836 2,687,200 2,588,568

Cost of goods sold:

Rough castings produced . . . . . . . . . . . . . . . . 1,393,645 1,549,642 1,348,347 1,454,488 1,486,657

Rough castings purchased

 from other companies . . . . . . . . . . . . . . . . 2,441 11,597 52,702 68,169 66,510

In-house machining costs ................ 580,349 647,816 566,187 713,577 661,235

Subcontracted machining costs . . . . . . . . . . . 17,121 20,934 22,517 26,141 30,212

Other machining costs . . . . . . . . . . . . . . . . . . 36,463 39,836 38,826 72,898 77,584

 Total costs of goods sold . . . . . . . . . . . . . . . 2,030,019 2,269,825 2,028,579 2,335,273 2,322,198

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 367,919 414,569 350,257 351,927 266,370

Selling, general, and administrative . . . . . . . . . . 69,264 128,975 125,866 86,668 85,602

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 298,655 285,594 224,391 265,259 180,768

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 85 85 85 87 90

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15 15 13 10

Selling, general, and administrative .......... 3 5533

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 12 11 9 10 7

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 18 19 19 22 22

Financial results data . . . . . . . . . . . . . . . . . . . . . 86 90 92 92 93 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Raw Materials and Energy

Between 1999 and 2003 the share of scrap to primary aluminum as inputs to the casting process

remained fairly stable (table 7-11). The drop in the cost share of aluminum scrap in 2000 corresponds to an

increase in aluminum ingot prices during that year. In late 2003 and early 2004, however, firms reported

shifting back to primary aluminum. According to producers, the market for aluminum scrap has tightened

considerably, and it is hard to obtain.14 Further, the industry may shift from scrap because melting aluminum

scrap causes foundries to surpass acceptable pollution limits dictated by the EPA.15 To meet these new

standards, aluminum scrap must be free of paint, coating, and lubricants, or measures need to be taken to

prevent release of dioxin and furan, which can cause cancer and other illnesses.16 By 2000, many aluminum

foundries had converted to natural gas furnaces in response to the relatively low cost of natural gas at the time

(table 7-12). However, natural gas costs rose by 2003, accounting for a higher percentage of total energy

costs.17
 18 For more details, see Chapter 3: U.S. Foundry Industry. 

 19 U.S. industry official, telephone interview with USITC staff, Feb. 3, 2005.

7-10

Labor

During 1999-2003 employment costs increased by 17 percent despite the decline in employees and

hours worked during 1999-2003 (table 7-13 and see table 7-6). These shifts were in line with shifts occurring

throughout the manufacturing industry. The cost of health benefits grew 41 percent, slightly higher than the

increase for metal foundries as a group.18 Employee training costs were relatively high compared with other

metal castings mainly owing to training for new aluminum castings processes.19

Table 7-11 

Aluminum foundries: Share of total metal raw material costs for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Primary metals in scrap form . . . . . . . . . . . . . . . 18 15 18 18 18

Primary metals in other forms . . . . . . . . . . . . . . . 68 72 71 72 73

Other metal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 12 11 10 9 —————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-12

Aluminum foundries: Share of total energy costs for responding U.S. producers' rough casting operations,

fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 46 42 46 43

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 52 57 52 56

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ————————————————————————————— 2111

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-13 

Aluminum foundries: Responding U.S. producers' employment costs for their rough casting operations,

fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Salaries and wages (including overtime) . . . . . . 1,188,737 1,252,618 1,279,031 1,353,239 1,343,493

Health benefits .......................... 154,382 172,289 182,062 199,158 218,304

Pension and profit sharing . . . . . . . . . . . . . . . . . 52,917 54,950 61,716 58,367 74,052

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,079 128,196 138,409 139,104 146,906

Employee training . . . . . . . . . . . . . . . . . . . . . . . . 8,861 9,014 7,877 7,642 7,627 —————————————————————————————

Total employee costs . . . . . . . . . . . . . . . . . . . 1,523,976 1,617,067 1,669,095 1,757,510 1,790,382 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-11

Investment and Debt

Aluminum foundries maintained significant levels of capital investment and research and

development expenditures throughout the 5-year period, spending over $1.8 billion in total capital

expenditures and $339 million for research and development (table 7-14). Original costs grew over the period

as companies maintained purchases of capital, averaging $303 million in capital spending each year (table

7-15). This reflects the expenditures necessary to convert facilities from iron castings to aluminum castings

to meet automotive demand, along with significant advances in aluminum casting technology over the period.

Purchaser Trends

Reflecting increasing demand for aluminum foundry products, purchases of aluminum-based castings

by downstream industries increased from 1999 to 2003 (table 7-16). While purchases of domestic castings

remained significantly higher than foreign origin castings throughout the period, growth in purchases of

foreign origin castings outpaced domestic castings for both the rough and machined segments. Purchases of

Japanese machined aluminum castings increased the most (table 7-17), reflecting an increased presence of

production facilities for Japanese automobiles in the United States.

Table 7-14 

Aluminum foundries: Responding U.S. producers' capital and R&D expenditures for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capital expenditures:

 Machinery, equipment, and fixtures:

 Environmentally related . . . . . . . . . . . . . . . . 11,147 8,290 2,406 5,037 1,969

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,345 325,167 300,265 269,236 241,898

 Land, building, and related improvements . . . . 47,575 83,222 74,944 37,130 52,195 ––––––––––––––––––––––––––––––––––––––––––––––––––

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,067 416,679 377,615 311,403 296,062

Research and development expenditures . . . . . . 48,509 117,184 83,554 40,638 48,843 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-15 

Aluminum foundries: Other financial information for responding U.S. producers' rough casting operations,

fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total debt (1,000 dollars) .................. 806,416 829,960 731,468 985,860 870,201

Property, plant, and equipment:

 Original cost (1,000 dollars) . . . . . . . . . . . . . . . 3,444,618 3,984,358 4,425,582 4,672,910 5,167,086

 Book value (1,000 dollars) . . . . . . . . . . . . . . . . 1,888,055 2,118,506 2,214,315 2,190,809 2,211,000 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-12

Table 7-16 

All aluminum castings: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Type 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 896,510 1,000,727 950,540 1,191,412 1,213,916

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,104 111,531 122,376 110,545 113,253

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970,614 1,112,258 1,072,916 1,301,957 1,327,169

Machined castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 949,185 1,046,396 1,080,347 1,227,970 1,304,567

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,809 547,296 720,464 686,330 726,742

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,449,994 1,593,692 1,800,811 1,914,300 2,031,309 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Domestic castings purchases for 1999 include purchases of castings from unknown sources to prevent

disclosure of confidential business information.

Note.–These data do not indicate all purchases of castings in the United States. See ch. 1 for additional information

on data coverage.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 7-17

All aluminum product groups: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Country or region1 1999 2000 2001 2002 2003 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,387 238,716 211,814 270,159 295,278

Foreign:

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (2) (2) (2) (2)

Japan .............................. (2

) (2) (2) (2) (2)

All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,733 16,030 16,606 19.984 19,035

—————————————————————————————

Total, foreign purchases . . . . . . . . . . . . . . 27,118 37,505 41,675 44,500 43,837

Machined castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 560,701 555,543 584,496 646,414 770,810

Foreign:

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,596 40,588 81,732 90,098 79,560

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,114 56,986 39,821 40,520 45,644

EU15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2

) (2) (2) (2) (2)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2

) (2) (2) (2) (2)

All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,443 14,112 19,563 36.704 20,258

—————————————————————————————

Total, foreign purchases . . . . . . . . . . . . . . 66,448 115,373 144,368 171,859 154,110 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Countries and regions are mutually exclusive

2

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. Includes purchases of aluminum engine components and

aluminum suspension parts. Product group data combined to prevent disclosure of confidential business information.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
 20 Anna Kochan, “Higher Volume Cars to Test Aluminum,” Automotive News, Jan. 29, 2002.

 21 Hearing submission of ASC Industries, Inc., Foundry White Paper, p. 4.

7-13

Product Profiles

Aluminum Engine Component Castings

Industry Profile

Industry structure.SThirty-nine manufacturers

responding to the USITC questionnaire reported

production of aluminum engine components, many of

which are leading suppliers of automotive

subassemblies and modules in addition to cast

aluminum components. These firms are largely located

in the Midwest and Mid-Atlantic regions near motorvehicle production centers to provide responsive service

to their customers. Most of these manufacturers are

large, multi-product companies that principally use sand

or die casting to manufacture aluminum engine

components. A few foundries cast these products using

the permanent mold process. In addition to casting,

most responding foundries largely perform some

machining. Less than one-half of respondents,

however, perform any other casting-related operations,

such as mold making, casting design, or pattern making.

The majority of reporting producers indicated that their

customers required certification of their establishments, with ISO9000/14000 the most common certifications.

Demand characteristics.—U.S. foundries reporting for this industry indicated that 49 percent of

rough castings were retained for in-house machining to supply OEMs (i.e., automakers), which accounted

for three-fourths of the machined castings shipped for use in vehicle engines (table 7-18). By retaining these

castings in house for machining, these foundries provide a higher-valued product. Overall, the motor vehicle

industry accounted for 71 percent of U.S. producers’ castings shipments used as aluminum or aluminum alloy

engine components (table 7-19), while 29 percent of these castings shipments were destined for machinery

and equipment for use in engines to power lawn mowers and tractors, for example.

The U.S. market for aluminum castings used as engine components is primarily influenced by trends

in the motor-vehicle industry, particularly North American motor-vehicle production levels asa well as efforts

to reduce motor-vehicle engine weight to improve fuel economy and reduce emissions. Moreover, aluminum

engine components are seeing increased use in motor-vehicle engine applications because of their relative

strength and good recycling characteristics,20despite a few manufacturing difficulties associated with the use

of aluminum (e.g., joining of components) and its higher cost than steel. For example, General Motors (GM)

switched from cast iron to aluminum for the cylinder heads and to aluminum or composite plastic for the

intake manifolds of its V6 and V8 engines.21 GM’s Vortec V-8, to be installed on 2006 model Monte Carlos

and Impalas, includes aluminum oil pans, chain cases, water pumps, and pistons.

Product Description and Uses

Motor-vehicle engines (rotary internal combustion

and spark-ignition) are comprised of a number of

parts, including such principal components as intake

manifolds, exhaust manifolds, pistons, and

connecting rods. These parts are often

manufactured from aluminum alloys because of their

light weight and relative strength. These parts all

serve distinct functions within an engine. The intake

manifold supplies the air-fuel mixture to the cylinders

by means of pipes connecting the carburetor of fuel

injection system and intake valves. The exhaust

manifold performs a similar function, connecting the

exhaust valves with the exhaust pipe to release

engine exhaust. Pistons are cylindrical pieces of

metal, closed at one end, that move up and down

inside the cylinders. They are connected to the

crankshaft by connecting rods, which can rotate at

both ends to adjust to the change in piston and

crankshaft positions and movements.
 22 Al Wrigley, “GM retools for new aluminum engine family,” American Metal Market, Oct 29, 2001.

 23 “General Motors engines will share components,” American Metal Market, Oct. 4, 2002, found at

http://www.amm.com, retrieved Feb. 17, 2005.

7-14

Table 7-18 

Aluminum engine component castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-19 

Aluminum engine component castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Farm and garden machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Household appliances ............................................................ 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

The trend to parts commonality and interchangeability in vehicle platforms has also improved

aluminum penetration in the engine sector.22 General Motors announced that about 75 percent of its Vortec

I-5 and I-4 truck engine components would be shared with the Vortec 4200 I-6 engine, and that 89 percent

of components would be shared between the 3.5 liter I-5 and 2.8 liter I-4 engines.23
 24 Certain data have been withheld to avoid disclosure of business confidential information. These data include

export quantity, breakouts of internal net sales quantities, operating income and related ratios, and research and

development.

 25 Motor vehicle production declined by 8 percent overall during 1999-2003, to 16.2 million vehicles. The period

low was reached during the economic downturn of 2001, when vehicle output totaled 15.8 million units. “North

American Car & Truck Production, 1954-2003,” 2004 Ward’s Automotive Yearbook, p. 117.

 26 See table 7-6, Aluminum castings: Responding U.S. producers’ employees and related information for their

rough castings operations, 1999-2003, p. 7-7.

7-15

Producer Trends24

Production and inventories.—Despite a decline in U.S. motor vehicle production during the period,25

reported U.S. production of aluminum engine component castings fluctuated during the 1999-2003 but posted

a 41-percent total increase to 240,936 short tons in during 1999-2003, in part a response to greater emphasis

on reducing motor-vehicle engine weight to improve fuel economy and reduce emissions (table 7-20).

Inventory levels declined slightly during the period to 4 percent of production volume in 2003, driven in part

by the continued shift to just-in-time delivery by the motor vehicle industry to reduce warehouse and storage

costs incurred with large inventories.

Employment.—Based on questionnaire responses, productivity in the aluminum engine component

sector rose by a total of 33 percent during 1999-2003 to 20 short tons per hour (table 7-21), which exceeds

the overall aluminum foundry industry reported productivity increase of 20 percent. This improvement was

achieved in part through greater application of automation and computer-controlled equipment, as well as

employment cutbacks. Despite a 5-percent decline in total employment, the average number of production

and related workers in the industry remained relatively constant, indicating greater reductions in nonproduction related employment. As a result of these cutbacks, the number of hours worked and the amount

of wages paid also experienced slight declines. The average hourly wage remained relatively constant

between $13.00 to $14.00, reflecting in part U.S. producers’ ongoing efforts to control labor costs at a time

of increased price pressure and competition from low-cost producers. The 2003 hourly wage was 25 percent

less than that earned by U.S. workers employed by the overall aluminum foundry industry ($17.57).26

Table 7-20 

Aluminum engine component castings: Responding U.S. producers' production and inventories for their rough

casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) .................... 170,453 223,862 189,005 219,624 240,936

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 8,611 11,400 10,783 11,855 10,724

Share of production (percent) ............. 6 6665 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-16

Producers’ shipments and exports.—During the period under study, the value of overall shipment

levels experienced significant growth, up 46 percent to $1.2 billion in 2003 (table 7-22). The increase

occurred principally in shipments for internal consumption, as a larger share of expanded industry output was

retained in-house for machining, reflecting in part the trend in the motor vehicle industry for component

manufacturers to shoulder greater manufacturing responsibility and add value to their output by producing

subassemblies or modules. The value of U.S. exports by reporting producers of rough castings used as

aluminum engine components nearly tripled by value during the period and accounted for a small but

increasing share of U.S. producers’ shipments. U.S. exports are principally directed to NAFTA partners

Canada and Mexico, which serve as production bases for U.S. and foreign vehicle makers.

Table 7-21 

Aluminum engine component castings: Responding U.S. producers' employees and related information for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 6,839 7,371 6,693 6,614 6,478

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,804 5,136 4,603 4,678 4,615

Hours worked (1,000 hours) . . . . . . . . . . . . . . 11,347 12,322 10,796 11,221 11,249

Wages paid (1,000 dollars) ............... 157,228 165,914 143,462 155,890 148,557

Average hourly wages (dollars per hour) . . . . . 13.86 13.46 13.29 13.89 13.21

Productivity (short tons per 1,000 hours) . . . . . 15 17 17 19 20 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-22 

Aluminum engine component castings: Responding U.S. producers' domestic shipments and exports for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,979 77,972 73,550 86,840 88,021

Internal consumption and transfers ......... (1

) (1) (1) (1) (1)

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,029 213,317 182,407 212,518 232,269

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,584 334,318 309,246 357,799 357,132

Internal consumption and transfers ......... 443,683 740,936 585,166 681,348 749,746

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,448 36,666 32,277 40,978 52,615

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795,715 1,111,920 926,689 1,080,125 1,159,493 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-17

Financial condition.—Despite price pressures in the motor vehicle industry, U.S. producers reporting

sales of rough aluminum engine castings posted the highest operating income level of the period in 2003 on

sales of 226,984 short tons. Operating income as a share of net sales value was relatively high in 2003, but

down slightly from the period high recorded in 1999 (table 7-23). Of the 38 firms reporting financial data,

8 foundries reported operating losses in 2003, up from 3 firms in 1999. For the machined casting sector,

estimated operating income fluctuated by a wider margin, as operating income fell during the first 3 years of

the period before recovering to a reported period high in 2003. Reported net sales during the period rose by

31 percent overall to $533.4 million in 2003 on net sales of 60,321 short tons. As a share of net sales, the

sector’s operating income returned to double digits in 2003. One responding firm accounted for a large share

of the increase in net sales and operating income, however, as its parent company expanded its U.S.

operations and boosted sales. Despite the improved financial condition of this industry reported during 2002-

03, 4 of the 19 firms reporting financial data recorded operating losses in 2003.

Investment.—Capital expenditures in the rough aluminum or aluminum alloy engine component

castings industry fluctuated during the period, ranging between $32.9 million and $55.4 million (table 7-24).

Research and development expenditures in this sector were considerably lower.

Purchaser Trends

Total purchases of rough and machined aluminum engine castings rose by 57 and 43 percent,

respectively, during 1999-2003, with machined castings accounting for more than three-fourths of purchases

in 2003 (table 7-25). U.S.-produced castings accounted for the bulk of rough castings purchases during 1999-

2003, ranging between 80 and 85 percent of the total. U.S.-produced castings accounted for the bulk of

machined castings purchases as well, although purchases of foreign-produced machined castings made slight

inroads during the period.

Because limited purchasing data were provided by U.S. purchasers of these castings, specific country

details cannot be provided to protect business confidentiality. However, Korea was the leading foreign source

of rough aluminum engine component castings reported by U.S. purchasers during the period, and Japan was

by far the leading foreign source of machined castings used for aluminum engine components imported by

U.S. purchasers. Japanese transplant vehicle and parts producers maintain close ties to Japan-based suppliers

and are believed to account for a large share of these purchases. Several questionnaire respondents also

indicated that there were new suppliers of these products to the U.S. market, most of which were reported to

be foreign suppliers.

The level of direct imports of these products reported by U.S. producers fails to capture those cast

aluminum engine components that are also imported indirectly to the U.S. market as parts of finished engines

and parts. Imports of finished engines and engine parts, which incorporate aluminum engine castings as well

as other types of engine parts, increased by 19 percent during 1999-2004 to $9.1 billion (table 7-26). Canada,

Mexico, and Japan remain the leading suppliers of engines to the U.S. market because of their extensive

integration into the U.S. motor vehicle industry. In addition to Canada Japan, and Mexico, however,

Germany, Korea, and Italy posted large gains during the period. Other notable increases occurred in imports

of engines and related parts from Brazil, China, and Taiwan.
7-18

Table 7-23 

Aluminum engine component castings: Responding U.S. producers' financial results for their rough casting and

machining operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales . . . . 88,868 90,372 83,325 96,661 97,754

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............. 157,093 209,896 178,359 205,740 226,984

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... 371,480 420,189 359,996 410,674 412,212

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 744,355 1,031,054 849,784 994,923 1,055,376

Operating income . . . . . . . . . . . . . . . . . . . . 110,160 128,371 76,616 134,341 150,953

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 15 12 9 14 14

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 3 4898

Financial results data . . . . . . . . . . . . . . . . . . . 27 35 35 37 38

Machined castings:

Net sales (short tons) . . . . . . . . . . . . . . . . . . . 53,726 58,242 49,657 55,775 60,321

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408,255 483,938 420,850 500,737 533,414

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) 36,090 18,383 25,413 (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) 7 4 5(1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 2 4454

Financial results data . . . . . . . . . . . . . . . . . . . 17 18 18 19 19 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-19

Table 7-24 

Aluminum engine component castings: Responding U.S. producers' capital and R&D expenditures for their

rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 34,470 55,375 42,649 46,545 32,939

Research and development expenditures ...... (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-25 

Aluminum engine component castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 ....................................................................... 160,360

2000 ....................................................................... 218,919

2001 ....................................................................... 184,949

2002 ....................................................................... 231,444

2003 ....................................................................... 251,912

Machined castings:

1999 ....................................................................... 611,282

2000 ....................................................................... 648,667

2001 ....................................................................... 702,043

2002 ....................................................................... 782,553

2003 ....................................................................... 875,099 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-26

Aluminum engine part castings: U.S. imports for consumption of downstream products, by leading

suppliers, 1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Canada . . . . . . . . . . . . . . . . . . 3,398,328 3,512,828 2,773,274 2,821,348 3,131,331 3,645,162

Mexico . . . . . . . . . . . . . . . . . . 1,707,221 1,684,604 1,514,641 1,513,832 1,674,504 2,286,756

Japan . . . . . . . . . . . . . . . . . . . 1,854,205 2,222,129 2,179,555 2,305,800 2,056,653 1,886,708

Germany . . . . . . . . . . . . . . . . . 465,114 953,047 912,218 1,042,630 1,080,783 915,780

United Kingdom . . . . . . . . . . . 95,332 127,038 129,290 293,947 226,011 96,303

Brazil . . . . . . . . . . . . . . . . . . . 46,431 54,581 64,883 71,920 72,132 62,726

Korea . . . . . . . . . . . . . . . . . . . 7,695 7,612 11,369 16,343 30,167 39,330

China . . . . . . . . . . . . . . . . . . . 15,186 14,872 17,579 24,781 29,029 30,259

Italy . . . . . . . . . . . . . . . . . . . . . 6,053 4,061 4,664 8,677 14,285 29,244

Taiwan . . . . . . . . . . . . . . . . . . 15,232 14,176 17,030 18,273 22,289 25,187

All other . . . . . . . . . . . . . . . . . 43,384 63,464 68,780 70,971 79,148 78,584

 Total . . . . . . . . . . . . . . . . . . . 7,654,182 8,658,411 7,693,278 8,188,532 8,416,333 9,096,040

Note.–Downstream products include spark-ignition engines for motor vehicles and parts of these engines (HTS

classifications 8407.34.18, 8407.34.48, and 8409.91.50). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.
7-20

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.—China and Brazil were identified by U.S. producers of castings for

aluminum or aluminum alloy engine components as the leading competitive concerns for this industry (table

7-27). Although one producer indicated that the price of castings from China was higher than the U.S. price,

18 U.S. producers reported that Chinese prices were an average of 26 percent lower than the U.S. price for

comparable products. Castings from Brazil were estimated by 7 producers to average 18 percent lower in

price than U.S. castings. A few U.S. producers indicated that rough castings from Germany, India, and

Taiwan were higher priced than the comparable U.S. product.

U.S. producers largely found China to be the lowest priced supplier to the U.S. market for machined

aluminum engine castings, with prices averaging 33 percent lower than the U.S. price. Prices of castings from

Brazil averaged 17 percent below U.S. prices. Other low-priced suppliers of machined castings reported by

U.S. producers include Korea and Mexico.

U.S. purchasers largely noted that imports of rough castings were priced lower than similar U.S.

products, except for those castings from Japan (table 7-28). Imports of machined castings were generally

reported by U.S. purchasers to be comparably priced or lower priced than U.S. imports. Imports of Chinese

castings were cited as averaging 18 percent below U.S. prices, the lowest of all reported foreign sources.

Three U.S. purchasers indicated that machined castings from the EU-15 averaged 11 percent higher than U.S.

products.

Table 7-27 

Aluminum engine component castings: Price comparison by responding U.S. producers of domestic and foreign

castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 18

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 18 26

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 30

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 2 8

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 30

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 30

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 30

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 25

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 8 17

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 11 33

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 30

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 30

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 23

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 27

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 25 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
7-21

Table 7-28 

Aluminum engine component castings: Price comparison by responding U.S. purchasers of domestic and foreign

castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 18

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 5

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 5

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 2

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 11

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

Canada .............................. About the same 3 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 18

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 3 11

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 3 (1

)

Eastern Europe 2

 . . . . . . . . . . . . . . . . . . . . . . Lower 2 7

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 13

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 2 18

Japan ............................... About the same 4 (1

)

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 15

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (1

)

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (1

)

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 4

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 13

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

1

 Not applicable.

2

 Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland,

Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro).

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

When asked for the leading countries from which they have increased imports, U.S. purchasers most

often cited China, Japan, Korea, Mexico, and Brazil. Of particular note is Japan, which was the only country

noted by most responding domestic purchasers as improving on its U.S. delivered price. Non-price factors,

such as better packaging and more flexible payment terms, were the most commonly cited reasons for

increased purchases from most countries. Although these countries demonstrated strengths in many of these

areas, Korea reportedly lagged in providing better product quality and Brazil was less competitive in range

of products offered, reliability of supply, and technical support and service.

Producers’ response to import competition.—The 33 responding producers indicated that the

principal actions undertaken in response to import competition were related to price/cost and quality issues

(table 7-29). The majority of firms (28) lowered or suppressed prices in an effort to counter foreign

competition. Responding U.S. producers of castings for aluminum engine components largely agreed that

prices for these products remained the same or dropped during the period, with price declines generally
7-22

ranging up to 10 percent. Another 27 respondents implemented cost reduction efforts, and 22 firms improved

product quality. Cost-reduction and quality improvement efforts often focus on the implementation of lean

manufacturing, Six Sigma, and total quality management programs that emphasize reductions in waste and

product defects and quality improvements. Less common responses to import competition were corporate

decisions to shift to other cast products and cut back or eliminate production. Four foundries reported that they

lacked the capital funds to respond to their import competition. Foundries reporting operating losses are less

likely to be able to internally fund capital investments, and may find access to external financial sources

somewhat limited because of the relatively unfavorable financial situation and credit rating of the motor

vehicle industry.

Table 7-29 

Aluminum engine component castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 4

Had already shifted production to other lines of castings ............................... 5

Lacked capital funds to counter foreign competition ................................... 4

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Reduced or dropped plans to expand capacity ....................................... 7

Cut back or eliminated production ................................................. 8

Closed production lines ......................................................... 5

Shifted to other cast products .................................................... 8

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Imported product instead ........................................................ 5

Opened a plant in a foreign country ............................................... 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 27 U.S. industry official, telephone interview with USITC staff, Jan. 10, 2005.

 28 Electrical energy costs often account for nearly 50 percent of total manufacturing cost. 

 29 U.S. industry official, telephone interview with USITC staff, Jan. 10, 2005.

 30 Officials of aluminum foundries indicate that little distinction is being made between production in the United

States by U.S.-owned firms or by foreign transplants, which are increasingly open to sourcing their castings needs

from U.S. foundries if the quality and price of these castings are competitive. 

 31 The most notable example is the Corporate Average Fuel Economy (CAFÉ) standards developed by the Federal

Government.

 32 Auto manufacturers announcing new aluminum use were DaimlerChrysler AG’s adoption of aluminum steering

knuckles made of A356 in the 2004 Dodge Durango SUV; Ford Motor Co.’s use of aluminum steering knuckles in

the 2001 Explorer and Mountaineer SUVs, and use of aluminum cast crossmembers for the 2003 Mercury Grand

Marquis and Marauder sedans and for the 2003 Lincoln Town Cars; General Motors’ use of aluminum engine

cradles in its 2004 Pontiac Grand Prix and 2005 Buick Regal cars, and use of aluminum steering knuckles, control

(continued...)

7-23

Aluminum Suspension/Steering Part Castings 

Industry Profile

Industry structure.—A total of 28 firms

responded indicating that they produced aluminum

alloy castings used in suspension/ steering systems

for on-highway trucks, buses, passenger vehicles and

light-duty trucks. An estimated 5 firms account for

nearly 75 percent of aluminum alloy castings used

for suspension/steering applications.27 Most

automotive foundries are located near automotive

production facilities (whether OEM or Tier 1

suppliers), largely in the Midwest. However, a

number of newer aluminum foundries have chosen to

locate near sources of inexpensive electrical energy28

(such as in the U.S. Southeast) and sources of stable,

skilled, and less expensive labor. The degree of

specialization in this industry is largely determined

by the quantity and variety of equipment a particular

foundry possesses. Larger, more highly-capitalized

foundries tend to have a wider volume and variety of

equipment, allowing them to produce a wider range

of products in order to serve a larger number of endusers. Smaller aluminum foundries tend to specialize

in the production of products related to a single enduser with producers of automotive-related aluminum

castings producing solely for the automotive industry.29

Demand characteristics.—U.S. demand for aluminum part castings is heavily dependent on the level

of automotive production in the United States,30 on the continuation of federal legislation to require that

automobiles sold in the United States reach certain average mileage standards,31 and the substitution of lighterweight aluminum components for iron and steel components in order to comply with these standards. During

the past 5 years, a number of automakers in the United States have announced projects to manufacture

suspension/steering parts made from aluminum alloy 356. In part, automakers decided to increase aluminum

use to compensate for weight increases caused by upsizing of new vehicles.32

Product Description and Uses

The steering system in automobiles includes the steering

wheel, various gears and linkages to connect the steering

wheel to position the front tires and other components

used to control the direction of a vehicle’s motion. The

steering system may also contain a power-steering assist

system to supply the force needed to assist the driver in

turning the steering wheel. Principal automotive steering

system components include the steering wheel and

column, a manual gearbox and pitman arm or a rack and

pinion assembly, and linkages (including tie rod, tie rod

end, and idler arm). Major automotive steering

components made of cast aluminum include steering

column components, power steering pump components,

and the housing for the rack and pinion unit. The role of

the automobile suspension system is to keep the car’s

wheels in firm contact with the road surface, as well as,

to provide a comfortable ride for passengers by

absorbing road shock that would otherwise be directly

transmitted to the steering wheel and to the automotive

chassis. Major suspension system components include

the steering knuckle assembly (steering knuckle, control

arm, and caliper), engine cradle, differential carrier, coil

springs, shock absorber and/or strut, sway bar, rotor,

wheel bearing, and wheel rim. 
 32 (...continued)

arms, and differential carriers on the 2004 Cadillac SRX sports wagon; and Mitsubishi’s use of aluminum castings in

crossmembers in V-6 versions of its U.S.-built Eclipse, Galant, and Eclipse Spyder cars. In each case, the aluminum

casting will replace a comparable steel part. 

 33 U.S. industry official, telephone interview with USITC staff, Jan. 10, 2005.

 34 U.S. industry official, telephone interview with USITC staff, Feb. 2, 2005.

 35 Ibid.

 36 U.S. industry official, telephone interview with USITC staff, Jan. 10, 2005.

7-24

Increasingly, the trend in the industry has been for foundries to supply customers (typically OEMs and

Tier 1 producers) with machined castings rather than rough castings for economic reasons. Customers realize

savings from having an entire component cast, machined, and possibly assembled at a single site than having

various stages of production occurring at multiple sites.33 

Aluminum castings compete with iron and steel castings for use in automotive components.

Aluminum gained market share at the expense of iron and steel as automakers sought to reduce weight by

substituting aluminum. However, the higher price of aluminum components relative to iron and steel has

forced automakers to evaluate the benefits associated with weight savings versus cost increases. As a result,

a number of automakers still use components made of iron and steel for reasons of economy. 

The use of aluminum suspension/steering components is a relatively recent development, occurring

during the last 10 years, and most of the design of such components was first developed by U.S.

manufacturers. Much of the design work is performed for OEMs by U.S. foundries. As a result, the U.S.

foundry industry has developed a technological lead relative to the rest of the world in the design and

manufacture of these castings. Because these components are structural in nature, automakers require that

foundries meet certain minimum certification and testing requirements, including use of X-ray and nondestructive analysis, in order to qualify as a supplier. Thus far, most of the qualified automotive suppliers have

tended to be U.S. foundries.34 The U.S. industry’s greater experience in process control has allowed

production of castings that more easily meet the automobile industry’s rigid quality requirements than foreign

castings, with fewer costly rejects. U.S. foundries produce aluminum castings for the automotive industry in

comparatively large volumes, owing to the higher percentage use of aluminum automotive castings in the

United States than in Europe and Japan as well as greater U.S. automotive production volumes. As a result,

U.S. foundries are able to take advantage of economies of scale to produce individual castings more

inexpensively than foundries producing the same castings, but in smaller volumes, overseas.35

The leading outlet for rough aluminum suspension/steering part castings in 2003 was OEMs, which

machined nearly 42 percent of the rough castings shipped by U.S. foundries (table 7-30). Nearly 15 percent

of the subject rough castings shipped were machined by other machine shops while nearly 34 percent were

machined in-house in 2003. Nearly 55 percent of total machined aluminum suspension/steering part castings

in 2003 were shipped directly to OEMs and 41 percent were shipped in-house for use in the manufacture of

the finished downstream product. It is expected that in time, increasing percentages of castings will arrive at

the OEM fully machined and ready to be assembled.36

The major end-use market for aluminum suspension/steering part castings in 2003 was the motor

vehicle (automobiles and trucks) market, which accounted for 98 percent of all subject shipments by foundries

producing such castings (table 7-31). Automobiles (including light-duty trucks, SUVs, and vans) were

responsible for 85 percent of these castings shipments. 
7-25

Table 7-30 

Aluminum suspension/steering part castings: Responding U.S. producers' shipments, by channel of

distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Machine shop/other fabricators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

)

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8–––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Original equipment manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 7-31 

Aluminum suspension/steering part castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Motor vehicles:

 Automobiles (including light duty trucks, SUVs, vans, etc.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

 Trucks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2–––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends

Production and inventories.—U.S. production of rough aluminum suspension/steering part castings

by responding foundries increased 16 percent during 1999-2003 (table 7-32), reflecting increasing percentages

of aluminum use in automotive applications as automakers continue to substitute light-weight aluminum for

iron and steel components, despite the higher cost of aluminum. Lowering the weight (both sprung and

unsprung) of the vehicle has been a primary objective for automakers seeking to achieve fuel economy savings

and to improve vehicle ride and handling capabilities. 
 37 U.S. industry official, telephone interview with USITC staff, Jan. 14, 2005.

 38 U.S. industry consultant, telephone interview by USITC staff, Jan. 10, 2005.

7-26

Table 7-32 

Aluminum suspension/steering part castings: Responding U.S. producers' production and inventories for their

rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) .................... 191,453 211,632 194,689 228,007 221,330

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 8,103 9,682 9,912 12,145 11,405

Share of production (percent) ............. 4 5 5 5 5 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments that

were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

For such critical components as control arms and steering knuckles used in cars and light-duty trucks,

the percentage of such components made of aluminum castings has almost doubled during the last 5 years to

20 percent.37 Nearly 5 percent of engine cradles and differential carriers are made of cast aluminum and this

figure has nearly doubled during the last 5 years. The percentage use of aluminum castings has increased

particularly in cars, light-duty trucks and SUV platforms. 

Employment.—The number of production and related workers reported by responding foundries

engaged in the production of rough aluminum suspension/steering part castings declined 11 percent during

1999-2003, with total number of hours worked declining 12 percent and total wages paid rising 11 percent to

$146 million (table 7-33). Average hourly wages for this industry rose to $18.08/hour in 2003 compared with

$14.32/hour in 1999. Industry productivity rose from 19 short tons of castings per 1,000 hours in 1999 to 27

short tons per 1,000 hours in 2003. Industry sources attribute the increase in productivity to increased capital

investment in foundry facilities to include greater use of automated equipment. The industry has been able

to achieve significant cost savings and productivity improvements in materials handling and in finishing

operations, the principal labor-intensive areas of production, through the use of robotic technology.38

Table 7-33 

Aluminum suspension/steering part castings: Responding U.S. producers' employees and related information

for their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 5,050 5,032 4,867 5,196 4,676

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,170 4,121 4,069 4,288 3,720

Hours worked (1,000 hours) . . . . . . . . . . . . . . 9,147 8,476 8,795 9,120 8,064

Wages paid (1,000 dollars) ............... 131,023 126,322 142,927 158,937 145,763

Average hourly wages (dollars per hour) . . . . . 14.32 14.90 16.25 17.43 18.08

Productivity (short tons per 1,000 hours) . . . . . 19 23 21 24 27 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 39 U.S. industry official, telephone interview with USITC staff, Jan. 13, 2005.

 40 Ibid.

 41 U.S. industry officials, telephone interviews with USITC staff, Feb. 7-11, 2005.

7-27

Producers’ shipments and exports.— Total U.S. producers’ shipments by quantity of rough aluminum

suspension/steering part castings by responding foundries increased 17 percent during 1999-2003 (table 7-34).

U.S. domestic commercial shipments of rough aluminum castings increased 7 percent during this period. U.S.

exports of the subject rough castings increased 77 percent during 1999-2003 and accounted for 6 percent of

total U.S. shipments in 2003. U.S. exports increased primarily to Canada and Mexico, because of increased

production of cars and light-duty trucks by OEMs in these countries, as well as increasing percentages of cast

aluminum cross members and control arms used by OEMs and Tier 1 suppliers in these nations.39

Table 7-34 

Aluminum suspension/steering part castings: Responding U.S. producers' domestic shipments and exports for

their rough casting operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,953 125,489 118,497 137,023 133,534

Internal consumption and transfers . . . . . . . . . 55,033 72,702 56,163 140,575 71,700

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,523 7,446 [15,271 10,023] 13,253

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,509 205,637 189,931 287,621 218,487

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 498,074 510,541 502,931 538,080 559,652

Internal consumption and transfers ......... 202,427 256,290 219,333 286,734 276,061

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,422 [74,516 52,441 47,698] 54,076

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740,923 841,347 774,705 872,512 889,789 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission

Financial condition.—Total net sales value reported by responding foundries producing rough

aluminum suspension/steering part castings increased 32 percent during 1999-2003 (table 7-35). Operating

profits fluctuated during this period, declining from $76 million (12 percent of sales) in 1999 to a negative $5

million in 2001 (a negative 1 percent of sales) before rebounding to $83 million (10 percent of sales) in 2003.

The industry returned to profitability during this period as a result of strong sales increases, as demand

conditions in the automotive vehicle market improved. Additionally, producers placed continued emphasis

on annual reductions in operating costs. The cost reductions were achieved through both process

improvements on the production floor to reduce labor costs by automating certain manufacturing steps and

working with customers to redesign products to reduce the labor component of manufacturing particular

castings.40

At the same time, net sales values for foundries producing machined aluminum alloy castings

increased 33 percent while operating income declined. The decline in operating income was largely

attributable to highly competitive conditions in the industry which have led foundries to enter into agreements

with their larger automotive customers to reduce the non-raw material portion of their manufacturing costs

charged to customers by 3-5 percent annually, putting pressure on the ability of foundries to pass their costs

on to their customers.41 In order to protect themselves from future competition, a number of foundries have

entered into long-term agreements with automotive customers to reduce the costs of their finished castings by

3-5 percent annually for both current product platforms and future replacement programs. 
7-28

Table 7-35 

Aluminum suspension/steering part castings: Responding U.S. producers' financial results for their rough casting

and machining operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... 101,540 110,123 114,351 133,277 130,871

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities ............. 166,035 192,529 181,534 220,180 213,147

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... 419,838 456,721 482,748 552,344 525,897

Internal consumption for production of

 machined castings .................. (1

) (1) (1) (1) (1)

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 643,483 722,869 737,651 878,692 848,961

Operating income . . . . . . . . . . . . . . . . . . . . 75,729 66,961 -4,624 79,744 82,804

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 12 9 -1 9 10

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 4 5 10 5 6

Financial results data . . . . . . . . . . . . . . . . . . . 23 24 27 26 27

Machined castings:

Net sales (short tons) . . . . . . . . . . . . . . . . . . . 67,975 80,797 65,683 88,036 81,302

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373,008 446,136 377,808 527,941 495,119

Operating income . . . . . . . . . . . . . . . . . . . . . . 63,766 64,487 (1

) 57,649 (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 17 14 (1

) 11 (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 1 2445

Financial results data . . . . . . . . . . . . . . . . . . . 12 13 15 15 14 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 42 U.S. industry official, telephone interview with USITC staff, Jan. 17, 2005.

 43 U.S. industry official, telephone interviews with USITC staff, Jan. 13 and Jan. 21, 2005.

 44 Ibid.

7-29

Investment.—Capital expenditures on machinery, equipment, and fixtures by responding foundries

producing aluminum suspension/steering part castings declined 72 percent during 1999-2003 (table 7-36).

Capital expenditures in this industry are usually budgeted in advance of anticipated use of the component in

a new motor vehicle platform. An automotive OEM may announce a projected use of aluminum when it

announces a new product launch and 18-24 months may elapse before the vehicle platform is built and the

parts ordered. Capital expenditures for the parts suppliers generally follow a cycle. Expenditures for

machinery and equipment will ramp up in advance of the actual construction of the vehicle to assure that the

parts will be produced and available to OEMs when they are needed. The automotive industry greatly

expanded the use of aluminum in a number of new product models during 1999-2003; however, capital

expenditures among aluminum foundries tended to occur during the prior 5-year period. According to industry

sources, capital expenditures during the 1999-2003 period declined dramatically because of anticipated

winding down of a number of product platforms using aluminum components and consequent lowered demand

for components. Capital expenditures in the sector are expected to increase again with the announcement by

OEMs of new product platforms.42 

Table 7-36 

Aluminum suspension/steering part castings: Responding U.S. producers' capital and R&D expenditures for their

rough casting operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures .......... 215,907 73,011 82,239 47,206 60,016

Research and development expenditures ...... (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 Research and development expenditures increased 36 percent during 1999-2003. Such expenditures

in this industry tend to be low, relative to capital expenditures for machinery and equipment, as most of the

components produced for the automotive industry are based on existing technology. Automotive customers

tend to be reluctant to adopt new, unproven technologies for use in safety-critical components.43 At the same

time, some large foundries with multiple product operations indicated that research and development

expenditures are not strictly product related and such expenditures may be included in a separate operational

budget elsewhere in the corporate structure.44 One such foundry had a separate research facility devoted to

aluminum product development.

Purchaser Trends

U.S. purchases of domestic- and foreign-produced rough aluminum suspension/steering part castings

by responding purchasers increased 81 percent in value during 1999-2003 (table 7-37) with imports from

China, Japan, Mexico, and Canada contributing to the increase. U.S. purchases of machined aluminum part

castings more than doubled during 1999-2003 with imports from Japan providing most of the increase.
 45 U.S. industry official, telephone interview with USITC staff, Feb. 9, 2005.

7-30

Table 7-37

Aluminum suspension/steering part castings: Purchases of domestic and foreign castings by responding U.S.

purchasers, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,145

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,302

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,540

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,215

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,203

Machined castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,867

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,249

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,821

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,720

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,821 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

According to U.S. purchasers, foreign purchases accounted for a growing share of total purchases of rough

castings but a declining share of purchases of machined castings. Despite the increase in imports during this

period, imports of rough aluminum suspension/steering part castings as a percentage of U.S. apparent

consumption totaled 1 percent in 2003. 

Beginning in 2002, China became the leading foreign source of rough aluminum suspension/steering

part castings, as reported by U.S. purchasers. Rough castings from China are composed principally of simpler,

easier to cast parts, and their use appears to be primarily confined to specific non-structural components of the

automobile. The presence of Chinese machined castings in the U.S. market appears to be limited at this point.

Japan was the second leading supplier to the United States of rough aluminum castings and the leading

supplier of machined castings to the United States. The Japanese presence in the U.S. market is related to the

advanced nature of the Japanese aluminum foundry industry and the strong relationship Japanese foundries

have established with Japanese automobile transplant manufacturers in the United States. 

 Thus far, imported aluminum castings for use in structural suspension components such as steering

knuckles and control arms do not appear to be a significant competitive factor in the U.S. automotive market.

Foundries producing aluminum castings for rack-and-pinion steering units have indicated that increasing

percentages of these components are being sourced from Asian nations. The housing for these units are

relatively simple one-piece, two-piece, or three-piece designs that are increasingly within the ability of

producers in Japan and China to cast.45 

U.S. imports of downstream products produced using aluminum suspension/steering part castings

increased 66 percent during 1999-2004 (table 7-38). Mexico accounted for the largest import increase during

this period while Canada, Mexico, and Japan were the largest suppliers of these imports to the United States

in 2004, accounting for 27 percent, 24 percent, and 22 percent, respectively of imports.
7-31

Competitive Assessment of Price- and Product-related Factors 

Price and non-price factors.––According to foundry respondents, most U.S. producers regard China

as the principal low-cost foreign competitor in the U.S. market for aluminum suspension/steering part castings.

Chinese rough casting prices were, on average, 28 percent lower than U.S. prices, and machined castings prices

were, on average, 26 percent lower than U.S. prices for comparable components (table 7-39).

Table 7-38

Aluminum suspension/steering part castings: U.S. imports for consumption of downstream products, by

leading suppliers, 1999-2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

Canada ................... 681,640 649,339 568,567 707,577 766,588 841,317

Mexico . . . . . . . . . . . . . . . . . . . 402,867 427,722 418,093 547,464 595,284 743,631

Japan .................... 378,180 471,948 519,820 574,888 584,341 665,908

Germany . . . . . . . . . . . . . . . . . . 121,293 114,513 117,602 157,285 230,908 250,989

Liechtenstein . . . . . . . . . . . . . . . 109,723 109,741 99,126 106,899 120,321 134,259

Korea . . . . . . . . . . . . . . . . . . . . 9,535 18,474 20,570 37,854 46,564 84,889

India . . . . . . . . . . . . . . . . . . . . . 5,650 7,530 8,904 27,893 36,967 58,189

Taiwan . . . . . . . . . . . . . . . . . . . 16,163 17,239 14,804 20,976 26,461 48,120

Brazil . . . . . . . . . . . . . . . . . . . . . 8,062 18,894 17,109 16,885 17,527 40,223

Spain . . . . . . . . . . . . . . . . . . . . 6,826 8,983 20,410 24,129 32,795 33,881

All other . . . . . . . . . . . . . . . . . . 110,865 105,541 92,220 123,861 135,748 171,990

 Total . . . . . . . . . . . . . . . . . . . . 1,850,804 1,949,924 1,897,225 2,345,711 2,593,504 3,073,396

Note.–Downstream products includes steering wheel, steering columns, and steering boxes (HTS classifications 

8708.94.50, 8708.99.43, and 8708.99.46). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Table 7-39 

Aluminum suspension/steering part castings: Price comparison by responding U.S. producers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 15

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 11 28

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 3 22

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 16

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 40

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 18

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 14 26

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 20

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 20

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 10 12 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 46 U.S. industry official, telephone interview with USITC staff, Feb. 10, 2005.

7-32

U.S. purchasers reported price experience principally with machined castings. According to

purchasers, there appeared to be no general consensus on the leading foreign suppliers of these castings to the

United States. A narrow majority of purchasers listed China and Japan as the leading foreign suppliers, with

Chinese castings, on average, 20 percent lower than U.S. prices and purchasers divided over whether Japanese

castings for comparable components were priced lower or nearly the same as U.S. prices (table 7-40).

Although the sample of responses was relatively small, U.S. purchasers indicated that purchases from

Canada have increased because of improvements in all non-price factors, such as product quality and reliability

of supply. Purchases from China and Japan were also largely influenced by similar determinants. U.S.

purchasers generally indicated that U.S. delivered prices from the noted foreign sources had not improved

sufficiently to influence their purchasing decisions.

Producers’ response to import competition.— Cost/price adjustments were the leading response to

import competition by U.S. producers responding to import competition (table 7-41). These foundries

indicated that they lowered prices or suppressed price increases and implemented cost-reduction efforts to

improve their competitive position relative to their foreign competitors. Since labor costs are the principal

manufacturing cost component, a significant number of firms have attempted to automate their operations,

principally the materials handling and finishing operations, in order to lower labor costs. Over one-half of

responding producers indicated that they have sought to improve product quality in order to compete more

effectively while a significant number reduced or dropped plans to expand capacity because of import

competition. Very few respondents indicated that they have responded to foreign competition by importing

the product directly or by opening a plant in a foreign country.

Over one-half of responding producers indicated that no or few actions were taken as a result of import

competition because they had already shifted production to more advanced types of castings or to other lines

of castings. A number of these producers have sought to broaden their product range to non-automotive

aluminum applications, citing aluminum castings for use in helicopters, farm tractors, and heavy trucks as

examples. These end-uses are viewed as a supplement to the main automotive business of these producers

rather than a replacement because of the small volumes involved. Some producers are exploring the use of

aluminum castings in the telecommunications market (use in satellites and fiber optics), an end-use market

with potentially high volumes.46
7-33

Table 7-40 

Aluminum suspension/steering part castings: Price comparison by responding U.S. purchasers of domestic and

foreign castings in the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 4

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 13

Canada .............................. About the same 2 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 20

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

Eastern Europe2 . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Japan ............................... About the same 2 (1

)

Korea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 18

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

1

 Not applicable.

2

 Includes Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Hungary, Macedonia, Poland,

Romania, Slovakia, Slovenia, and Yugoslavia (Serbia and Montenegro).

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 7-41 

Aluminum suspension/steering part castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Took no or few actions because:

Had already shifted production to more advanced types of castings . . . . . . . . . . . . . . . . . . . . . . . 13

Had already shifted production to other lines of castings ............................... 5

Lacked capital funds to counter foreign competition ................................... 1

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Took the following actions:

Lowered prices or suppressed price increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Reduced or dropped plans to expand capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Cut back or eliminated production ................................................. 8

Closed production lines ......................................................... 7

Shifted to other cast products .................................................... 3

Implemented cost-reduction efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Improved product quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Imported product instead ........................................................ 3

Opened a plant in a foreign country ............................................... 2

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 1

 Of the 49 establishments reporting production of copper castings, 12 respondents reported information on

copper valve castings. Of the 84 respondents reporting purchases of copper castings, 38 purchasers reported

information on copper valve castings.

 2

 AFS, “38th Annual Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 3

 For more details on the reasons for locating firms in specific states, see Chapter 3: U.S. Foundry Industry. 

8-1

CHAPTER 8

U.S. COPPER FOUNDRY INDUSTRY

This chapter provides an overview of the U.S. copper foundry industry, based on responses to the

USITC producer and purchaser questionnaires, fieldwork, and interviews with leading industry participants.

The various business trends and production factors that affect copper-based foundries are identified, including

the principal purchasing trends influencing industry performance. The chapter examines the structure of the

industry and leading demand characteristics. Most copper foundries machine their castings in-house and sell

directly to end-users, primarily the valve and pipe, and plumbing industries; hence, sales are highly dependent

on residential construction trends. Ease of casting and widespread technology dissemination renders copper

foundries particularly vulnerable to foreign price competition. Additionally, copper castings have lost market

share to lower-cost PVC for valves and pipe fittings. Operating incomes from production of rough copper

castings remain robust, but foundries that machine copper castings are barely breaking even.

Of the 465 establishments responding to the foundry questionnaire, 49 establishments reported

producing copper castings in the United States during 1999-2003.1

 The American Foundry Society (AFS)

also collects information on the foundry industry based on metal types. Questionnaire data collected by the

USITC account for 32 percent of copper foundry production in 2003, as reported by the AFS.2

 Of 463 U.S.

purchasers responding to the foundry questionnaire, 88 firms reported purchasing copper-based castings.

Results from the producer and purchaser questionnaires are discussed in this chapter and provide an overview

of the copper foundry industry as well as more product-specific analysis of copper-alloy hand-operated and

check-type taps, cocks, and valves.

Industry Profile 

Industry Structure

 The copper foundry industry is highly concentrated as the ten largest responding establishments

produced more than 126,000 tons of copper castings in 2003, accounting for 72 percent of production.

Responding foundries that cast copper are concentrated primarily in Pennsylvania and Indiana.3

 These firms

are primarily small businesses – 34 companies have less than 100 employees.

Establishments reporting production of rough copper castings largely consider themselves job shops

that produce a large variety of small-run products. Leading products produced are pump components, such

as impellers, and a variety of valves. Establishments are primarily sand casting facilities. Production related

activities performed at reporting establishments are diverse, with most companies indicating that they perform

all activities through the casting production process (table 8-1).
 4

 U.S. industry official, interview with USITC staff, Jan. 18, 2005. 

8-2

Table 8-1 

Copper foundries: Establishment activities of responding producers ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Number responding that Average percentage

Activity performed activity performed in-house

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total establishments reporting = 40

Design of rough castings . . . . . . . . . . . . . . . . . . . . . . . 25 72

Pattern making . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 74

Mold making, expended type . . . . . . . . . . . . . . . . . . . . 28 91

Mold/die making, permanent type . . . . . . . . . . . . . . . . . 10 47

Machining of rough castings . . . . . . . . . . . . . . . . . . . . . 31 68

Downstream manufacture . . . . . . . . . . . . . . . . . . . . . . . 15 71 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Demand Characteristics

The copper castings industry was negatively impacted by the economic downturn during 2000 and

2001 and the rise in interest rates that slowed housing starts in 2000.4

 Housing starts are a significant

component of demand for the copper foundry products industry as a majority of copper castings are intended

for the plumbing and valve and pipe fittings industries (table 8-2). Copper is the only metal casting type with

a significant military component, as 5 percent of sales are purchased by the Department of Defense. Sixteen

firms reported that their products have military applications, primarily as propellers and valves for Navy

ships.

Copper foundries indicated that 73 percent of rough castings were further machined in-house to make

downstream products, such as valves and pipe fittings. As these goods need little further processing to be used

in the final product, most foundries can sell the valve and pipe fittings direct to the end-user (table 8-3).

Table 8-2 

Copper foundries: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

End market castings by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Mining and oil/gas field machinery and equipment ...................................... 3

Construction machinery and equipment .............................................. 1

Refrigeration, air conditioning, and heating equipment ................................... 3

Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Industrial machinery ............................................................. 1

Valve and pipe fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Pumps and compressors ......................................................... 2

Construction/municipal castings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Ships and boats ................................................................ 4

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 ––––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 5

 U.S. industry official, interview with USITC staff, Jan. 26, 2005.

 6

 U.S. industry official, interview with USITC staff, Jan. 27, 2005.

 7

 Roxana Tiron, “Lack of Specificity in Navy Shipbuilding Plans Irks the Industry,” July 2004, found at

http://nationaldefense.ndia.org/issues/2004/Jul/Lack_of_Specificity.htm, retrieved Mar. 18, 2005. 

 8

 Based on responses to the USITC producer questionnaire. 

8-3

Table 8-3 

Copper foundries: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003

shipments of

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Machining subcontractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Machine shop/other fabricators ................................................... 1

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Original equipment manufacturers (OEM) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends 

Capacity, Production, Inventories, and Shipments

Copper foundries responding to the questionnaire expanded capacity each year during 1999-2003.

Reported capacity was 10 percent higher in 2003 than in 1999 (table 8-4). Production fluctuated during the

period, but declined by 11,793 short tons overall leading to a 12-percentage point decrease in capacity

utilization from 1999-2003 dropping from 62 percent to 50 percent. Most of the additional capacity is

accounted for by mergers in the industry in 2001, which expanded pouring capabilities for a few large firms.

Further, some foundries went forward with expansion projects planned prior to the decline in demand.5

 Some

of the expanded capacity is also to meet Navy contracts for new ships. The Navy6

 plans to build 10 new ships

a year in order to maintain its goal of a 300-vessel fleet.7

Owing to declining demand, the quantity of shipments fell by over 8,000 short tons during the period

(table 8-5). However, the value of the shipments of copper castings increased slightly, largely attributable

to an increase in the value of internal consumption and transfers to related firms (up 16 percent to $255.6

million). This shift resulted from acquisitions within the industry that expanded high-value product lines for

a few large firms.8
8-4

Table 8-4 

Copper foundries: Responding U.S. producers' capacity, production, and inventories for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capacity (short tons) ...................... 158,790 159,123 165,372 176,483 175,313

Production (short tons) . . . . . . . . . . . . . . . . . . . . 99,016 98,291 88,874 89,628 87,223

Capacity utilization (percent) . . . . . . . . . . . . . . . . 62 62 54 51 50

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 6,716 6,072 5,488 5,479 6,240

Share of production (percent) ............. 6 6778 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Capacity utilization based on establishments that were

able to provide both capacity and production amounts. Inventory share of production based on establishments that

were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-5 

Copper foundries: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,547 21,036 17,345 17,185 14,732

 Internal consumption and transfers . . . . . . . . . 65,973 67,652 62,407 64,268 64,135

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 430 352 294 453 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,895 89,118 80,104 81,747 79,320

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,905 101,944 87,772 84,737 77,795

 Internal consumption and transfers ......... 219,723 229,759 230,213 264,070 255,612

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,312 2,950 2,403 1,763 2,405 —————————————————————————————

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,940 334,653 320,388 350,570 335,812 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 Employment

With the decline in copper casting production, the number of workers employed by copper foundries

decreased by 10 percent (table 8-6). Productivity remained fairly stable at about 20 short tons per hour.

Producers indicated that the decline in demand for copper products resulted in few capital investments and

improvements to productivity. Firms indicated that productivity improvements were limited to process

improvements such as reclamation of excess metal from the casting process, training, and automation. As

hours worked dropped, so did total wages paid to those workers. At $15.04 per hour, the hourly wage paid

to copper production workers in 2002 and 2003 is $2.53 less than the wage paid to production workers for

all metal types.
 9

 U.S. industry officials, E-mail correspondence with USITC staff, Jan. 18, 2005; and various producer

questionnaire responses. 

 10 U.S. industry officials, E-mail correspondence with USITC staff, Jan. 18, 2005.

8-5

Table 8-6 

Copper foundries: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 2,916 2,961 3,002 2,844 2,632

Production and related workers:

Average number . . . . . . . . . . . . . . . . . . . . . . . 2,381 2,424 2,430 2,333 2,149

Hours worked (1,000 hours) . . . . . . . . . . . . . . 4,892 4,954 4,898 4,652 4,367

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 67,958 68,596 68,337 67,614 65,683

Average hourly wages (dollars per hour) . . . . . 13.89 13.85 13.95 14.53 15.04

Productivity (short tons per 1,000 hours) . . . . . 20 20 18 19 20 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid data. Productivity based on establishments that were able to

provide both production quantity and hours worked data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Financial Condition

Rough Castings

Respondents report that the rough copper foundry industry recovered in 2002 and 2003 from lows

in 2001 (table 8-7). According to industry officials, operating income rebounded just short of 1999 levels

in 2002 as firms found process efficiencies through automation, offered fully machined and finished products,

took on niche product lines, and shortened lead times.9

 

 Total net sales quantities fluctuated through the period and were 9 percent lower in 2003 than in

1999. According to responses to producer questionnaires, sales declined as customers began to buy offshore.

This trend is most apparent when the customer “owns” the pattern for the product and can easily move

production offshore where they reportedly can get a lower price.10 Despite the quantity decrease, the value

of sales of rough copper castings increased slightly (2 percent); this increase resulted from a sharp increase

in the total sales unit value of the copper cast by foundries that moved into more complex castings over the

period. 

However, the overall financial results for this industry reflect the dominance of a few large firms.

When these firms are removed from the aggregate data, operating income for the remaining firms over the

period is negligible, and reflected a loss during 2001. Even the economic recovery did not substantially affect

small firms – operating income recovered slightly, but still held at less than 1 percent. 

 These firms were the most affected by the peak in the cost of goods sold in 2001 (represented by a

growth in the COGS ratio to net sales), particularly the increase in raw materials costs. Overall, raw material

costs for producing rough copper castings were a large component of net sales and remained a relatively
8-6

Table 8-7 

Copper foundries: Responding U.S. producers' financial results for their rough casting operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Net sales:

Commercial domestic and export sales . . . . . . 18,862 18,350 15,636 15,421 13,503

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 61,413 62,338 58,372 60,050 59,375

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 750 791 784 809 657

 Total net sales quantities . . . . . . . . . . . . . . . 81,025 81,479 74,792 76,280 73,535

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales . . . . . . 94,771 91,310 77,585 78,077 69,410

Internal consumption for production of

 machined castings .................. 270,733 284,721 283,927 313,847 304,607

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . 2,528 2,391 2,800 3,033 2,694

 Total net sales values . . . . . . . . . . . . . . . . . 368,032 378,422 364,312 394,957 376,711

Cost of goods sold:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . 129,239 133,034 132,002 135,487 131,207

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,216 64,825 64,664 67,076 65,373

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,237 12,835 15,411 13,359 14,051

Other factory cost . . . . . . . . . . . . . . . . . . . . . . 77,435 90,806 84,797 94,188 85,764

Total cost of goods sold ................ 283,127 301,500 296,874 310,110 296,395

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,905 76,922 67,438 84,847 80,316

Selling, general, and administrative . . . . . . . . . . 39,528 39,485 38,482 40,912 37,339

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 45,377 37,437 28,956 43,935 42,977

Other income and expenses:

Interest expense . . . . . . . . . . . . . . . . . . . . . . . 3,593 6,173 5,355 4,674 3,566

All other expenses and income . . . . . . . . . . . . -520 -22,064 521 378 260

Net income before taxes . . . . . . . . . . . . . . . . . . . 42,304 53,328 23,080 38,883 39,151

Depreciation/amortization . . . . . . . . . . . . . . . . . . 11,831 13,150 14,581 14,692 14,503

————————————————————————————— Ratio to net sales (percent)

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 35 36 34 35

Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17 18 17 17

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3434

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 21 24 23 24 23

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 77 80 81 79 79

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 20 19 21 21

Selling, general, and administrative . . . . . . . . . . 11 10 11 10 10

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 12 10 8 11 11

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 9 11 15 12 13

Financial results data . . . . . . . . . . . . . . . . . . . . . 39 39 39 39 39 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 11 Minerals and Metals, Shifts in U.S. Merchandise Trade 2001, July 2002, Publication No. 3525, U.S.

International Trade Commission, p . 9-1.

 12 Lisa Swenson, “Converting to Low-Lead Copper Casting: Three Foundries' Experiences,” Modern Casting,

Oct. 1, 2001, vol. 91, p. 40. 

 13 Multiple producer questionnaire responses, and U.S. industry official, telephone interview with USITC staff,

Mar. 18, 2005. 

 14 Testimony by James Mallory, Executive Director, Non-Ferrous Founder Society, hearing transcript, p. 12.

 15 U.S. industry official, interview with USITC staff, June 24, 2005. 

 16 U.S. industry official, interview with USITC staff, Jan. 27, 2005. 

 17 U.S. industry officials, interviews with USITC staff, United States, June 24, 2005 and Jan. 26, 2005. 

8-7

consistent share throughout the period despite copper prices that grew measurably from 1999-2003 (table 8-

8).11 However, the average unit value for raw materials costs grew the most between 2000 and 2001. During

2000, firms converted to no- or low-lead copper alloys, which are more expensive than leaded ones.12

Machined Castings

For responding foundries that also machined copper castings, operating income for the machining

operations declined at a faster rate than operating income for rough casting operations (table 8-9). This

decrease was primarily attributable to a decrease in net sales over the period. According to producers, sales

declined as high-volume products, such as connectors and clamps, moved offshore, particularly to China and

India.13 Additionally, the number of firms reporting operating losses increased by 8 firms.

Raw Materials and Energy

Raw material costs as a share of metals costs shifted over the period along with prices for scrap and

ingot (table 8-10). Overall, there has been a shift away from scrap as an input because copper scrap has

become more expensive and difficult to obtain, as China has been purchasing large amounts of the world

scrap supply.14 According to one U.S. producer, Chinese demand for scrap copper is so high that the Chinese

even purchase scrap copper wire coated in plastic; U.S. firms do not recycle this product as it is too laborintensive to strip off the plastic coating.15 Additionally, U. S. firms find it difficult to use some scrap materials

because many include lead, and remelting creates concerns with air quality standards that foundries are

required to meet. According to industry representatives, the problems with raw material costs were

compounded significantly during 2004 when copper prices rose 60 percent over 2003.16

According to industry representatives, although energy costs account for a consistent share of net

sales, energy costs have a significant impact on the copper foundry industry as copper requires the highest

remelt temperature (over 22,000 degrees Fahrenheit) of all foundry products (table 8-11).17 Establishments

producing rough copper castings use electricity as their predominant form of energy. As a percentage of total

energy costs, electricity costs declined 3 percentage points during 1999-2003 because of the higher cost of

natural gas, which now accounts for a greater percentage of energy costs.
8-8

Table 8-8 

Copper foundries: Selected financial unit values for responding U.S. producers' rough casting operations, fiscal

years 1999-2003

(Dollars per short ton) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total sales unit value . . . . . . . . . . . . . . . . . . . . . 4,542 4,644 4,871 5,178 5,123

Raw material cost . . . . . . . . . . . . . . . . . . . . . . . . 1,595 1,633 1,765 1,776 1,784

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . 805 796 865 879 889

Energy cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 158 206 175 191

Other factory cost . . . . . . . . . . . . . . . . . . . . . . . . 956 1,114 1,134 1,235 1,166

Total cost of goods sold . . . . . . . . . . . . . . . . . . . 3,494 3,700 3,969 4,065 4,031

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,048 944 902 1,112 1,092

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. For each of the above items, unit values calculated only

where establishment provided both value and quantity data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-9 

Copper foundries: Responding U.S. producers' financial results for their machining operations, fiscal years

1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Net sales (short tons) . . . . . . . . . . . . . . . . . . . . . 39,874 39,659 37,459 35,222 35,546

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,478 323,364 309,271 303,858 304,902

Cost of goods sold:

Rough castings produced ................ 170,371 181,154 167,551 177,523 174,650

Rough castings purchased

 from other companies ................ (1

) (1) (1) (1) (1)

In-house machining costs . . . . . . . . . . . . . . . . 73,363 74,690 71,517 70,630 71,384

Subcontracted machining costs . . . . . . . . . . . (1

) (1) (1) (1) (1)

Other machining costs . . . . . . . . . . . . . . . . . . 11,100 10,571 12,583 8,156 15,067

 Total costs of goods sold ............... 258,967 270,664 255,905 260,237 264,924

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,511 52,700 53,366 43,621 39,978

Selling, general, and administrative . . . . . . . . . . 24,587 23,208 24,154 22,318 21,982

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 29,924 29,492 29,212 21,303 17,996

————————————————————————————— Ratio to net sales (percent)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . 83 84 83 86 87

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 16 17 14 13

Selling, general, and administrative .......... 8 7877

Operating income . . . . . . . . . . . . . . . . . . . . . . . . 10 9976

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . . . 2 4 7 4 10

Financial results data . . . . . . . . . . . . . . . . . . . . . 23 24 24 24 24 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and cost data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 18 U.S. industry official, telephone interview with USITC staff, Jan. 26, 2005. 

 19 Plumbing Alloys In The Scrap Stream, Copper Development Association, found at

http://www.copper.org/environment/trends/plumbing_alloys.html, retrieved Jan. 26, 2004.

 20 Illinois Department of Public Health, Lead in Industry, found at 

http://www.idph.state.il.us/about/epi/getpbout.htm, retrieved Jan. 26, 2005. 

8-9

Table 8-10 

Copper foundries: Share of total metal raw material costs for responding U.S. producers' rough casting

operations, fiscal years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Primary metals in scrap form . . . . . . . . . . . . . . . 25 16 16 20 21

Primary metals in other forms . . . . . . . . . . . . . . . 58 68 68 65 64

Other metal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 16 16 15 15 —————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-11 

Copper foundries: Share of total energy costs for responding U.S. producers' rough casting operations, fiscal

years 1999-2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 84 82 87 84

Natural gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 16 18 13 16

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (1

) (1) (1) (1

—————————————————————————————)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 100 100 100 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Labor

In spite of a decline in the workforce, employment costs for the copper castings industry were 11

percent higher in 2003 than in 1999 (table 8-12 and see table 8-6). Most of the increase was driven by a rise

in salaries and wages, which increased by 15 percent (to $33,651) on a per employee basis from 1999-2003.

Health benefits increased by more than 75 percent to $5,239 per employee, following trends for the foundry

industry as a whole. Associated costs per employee increased by 32 percent, mainly as a result of an increase

in worker compensation costs. According to industry representatives, worker compensation costs in the

copper foundry industry have grown in part because of the concern over exposure to lead.18 Lead is an

important alloying element, particularly for plumbing products as lead is easily machined, maintains its shape

under pressure, and can be recycled.19 However, exposure of foundry workers to lead can lead to long term

damage of the muscles and internal organs.20
 21 Multiple responses to the USITC producer questionnaire; and U.S. industry official, telephone interview with

USITC staff, Jan. 27, 2005. 

8-10

Table 8-12 

Copper foundries: Responding U.S. producers' employment costs for their rough casting operations, fiscal years

1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Salaries and wages (including overtime) . . . . . . 85,241 86,913 86,930 91,811 88,570

Health benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 9,451 9,950 11,340 14,023 14,985

Pension and profit sharing . . . . . . . . . . . . . . . . . 3,312 3,342 2,569 3,487 4,485

Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,618 11,191 11,462 12,789 13,788

Employee training . . . . . . . . . . . . . . . . . . . . . . . . 241 248 202 213 241 —————————————————————————————

Total employee costs . . . . . . . . . . . . . . . . . . . 109,863 111,644 112,503 122,323 122,069 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Investment

According to producers, capital expenditures for rough castings were greatly restricted during the

period, but particularly during the economic slowdown in 2000 and 2001 (table 8-13). Many foundries

indicated that owing to their financial situation even routine upgrades/improvements were delayed.21

Research and development related expenditures decreased during the period for these reasons. Despite the

decrease, capital expenditures were still 10 percent of gross profits in 2003. As firms looked to maintain

competitiveness and manage labor costs, many copper foundries indicated that they automated production

lines. Environmentally-related expenditures peaked in 1999 and 2000 as firms implemented OSHA mandated

improvements to limit lead exposure.

Table 8-13 

Copper foundries: Responding U.S. producers' capital and R&D expenditures for their rough casting operations,

fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Capital expenditures:

 Machinery, equipment, and fixtures:

 Environmentally related . . . . . . . . . . . . . . . . 2,468 1,768 345 596 360

 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,118 22,416 10,556 8,533 6,109

 Land, building, and related improvements . . . . 4,292 7,507 926 1,090 1,956 ––––––––––––––––––––––––––––––––––––––––––––––––––

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,878 31,691 11,827 10,219 8,425

Research and development expenditures ...... (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
8-11

Debt

Original costs rose 18 percent though firms spent fairly little on capital investments from 1999-2003

(table 8-14). However, most of the growth was between 1999-2000 before the industry was negatively

affected by the economy. Industry debt increased sharply until 2001 when it declined dramatically. This

fluctuation is because of insurance payouts after damage from fires and floods at several firms which

eliminated debt.

Purchaser Trends

Purchases of copper-based castings increased steadily throughout the period. Purchases of rough

copper castings of domestic origin exhibited the greatest growth in value, increasing 67 percent throughout

the period (table 8-15). However, purchases of domestic machined copper castings decreased, as purchasers

increasingly sourced machined castings from foreign suppliers. Almost all purchasers who reported purchases

of copper castings indicated that they bought foreign copper castings because of their lower price.

Table 8-14 

Copper foundries: Other financial information for responding U.S. producers' rough casting operations, fiscal

years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total debt (1,000 dollars) . . . . . . . . . . . . . . . . . . 73,920 89,097 90,423 65,178 54,513

Property, plant, and equipment:

 Original cost (1,000 dollars)............... 214,669 239,223 247,536 253,572 252,352

 Book value (1,000 dollars) . . . . . . . . . . . . . . . . 82,817 98,803 95,919 90,753 85,795 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-15 

All copper castings: Total reported U.S. purchases of domestic and foreign castings, 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Type 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,597 89,090 241,541 130,777 160,960

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 1,158 2,406 2,504 2,434

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,387 90,248 243,947 133,281 163,394

Machined castings:

Domestic1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,191 80,135 60,572 62,670 59,959

Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,509 66,006 59,844 82,410 92,315

—————————————————————————————

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,700 146,141 120,416 145,080 152,274 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Includes data for purchases of castings from unknown sources to prevent disclosure of business confidential

information.

Note.–These data do not indicate all purchases of castings in the United States. See ch. 1 for additional information

on data coverage.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.
8-12
 22 U.S. industry official, telephone interview with USITC staff, Feb. 18, 2005.

 23 Vanguard Economic Week in Review, Feb. 19, 2005. 

 24 National Association of Home Builders, Annual Housing Starts (1978-2003), found at

http://www.nahb.org/generic.aspx?genericContentID=554, retrieved Dec. 16, 2003.

8-13

Product Profiles

Copper Valve Castings 

Industry Profile

Industry structure.—Twelve establishments

reported producing copper-alloy hand-operated and

check-type taps, cocks, and valve (“copper valve”)

castings in the United States during 1999-2003. The

three largest establishments accounted for 64 percent

of all reported copper valve castings production in

2003. Three of the 12 are located in Pennsylvania; 11

of these foundries use sand casting and one uses

investment casting. Many of these producers are

producers of finished copper valves, rather than job

shops; however, most perform design, pattern making,

and mold making, as well as machining and

downstream manufacturing. The majority of these

firms produce castings only for copper valves,

although some produce other cast copper-alloy

products or cast products of other metals.

Demand characteristics.—According to

questionnaire responses, 93 percent of rough copper

valve castings were produced for in-house machining;

and 72 percent of machined castings were intended for

in-house use in downstream products, indicating that

the majority of copper valve castings currently being

produced in the United States are being produced by

valve manufacturers rather than by job shops (table 8-16). The remainder represent direct sales of castings

to valve manufacturers. Questionnaire responses indicate that the leading end use applications for copper

valve castings are plumbing and valves and pipe fittings, accounting for 37 and 54 percent, respectively, of

total sales (table 8-17).

Demand for valves is dependent upon investment in new capital goods, such as for water and sewage

treatment systems, replacement of valves in existing piping systems,22 and the residential construction

industry. Housing starts have been a stable source of demand for copper valves.23 Housing starts increased

13 percent during 1999-2003, to 1.8 million in 2003.24 Copper valves compete directly with polyvinyl

chloride (PVC) for many household and low pressure applications, and the market share of copper has been

declining due to advantages of PVC in cost and ease of installation.

Product Description and Uses

Valves are used to control the flow of liquids, gases,

and solids through pipes and piping systems. Control

is achieved by moving a disc, plug, or other flowcontrolling element within the valve assembly to open,

close, or partially obstruct the passageway. Valves are

produced in a range of sizes and are used with a

variety of pressures. A check valve permits the

material in a system to flow in only one direction.

These generally have no external means of control,

but are opened by the pressure in the system and are

closed automatically when the pressure drops below

the level for which the valves were designed. A handoperated valve contains a mechanism that is used to

open and close the valve. Valves are generally

produced according to standards and specifications

established by standards-setting organizations such

as the American Society for Testing and Materials

(ASTM), the American Petroleum Institute (API), and

the American National Standards Institute (ANSI). For

valves used in other countries, other standards may

apply.

Copper valves are those made of metal in which the

copper content is, by weight, less than 99.3 percent,

but not less than any other metallic element. Copper

scrap is generally used as raw material.
 25 Certain data have been withheld to avoid disclosure of business confidential information. These data include

commercial shipments, export shipments, commercial domestic and export sales, sales for internal consumption or

transfer to related firms other than for production of machined castings, and operating income for rough castings; net

(continued...)

8-14

Table 8-16 

Copper valve castings: Responding U.S. producers' shipments, by channel of distribution, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

Channel of distribution by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

In-house machining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Original equipment manufacturers ................................................ 7 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

Machined castings:

Original equipment manufacturers ................................................ (1

)

In-house for use in downstream products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Less than 0.5 percent.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-17 

Copper valve castings: End market for responding U.S. producers' shipments, 2003

(Percent) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Share of 2003 shipments of castings

End market by quantity ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Mining and oil/gas field machinery and equipment ...................................... 1

Refrigeration, air conditioning, and heating equipment ................................... 4

Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Valve and pipe fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Pumps and compressors ......................................................... 2

Ships and boats ................................................................ 1

Other/unknown . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 –––

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producer Trends

Production and inventories .—According to questionnaire responses, the quantity of U.S. production

of rough copper valve castings fluctuated during 1999-2003 and was 6 percent lower in 2003 than 1999. The

decline reflected the combined effect of material substitution and increased import penetration. Inventories

were little changed, with an increase of 2 percent by weight but less than 1 percentage point as a share of

production (table 8-18).25
 25 (...continued)

sales and operating income for machined castings; and expenditures for machinery, equipment, fixtures, research,

and development.

8-15

Table 8-18 

Copper valve castings: Responding U.S. producers' production and inventories for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (short tons) . . . . . . . . . . . . . . . . . . . . 54,133 56,199 51,761 51,856 50,966

Inventory:

Total (short tons) . . . . . . . . . . . . . . . . . . . . . . . 4,401 3,962 3,748 3,676 4,511

Share of production (percent) ............. 8 7779 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Inventory share of production based on establishments

that were able to provide both inventory and production amounts.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Employment.—Questionnaire responses indicate that the number of persons employed in the

production of copper valve castings decreased each year during 1999-2003, and the number in 2003 was 14

percent below the level of 1999. The number of hours worked by PRWs declined 17 percent between 1999

and 2003 and wages paid fell about 7 percent, while average hourly wages and productivity both increased,

by 13 percent and 15 percent, respectively. According to questionnaire respondents, productivity increased

as a result of such actions as utilizing automatic molding machines and introducing the use of trim dies, which

also improve quality (table 8-19).

Table 8-19 

Copper valve castings: Responding U.S. producers' employees and related information for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average number of employees . . . . . . . . . . . . . . 1,111 1,067 1,023 1,013 954

Production and related workers:

Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934 890 852 844 805

Hours worked (1,000 hours) . . . . . . . . . . . . . . 1,973 1,933 1,726 1,667 1,632

Wages paid (1,000 dollars) . . . . . . . . . . . . . . . 31,654 30,361 29,340 29,682 29,570

Average hourly wages (dollars per hour) . . . . . 16.04 15.71 17.00 17.81 18.12

Productivity (short tons per 1,000 hours) . . . . . 27 29 30 31 31 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Figures may not add to totals because of rounding. Average hourly wages based on establishments that were

able to provide both hours worked and wages paid. Productivity based on establishments that were able to provide

both production quantity and hours worked.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Producers’ shipments and exports.—According to questionnaire responses, U.S. producers’

domestic shipments, as measured in both quantity and value, fluctuated during 1999-2003. Both indicators

were lower in 2003 than 1999. Export shipments, which were less than one percent of total shipments

throughout the period, were also lower in both quantity and value in 2003 as compared to 1999. The bulk

of domestic shipments (over 85 percent) have been in the form of shipments for internal consumption or

transfer by captive foundries, as opposed to commercial shipments. The quantity and value of commercial

shipments 
 26 U.S. industry official, telephone interview with USITC staff, Feb. 22, 2005.

8-16

Table 8-20 

Copper valve castings: Responding U.S. producers' domestic shipments and exports for their rough casting

operations, 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers . . . . . . . . . 48,105 49,918 46,473 47,185 46,520

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,848 55,895 51,039 51,187 49,819

————————————————————————————— Value (1,000 dollars)

Domestic shipments:

Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Internal consumption and transfers ......... 119,507 119,895 116,875 131,229 123,142

Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,183 145,314 136,723 149,421 137,924 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

declined significantly during the period (by over 40 percent) while the quantity of shipments for internal

consumption and transfer fell 3 percent and the value increased 3 percent (table 8-20).

Financial condition.—U.S. producers of rough copper valve castings reported declining but

generally stable sales and profitability during 1999-2003. Net sales quantities fell by 7 percent between 1999

and 2003 and net sales values decreased about 1 percent (table 8-21). Operating income in 2001 was about

one-half of its 1999 amount, and recovered to 94 percent of the 1999 amount in 2003. Although two of 10

reporting firms reported operating losses in 2003 (up from 1 of 9 reporting firms in 1999), the operating

margin recovered in 2002-2003 after a poor year in 2001.

With respect to machined copper valve castings, questionnaire responses indicate that net sales

quantities decreased 3 percent during 1999-2003, while net sales values rose 5 percent. Operating income

increased 38 percent and the operating margin for the industry increased, but remained at less than one-half

that for rough castings. As was the case with rough copper valve castings, 2001 was the worst year financially

for the machined copper valve castings industry (see table 8-21).

Investment.—Questionnaire responses indicate that capital expenditures on machinery, equipment,

and fixtures decreased each year during 1999-2003, and that the 2003 level was 45 percent below the 1999

level (table 8-22). The data reflect the fact that one major producer invested heavily in a new foundry and

machining center during 1999-2001, but reduced capital spending based on reduced sales outlook in 2002-

2003.26
8-17

Table 8-21 

Copper valve castings: Responding U.S. producers' financial results for their rough casting and machining

operations, fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

————————————————————————————— Quantity (short tons)

Rough castings:

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings . . . . . . . . . . . . . . . . . . 41,153 42,149 39,723 40,287 38,731

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales quantities . . . . . . . . . . . . . 49,292 50,663 46,994 47,584 45,624

————————————————————————————— Value (1,000 dollars)

Net sales:

Commercial domestic and export sales .... (1

) (1) (1) (1) (1)

Internal consumption for production of

 machined castings .................. 165,060 167,937 162,611 173,908 166,976

Other internal consumption or transfers

 to related firms . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

 Total net sales values . . . . . . . . . . . . . . . . 197,629 202,355 192,918 205,162 195,694

Operating income . . . . . . . . . . . . . . . . . . . . 22,552 19,678 11,960 19,177 21,283

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . 11 10 6 9 11

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 1 1312

Financial results data . . . . . . . . . . . . . . . . . . . 9 9 10 10 10

Machined castings:

Net sales (short tons) . . . . . . . . . . . . . . . . . . . 24,225 24,717 24,020 23,568 23,436

————————————————————————————— Value (1,000 dollars)

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,183 219,741 211,482 217,592 223,535

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Ratio to net sales (percent)

Operating income . . . . . . . . . . . . . . . . . . . . . . (1

) (1) (1) (1) (1)

————————————————————————————— Number of establishments reporting:

Operating losses . . . . . . . . . . . . . . . . . . . . . . . 1 1111

Financial results data ................... 4 5555 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding. The figures above reflect only those establishments that

were able to provide quantity, value, and operating income data.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 27 Kenneth H. Kirgin, “Casting Imports to U.S. Reach 3 Million Tons,” Modern Casting, Sept. 2004, p. 2.

 28 Ibid. 

 29 Ibid.

8-18

Table 8-22 

Copper valve castings: Responding U.S. producers' capital and R&D expenditures for their rough casting

operations, fiscal years 1999-2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Machinery, equipment, and fixtures . . . . . . . . . . 11,976 7,827 6,561 3,823 3,224

Research and development expenditures ...... (1

) (1) (1) (1) (1) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1

 Data withheld to avoid disclosure of confidential business information.

Note.–Figures may not add to totals because of rounding.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Purchaser Trends

U.S. firms produced almost 100 percent of rough copper valve castings purchased in the United States

throughout the 5-year period, according to questionnaire responses. For machined castings, however, U.S.

producers lost ground to foreign suppliers (table 8-23). Purchases of U.S.-produced machined castings

declined by 56 percent during 1999-2003 while purchases of foreign-produced machined castings increased

by a comparable amount. Overall, purchases of U.S.-produced copper valve castings have declined by 23

percent, while purchases of imported castings have increased by 57 percent. The share of total purchases

represented by U.S.-produced castings declined to 30 percent from 54 percent.

Imports were an important and growing source of machined copper valve castings. To protect

business confidentiality, specific country detail cannot be provided. By value, 31 percent of all imports of

machined copper valve castings in 2003 came from China, according to questionnaire responses. Imports

from the rapidly growing Asian countries China, Thailand, Taiwan , and India accounted for 57 percent of

total imports of machined copper valve castings in 2003, up from 24 percent in 1999.

According to questionnaire responses by purchasers of machined castings, the quantity of purchases

of imported castings increased by more than 400 percent during 1999-2003. China, in particular, increased

from being only a nominal source to become the leading source of such castings, accounting for 58 percent

of imports in 2003. Imports from Thailand, the European Union, and Taiwan also increased by notable

amounts.

An industry source indicates that U.S. imports of copper-alloy valves and fittings are expected to

reach 30,000 tons in 2005.27 However, most of these are imported as finished products and would not be

reported in official statistics.28 Import penetration statistics indicate that imports of copper-based valves

account for a quarter of all valve consumption in the United States.29

The value of imports of downstream product containing copper valves and copper parts for valves

increased 34 percent during 1999-2004. Imports from China, which increased 277 percent and now account

for over one-third of all such imports, and Italy, which increased 50 percent, were partially offset by a major

decrease in imports from Mexico (table 8-24).
8-19

Table 8-23 

Copper valve castings: Purchases of domestic and foreign castings by responding U.S. purchasers, 1999-

2003

(1,000 dollars) ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Year Total ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,089

2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,980

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,667

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,608

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,969

Machined castings:

1999 ....................................................................... 155,579

2000 ....................................................................... 151,120

2001 ....................................................................... 125,593

2002 ....................................................................... 161,216

2003 ....................................................................... 129,500 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Domestic and foreign purchases not shown separately to prevent disclosure of confidential business

information.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

Table 8-24

Copper valve castings: U.S. imports for consumption of downstream products, by leading suppliers, 1999-

2004

(1,000 dollars)

Country 1999 2000 2001 2002 2003 2004

China . . . . . . . . . . . . . . . . . . . . 98,162 117,111 138,010 235,652 265,954 370,033

Taiwan . . . . . . . . . . . . . . . . . . . 150,413 153,024 128,510 131,037 151,785 164,607

Mexico . . . . . . . . . . . . . . . . . . . 239,099 265,292 266,369 237,383 186,305 141,404

Italy . . . . . . . . . . . . . . . . . . . . . . 78,848 90,542 87,228 87,333 108,307 118,039

Germany . . . . . . . . . . . . . . . . . . 61,160 70,026 72,371 45,100 48,495 71,758

Canada . . . . . . . . . . . . . . . . . . . 39,864 45,649 42,960 40,854 43,623 48,478

Korea . . . . . . . . . . . . . . . . . . . . 13,036 23,882 19,379 22,908 15,181 20,358

Turkey . . . . . . . . . . . . . . . . . . . . 18,835 27,388 20,902 21,905 18,393 19,385

Portugal . . . . . . . . . . . . . . . . . . 13,655 15,920 15,851 15,500 14,069 16,353

Thailand . . . . . . . . . . . . . . . . . . 6,783 8,474 6,635 10,157 10,510 15,209

All other . . . . . . . . . . . . . . . . . . 76,173 75,164 63,986 79,943 73,105 83,875

 Total . . . . . . . . . . . . . . . . . . 796,028 892,472 862,201 927,772 935,727 1,069,499

Note.–Downstream products includes copper valves and copper parts for valves (HTS classifications 8481.30.10

and 8481.80.10). Figures may not add to totals because of rounding.

Source: Compiled from official statistics of the U.S. Department of Commerce.

Competitive Assessment of Price- and Product-related Factors

Price and non-price factors.—U.S. producers, in questionnaire responses, indicated that prices from

all countries mentioned are lower than those of U.S. copper valve castings producers. China was the country

most often mentioned by producers; Chinese castings were estimated to be priced 36 percent lower than

comparable U.S.-produced castings (table 8-25). Castings purchasers, in the main, also reported lower prices

for imported castings. For the following countries, the average of the estimated price differentials reported

by purchasers were: China (33 percent), Thailand (26 percent) and Taiwan (24 percent). A few purchasers
8-20

Table 8-25 

Copper valve castings: Price comparison by responding U.S. producers of domestic and foreign castings in the

U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 30

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 13

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 4 36

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 15

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 28

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 35

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 75

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 5

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 5 37

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 30 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

responded that the prices from those 3 sources were “about the same” as those in the United States and one

respondent stated that prices from China were 10 percent higher than those in the United States (table 8-26).

Purchasers of imported copper valve castings indicated that their decisions to increase purchases of

imported product were influenced by advantages in every competitive factor identified. For imports from

China, 13 (100 percent) of those who responded indicated that Chinese product incorporated better design,

better range or variety of product, better warranty terms, better technical support and service, lower

transportation costs, and better packaging. Only 5 of the respondents noted better U.S. delivered price as an

advantage, although 11 noted more discounts as a Chinese advantage. Respondents also noted Chinese

advantages in lead times, minimum order size, design, quality, and flexible payment terms. Similar responses

were noted by purchasers of castings from Taiwan, Canada, and Germany, with imported castings being

preferred by purchasers on the basis of every competitive factor; not on the basis of price alone.

Producers’ response to import competition.—Actions taken by producers in response to import

competition were primarily to reduce prices or suppress price increases, to implement cost-reduction efforts,

and to improve product quality. One of the nine producers that responded indicated that it had changed to

imported product and one indicated that it had opened a plant in a foreign country (table 8-27).
8-21

Table 8-26 

Copper valve castings: Price comparison by responding U.S. purchasers of domestic and foreign castings in

the U.S. market

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Average

Price relative to Number of percent

Country U.S. castings responses difference

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Rough castings:

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 16

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 17

Machined castings:

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 28

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

Brazil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Canada .............................. About the same 3 (1

)

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 10 33

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 10

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (1

)

EU-15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 2 15

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 40

Japan ............................... About the same 1 (1

)

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 10

Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Higher 1 20

Portugal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 20

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 8 24

Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 2 (1

)

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 7 26

Thailand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . About the same 1 (1

)

Turkey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lower 1 25 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1Not applicable.

Source: Compiled from data submitted in response to purchaser questionnaires of the U.S. International Trade

Commission.

Table 8-27 

Copper valve castings: Responding U.S. producers' responses to import competition ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Nature of response Number of responses ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Total number of establishments responding ........................................... 9

Took no or few actions because:

Had already shifted production to more advanced types of castings ....................... 1

Had already shifted production to other lines of castings ............................... 1

Lacked capital funds to counter foreign competition ................................... 1

Took the following actions:

Lowered prices or suppressed price increases ....................................... 8

Reduced or dropped plans to expand capacity ....................................... 2

Cut back or eliminated production ................................................. 2

Shifted to other cast products .................................................... 2

Implemented cost-reduction efforts ................................................ 8

Improved product quality ........................................................ 7

Imported product instead ........................................................ 1

Opened a plant in a foreign country ............................................... 1 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.

 1

 Production of 32 countries is represented in these data. Data are typically collected from the individual

country’s foundry association. “38th Census of World Casting Production – 2003,” Modern Casting, Dec. 2004, 

pp. 25-27. 

9-1

CHAPTER 9

PROFILES OF THE FOUNDRY

INDUSTRY IN SELECTED FOREIGN

COUNTRIES

Introduction

Many industrialized economies have developed large foundry industries to support their

manufacturing sectors. Moreover, the availability of abundant raw material resources in certain producing

countries also furthered foundry industry development. Global production of foundry products totaled

approximately 74 million metric tons in 2003, with the top-10 producing countries accounting for 82 percent

(60.3 million metric tons) of output.1

 Seven countries, which accounted for 41 percent (30.4 million metric

tons) of estimated 2003 global production, are the focus of this chapter (figure 9-1). China is the world’s

largest producer of foundry products and a leading competitive concern of the U.S. industry, according to

hearing testimony and questionnaire responses. In addition to China, Latin America’s largest castings

producer, Brazil, was specifically cited in the request letter as a focus of this study. Other countries, such

as Korea, India, Mexico, and Taiwan, were frequently mentioned by the U.S. industry and questionnaire

respondents as principal competitors in the U.S. market. They also rank among the world’s 12 leading

castings manufacturers. The Canadian industry is included here because of its role in the larger North

0

2

4

6

8

10

12

14

16

18

20

C hina U nited

States

Bra zil C a na d a Me xico In d ia Kore a Ta iw a n

Million metric tons

1999 2003

Figure 9 -1

Production of foundry products in selected countries, 1999 and 2003

Sourc e: 34th and 38th Cens us of W orld Cas ting Produc tion, 1999 and 2003, Modern Casting , Dec. 

2000 and 2004.
9-2

American industry and North American Free Trade Agreement (NAFTA) membership. The foundry

industries in more developed countries, such as Japan and those in Western Europe, are generally comparable

to the U.S. industry in terms of production cost structure, infrastructure development, and government

policies and regulations. Based on questionnaire responses, U.S. producers did not indicate that these

countries are competitive concerns in the U.S. market. Consequently, this chapter focuses on the previously

cited countries of competitive concern to the U.S. industry and provides information on industry conditions,

factors of production, and government policies, to the extent possible.
 2

 Joe Scarry, “Shifts In Global Casting In 1999,” CastingTrade.com, found at

http://www.castingtrade.com/html/world/worldchange.html, retrieved Mar. 18, 2005.

 3 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 4 ABIFA Foundry Guide 2004. The Associação Brasileira de Fundição (ABIFA) is the Brazilian foundry

industry association.

 5 “38th Census of World Casting Production – 2003,” Modern Casting, Dec. 2004, p. 26.

 6 ABIFA presentation.

 7 Ibid.

 8 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004. Brazilian tariffs on castings range

from 0-20 percent.

 9 ABIFA presentation to USITC staff, Brazil, Nov. 2004.

 10 David P. Kanicki, “Global Casting Report: Past, Present & Future,” Modern Casting, Dec. 2000, p. 24.

 11 Brazilian industry association official, interview with USITC staff, Brazil, Nov. 2004. 

9-3

Brazil

Industry Profile

The resurgent Brazilian economy has generated

increased demand for foundry products from leading markets,

such as the motor-vehicle industry. Despite concerns with

high interest rates, an overburdened transportation

infrastructure, and hiring and retaining skilled employees, the

Brazilian industry expects domestic demand for foundry

products to continue to increase as major end-use markets

benefit from the improved economy, greater consumer

spending, and infrastructure investments.

Although Brazil is one of world’s top 10 foundry

products manufacturers, the value of its output is considered

to be relatively low because iron castings dominate its

product mix, relative to higher-valued aluminum and other non-ferrous production.2

 The industry is

characterized by its extensive use of domestically produced raw materials and production of labor-intensive

foundry products, a specialty of the Brazilian industry.3

 Brazilian foundries use a wide array of casting

methods in their production processes, including die, investment, and shell (sand) casting, and many perform

some machining of castings.4

Brazil accounted for 3 percent of global ferrous casting production and 1 percent of nonferrous

production in 2003.5

 Industry revenue totaled $2.9 billion in that year, up 26 percent from the 1999 level,6

reflecting the notable upturn in the Brazilian economy (table 9-1). The Brazilian foundry industry accounted

for 0.58 percent of Brazilian GDP in 2003.7

 Despite its position as one of the largest Latin American markets

for foundry products, foreign competition is limited, with most foreign castings entering the country

incorporated into parts or finished goods.8

Following two years of continuous decline in the number of foundries operating in Brazil, the

industry added foundries during 2002-03, reaching a period high of 1,231 foundries.9

 Although most

foundries are Brazilian owned,10 and 95 percent are small- to medium-sized businesses,11 several U.S. and

other foreign companies are represented in the Brazilian industry. These include General Motors (United

States), Teksid (Italy), Gibbs Die Casting (United States), and Magal (Germany). A few U.S. foundries have

Industry statistics (2003):

• World rank – 9th

• Production – 2.2 million metric tons 

• Employment – 47,198 workers

• No. of firms – 1,231

Industry characteristics:

• Net exporter of foundry products

• Industry is largely Brazilian-owned 

• Small and medium firms account for 95

percent of industry
 12 Ted Evanoff, “Chinese imports hurting iron trade: Low-cost suppliers help fuel Hoosier plants’ woes,”

Indianapolis Star, Jan. 17, 2003, found at http://www.incma.org, retrieved Sept. 26, 2003.

 13 ABIFA presentation.

 14 Four Brazilian foundries – General Motor Ferro, Minas Zinco, Teksid Iron, and Tupy (Joinville) – are known

to have a production capacity in excess of 100,000 metric tons, and another six foundries have capacities ranging

between 50,000-100,000 metric tons, ABIFA Foundry Guide 2004.

 15 In addition, exports account for 16 percent of output; capital goods, 14 percent; steelmakers and other

consumers, 5 percent each; and infrastructure applications, 3 percent. ABIFA Foundry Guide 2004, p. 24, and

ABIFA presentation.

 16 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004; “Foundries see 20% increase in

sales in 2004,” BNAmericas.com, June 25, 2004, found at http://itc.newsedge-web.com, retrieved June 29, 2004; and

“Brazilian Economy Growing After Recession,” Associated Press, found at http://itc.newsedge-web.com, retrieved

June 30, 2004.

 17 Information from Tupy website, found at http://www.tupy.com.br/ing.htm.

 18 Information from Teksid website, found at http://www.teksid.com.

9-4

Table 9-1

Brazilian foundry industry: Number of firms and industry revenue, 1999-2003

Item 1999 2000 2001 2002 2003

Number of firms . . . . . . . . . . . . . 1,050 1,015 1,007 1,177 1,231

Revenue (billion dollars) . . . . . . . 2.3 2.7 2.3 2.5 2.9

Source: ABIFA presentation.

reportedly partnered with Brazilian foundries to gain access to low-cost castings to supply U.S. customers

that might otherwise purchase castings from China.12

The Sao Paolo region is the largest producing area in Brazil, accounting for 34 percent of Brazilian

foundry production in 2003. Other leading producing areas are the state of Minas Gerais and the South,

which accounted for 29 percent and 28 percent, respectively, of Brazilian foundry output.13 Brazilian output

is concentrated in 10 foundries, which accounted for 47 percent (930,034 metric tons) of production in 2003.14

Many of these same firms are the largest employers in the Brazilian foundry industry, with employment in

excess of 1,000 workers.

The automotive market purchases nearly 57 percent of foundry output in Brazil.15 The growth of the

Brazilian motor vehicle industry, with a reported investment of $20 billion, has spurred development of the

Brazilian foundry industry. The capital goods and railroad sectors are also exhibiting signs of recovery,

which is reportedly lifting demand for foundry products.16

Tupy SA, an independent Brazilian foundry with operations worldwide, is the largest foundry in Latin

America. Tupy’s Brazilian operations are located in Joinville and Mauá, with total foundry capacity of

500,000 metric tons. Production is focused on cylinder blocks and heads for medium- and heavy-duty engine

applications. Tupy (Mauá) is one of the few foundries that casts compacted graphite iron (CGI), which is

used to produce V-6 engine blocks for Ford.17 Tupy also pours gray iron and nodular (ductile) iron at its

Brazilian foundries. Another large international player in the Brazilian industry is Teksid do Brasil, an

Italian-based foundry company. Teksid produces gray and nodular iron castings primarily for motor vehicle

applications at its Betim, Brazil facility, which has a production capacity of approximately 250,000 metric

tons per year.18
 19 Table entitled “Produção de Fundidos,” ABIFA, found at

http://www.abifa.org.br/mercado/mercado_prod_fun.asp, retrieved Jan. 3, 2005.

 20 Ibid.

 21 ABIFA presentation.

 22 “Abal/Aluminum consumption to grow 7.9% in 2004,” BNAmericas, Aug. 19, 2004, found at

http://itc.newsedge-web.com, retrieved Aug. 20, 2004.

 23 “Foundries see 20% increase in sales in 2004.”

 24 “Brazilian Economy Growing After Recession.”

 25 Brazilian industry association officials, interview with USITC staff, Brazil, Nov. 2004.

 26 Ibid.

9-5

Business Trends

Production

Following the 2001 recession and electricity shortage, Brazilian foundry production rose by 28

percent to 2.2 million metric tons in 2003 in response to the rapid growth of the Brazilian economy (table 9-

2). Total projected production of metal castings in 2004 is 2.8 million metric tons, about 25 percent higher

than the 2003 average total of 2.2 million metric tons.19 The daily pour rate has risen by 22 percent to 12.3

metric tons per day in November 2004, compared with 10 metric tons during the comparable period in 2003.20

Despite growth in the aluminum casting sector, the

Brazilian foundry industry remains largely focused on

lower-valued gray and ductile iron production, which

accounted for about 86 percent of industry output in 2003

(figure 9-2). Although iron accounted for the largest portion

of 2003 sales by quantity, nonferrous and steel castings

accounted for a greater share by value (30 percent and 13

percent, respectively).21 The aluminum sector, in particular,

has been cited as a major beneficiary of the upturn in the

transportation industries.22 Increased investment in the

automotive sector and greater motor vehicle production are

generating demand for foundry products. The privatization

of the railway sector has also spurred demand for castings,

as has growth in the agricultural equipment industry.23

Demand from the capital goods sector is also rebounding as the Brazilian economy recovers.24

According to industry sources, installed capacity and production are expected to increase through

2009, although not at the same pace. By 2009, Brazilian demand for castings is expected to outstrip installed

capacity by 510,000 metric tons, creating a significant deficit in projected supply (table 9-3). According to

Brazilian industry sources, the Brazilian government must reduce interest rates to enable the industry to invest

in expansions and facility upgrades to meet projected demand.25 According to the Brazilian foundry

association, the projected shortfall in domestic production may result in increased imports to the Brazilian

market, particularly to the growing motor vehicle industry.26

Copper

1%

Steel

6%

Aluminum

7%

Iron

86%

Source: Modern Casting .

Figure 9-2

Brazilian foundry industry: 2003 production, 

by metal type (based on weight)
 27 Kanicki, “Global Casting Report: Past, Present & Future.”

9-6

Table 9-2

Brazilian foundry industry: Casting production, by metal, 1999-2003

(1,000 metric tons)

Type of metal casting 1999 2000 2001 2002 2003

Gray iron . . . . . . . . . . . . . . . . . . 971 1,168 1,114 1,219 1

1,949

Ductile iron . . . . . . . . . . . . . . . . 361 379 387 494 (2

)

Aluminum . . . . . . . . . . . . . . . . . 98 108 119 122 150

Steel . . . . . . . . . . . . . . . . . . . . . 76 89 83 87 124

Malleable iron . . . . . . . . . . . . . . 32 33 27 23 (2

)

Copper-base . . . . . . . . . . . . . . . 16 15 14 14 16

Zinc . . . . . . . . . . . . . . . . . . . . . . 12 12 10 8 6

Magnesium ................ 66645

Other nonferrous ............ 00000

 Total . . . . . . . . . . . . . . . . . . . . 1,574 1,810 1,760 1,970 2,249

 1

 Includes production of malleable and ductile iron.

 2

 Production included with gray iron.

Note.–Figures may not add to totals because of rounding.

Source: Annual Census of World Casting Production from several issues of Modern Casting .

Table 9-3

Brazilian foundry industry: Actual and projected production and installed capacity, 2003-2009

(1,000 metric tons)

Actual Projected

Item 2003 2004 2005 2006 2007 2008 2009

Production . . . . . . . . . . . . . . . . . . . 2,249 2,800 3,130 3,400 3,580 3,770 3,910

Installed capacity . . . . . . . . . . . . . . 3,000 3,100 3,400 3,400 3,400 3,400 3,400

Source: ABIFA presentation.

Employment

The Brazilian industry is adjusting to new market conditions as tariffs decline and globalization

continues, with a focus on improving labor productivity to retain its share of the global market.27 Brazilian

foundries have emphasized greater mechanization and increased investment in employee training to achieve

these improvements. As a result, productivity has improved significantly over the period, with metric tons

per worker increasing 19 percent and hours/per ton declining by 16 percent (table 9-4). Recent favorable

economic conditions that have attracted new industry entrants and boosted production have had a corollary

effect on employment, which rose by 11 percent since 2001 to 47,198 workers in 2003. Brazilian government

policies that restrict a firm’s staffing flexibility likely limited worker reductions during the 2001 recession.

Table 9-4

Brazilian foundry industry: Employment and productivity, 1999-2003

Item 1999 2000 2001 2002 2003

Employment (number of workers at year-end) . . . . 38,202 41,407 42,409 43,918 47,198

Productivity (metric tons per worker) . . . . . . . . . . . 41.2 44.6 41.0 45.4 49.0

Productivity (hours per metric ton) . . . . . . . . . . . . . 48.6 44.8 48.7 44.0 40.8

Source: ABIFA presentation.
 28 “Metalurgia 2002,” Business Network Switzerland, found at

http://212.23.235.40/~0xac10400b_0x000a7dde/metalbrazil.doc, retrieved Jan. 21, 2005.

 29 Brazilian industry association officials, interview with USITC staff, Brazil, Nov. 2004.

 30 Ibid.

 31 “Foundries see 20% increase in sales in 2004,” Bnamericas.com.

 32 Brazilian industry association officials, interview with USITC staff, Brazil, Nov. 2004.

 33 ABIFA filed an antitrust case against Brazilian pig iron producers in December 1998 charging them with

establishing a cartel and jointly raising pig iron prices. “Brazil foundry group presses for ruling on pig iron price

complaint,” American Metal Market, Mar. 27, 2000, found at http://www.findarticles.com/, retrieved Oct. 8, 2003.

9-7

Investment

Industry sources have indicated that investment in the Brazilian foundry industry is needed to meet

future demand and maintain its position as a net exporter of foundry products.28 However, capital investment

is hampered by high interest rates.29 The investment necessary to meet projected 2009 demand for Brazilian

castings is estimated by industry sources at $560 million.30 With the recent improvements in the Brazilian

economy and foundry industry fundamentals, local foundries anticipated increasing their investment in

capacity expansions by $100 million to reach $450 million in 2004.31

Exports 

Brazil is a net exporter of foundry products, with 14 to 16 percent of Brazilian castings output

exported. Exports grew by 14 percent a year by value during the period, and were expected to reach $750

million in 2004.32 The volume of exports rose at a lower rate (10 percent), reaching 361,395 metric tons in

2003 (table 9-5). Iron castings accounted for about 88 percent of these exports, reflecting the dominance of

iron in Brazilian foundry production. Exports of nonferrous castings, in particular components for the

automotive industry, rose by 53 percent during the period and accounted for 6 percent of total exports in

2003. Exports were reportedly adversely affected in 1999 because of high pig iron prices that reduced cost

competitiveness,33 and in 2001 by the global economic slowdown.

Table 9-5

Brazilian foundry industry: Exports by metal type, 1999-2003

Metal type 1999 2000 2001 2002 2003

Quantity (metric tons)

Iron . . . . . . . . . . . . . . 219,850 232,658 204,172 265,152 317,276

Steel . . . . . . . . . . . . . 15,035 21,649 19,865 21,145 22,475

Non-ferrous . . . . . . . . 14,143 19,247 14,443 17,714 21,644

 Total . . . . . . . . . . . . 249,028 273,554 238,480 304,011 361,395

Value (million dollars)

Total value . . . . . . . . . 355.8 398.1 337.1 446.9 564.6

Source: ABIFA presentation and ABIFA Foundry Guide 2004, ABIFA, p. 25.
 34 Kenneth H. Kirgin, “Casting Imports: What to Expect in 2003,” Modern Casting, Sept. 2002, found at

http://moderncasting.com, retrieved June 10, 2004.

 35 “Foundries see 20% increase in sales in 2004,” Bnamericas.com.

 36 ABIFA Foundry Guide.

 37 U.S. Department of Energy, Office of Fossil Energy, An Energy Overview of Brazil, Oct. 20, 2003, pp. 2-3,

found at http://www.fe.doe.gov/international..., retrieved July 20, 2004; and U.S. Department of Energy, Energy

Information Administration (EIA), Country Analysis Briefs: Brazil, July 2003, pp. 9-10, found at

http://www.eia.doe.gov...., retrieved July 20, 2004.

 38 Petrobrás has been partly privatized. “Latin American Reforms May Scare Investors,” Petroleum Intelligence

Weekly, found at http://itc.newsedge-web.com, retrieved Aug. 10, 2004.

 39 U.S. Department of the Interior, U.S. Geological Survey, “The Mineral Industry of Brazil – 2001,” U.S.

Geological Survey Minerals Yearbook – 2001, found at

http://minerals.usgs.gov/minerals/pubs/country/2001/brmyb01r.pdf, p. 5.1.

 40 “The structure of the Brazilian Economy,” Doing Business With Brazil, Nov. 26, 2001, found at

http://www.cni.org.br/produtos/com_ext/src/doing02.pdf, retrieved Jan. 3, 2005.

 41 Country Analysis Briefs: Brazil, U.S. Department of Energy.

 42 “A dark future ahead if investors don’t switch-on to energy funding,” American Metal Market, July 28, 2003,

p. 7.

 43 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

9-8

Brazil is one of the top 10 suppliers of castings to the U.S. market. An estimated 70 percent of

Brazil’s exports are destined for the United States. Engine blocks and heads of gray iron (for diesel engines)

and aluminum are among the leading Brazilian foundry exports to the United States.34 Another 20 percent

of its castings exports reportedly are shipped to Europe (primarily Germany).35

Factors of Production

Brazil is considered a low-cost producer of foundry products because of certain natural advantages

(low-cost hydroelectric power and abundant supplies of pig iron and aluminum) as well as relatively low-cost

labor. However, the Brazilian industry is hampered by an inadequate transportation infrastructure and

concerned about the availability of trained workers.

Raw Materials and Energy

The Brazilian foundry industry is a large consumer of electricity, most of which is generated by

hydroelectric power.36 Despite these resources, Brazil’s energy supply remains vulnerable to disruption

because of dependence on sufficient rainfall to power hydroelectric facilities and the lack of needed

investment in power generation and distribution systems.37 Additional demands on the Brazilian energy

sector resulting from improved industrial and export growth may strain supply limits and cause shortages in

certain regions.

The Brazilian energy sector has been largely controlled by state-owned energy companies, most

notably Petrobrás, the leader in oil and natural gas exploration and production,38 but government control of

the production sector ended in 1999.39 Power generation is largely controlled by the federal government, but

distribution is, for the most part, state- or privately held.40 Currently, an estimated 80 percent of Brazil’s

electricity generation is government-held.41 State-generated energy has generally been cheaper than that

provided by private entities.42 

Brazil’s hydroelectricity prices, believed to be the world’s lowest,43 declined by 5 percent during the

period. Hydroelectric power accounts for about 95 percent of Brazil’s electricity output, with less than 25
 44 “Brazil to announce electric sector regulations,” AP Worldstream English, July 27, 2004, found at

http://itc.newsedge-web.com, retrieved July 29, 2004.

 45 The 2001 electricity shortage resulted from inadequate rainfall levels and insufficient investment in the

hydroelectric power industry. Country Analysis Briefs: Brazil, U.S. Department of Energy.

 46 Brazilian natural gas reserves totaled 237 billion cubic meters in 2002. Brazilian Energy Balance 2003,

Ministry of Mines and Energy, Secretariat for Energy, http://www.mme.gov.br/paginasInternas.asp?url=../ben/,

retrieved July 21, 2004.

 47 Country Analysis Briefs: Brazil, U.S. Department of Energy.

 48 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 49 ABIFA Foundry Guide 2004, p. 21.

9-9

percent of its hydroelectric potential utilized.44 The 2001 supply shortage45 led the government to focus on

expansion of hydroelectric generating capacity and the creation of a competitive marketplace, as well as the

development of its natural gas reserves46 to reduce dependence on hydroelectric power.47 Since 1999, natural

gas production has increased by 31 percent in contrast to the 3-percent decline in hydroelectricity production

(table 9-6). The average price of natural gas reached period highs during the hydroelectricity supply shortage,

but increased overall by only 3 percent (table 9-7).

Table 9-6

Brazilian energy production by selected sources, 1999-2002

Energy source 1999 2000 2001 2002

Natural gas (million cubic meters) . . . . . . . . 11,898 13,283 13,998 15,568

Hydroelectric energy (gigawatt hours) .... 293,000 304,403 267,876 284,944

Source: Brazilian Energy Balance 2003, Ministry of Mines and Energy, Secretariat for Energy, found at 

http://www.mme.gov.br/paginasInternas.asp?url=../ben/, retrieved July 21, 2004.

Table 9-7

Average prices of selected Brazilian energy sources, 1999-20021

Energy source 1999 2000 2001 2002

Natural gas (US dollars per cubic meter)2 . . . . . . . . . . . . 83.4 103.2 101.7 86.3

Industrial electricity (US dollars per megawatt hour)3 . . . 42.6 47.6 43.3 40.6

 1 Brazilian reals converted to current U.S. dollars; price to consumer with taxes.

 2

 Petrobrás selling prices to industrial consumers.

 3

 Brazilian average prices.

Source: Brazilian Energy Balance 2003, Ministry of Mines and Energy, Secretariat for Energy, found at

http://www.mme.gov.br/paginasInternas.asp?url=../ben/, retrieved July 21, 2004.

Consumers of energy resources in Brazil are grouped by type of end-user (e..g, residential, industrial),

and Brazilian foundries are designated as industrial power consumers that purchase from designated suppliers

and negotiate with the power source for this supply. Foundries may pay a premium for energy consumed

during peak hours (e.g., 10 times more than the standard rate). Some foundries are able to reduce their energy

costs because they purchase molten metal from a local source rather than melt their own metal, which requires

maintaining and operating furnaces.48

Brazil is the world’s second largest producer of pig iron,49 a principal input in gray iron castings.

This contributes to the dominance of gray iron castings in the Brazilian foundry industry’s product mix.

Brazil exports 62 percent of its pig iron, which is considered to be low cost and of good quality because of
 50 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 51 Ibid.

 52 “Worldwide Labor Rates–Foundry Industry,” AFS 2003 Metalcasting Forecast & Trends, p. 31.

 53 The minimum wage currently stands at 260 reals (around $95) a month. “Brazil wants to hike wages again,”

United Press International, Dec. 15, 2004, found at

http://washingtontimes.com/upi-breaking/20041215-052924-1544r.htm, retrieved Feb. 17, 2005.

 54 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, “Brazil - Country Reports on

Human Rights Practices 2003,” Feb. 25, 2004, found at http://www.state.gov/g/drl/rls/hrrpt/2003/27888.htm,

retrieved Feb. 8, 2005.

 55 Employers are mandated by the federal government to provide commuting expenses; risk premiums and health

hazard allowances; family, birth, and maternity allowances; social contributions equivalent to 15 percent of payroll;

social security contributions equivalent to 20 percent of payroll; on-job accident insurance; and contributions to third

parties, such as SENAI. Doing Business in Latin America - Brazil, found at

http://www.onlinelearning.net/instructors/smurr/LatAm/sam/brazil.html#lablaw, retrieved Jan. 3, 2005.

 56 The employer pays for commuting expenses that exceed 6 percent of an employee’s base wage or

compensation. Doing Business in Latin America - Brazil.

 57 Every employee, upon completing one year's service with the same company, is entitled to 30 calendar days

vacation as long as the employee has not accrued more than five unjustified absences from work during the period. 

Workers receive a one-third bonus in addition to the normal wage for annual vacations. Doing Business in Latin

America - Brazil.

 58 In December of each year, an employer pays a salary bonus, known as the Christmas bonus, to each employee.

The bonus corresponds to 1/12th of the overall wage paid to the employee. Doing Business in Latin America -

Brazil.

9-10

its low sulfur and phosphorous content. Although Brazilian foundries pay the world price for pig iron, their

transportation costs are much lower because they only pay for internal shipping.50 Brazil is also a leading

world producer of aluminum because of the high quality of its local bauxite ore and the low cost of

hydroelectricity used to power energy-intensive aluminum smelters.

Labor

The training and availability of skilled, technical workers is a leading concern of the Brazilian

foundry industry. Larger companies operate in-house training to maintain and improve skill levels, and have

developed educational institutions to address specific needs. Industry officials noted that Brazil lacks

sufficient educational opportunities in metallurgy, and is encouraging schools to offer more metallurgical

courses.51

Although wage rates are relatively low compared to those in the United States, benefits to employees

are quite extensive. Hourly wage rates for Brazilian foundry workers averaged $4.60 an hour (in U.S.

dollars)52 for foundry workers in 2003,53 but these rates are considerably higher than those paid in China. To

offset this wage differential and to better retain its share of the international market, the Brazilian foundry

industry has focused on increased mechanization and investment in employee training. The Brazilian

Constitution limits the workweek to 44 hours and stipulates a weekly rest period of 24 consecutive hours,

preferably on Sundays.54

Brazilian foundries subsidize a range of employee benefits, many of which are government

mandated.55 The benefits vary by company, but often include a basket of food or restaurant coupons;

transportation to and from work;56 free or subsidized meals; uniforms and safety equipment; and healthcare.

In addition, employees receive generous paid vacations57 and a government-mandated “13th” salary.58 Some
 59 Brazilian industry officials, interviews with USITC staff, Brazil, Nov. 2004. Provisional Measure 794 of

December 29, 1994 established the basis for profit sharing as a production incentive. Doing Business in Latin

America - Brazil.

 60 Brazilian industry officials, interviews with USITC staff, Brazil, Nov. 2004.

 61 Ibid.

 62 Doing Business in Latin America - Brazil.

 63 Ibid.

 64 “Asian Development Bank: Skills Promotion Funds,” found at

http://www-ilo-mirror.cornell.edu/public/english/employment/skills/recomm/publ/003.htm, retrieved Jan. 3, 2005.

 65 “An Educational Exchange Between Piedmont Virginia Community College and Escola Technica Tupy,”

found at http://www.vccaedu.org/inquiry/vcca-journal/priddy.html, retrieved Jan. 3, 2005.

 66 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 67 Brazilian industry officials, interviews with USITC staff, Brazil, Nov. 2004.

 68 Of the 453 firms reporting to ABIFA, 305 foundries employ manual molding systems, 201 firms employ

mechanized systems, and 73 foundries operate automated molding systems. Many foundries utilize more than one

type of molding system. ABIFA Foundry Guide 2004.

9-11

foundries also offer profit-sharing59 and additional bonuses based on company and employee performance.

Larger foundries also provide extensive social support to their employees, including such services as

recreational programs, maternity and child care counseling, and volunteer activities.60

Brazilian firms, including foundries, must also comply with federal regulations that govern the hiring

and dismissal of employees. These stipulations may influence employment and scheduling decisions by firms

seeking to maintain balanced staffing through periods of fluctuating production.61 Firing a permanent

employee “without good cause” is considered difficult and incurs a financial penalty. Employees contribute

8 percent of their monthly salary to the Unemployment Guarantee Fund (FGTS), with matching funds

provided by the employer. If an employee is dismissed, the employer must contribute an additional 40

percent of the amount accrued in the FGTS fund as a severance for the fired employee.62 A maximum threemonth (90 days) probation contract allows firms to employ workers without permanently hiring them.63

Two government-funded educational programs target technical workers – Serviço Nacional de

Aprendizagem Industrial (SENAI) and Escola Technica Tupy (ETT). SENAI, a vocational training center,

is one of four major sector-based vocational training corporations that operate throughout Brazil. SENAI,

which is privately managed and financed from payroll taxes levied on employers, provides a wide range of

short-term training and upgrading programs for adult workers.64 ETT, which began as Tupy’s in-house

educational program to train foundry technical workers, has expanded its course offerings and is currently

under the supervision of the Sociedade Educacional De Santa Catarina.65

Technology

Industry investment in various types of production technology is considered important for

manufacturing and product quality consistency, as well as lower costs that improve competitiveness in global

markets.66 Industry observers note that the technology level in the global foundry industry is not high, and

that the same technologies are available worldwide and are evenly distributed.67 The technology level of the

Brazilian foundry industry is generally comparable to that of the U.S. industry. Larger foundries are capital

intensive, making extensive use of automated mold- and core-making equipment and employing sophisticated

machining equipment.68 These foundries also operate an array of laboratories to measure the physical and

chemical properties of castings. Smaller foundries are more likely to employ manufacturing methods that

are more labor intensive, such as manual mold- and core-making. 
 69 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 70 Ibid.

 71 TS 16949 is a technical specification for facilities that produce OEM or service parts for the automotive

industry to improve product and process quality.

 72 U.S. & Foreign Commercial Service and U.S. Department of State, Brazil Country Commercial Guide FY

2003, Dec. 13, 2002, p. 4; and “Brazil has worse infrastructure than half of Latin America,” EFE News Service,

Sept. 27, 2004, found at http://itc.newsedge-web.com, retrieved Sept, 28, 2004..

 73 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 74 “Brazil economy: Aiming for growth minus inflation,” Economist Intelligence Unit, Aug. 4, 2004, found at

http://itc.newsedge-web.com, retrieved Aug. 6, 2004.

 75 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 76 “The Structure of the Brazilian Economy,” Doing Business With Brazil, Confederação Nacional da Indústria,

Nov. 26, 2001, found at http://www.cni.org.br/produtos/com_ext/src/doing02.pdf,retrieved Jan. 3, 2005.

 77 “Brazil in Brief,” Embassy of Brazil, found at http://www.brasilemb.org, retrieved Aug. 10, 2004.

 78 Only 9 percent of federal, state, and municipal roads totaling about 1.7 million kilometers are paved. “The

Structure of the Brazilian Economy,” Doing Business With Brazil.

 79 “Brazil economy: Aiming for growth minus inflation,” Economist Intelligence Unit, Aug. 4, 2004, found at

http://itc.newsedge-wen.com, retrieved Aug. 6, 2004.

9-12

Brazilian industry officials note that investment in technology is hampered by Brazil’s high interest

rates and by the government prohibition on the purchase of used equipment from foreign sources.69 In

addition, the federal government reportedly offers incentives to firms to purchase Brazilian-made equipment

and penalizes (with taxes) those that purchase foreign-made equipment.70

Of the 453 firms reporting to ABIFA, 130 foundries reported receiving ISO 9000 and 14000, TS

16949,71 or QS 9000 certification. The majority of those certified are in compliance with ISO 9000.

Transportation

The Brazilian transportation infrastructure has numerous infrastructure deficiencies, resulting in high

costs, long delays, and bottlenecks for business, particularly with respect to road and port systems.72 As a

result, transportation has been problematic for some foundries. Because of the lack of containers and ships

at ports, some foundry shipments have been air freighted at a significant cost to the foundry to meet customer

delivery requirements.73

Investment in transportation infrastructure has increased, but continued funding may depend on the

success of the public-private partnerships pending approval in the Brazilian Congress.74 These partnerships

are considered to be critical because the Brazilian government reportedly has limited funding to solely support

such improvements.75 More than $8.6 billion is necessary to fund identified rail and port improvements; an

estimated $10 billion is necessary to fund 18 targeted transportation projects.76

After decades of state-ownership, the federal railroad system has been transferred to the private

sector.77 Rail transportation is limited, but ongoing upgrades in rolling stock and other equipment by the

newly privatized railroad is expected to improve rail performance. The quality of most roads is still poor,78

with the state of São Paulo and the south the only regions with world-class highways. Since over 60 percent

of Brazilian domestic freight is moved over the road system,79 the inadequate state of this system is a further

drag on the economy. Moreover, gasoline is expensive, contributing to higher trucking costs.

The Law of Port Modernization of 1993 (law 8630) provided for reforms of Brazilian port operations,

but high costs, long turnaround times, container shortages, and organized labor are standing concerns for
 80 U.S. & Foreign Commercial Service and U.S. Department of State, Brazil Country Commercial Guide FY

2004, July 15, 2003, found at http://www.exporthotline.com/chamber...., retrieved Feb. 16, 2005.

 81 “Brazil economy/Tax breaks for growth,” Economist Intelligence Unit, Aug. 11, 2004, found at

http://itc.newsedge-web.com, retrieved Aug. 13, 2004.

 82 U.S. Department of State telegram, “GOB Further Defines Industrial Policy,” message reference No. 00661,

prepared by the U.S. Embassy, Brasilia, Mar. 2004.

 83 The BNDES has allocated 2.5 billion reals ($824 million) for this program and will finance 90 percent of the

equipment purchase, to be repaid in no more than 60 installments at an interest rate not to exceed 15 percent a year. 

“BNDES approves US$824mn in loans for machinery,” BNAmericas, Aug. 11, 2004, found at http://itc.newsedgeweb.com, retrieved Aug. 13, 2004.

 84 “GOB Further Defines Industrial Policy.

 85 2004 National Trade Estimate Report on Foreign Trade Barriers, United States Trade Representative, p. 22.

 86 “Foreign Trade,” Doing Business with Brazil, Confederação Nacional da Indústria, Nov. 26, 2001, found at

http://www.cni.org.br/.

 87 “Capital goods sector is “reviving,” says Furian,” Oct. 10, 2003, found at http://www.radiobras.gov.br,

retrieved Aug. 3, 2004.

 88 One industry official estimated that only 5 percent of Brazilian firms meet the BNDES terms. Brazilian

industry official, interview with USITC staff, Brazil, Nov. 2004.

9-13

industry. Port privatization is promised.80 To stimulate investment in port improvements, the Government

recently exempted purchases of terminal equipment from certain taxes.81

Domestic Policies

High interest rates are a leading concern of the Brazilian foundry industry, as they impact the

industry’s ability to obtain favorable financing to fund expansions and equipment upgrades. The industry

is also subject to the highest taxes in South America. The depreciation of the Brazilian real relative to the

U.S. dollar, however, may enhance the industry’s export opportunities to the U.S. market.

Federal/Regional Programs

Although no known Brazilian government programs are specifically directed at the foundry industry,

the industry likely benefits indirectly from ongoing government programs that provide financial support or

incentives. Brazil is developing an industrial support program to help modernize industrial equipment,

support technological innovation, and expand export levels. This program is bolstered by subsidized loan

programs and the establishment of a new industrial development agency.82 One of the sectors to benefit from

these initiatives is the capital goods sector, a principal end-use market for foundry products. Two programs

have been announced. The Modermaq program provides low-interest loans for purchasers of modern

industrial equipment.83 Another program for industrial exporters is designed to encourage innovation and

competitiveness in small and medium businesses.84

Brazil also offers credit assistance to its exports under two programs. The Export Financing Program

known as PROEX, which was established in 1991, is intended to equalize Brazilian and international interest

rates for export financing and to fund the manufacture of goods for trade.85 In addition, the National Bank

for Economic and Social Development (BNDES) manages the BNDES-Exim Program, which funds the

manufacture and foreign sale of domestically produced goods.86 BNDES also offers a credit line for

purchases of agricultural machinery and equipment known as Moderfrota.87 However, BNDES reportedly

requires compliance with an extensive list of regulations to gain financing at favorable rates, and Brazilian

companies that export have better access to its credit program.88 Moreover, the Forum for Competitiveness
 89 “Capital goods sector is “reviving,” says Furian..”

 90 International Financial Statistics Browser, International Monetary Fund, found at

http://ifs.apdi.net/imf/ifsbrowser.aspx?branch=ROOT, retrieved Feb. 8, 2005.

 91 Except where noted, information for this section collected from “How to Understand Corporate Taxes in

Brazil,” American Chamber of Commerce – Sao Paulo by PriceWaterhouseCoopers; and “Taxes and Taxing

Powers,” found at http://www.receita.fazenda.gov.br, retrieved Oct. 15, 2003. 

 92 Brazil County Commercial Guide FY 2004.

 93 Raymond Colitt, “Brazilian industry angry at tax rise plan,” Financial Times, July 20, 2004, found at

http://financialtimes.printthis.clickability.com, retrieved July 21, 2004.

 94 “Brazil’s Lula to decree income tax cuts Wednesday,” Reuters, July 19, 2004, found at http://biz.yahoo.com,

retrieved Aug. 3, 2004.

 95 U.S. Department of State, Brazil - 2005 Investment Climate Statement, found at

http://www.state.gov/e/eb/ifd/2005/41988.htm, retrieved Apr. 1, 2005.

 96 “Brazil economy: Tax break package aims to boost Brazilian growth.”

9-14

in the Capital Goods Productive Chain has been created at BNDES with the aim of supporting industrial

sustainability through government investments and purchases, and infrastructure improvements.89

Monetary/Tax Policies

Exchange rates.--The Brazilian real steadily depreciated against the dollar during 1999-2003, losing

69 percent of its value, as shown in the following tabulation (reals per U.S. dollar):90

Year Rate

1999 . . . . . . . . . . . . 1.82

2000 . . . . . . . . . . . . 1.83

2001 . . . . . . . . . . . . 2.36

2002 . . . . . . . . . . . . 2.92

2003 . . . . . . . . . . . . 3.08

This depreciation follows the independent floating of the real with respect to the U.S. dollar since January

15, 1999. Although numerous economic factors influence Brazil’s overall competitive condition, such as its

relatively high inflation rate, the lower value of the Brazilian real relative to the U.S. dollar may improve the

cost competitiveness of Brazilian foundry exports to the U.S. market as well as the export of finished goods

that incorporate foundry products.

Tax structure.91--The tax level in Brazil on imported and locally manufactured goods is the heaviest

in Latin America and higher than that in the United States.92 These taxes reportedly hinder the international

competitiveness of Brazilian products and investment levels. Brazilian companies are reportedly subject to

as many as 61 different taxes,93 with a corporate tax rate in 2003 of 34 percent. Total tax collections

accounted for nearly 36 percent of Brazilian gross domestic product in 2003.94 Although these taxes are

considered burdensome, they do not discriminate between foreign and domestic firms.95 Tax reform is widely

discussed, but the projected reduction in the level of overall tax collection has reportedly thwarted reform

efforts. In August 2004 the Government of Brazil announced its intention to reduce tax rates on capital gains

and capital goods, as well as personal income. These measures are designed to streamline the Brazilian tax

system and ease the tax burden for the agricultural and industrial sectors, thereby spurring investment in these

sectors and improving productivity.96 The most notable taxes in the manufacturing sector include the
 97 The IPI is a federal excise tax, generally ranging between 10 and 15 percent, assessed on most domestic and

imported manufactured products. The IPI rate has been lowered to 2 percent for a broad range of capital goods to

encourage investment in machinery and equipment. “Brazil economy/Tax breaks for growth,” Economist

Intelligence Unit, Aug. 11, 2004, found at http://itc.newsedge-web.com, retrieved Aug. 13, 2004. Brazilian exports

are exempt from the IPI tax. The ICMS is a value-added tax assessed by state governments on both imports and

domestic goods. The rate ranges between 7 and 18 percent among the different Brazilian states, depending on the

type of transaction. The Corporate Income Tax (IRPJ) is an assessment of 15 percent on taxable income, as well as a

surcharge of 10 percent on annual taxable income greater than R$240,000 (about US$120,000). The Social

Contribution on Net Income (CSLL) tax was 9 percent on taxable corporate income in 2002.

 98 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 99 International Financial Statistics Browser, International Monetary Fund, found at

http://ifs.apdi.net/imf/ifsbrowser.aspx?branch=ROOT, retrieved Feb. 8, 2005.

 100 Jonathan Wheatley, “Brazil moving to a calmer rhythm: Borrowing overseas is no longer always the best

option for Latin firms,” Financial Times USA, July 12, 2004, found at http://itc.newsedge-web.com, retrieved July

22, 2004.

 101 David Shaman, “Brazil’s Pollution Regulatory Structure and Background,” Sept. 9, 1996, found at

http://www.worldbank.org, retrieved July 28, 2004, and “Comparing environmental laws in Latin America,” InterAmerican Development Bank, Nov. 25, 2003, found at http://iadb.org, retrieved July 28, 2004.

 102 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 103 Brazilian industry officials, plant visits and interviews with USITC staff, Brazil, Nov. 2004. Ten ABIFA

member foundries have received ISO14000 certification for environmental management and methods to improve

(continued...)

9-15

Industrialized Product Tax (IPI), the Merchandise and Service Circulation Tax (ICMS), the Corporate Income

Tax (IRPJ), and the Social Contribution on Net Income Tax (CSLL).97

Interest rates.--The cost of money has been cited by industry officials as one of the leading

impediments to investment in and the improved competitiveness of the Brazilian foundry industry. According

to Brazilian industry sources, Brazilian interest rates must be reduced to improve the industry’s ability to

finance necessary investments in expansions, equipment, and other facility improvements.98 Although the

bank commercial lending rate fluctuated during 1999-2003, it remained consistently higher than that in the

United States, as shown in the following tabulation (percent):99

Year Rate

1999 . . . . . . . . . . . . 80.44

2000 . . . . . . . . . . . . 56.83

2001 . . . . . . . . . . . . 57.62

2002 . . . . . . . . . . . . 62.88

2003 . . . . . . . . . . . . 67.08

The government has maintained high interest rates to protect the Brazilian real and to guard against

inflation.100

Environment

Despite extensive environmental laws that are reportedly as stringent as those of developed countries,

enforcement of these regulations in Brazil has reportedly been lax. Environmental agencies lack the financial

resources, personnel, training, and political support to pursue regulatory compliance.101 Certain local

governments have reportedly enacted regulations specific to local industries, and enforced stricter

environmental standards than those enacted at the federal level.102 However, several Brazilian foundries have

environmental programs that meet or exceed existing environmental standards.103 Teksid and Tupy, for
 103 (...continued)

environmental performance.

 104 “Policy for Environment and Safety,” Teksid, found at

http://www.teksidaluminum.com/pdf/Pieghevole-UK.pdf, retrieved Feb. 16, 2005, and Sustainability Balance Sheet

2001, Tupy.

 105 Sustainability Balance Sheet, Tupy, p. 15.

 106 Environmental quality issues are within the purview of the agencies that comprise the National

Environmental System (SISNAMA), which includes agencies from the national, state, and local levels. The

Ministry of Environment (MMA) is the central body of the System and the Brazilian Institute of Environment and

Natural Renewable Resources (IBAMA) is the federal executive body. IBAMA is charged with monitoring and

enforcing environmental regulations, as well as assisting state agencies with technical advice. Mandatory approval

of any project that may cause adverse environmental effects is required by IBAMA. The Brazilian states as well as

local governments have established individual agencies that serve to improve environmental quality. “An Energy

Overview of Brazil,” U.S. Department of Energy, found at http://www.fe.doe.gov, retrieved July 20, 2004, p. 25.

 107 The Environmental Crimes Act of 1998, Embassy of Brazil, found at http://lawvianet.com/lawsregs.html,

retrieved Apr. 5, 2005.

 108 The Federal Constitution of 1988, Embassy of Brazil, found at http://lawvianet.com/lawsregs.html, retrieved

Apr. 5, 2005.

 109 U.S. Department of Energy, An Energy Overview of Brazil, found at http://www.fe.doe.gov, retrieved July 20,

2004, p. 25.

 110 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, “Country Reports on Human

Rights Practices,” Mar. 31, 2003, found at http://www.state.gov, retrieved Aug. 10, 2004.

9-16

example, pursue sustainable development policies.104 These foundries also recycle sand and employ

sophisticated air and water treatment systems. Tupy, for example, installed sleeve filters in its furnaces that

reduce CO2, NOx, and SOx emissions by 95 percent.105 

The Federal Constitution of 1988 provides the basis for Brazil’s environmental program for the

conservation of biodiversity and its sustainable use.106 The Environmental Crimes Act, No. 9,605, approved

on February 13, 1998, improves upon many aspects of the previous environmental legislation. The new law

streamlines sentences, addresses the criminal responsibility of companies that infringe environmental laws,

and strengthens other provisions.107 The federal government, the states, the Federal District, and

municipalities are authorized under Article 23 of the Federal Constitution to protect the environment, to take

action against any type of pollution, and to protect Brazilian wildlife. One of the most important items in the

Constitution is the requirement of an environmental impact study prior to any activities "which may

potentially cause significant degradation of the environment."108

In addition, Brazil ratified the Kyoto Treaty in August 2003, but is exempt from reducing its carbon

emissions because of its status as a developing country. Brazil is eligible to receive financial aid from foreign

sources under the Kyoto Treaty’s Clean Development Mechanism to promote the use of cleaner energy

technologies.109

Worker Health and Safety

The Ministry of Labor establishes regulations outlining occupational, health, and safety standards

applicable to Brazilian industries and their workers. This regulatory framework is consistent with

internationally accepted standards, but as with other aspects of Brazilian government regulations, application

and enforcement are considered lax. The responsible government authorities reportedly lack sufficient

funding to fulfill their enforcement and inspection mandates.110 Brazilian legislation governing worker health
 111 The Brazilian government mandates an ergonomically correct workplace, which requires jobs to be adapted

to an individual. Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

 112 International Occupational Safety and Health Information Centre, International Labour Organization, found at

http://www.ilo.org/public/english/protection/safework/cis/managmnt/ioha/app_c03.htm, retrieved Apr. 5, 2005.

9-17

and safety is covered by Portaria 3.214, which outlines labor safety guidelines. The three principal elements

of this legislation – safety, health, and ergonomics111 – are included in the Environmental Risks Prevention

Program (PPRA),112 the Workers Health and Medical Program (PCMSO), and NR 17.
9-18
 113 American Foundry Society (AFS), “The Global Metalcasting Market,” ch. in AFS 2003 Metalcasting

Forecast and Trends, p. 30. 

 114 Industry Canada, “Industry Structure and Overview,” ch. in Canadian Metalcasting Technology Roadmap,

rev. Oct. 2003, p. 2, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00065e.html, retrieved June 14,

2004. 

 115 Ibid, pp. 1-2.

 116 Industry Canada, “Partnerships,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, 

pp. 1-2, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00065e.html, retrieved June 14, 2004. 

 117 U.S. industry representative, interview by USITC staff, United States, Oct. 21, 2004. 

 118 Industry Canada, “Partnerships,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, p. 2,

found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00065e.html, retrieved June 14, 2004. 

9-19

Industry statistics:

• World rank (2001): 17th

• Production (2001): 912,000 metric tons

• Employment (2002): 14,900 production

workers

• No. of establishments (2002): 260

Industry characteristics:

• An increase in nonferrous metal

production over the past decade. 

• Primarily small establishments.

• Net exporter if indirect exports are

included; otherwise, net importer.

Canada

Industry Profile

Canadian metal casting is a relatively small but well

established industry in transition from traditional products

to value-added services and products. In terms of weight,

Canada ranked 17th among reporting countries with an

estimated casting production of 912,000 metric tons or 1

percent of world output in 2001 (latest year available).113

Like the U.S. industry, the Canadian casting

industry comprises three basic kinds of operations: job

shops, production shops, and captive shops. Traditionally,

job shops tended to supply castings to local markets,

production shops supplied original equipment

manufacturers (OEMs), and captive shops were embedded

within the manufacturing system of the end-use product.114 However, these distinctions have become

somewhat blurred. With the advent of e-commerce and customer partnerships, some job shops sell beyond

their local borders and some production shops have teamed up with their customers to provide a smoother

production system. Casting methods used in Canada include die, sand, centrifugal, permanent mold, semisolid, lost foam, and investment castings.115

Also like the U.S. industry, over the past decade, some members of the Canadian casting industry

have evolved from product provider to customer partner by incorporating supportive services in their product

base. These customer relationships embody a range of product bundling, including cast design support,

modeling, and prototyping; metallurgical research and development; pattern making; machining; testing;

partial assembly with the end product; and warehousing to support the customer’s just-in-time inventory

system. One casting operation serving the automotive industry reported assigning a resident engineer to each

customers’ design centers as a key member of the design team. Another caster reduced lead time by

forecasting its customers’ needs and putting their cast components on open order or consignment, resulting

in doubled sales to these same customers. The formation of partnerships by casters has not been limited to

the larger production shops. Some job shops have also developed long term customer relationships.116

Although price has been reported to be a criteria customers used to select a casting partner, other factors

considered by customers include casting quality (equally important as price117), delivery time, and customer

loyalty.118
 119 Canadian Industry Statistics defines principal establishments as those that are incorporated, have employees

that are primarily engaged in manufacturing, and have annual sales of manufactured goods of $30,000 or more.

 120 Canadian Industry Statistics, Establishments, Foundries (NAICS 3315), found at

http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005.

 121 There are no foundries reported in the Northwest Territories, Nunavet, nor Yukon. Canadian Industry

Statistics, Establishments, Foundries (NAICS 3315).

 122 Canada’s prairie region spans the provinces of Alberta, Saskatchewan, and Manitoba.

 123 Industry Canada, “Marketing,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct 2003, p. 1,

found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00065e.html, retrieved June 14, 2004.

9-20

In 2002, Canada had about 260 active principal casting establishments,119 of which nearly 80 percent

were small operations with fewer than 100 employees.120 About 47 percent of all active principal casting

establishments are located in the Province of Ontario, with those in the southern region serving primarily

OEMs for both the Canadian and U.S. automotive industry. In addition, the Province of Quebec hosts about

26 percent of the establishments and British Columbia about 13 percent.121 Although casting establishments

in the coastal, northern, and prairie regions122 have experienced declining traditional local markets such as

maritime, forestry, mining, and agriculture sectors, some have reportedly remained viable by developing new

products, geographically diverse marketing campaigns, and customer partnerships.123

Despite the decline in many traditional casting markets, the number of Canadian foundry

establishments has actually increased over the past decade, with a growing trend towards more production

of nonferrous castings (table 9-8).

Table 9-8

Canadian foundry industry: Foundry establishments, by metal type, 1993 and 1999-2002

(Number)

Establishments by metal type 

Year

Total

establishments Iron Steel Nonferrous

19931 . . . . . . . . . . . . . . . . . . . . . . . 154 79 34 41

1999 . . . . . . . . . . . . . . . . . . . . . . . . 189 70 35 84

2000 . . . . . . . . . . . . . . . . . . . . . . . . 264 102 44 118

2001 . . . . . . . . . . . . . . . . . . . . . . . . 261 100 47 114

2002 . . . . . . . . . . . . . . . . . . . . . . . . 260 98 46 116

 1

 This year included to provide an historical perspective.

Note.–Making data correlations between 1999 and 2000 is problematic because the Government of Canada made

conceptual and methodology changes to the data set collection in 2000. As a result of these collection changes,

nearly 24,000 principal establishments were added to the overall manufacturing sector in 2000. The magnitude of

the effect from these changes is not readily available and differs by industry. With the exception of trade data,

problematic correlations apply to all data sets between 1999 and 2000 in the Canadian section of this report. See

Canadian Industry Statistics, establishments, foundries (NAICS 3315) found at

http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005

Source: Compiled by the Commission from official Canadian Industry Statistics for all foundry establishments

(NAICS 3315), iron foundries (NAICS 331511), steel foundries (NAICS 331514), and nonferrous foundries (NAICS

33152), found at http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005. 
 124 Canadian Industry Statistics, Establishments, Nonferrous Foundries (NAICS 33152) and Iron Foundries

(NAICS 331511), found at http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13,

2005.

 125 Canadian Industry Statistics, Establishments, Nonferrous Foundries (NAICS 33152).

 126 Comparable data for specific nonferrous metal castings are not readily available. However, the Aluminum

Association reported that in 2002 and 2003, Canadian aluminum castings were used predominantly for passenger

cars and light trucks, including wheels. The Aluminum Association Incorporated, “Aluminum Casting Statistics,

Canadian Shipments of Aluminum Castings,” Fourth Quarter 2003 Report (Washington, D.C., Mar. 19, 2004), p. 1.

9-21

To provide some perspective on size and location, Canada has four large casting establishments (500

plus employees), of which two are nonferrous and two are iron, all of which are located in Ontario.124 Of

another 48 medium-sized casting establishments (100-499 employees), approximately one-half are

nonferrous, with the majority also located in Ontario.125 Canadian nonferrous castings are used primarily for

the transportation industry.126 Based on reported annual sales of $50 million or more, a combination of

domestic- and foreign-owned companies are among Canada’s leading foundry producers and represent a

variety of cast metal products for end users (table 9-9).

Table 9-9

Canadian foundry industry: Leading foundry producers, country of ownership, and major products

Company

Country of

ownership Products

Norcast . . . . . . . . . . . . . . . . . . . . . Canada Iron and steel grinding mill liners

Atlas Steels Inc. . . . . . . . . . . . . . . Canada Steel, stainless steel, carbon, and alloy steel bar,

plate, and tube products

Haley Industries .............. Canada Aluminum and magnesium castings for the

international aerospace industry

Exco Technologies Inc. ......... Canada Large die castings for the automotive industry

Gerdau Ameristeel Inc. . . . . . . . . Brazil Steel equipment blades (e.g., bulldozer blades)

Ispat Sidbec Inc. (subsidiary of

 Ispat International) ...........

Netherlands Steel and alloy steel wire, bars, sheets, pipes, and

tubes for the construction industry

Kubota Metal Corp. ........... Japan Variety of steel and alloy steel products including

centrifugal tubes, steel processing equipment, and

assemblies for the refining and chemical industries

Canada Pipe Co. Ltd. . . . . . . . . . United States Iron pipe for sewers

Brake Parts Canada Inc. . . . . . . . . United States Engine parts, rotors, disk brakes, flywheels,

crankshafts, and steering parts for motor vehicles

Source: Canadian Industry Statistics, Company Directories, Foundries (NAICS 3315) found at 

http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis 3..., retrieved Jan. 13, 2005.

Business Trends

Despite relatively constant shipment values during 1999-2002, Canada reported growing exports of

high value castings while increased imports supported domestic demand for lower priced commodity type

castings.
 127 Canadian Industry Statistics, data tables, Foundries (NAICS 3315) found at

http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005.

 128 Ibid.

 129 Industry Canada, Appendix A in Canadian Metalcasting Technology Roadmap, 2000, pp. 44-51, found at

http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/h rm 00051e.html, retrieved Jul.. 28, 2004. 

 130 Canadian Industry Statistics, data tables, Foundries (NAICS 3315).

 131 Ibid.

 132 Despite the increased number of establishments because of changes in data collection in 2000, the number of

production workers decreased from 1999 to 2000.

 133 Calculated by Commission staff using Canadian dollar average annual salary per production worker for

foundries (NAICS 3315), found at http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3... , and the

Bank of Canada’s inflation calculator, found at http://www.bankofcanada.ca/en/inflation_calc.htm. The calculator

uses monthly consumer price index (CPI) for which June 1992 CPI=100.

 134 Industry Canada, “Technology,” Human Resources,” and “Investment,” chs. in Canadian Metalcasting

Technology Roadmap, rev. Oct. 2003, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/hrm

00051e.html, retrieved July 28, 2004.

9-22

Production

The value of Canadian foundry shipments remained fairly constant at $2.1 billion during 1999-2002

(latest year available), as shown in the following tabulation (in million U.S. dollars):127

Year Value

1999 . . . . . . . . . . . . 2,100

2000 . . . . . . . . . . . . 2,200

2001 . . . . . . . . . . . . 2,000

2002 . . . . . . . . . . . . 2,100

Of the metals cast in 2002, nonferrous metals accounted for $1.2

billion (57 percent) of total shipment value,128 and included

primarily aluminum, copper, and zinc as well as some

magnesium and nickel.129 That same year, gray and ductile iron

together accounted for $698 million (33 percent of total

shipments in 2002), and steel accounted for $162 million (8

percent).130 This mix of metal types has changed over time.

During 1993-1995, iron castings accounted for the majority of

the value of shipments, followed by nonferrous castings and

steel.131 For a breakout of metal types by weight in 2001 (latest

year available), see figure 9-3.

Employment

The employment trend during 1999-2002 reflects

increased use of automated production processes. During the period, the number of production workers

decreased by 11 percent to 14,900 in 2002 (table 9-10).132 Commensurate with the reduction in production

workers, total wages and salaries decreased by 6 percent to $436 million in 2002. Within the same time

frame, the average annual salary per production worker increased from about $28,000 in 1999 to just over

$29,000 during 2000-2002.133 Although salaries remained fairly constant over the four years, the average

output value per production worker grew by an estimated $15,940 to approximately $140,940 in 2002. One

report indicates that the Canadian casting industry has made capital improvements during this time frame,134

which may explain the increase in worker productivity.

Aluminum

8%

Steel

17%

Iron

75%

Source: Modern Casting .

Figure 9-3

Canadian foundry industry: 2001 

production, by metal type (based on 

weight)
 135 Canadian manufacturing shipments and Canadian apparent domestic market, found at

http://strategis.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tax, retrieved Jul. 30, 2004.

 136 Industry Canada, “Competitiveness,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, 

p. 1, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/hrm 00051e.html, retrieved July 28, 2004.

 137 Industry Canada, “Markets,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, p. 3, found

at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/hrm 00051e.html, retrieved July 28, 2004.

 138 Industry Canada, “Competitiveness,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, 

p. 1, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/hrm 00051e.html, retrieved July 28, 2004.

9-23

Table 9-10

Canadian foundry industry: Number of employees and production and related workers, 1999-2002

Item 1999 2000 2001 2002

All employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,400 19,700 18,100 17,500

Production and related workers . . . . . . . . . . . . . . . . . 16,800 16,600 15,300 14,900

Man-hours worked (1,000 hours) . . . . . . . . . . . . . . . . 34 (1

) (1) (1)

Wages paid to production workers (U.S.

 million dollars) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 487 439 436

 1

 Not available.

Note.–As of 2000, Canada Industry Statistics no longer included data on hours worked.

Source: Canadian Industry Statistics, Foundries (NAICS 3315), Data Tables, found at

http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005

Trade

During 1999-2002, demand for Canadian foundry products outpaced production, resulting in a

shortfall in Canadian producer shipments versus domestic demand of $21 million in 2002 (latest year

available).135 As a result, imports increased by 5 percent to $247 million in 2003 (table 9-11). Although the

United States has long accounted for a disproportionate share of Canada’s casting imports, that share has

started to erode in recent years with the growth in imports from Asia, primarily China. This is explained in

part by the availability of lower-priced, off-the-shelf commodity-type castings such as municipal-use castings

from China.136 With a narrowing of discernible qualitative differences between domestic- and Chineseproduced products,137 some casters are reportedly importing commodity-type castings to fill their product line

while focusing their own production on more complex, value-added products.138

Table 9-11

Canada: Imports, by principal sources, 1999-2003

(1,000 U.S. dollars)

Country 1999 2000 2001 2002 2003

United States . . . . . . . . . . . . . . . . . . . . . . 177,400 201,653 197,644 175,419 169,143

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,802 16,653 20,136 24,562 31,671

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . 2,931 2,669 3,680 4,203 7,625

India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,976 2,748 4,940 3,432 5,284

All other countries . . . . . . . . . . . . . . . . . . . 37,170 35,851 34,816 36,684 33,520

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235,279 259,574 261,216 244,300 247,243

Source: Canadian Industry Statistics, Canadian Trade by Industry, Foundries (NAICS 3315), found at

http://strategis.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag, retrieved Jan. 13, 2005.
 139 Shipment data for 2003 are not available to make an export to shipment comparison. Canadian Trade by

Industry, foundry (NAICS 3315), found at http://strategis.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag, retrieved July 30,

2004.

 140 “Indirect” meaning that the casting is already assembled in the customer’s product when exported.

 141 E-mail correspondence from Canadian industry official to USITC staff, Mar. 2, 2005. 

 142 Canadian Trade by Industry, Foundry (NAICS 3315), found at

http://strategis.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag, retrieved July 30, 2004.

 143 Ibid.

9-24

During 1999-2003, Canadian exports of castings increased by 19 percent to $224.4 million (table 9-

12), and accounted for 9 percent to 11 percent of its casting shipments through 2002.139 An estimated 70

percent of the industry’s shipments are reportedly exported through indirect means,140 primarily to the U.S.

market.141 During 1999-2003, nonferrous castings accounted for 70-74 percent of exports (table 9-13),

followed by iron castings (13-19 percent), and steel castings (11-14 percent).142 The United States has long

been Canada’s major export market, receiving $194.3 million (87 percent) of export shipments in 2003.143

Table 9-12

Canada: Exports, by principal markets, 1999-2003

(1,000 U.S. dollars)

Country 1999 2000 2001 2002 2003

United States . . . . . . . . . . . . . . . . . . . . . . 167,769 189,315 189,043 188,015 194,283

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . 1,959 2,058 2,746 2,209 4,390

Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,652 2,620 2,980 2,679 4,084

South Africa . . . . . . . . . . . . . . . . . . . . . . . 28 58 113 1,250 2,510

All other countries . . . . . . . . . . . . . . . . . . . 15,357 14,011 16,877 19,492 19,121

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,765 208,062 211,759 213,645 224,388

Source: Canadian Industry Statistics, Canadian Trade by Industry, Foundries (NAICS 3315), found at

http://strategis.ic.gc.ca/sc_mrkti/tdst/tdo/tdo.php#tag, retrieved Jan. 13, 2005.

Table 9-13

Canada: Exports, by principal products, 1999-2003

(1,000 U.S. dollars)

Item 1999 2000 2001 2002 2003

Iron cast products . . . . . . . . . . . . . . . . . . . . 36,327 33,413 32,345 27,698 32,991

Steel cast products . . . . . . . . . . . . . . . . . . . 20,730 25,299 26,976 29,673 26,372

Non-ferrous die-cast products . . . . . . . . . . . 86,607 93,265 90,740 95,427 103,215

Non-ferrous other than die-cast products . . 45,101 56,085 61,699 60,846 61,811

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,765 208,062 211,759 213,645 224,388

Note.–Figures may not add to totals because of rounding.

Source: Canadian Trade by Industry, Foundries, (NAICS 3315) found at

http://strategis.ic.gc.ca/scmrkti/tdst/tdo/tdo.php#tag, retrieved Jan. 13, 2005.

Factors of Production

As with the U.S. industry, rising costs for input materials and energy have put a strain on the

Canadian casting industry’s profit margin. At the same time, a tighter labor market has challenged

management’s ability to adapt. However, education and implementation of advanced technology are two

methods being used to help mitigate these problems.
 144 Canadian Industry Statistics, data tables, Foundries (NAICS 3315), “Cost of Materials and Supplies,” found

at http://strategis.ic.gc.ca/canadian_industry_statistics/cis.nsf/IDE/cis3..., retrieved Jan. 13, 2005. 

 145 Office of Energy Efficiency, Profile of the Canadian Foundry Industry, found at

http://oee.nrcan.gc.ca/cipec/ieep/newscentre/foundry, retrieved Jan. 18, 2005.

 146 Ibid.

 147 Canadian Industry Statistics, data tables, Foundries (NAICS 3315). 

 148 Calculated by USITC staff.

 149 Office of Energy Efficiency, Profile of the Canadian Foundry Industry, found at

http://oee.nrcan.gc.ca/cipec/ieep/newscentre/foundry, retrieved Jan. 18, 2005.

 150 Information for Labor was derived principally from Industry Canada, “Human Resources and Education,” ch.

in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, pp. 1-3, found at

http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00079e.html, retrieved June 14, 2004.

 151 Industry Canada, “Industry Structure and Overview,” ch. in Canadian Metalcasting Technology Roadmap,

rev. Oct. 2003, p. 3, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00069e.html, retrieved June

14, 2004.

 152 University of Windsor, Ontario, Canada, An Employers’ Guide Contact Information, found at

http://www.google.com/u/uofwindsor?query=co-op+programs&sa.x=0&sa.y=0, retrieved Feb. 8, 2005.

9-25

Raw Materials and Energy

From 1999 to 2002 (latest year available), the cost of materials and supplies for the manufacturing

of cast products in Canada increased by $20 million to about $828 million, and accounted for an estimated

39 percent of the industry’s shipment value in 2002.144 The primary raw material for the industry is recycled

metal.145 Virgin metal is used for a small fraction of specialty formulations, including some aluminum and

brass castings.146 During this time period, energy costs increased by about $27 million (34 percent) to

approximately $107 million147 and accounted for approximately 5 percent of the industry’s 2002 shipment

value.148 The primary reasons for rising energy costs were higher natural gas prices and deregulation of the

electricity market in 2000.149

Labor150

The lack of skilled and unskilled labor has been a problem for the industry, according to some

foundry representatives. The shortage is felt throughout the provinces in rural and urban areas, and covers

the full range of the production process, including metallurgists, computer/electronic specialists, engineers,

and people who can operate and repair the new technology/equipment. Part of the problem is a “dirty, dull,

and dangerous” image of the industry.151 Traditionally, Canadian foundries hired skilled labor from Europe,

but this source has reportedly diminished with improved job opportunities in Eastern Europe. Other causal

factors include low wages and a lack of industry promotion within the education system and communities in

general.

Some labor issues are being addressed through a variety of education programs. The joint Education

Committee of the Canadian Foundry Association (CFA) and the Ontario Chapter of the American Foundry

Society (AFS) have produced a video and education package for foundries to use as a presentation tool to help

develop student and public awareness of the industry. On a larger scale, the joint CFA/AFS-Ontario

Education Committee, with contributions from the Government of Ontario, and industry members and

suppliers, established the Modern Technologies Institute at Mohawk College in Hamilton, Ontario; classes

started in September 2000. In addition, the University of Windsor, in Ontario, has a very strong education

apprentice program with many corporate partners, including Windsor Mold Group, Fleetwood Metal Industry

Inc., and three automotive companies that have plants in Canada: Daimler Chrysler, Ford, and General

Motors.152 One foundry reportedly recruited permanent employees through its participation in engineering

apprenticeship programs in Manitoba and Nova Scotia Provinces. Another foundry, with its own onsite
 153 Cast Metals Institute, About CMI, found at http://www.castmetals.com/aboutcmi.html, retrieved Feb. 8, 2005.

 154 Information for Technology was derived principally from Industry Canada, “Technology,” ch. in Canadian

Metalcasting Technology Roadmap, rev. Oct. 2003, pp. 1-3, found at http://strategis.ic.gc.ca/epic/internet/intrmcrt.nsf/en/rm00078e.html, retrieved June 14, 2004.

 155 Office of Energy Efficiency, Environmental Considerations, found at

http://oee.nrcan.gc.ca/cipec/ieep/newscentre/foundry, retrieved Jan. 18, 2005.

 156 Some casters using computer-based modeling reported turnaround time of less than two weeks from the

customer’s initial request to product delivery. Computer-based modeling reduces product turnaround time by

allowing customer and caster to share drawings and specs electronically. It also reportedly reduces product design

time and facilitates a more efficient casting process. See “Casting Process Modeling Ensures Design Accuracy for

ATM Housing,” found at http://www.castsolutions.com/archive/CastingSucesses/LCS0300_8.html, retrieved Apr. 1,

2005. 

 157 Industry Canada, “Government,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, p. 1,

found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00078e.html, retrieved June 14, 2004.

9-26

training facility, established an apprenticeship program with its local community college. However, these

educational arrangements are the exception. Most foundries use on-the-job training and/or continuing

education course work offered by the American Foundry Society’s Cast Metals Institute (CMI). CMI course

work is available over the Internet as well as in Canada and the United States.153

Technology154

The adoption of advanced technology by the Canadian industry has helped to mitigate labor concerns,

as well as some environmental issues. One important change made by most Canadian cast iron operations

during the past two decades is the shift from coke-using cupolas to electric induction furnaces, which

increased compliance with pollution standards for carbon dioxide emissions.155 Near net shaping has been

adopted by some of the major foundries. This is an important advancement because it produces castings with

such close precision to the customer’s required dimensions that little or no machining is needed, thereby

reducing or eliminating waste and a major step in the production process. More recently, the adoption of

process sensors and controls have made it easier to shift from skilled manual labor to an automated operation,

which has the advantage of increased product consistency and quality, particularly for long production runs.

Long production runs may, in turn, provide economies of scale that contribute to lower unit cost. Process

sensors and controls also provide data for computer-created models of the casting process, the benefits of

which include reduced product turnaround time,156 reduced energy use, and reduced scrap waste. Modeling

is available through some Canadian public institutions (notably Industrial Materials Institute of Boucherville,

and the Industrial Technology Centre in Manitoba), and independent design consultants.

Domestic Policies

Exchange rates between the Canadian and U.S. dollar were not highly correlated with the value of

bilateral trade for castings. Industry sources noted that other factors affecting bilateral trade include market

proximity, open markets, and common language. In terms of environment and worker health and safety

issues, Canada reportedly has extensive laws and enforcement programs.

Federal/Regional Programs

As of 2003, some Canadian foundry representatives reportedly expressed concern that the

Government of Canada does not assist the industry in the form of no-fault loans, tax credits, and accelerated

two-year writeoffs for capital investments, particularly those for pollution control.157 Also, possible

government-based solutions for competing with increasing imports were suggested, including tariffs,
 158 Industry Canada, “Competitiveness,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, 

p. 1, found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00078e.html, retrieved June 14, 2004.

 159 Federal Reserve Statistical Release, Foreign Exchange Rates, found at

http://www.federalreserve.gov/releases/g5a/current, retrieved Jan. 15, 2005.

 160 Industry Canada, “Markets,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, p. 2, found

at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00078e.html, retrieved June 14, 2004.

 161 International Monetary Fund, International Financial Statistics, Dec. 2004, Canada, p. 232.

9-27

subsidies, and Canadian content rules. However, it was reported that such solutions for imports are not likely

to be implemented given the government’s policies and WTO regime, of which Canada is a member.158

Monetary/Tax Policies

Canada has a free floating exchange rate system. During 1999-2003, the Canadian rates fluctuated

somewhat against the U.S. dollar, as shown in the following tabulation (in Canadian dollars per U.S.

dollar):159

Year Rate

1999 . . . . . . . . . . . . 1.4858

2000 . . . . . . . . . . . . 1.4855

2001 . . . . . . . . . . . . 1.5487

2002 . . . . . . . . . . . . 1.5704

2003 . . . . . . . . . . . . 1.4008

The movement in exchange rates between the Canadian and U.S. dollars was not highly correlated with the

value of bilateral trade for castings. According to industry sources, other factors affecting bilateral trade in

castings between Canada and the United States include the geographic closeness of the markets in both

countries, market openness, common language, and the interrelationship between casters and their

customers.160

During 1999-2003, the Canadian commercial lending interest rate fluctuated downward by 2-3 

percentage points, as reflected in the following tabulation (in percent):161

Year Annual rate

1999 . . . . . . . . . . . . 6.44

2000 . . . . . . . . . . . . 7.27

2001 . . . . . . . . . . . . 5.81

2002 . . . . . . . . . . . . 4.21

2003 . . . . . . . . . . . . 4.69

A number of factors influence investment decisions, including relatively low interest rates.
 162 Environment Canada, The Canadian Council of Ministers of the Environment (CCME), found at

http://www.ec.gc.ca/ceqg-rcqu/English/ccme/default.cfm, retrieved Feb. 8, 2005.

 163 U.S. Environmental Protection Agency, International Affairs, About U.S.-Canada Environmental

Cooperation, found at http://www.epa.gov/international/regions/Canada/cooperation.html, retrieved Feb. 2, 2005.

 164 U.S. Environmental Protection Agency, International Affairs, Great Lakes Water Quality Agreement, found

at http://www.epa.gov/international/regions/Canada/glwqa.html, retrieved Feb. 2, 2005.

 165 U.S. Environmental Protection Agency, International Affairs, US-Canada Air Quality Agreement 2004

Progress Report, found at http://www.epa.gov/airmarkets/usca/2004report.html, retrieved Feb. 2, 2005

 166 U.S. Environmental Protection Agency, Chemical Emergency Preparedness and Prevention, Bi-Lateral

Border Programs, found at http://yosemite.epa.gov/oswer/ceppoweb.nsf/content/ip-bilateral.htm, retrieved Feb. 2,

2005.

 167 U.S. Environmental Protection Agency, International Affairs, About the North American Commission on

Environmental Cooperation (NACEC), found at http://www.epa.gov/international/regions/Mexico/nacec.html,

retrieved Feb. 2, 2005.

 168 Information for Worker Health and Safety was derived principally from Canadian Centre for Occupational

Health and Safety, OHS Legislation in Canada - Internal Responsibility System, found at

http://www.ccohs.ca/oshanswers/legisl/irs.html, retrieved Feb. 3, 2005. 

 169 Industry Canada, “Government,” ch. in Canadian Metalcasting Technology Roadmap, rev. Oct. 2003, p. 2,

found at http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00078e.html, retrieved June 14, 2004. 

 170 This Canadian industry representative reported that by implementing OHS standards, the facility was able to

operate without lost injury time for over 800 days. See Industry Canada, “Management,” ch. in Canadian

Metalcasting Technology Roadmap, rev. Oct. 2003, p. 2, found at http://strategis.ic.gc.ca/epic/internet/intrmcrt.nsf/en/rm00078e.html, retrieved June 14, 2004. 

 171 Human Resources and Skills Development Canada, Jurisdiction of the Federal Government, the Provinces

(continued...)

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Environment

Canada is considered to have a rigorous national environmental protection and enforcement program,

which is administered and regulated under the Ministry of Environment. In general, the Canadian Council

of Ministers of the Environment (composed of environmental ministers from federal, provincial, and

territorial governments) proposes nationally consistent environmental standards and objectives concerning

the release of toxic substances into the air, water, and soil, after which each jurisdiction comprising the

Council decides whether or not to adopt the proposal.162 Consequently, environmental standards are

administered and regulated at the federal, provincial, and territorial levels.

In addition to national and regional regulations, the Governments of Canada and the United States

established the International Joint Commission in 1909, under which they share more than 30 government

agreements on the environment,163 including the 1972 Great Lakes Water Quality Agreement164 and the 1991

U.S.-Canada Air Quality Agreement.165 Further, Canada and the United States developed the Joint Inland

Pollution Contingency Plan to coordinate reporting and response measures in the event of a chemical accident

along shared inland boundaries.166 With the United States and Mexico, Canada is also a member of the North

American Commission on Environmental Cooperation, the environmental side agreement to the North

American Free Trade Agreement (NAFTA).167

Worker Health and Safety168

Although some representatives of Canada’s casting industry have reportedly expressed the view that

occupational health and safety (OHS) programs are excessive in some Provinces,169 it has also been noted that

high OHS standards and strong controls are beneficial to the overall casting operation.170 In Canada, OHS

is primarily the responsibility of each province and territory.171 The underlying philosophy of OHS
 171 (...continued)

and the Territories in the Field of Occupational Health and Safety, found at

http://www.hrsdc.gc.ca/asp/gateway.asp?hr=/en/lp/spila/clli/ohslc/02..., retrieved Feb. 3, 2005.

 172 Canadian Centre for Occupational Health and Safety, OHS Legislation in Canada - Basic Responsibilities,

found at http://www.ccohs.ca/oshanswers/legisl/responsi.html, retrieved Feb. 3, 2005.

 173 Ministry of Labour, Ontario, Occupational Health and Safety Act, R.R.O. 1990, Regulation 851, Industrial

Establishments, found at http://www.e-laws.gov.on.ca/DBLaws/Regs/English/900851_ehtm, retrieved Feb. 3, 2005.

 174 Canadian Centre for Occupational Health and Safety, Provincial Workers’ Compensation Boards in Canada,

found at http://www.ccohs.ca/oshanswers/information/web_canada.html, retrieved Feb. 3, 2005.

9-29

legislation in all Canadian jurisdictions is the internal responsibility system, which holds both employers and

employees responsible for workplace safety by establishing a responsibility sharing system, promoting safety

culture, promoting best practices, developing self reliance, and ensuring compliance. Under this system,

employers are free to establish and control safety procedures appropriate for their individual workplace.

However, for legal defense purposes, the employer must meet the “due diligence” test, which, as applied to

OHS, means “taking all reasonable precautions, under the circumstances, to prevent injuries or accidents.”

Conditions for establishing due diligence require having certain criteria in place before the occurrence of an

accident or injury, including:

• written OHS policies, practices, and procedures;

• provision of appropriate employee training and education regarding established policies,

practices, and procedures;

• training of supervisors to ensure their level of competence as defined in legislation;

• monitoring of the workplace to ensure adherence to established policies, practices, and

procedures (written documentation of discipline for breaches of safety rules is considered

due diligence); 

• having an accident investigation and reporting system in place; and

• having written documentation of the above criteria.

In addition, employers must supply personal protective equipment as needed, immediately report all

critical injuries to the jurisdiction’s OHS government department, and establish a health and safety

committee.172 Legislation in the different provinces and territories generally require that the committee be

composed of half management and half labor representatives (selected by the workers), meet on a regular

basis, and be co-chaired by one management representative and one worker. Beyond these basic

requirements, details of the OHS legislation and enforcement vary among the provinces and jurisdictions.

For example, the Province of Ontario, where most foundries are located, established additional regulations

relevant to industrial establishments, with certain sections applicable specifically to foundries.173 Each

jurisdiction is also responsible for worker compensation services and relevant compensation rates.174
9-30
 175 Chinese government and industry officials, interviews by USITC staff, China, Nov. 2004.

 176 Ibid.

 177 China Foundry Association (CFA), interview with USITC staff, China, Nov. 2004.

 178 American Foundry Society, AFS Metalcasting Forecast & Trends, 2004, p. 32.

 179 Based on data reported by Modern Casting in the 34th and 38th Annual Census of World Casting Production,

found at http://www.moderncasting.com, retrieved Mar. 17, 2005.

 180 CFA interview.

 181 Ibid.

 182 Ibid.

 183 Ibid.

 184 Chinese industry officials, interviews with USITC staff, China, Nov. 2004; and testimony of Tim Brown, vice

president, Benton Foundry Co., hearing transcript, p. 30.

 185 These are generally small, family-run enterprises that are not a competitive concern of the U.S. industry. 

Testimony of Tim Brown, vice president, Benton Foundry Co., hearing transcript, p. 29.

9-31

Industry statistics (2003):

• World rank – 1st

• Production – 18 million metric tons

• Employment – 1.2 million workers

• No. of establishments – 20,000-25,000

Industry characteristics:

• Beneficiary of strong and growing

demand from domestic motor vehicle

producers

• Growing number of foreign-invested

producers that use modern technology

and produce high-quality castings

• Net exporter

China

Industry Profile

China's foundry industry is expanding rapidly

because of burgeoning demand from the country's fast

growing manufacturing industries and, to a lesser extent,

strong demand for Chinese castings in foreign markets.

Structural changes resulting from foreign investment,

especially the increasing number of joint ventures with

foreign partners and wholly foreign-owned operations, have

contributed significantly to this expansion.175 Foreign

investment is also a source of technological and managerial

improvement for the industry.176

China's foundry industry is the largest in the world

by a wide margin, surpassing the United States in 2002.

China produced over 18 million metric tons of castings and

employed over 1.2 million people in 2003.177 By

comparison, the United States produced 12 million metric tons in 2003, followed by Russia and Japan, each

of which produced approximately 6 million metric tons.178 The growth rate of Chinese production is also

the highest in the world, averaging almost 10 percent per year during 1999-2003.179

Despite strong growth and foreign investment, the Chinese foundry industry generally produces low

quality castings, uses old equipment, is inefficient, and causes significant deleterious environmental effects.180

Productivity is low and energy consumption is high, as compared with foundries in developed countries.181

 Chinese foundries also produce a large amount of basic, low-valued castings of relatively simple

metallurgy.182 Moreover, management skill and technical expertise in most foundries are average by world

standards.183 However, certain operations are among the most advanced in the world, using state-of-the-art

machinery and modern management techniques.184 

The industry is composed of up to 25,000 producers, although 20,000 of these are small-scale

enterprises.185 Industry concentration is high–the 1,400 members of the Chinese Foundry Association (CFA)
 186 The CFA is a Chinese Government agency that acts as a trade association. It publishes statistical and other

information about the foundry industry and provides fee-based technical services to Chinese foundries. Member

companies pay a reduced rate for these services. CFA has no regulatory function.

 187 To qualify as an FIE, the foreign partner must own at least 25 percent of a venture. The investment and tax

incentives are discussed in the Domestic Policies section.

 188 In most cases, conversion of township/village enterprises to private companies has been accomplished. 

Privatization of the centrally-controlled enterprises has been a much slower process because of the huge size of these

operations and concern for the disposition of State assets (e-mail correspondence from U.S. Embassy official to

USITC staff, January 2005). The State-Owned Assets Supervision and Administration Commission is a powerful

government agency that oversees SOEs.

 189 CFA interview.

9-32

account for 70 percent of total production in terms of quantity.186 Foundry establishments are widely

distributed in the country. The eastern, southeastern, and northeastern regions account for approximately 70

percent of the enterprises. The north central and southwestern regions account for the rest. The foundries in

the large eastern cities (including surrounding areas) and along coastal areas are generally more modern than

those in inland and rural areas. 

Prior to the 1990s, the Chinese foundry industry was

primarily state-controlled, either at the national level or the

township/village level. Since the early 1990s, structural

changes reflecting the Chinese Government's plan to shift

from a centrally-controlled economy to a market-based

economy have substantially altered the Chinese foundry

industry. Coupled with new laws that are designed to attract

foreign investment, this has contributed to a proliferation of

foundries that are foreign-invested enterprises (FIE). FIEs

can take the form of joint ventures with foreign partners or

wholly foreign-owned ventures (table 9-14 shows a

representative sample of foundry FIEs).187 Foreign companies

are attracted to China because of the prospect of low labor

costs and a strong local castings market. The creation of FIEs

is further encouraged by investment and tax incentives that

are available only to an FIE. Thus, there are significant

inducements for foreign companies to create an FIE in China

and for existing Chinese foundries to find a foreign jointventure partner.

Privatization of state-controlled foundries also has been a part of the restructuring. In some cases,

this involves the privatization of an entire enterprise. In other cases, the state-owned enterprise (SOE)

remains intact and forms an FIE joint venture as a separate entity with a foreign partner; many state-controlled

foundries have taken advantage of these arrangements.188 In terms of quantity, 50 percent of production is

now from SOEs and 50 percent from private-sector foundries.189

Privatization is typically accomplished by establishing an SOE as a share company. The shares

initially may be divided between the government at either the central or township/village level and other

parties that may include the managers and/or employees of the old enterprise. If enough shares are sold to

a foreign company, then the company becomes a joint venture FIE. Such ventures typically involve complex

negotiations involving social-goal obligations that are of paramount importance to the State. Provisions of

Chinese Foundry Industry Structure 

By Ownership Type

• State-owned enterprises:

 • Centrally controlled

 • Township/village owned

• Foreign-invested enterprises:

 • Joint ventures:

• Majority Chinese owned

 • Majority foreign owned

 • Wholly foreign owned

• Other private enterprises: 

 • Privatized township/village enterprise

 • Very small producers, frequently 

 family-run enterprises.
 190 U.S. government official in China, e-mail correspondence with USITC staff, Jan. 28, 2005. These provisions

are crucial from the State's perspective because it does not have, in many cases, the resources to immediately assume

all the social responsibilities of an ex-SOE. E-mail correspondence from U.S. Embassy official to USITC staff, Jan.

2005.

9-33

Table 9-14

China foundry industry: Selected joint ventures and wholly foreign-owned operations

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Name and location Ownership type Ownership nationality Metal type

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

ASC Industries, Tianjin . . . . . . . . . . . . . . . . Wholly-owned United States Aluminum

ASC Industries . . . . . . . . . . . . . . . . . . . . . . Joint ventures (2) United States/China Iron, aluminum

Nanjing Teksid, Nanjing . . . . . . . . . . . . . . . Joint venture Italy/China Aluminum

Zhenjiang Teksid . . . . . . . . . . . . . . . . . . . . Joint venture Italy/China (1

)

Tianjin New Wei San Industrial 

 Co., Tianjin . . . . . . . . . . . . . . . . . . . . . . . Wholly-owned Taiwan Iron

Tianjin Sanda Casting Co. . . . . . . . . . . . . . Joint venture Japan/China Iron, steel

Shanghai EB . . . . . . . . . . . . . . . . . . . . . . . . Joint venture (1

) (1)

Zhenjiang Yinfong . . . . . . . . . . . . . . . . . . . . Joint venture Spain/China (1

)

Kunshan Fujiwa . . . . . . . . . . . . . . . . . . . . . Joint venture Japan/China (1

)

Kunshan Toyota . . . . . . . . . . . . . . . . . . . . . Joint venture Japan/China (1

)

Asimco (Beijing) . . . . . . . . . . . . . . . . . . . . . Wholly-owned United States Iron, steel,

aluminum

Shanxi International Casting 

 Co., Shanxi Province . . . . . . . . . . . . . . . . Joint venture United States/China Iron

Langfang Meiliar (Asimco) . . . . . . . . . . . . . Joint venture United States/China Iron ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Not available.

Source: Industry sources, hearing transcript, and InterChina Consulting.

the joint venture agreement will often include guaranteed support for employees and local services (e.g.,

hospitals, schools that were originally supported by the SOE) and other obligations such as assumption of

the SOE's debt.190

Many of the largest foundry operations are divisions of Chinese SOEs. The FAW Group, a centrallycontrolled SOE and a major Chinese automobile producer, owns FAW Foundry (FAW). FAW is based in

Changchun (northeast region) and is the largest producer of automobile castings in China, employing over

6,600 people. Production in 2004 was approximately 240,000 metric tons, almost 10 percent of China's

automobile casting production, with sales of $200 million. FAW produces castings of gray iron, ductile iron,

nonferrous, and other metal types at 6 facilities. It has a joint venture operation producing die castings, and

is actively seeking additional joint venture partners. It sells castings to FAW Group's automobile division,

its joint venture partner, other domestic users (including foreign joint venture automobile producers and

wholly Chinese companies), and export markets. The size of the company is a significant competitive

advantage and its earnings support a large R&D center that enables research designed to improve process
 191 Chinese industry official, interview with USITC staff, China, Nov. 2004.

 192 Ibid.

 193 Ibid.

 194 CFA interview.

 195 Ibid.

 196 Ibid.

 197 The rural and western foundries produce very basic castings (e.g., storm grates). Tsinghua University

(Beijing, China) professor, interview with USITC staff, China, Nov. 2004.

 198 Chinese industry officials, interview with USITC staff, China, Nov. 2004.

9-34

technologies.191 FAW's R&D budget is 1 percent of sales. The company's Mold and Tool plant has a

reputation for high quality patterns. 

Dongfeng Automobile Corporation, another SOE automobile producer, owns Dongfeng Foundry #1

and #2, employing over 5,000 workers. The company also has a joint venture foundry operation with Honda

to make engine and transmission parts.

The restructuring of the Chinese foundry industry has improved China’s ability to compete with

producers in other countries and has also increased competition within the country, resulting in the closure

of many foundries.192 Local foundries are improving their abilities to compete with other Chinese producers

by integrating downstream machining and assembly operations with their foundry operations.193

Business Trends

Production

Production of all types of castings has increased by

over 50 percent since 1999 (table 9-15) and China now is the

world's largest producer. Most of the production increase has

come from existing facilities, but new facilities have also

contributed to the increase.194

Chinese production of basic low-valued metal types,

in comparison with developed countries, is reflected in the

ratio of ductile iron castings to gray iron castings, which is

0.3 for China in 2002 versus 0.8 for the United States and 1.2

for Japan.195 Further, China’s share of aluminum castings to

all castings produced is less than 7 percent, compared with 16

percent for the United States and 21 percent for Japan (figure

9-4).196 Chinese production of specialty alloy precision

castings is also lacking.197

There are no comprehensive data on production trends of the FIEs. Many of these operations produce

higher-valued, higher-quality castings, many of which are used by local automobile producers or exported.

Several FIEs in the Beijing and Shanghai areas report production or sales increases of 50 to over 100 percent

during 2002-2004.198

Copper

1%

Other

2%

Gray iron

60%

Aluminum

Steel 7%

10%

Ductile 

iron

20%

Source: Modern Casting .

Figure 9-4

China foundry industry: 2003 production, by 

metal type (based on weight)
 199 CFA interview.

 200 Chinese industry officials, interview with USITC staff, China, Nov. 2004.

 201 Chinese and U.S. industry officials, interview by USITC staff, China, Nov. 2004.

 202 Testimony of Tim Brown, vice president, Benton Foundry Co., hearing transcript, p. 30.

 203 Chinese industry officials, interviews by USITC staff, Nov. 2004.

9-35

Table 9-15

China foundry industry: Production, imports, exports, and employment, 1999-2004 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003 2004

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Production (1,000 metric tons):

Total . . . . . . . . . . . . . . . . . . . . . 12,737 13,900 14,889 16,261 18,146 20,000

Iron:

Gray . . . . . . . . . . . . . . . . . . . . 7,912 (1

) 9,002 9,840 10,800 (1)

Ductile . . . . . . . . . . . . . . . . . . 2,063 (1

) 2,730 2,995 3,630 (1)

Other . . . . . . . . . . . . . . . . . . . 360 (1

) 428 452 400 (1)

Steel . . . . . . . . . . . . . . . . . . . . . 1,353 (1

) 1,590 1,692 1,770 (1)

Aluminum2 . . . . . . . . . . . . . . . . . 736 (1

) 878 979 1,249 (1)

Copper . . . . . . . . . . . . . . . . . . . 108 (1

) 137 157 157 (1)

Other . . . . . . . . . . . . . . . . . . . . . 115 (1

) 122 146 140 (1)

Imports (1,000 metric tons)...... (1

) (1) (1) 20 (1) (1)

Exports:

Quantity (1,000 metric tons) ... (1

) (1) (1) 1,200 1,700 (1)

Value (1,000 dollars) ......... (1

) 781,241 812,013 909,613 (1) (1)

Employment (million) . . . . . . . . . . 0.8 (1

) (1) (1) 1.2 1.2 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 1 Not available.

 2 Includes magnesium castings.

Note.–Figures may not add to the totals shown due to rounding. Data for 2004 are estimates by the China Foundry

Association.

Source: Modern Castings and China Foundry Association.

Employment

Employment has also increased by 50 percent since 1999. Productivity for the industry as a whole

is about one-fifth of U.S. productivity.199 The SOEs have little flexibility in discharging employees because

the Chinese Government at the national and local level wants to limit unemployment problems,200 so it is

difficult to improve productivity even when firms invest in new machines that can automate foundry

processes. 

Typically, national and local government officials influence employment levels at FIEs to a much

lesser extent,201 resulting in higher productivity at many of these individual foundries. For example,

employment levels at ASIMCO, an FIE with multiple operations in China, are reportedly only 10 to 15

percent higher than comparable U.S. operations.202 Certain wholly-owned operations have automated

operations to the extent that employment levels rival any plant in the United States.

Investment

There are no comprehensive data on investment in China's foundry industry. Fieldwork in China

indicates many FIEs have made substantial investments in recent years.203 One major SOE typically invests
 204 Chinese industry official, interview by USITC staff, China, Nov. 2004.

 205 Guo Shuyan, President of the China Foundry Association, “China's Economic Development and Foundry

Industry After China's Entry into the WTO,” found at

http://www.moderncasting.com/MoreInfo/1202/ChinaWTO_1202.pdf, retrieved Feb. 11, 2005. Guo phrased the

investment as several billion yuan. One billion yuan is approximately $121 million.

 206 Gettman, Matthew and Decker, Stephanie, "A Guide to Doing Business in China and Information on Current

Economic Conditions," U.S. Embassy in Beijing, China, Feb. 4, 2004.

 207 “Foreign Investment in China,” The U.S.-China Business Council, found at

http://www.uschina.org/statistics/2003foreigninvestment.html,retrieved Mar. 19, 2005.

 208 Chinese industry officials, interviews by USITC staff, China, Nov. 2004.

9-36

$12-24 million per year in its existing foundries,204 and a U.S. company recently completed a new plant in

China that required a $7 million investment. Chinese purchases of foundry equipment from both domestic

and foreign sources have been substantial. Reportedly, these investments have totaled at least $120 million

in recent years for modern equipment such as automatic production lines, resin sand molds and cores,

centrifugal casting equipment, and die-casting equipment.205

Mergers and acquisitions are gaining increasing prominence in China as a result of new regulations

that took effect during 2002-2003.206 These regulations explicitly permit foreign investors to purchase traded

and non-traded shares of Chinese companies. No comprehensive information exists regarding M&A activity

involving foundry companies, but total M&A investments in China amounted to nearly $14 billion in 2002.207

Consumption

The growth of the Chinese foundry industry is directly related to increased demand from China’s

construction sector and manufacturing industries, especially motor-vehicle production. Consumption by end

market in 2002 (latest available year) according to the China Foundry Association is shown in the following

tabulation (in 1,000 metric tons):

End market Quantity

Motor vehicles (automobiles and trucks) . . . . . . . . . . . . 2,800

Internal combustion engines (non-motor vehicle), 

 tractors, and agricultural equipment . . . . . . . . . . . . . . 3,800

Cast pipe and fittings . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500

Metallurgical and mining equipment . . . . . . . . . . . . . . . 2,800

Machine tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700

Construction castings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200

All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500

The motor-vehicle sector is not the largest end-user, but it accounts for a large share of the demand for the

most advanced castings. Foreign investment in the Chinese foundry industry is likely concentrated in the

foundries that supply this sector.208 Chinese automobile production has increased from 2.1 million vehicles

in 2000 to 4.3 million vehicles in 2004 as demand for all motor vehicles (trucks and automobiles) has

increased. However, beginning in late 2004, automobile sales started to wane and affect demand for foundry

products. Reportedly, automobile production has begun to decline because of import tariff reductions

(pursuant to China's WTO commitments) that have spurred car imports, infrastructure congestion that is
 209 Ibid.

 210 Chinese industry official, interview by USITC staff, China, Nov. 2004.

 211 “China’s economy grows at 9.5% in 2004,” ChinaDaily, found at

http://www.chinadaily.com.cn/english/doc/2005-01/25/content_412097.htm, retrieved Mar. 19, 2005; and Gettman

and Decker, “A Guide to Doing Business in China.”

 212 International Iron and Steel Institute.

 213 Chinese government officials, interview with USITC staff, China, Nov. 2004.

 214 The information in this paragraph is based on interviews with Chinese industry officials by USITC staff,

China, Nov. 2004.

 215 Chinese industry officials, interview with USITC staff, China, Nov. 2004.

 216 E-mail correspondence from Chinese industry official to USITC staff, Jan. 2005.

 217 CFA interview.

9-37

discouraging automobile purchases, and consumer anticipation of declines in vehicle prices.209 One foundry

reduced prices by almost 10 percent to maintain its volume of sales.210

Demand for cast pipe and fittings by the construction sector reflects extensive infrastructure projects

in China. Total investment in Chinese infrastructure (roads, railways, ports, pipelines, etc.) grew by more

than 29 percent in 2003, and similar growth occurred in 2004.211

The demand for castings from China's steel industry (included in the metallurgical and mining

equipment sector) is growing rapidly, reflecting increasing Chinese steel production, which has doubled since

1999 to over 270 million metric tons in 2004.212 China's coal mining sector is also expanding, increasing

demand for cast wear parts used in mining machinery.

Trade

China is virtually self-sufficient in castings (although it likely imports a large volume of downstream

products that contain castings). Imports are a very small fraction of consumption and tend to be the more

sophisticated types that Chinese foundries cannot produce.213 Exports are growing rapidly but are less than

10 percent of production.

Many export customers are located in Taiwan, Japan, Korea, the United States, and the EU (European

Union).214 Some U.S. motor vehicle manufacturers and aftermarket motor-vehicle part producers are

customers of Chinese foundries. Exports in many cases are intra-company transfers from a Chinese foundry

that is partially owned or wholly owned by the parent foreign company. Typically, the parent company

assembles parts incorporating these Chinese castings.

Factors of Production

Raw Materials

 Reportedly, prices for metal raw materials in China are equal to or greater than prices in the United

States.215 One foundry claims that aluminum alloy prices are 5 percent higher in China.216 Price increases for

metallic raw materials in China mirrored the large increases in world prices in 2004 (see U.S. overview in

chapter 3 for a discussion of raw material price trends). Rural and western region foundries generally have

access to lower-cost raw materials because sources are close. Inland areas also have access to more locallygenerated scrap, unlike eastern foundries that must import much of their scrap requirements.217 Some Chinese

raw materials are of low quality, which is especially problematic when a foundry is making castings for
 218 U.S. industry official, telephone interview with USITC staff, Jan. 2005.

 219 APEC Tariff Database, found at http://www.apectariff.org, retrieved Feb. 11, 2004.

 220 Chinese industry officials, interview with USITC staff, China, Nov. 2004.

 221 The information is this paragraph is based on interviews with Chinese industry officials by USITC staff,

China, Nov. 2004.

 222 Ibid.

 223 Ibid.

 224 See China - Labor Law, 1994. The complete text of the law may be found at

http://www.jus.uio.no/lm/china.labor.law.1994/doc.html#to2.

9-38

critical components such as a brake system. In these cases, imported raw materials may have to be

substituted.218 China's MFN tariffs for key raw materials are shown in the following tabulation (in percent):219

Item MFN tariff

Scrap:

 Iron and steel . . . . . . . . . . . . . . . . 1.5-3

 Aluminum . . . . . . . . . . . . . . . . . . 6

 Copper ..................... 2

Ingot:

 Pig iron . . . . . . . . . . . . . . . . . . . . 1

 Aluminum (including alloys) . . . 7-9

 Copper (including alloys) . . . . . . 1-2.5

China’s domestic resources of aluminum are limited and much of the aluminum consumed by

Chinese foundries must be imported.220 A value-added tax (VAT) of 17 percent applies to raw materials that

are imported, as well as to raw materials that are purchased in China. This is partially refunded if the material

is contained in an exported product, effectively reducing the VAT to 4 percent (the import tariff is not

refundable). A VAT also applies to foundry production activities, and it too is partially refunded if the

product is exported. 

Energy

Foundries report electricity costs of 5-8 cents per kilowatt hour in eastern regions of China.221 In the

Shanghai and Beijing areas, power interruptions such as rolling blackouts occasionally cause production

problems. Foundries typically work with power authorities to level loads, such as planning off days during

different parts of the week (such as having Sunday and Monday as the weekly off-days). Some foundries are

shifting from electricity to natural gas for melting furnaces to reduce costs; reportedly, a new natural gas

pipeline under construction will be transporting gas from northwestern China to Shanghai.222 China has a

large coal industry, much of it produced in the inland province of Shanxi, and foundries located here have

a transportation cost advantage as compared with the eastern foundries when purchasing coal. However, the

quality of some of the Chinese coal is poor and can cause environmental problems when consumed, and at

least one foundry has had to purchase cleaner, higher-cost coal, to limit emissions.223

Labor

China's Labor Law224 provides legal rights for workers and regulates, among other things, work hours,

overtime, and wages. For example, the average number of hours worked are not to exceed 8 hours a day and

44 hours per week, overtime is limited to 36 hours per month, and overtime pay must be at a higher rate than

regular pay (150-300 percent of regular pay, depending on the circumstances of the extra work). Certain
 225 Chinese industry officials, interview by USITC staff, China, Nov. 2004

 226 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, Country Report on Human

Rights Practices-2003, Feb. 25, 2004, found at http://www.state.gov/g/drl/rls/hrrpt/2003/27768.htm, retrieved Mar.

18, 2005.

 227 The information in this paragraph is based primarily on interviews of Chinese government and industry

officials by USITC staff, China, Nov. 2004.

 228 Tsinghua University (Beijing, China) professor, interview with USITC staff, China, Nov. 2004.

 229 The information in this paragraph is based on interviews of Chinese industry officials by USITC staff, China,

Nov. 2004.

 230 Chinese government officials, interview by USITC staff, China, Nov. 2004

9-39

Chinese foundry officials indicate that their operations are consistent with these labor regulations,225 but

comprehensive information on the whole industry is not available. The law states that there must be a

minimum wage related to minimum living costs, but the actual minimum wage amount is determined by local

government authorities. However, other sources indicate that enforcement of the minimum wage is lacking

because localities want to attract and retain businesses with inexpensive labor.226

Typical wages in the eastern regions reportedly are $1.50-$2.00 per hour, but are only a tenth of this

in rural and western regions.227 This disparity can result in large differences in the price of Chinese castings.228

Benefits usually include a yearly bonus equal to one month's wages and other provisions, such as company

provided lunch and transportation to work. Companies must also make payments, usually equivalent to 50-60

percent of direct employee costs, for social-goal obligations such as health, unemployment, and pension

insurance. The typical work week is 40 hours.

Foundry SOEs must provide for their employees even if these employees are no longer working, a

requirement that inhibits labor cost reductions.229 Typically, they must pay these employees until retirement

age, at which point the national retirement system assumes a support obligation. SOE labor costs are also

affected because of pressure from national and local governments to maintain high employment levels. The

expectations for high employment levels are much lower for joint venture and foreign wholly owned

operations. These entities also have much more flexibility with regard to employee dismissals without

incurring cost obligations.

The rise of unions and changes in labor attitudes are beginning to reshape the labor and management

relationship, and the concept of worker rights is building. Labor is increasingly mobile; in the past, a resident

registration requirement made it difficult to move, but now the free flow of labor is promoted by the

Government.230 Worker expectations are increasing, especially in urban areas, as a result of the improving

standard of living and material possessions. 

Many Chinese foundries are finding it difficult to attract and retain workers, in part because foundry

work is considered dirty and unrewarding. Technically-trained employees are also difficult to find and retain.

Competition between foundries to hire this type of worker is intense, especially in urban areas where many

other opportunities exist. The professor at a Beijing university with a foundry engineering program reported

that most graduates take jobs in non-foundry industries. Foundries send employees to universities for

non-degree-track training programs to compensate for difficulties in attracting graduates.

Technology

In many of the FIEs and the centrally-controlled SOEs, the level of technology is comparable to

foundries in developed countries. Many of the major equipment producers in Japan, Taiwan, the EU, and the

United States export to China. But in western and rural regions, the foundries typically use obsolete

technology, and the overall technology level of the industry is low as compared with developed countries.
 231 Chinese government official, interview by USITC staff, China, Nov. 2004.

 232 Chinese industry officials, interviews by USITC staff, China, Nov. 2004.

 233 Chinese government and industry officials, interview by USITC staff, China, Nov. 2004.

 234 Chinese industry officials, interview with USITC staff, China, Nov. 2004.

 235 The information in this paragraph is based on interviews with Chinese industry officials, China, Nov. 2004.

 236 Chinese industry official, interview with USITC staff, Nov. 2004.

 237 This region is an old industrial area, often referred to as China's “rust belt.”

9-40

Transportation

China's transportation infrastructure has improved substantially since the early 1990's. In eastern

areas of the country, the freeway, rail, and port facilities are well developed although congested. Despite

development efforts, however, inland freeway and rail networks are not well developed.231 Reportedly,

transportation costs from foundries located in inland areas are high enough to offset much of the labor and

raw material cost advantages in these regions.232

Management Ability

Chinese Government and industry officials cite the lack of management ability in the Chinese

foundry industry.233 Some of this is a legacy of the old, centrally-planned economy when meeting production

goals was of prime importance, regardless of product quality and demand. Managers at the FIEs are generally

skillful at instituting and managing quality control systems, but managers at other Chinese companies are

not.234

Domestic Policies

There are no known Chinese government programs and policies that are specifically directed at the

foundry industry. However, foundries have extensively used many programs and policies that assist

industries in general.

Federal/Regional Programs

The laws that regulate the formation of FIEs and special industrial zones have been beneficial to the

Chinese foundry industry.235 Two laws that have had a significant effect on the foundry industry -- the Joint

Venture Law and the Wholly Foreign Owned Enterprise Law of the People's Republic of China -- contain

incentives such as reduced income tax rates and other tax-related benefits.

China has numerous industrial zones, usually referred to as special economic zones or development

zones, designed to attract investment. Government authorities at the national or local level oversee these

special areas and have authority to grant incentives that can include income tax exemptions, lower income

tax rates, VAT exemptions, and priority access for utility services, among others. In many cases, incentives

are not automatic and are subject to negotiations with the authorities.

A special VAT exemption program is available on a regional basis.236 Reportedly, companies in the

northeast region are eligible for a partial VAT exemption because the Chinese Government wants to provide

incentives to revitalize the region.237 The funds from the exemption must be used for technical improvement,

e.g., new equipment, research and development. One major foundry in the region has applied for benefits

under this program, but it is not clear to what extent this program aids foundries.
 238 Based on Federal Reserve statistics, found at http://www.federalreserve.gov, retrieved Jan 2005.

 239 The information in this paragraph is based on interviews with Chinese industry officials by USITC staff,

China, Nov. 2004.

 240 Gettman and Decker, “A Guide to Doing Business in China.”

 241 The information in this paragraph is based on interviews with Chinese industry officials by USITC staff,

China, Nov. 2004.

 242 International Monetary Fund International Financial Statistics Browser, found at

http://ifs.apdi.net/imf/ifsBrowser.aspx, Feb. 3, 2005

 243 Chinese industry official, interview with USITC staff, China, Nov. 2004.

 244 Background Note: China, U.S. Department of State, Oct. 2004, found at

http://www.state.gov/r/pa/ei/bgn/18902.htm, retrieved Jan. 31, 2005.

 245 Background Note: China, U.S. Department of State.

 246 Chinese industry officials, interviews with USITC staff, China, Nov. 2004.

9-41

Monetary/Tax Policies

Exchange rates.--China has an exchange rate that is pegged to the U.S. dollar. This rate has varied

within a narrow range around 8.28 yuan to the dollar, during 1999-2004.238 The U.S. dollar has weakened

considerably since 2002 versus the currencies of the EU and Japan, and to a lesser extent, the currency of

Korea. Because Chinese foundries purchase foundry equipment from these countries, these currency value

changes have likely increased the cost of imported foundry equipment in China.

Tax structure.--The nominal income tax rate is 33 percent on profits.239 The joint venture law allows

a 2 year exemption on income tax after the company is profitable, and an additional 3 years during which the

tax rate is one-half of the regular rate. VAT-free importation of equipment is also available, but only as part

of the original joint venture plan. Operations in special economic zones may also qualify for income tax rate

reductions. For example, a provincial zone near Suzhou has an income tax rate of 24 percent; national zones

have an income tax rate of 20 percent. These zones may also grant other incentives, such as a partial (up to

75 percent) income tax refund if profits are reinvested in China.240

The Chinese VAT, in most cases, is 17 percent, and is paid on production activities and on inputs.241

A VAT of 17 percent applies to raw materials that are purchased in China. This is partially refunded if the

material is contained in an exported product, effectively reducing the VAT to 4 percent. The VAT that

applies to the value of foundry production is also partially refunded if the casting is exported. 

Interest rates.--Bank commercial loan rates have varied from 5.3 to 5.8 percent during 1999-2003.242

One Chinese foundry official claimed the normal interest rate for purchasing equipment is about 6 percent

annually, but that foundries may not get the total loan requested and may have to give collateral.243

Environment

In general, China has extensive environmental challenges; several cities are considered to be among

the most polluted in the world.244 A 1998 World Health Organization report on air quality in 272 cities

worldwide concluded that seven of the world's 10 most polluted cities were in China. Environmental

protection is officially part of the duties of a ministerial-level agency called the State Environmental

Protection Administration (SEPA). In recent years, China has strengthened its environmental legislation and

made some progress in stemming environmental deterioration.245

Environmental laws are strict in urban areas in the east. Foundries in Beijing and Shanghai have

particular problems with local governments that do not want polluting industries within city limits.246

Reportedly, local government authorities monitor foundries in Shanghai, assessing fines for poor
 247 Chinese industry official, interview with USITC staff, China, Nov. 2004.

 248 Opening Remarks by Ms. Christine Evans-Klock, Director of Subregional Office for East Asia, The 2nd China

International Forum on Work Safety and China International Occupational Safety and Health Exhibition, found at

http://www.ilo.org/public/english/region/asro/bangkok/public/speeches/yr2004/oshchina_chris.htm, retrieved Mar. 

19, 2005.

 249 The Brief Introduction of State Administration of Work Safety, found at

http://www.cis-safety-inf.org.cn/cis_english_organizations/cis_organizations_01.htm, retrieved Mar. 19, 2005.

 250 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, Country Report on Human

Rights Practices-2003, Feb. 25, 2004, found at http://www.state.gov/g/drl/rls/hrrpt/2003/27768.htm, retrieved Mar.

18, 2005.

 251 Tsinghua University (Beijing, China) professor, interview with USITC staff, China, Nov. 2004.

 252 Chinese industry official, interview by USITC staff, China, Nov. 2004.

9-42

performance. Foundries are strongly encouraged to move away. However, in many cases this is an

opportunity to establish a new facility and purchase new machinery, because negotiations with Government

officials can result in monetary incentives to move. Local governments may also assist with moving costs.

The foreign-invested foundries are typically held to higher environmental standards than state-owned

foundries.247

Worker Health and Safety

The Labor Law, Law on Work Safety, and the Law on Prevention and Control of Occupational

Diseases are the main regulations that cover worker health and safety in China.248 The State Administration

of Work Safety Management and Supervision is a government agency that manages national work safety and

enforces worker health and safety laws.249 Enforcement is reportedly poor and the rate of industrial accidents

is high.250 Reportedly, foundries have made little investment in worker health and safety equipment and

procedures.251 However, FIEs tend to have fewer problems related to health and safety, and in some cases

have safety procedures comparable to U.S. foundries.252
 253 This sector is also called a cottage industry or “non-organized sector”, which mostly produces nonferrous

(aluminum) casting and operates at very low capacity utilization rates. Indian trade officials, correspondence with

USITC staff, July 7-21, 2004; Financial Times Information, found at http://www.nexis.com/research/ retrieved July

21, 2004; and “38th Census of World Casting Production– 2003,” Modern Casting, Dec. 2004, pp. 25-26.

 254 India’s exports currently amount to only one percent of world consumption and given its excess capacity,

India can potentially become the fourth largest global metal casting producer. “Foundry Industry on the Upswing,”

The Times of India, Feb. 8, 2004, found at http://timesofindia.indiatimes.com, retrieved Aug. 10, 2004; and “38th

Census of World Casting Production–2003,” Modern Casting, Dec. 2004, pp. 25-26.

 255 In 1991, after many decades of economic isolation, India began implementing economic reform and trade

liberalization. Since then, private economic activities have been encouraged, the government sector has been

reduced through privatization, and foreign direct investment has been welcomed. Following the 1991 economic

reform, the Indian economy grew at an average annual rate of about 6 percent for much of the 1990s, a higher rate

than many other developing countries. However, in the early 2000's, India’s economy was affected by a decrease in

agricultural production caused by a drought, and a drop in demand for manufacturing exports. In 2002 and 2003,

India’s gross domestic product (GDP) grew by 4.3 and 8.3 percent, respectively. The U.S. Department of Energy

(June 2004) expected India’s 2004 economic growth to be at 6.4 percent. U.S. Department of Energy, Energy

Information Agency, “Country Analysis Briefs: India,” June 2004, p.1. See also “Foundry Industry on the Upswing.”

 256 These applications also include DISA line, shell, hot box, and cold box core making, CAD/CAM pattern-anddie making, automatic sand plant, and advanced test facilities like spectrometer, magnetic particle testing, and

ultrasonic and X-ray examination. Foundry Forge International Newsletter, Jan. 2004, found at

http://www.subcntractsolutions.com/Newsletter/, retrieved Aug. 6, 2004. Indian industry officials, interview with

USITC staff, India, Dec. 2004.

9-43

Industry statistics:

• World rank (2003): 6th.

• Production (2003): 4 million metric tons

• Employment (2003): 500,000 employees

• No. of establishments (2002): 5,000

Industry characteristics:

• Major consumers: automotive and industrial

equipment sectors

• Most large foundries are affiliated, captive

or state-owned operations

• Exporter of iron ore and importer of energy,

scrap metals, and coke

• Beneficiary of supporting government

industrial policy 

India

Industry Profile

Metal casting is a well-established Indian

industry. In 2002, over 90 percent of India’s 5,000 metal

foundries were traditional, small-scale, family-owned

operations, accounting for 30 percent of total output.253

The remaining 10 percent includes approximately 500

large, modern and globally competitive metal foundries

that account for 70 percent of production. Most of these

are captive facilities operating at near capacity. India’s

total annual metal foundry capacity is currently 7.5

million metric tons, with a yearly production of 4 million

metric tons.254 

The industry has grown rapidly since India’s 1991

economic reform and, following a general economic

slowdown in the early 2000s, the industry has begun to

recover rapidly since 2003.255 To minimize transportation costs and to serve specific regional end-use

customers, Indian foundries typically are clustered near key industrial centers (table 9-16).

Most small foundries melt metals with cupolas using foundry grade coke; casting is done in standard

sand molds. Since the 1991 trade reform, the foundry industry has been increasingly modernized and many

large foundries are ISO-certified. In the large foundries, induction furnaces have gradually replaced cupolas,

and modern casting technologies including high-pressure molding, and computer-assisted techniques in

design and production have been increasingly adopted.256 Most of the large foundries are captive or affiliated
 257 Foundry Forge International Newsletter. Some large captive foundries remain state-owned enterprises

(SOEs), including the foundry units of Bharat Heavy Electricals Ltd., Bharat Earth Movers Ltd., Hidustan

Aeronautics, Scooters India, and HAL. Indian industry officials, correspondence with USITC staff, July 20 and Aug.

3, 2004. 

9-44

Table 9-16

Indian foundry industry: Foundry clusters

Cluster name Location

Number 

of foundries Products

Belgaum . . . . . . . . . . . . . . . Karnataka, 

Southern India

100 High precision, economical, and high- volume

castings to the pump-set and automotive

equipment makers. 

Chennai (Madras) . . . . . . . . Tamil Nadu,

Southeastern India

 70 Iron and steel castings for local automotive

industry.

Coimbatore . . . . . . . . . . . . . Tamil Nadu,

Southern India

200 Supplies pump industry (46 percent of total

output) and the food processing and textile

industries (14 percent);10 percent of output is

exported.

Batala and Jalandhar . . . . . Punjab,

Northern India

(

1

) Small-scale gray iron castings for machine parts

and agricultural sectors (70 percent); exports

amount to 15 percent of total production.

Kolhapur ...............Maharashtra,

Southern India

250 Supplies automotive industry; about 25 percent

of production is exported.

Rajkot . . . . . . . . . . . . . . . . . Gujarat,

Central India

500 Supplies diesel engine, automotive, and textile

industries, mostly with gray iron castings and

exports amount to 10 percent of total output.

 1

 Not available.

Source: Institute of Indian Foundrymen, July 2004.

operations with annual capacities ranging from 30,000 to 60,000 metric tons and utilization rates from 85 to

90 percent.257 Their leading customers include mass producers of engine blocks or related equipment in the

automotive and agricultural equipment industries.
 258 Products include castings for machine tools, automobiles, tractors, factory equipment such as diesel engines,

electric motors, air compressors, earth moving equipment, and railways and aircraft industries. Other casting metals

include art ware, copper-based alloys, zinc-based, and magnesium-based alloys. Indian industry official,

correspondence with USITC staff, Aug. 3, 2004. 

 259 In the Indian foundry industry, the organized sector is the large and modern part of the industry, as compared

with the “non-organized”sector or the cottage industry which includes the small, traditional and family-owned

foundries. Foundry Forge International Newsletter.

 260 Indian mainly produces low-grade exports such as rough castings and municipal sanitary castings. Indian

industry officials, interview with USITC staff, India, Dec. 2004.

9-45

Business Trends

Production

Indian foundries produce a wide range of castings

including castings of iron, steel, and nonferrous metals.258

Over 70 percent of castings are of gray iron while ductile iron,

steel, and aluminum accounted for about 10 percent each in

2003 (figure 9-5). During 1999-2003, India’s casting

production grew by 25 percent from a low base (table 9-17),

which was largely attributed to the strong trend of

globalization in the automotive and industrial equipment

industries. Gray iron castings accounted for about 55 percent

of this total increase in casting production (440,000 metric

tons). Production growth was concentrated in large-scale

foundries which produce globally competitive castings.259

Intense and growing competition from China in many market

segments, especially in low value castings, has compelled

India to focus on the higher value-added and capital-intensive

segments of the industry.260

Table 9-17 

Indian foundry industry: Production by metal types, 1999-2003

(1,000 metric tons)

Type of metal casting 1999 2000 2001 2002 2003

Gray iron . . . . . . . . . . . . . . . . . . 2,400 2,300 2,300 2,370 2,840

Ductile iron . . . . . . . . . . . . . . . . 260 250 285 300 363

Malleable iron1 . . . . . . . . . . . . . 50 40 30 30 39

Steel . . . . . . . . . . . . . . . . . . . . 310 320 310 325 465

All nonferrous . . . . . . . . . . . . . . 220 210 230 242 331

 Total . . . . . . . . . . . . . . . . . . . . 3,240 3,120 3,155 3,267 4,038

 1

 Includes pipe.

Source: Several issues of Modern Casting providing the Annual Census of World Casting Production.

All 

nonferrous

8%

Other

1%

Ductile iron

9%

Steel

12%

Gray iron

70%

Source: Modern Casting .

Figure 9-5

Indian foundry industry: 2003 production, 

by metal type (based on weight)
 261 The small-scale sector includes many inefficient units employing old equipment and technology, typically

with capacity utilization rates averaging 50 percent. These foundries are very sensitive to material shortage, frequent

and large price increases of raw materials, and strict pollution control regulations forcing many to shut down. For

example, the number of active foundries in the Coimbatore cluster has decreased to 200 from 600. Financial Times

Information; and Indian industry official, correspondence with USITC staff, Aug. 3, 2004. 

 262 Technology Information Forecasting and Assessment Council, “Focus on Foundry Industry,” found at

http://www.tifac.org, retrieved Aug. 6, 2004.

 263 For example, Volvo and Suzuki foundries in Madras (southern India) and New Delhi, respectively. Daewoo

Motor has a foundry facility in Chennai, Sundaram. Chennai-based Sundaram Clayton has entered contracts with

Cummins, Hyundai Motor, Delphi, Ford-India, Tata-Cummins, and Cummins-India. General Motors and Ford have

contracts of foundry products for export with a total value of about $35 million. Suzuki Motor Corp. of Japan has

formed a joint venture with Maruti Udyog Ltd. to build an aluminum casting plant at Masenar, in Haryana, to make

car-related products including cylinder blocks, transmission cases, and cylinder heads. Indian industry officials,

correspondence with USITC staff, Aug. 3, 2004; and Indian industry officials, interview with USITC staff, India,

Dec. 2004; and Financial Times Information.

 264 Foreign direct investment is typically made in the organized segment where working conditions are generally

better than those in the cottage industry segment. 

 265 Foundry Forge International Newsletter.

 266 This level is only about one tenth of the annual FDI in China. However, since India’s trade has been

liberalized much later than China and other major Asian countries, this is a large increase in FDI for India. Country

Analysis Briefs: India, U.S. Department of Energy, June 2004, p. 2.

 267 Country Commerce: India, The Economist Intelligence Unit, Nov. 2003, p. 15.

 268 John Larkin, “India Eases Foreign-Investment Rule,” Wall Street Journal, Jan. 13, 2005, p. A10.

9-46

Employment

According to an Indian industry official, as its foundry industry shifts from labor-intensive products

to higher-grade castings, India has lost approximately 10 percent of total employment over the last 10 years,

mostly in the non-organized sector.261 Employment in 2003 stands at about 500,000 workers. However, the

on-going trend of industrial consolidation and modernization is expected to improve productivity.262

Investment

In response to the 1991 trade reform, several international corporations from the EU, the United

States, and East Asian countries have increased overseas operations and established foundry operations in

India,263 introducing modern production technologies and management techniques that have enhanced

productivity, employee welfare,264 and environmental standards of the industry. One industry source

reportedly anticipates that India’s foundry industry as of 2004 would have needed $2 billion in investment

to meet the demand of a growing domestic industry and a strong export drive.265 

Following the 1991 economic reform, the Government of India (GOI) has reduced or eliminated

tariffs on imported capital goods, relaxed limitations on foreign ownership, and opened many industries to

competition. As a result, the annual average amount of foreign direct investment (FDI) in India is reported

to have recently increased to between $3 billion and $4 billion.266 The reform also encourages the

privatization of India’s industry, enabling foreign companies to invest or form joint ventures with Indian

foundry companies. FDI projects are now permitted under an automatic approval process.267 To encourage

added foreign investment, the GOI has recently declared that foreign partners in a joint venture do not have

to seek permission from their Indian partners before setting up a separate operation in the same sector.268
 269 U.S. Department of State telegram, “India Foundry Industry,” message reference No. 157426, prepared by

U.S. Embassy, India, Oct. 1, 2004. 

 270 Indian fiscal year runs from April 1through March 31. U.S. Department of State telegram, “India Foundry

Industry,” message reference No.157426, prepared by U.S. Embassy, India, Oct. 1, 2004. 

 271 Recently, cities in the United States, the EU, and industrialized Asian countries have purchased large amounts

of India’s municipal sanitary castings. Even after including the transportation cost, Indian castings still typically cost

only one third of those made in the United States. “Municipalities in the United States Are Buying Manhole Covers

from India,” Newsday, Jan. 20, 2004, pp. A25,30, and Roger Trap,“Import: Is Free Trade Becoming Too Costly,”

Factiva, found at http://global.factiva.com, retrieved Aug. 2, 2004. 

 272 India currently produces about 450,000 metric tons of automotive castings. Over the next 5 years, this is

envisioned to increase to 700,000 metric tons as India’s tractor industry is expected to take off. John Deere and

Massey-Ferguson both have production facilities in India. Currently, India is the second largest producer of tractors

in the world. Indian industry officials, interview with USITC staff, India, Dec. 2004, p. 2.

 273 Cost recovery for material and energy is difficult, as most contracts are reportedly long-term commitments

without cost-adjustment clauses. Financial Times Information, Dec. 15, 2004, found at

http://www.nexis.com/research/ retrieved July 21, 2004. 

 274 The premium is for the high transportation costs from the United States to India and the small quantities

purchased by Indian small-scale operations. Indian industry officials, interview with USITC staff, India, Dec. 2004.

 275 India has the world’s largest ship-breaking industry. “India to Cut Import Duty on Ships to Be Scrapped,”

American Metal Market, July 30, 2004, found at http://www.amm.com, retrieved Aug. 2, 2004.

9-47

Exports

According to industry sources, overseas demand for India’s castings is growing but is not large,

primarily because of the lack of long-standing relationships with foreign partners and strong competition from

China in several markets.269 One source states that in Indian fiscal year (IFY) 1999-2000, India’s exports of

iron and steel castings were valued at $132 million and increased to $138 million in IFY 2000-2001. Export

value is expected to increase to $200 million by IFY 2005-2006.270 Even though current overseas demand for

low-grade Indian castings is strong,271 Indian exporters have increasingly focused on the high-grade products,

most of which are exported to the EU and the United States. The majority of these exports are rough castings

but, increasingly, customers are demanding high-precision machined castings.272

Factors of Production

Raw Materials and Energy

Since late 2003, supply dislocations and cost increases in raw materials and energy have reportedly

caused about 500 small Indian foundries to close.273 Overall, India is an exporter of pig iron but must import

scrap metals, coke and other energy sources.

With respect to scrap metal, Indian foundries must pay a premium274 because much of this material

must be transported from the United States, which is the world's leading supplier of scrap metals. To help ease

supply problems, the GOI reportedly plans to reduce tariffs on ships for demolition.275
 276 India previously imported coke from Australia, which has recently reduced coke production due to

environmental concerns, making India even more dependent on China for foundry coke. Indian coke has a very high

ash content and is mostly used in small foundries. In 2003, India imported about 2.75 million metric tons of

metallurgical coke (low ash content) for the production of pig iron, and 90 percent of this coke came from China. In

2004, India is expected to import between 2.5 to 3 million metric tons of coke from China. Financial Times

Information. 

 277 For example, Tisco, Kalyani Steel and Electro Steel Casting. Financial Times Information.

 278 Indian industry officials, interview with USITC staff, India, Dec. 2004.

 279 Indian foundries currently pay about 9 cents per kWh. In contrast, Chinese foundries pay only 4.5 cents.

Indian industry officials, interview with USITC staff, India, Dec. 2004, and U.S. Department of State telegram,

“India Foundry Industry.”

 280 Indian industry officials, interview with USITC staff, India, Dec. 2004.

 281 Ibid.

 282 Indian industry official, correspondence with USITC staff, Aug. 3, 2004. 

 283 Country Commerce: India, p. 55.

 284 States can also set their own minimum wage levels for local industries. India’s labor legislation is a network

of many inter-related pieces specifying various benefits to the workers and other aspects including strike, union

formation, and management’s salary. Country Commerce: India, p. 52.

 285 “Municipalities in the US Are Buying Manhole Covers from India,” Newsday, Jan 20, 2003, pp. A25, A30,

and A31, found at http://www.gnp.org/india.htm, retrieved 7-23-04. Compensation in India as estimated by the EIU

is between Rs 5,000 to 9,000 with an unskilled worker earning between Rs 3,000 to 4,500 per month, depending on

the states and experiences. The Factories Act of 1948 specifies that factory workers work between 43 to 48 hours

during a six-day week. Country Commerce: India, p. 56.

9-48

India relies on China for its foundry-grade coke needs276 but China has recently attempted to restrict

coke exports to meet its own rising demand. In response, India has built many coke oven batteries, primarily

for captive facilities of major producers.277 Molding sand is locally available in India, an advantage as

compared with China and Korea which must import this raw material.278 

Energy costs typically account for 10 to 15 percent of the total production costs in an Indian foundry

and have gradually increased since the 1991 economic reform.279 Also, as a net importer of energy, India has

suffered from the recent upward trend in global energy costs and many companies have installed back-up

generation, mostly in the form of relatively expensive wind power. Windmills account for 25 percent of all

energy consumed by the foundry industry.280 Energy privatization and the allowance of third-party sales of

energy to ease the high cost of energy has been discussed by the GOI, but this has yet to be enacted.281

Labor

Labor is India’s major comparative advantage over the foundry industries in industrialized countries.

Indian foundry labor costs account for approximately 15 percent of total production costs282 and typically

include three components: the base wage, the cost-of-living adjustment allowance, and fringe benefits. The

last item typically amounts to between 40 to 50 percent of base wages. In the organized sector, all

components are typically negotiated between the local union and the management.283 The minimum wage is

currently set at a little more than a dollar a day at current exchange rates for workers in the organized sector284

and a foundry employee typically earns from $1 to $3 for an 8-hour day.285
 286 Permission for labor termination must be obtained from the government. Joanna Slater,“India’s Mandate:

Share the Growth,” Far Eastern Economic Review, May 27, 2004, p. 12.

 287 Indian total workforce is estimated at 482 million in a population of over 1 billion in 2004 with 380 million

being illiterate and 380 million living in poverty. With about 10 million people annually entering the workforce, the

unemployment rates, ranging between 7 to 10 percent, are expected to rise mainly due to industrial consolidation and

modernization in the Indian manufacturing sector. “India: Elections,” BusinessWeek, May 31, 2004, p. 42; and

Country Commerce: India, p. 52.

 288 India has problems at the primary education level with a low literacy rate of 62 percent, either in native

language or in English, which is widely used by supervisory personnel. This rate lags behind China’s 85 percent. 

Country Commerce: India, p. 52; and “India: Elections,” p. 42.

 289 Indian industry officials indicated that customers have indicated that English-language proficiency provides

India an advantage over countries such as China. Indian industry officials, interview with USITC staff, India, Dec.

2004.

 290 Technology Information Forecasting and Assessment Council, “Focus on Foundry Industry,” found at

http://www.tifac.org, retrieved Aug. 6, 2004. 

 291 Ibid. 

 292 Financial Times Information.

 293 Indian industry officials, interview with USITC staff, India, Dec. 2004.

 294 Ibid.

 295 Indian industry official, correspondence with USITC staff, Aug. 3, 2004. 

 296 Government of India, Ministry of Finance, Union Budget and Economic Survey, 2003-2004, p. 185. 

 297 Road transportation accounts for 70 percent of freight traffic and highways account for 40 percent of total

road traffic, but represent only 2 percent of the total road system. Government of India, Ministry of Finance, Union

Budget and Economic Survey, 2003-2004, p. 184. 

9-49

FDI into India is reportedly still inhibited by a 1947 labor law restricting medium and large

companies from terminating employees.

286 Indian labor is characterized by a low turn-over rate287 and low

productivity. Labor productivity in the foundry industry is among the lowest of major Asian countries because

of antiquated foundry equipment and a low literacy rate, especially in the small-scale sector. Annually, India

produces approximately 2.5 million college graduates including about 300,000 engineers who can provide

leadership in industrial research and development and in the application of advanced technologies.288 The

English-language proficiency of both production workers and management in India makes it easier to

communicate with customers worldwide.289 However, most skilled workers are attracted to higher pay and

better working conditions in sectors other than the foundry industry.290

Technology

To improve India’s competitiveness in the high end of the global foundry market, the GOI has

encouraged technology transfer through joint ventures with foreign firms, including automation and casting

process simulation. Eco-friendly foundry techniques have also been introduced in India291 and the GOI has

cooperated with the private sector and the United Nations Industrial Development Organization (UNIDO)

to modernize many foundry clusters.292 According to Indian industry officials, the Indian casting industry

has an advantage over China when producing highly complex machined components with precision quality

standards, as engineering and machining of castings is superior in India.293

Transportation

Industry sources state that Indian port facilities lack the capacity to handle growing export volumes,294

whereas road and rail systems appear to be adequate.295 The GOI has plans to upgrade 13,146 km of India’s

highway network296 and link it to 10 major ports by 4-lane roads.297 Legislation has also been passed to help

upgrade India’s physical infrastructure. The 1999 National Highways Development Project, with the
 298 The Economist Intelligence Unit, Country Commerce: India, Nov. 2003, p. 14.

 299 Ibid., p. 15.

 300 The central government’s Ministry of Industry oversees the foundry industry while the Iron and Steel

Ministry supervises the iron and steel foundry industries and the Engineering Export Promotion Council is in charge

of product promotions.

 301 Country Commerce: India, p. 14.

 302 The GOI has already undertaken key strategic measures including the sale of its 51 percent of equity in

Bharat Aluminum Company to Sterlite Industries in March 2001, and its 50 percent stake in Maruti Suzuki to Suzuki

of Japan, its joint-venture partner. Country Commerce: India, p. 35.

 303 The GOI also controls some minerals and metal scrap trading companies. In the steel industry, major stateowned enterprises include Kudremukh Iron Ore, National Mineral Development, Rashtriya Nigam, and Steel

Authority of India. Country Commerce: India, pp. 10 and 13.

 304 The current government has recently abolished the Ministry of Disinvestment, a cabinet-level privatization

agency. Country Analysis Briefs: India, p. 1. 

 305 Country Commerce: India, pp 20-21 and 24; and U.S. Department of Commerce, Global Steel Trade, July

2000.

 306 The state of Maharashtra, for example. Country Commerce: India, p. 24,; and Global Steel Trade.

 307 Country Commerce: India, p. 15.

 308 Ibid., p. 24.

 309 Including tax holidays and tax exemption. Country Commerce: India, p. 24.

9-50

assistance of the World Bank, sets the framework for the development of a national cross-country highway

network. A tax on gasoline reportedly has been imposed to create an independent fund for road

maintenance.298 The GOI also permits full foreign ownership in physical infrastructure including power,

roads, industrial towns and parks, harbors and ports.299 Automatic approval is allowed for the purchase of

ships, and cabotage laws were relaxed for container ships to facilitate transportation.

Domestic Policies

India is still an economy in transition and the central government plays a key role in the industry300

and many large foundries remain state-owned enterprises. Since the economic reform, however, legislation

has been passed to promote domestic competition, technology transfer, and foreign investment, and to

enhance the global competitiveness of Indian products.301 India’s amended Monopolies and Restrictive Trade

Practices Act of 1969 and the Competition Act of 2002 promote the privatization of state-owned companies,

market competition, and minimize unfair trading practices, including collusion, cartel formation, and price

fixing.302 In general, Indian industry is highly-protected and the government continues to monitor virtually

all aspects of business.303 In addition, the current government may slow the privatization of profitable

SOEs.304

Federal/Regional Aid

To promote investment and to assist weaker companies, the GOI reportedly allows tax deductible

research-and-development expenditures, including capital outlays; government loans; loan guarantees;

accelerated depreciation; and debt write-offs.305 Local states can allow exemption or deferral of sales tax

payable on raw material purchases.306

According to the Economist Intelligent Unit, the GOI offers development incentives307 to targeted

industries and lagging regions.308 Tax and non-tax incentives are provided for establishing new industrial

facilities309 and for exported products in export-processing zones. Further incentives are also available at the

state level including tax holidays, tax exemptions, income tax exemption on interest and long-term capital
 310 Country Commerce: India, p. 14.

 311 Ibid., p. 37.

 312 Jay Solomon,“Finding the Balance,” Far Eastern Economic Review, July 22, 2004, p. 48. 

 314 Financial Times Information.

 315 “Indian Metal Casting Site to be Operational by End of 2005,” Modern Casting News Release, found at

http://www.moderncasting.com/News, retrieved Aug. 6, 2004. 

 316 Supporting facilities of the industrial park include a testing facility, research and development center, sand

preparation, plants truck terminals, analytical laboratory, raw material and chemical storage facilities, and related

commercial facilities including banks, restaurants, hotels, and a post office. Financial Times Information, found at

http://www.nexis.com/research/, retrieved July 21, 2004.

 317 Financial Times Information, found at http://www.nexis.com/research/, retrieved July 21, 2004. 

 318 The cash reserve is the amount that a commercial bank must deposit in its account at the RBI. Country

Commerce: India, p. 15; see also International Monetary Fund, “International Financial Statistics,” Dec. 2004, 

p. 484. 

 319 Country Commerce: India.

9-51

gains, and special excise duty rates for small producers.310 The GOI eliminated the administered price control

in the steel industry in 1992311 and plans to reduce the tax on global companies' investment in Indian firms

to align rates with those of comparable local companies.312

The GOI also helps upgrade foundry clusters. The Coimbatore cluster (producing pump-set castings)

is slated to be a world-class center with the support of the GOI and the UNIDO.314 A special government

office will be created to assist local foundries in modernizing their production facilities, achieving global

benchmarking standards, and acquiring quality certifications. In addition, a mobile laboratory and a “Quality

Institute” will also be established to provide support to this local foundry cluster. 

In the state of West Bengal, a new $3-billion cluster of 150 foundries, in the Howrah district, is

scheduled to commence operations by the end of 2005.315 The GOI will also provide important supporting

operational facilities to all local foundries of the cluster.316 The Indian Institute of Foundrymen (IIF) has

proposed plans to strengthen and develop foundry clusters across India including Belgaum (pump-set and

automotive castings), Kolhapur (automotive castings), Rajkot (castings for the automotive, diesel, and textile

industries), and Batala/Jalandhar (castings for agricultural equipment). In addition, the clusters of Hyderabad

and Chennai have also been identified for development and expansion.317

Monetary/Tax Policies

Indian monetary and fiscal policies work in tandem to encourage business activities. Since 1999, the

Reserve Bank of India or RBI (India’s Central Bank) has eased credit by lowering interest rates (table 9-18).

Commercial lending rates that were around 12.5 percent have gradually been lowered since 1999 reaching

11.5 percent in 2003. Required bank cash reserves318 also have been reduced to increase the money supply

and ease credit further. To encourage investment while improving tax revenues, corporate tax rates were

lowered, the tax base broadened and tax compliance enforced.319 Excise taxes and custom duties also have

been reduced and, as stated above, local and central governments provide tax incentives to encourage

industrial development, foreign direct investment, and exports.
 320 The rupee was devalued by 20 percent against the dollar in 1991, followed by a further devaluation in 1992.

 321 Petia Topalova, “Trade Liberalization and Firm Productivity: The Case of India,” International Monetary

Fund Working Paper, Feb. 2004, p. 6. 

 322 Country Commerce: India, p. 37.

 323 The easing of crossborder tensions with Pakistan also played a key role in the rise in the rupee’s value. See

Country Commerce: India, p. 8.

 324 Indian industrial sources have expressed concerns regarding the exchange rate policy of China (pegging the

Remimbi to the dollar) which effectively devaluates the Chinese currency relative to the Rupee. Indian industry

official, correspondence with USITC staff, Aug. 3, 2004, p. 5.

 325 The Department of Environment and Forests issues the national environment guidelines which are

implemented through the Central Pollution Control Board in New Delhi, as well as the pollution-control boards in

each state where states’ environmental authorities deal with state-specific issues. Indian industry official,

correspondence with USITC staff, Technology Exchange Network, Bangalore, India, July 20, 2004. 

 326 Many of India’s largest cities are ranked among the world’s most polluted. Country Analysis Briefs: India, 

p. 7. 

 327 Ibid., pp. 7-8.

 328 Country Commerce: India, pp. 20-21.

 329 Indian industry official, correspondence with USITC staff, Aug. 2004.

 330 These techniques include the dry gas cleaning systems or the “divided blast systems.” Suren Erkman and R.

Ramaswamy, “Applied Industrial Ecology: A new Platform for Planning Sustainable Societies,” Aicra Publishers,

(continued...)

9-52

Table 9-18 

Indian foundry industry: Financial rates, 1999-2004

Annual rates 1999 2000 2001 2002 2003 2004

Foreign exchange rate (rupees per dollar) . . . . . . . . . . 43.1 44.9 47.2 48.6 46.6 45.3

Commercial lending rate, annual average (percent) . . . 12.5 12.3 12.1 11.9 11.5 (1

)

 1 Not available.

Source: Federal Reserve Board, Foreign Exchange Rates, 2005; IMF, International Financial Statistics, Dec. 2004.

Exchange rates.--International observers reported that the effects of the devaluation of the rupee

against the dollar during 1991-1992320 have been mostly overshadowed by the impact of various GOI’s trade

reform and fiscal measures taken during the 1990s.321 The GOI governs India’s exchange-control policy in

conjunction with the RBI and, since 1993, exchange rates have been market-determined.322 From 1999 to

2002, the rupee fell against the dollar by about 13 percent, but as foreign in-flows from exporters, nonresident Indians, and FDI activities increased in combination with the general weakness of the dollar, the

rupee rose about 7 percent against the dollar between 2002 -2004.323 Indian industry officials express concerns

that if this trend continues, exchange rates may negatively affect Indian foundry exports by making India’s

exports more expensive than Chinese products. China is a key competitor in the important U.S. market.324

Environment325

The combination of urbanization, population growth and industrialization presents a major challenge

to India’s environment.326 Although India’s Environmental Act requires most foundries to obtain clearance

for the installation, expansion or modernization of facilities, its enforcement appears uneven as economic

development priorities often overshadow environmental considerations.327 The government provides free,

modern environmental technologies to medium and large enterprises328 and 400 Indian foundries have become

ISO-certified.329 To reduce foundry pollution, which is mainly associated with coke, several units have

reportedly utilized more modern techniques to enhance the metal to coke ratio.330 Although Indian
 330 (...continued)

2003, p. 74. 

 331 Indian industry officials, interview with USITC staff, India, Dec. 2004.

 332 These include hours worked, health insurance, sick pay, maternity leave, child labor, and termination rules.

Country Commerce: India, pp. 53 and 55.

 333 Suren Erkman and Ramesh Ramaswamy, “Applied Industrial Ecology: A New Platform for Planning

Sustainable Society,”Aicra Publishers, 2003, p. 74. However, USITC staff observed the use of safety equipment

similar to that used in the United States during foundry visits in India. 

 334 Indian industry official, correspondence with USITC staff Aug. 3, 2004, p. 5.

9-53

environmental regulations have tightened in the past 20 years, they remain less stringent than U.S.

environmental laws.331 Indian industrial environmental conditions are expected to improve with increasing

FDI.

Worker Health and Safety

Indian laws require companies with more than 100 workers to specify working conditions.332

Although worker safety has long been stressed by authorities, enforcement is ineffective, according to

industry sources. For example, in the small-scale, non-organized sector of the foundry industry, it is reported

that employees carrying molten metal typically work without any safety equipment.333 The current GOI’s

labor policy334 and increasing FDI in the foundry business are expected to help improve Indian worker health

and safety conditions. 
9-54
 335 For the purposes of this investigation, references to Korea in this section only include South Korea.

 336 Industry statistics are from the “38th Census of World Casting Production–2003,” Modern Casting, Dec.

2004, pp 25-26. There are differences in data coverage for firms between Modern Casting Magazine and the

Korean Foundry Cooperative Association (KFCA). Differences in data can be attributed to a number of factors,

such as the number of companies that provided information and collection methods. According to the KFCA’s 2003

data from its members, approximately 183 firms produced iron castings, with an average production of almost 526

tons per company. Korean Foundry Cooperative Association, “2002-2003 Total Production By Product,” found at

http://www.kfca.or.kr/data/h_03.htm, retrieved Jan. 7, 2005.

 337 “Press Release Ronneby 5 February 2004,” Novacast, found at http://www.novacast.se/Daehan_eng.pdf,

retrieved Jan. 3, 2005. The Korean automobile industry ranks fifth in the world in automobile unit production, with

a total market demand for automotive parts and accessories valued at $18.5 billion in 2002. Production of motor

vehicles in Korea has continually risen over the years, and now is estimated to be around 3.1 million vehicles per

year. Korea’s shipbuilding industry, another major consumer of castings, is first in the world in terms of order

receipt and output, and accounted for 44.5 percent of all orders placed worldwide, by tonnage, in 2003. U.S.

Department of Commerce (USDOC), Foreign Commercial Service (FCS), Korea Country Commercial Guide FY

2004, found at http://www.stat-usa.gov, retrieved Aug. 3, 2004; Kenneth H. Kirgin, “Casting Imports to U.S.

Approach 3 Million Tons,” Modern Casting, Sept. 2004, p. 37; and Invest in Korea, “Efficient Industrial Clusters,”

found at: http://www.investinkorea.org/include/print_read.jsp?PATH=/contents/type0/2/11.html, retrieved Jan. 6,

2005.

 338 E-mail correspondence from USFCS embassy staff with USITC staff, Sept. 9, 2004.

 339 Ibid.

 340 Korean Foundry Cooperative Association, “Third and Fourth Quarter 2004 Regional Production Trend,”

found at http://www.kfca.or.kr/data/h_03.htm, retrieved Jan. 7, 2005.

 341 “Encyclopedia Article–South Korea,” MSN Encarta, found at

http://encarta.msn.com/encyclopedia_761562354_2/South_Korea.html, retrieved Feb. 15, 2005.

 342 Ibid.

9-55

Industry statistics (2003):

• World rank – 11th

• Production – 1.8 million metric tons

• No. of establishments – 769 

Industry characteristics:

• Import market share is estimated to be

only around 1 percent

• Significant focus on production for the

automotive industry

Korea335

Industry Profile336

Many major industries in the Korean economy, such

as the automobile sector, serve as major customers for the

metal foundry industry.337 The Korean foundry market is

valued at an estimated $3.5 billion.338 It is dominated

primarily by Korean manufacturers, with the import market

share only around 1 percent.339 The foundry industry is

concentrated in the cities of Busan, Daegu, Incheon, and

Choong Chung.340 Each city offers different geographic

benefits to the Korean foundry industry. Cities such as Busan

and Incheon are major seaports in the country,341 providing

access to shipping routes, while Daegu is known as the

principal commercial and manufacturing center of the south.342 Major downstream producers such as the

automobile industry and the shipbuilding industry are located in various sections of the country.
 343 “38th Census of World Casting Production–2003,” Modern Casting, Dec. 2004, p. 26.

 344 Metals Industry Research and Development Center, “Metals Industry Trends & Events, The State of Asia’s

Foundry Industries,” March-April 2002, found at http://www.mirdc.dost.gov.ph/marapr02.htm, retrieved Jan. 10,

2005.

 345 Korean Foundry Cooperative Association, “2002-2003 Total Production By Product,” found at

http://www.kfca.or.kr/data/h_03.htm, retrieved Jan. 7, 2005.

9-56

Business Trends

Production

Despite economic slowdowns in 2000 and early 2003, Korean foundries increased production in

almost every type of metal castings, with total output increasing by 10 percent from 1999-2003 to almost 1.8

million metric tons (table 9-19).343 In 2003, almost 86 percent of production was concentrated in iron castings,

with steel a distant second with slightly over 8 percent (figure

9-6). However, the greatest growth occurred in the aluminum

castings sector, particularly during 2002-03, when production

increased by approximately 63 percent. This increase can be

largely attributed to the growing trend of automobile makers’

increased demand for aluminum castings to reduce vehicle

weight. The Korean foundry industry has a strong focus on

automotive parts products because of the presence of major

automotive makers344 such as Hyundai and Kia. In 2003, over

503,000 metric tons of castings were sold to the automobile

industry, followed by sales for engineering equipment at

almost 168,000 metric tons, and for industrial machinery with

over 167,000 metric tons. Castings sales to the ship industry

totaled slightly over 62,000 metric tons.345

Table 9-19

Korean foundry industry: Casting production, by metal types, 1999-2003

(1,000 metric tons)

Metal type 1999 2000 2001 2002 2003

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . 895 905 914 925 944

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . 482 496 511 523 539

Malleable iron . . . . . . . . . . . . . . . . . . . . . . . 38 41 43 46 48

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 139 142 145 147

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . 46 46 47 48 78

Copper-base . . . . . . . . . . . . . . . . . . . . . . . . 19 20 21 22 22

Other nonferrous ..................... 55566

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,621 1,652 1,683 1,715 1,784

Source: Several issues of Modern Casting.

Copper

1%

Other

4%

Gray iron

53%

Aluminum

Steel 4%

8%

Ductile 

iron

30%

Source: Modern Casting .

Figure 9-6

Korean foundry industry: 2003 production, 

by metal type (based on weight)
 346 This is according to the latest available data from the KFCA as of September 2004. Further, the KFCA

reports that production in the city of Busan increased by 11 percent from September 2003. Korean Foundry

Cooperative Association, “Third and Fourth Quarter 2004 Regional Production Trend,” found at

http://www.kfca.or.kr/data/h_03.htm, retrieved Jan. 7, 2005; and Korean Foundry Cooperative Association, “2002-

2003 Total Production By Product,” found at http://www.kfca.or.kr/data/h_03.htm, retrieved Jan. 7, 2005.

 347 Michael J. Gallagher, “Korea,” CastingTrade.com, 2001, found at

http://www.castingtrade.com/html/gallagher/gallagher15.html, retrieved Aug. 2, 2004.

 348 “Introduction,” Daewoo Heavy Industries & Machinery LTD., Engine & Material Div., found at

http://www.enginepark.com/eng/01_introduction.asp, retrieved Aug. 3, 2004.

 349 U.S. Department of State telegram, “USITC Study on Foundry Products,” message reference No. 157426,

Mar. 2005, prepared by the U.S. Embassy, Seoul.

 350 Ibid.

 351 Kenneth H. Kirgin, “Casting Imports to U.S. Approach 3 Million Tons,” Modern Casting, Sept. 2004, p. 37.

 352 Korea Ministry of Commerce, Industry and Energy, “Toward A 2010 Energy Policies,” found at

http://www.mocie.go.kr/eng/policies/energy/energy3.asp, retrieved Feb. 9, 2005.

 353 Ibid.

 354 U.S. Department of Energy, “South Korea Country Analysis Brief,” Dec. 2003, found at

http://www.eia.doe.gov/emeu/cabs/skorea.html, retrieved Oct. 4, 2004.

 355 “Republic of Korea, Background,” World Energy, found at http://www.worldenergy.org, retrieved Oct. 15,

2005; and APEC, “APEC Energy Overview 2003,” Jan. 2004, found at

http://www.ieej.or.jp/aperc/2003pdf/APEC_Energy_Overview_2003.pdf, retrieved Jan. 16, 2005.

9-57

The city of Busan is reportedly the leading Korean production center by volume.346 Another major

production area, the city of Incheon, is a major focal point of die casting production in Korea.347 Companies

such as Daewoo Heavy Industries and Machinery have engine production facilities located in Incheon.

Daewoo has a foundry shop in Incheon that has an annual capacity of 36,000 metric tons.348

Exports

In 2003, the Korean foundry industry exported 201,930 metric tons of castings, accounting for over

$431 million.349 The primary export markets for Korean castings in 2003 were Japan ($129 million) and the

United States ($82 million).350 Despite being a primary export market, castings from Korea account for a

relatively small share of total U.S. imports. According to an industry publication, Korea’s exports of all

castings to the United States are anticipated to reach 180,000 metric tons in 2005.351

Factors of Production

Raw Materials and Energy

The Korean Government is heavily involved in setting energy prices.352 For the industrial sector,

energy prices are generally low, while prices for household and commercial sectors are considered

comparatively high.353 According to the Korea Ministry of Commerce, Industry, and Energy (MOCIE), this

is done to “achieve industrial competitiveness and price stabilization in Korea.” In the upcoming years, the

Korean government plans to privatize many large state-owned enterprises to facilitate an open market system

in the energy sector. These include the power generation assets of the state electricity utility, Korean Electric

Power Corporation (KEPCO) and the natural gas monopoly Korea Gas Company (KOGAS).354 

Korea has limited indigenous energy sources, including no oil reserves, and must import over threequarters of its energy resource requirements.355 According to MOCIE, on average, industrial electricity prices
 356 Korea Ministry of Commerce, Industry, and Energy, “Toward a 2010 Energy Policies,” found at

http://www.mocie.go.kr/english/policies/toward/default.asp, retrieved Sept. 13, 2004.

 357 U.S. Department of Energy, “South Korea Country Analysis Brief,” Dec. 2003, found at

http://www.eia.doe.gov/emeu/cabs/skorea.html, retrieved Oct. 4, 2004.

 358 Pui-Kwan Tse, “The Mineral Industry of the Republic of Korea,” found at

http://minerals.usgs.gov/minerals/pubs/country/2003/ksmyb03.pdf, retrieved Mar. 31, 2005.

 359 Dan Sandoval, “Tapping the Breaks?,” Recycling Today, Apr. 23, 2004, found at

http://www.recyclingtoday.com, retrieved Feb. 9, 2005.

 360 American Foundry Society, 2002 Metal Forecast & Trends, p. 30.

 361 Kenneth H. Kirgin, “Casting Imports to U.S. Approach 3 Million Tons,” Modern Casting, Sept. 2004, p. 37.

 362 Korea Labor Institute, “A Study on the Ways to Facilitate Reducing Working Hours,” found at 

http://www.kli.re.kr/20_english/01_about/sub06.asp?tmp_topic=7&tmp_year=2004, retrieved Jan. 7, 2005.

 363 U.S. Department of State, “Korea, Republic of–Country Reports on Human Rights Practices 2003,” Feb. 25,

2004, found at http://www.state.gov/g/drl/rls/hrrpt/2003/27776.htm, retrieved Feb. 7, 2005.

 364 Economist Intelligence Unit, “South Korea-Labour market risk,” found at http://dialog.newsedge.com,

retrieved Jan. 6, 2005.

 365 Ibid. The article further notes that many companies do not observe this rule and many employees feel

reluctant to report overtime. Overtime work consists of work done between 12am and 6am, on Sundays and public

holidays.

9-58

are lower in Korea compared with many other OECD countries.356 Lower electricity prices, combined with

the Korean government’s energy price policies may provide cost benefits to the foundry industry in the

production process. Overall, Korea ranks 12th in global capacity for electricity generation. Korea uses a

combination of fossil fuel (oil, gas, and coal), nuclear, and hydroelectric capacity to meet demand. At the

beginning of 2001, total power generation capacity was estimated at 54 gigawatts (GW). Most of the

country’s generating capacity is controlled by KEPCO. While plans for the privatization of KEPCO have

stalled because of controversy from groups such as the labor union and some politicians, there are a few

independent power producers in the country (approximately 2.5 GW).357

Overall, the Republic of Korea has limited mineral resources. In July 2003, import tariff rates on raw

materials, many used by the foundry industry, such as pig iron, coal, and aluminum ingots were reduced from

13 percent to 0-3 percent.358 The Korean Government has also intervened in the scrap metal market, a source

of material for the foundry industry. Strong demand for scrap metal in Korea, combined with China’s high

demand and rising scrap metal prices, prompted the Korean government to impose export restrictions for six

months in 2004. This action was taken to deal with the growing shortage and increased prices of these raw

materials,359 which particularly affect the foundry industry.

Labor

In 2002, the reported labor rate (hourly compensation plus benefits) in the Korean foundry industry

was approximately $9 per hour.360 However, another source states that Korean labor rates are estimated at

$5.70 per hour (including fringe benefits).361 The Economist Intelligence Unit reports that labor laws remain

restrictive. The Korean foundry industry faces numerous government labor policies that affect all Korean

industries, particularly the Labor Standards Act. Compliance with these regulations increases operating costs.

A revision in the Labor Standards Act, which shortened the work week to 40 hours, which has been gradually

implemented since July 2004.362 The labor law also requires a mandatory 24-hour rest period each week.363

With the new rules, many employers have attempted to implement wage reductions because of the shorter

work schedule.364 Further, under the Labor Standards Act employers must pay workers an additional 50

percent of their normal wage for overtime work.365 An employer may not terminate a regular employee

without 30 days notice or 30 days of normal wages. The employer also cannot “dismiss, layoff, suspend or
 366 Ibid.

 367 With most of its borders surrounded by the sea, essentially all of Korean exported goods depend on maritime

transportation. Korea has 28 international-standard ports and 22 coastal harbors and is home to the third-largest

container port in the world, the port of Busan. Invest Korea, “A Strategic Location,” found at

http://www.investkorea.org/templet/type0/1/read.jsp, retrieved Aug. 16, 2004.

 368 Jaebong Ro, “Infrastructure Development in Korea,” United Nations Online Network in Public

Administration and Finance, Sept. 2002, found at

http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN008650.pdf, retrieved Jan. 19, 2005.

 369 USDOC, FCS, Korea Country Commercial Guide FY 2004, found at http://www.stat-usa.gov, retrieved Aug.

3, 2004.

 370 Ibid.

 371 Seoul Metropolitan Area, Chungcheong, Jeolla, Gyeongsang, and Gangwon.

 372 Invest Korea, “Efficient Industrial Clusters,” found at:

http://www.investinkorea.org/include/print_read.jsp?PATH=/contents/type0/2/111.html, retrieved Jan. 6, 2005.

9-59

transfer a worker, without reasons ‘justifiable’ by criminal or disorderly behavior or other misconduct on the

part of the worker.”366

Transportation367

The quality of Korea’s transportation infrastructure is advanced compared to many nations, but lags

behind many of its developed nation counterparts. Korea’s rapid industrial development and an increase in

the number of automobiles, prompted by a government-led attempt to promote the automobile industry, has

benefitted the foundry industry in terms of creating greater customer demand for castings. However, the

increase in the number of automobiles led to both bottlenecks in Korea’s infrastructure and to significant

levels of investment by the government to alleviate the problems.368 

An estimated $300 billion is set aside for infrastructure projects over the next 19 years, with

approximately $170 billion marked for new roads, railways, ports, and airports.369 A multibillion dollar

expansion of the highway system is planned; increased capacity in several international and domestic airports

is expected; and existing port facilities are expected to benefit from the additional investments.370 Many

foundries are located near large ports such as Busan and major industrial areas such Daegu, providing access

to major transportation routes. Many industrial sectors such as the foundry industry can expect to benefit from

improvements to Korea’s transportation infrastructure, particularly improvements to existing port facilities.

Domestic Policies

Federal/Regional Programs

Presently, there are no known government programs that are specifically directed at the Korean

foundry industry. However, there are cross-industry programs that may assist the foundry industry. The

Korean government established industry-based industrial clusters in its five largest regions371 aimed at

providing a beneficial corporate business environment. For example, Incheon, Ulsan, Chungnam, Jeonbuk,

and Gwangju have been targeted for the development of automobile and automobile parts production. Within

these industrial clusters, there are Foreign-Exclusive Investment Complexes (FEICs) which provide benefits

such as tax relief and financial support toward technological development.372
 373 Kenneth H. Kirgin, “Casting Imports to U.S. Approach 3 Million Tons,” Modern Casting, Sept. 2004, p. 37.

 374 CIA World Factbook, “Korea,” found at http://www.cia.gov/cia/publications/factbook/geos/ks.html, retrieved

Jan. 16, 2005.

 375 United Nations Online Network in Public Administration and Finance, “Key Indicators of Developing Asian

and Pacific Countries, Republic of Korea,” found at

http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan012577.pdf, retrieved Jan. 5, 2005.

 376 Organization for Economic Cooperation and Development, “Economic Surveys: Korea 2004,” pp. 53-54,

found at http://www.sourceoecd.org/, retrieved Jan. 6, 2005.

 377 In 2003, this rate was a national corporation tax of 27 percent with an additional local inhabitant surtax of 10

percent of the national tax imposed, thus leading to a top corporation tax rate of 29.7 percent. American Chamber of

Commerce in Korea, “Improving Korea’s business climate 2003–Taxation,” found at

http://www.amchamkorea.org/publications/2003ikbc/Taxation.doc, retrieved Jan 7, 2005.

 378 “KPMG’s Corporate Tax Rate Survey–January 2003,” KPMG, found at

http://www.us.kpmg.com/microsite/global_tax/ctr_survey/2003CorprorateTaxSurveyFINAL.pdf#search='korea%20

corporate%20tax%20rate%202003', retrieved Feb. 7, 2005.

 379 Korea Securities Dealers Association, “Taxation,” found at

http://www.ksda.or.kr/english/invest/tax_resident.cfm, retrieved Jan. 7, 2005.

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Monetary/Tax Policies 

Exchange rates.--According to an industry source, the currency exchange rate between the U.S.

dollar and the Korean won has aided the competitiveness of Korean castings exports to the United States and

Europe.373 Although the exchange rate fluctuated from 1999-2003, the 2003 rate of 1,145 won per U.S. dollar

is nearly the same as the 1999 exchange rate, as shown in the following tabulation (in won per dollar).374

Year Rate

1999 . . . . . . . . . . . . 1,188

2000 . . . . . . . . . . . . 1,130

2001 . . . . . . . . . . . . 1,291

2002 . . . . . . . . . . . . 1,251

2003 . . . . . . . . . . . . 1,191

2004 . . . . . . . . . . . . 1,145

In 2004, the dollar declined slightly against the won. These latter years provide a contrast with exchange

rates in the early to mid-1990s, which averaged around 771 won per U.S. dollar in 1995.375 In an OECD

report that compared currencies in 2003, the rate of the won to the dollar was relatively stable; the won

depreciated by 10 percent against the yen and 16 percent against the euro by the end of 2003.376

Tax structure.--A number of factors are considered when determining the effects of the country’s

tax structure on companies. Items such as the national corporate tax rate, local tax rates, financial incentives,

and special deductions can greatly impact the effect of the tax structure on the foundry industry. Korea’s

corporate tax rate, at just under 30 percent,377 is lower than rates of many countries. However, the rate is

higher than some of its neighbors, such as Hong Kong, which has a corporate tax rate of 18 percent.378

Generally, a corporation with head offices located in Korea is subject to corporate tax on its total income; the

tax rate varies, depending on a corporation’s taxable income.379 
 380 International Monetary Fund, International Financial Statistics.

 381 Yahoo Finance, Australia and NZ, “S. Korea’s Interest Rates Fall To Record Lows in Nov,” found at

http://au.biz.yahoo.com//041227/17/2lsg.html, retrieved Jan. 16, 2005.

 382 U.S. Department of Energy, “South Korea Country Analysis Brief,” Dec. 2003, found at

http://www.eia.doe.gov/emeu/cabs/skorea.html, retrieved Oct. 4, 2004. 

 383 USDOC, International Trade Administration, “Korea Environmental Technologies Export Market Plan,”

found at http://www.ita.doc.gov/media/Publications/text/korea2002FINAL.txt, retrieved Sept. 13, 2004.

 384 United States-Asia Environmental Partnership, “Korea: Regulatory Framework,” found at

http://apocalypse.usaep.org/export/em-korea-rf.htm, retrieved Sept. 13, 2004. 

 385 USDOC, FCS, Korea Country Commercial Guide FY 2004.

9-61

Interest rates.–Commercial lending rates in Korea declined during 1999-2003, as shown in the

following tabulation (in percent): 380

Year Rate

1999 . . . . . . . . . . . . 9.4

2000 . . . . . . . . . . . . 8.5

2001 . . . . . . . . . . . . 7.7

2002 . . . . . . . . . . . . 6.8

2003 . . . . . . . . . . . . 6.2

The decline did not increase investment spending in the country. Reports indicate that “low lending rates

failed to boost bank loans to companies,” despite deposit and loan rates being the lowest since January

1996.381

Environment

Rapid growth and industrialization of the Korean economy in the past few decades has led to many

negative environmental effects. According to the United States-Asia Environmental Partnership, “Industrial

emissions from factories have caused serious acid rain problems. Increased car ownership also has led to a

corresponding rise in carbon emission from the country’s transportation sector, contributing to Korea’s air

pollution problems.”382

Like other industries, the metal casting industry in Korea must abide by environmental regulations

imposed by its government, particularly the Ministry of Environment (MOE). The MOE establishes federal

environmental policies and regulations. Local governments may impose their own environmental rules along

with those designated by the MOE.383 The Korean government implemented the Basic Environment Policy

Act (BEPA), which was modeled after legislation in the United States. The BEPA (figure 9-7) provides basic

guidelines, principles, and an administrative framework for environment preservation and remediation with

a “polluter pays” principle. The legislation requires corporations to cooperate with government regulations

and to take the necessary steps to prevent environmental pollution.384 Additionally, many Korean companies

adopted the ISO 14000 environment management system in 1997.385 
 386 United States-Asia Environmental Partnership, “Korea: Regulatory Framework.,” 

 387 Jungsun Park and Yangho Kim, “The Present and the Future of Occupation Health in Korea,” Journal of

Occupational Health, found at http://joh.med.uoeh-u.ac.jp/pdf/E41/E41_1_11.pdf, retrieved Mar. 31, 2005; and the

Korea Ministry of Labor, “About MOL,” found at http://www.molab.go.kr:8787/English/abou/sub_1.jsp, retrieved

Mar. 31, 2005.

 388 Korea Occupational Safety and Health Agency, “About Kosha,” found at

http://www.kosha.net/english/english.htm, retrieved Mar. 31, 2005.

 389 University of Iowa College of Nursing, “South Korea–Occupational Health,” found at

http://www.occhealthnursing.net/korea03.htm, retrieved Sept. 22, 2004.

 390 Ibid.

 391 Ibid.

9-62

Figure 9-7

Korean foundry industry: Environmental regulatory framework386

Atmospheric Environment Water Environment Preservation Noxious Chemical Substance

Regulates emission of pollutants

into the air. Pollutants regulated

under AEPA include sulfuric

oxides, nitric oxides, carbon

monoxide, and particulates.

Regulates effluents released into

surface waters. Pollutants regulated

under WEPA include biochemical

oxygen demand, chemical oxygen

demand, floating material, chrome,

copper and zinc.

Regulates the manufacture and

importation of virtually all

chemicals. Any business that

manufactures, distributes, holds,

stores, or transports toxic

substances must register with the

MOE.

Source: United States-Asia Environmental Partnership.

Worker Health and Safety 

Presently, there is no worker health and safety legislation known to be directed specifically at the

foundry industry. Like many other industries, Korean foundries incur costs from worker health and safety

guidelines set by the government. There are several government agencies that oversee worker health and

safety in Korea. The Korean Ministry of Labor (MOL) is the primary agency responsible for occupational

health policy and administration. Regional labor offices are located around the country to provide

administrative and oversight support to the agency.387 The Korea Occupational Safety and Health Agency

(KOSHA) is responsible for research, accident prevention, and safety and health education. KOSHA has

branch offices located in major cities to assist in occupation accident prevention activities such as providing

health and safety technical guidance and training.388

Specific legislation in Korea that addresses worker health and safety issues includes the Labor

Standards Act (1953) and the Industrial Safety and Health Act (1981 and revised in 1996). The Industrial

Safety and Health Act requires corporations with 50 or more employees to employ plant physicians and health

managers to oversee the occupational health and safety of workers.389 Workers’ compensation was enacted

in 1963.390

A group occupational health service system provides occupational health services for workers in

small to medium size corporations (below 1000 employees). Under this system, a monthly premium is

assessed, and companies can rely on system benefits rather than having to individually hire factory doctors,

nurses, or hygienists. Larger corporations hire their own physicians, nurses, and health managers. Funds are

also budgeted by the Korean government to support group occupational health services, which include visits

to factories by occupation health personnel to monitor activities.391 
 392 Foundries are also located in the central portion of the country in and around Mexico City (e.g., Curernavaca,

Pachuca, Queretaro, and Toluca), in the north-central interior cities (e.g., Aguascalientes, Durango, Guadalajara, San

Luís Potosí, and Torreón), in Veracruz on the mid-Caribbean coast, and along the U.S.-Mexico border. FundiExpo,

“FundiExpo Monterrey Expects 4,000 Attendees,” Modern Casting, a publication of the American Foundry Society

(AFS), Dec. 6, 2002, found at

http://www.moderncasting.com/News/NewsReleaseRequest.asp?ReleaseID=667&MonthYear=December%202002,

retrieved July 20, 2004; “National Casting Industry Profile: Mexico. Hoy! Mexico Wants Development–Today!,”

CastingTrade.com, 2001, found at http://castingtrade.com/html/world/mexico.html, retrieved July 22, 2004; and

Antonio E. Guerrero and Eduardo Salinas, “Mexican Metalcasting on the Move,” Foundry Management &

Technology, May 2000, p. 32.

 393 Latest year for which data are available. “36th Census of World Casting Production–2001,” Modern Casting,

Dec. 2001, pp. 22-25.

 394 “National Casting Industry Profile: Mexico,” CastingTrade.com, retrieved Apr. 5, 2005.

 395 The Mexican Society of Foundries, cited in e-mail correspondence from Economic Section official, U.S.

Embassy, Mexico City, to USITC staff, Dec. 8, 2004.

 396 As a more specific example, Grupo Quimmco purchased loss-making Macimex from bank receivership in

2001, invested more than $60 million to upgrade the operation, and turned the company into the group’s fastestgrowing, highest-growth potential entity. In 2003, General Motors Corp. recognized Macimex as a “Worldwide

Supplier of the Year” for providing precision machined crankshafts. “Mexico Report–Iron and Aluminum Casting in

Monterrey, World Leading Technology Ahead,” Wards’s AutoWorld, Jan. 2005, p. 18.

9-63

Industry statistics:

• World rank (2003): 10th

• Production (2003): 1.8 million metric tons

• No. of establishments (2001): 1,787

Industry characteristics:

• Integrated into the North American

production chain as a domestic supplier

and net exporter of metal castings.

• Automotive sector consumes three-fifths of

all Mexican-produced castings.

• Beneficiary of extensive foreign direct

investment and ambitious growth strategies

of Mexican firms.

Mexico

Industry Profile

The metal foundry industry is well established in

Mexico, having benefitted from extensive foreign direct

investment (FDI) during the 1970s and 1980s. Although

well integrated in the North American production chain,

Mexico’s foundries have been overshadowed since the

late 1990s-early 2000s by rising production in lower-cost

countries, particularly China and India. Mexican foundries

are concentrated in the country’s major industrial and

manufacturing centers. Roughly three-quarters of all

Mexican castings are produced in the northeast region,

particularly in and around the cities of Monterrey,

Monclova, and Saltillo.392

About 1,787 foundries were operating in Mexico

in 2001, of which most (1,019) were nonferrous casters;

among the ferrous foundries, casters of iron (741) outnumbered those that cast steel (27).393 Most foundries

in Mexico are small- or medium-scale operations, with more than 90 percent having fewer than

100 employees.394 There is a mix of both indigenous and foreign-owned operations among Mexican foundries.

About 35 percent of Mexican foundry output is consumed domestically.395 Details are not readily available

regarding the extent to which mergers and acquisitions have affected the number of foundry operations in

Mexico. However, one example is the indigenous corporation Grupo Quimmco that rose to be among one of

Mexico’s major casters of automotive and heavy-equipment components during a decade of ambitious

growth through buyouts and pursuit of new business opportunities.396

The predominant end-use sector is the export-oriented automotive industry, both assemblers and

original equipment manufacturers (OEMs), which consumes nearly 60 percent of all metal castings produced
 397 Virginia Cahill, “Mexican Metalcasting Makes Its Mark,” Foundry Management & Technology, Dec. 2001,

p. 30.

 398 U.S. industry publication official, telephone interview with USITC staff, Feb. 8, 2005.

 399 Less power-intensive EIFs are preferred over electric-arc furnaces due to the high cost of electricity to

industrial customers in Mexico. U.S. industry-publication official, telephone interview with USITC staff, Feb. 8,

2005.

 400 The Mexican Society of Foundries, cited in e-mail correspondence from Economic Section official, U.S.

Embassy, Mexico City, to USITC staff, Dec. 8, 2004.

 401 U.S. industry official, telephone interview with USITC staff, Feb. 23, 2005.

 402 Cahill, “Mexican Metalcasting Makes Its Mark,” p. 32.

 403 Among the larger die casting firms are Auma (Mexico), Leggett & Platt (U.S.), and MABE (Mexico).

Michael J. Gallagher, “Highlights of the Global Die Casting Industry: Mexico,” CastingTrade.com, 2001, found at

http://castingtrade.com/html/gallagher/gallagher02.html, retrieved July 22, 2004. 

 404 U.S. industry official, interview with USITC staff, United States, June 2004.

 405 U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 406 “National Casting Industry Profile: Mexico,” CastingTrade.com. 

 407 U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 408 U.S. industry official, interview with USITC staff, United States, June 2004.

 409 Ibid.

 410 U.S. industry official, interview with USITC staff, United States, Oct. 2004.

 411 Top iron foundry firms serving the automotive industry include Abomex (Mexico), Autometales (Mexico),

(continued...)

9-64

in Mexico.397 Top-end foundries in Mexico are tier-1 automotive parts producers or casters of other

engineered components. Mid-range foundries tend to be job shops that produce less-sophisticated products

for both automotive and non-automotive applications. The low-end Mexican foundries cast simple shapes

(e.g., valves) in large-volume runs, which renders them vulnerable to rising competition from lower-cost,

foreign competitors with similar capabilities.398

Older foundries in Mexico primarily rely on cupola furnaces for melting iron and electric induction

furnaces (EIFs)399 for melting aluminum, copper, and other nonferrous scrap,400 whereas newer operations

utilize EIFs to melt ferrous or nonferrous metals.401 Mexican foundries are capable of casting with all molding

methods including green sand, no-bake, cold box, shell, lost-foam, semi-permanent, and permanent

molding;402 and die casting.403 The industry is also noted for its expertise in designing and constructing lostfoam moldings404 and in woodworking to excel at pattern building.405

The predominant metals cast are gray iron (43 percent)

and aluminum alloys (30 percent). According to one industry

analysis, Mexico has the highest-value metal mix of any

country due to the high proportion of aluminum castings

(figure 9-8).406 Reports about the quality of Mexican castings

vary from generally good, but with some problems in

producing higher-end castings;407 to not as good in more recent

years,408 with material-composition discrepancies and internal

defects.409 By contrast, another U.S. castings purchaser found

Mexican castings cleaner (i.e., without the burnt mold-sand

residue) than those from its domestic and third-country

sources.410 Iron foundries provide components primarily for

the automotive sector.411 Steel foundries produce primarily

Copper

10%

Other

6%

Ductile 

iron

11%

Aluminum

30%

Gray iron

43%

Source: Modern Casting.

Figure 9-8

Mexican foundry industry: 2003 production, 

by metal type (based on weight)
 411 (...continued)

GIS-Cifunsa (Mexico), General Motors (U.S.), Proeza/Grede (U.S.), Hayes Lemmerz (U.S.), Nissan (Japan), Rassini

(Italy), Teksid (Italy), and Volkswagen (Germany). IUSA (Mexico) and Tisa/Tismatic (Mexico) serve nonautomotive markets. Cahill, “Mexican Metalcasting Makes Its Mark,” p. 32; and Guerrero and Salinas, “Mexican

Metalcasting on the Move,” p. 34.

 412 Major steel foundries include Aceros Fundios Internacional (U.S.), Acerlan (Mexico), Magoteaux (U.S.),

Amsco (U.S.), Fundemex (Mexico), FWF (France), Kitz (Japan), Naco (U.S.), and Susano Solis (Mexico). Cahill,

“Mexican Metalcasting Makes Its Mark,” p. 32.

 413 Major nonferrous foundries include GIS-Castech (Mexico), Volkswagen (U.K. and Germany), Ronald

(Germany), Auma (Mexico), Levelier (France), Mahle (Germany), Montupet (France), Nemak (Mexico), Nissan

(Japan), Pistones Moresa (U.S.), and Teksid (Italy). Ibid.

 414 Guerrero and Salinas, “Mexican Metalcasting on the Move,” p. 32.

 415 “Intermet Plans New, $40-Million Ductile-Iron Foundry in Mexico, to Start in ‘04,” Foundry Management &

Technology, Oct. 2003, p. 6.

9-65

valves and fittings, and miscellaneous cast parts.412 The majority of nonferrous castings413 are produced for

various industrial equipment markets and the automotive sector.414

Business Trends

Production and Employment

Production of metal castings by Mexican foundries increased each year from 1999 to 2001 (table

9-20), but declined in 2002 and again in 2003. Domestic production is insufficient to meet demand,

particularly in the automotive sector, which must rely on imports to round out its needs for cast metal

components.415

Table 9-20

Mexican foundry industry: Production by metal type, 1999-2003

(1,000 metric tons)

Metal type 1999 2000 2001 2002 2003

Gray iron1 . . . . . . . . . . . . . . . . . . . . . . . . . . 631 704 2

888 800 790

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . 44 56 2

62 175 200

 Total, iron . . . . . . . . . . . . . . . . . . . . . . . . . 675 760 950 975 990

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104 143 100 300 8

Copper alloys . . . . . . . . . . . . . . . . . . . . . . . 125 135 80 175 175

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . 454 600 525 480 550

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 123 225 100 100

 Total, all metal types . . . . . . . . . . . . . . . . 1,474 1,761 1,880 2,030 1,823

 1

 Includes malleable iron.

 2

 Estimated from proportions of total cast-iron shipments.

Note.–Figures may not add to totals because of rounding.

Source: “Annual Census of World Casting Production,” Modern Casting, Dec. (various years); and Kenneth H. Kirgin,

“Casting Market Trends,” Modern Casting, Sept. 2004, p. 38.
 416 “National Casting Industry Profile: Mexico,” CastingTrade.com.

 417 Cahill, “Mexican Metalcasting Makes Its Mark,” p. 30.

 418 Ibid.

 419 “GSC Foundries Invests 15 Million Dollars,” Maquilaportal.com, Apr. 1, 2004, found at

http://www.maquilaportal.com/cgi-bin/public/hist/hist.pl?Klein-2004-04-01&Klein2=6114&Klein..., retrieved

July 23, 2004.

 420 Intermet Corp., “Intermet Announces Plans for New Foundry in Mexico,” news release, Sept. 15, 2003, found

at http://www.intermet.com/latest/current/mexico.html, retrieved July 23, 2004; and “Intermet Plans New, $40-

Million Ductile-Iron Foundry in Mexico,” Foundry Management & Technology, p. 6.

 421 “National Casting Industry Profile: Mexico,” CastingTrade.com.

9-66

Table 9-21

Mexican foundry industry: Number of employees and production and related workers, 1999-2003

Item 1999 2000 2002 2002 2003

Number of establishments . . . . . . . . . . . . 77 77 76 72 (1

)

Production and related workers:

 Number . . . . . . . . . . . . . . . . . . . . . . . . . 9,725 9,354 7,547 6,243 5,324

 Man-hours worked (1,000 hours) . . . . . . 22,802 22,457 26,203 24,285 22,237

 Wages paid (1,000 pesos)........... 237,992 278,285 276,624 242,687 227,014

 1

 Not available.

Note.–The number of metal foundry establishments in this table differs from the "Census of World Casting

Production" survey cited previously due to a difference in industry definitions between INEGI and the AFS.

Source: Class 382200–Smelting and Molding of Metallic, Ferrous and Nonferrous Pieces. Compiled from official

statistics of the National Institute of Statistics, Geography, and Information (INEGI) of Mexico.

According to Mexico’s National Institute of Statistics, Geography, and Information (INEGI), both

the number of employees and the man-hours worked declined in each of the past 5 years, partly as a reflection

of the slight decline in the overall number of foundry establishments (table 9-21).

Investment

Numerous multinational corporations from the United States, Western Europe, and East Asia have

established foundry operations in Mexico, which are credited with enhancing not only production technology,

but also management, working conditions, and environmental protection in the industry.416 During 1995-2001,

more than 30 new large and medium-size foundries were established by investors from France, Germany,

Japan, Mexico, and the United States.417 The majority of new foundries established in recent years,

particularly for iron and nonferrous cast parts, are in the automotive sector.418 Recent examples of foundry

operations being established or expanded in Mexico include GSC Foundries, a manufacturer of aerospace

parts, that will expand its investment in its Saltillo facilities;419 and Intermet Corp., one of the world’s largest

manufacturers of automotive powertrain, chassis, suspension, and structural components, which announced

plans for a new ductile-iron foundry in Monterrey to cast automotive structural components, beginning in

2004.420

Exports

The major items exported by Mexico’s foundry industry are automotive parts, especially engine

blocks.421 Other notable exports include miscellaneous castings, valves and fittings, and municipal castings.

Mexican foundries export primarily to the United States, with exports of metal castings anticipated to reach
 422 Kenneth H. Kirgin, “Casting Imports to U.S. Approach 3 Million Tons,” Modern Casting, Sept. 2004, p. 38.

 423 Guillermo Vogel, Vice President, Mexican Chamber of the Steel Industry (CANACERO), cited in U.S. &

Foreign Commercial Service (US&FCS) and U.S. Department of State, “Iron Scrap Shortage in Mexico Forces Steel

Prices Up,” International Market Insight, ID No. 124414, Apr. 19, 2004.

 424 U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 425 Steel scrap prices in Mexico rose from an average of $100 per metric ton in 2002 to $140 per metric ton in

2003, and to $255 per metric ton by spring 2004. Since 1999, prices in Mexico for scrap iron increased by

243 percent and for pig iron by 205 percent. US&FCS and U.S. Department of State, “Iron Scrap Shortage in

Mexico Forces Steel Prices Up.”

 426 Paul Schaffer, “Producers, Chinese Demand Jar Secondary Smelters,” American Metal Market, Mar. 14,

2003; and U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 427 Major copper mines are concentrated in the northwestern state of Sonora. Ivette E. Torres, “The Mineral

Industry of Mexico,” Minerals Yearbook, Vol. III, Area Reports, U.S. Geological Survey, 2002. There are two

copper refineries in Mexico, according to the Mexican Society of Foundries. E-mail correspondence from Economic

Section official, U.S. Embassy, Mexico City, to USITC staff, Dec. 8, 2004.

 428 Joseph McCann, “Copper Still Strong Despite Short-Term Blip,” American Metal Market, Apr. 23, 2004; and

U.S. industry official, telephone interview with USITC staff, July 30, 2004.

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292,000 metric tons in 2005.422 Other major export destinations include Canada and Latin America–a

reflection of Mexico’s extensive FDI ties and network of free-trade agreements (FTAs).

Factors of Production

Raw Materials

Currently, Mexican foundries are reportedly being adversely impacted by rising costs for raw

materials and energy. Raw material costs in Mexico have escalated to the point that an industry observer

noted that many small and medium-size ferrous foundries are shutting down.423 Traditionally, the United

States is the predominant source of iron and steel scrap for Mexican industries, although some ferrous scrap

is also generated within Mexico.424 However, shortages of ferrous scrap worldwide, attributed to China’s

rapidly expanding scrap purchases, have driven up costs of scrap steel, scrap iron, and pig iron to Mexican

industries in recent years.425 Mexico is heavily reliant on imports of aluminum ingot and scrap, thus exposing

the foundry industry to increased competition with Chinese secondary-aluminum producers that are

increasingly seeking more U.S. scrap, also a major source for Mexican foundries.426 By contrast, Mexican

foundries are less dependent on foreign sources of copper cathodes due to the country’s sizeable mining and

smelting industry,427 but rely largely on the United States for copper scrap, where prices have been buoyed

by robust domestic and foreign demand.428

Energy

According to the Mexican Society of Foundries (CAINTRA), the industry’s energy usage can be

broken out by source as shown in the following tabulation (in percent):

Energy source Share

Electricity . . . . . . . . . . 35

Metallurgical coke . . . 25

Natural gas . . . . . . . . . 20

Diesel fuel ......... 5

 Total . . . . . . . . . . . . 100
 429 Alonso Ancira Elizondo, President, Mexican Iron and Steel Chamber (CANACERO), cited in US&FCS and

U.S. Department of State, “Trends in Steel Consumption and Production in Mexico,” Country Commercial Guide FY

2004–Mexico, ID No. 122909, Jan. 26, 2004.

 430 Ivan Grillo, “Energy Company to Crack Down on Power Theft,” Mexico City News, Oct. 8, 2002; and David

Shields, “Government Prepares Energy Reform,” Mexico City News, Mar. 8, 2001. Electricity prices in Mexico rose

6 percent since the beginning of 2004. “Economic Summary,” Mexico Watch, June 1, 2004, pp. 1-4.

 431 John Nagel, “Mexico Cuts Import Duties, Energy Costs to Curb Inflation, Boost Competitiveness,”

International Trade Daily, Dec. 21, 2004, found at http://pubs.bna.com/ip/BNA/ITD.NFS/..., retrieved Dec. 21,

2004.

 432 Mexico’s Constitution reserves the oil and gas sectors for the state. “Pemex Courts Foreign Investment in

Natural Gas, but Firms are Wary of Legal Minefield,” Mexico Watch, July 1, 2002, p. 4.

 433 Natural-gas prices in Mexico rose by 11 percent between Jan. and May 2004. “Economic Summary,” Mexico

Watch, pp. 1-4; and George T. Baker, President, Baker & Associates, Houston, TX, cited in Philip Burgert,

“Bottlenecks Disrupt Delivery of Raw Materials,” American Metal Market, Jan. 27, 2005.

 434 Nagel, “Mexico Cuts Import Duties, Energy Costs to Curb Inflation.”

 435 The price of metallurgical coke rose 335 percent in Mexico since 1999. US&FCS and U.S. Department of

State, “Iron Scrap Shortage in Mexico Forces Steel Prices Up.”

 436 China, the world’s largest supplier of coke, scaled back its export licencing quotas in recent years to meet

growing demand by its domestic industries at a time when other developing nations, particularly India, also

increased demand for coke, following an extended period of coke capacity closures worldwide that far exceeded the

few new additions. Nancy E. Kelly, “US, EU Protest Chinese Coke Export Controls,” American Metal Market, May

28, 2004; and Scott Robertson, “Summit Speakers Warn of Crisis in the Coke Market,” American Metal Market,

Oct. 8, 2003.

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Higher energy costs are another concern to foundries, as electricity and natural gas account for an estimated

25 to 40 percent of production costs for iron and steel industries (including foundries) in Mexico.429

Constrained electric-power supplies due to the country’s shortage of generating capacity; transmission and

distribution losses from an aging power grid, inefficient equipment, and pilferage; and discounted rates to the

agricultural and residential sectors, reportedly drive-up electricity costs to industrial customers.430 However,

in December 2004, the Office of the President of Mexico announced lower state-administered energy costs

to industry as part of a package of measures to check inflation and to enhance the country’s economic

competitiveness.431 Prices for electricity use beyond normal threshold levels during peak hours are to be cut

by 50 percent. Likewise, monthly upward adjustments to electricity rates will be at a slower rate for industrial

users, because the state-run electricity corporation will purchase fuel oil at reduced prices from the stateowned petroleum company (PEMEX). Mexico has abundant natural-gas resources but FDI development

interest is lacking due to legal concerns432 and perceptions that wellhead prices in Mexico are set below those

prevailing in Houston. Hence, an inadequate infrastructure for gas production, storage, and transportation

forces Mexico to rely on imports of high-cost gas from the United States.433 Natural-gas imports will also be

exempted from duties as part of the package of measures announced in December 2004.434 Finally, an

additional concern for ferrous foundries that rely on coke-fired cupola furnaces is the escalating cost of

metallurgical coke in Mexico435 and worldwide as China scaled-back its exports at a time of rising global

demand.436
 437 Mexico’s Federal Labor Law (LFT) requires employers to pay workers double time for working overtime,

and triple time for working more than 3 hours of overtime per day or for working overtime on 3 consecutive days.

Employers are required by the LFT to provide employees with paid vacation time and bonuses (especially an annual

end-of-year holiday bonus equivalent to at least 2-weeks pay), which amounts to an estimated additional 30 to

35 percent of salaries. U.S. Department of State, Bureau of Democracy, Human Rights, and Labor (BDHR&L),

“Worker Rights,” Country Reports on Human Rights Practices 2003–Mexico, Feb. 25, 2004; and US&FCS and U.S.

Department of State, “Investment Climate,” Country Commercial Guide FY 2004 (Aug. update)–Mexico, ID No.

126796, Aug. 12, 2004. Information was not readily available about the share of benefits in total compensation to

employees of Mexico’s metal foundry industry. For comparison purposes, across the manufacturing sector in 2001,

benefits are estimated to account for an 11.2-percent share of total employee compensation in Mexico, compared to

20.6-percent in the United States. Official statistics of the U.S. Bureau of Labor Statistics, cited in Jeremy A.

Leonard, How Structural Costs Imposed on U.S. Manufacturers Harm Workers and Threaten Competitiveness,

Manufacturers Alliance/MAPI, for the Manufacturing Institute of the National Association of Manufacturers, 2003,

p. 13.

 438 AFS, AFS Metalcasting Forecast & Trends 2004, Oct. 2003, p. 34.

 439 Although labor in industrial areas of the country is highly organized, the extent of unionization and wage

levels in export-oriented industries vary among locales and by degree of manufacturing process. Labor unions are

reportedly not considered an impediment for operators of metal foundries in Mexico. Generally, labor unions in

Mexico do not have the degree of bargaining clout as do their counterparts in the United States. Moreover, wage

increases in most Mexican collective bargaining agreements reportedly have kept pace with or even outpaced

inflation, but not sufficiently to enable workers to recoup consumer purchasing power eroded over the past decade.

U.S. Department of State, BDHR&L, “Worker Rights;” U.S. industry-publication official, telephone interview with

USITC staff, Feb. 8, 2005; and U.S. industry official, telephone interview with USITC staff, Feb. 23, 2005.

 440 U.S. industry official, interview with USITC staff, United States, June 2004.

 441 Testimony of George G. Boyd, President and Chief Executive Officer, Golden’s Foundry & Machine, hearing

transcript, p. 132; and testimony of Roy Hanks, Marketing Manager, ThyssenKrupp-Waupaca, hearing transcript, 

p. 134.

 442 Cited in “The Peso Crisis, Ten Years On, Tequila Slammer, Mexico Has Still Not Fully Recovered from Its

Worst Financial Crisis,” Economist, Jan. 1, 2005, pp. 55 and 58.

 443 US&FCS and U.S. Department of State, “Investment Climate.”

 444 U.S. industry official, interview with USITC staff, United States, Oct. 2004.

 445 For example, Tech de Monterrey (Instituto Technológico de Estudios Superiores de Monterrey, ITESM),

centered in the northeastern industrial city of Monterrey, NL, with branch campuses throughout the country, is well

regarded for providing highly trained technicians, engineers, managers, and other professionals for Mexican business

and industry. See: Tech de Monterrey’s English-language website at http://www.mty.itesm.mx/principal.html.

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Labor

The average hourly labor rate (wages plus benefits437) in the Mexican foundry industry of $1.70 in

2003 is about 9 percent of the rate in the U.S. industry ($19.00) and less than one-half that in Brazil ($3.60).438

However, wage rates have risen in recent years for Mexico’s highly unionized foundry industry,439 thereby

eroding its competitive advantage in the U.S. market compared with other low-cost foreign sources.440 Hence,

some U.S. companies that initially sought lower-cost labor by establishing foundry operations in Mexico have

subsequently begun relocating to China.441 Although Mexico has an abundance of low or unskilled workers,

formal hiring is reportedly hindered by relatively high social-security contribution requirements, according

to the Organization for Economic Co-operation and Development (OECD).442 There is also a shortage of

technically skilled workers, technicians, engineers, and managers in Mexico443 and some firms reportedly

have difficulty keeping experienced foundry workers.444 Metal foundries train workers in-house and those

in the border area usually import technical and managerial staff from the United States. Although these

foreign workers have transferred expertise to Mexican mid-career workers, Mexican university programs445
 446 U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 447 Statistics Canada, “Competitiveness,” Canadian Metalcasting Technology Roadmap, found at

http://strategis.ic.gc.ca/epic/internet/intrm-crt.nsf/en/rm00075e.html, retrieved July 23, 2004.

 448 “National Casting Industry Profile: Mexico.”

 449 Nemak’s foundry operations in Monterrey, NL, are ISO/TS-16949 and ISO-14001 certified, with the most

advanced casting technology available, and the firm has received prestigious supplier awards from the Big-Three

U.S. automakers. In 1990, Nemak established its research and development center focusing on metallurgy, product

engineering and design, and CAD/CAM techniques that resulted in several patents, successful launch of 35 new

aluminum-cast products in 4 years, and ability to tailor its production process to readily meet customer

specifications. “Mexico Report,” Wards’s AutoWorld, pp. 16-17.

 450 U.S. industry official, telephone interview with USITC staff, July 30, 2004.

 451 US&FCS and U.S. Department of State, “Manufacturing in Mexico,” Industry Sector Analysis, ID No.

121095, Oct. 1, 2003.

 452 The United States supplied 69 percent of all tools and dies, and nearly 64 percent of all jigs and fixtures

imported by Mexico in 2001. Other important sources were the European Union, Canada, and Japan. USITC,

“Mexico,” Tools, Dies, and Industrial Molds: Competitive Conditions in the United States and Selected Foreign

Markets, Inv. No. 332-435, publication 3556, Oct. 2002, pp. 4-21-4-23.

 453 For example, one estimate of the cost to transport heavier products into the United States from regions

beyond the U.S.-Mexico border area (e.g., from the north-central interior city of Guadalajara, JAL) is about 40-

percent higher than for transporting the same product from China. Testimony of William T. Blackerby, Jr., Chief

Operating Officer, ASC Industries, Inc., hearing transcript, p. 135.

 454 E-mail correspondence from US&FCS official, Mexico City, to USITC staff, Feb. 8, 2005.

 455 US&FCS and U.S. Department of State, “Federal Transportation Authority Work Plan for Railroad

Transportation,” International Market Insight, ID No. 124909, May 21, 2004; and “Plans to Increase Air Cargo

Transportation Through Mexican Airports,” International Market Insight, ID No. 124908, May 21, 2004.

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and industry in-house development over the past 8 to 10 years also are producing native-Mexican technicians

and managers for the foundry industry.446

Technology

Mexico’s automotive foundries are considered “high-tech” by North American standards, with some

of the newest facilities (e.g., established by Ford Motor Co. and Nissan North America Inc.) considered

among the best in the world.447 This largely reflects the extensive FDI and technology transfer by foreign

multinational corporations448 or ambitious growth strategies by Mexican-owned corporations. Automotive

components producer Nemak, considered the world’s largest aluminum foundry, reportedly invests some $20

million annually in cost-cutting, product quality improvements, product development, casting technology,

and customer service to maintain its competitive edge not only in Mexico but also worldwide.449 For the

Mexican metal foundry industry as a whole, molding machinery and equipment are generally of U.S., Italian,

or German origin,450 although there is domestic production of foundry molding boxes.451 Without much

domestic production of tooling, dies, jigs, and fixtures, these items are sourced primarily from the United

States.452

Transportation

Some U.S. industry officials considered transportation to be costly and inefficient, rendering Mexican

foundries uncompetitive with U.S. or even Chinese foundries for hauling bulk raw materials, equipment, and

cast products, particularly heavier castings.453 Surface transportation of cargo in Mexico is dominated by

commercial trucking,454 although growth in the recently privatized rail sector is anticipated to continue; by

contrast, air cargo transportation is minimal.455 However, the prevalence of toll highways and bridges drives
 456 E-mail correspondence from US&FCS official, Mexico City, to USITC staff, Feb. 8, 2005.

 457 For example, Teksid de Mexico, a joint-venture between Fiat and Grupo Quimmco to cast gray-iron and

aluminum engine blocks, is located in the northeastern industrial city of Monclova, COAH. Although this city is

linked by an air port, rail lines, and highways with other northeastern and border cities, a heavily traveled, two-lane

highway between Saltillo, COAH, and Monterrey, NL, reportedly constrains Monclova’s industrial growth potential.

US&FCS and U.S. Department of State, Commercial News USA, 1999, found at 

http://www.export.gov/autosuggest.asp?docid=9166401&links=MONCLOVA&ip=&port=&imgflg=&sumflg=Cont

extSummary&option=showcontent, retrieved July 21, 2004.

 458 See e.g., Ibid., “Agreement to Improve Logistic Links and Create Multimodal Corridors in Mexico,”

International Market Insight, ID No. 127350, Sept. 13, 2004; and “Federal Transportation Authority Work Plan for

Railroad Transportation.” The current Mexican Administration is planning for new highways to connect the Mexico

City area with major ports on both the Pacific and Caribbean Basin coasts, and highway upgrades into a six-lane

system from Mexico City northward to Nuevo Laredo, TAMPS-Laredo, TX. Ibid., “Economic Trends and Outlook,”

Country Commercial Guide FY 2004 (Aug. update)–Mexico, ID No. 126779, Aug. 12, 2004. In early Oct. 2004, the

Mexican Government announced $1.5 billion in public financing for 22 new toll highways and 2 new toll bridges.

US&FCS, “Highway Construction in Mexico,” International Market Insight, Oct. 1, 2004.

 459 US&FCS and U.S. Department of State, “Economic Trends and Outlook.”

 460 Ibid., and “Investment Climate.”

 461 “Casting Imports, What to Expect in 2003,” Modern Casting, Sept. 2002, p. 27.

 462 Office of the U.S. Trade Representative (USTR), “Mexico,” 2004 National Trade Estimate Report on

Foreign Trade Barriers, 2004, p. 328.

 463 U.S. industry-publication official, telephone interview with USITC staff, Feb. 8, 2005; and U.S. industry

official, telephone interview with USITC staff, Feb. 23, 2005.

 464 US&FCS and U.S. Department of State, “Investment Climate.”

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up truck haulage costs along major transit routes.456 Moreover, transportation between industrialized areas,

where metal foundries are located, has been constrained by the nation’s unevenly developed highway

infrastructure.457 Despite concerted efforts by the Mexican Government in recent years to coordinate and

develop the country’s multimodal transportation links,458 highway upgrades have been characterized as

varying from substantial to lagging among locales.459

Domestic Policies

Federal/Regional Programs

The Mexican Secretariat of Economy offers industrial development programs to promote output by

domestic metallurgical, mechanical, and consumer products industries,460 which would not only include metal

foundries but also downstream customers for Mexican-produced metal castings. There have not been any

reports of subsidies being paid by the Mexican Government to metal foundries, according to a 2002 U.S.

foundry industry trade publication.461

Any remaining Mexican tariffs on manufacturing inputs to the metal foundry industry (and nonagricultural imports, in general) imported from its North American trade partners, were eliminated at the

beginning of 2003, in accordance with the 10-year staged reductions set out in the North American Free Trade

Agreement (NAFTA).462 Metal foundry operations registered under the Maquiladora Program and the

Program for Temporary Imports to Produce Exports (PITEX) tend to be foreign-owned or joint-venture,

rather than indigenous firms.463 Under these programs, metal foundries benefitted from duty exemptions on

imported material inputs, capital equipment, and lubricants used in manufacturing products for export.464 To

reduce the impact of the new NAFTA-required limits to duty waivers on inputs of non-NAFTA origin for

producing goods intended for export to NAFTA partners, Mexico launched the Sectoral Promotion Programs

(PROSECs), at the beginning of 2001, for export-oriented manufacturers in 22 industry sectors (the minerals
 465 USTR, “Mexico,” p. 329.

 466 US&FCS and U.S. Department of State, “Trade Regulations and Standards,” Country Commercial Guide FY

2004 (Aug. update)–Mexico, ID No. 126784, Aug. 12, 2004.

 467 Mexico has pursued the largest network of FTAs of any country in the world, having entered into 12

agreements with Chile (agreement signed in 1992); its NAFTA partners the United States and Canada (1994); its G3 partners Colombia and Venezuela (1995); Costa Rica (1995); Bolivia (1995); Nicaragua (1998); the European

Union (2000); Israel (2000); the European Free-Trade Association members Iceland, Liechtenstein, Norway, and

Switzerland (2001); its Northern Triangle partners El Salvador, Guatemala, and Honduras (2001); Uruguay (2004),

and Japan (2005). Negotiations to liberalize bilateral trade are also ongoing with the Southern Cone Common

Market (MERCOSUR) members Argentina, Brazil, and Paraguay, as previously with MERCOSUR member

Uruguay. Mexico Secretariat of Economy, “Fechas de Publicación y Entrada en Vigor de los TLCs Suscritos por

México,” found at http://www.economia-snci.gob.mx/sic_hpp/ls23al.php?s=20&p=1&l=1, retrieved Feb. 5, 2005;

Mexico Secretariat of Economy, “Agreements and Negotiations,” found at

http://www.economia-snci.gob.mx/sic_php/ls23al.php?s=20&p=1&l=2, retrieved Feb. 5, 2005; and US&FCS and

U.S. Department of State, “Trade Regulations and Standards.”

 468 US&FCS and U.S. Department of State, “Trade Regulations and Standards.”

 469 Ibid., “Investment Climate;” and “Trade and Project Financing,” Country Commercial Guide FY 2004 (Aug.

update)–Mexico, ID No. 126789, Aug. 12, 2004.

 470 Ibid., “Trade Regulations and Standards.”

 471 U.S. industry official, telephone interview with USITC staff, Feb. 23, 2005.

 472 USTR, “Mexico,” p. 333.

 473 US&FCS and U.S. Department of State, “Economic Trends and Outlook.”

 474 Compiled from official statistics of the International Monetary Fund, series 273..WF..ZF.

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and metals sector includes metal foundries) that lowered or eliminated import duties on such non-NAFTA

origin inputs.465 However, such preferences were noted by one assessment as diminishing somewhat the

advantages of duty-free access for U.S. suppliers under NAFTA.466 Mexico’s FTA with the European Union

(EU) provides roughly similar NAFTA parity for imports of EU origin beginning in 2003. Similarly, one U.S.

source noted that under Mexico’s numerous other FTAs,467 many other third-country trade competitors also

enjoy or will enjoy NAFTA-type, duty-free access to the Mexican market.468

The 1993 Foreign Investment Law eliminated a number of non-tariff barriers to trade and investment,

including export requirements (for other than export-program participants), domestic content percentages,

and capital controls–thus allowing profits to be repatriated freely.469 However, for importation of raw

materials and capital equipment, Mexican customs laws for preparing and submitting entry documentation

are strictly enforced to the point that, reportedly, paperwork errors can result in fines or even confiscation of

goods.470 In part, given the widespread diffusion of metal casting technology, U.S. industry officials are not

aware of any reports of intellectual property (IP) piracy plaguing the Mexican foundry industry.471 Mexico

has enacted comprehensive IP rights-protection laws but official enforcement is reportedly uneven.472

Monetary/Tax Policies

Exchange rates–The peso is freely convertible on international exchange markets. Relative

production costs at Mexican foundries rose as the value of the peso appreciated relative to that of the U.S.

dollar. The Mexican economy received significant FDI in-flows during 1999-2001 which helped to render

the peso among the strongest of currencies worldwide. Subsequently, Mexico’s economic growth was

adversely affected by declining global FDI in-flows and by the economic slowdown in the United States, its

largest trade and investment partner.473 Hence, relative production costs declined at Mexican foundries as the

peso continues to depreciate relative to the dollar, as shown in the following tabulation (average annual

exchange rate in pesos per dollar):474
 475 Mexico Secretariat of Economy, “Doing Business in Mexico–Fiscal Policy,” found at

http://www.naftaworks.org/sphp_pages/canada/invierte/doing_business/fiscal_policy.htm, retrieved July 28, 2004. 

 476 US&FCS and U.S. Department of State, “Investment Climate.”

 477 Ibid., “Trade Regulations and Standards;” and “Investment Climate.”

 478 Ibid., “Investment Climate.”

 479 Ibid., “Economic Trends and Outlook.”

 480 “The Peso Crisis,” Economist, pp. 55 and 58.

 481 Compiled from official statistics of the International Monetary Fund, series 27360P..ZF.

 482 Since Citibank purchased Banamex in 2001, only one-fifth of Mexico’s banking assets remained under

Mexican ownership. US&FCS and U.S. Department of State, “Economic Trends and Outlook;” and “Investment

Climate.”

 483 Ibid., “Executive Summary,” Country Commercial Guide FY 2004 (Aug. update)–Mexico, ID No. 126777,

(continued...)

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Year Rate

1999 . . . . . . . . . . . . . 9.560

2000 . . . . . . . . . . . . . 9.456

2001 . . . . . . . . . . . . . 9.342

2002 . . . . . . . . . . . . . 9.656

2003 . . . . . . . . . . . . . 10.789

2004 (preliminary) . . 11.286

Similarly, depreciation of the peso from 2002 onward enhanced Mexico’s competitiveness as an export

platform for metal castings and downstream products.

Tax structure–Since 1986, Mexico’s taxation system has undergone significant revisions to bring

it in line with those of its major trade and investment partners.475 Most direct tax incentives have been

eliminated by the Mexican Government, other than the accelerated depreciation schedule.476 Value-added

taxes of 10 percent on imported products remaining in the U.S. border region and 15 percent on those entering

the interior may be waived for imported material inputs, capital equipment, and lubricants to manufacturers

registered with an export-manufacturing program.477 The United States has a bilateral tax treaty with Mexico

to avoid double taxation.478

Interest rates–Commercial lending rates are reportedly high in Mexico,479 albeit having declined

significantly in recent years as the current Mexican Administration maintained tighter fiscal and monetary

policies to keep current-account deficits and inflation in check:480 These rates are shown in the following

tabulation (average annual rate in percent):481

Year Rate

1999 . . . . . . . . . . . . 23.743

2000 . . . . . . . . . . . . 16.928

2001 . . . . . . . . . . . . 12.795

2002 . . . . . . . . . . . . 8.198

2003 . . . . . . . . . . . . 6.905

2004 (preliminary) . 7.222

Despite infusions of foreign capital as a result of privatization efforts in the late 1990s-early 2000s,482 and

bankruptcy and lending reforms in 2000 and 2003, the Mexican banking system is still considered

undercapitalized–consequently, domestic credit is limited and expensive.483 Hence, only the larger (about 36
 483 (...continued)

Aug. 12, 2004; and “Investment Climate.”

 484 Ibid., “Trade and Project Financing.”

 485 Ibid., “Economic Trends and Outlook;” and “Investment Climate.”

 486 SEMARNAT, “The Sustainability in the New Government,” Environmental Programs for Environmental

and Natural Resources, 2001-2006, found at http://www.semarnat.gov.mx/dgeia/web_ingles/programa/5.shtml,

retrieved Feb. 2, 2005.

 487 Official statistics of the OECD, cited in Leonard, How Structural Costs Imposed on U.S. Manufacturers

Harm Workers and Threaten Competitiveness, p. 20.

 488 Mexico Secretariat of Economy, “Doing Business in Mexico–Labor Law,” July 8, 2004, found at

http://www.naftaworks.org/sphp_pages/canada/invierte/doing_business/labor_law.htm, retrieved July 28, 2004. 

 489 U.S. Department of State, BDHR&L, “Worker Rights.”

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percent of all) Mexican firms have direct access to domestic commercial bank financing.484 Although credit

provided by development banks has expanded in recent years, small and medium-size businesses must still

rely on non-bank or foreign sources.485

Environment

According to the Secretariat of the Environment and Natural Resources (SEMARNAT), Mexico’s

larger indigenous and foreign-owned manufacturing operations (including metal foundries) generally adhere

to international environmental-protection standards, particularly export-oriented standards so as not to

endanger their products’ market-access abroad. These larger operations are easier for Mexico’s Federal

Environmental Protection Agency to monitor than the more numerous, smaller and medium-size firms, many

of which do not have the financial resources to adopt the necessary technological improvements or are not

as strictly monitored.486 Estimates of the cost of environmental compliance were not readily available for the

Mexican foundry industry, but for comparison purposes, pollution control expenditures in the late 1990s were

estimated to account for 3.1 percent of manufacturing output in Mexico, less than one-half the share in the

United States (7.6 percent).487

Worker Health and Safety

Worker health and safety in Mexican foundries are regulated by the Federal Labor Law (LFT) that

also stipulates procedures for investigating causes of and proposing remedies for on-the-job injuries and

illnesses.488 The Federal Labor Secretariat (STPS) and Social Security Institute (IMSS) jointly issue

workplace health and safety standards, whereas LFT-required joint management-labor committees can set

additional standards and have the first-line responsibility for workplace enforcement. Private workplaces are

also subject to periodic health and safety inspections by both Federal and state labor inspectors, who

exchange information on findings. Compliance with safety and health standards, according to STPS and

IMSS officials, is reasonably good at most larger firms, but more difficult to monitor at the more numerous

smaller firms; there are an insufficient numbers of inspectors for frequent inspections, despite additional

hiring and improved Federal-state coordination. Under Mexican law, individual employees reportedly

cannotbe disciplined or dismissed for removing themselves from hazardous workplace conditions. Moreover,

individual employees and unions can raise grievances with inspectors, health and safety officials, or the

Federal labor board.489
 490 Industry statistics are primarily from the “38th Census of World Casting Production–2003,” Modern Casting,

Dec. 2004, p. 25.

 491 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, prepared by the

American Institute in Taiwan, retrieved Aug. 29, 2004.

 492 “37th Census of World Casting Production–2002,” Modern Casting, Dec. 2003, p. 23; and U.S. Department of

State telegram, “Foundry Products,” message reference No. 157426, prepared by the American Institute in Taiwan,

retrieved Aug. 29, 2004.

 493 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, Aug. 2004, prepared

by the American Institute in Taiwan.

 494 “Investment Castings,” Rivendell Bicycle Works, found at

http://www.rivendellbicycles.com/html/bikes_riv12.html, retrieved Jan. 7, 2004; and Michael J. Gallagher,

“Highlights of the Global Die Casting Industry, Taiwan,” CastingTrade.com, 2001, found at

http://www.castingtrade.com, retrieved Aug. 16, 2004.

 495 Michael J. Gallagher, “Highlights of the Global Die Casting Industry, Taiwan,” CastingTrade.com, 2001,

found at http://www.castingtrade.com, retrieved Aug. 16, 2004.

 496 Ibid.

 497 CIA World Factbook, “Taiwan,” found at http://www.cia.gov/cia/publications/factbook/print/tw.html,

retrieved Jan. 5, 2005; and “Characteristics of the Taiwan Market,” EMS Consulting Co., found at

http://www.emsgc.com/english/labten.htm, retrieved Jan. 6, 2005.

9-75

Industry statistics:

• World rank (2003) -- 12th

• Production (2003) -- 1.47 million metric

tons

• No. of establishments (2002) – 894

Industry characteristics:

• Approximately 80 percent of workers in

the foundry industry are expatriates.

• Significant movement of downstream

industries overseas

Taiwan

Industry Profile490

Despite still being a large player in the international

metal casting market, Taiwan’s foundry industry has

experienced a significant decline in the number of firms

operating on the island due primarily to the movement of

downstream industries overseas.491 In 2002, there were

approximately 943 foundries operating in the country, down

from 1,600 in the 1970s.492 Approximately 84 percent of the

factories are small- and-medium sized, with a concentration in

the Taichung (Central Taiwan) area. A few foundries are

located in Taipei, the northern region of Taiwan, and in the

southern portion of Taiwan, in Kaohsiung.493

Taiwan is known as a producer of different types of castings, particularly die castings and

investment/lost wax castings.494 One trade press article estimates that about 20 percent of foundries in Taiwan

produce gravity/pressure die castings.495 Currently, the automotive, motorcycle and electronics companies

are the industry’s most important domestic customers. However, the Taiwanese die casting foundries that

supply the automobile and motorcycle segments have been moving production to other countries to be closer

to growth industries, such as motor vehicle production.496

Business Trends

Production

Due to the global economic downturn, Taiwan’s economy experienced a recession in 2001; there

were lower export orders in general and a migration of industrial investment to China during this time.497
 498 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, Aug. 2004, prepared

by the American Institute in Taiwan.

 499 Ibid.

 500 Ibid. In the overall economy, there were approximately 300,000 foreign workers in 2003, up from 3,000 in

1991. UK Trade and Investment, “Country Profile-Taiwan,” found at

https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/fareast?_nfpb=true&_pageLabel=taiwan, retrieved Jan. 7,

2005. 

9-76

Table 9-22

Taiwan foundry industry: Casting production, by metal type, 1999-2003

(1,000 metric tons)

Metal type 1999 2000 2001 2002 2003

Gray iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 849 1013 688 723 782

Ductile iron . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 141 224 275 257

Malleable iron . . . . . . . . . . . . . . . . . . . . . . . . . . 8 14 8 8 1

Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 78 61 62 69

Aluminum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 399 420 255 267 251

Copper-base . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 5 50 49 46

Zinc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 0 48 50 54

Magnesium ............................ 0 0 5 5 5

Other nonferrous ........................ (1

) (1) (1) (1) 2

 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,529 1,671 1,339 1,439 1,467

 1

 Not available.

Source: Foundry Taiwan, and several years of Modern Casting data. 

Castings production declined from almost 1.7 million metric tons in 2000 to approximately 1.3 million metric

tons in 2001, which paralleled Taiwan’s economic downturn (table 9-22). However, the foundry industry

increased production during 2002-2003.

The majority of products made by foundries in

Taiwan are gray or ductile iron, and aluminum castings. 

Production of cast iron products in 2003 accounted for just

under 71 percent of the industry’s total production and

aluminum accounted for just over 17 percent of production

(figure 9-9). This product mix was driven by demand for

gray iron castings from the machine tool industry, and for

aluminum alloy products from machine tool and vehicle

manufacturers.498 Currently, most foundries produce lowvalue components such as parts of machine tools, vehicles,

home electrical appliances, and the outer casings of

computer, communication, and consumer products. Most

production supports the domestic manufacturing industry

and component suppliers.499

Employment

Declining interest by younger Taiwan workers in joining the foundry industry has led to a high

number of expatriate workers. Taiwan industry association officials estimate that approximately 80 percent

of foundry employees are expatriates, primarily from Thailand and Indonesia.500 Further, most foundries are

Ductile 

iron

18%

Aluminum

17%

Steel

5%

Gray iron

53%

Other

4%

Copper

3%

Source: Modern Casting .

Figure 9-9

Taiwan foundry industry: 2003 production, by 

metal type (based on weight)
 501 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, prepared by the

American Institute in Taiwan, retrieved Aug. 29, 2004.

 502 The majority of information in this section is from the U.S. Department of Energy, “Taiwan Country Analysis

Brief,” July 2004, found at http://www.eia.doe.gov/emeu/cabs/taiwan.html, retrieved Oct. 25, 2004. 

 503 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, Aug. 2004, prepared

by the American Institute in Taiwan.

 504 Ibid.

 505 Ibid.

 506 U.S. Department of Energy, “Taiwan Country Analysis Brief,” July 2004, found at

http://www.eia.doe.gov/emeu/cabs/taiwan.html, retrieved Oct. 25, 2004. 

 507 Yu-min Chang, “MOEA to promote energy service companies,” found at

http://publish.gio.gov.tw/FCJ/past/05022531.html, retrieved Mar. 31, 2005.

 508 Another supplier, the Formosa Petrochemical Company (FPC) owns a refinery in Mailiao, producing a full

capacity of 450,000 barrels per day in 2002. Liquified natural gas (LNG) consumption in 2003 was approximately

287 billion cubic feet (Bcf), of which 257 Bcf was imported. 

 509 Pui-Kwan Tse, “The Mineral Industry of Taiwan,” found at

http://minerals.usgs.gov/minerals/pubs/country/2003/twmyb03.pdf, retrieved Apr. 1, 2005.

 510 Ibid.

9-77

small-to-medium sized, with the typical foundry having an average of 20 to 30 workers.501 Total employment

for the Taiwan foundry industry is unknown.

Factors of Production

Raw Materials and Energy502

Energy sector liberalization, increasing energy prices, and a lack of domestic energy sources are all

factors that affect the island’s foundry industry. One Taiwan industry official estimates that 45 percent of

production costs are from raw materials, while 35 percent of production costs are attributed to other

manufacturing503 inputs such as energy. Primary energy sources for the Taiwan foundry industry are coke

and electricity. Due to its lower cost, coke has been widely used and imported mainly from China.504

However, China’s reduction of its coke export quota in early 2004 caused coke prices to quadruple.505 

Taiwan relies heavily on energy imports, due to a lack of sufficient domestic energy sources.

According to the U.S. Department of Energy, Taiwan’s energy consumption is relatively high compared to

other developed countries due to its heavy concentration of energy-intensive manufacturing industries506 like

the foundry industry. The Government of Taiwan is involved in many major facets of the energy industry.

Reportedly, the Taiwan Government has indicated that the low cost of energy in Taiwan contributes to a lack

of energy conservation measures by many.507 The Chinese Petroleum Corporation (CPC) is Taiwan’s national

oil company and is the major supplier in the petroleum industry.508 CPC also is involved in the exploration,

production and imports of Taiwan’s natural gas sector. The dominant supplier of electricity is the Taiwan

Power Company (Taipower), a state-owned facility that the government plans to privatize by 2006. Despite

privatization, the government reportedly would maintain Taipower’s exclusive control over nuclear and

hydropower plants.

Taiwan has limited resources of the raw materials consumed by the foundry industry.509 There is no

primary aluminum production in Taiwan, and producers depend on imports of aluminum ingot and scrap.510
 511 Except as otherwise noted, the information is primarily from the U.S. Department of Commerce, Foreign

Commercial Service, Taiwan Country Commercial Guide FY2004, found at http://www.stat-usa.gov/, retrieved Oct.

8, 2004.

 512 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 513 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, Aug. 2004, prepared

by the American Institute in Taiwan.

 514 Industrial Development and Investment Center, Invest in Taiwan, “Precision Machinery, Competitive

Advantages and Market Strengths,” found at http://investintaiwan.nat.gov.tw/en/opp/precision_machinery.html,

retrieved Oct. 8, 2004.

 515 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 516 Approximately $14.5 billion at the 2003 exchange rate.

 517 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 518 Ibid.

 519 Industrial Development and Investment Center (IDIC), “Functions of the IDIC,” found at

http://www.idic.gov.tw/html/eintro-2.htm, retrieved Aug. 16, 2004.

9-78

Labor511

Workers in Taiwan are offered many of the benefits provided by companies in other countries such

as Brazil. There is usually a one-month bonus at the end of the year. Typical fringe benefits often include

meals, transportation, and dormitory housing. Employees and family members are covered by a universal

national health insurance system. Companies are required to provide a standard labor insurance program that

includes items such as retirement and maternity benefits. Under the Labor Standard Law (LSL), the typical

workweek in Taiwan consists of a standard eight-hour workday and a maximum of 84 hours biweekly.512

Labor costs are estimated to account for 20 percent of the production cost of metal castings.513

Transportation

Taiwan’s location provides a competitive advantage as a center for sea transportation and shipping

in Asia.514 Taiwan’s transportation infrastructure includes five international airports, 15 domestic airports,

and 6 international harbors. Many upgrades have been made to the highway system to improve traffic flow,

and its overall road system is considered well-developed.515 Further, the government has approved a 500

billion New Taiwan dollar (NT)516 construction program for 2004-2008 that includes several freeways and

subways in major cities.517 According to the U.S. Department of Commerce, Foreign Commercial Service,

“Taiwan’s infrastructure construction efforts have improved traffic congestion and power shortage

problems.”518

Domestic Policies

Federal/Regional Programs

Like the United States, the government in Taiwan has established agencies dedicated to assisting

business and industry in international trade. While no programs are specifically targeted for the foundry

industry, some programs may provide indirect benefits. One such agency providing program assistance is

the Industrial Development and Investment Center (IDIC) within the Ministry of Economic Affairs. The

primary function of IDIC is to promote foreign investment in Taiwan and assist domestic companies in doing

business overseas. Another important function of the IDIC is the recruitment of overseas science and

technology personnel.519 To encourage research and development (R&D) on the island, Taiwan provides duty-
 520 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 521 IDIC, “Chapter 11: Choice of Investment Locations–Industrial Estates,” found at

http://www.idic.gov.tw/content/pdf/Roc_epdf_11.pdf, retrieved Aug. 16, 2004.

 522 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 523 “Taiwan Yearbook 2004,” Taipei Times, found at

http://ecommerce.taipeitimes.com/yearbook2004/P155.htm, retrieved Mar. 31, 2005.

 524 Central Intelligence Agency, “World Factbook–Taiwan,” found at

http://www.cia.gov/cia/publications/factbook/print/tw.html, retrieved Feb. 9, 2005.

 525 The Heritage Foundation, “Taiwan,” 2004 Index of Economic Freedom, found at http://cf.heritage.org/,

retrieved Jan. 7, 2005.

 526 “KPMG’s Corporate Tax Rate Survey–January 2003,” KPMG, found at

http://www.us.kpmg.com/microsite/global_tax/ctr_survey/2003CorprorateTaxSurveyFINAL.pdf#search='korea%20

corporate%20tax%20rate%202003', retrieved Feb. 7, 2005.

 527 “Country ViewsWire Taiwan Factsheet,” Economist Intelligence Unit, Dec. 29, 2003, found at

http://www.economist.com/, retrieved Jan. 3, 2005.

9-79

free treatment for imports of equipment for R&D purposes. Low interest loans are also available for

purchases of pollution-control equipment.520

Other forms of government assistance that promote industrial development in the country are also

available. One such program, operated by the Ministry of Economic Affairs, provides preferential lease

measures for land in industrial estates. Companies that lease industrial park land are exempt from payment

of lease fees for the first two years, and years three through seven include substantial discounts from the full

leasing rates. If a company decides to purchase the land before the end of the lease, the money paid for the

lease in the prior years can be subtracted from the final purchase price.521 Ultimately, this results in a rent-free

situation, since the money is applied to the land ownership. Further, while there are currently no foreign trade

zones in Taiwan, the government plans to construct two such zones at ports in Kaohsiung and Keelung.522

Monetary/Tax Policies

Exchange and interest rates.– Although no official interest rate for lending was available at the

Central Bank of China (CBC), interest rates are generally deemed to be fairly low for borrowers such as the

foundry industry. However, despite the low interest rates, companies in all industries reportedly were hesitant

to borrow, particularly due to the economic slowdown in the country during 2001.523 In 2002, despite a slight

recovery in economic conditions, companies held a cautious attitude towards borrowing from banks and

increasingly turned to other methods of raising money, such as issuance of corporate bonds. Additionally,

the average exchange rate between the U.S. dollar and the NT increased slightly from 1999-2003, ranging

from NT 31.60 per dollar in 1999 to NT 34.42 per dollar in 2003.524

Tax structure.– A number of factors are considered when determining the effects of the country’s

tax structure on companies. Items such as the national corporate tax rate, local tax rates, financial incentives,

and special deductions can greatly impact the effect of the tax structure on the foundry industry. Currently,

Taiwan’s highest corporate tax rate is 25 percent and the top personal income tax rate is 40 percent.525

Taiwan’s corporate tax rate is lower than some nations, which may provide a slight benefit for the Taiwan

foundry industry. However, its corporate tax rate is higher than some of its neighbors, such as Hong Kong

which has a corporate tax rate of 18 percent.526 According to the Economist Intelligence Unit, “most foreigninvested firms pay corporation tax at rates of 22 percent or 25 percent.” Further, there is a value-added tax

that is approximately 5 percent.527 The Taiwan government has undertaken measures to reduce taxes in the

past few years. In early 2003, legislation provided the manufacturing sector with a “five-year tax holiday for

new investment projects and expansion projects during a two-year period from January 2002 to December
 528 USDOC, FCS, Taiwan Country Commercial Guide FY2004.

 529 U.S. Department of State telegram, “Foundry Products,” message reference No. 157426, Aug. 2004, prepared

by the American Institute in Taiwan.

 530 IDIC, “Chapter 19: Environmental Protection,” found at

http://www.idic.gov.tw/content/pdf/Roc_epdf_19_20.pdf#page=01, retrieved Aug. 16, 2004.

 531 Jia-Chen Chuo, “Proposed industrial park project offers mixed blessings,” Feb. 16, 2005, found at

http://publish.gio.gov.tw/FCJ/past/05021632.html, retrieved Mar. 21, 2005.

 532 Council for Economic Planning and Development, Executive Yuan, “Taiwan’s Economic Situation and

Outlook,” found at http://www.cepd.gov.tw, retrieved Jan. 7, 2005.

 533 Industrial Safety and Health Association, Taiwan, “Administration system for occupational safety and health

in Taiwan,” found at http://www.isha.org.tw/english/eng_3.htm, retrieved Jan. 5, 2005.

9-80

2003.” Further, tax incentives are provided for introducing new technology into Taiwan, locating companies

in lesser developed areas, reducing land value increment taxes, and facilitating R&D programs.528

Environment

Because of rapid industrialization, pollution in Taiwan has become an increasing problem, resulting

in the creation of the Environmental Protection Administration (EPA) in 1987. The foundry industry must

abide by strict standards set by the EPA. One industry official indicated that EPA inspectors do not assist the

foundry industry with suggestions for improvement and only inform companies as to whether or not they have

passed inspection.529 

Taiwan has established standards and specific legislation for controlling air, water, and noise

pollution, as well as the treatment of solid waste. Disciplinary action is taken against companies found

discharging toxic gas or polluting water. The government has also created incentives, such as providing dutyfree treatment for imports of pollution abatement equipment.530 Despite the fact that Taiwan is not a signatory

to the Kyoto Protocol, the Government had indicated that it plans to observe the agreement.531 The Council

for Economic Planning and Development in Taiwan anticipates that the implementation of the Kyoto Protocol

will impact many industries, such as the iron and steel industries, in efforts to reduce carbon dioxide

emissions.532

Worker Health and Safety533

The foundry industry in Taiwan faces health and safety inspections similar to companies located in

other countries such as the United States and Brazil. Industrial health and safety issues are under the purview

of the Council of Labor Affairs. The administrative aspects fall under two departments, the Department of

Labor Safety and Health and the Department of Labor Inspection. The Department of Labor Inspection’s

primary responsibilities are the planning and supervision of labor inspections, while local governments carry

out the actual inspections. The Department of Labor Safety is responsible for the planning and guidance of

labor safety and health strategies, and the promotion of training and education. The Institute of Occupational

Safety and Health was created in 2002 and is responsible for research about workplace-related risk factors

and how to combat them.
 1

 The coverage for each metal type varies. See ch. 1 for added detail on how the Commission's questionnaire

responses are represented by metal type.

 2

 The Commission, in consultation with the Committee on Ways and Means of the U.S. House of Representatives

and the American Foundry Society, selected 10 product groups, believed to be representative, for a detailed

competitive evaluation. See “Study Approach” section in ch. 1 for additional information on the selection process.

The 10 groups include cast products used in the following downstream products: ductile iron crankshafts/camshafts;

aluminum engine components; aluminum suspension/steering systems; gray iron motor vehicle gear boxes; copper

valves; steel valves; ductile iron bearing housings; gray iron compressor housings; gray iron pump parts; and gray

iron non-motor vehicle gear boxes. 

 3

 The purchaser questionnaires represent responses from companies buying domestic and foreign castings in each

of the 10 product groups but there is no basis to estimate the share of total castings purchases these responses

represent because benchmark data do not exist that cover the universe of purchasers.

10-1

CHAPTER 10

COMPETITIVE CONDITIONS IN THE

U.S. FOUNDRY MARKET

This chapter provides an assessment of the competitive environment that the U.S. foundry products

industry faced from 1999-2003 based on analysis in the previous chapters. This chapter provides a summary

of the condition of the U.S. foundry industry, evaluates the advantages and disadvantages of the U.S. foundry

industry compared with its major foreign competitors, and discusses the outlook for the U.S. industry. 

The Commission received producer questionnaires from 465 establishments containing extensive

quantitative and qualitative information on the U.S. foundry industry during 1999-2003. Data from the

questionnaires indicate that the responding producers account for approximately 75 percent of the industry's

production of castings.1

 An additional 463 questionnaires were received from companies reporting purchases

of castings, of which 254 indicated purchases of the 10 product groups.2

 These questionnaires were used to

identify purchaser trends in the U.S. market during 1999-2003.3

 Questionnaire responses were supplemented

by information collected through a Commission hearing, fieldwork interviews with domestic producers and

foreign competitors (including those in China, Brazil, and India), telephone discussions with domestic and

foreign industry sources, literature review, and information obtained by the Commission from other sources,

including foreign embassies and the U.S. and Foreign Commercial Service.

The U.S. foundry products industry experienced a highly competitive and changing marketplace

during 1999-2003. While the U.S. economic downturn in 2001 negatively affected demand for many cast

products, the industry also faced pressures from materials substitutions; for example, polyvinyl chloride

increasingly replaced copper for valves and fittings, and aluminum replaced iron for many automotive

applications. At the same time, many high-volume, commodity-type castings were increasingly sourced from

foreign suppliers. Concerns about product pricing increased; producers indicated that their customers,

particularly large automotive manufacturers, dictated prices and controlled contract terms in part because they

could source certain castings at lower cost offshore.

During the 5-year period, virtually all performance indicators for the foundry products industry,

including production, shipments, employment, and net sales, trended downward. Profit margins tightened

as rising raw materials, energy, and labor costs cut into decreased sales. In this environment, many firms

consolidated and closed. To stay competitive, remaining U.S. producers expanded customer services,

shortened lead times, and shifted to more complex cast products. Information reported by producers and

gathered throughout the course of this investigation suggests that the competitiveness of the industry is
 4

 For the purposes of this chapter, the iron foundry industry has been separated into gray and ductile iron

industries. The information in this section is based on producer questionnaire responses and fieldwork interviews

with domestic producers. Detailed data on production, shipments, financials, etc. for each type of metal foundry

were presented in chs. 5-8.

 5

 For more details, see chapter 7: U.S. Aluminum Foundry Industry. 

 6

 See the product group sections in chs. 5-9 for these data.

 7

 As U.S. foundries export only 7 percent of reported shipments (based on producer questionnaire responses), cast

components in these imported downstream products likely did not originate principally from U.S. suppliers.

10-2

significantly impacted by higher U.S. labor costs and a more stringent regulatory environment than its leading

competitors.

Summary of U.S. Foundry Industry Condition

The production, shipment, employment and financial condition of the rough foundry products

industry deteriorated during 1999-2003.4

 The decline in the financial performance of many foundries is

represented by the increase in firms showing operating losses across industry segments (figure 10-1).

Information collected during the course of this investigation suggests a number of factors contributed

to the decline. First, the U.S. economic slowdown during 2000 and 2001 affected the foundry industry as

demand from key market segments decreased, and there was little evidence of significant improvement in the

industry during subsequent years, except for aluminum foundries.5

Additionally, U.S. import statistics show increasing imports of downstream products containing the

foundry product groups during 1999-2003,6

 which suggests that purchases of downstream products containing

foreign metal castings replaced use of U.S. foundry products.7

Finally, downward pressure on price affected the foundry product industry’s financial condition

during 1999-2003 as it limited the ability of producers to raise prices to a level that covered the increase in

costs over the period. More than 79 percent of producers indicated that they had either reduced prices or

suppressed price increases to maintain customers. However, producers and purchasers have divergent views

on how substantially the pricing pressure affected prices over the period (table 10-1). There was a significant

disparity in the responses, as 42 percent of producers reported that their prices had decreased during

1999-2003, but only 13 percent of purchasers indicated that producers' domestic castings prices had decreased

during the period. Additionally, producers indicated that they have offered their customers other concessions

that are not reflected in the price of the castings, but that negatively affected their operating incomes, such

as providing discounts and rebates, and maintaining inventories for customers. 

Price and cost pressures for rough casting operations are illustrated by the comparison of sales unit

values with unit costs (table 10-2). The gray and ductile iron foundries are experiencing a squeeze, as sales

unit values decreased as unit costs increased. Although sales unit values increased for the steel, aluminum,

and copper foundries, the rate of increase for unit costs was greater.
10-3

Table 10-1

Domestic producers' and purchasers’ comparison of relative price changes for domestic and foreign

castings in the U.S. market, 1999-2003

(Number of responses)

Price change in U.S. market

Producer response

for U.S. castings1

Purchaser response

 for U.S. castings2

Purchaser response

for foreign castings3

Increased:

0-10 percent . . . . . . . . . . . . . . 59 137 94

11-20 percent . . . . . . . . . . . . . 42 78 38

21-30 percent . . . . . . . . . . . . . 9 27 9

31 percent or more . . . . . . . . . 1 11 1

Unspecified amount . . . . . . . . 3 17 9

Stayed the same . . . . . . . . . . . . . . . . . . 63 84 144

Decreased:

0-10 percent . . . . . . . . . . . . . . 74 40 35

11-20 percent . . . . . . . . . . . . . 36 6 10

21-30 percent 14 2 1

31 percent or more . . . . . . . . . 3 2 1

Unspecified amount ........ 0 3 1

 1

 The total number of responses was 304.

 2

 The total number of responses was 407.

 3

 The total number of responses was 343.

Source: Compiled from data submitted in response to producer and purchaser questionnaires of the U.S. International

Trade Commission.

0

10

20

30

40

50

60

Gray Ductile Steel Aluminum Copper

Percent 

1999 2003

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade Commission.

Figure 10-1

U.S. foundries: Percent of responding establishments with operating losses, by metal type, 1999 and 2003
10-4

Table 10-2 

All foundries: Selected financial results for responding U.S. producers by metal type, fiscal years 1999-2003 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Gray iron foundry industry:

Rough casting operations:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . 3,900,313 3,627,391 3,137,269 3,059,839 2,973,869

Operating income (1,000 dollars) ........ 342,597 54,154 5,117 -1,303 -162,942

Unit values (dollars per short ton):

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . 997 960 957 927 917

Cost of goods sold . . . . . . . . . . . . . . . . . . 860 895 898 875 910

Machining operations:

Net sales (1,000 dollars) ............... 471,463 469,747 488,220 489,695 520,112

Operating income (1,000 dollars) . . . . . . . . 69,260 63,817 57,850 47,573 64,394

Ductile iron foundry industry:

Rough castings operations:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . 3,860,879 3,938,956 3,577,004 3,565,761 3,586,132

Operating income (1,000 dollars) ........ 621,946 520,261 365,441 362,260 205,702

Unit values (dollars per short ton):

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . 996 971 959 942 939

Cost of goods sold . . . . . . . . . . . . . . . . . . 778 785 801 789 824

Machining operations:

Net sales (1,000 dollars) ............... 269,900 284,516 320,613 320,450 343,040

Operating income (1,000 dollars) . . . . . . . . 17,574 22,706 39,913 29,611 19,356

Steel foundry industry:

Rough casting operations:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . 1,301,629 1,352,339 1,270,047 1,119,326 1,186,315

Operating income (1,000 dollars) ........ 116,226 110,329 49,159 33,988 53,154

Unit values (dollars per short ton):

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . 2,215 2,611 2,563 2,417 2,358

Cost of goods sold . . . . . . . . . . . . . . . . . . 1,798 2,127 2,186 2,076 2,013

Machining operations:

Net sales (1,000 dollars) ............... 822,876 761,990 696,892 668,391 786,256

Operating income (1,000 dollars) ........ 123,714 81,117 66,181 77,273 87,563

Aluminum foundry industry:

Rough casting operations:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . 3,999,485 4,651,149 4,490,857 5,031,837 5,187,109

Operating income (1,000 dollars) ........ 255,812 267,107 77,610 211,581 286,921

Unit value (dollars per short ton):

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . 3,854 4,022 4,319 4,189 4,251

Cost of goods sold . . . . . . . . . . . . . . . . . . 3,412 3,581 4,010 3,820 3,824

Machining operations:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . 2,397,938 2,684,394 2,378,836 2,687,200 2,588,568

Operating income (1,000 dollars) ........ 298,655 285,594 224,391 265,259 180,768

Copper foundry industry:

Rough casting operations:

Net sales (1,000 dollars) ............... 368,032 378,422 364,312 394,957 376,711

Operating income (1,000 dollars) . . . . . . . . 45,377 37,437 28,956 43,935 42,977

Unit value (dollars per short ton):

Net sales . . . . . . . . . . . . . . . . . . . . . . . . . 4,542 4,644 4,871 5,178 5,123

Cost of goods sold . . . . . . . . . . . . . . . . . . 3,494 3,700 3,969 4,065 4,031

Machining operations:

Net sales (1,000 dollars) ............... 313,478 323,364 309,271 303,858 304,902

Operating income (1,000 dollars) . . . . . . . . 29,924 29,492 29,212 21,303 17,996 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Note.–Calculations based on unrounded data.

Source: Complied from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
 8

 For example, production of gray iron castings in key competitor countries was 87 percent of total production in

Brazil, 60 percent in China, 70 percent in India. 

 9

 The information in this section is based on producer and purchaser questionnaire responses.

10-5

Gray iron experienced the greatest decline of any product segment. Financial conditions in the rough

castings segment deteriorated to the extent that operating losses occurred in 2002 and 2003, although

conditions improved for machining operations in 2003. Gray iron was the segment most affected by the

movement of production of high-volume commodity type castings offshore as many of the key competitor

countries dominate this segment of the market.8

 Additionally, gray iron was affected by the shift to aluminum

in automotive applications. 

The gray and ductile iron foundry industries reported increased sales of machined castings from

1999-2003, in contrast to the downward trend in rough casting sales for those metal types (see table 10-2).

These foundries report that they have been expanding their machining operations to add more value to their

products and improve profitability. There were no operating losses during 1999-2003 for the gray iron

foundries’ machining operations, in contrast to their rough casting operations.

 The financial results for the 10 product groups covered in this report mirror the results for the metal

type foundries (table 10-3). Sales and operating incomes have declined for most product groups. Ductile iron

crankshaft/camshaft castings experienced the largest decline, mostly as a result of substitution of forged steel

shafts by automobile producers. Sales for the aluminum product groups have increased substantially, largely

reflecting aluminum substitution in the automobile industry. The number of establishments reporting

operating income losses increased for all product groups except steel valve castings during 1999-2003.

Competitive Comparisons9

In assessing whether domestic or foreign producers have the advantage among various factors of

competition, U.S. producer respondents overwhelmingly consider foundries in developing countries as having

an advantage in overall competitiveness (table 10-4). Far fewer cited developed country producers as having

an overall competitive advantage. These results also reflect the concern over competition from low-cost

producers expressed by foundry industry officials and are consistent with hearing testimony and results of

fieldwork and telephone interviews. According to responding U.S. producers, the producers providing the

principal competition in the U.S. market are from China, Mexico, India, Korea, and Brazil. U.S. producers

reported that the developing-country producers’ advantage is mainly attributed to their low U.S. market

prices, labor costs, level of enforcement of environmental regulations, and less onerous worker health and

safety regulations. However, significant competitive advantages accruing to foreign producers in developing

countries also were reported to include export, tax, import, exchange rate, and investment policies. The

perceived exchange-rate advantage for China, however, was noted as a particularly significant concern by

U.S. producers. In contrast, U.S. producers considered themselves as having clear advantages compared with

developing country competitors in transportation costs, lead times, and technical services, although domestic

purchasers considered technical support/service as only a minor advantage for U.S. producers (table 10-5).
10-6

Table 10-3

Product groups: Selected financial results for responding U.S. producers for their rough casting operations,

fiscal years 1999-2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Item 1999 2000 2001 2002 2003

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Ductile iron crankshaft/camshaft castings:

Net sales (1,000 dollars) ................. 585,022 483,583 318,689 353,652 342,569

Operating income index1 . . . . . . . . . . . . . . . . . 100 74 35 46 47

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 0 1112

Gray iron motor vehicle gear box castings:

Net sales (1,000 dollars) ................. 601,452 593,990 488,242 548,670 572,243

Operating income index1 . . . . . . . . . . . . . . . . . 100 102 68 75 69

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 4 3798

Ductile iron bearing housing castings:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . . . 10,596 18,061 12,939 15,341 12,196

Operating income index1 . . . . . . . . . . . . . . . . . 100 92 15 54 (2

)

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 2 1124

Gray iron compressor housing castings:

Net sales (1,000 dollars) ................. 150,746 151,590 137,348 119,167 117,636

Operating income index1 . . . . . . . . . . . . . . . . . 100 107 42 5 2

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 5 5 9 12 12

Gray iron pump castings:

Net sales (1,000 dollars) . . . . . . . . . . . . . . . . . 98,108 110,800 92,397 85,299 82,191

Operating income index1 . . . . . . . . . . . . . . . . . 100 96 49 50 35

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 8 7 13 15 18

Gray iron non-motor vehicle gear box castings:

Net sales (1,000 dollars) ................. 103,653 115,375 108,638 92,342 94,912

Operating income index1 . . . . . . . . . . . . . . . . . 100 123 65 79 59

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 6 5 10 10 13

Steel valve castings:

Net sales (1,000 dollars) ................. 151,613 172,818 154,797 154,034 158,718

Operating income index1 . . . . . . . . . . . . . . . . . 100 207 155 121 135

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 2 1132

Aluminum engine component castings:

Net sales (1,000 dollars) ................. 744,355 1,031,054 849,784 994,923 1,055,376

Operating income index1 . . . . . . . . . . . . . . . . . 100 116 1 122 137

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 3 4898

Aluminum suspension/steering part castings:

Net sales (1,000 dollars) ................. 643,483 722,869 737,651 878,692 848,961

Operating income index1 . . . . . . . . . . . . . . . . . 100 88 (2

) 105 109

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 4 5 10 5 6

Copper valve castings:

Net sales (1,000 dollars) ................. 197,629 202,355 192,918 205,162 195,694

Operating income index1 . . . . . . . . . . . . . . . . . 100 87 53 85 94

Establishments reporting operating income

losses (number) . . . . . . . . . . . . . . . . . . . . . . 1 1312 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

 1 Operating income for product groups is expressed as an index for this table for purposes of comparison.

 2

 Operating income is less than zero.

Note.–See chs. 5-8 for additional financial results.

Source: Complied from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
10-7

Table 10-4

Domestic producers’ comparison of the factors of competition

(Number of responses)

1

Compared with developing

countries, advantage goes to:

Compared with developed

countries, advantage goes to:

Factor of competition

Total

responses

U.S.

producer 

Foreign

producer Neither

U.S.

producer

Foreign

producer Neither

Overall competitiveness . . . . . . . . 1,107 38 817 101 12 59 80

Cost of raw materials . . . . . . . . . . 986 154 259 435 18 18 102

Availability of materials . . . . . . . . . 955 197 143 481 23 11 100

Energy costs . . . . . . . . . . . . . . . . . 856 147 431 154 37 31 56

Labor costs . . . . . . . . . . . . . . . . . . 1,130 12 958 16 24 61 59

Transportation to U.S. 

 customer . . . . . . . . . . . . . . . . . 1,075 739 56 130 99 6 45

Level of technology . . . . . . . . . . . . 1,024 433 54 393 16 27 101

Environmental regulations . . . . . . 1,066 14 886 29 12 41 84

Investment policies . . . . . . . . . . . . 688 37 466 87 6 37 55

Tax policies . . . . . . . . . . . . . . . . . . 711 19 544 52 19 35 42

Loan guarantees . . . . . . . . . . . . . . 550 29 353 91 10 24 43

Government R&D support . . . . . . 651 36 425 97 8 45 40

Import policies . . . . . . . . . . . . . . . . 717 35 493 89 8 45 47

Export policies . . . . . . . . . . . . . . . 757 19 552 90 8 44 44

Castings price in U.S. market . . . . 1,077 22 835 76 17 74 53

Castings quality . . . . . . . . . . . . . . 1,071 464 34 430 22 14 107

Lead time to serve U.S. 

 customers . . . . . . . . . . . . . . . . 1,060 690 60 166 67 14 63

Exchange rates . . . . . . . . . . . . . . . 784 49 480 133 29 62 31

Technical advice and service 

 to U.S. customer . . . . . . . . . . . 963 636 41 151 43 19 73

Worker health and safety

 regulations . . . . . . . . . . . . . . . . 998 46 797 30 9 41 75

 1

The bold underlined figures noting the number of responses, such as 817, highlight meaningful distinctions

discussed in the text for the referenced tables.

Note.–The number of establishments responding was 389. Most of these respondents rated 2 or more countries. 

Developing countries include China, India, Indonesia, Korea, Mexico, Taiwan, Thailand, Turkey, Vietnam, and South

American and Eastern European countries. Developed countries include Australia, Canada, Japan, and Western

European countries.

Source: Compiled from data submitted in response to producer questionnaires of the U.S. International Trade

Commission.
10-8

Table 10-5 

Domestic purchasers’ assessment of factors of competition between U.S. and foreign foundry products

producers

(Number of responses)

1

Factor

U.S. producers have: Neither

has

advantage

Foreign producers have: Do

not

know

 Major

advantage

 Minor

advantage

 Minor

advantage

 Major

advantage

Compared with developing countries:

Purchase price (delivered) . . . . . 2 15 9 93 315 18

Product availability . . . . . . . . . . . 73 120 177 25 35 20

Lead time . . . . . . . . . . . . . . . . . . 116 113 139 51 22 15

Delivery time . . . . . . . . . . . . . . . 242 118 49 15 6 17

Discount offered . . . . . . . . . . . . 7 12 297 29 31 60

Minimum order size . . . . . . . . . . 52 92 208 52 19 19

Product quality .............. 15 118 243 35 17 17

Product design . . . . . . . . . . . . . . 28 61 297 14 5 36

Range or variety of products . . . 31 68 266 33 12 35

Reliability of supply .......... 44 175 173 28 7 20

Payment terms . . . . . . . . . . . . . 36 65 264 38 23 20

Warranty terms . . . . . . . . . . . . . 13 44 330 8 3 40

Technical support/service ..... 64 182 156 13 5 25

Transportation costs . . . . . . . . . 185 177 43 12 5 15

Packaging . . . . . . . . . . . . . . . . . 25 69 287 24 5 16

Compared with developed countries:

Price (delivered) . . . . . . . . . . . . 6 38 59 54 37 15

Product availability . . . . . . . . . . . 17 48 101 15 16 12

Lead time . . . . . . . . . . . . . . . . . . 39 53 91 10 6 12

Delivery time . . . . . . . . . . . . . . . 83 65 41 4 5 11

Discount offered . . . . . . . . . . . . 2 6 159 8 5 25

Minimum order size . . . . . . . . . . 7 36 124 13 4 19

Product quality . . . . . . . . . . . . . . 4 13 145 20 14 11

Product design . . . . . . . . . . . . . . 3 12 138 23 12 18

Range or variety of products . . . 4 30 124 19 14 17

Reliability of supply . . . . . . . . . . 8 55 113 17 6 10

Payment terms . . . . . . . . . . . . . 10 22 137 13 9 12

Warranty terms . . . . . . . . . . . . . 2 13 169 5 3 14

Technical support/service . . . . . 11 52 99 18 13 12

Transportation . . . . . . . . . . . . . . 83 84 28 3 1 9

Packaging . . . . . . . . . . . . . . . . . 14 31 141 2 1 10

 1

 The bold underlined figures noting the number of responses, such as 242, highlight meaningful distinctions

discussed in the text for the referenced tables.

Note.–Developing countries include China, India, Indonesia, Korea, Mexico, Taiwan, Thailand, Turkey, Vietnam, and 

South American and Eastern European countries. Developed countries include Australia, Canada, Japan, and

Western European countries. 

Source: Compiled from data submitted in response to Commission Purchaser questionnaires.
 10 Representative products covering each of the four metal types–iron, steel, aluminum, and copper–are specified

in chs. 5-8.

10-9

Domestic producers ranked price, product quality, and delivery time as the three most important

factors affecting their ability to compete with other domestic producers and foreign producers (table 10-6).

Domestic purchasers also ranked these factors as most important when purchasing from domestic or foreign

foundries. However, in contrast to domestic producers who ranked price highest, domestic purchasers ranked

product quality as the most important factor in their purchasing decisions for both domestic and foreign

castings. This is consistent with interviews by USITC staff with certain purchasers who indicated the

importance of quality over price. However, this viewpoint likely depends on the casting application–the more

critical the part (e.g., a brake component), the more important quality is relative to price. Additionally, many

purchasers indicated that for simple or commodity-type castings, the quality of leading competitor countries

is most often the same. 

Domestic purchasers also assessed the relative advantages among domestic and foreign producers

(both in developing or developed countries), reporting that none held a distinct advantage in most of the

factors (see table 10-5). However, U.S. producers were considered by purchasers to have a clear major

advantage among developing country competitors in delivery time, which also was ranked in the top-five

factors that purchasers considered most important. The price of castings was reported by purchaser

respondents as by far the major and only measurable advantage for foreign, developing-country producers,

which is consistent with all other information gathered in this investigation. 

Transportation costs were considered by purchasers as either a major or minor advantage of U.S.

producers compared with both developing and developed country foundry competitors (see table 10-5).

Although many purchasers assessed U.S. producers as having at least a minor advantage in technical support

and services, reliability of supply, and product quality, more than one-half to nearly twice as many other

purchasers considered neither U.S. nor foreign producers as having an advantage in any of these three

competitive factors. However, based on producer questionnaire responses, telephone interviews, and

fieldwork by Commission staff, producers indicated a clear U.S. advantage in each of these factors.

The following sections compare and contrast competitive advantages based on these producer and

purchaser questionnaire responses, and provide supplemental information supporting the assessment

conferring an existing competitive edge to foreign or domestic producers.

Competitive Advantages for Foreign Producers

Pricing

The increasing pressure by customers for lower prices has made price an overwhelming competitive

factor in the foundry industry. Purchasers indicate that although quality is often a primary consideration,

given a comparable level of quality (which most foundries have), price is the determining factor. Both U.S.

producers and purchasers indicated that the lower purchase price was an advantage for foreign producers (see

tables 10-5 and 10-6). The Commission measured relative prices by gathering pricing data for 10 product

groups (table 10-7).10 These data indicate that foreign casting price levels for the major competing countries

in the U.S. market are substantially less than U.S. prices, for both rough and machined castings. Additionally,

purchasers noted that in some cases machined castings could be purchased from foreign sources for about the

same price as domestically-produced rough castings. 
10-10

Table 10-6

Domestic producers’ assessment of factors of competition considered most important when competing

against U.S. and foreign foundries, and domestic purchasers' assessment when purchasing domestic and

foreign castings

(Number of responses)

1

Domestic producers' assessment2 Domestic purchasers' assessment3

Factor Ranked 1 Ranked 2 Ranked 3 Ranked 1 Ranked 2 Ranked 3

Competing against/purchasing

from U.S. foundries:

1

Price . . . . . . . . . . . . . . . . . . 313 58 39 113 175 94

Delivery time . . . . . . . . . . . . 33 105 188 26 66 200

Product quality . . . . . . . . . . . 65 213 90 241 117 31

Competing against/purchasing

from foreign foundries:

2

Price . . . . . . . . . . . . . . . . . . 355 21 10 102 151 67

Delivery time . . . . . . . . . . . . 18 103 149 13 51 153

Product quality . . . . . . . . . . . 23 173 85 197 93 30

 1

 The bold underlined figures noting the number of responses, such as 313, highlight meaningful distinctions

discussed in the text for the referenced tables.

 2 A total of 424 establishments responded when making comparison to other U.S. foundries. A total of 396

establishments responded when making comparison to foreign foundries.

 3

 A total of 404 purchasers responded in case of purchasing from U.S. foundries. A total of 404 purchasers

responded in case of purchasing from foreign foundries.

Note.–A small number of respondents gave two or more factors the same ranking. Only the top 3 rankings are shown

on this table. For complete ranking, see ch. 3.

Source: Compiled from data submitted in response to Commission producer and purchaser questionnaires.
10-11

Table 10-7

Domestic producers' and purchasers’ assessment of relative price levels of castings in the U.S. market for all

product groups, 1999-20031

Casting type/country

U.S. producers’

responses

Domestic purchasers' 

responses

Price level

relative to U.S.

producers' price

Number of

responses

Average

percent

difference

Number of

responses

Average

percent

difference

Rough castings:

China . . . . . . . . . . . . . . . . . . Higher 0 (2

) 1 10

Lower 67 28 22 27

Same 1 (2

) 3(2)

Mexico . . . . . . . . . . . . . . . . . Higher 0 (2

) 15

Lower 5 38 14 18

Same 0 (2

) 2(2)

Brazil . . . . . . . . . . . . . . . . . . Higher 0 (2

) 0(2)

Lower 35 26 6 20

Same 0 (2

) 4(2)

India . . . . . . . . . . . . . . . . . . . Higher 0 (2

) 0(2)

Lower 5 32 7 32

Same 0 (2

) 0(2)

Korea . . . . . . . . . . . . . . . . . . Higher 0 (2

) 0(2)

Lower 2 (3

) 11 12

Same 0 (2

) 1(2)

Machined castings:

China . . . . . . . . . . . . . . . . . . Higher 0 (2

) 1 10

Lower 24 34 85 33

Same 0 (2

) 6(2)

Mexico . . . . . . . . . . . . . . . . . Higher 0 (2

) 1 20

Lower 4 17 21 14

Same 0 (2

) 5(2)

Brazil . . . . . . . . . . . . . . . . . . Higher 0 (2

) 1 10

Lower 7 25 17 15

Same 0 (2

) 2(2)

India . . . . . . . . . . . . . . . . . . . Higher 0 (2

) 2 23

Lower 2 60 29 34

Same 0 (2

) 1(2)

Korea . . . . . . . . . . . . . . . . . . Higher 0 (2

) 0(2)

Lower 1 20 20 16

Same 0 (2

) 0(2)

 1

 Table presents an aggregate compilation for the 10 product groups

 2

 Not applicable.

 3

 Amount not specified.

Source: Compiled from data submitted in response to producer and purchaser questionnaires of the U.S. International

Trade Commission.
 11 For U.S. foundry workers, the average wage is almost $19 per hour based on questionnaire responses. This

compares, for example, with foundry workers that earn approximately $2 to $3 per hour in the eastern region of

China, less than $1 per hour in the western regions of China, $4.60 an hour in Brazil, and $1 to $3 for an 8-hour day

in India.

 12 For example, the Chinese Foundry Association asserts that overall Chinese foundry productivity is one-fifth of

U.S. productivity (although the productivity of the foreign-invested foundries is likely better than the overall Chinese

productivity). Fieldwork interviews also indicate that Indian productivity is lower than any other country with whch

they compete. 

 13 These costs add approximately $6 per hour to U.S. wages, $1.00-$1.50 per hour to eastern Chinese wages, and

$1 per day to Indian wages. Brazil's foundry workers also receive extensive benefits, but their cost is not readily

available.

10-12

Labor Costs

Foundries in developing countries are reported to have a substantial labor cost advantage (figure 10-

2).11 Although this factor may be mitigated slightly by lower productivity in some competitor countries,12 the

competitive advantage accruing to foreign foundries resulting from the difference in wage rates is further

compounded by other costs, including health benefits and pension costs, that are often higher for U.S.

foundries than for their foreign competitors.13 

Managing labor costs, one of the largest cost component for U.S. foundries, has been problematic.

For example, total employee costs for all respondents increased by 6 percent, whereas the total number of

employees has declined by 12 percent during 1999-2003. Not only have wages increased by over $2 per

hour, but there has been a significant rise in workers compensation costs and health benefit costs. Workers

compensation costs reportedly have increased because of concern over exposure to materials detrimental to

employee health, such as silica dust in the air or lead in the copper castings. Increases in health benefits costs

correspond to growth in these costs for the United States as a whole. 

100

88

47

27

12 11 8

2

United States Canada Korea Taiwan Brazil Mexico China India

0

20

40

60

80

100

Source: Compiled from U.S. Bureau of Labor Statistics for all countries except China and India. Index for

China and India estimated by the Commission based on reported foundry wages as compared with U.S.

foundry wages.

Figure 10-2

Indexes of hourly compensation costs for production workers in manufacturing, 2003
 14 Employees contribute 8 percent of their monthly salary to the Unemployment Guarantee Fund (FGTS), with

matching funds provided by the employer. If an employee is dismissed, the employer must contribute an additional

40 percent of the amount accrued in the FGTS fund as a severance for the dismissed employee. 

 15 U.S. Department of State, Bureau of Democracy, Human Rights, and Labor, Country Report on Human Rights

Practices-2003, Feb. 25, 2004, found at http://www.state.gov/g/drl/rls/hrrpt/2003, retrieved Mar. 18, 2005.

 16 Chinese industry official, interview by USTIC staff, Jan. 2005.

 17 For example, in Alabama, peak-hour costs can be as high as 14 cents per kwh, but only 2 cents per kwh during

off-hours. 

10-13

National laws regarding the dismissal of employees may partially offset the disparity in total labor

costs; staffing flexibility in some countries reportedly may be more regulated and impose higher costs. In

China, state-owned foundries essentially cannot layoff or fire employees, according to interviews with

Chinese foundry officials. Whether these employees are working or not, the foundry must continue to pay

their wages until retirement age. According to fieldwork interviews, dismissing a permanent employee in

Brazil unless there is a good cause is considered difficult and incurs a financial penalty.14

Environmental Regulations

U.S. producers reported that environmentally related capital expenditures averaged over 5 percent

of operating income per year during 1999-2003, reaching a peak of 11 percent in 2003. Costs to maintain

equipment, monitor factory environment, and maintain records add to operating costs, although no figures

are available to document the magnitude of such costs. Fieldwork interviews in China, Brazil, and India

indicated that these countries have environmental regulations that are consistent with world standards. The

key difference appears to be enforcement, which reportedly is often lax. However, foundries in both China

and India find it increasingly difficult to operate in certain urban and residential areas where they were

originally established, due to opposition of local authorities. This is especially prevalent in the Shanghai area,

which has historically been a major foundry region. Foundries in this city are closely monitored and are fined

for environmental violations. Many foundries in China and India are relocating their operations outside urban

areas, reflecting some level of environmental enforcement.

Worker Health and Safety Regulations

Worker safety laws in the United States are reported by producer respondents as being extensive,

frequently expanded and tightened, and stringently enforced by the U.S. Occupational Health and Safety

Administration. For example, dust is typically a significant problem and foundries must invest in dust

collecting systems. Little comprehensive information on foundry worker safety is available for the foreign

industries under study. Similar to environmental regulations, laws are in place to protect the safety of

employees but enforcement is reportedly inconsistent. The U.S. Department of State reports that Brazil,

China, and India have high rates of industrial accidents and death, attributable to poor enforcement of health

and safety regulations.15 In China, the level of safety in some cases depends on the ownership structure of

an enterprise, according to an industry source. Foreign-invested enterprises are expected to abide by safety

rules comparable to world standards, with lower expectations for state-owned foundries.16 

Energy

Nearly two-thirds of responding U.S. producers consider foreign producers to have an advantage with

regard to energy costs. Although U.S. prices can fluctuate depending on the time of day and area of the

country,17 average U.S. electricity costs were roughly 4-5 cents per kilowatt-hour (kwh) for industrial

customers during 1999-2003. Most of Brazil's electrical energy is supplied by hydroelectric plants and prices
 18 Brazilian industry official, interview with USITC staff, Brazil, Nov. 2004.

10-14

are considered to be the world’s lowest.18 According to fieldwork interviews, Chinese electricity costs are

5-7 cents per kwh, slightly higher than the average U.S. cost. Based on fieldwork interviews, energy costs

in India are higher than in competing nations because the industrial sector has grown faster than the ability

of the Indian Government to supply energy and there are no private providers. 

A current data series showing natural gas prices in domestic and foreign markets is not available. No

known price series exist that compare domestic and foreign metallurgical coke prices.

The cost advantages of energy in many foreign countries may be offset by uncertainties over supply.

In China, for example, electrical generating capacity is insufficient and in urban areas electricity curtailments

can disrupt foundry operations. Brazil’s electrical energy supply remains vulnerable to disruption because

of dependence on sufficient rainfall to power hydroelectric facilities and a lack of investment in powergeneration and distribution systems.

VAT Rebates

The treatment of value-added taxes (VATs) benefits the foundry industry in many key developing

countries and was cited as a concern by many U.S. producers. In China and Brazil, for example, foundries

are subject to payment of a VAT on the castings they produce but a portion of this tax is remitted if the

product is exported. Foundries in China also are subject to payment of a VAT on imported input purchases;

this tax also can be remitted when such inputs are used in downstream products that are exported. In India,

foundries qualify for import tariff refunds on any imported inputs used to make castings.

Competitive Advantages for Domestic Producers

Lead Times

Lead times are an advantage for the domestic foundry industry, according to both U.S. producers and

purchasers. Responses to producer questionnaires indicate that the U.S. foundry industry has reduced average

lead times during 1999-2003 by more than 30 percent for castings with an existing pattern, and more than 10

percent for castings that require a pattern to be made. Comprehensive data for lead-time improvement by

developing countries is not readily available. During fieldwork, several large foreign foundries indicated they

have established sales and technical support operations in the United States that also help them reduce lead

times. Certain foreign companies have established warehouses in the United States to decrease lead times

for their U.S. customers. 

The U.S. lead-time advantage is likely eroding to some extent because electronic communication of

product designs and integrated computer systems can transform a design into a pattern quickly on automated,

computer-controlled machines. The time to develop product designs is also improving for the same reasons,

as rapid prototyping can be aided by electronic communication. Some Chinese foundries also have these

capabilities.

Transportation

Transportation costs are also an advantage for U.S. producers, according to purchasers. Because

many customers request specific delivery dates in a short time frame, reliability of transportation can be
 19 Producers reported shipping times from China of up to 4 weeks. One source indicated that ocean shipping

costs for transporting products from China to the United States are $2,500 to $3,000 per container. They further

claim that this adds $1.10 to a $12 casting, compared with only $0.30 for transporting a comparable Mexican casting

to the United States. Mitchell Quint and Dermot Shorten, “The China Syndrome,” found at

http://www.strategy-business.com/resiliencereport, retrieved May 2, 2005.

 20 U.S. industry officials, interviews by USITC staff, United States, Mar. 2005.

10-15

important in retaining customers. Freight time and cost from Asia can be prohibitive19 whereas some

suppliers in closer proximity, such as in Brazil and Mexico, often face problems associated with their

inadequate transportation infrastructure. Additionally, owing to the size and weight of certain cast products,

freight costs can make imports less competitive. For example, even though certain foreign producers may

have a cost advantage when producing items such as cast steel railcar wheels, U.S. producers presently have

a slight advantage in the domestic market for that product as they can be difficult to ship. In many cases, U.S.

foundries were established near their major customers; many are in Midwestern states near motor vehicle

production plants. However, as downstream customers move offshore this traditional advantage may be

eroded. Conversely, transportation-related advantages can benefit foreign foundries with access to captive

raw material, such as bauxite in China and pig iron in Brazil.

Technical Advice and Services

U.S. producers claim these services give them an important competitive advantage over foreign

foundries.20 The majority of U.S. purchasers considered U.S. producers to have a minor advantage at best

in this factor, but only a slightly smaller number consider that neither domestic nor foreign producers have

an advantage. The increasing sophistication of foreign producers, especially the foreign-invested foundries

in China, is likely contributing to a declining U.S. advantage for these services. In addition, standard software

that can simulate metal solidification and other computer-aided techniques to improve designs is available

universally. Largely because of the to the U.S. advantage in technical design, advice and services, purchasers

indicated that U.S. producers excel at complex castings. 

Competitive Concerns for Both Foreign and Domestic Producers

Raw Materials

The Commission found that with few exceptions, U.S. and foreign foundries purchase similar metallic

raw materials. These metals trade on world markets and tend to have equivalent prices. Robust demand by

the Chinese manufacturing sector has led to significant price increases for many raw materials for foundries.

Less-profitable U.S. foundries were especially impacted by these price increases. Additionally, demand from

China may have reduced availability of scrap in the U.S. market.

 Regional differences do exist for material costs, reflecting local market conditions and transportation

costs. For example, foundries in Brazil have local access to pig iron, and although these foundries pay the

world price for pig iron, their transportation costs are much lower because they only pay for internal shipping.

Brazil is also a leading world producer of aluminum, because of the high quality of its local bauxite ore,

giving them a similar transportation cost advantage. In contrast, much of the metallic raw materials used by

Indian and Mexican foundries must be imported and transportation costs can add to the cost of the raw

material. Western Chinese foundries have a raw material advantage because prices of local supplies of scrap

and coal are lower than world market prices, and there are lower transportation costs because these materials

are available locally. However, some of the price advantage is offset by higher inland transportation costs

for their castings and lower quality raw materials.
 21 For example, the U.S. industry’s greater experience in process control has allowed production of castings that

more easily meet the automobile industry’s rigid quality requirements than foreign castings, with fewer costly

rejects.

10-16

Product Quality

According to both purchasers and producers, at one time, U.S. foundries had a clear advantage in this

area, but foreign foundries have improved their product quality resulting in fewer defective products.

Additionally, determining who has an advantage in product quality largely depends on the type of castings

the customer requires. Purchasers indicated that the U.S. has a clear advantage in specialty castings which

require more complex designs, closer tolerances, and tighter material specifications.21 U.S. foundries were

also cited by responding U.S. purchasers as manufacturing with a low defect (rejection) rate. 

Concerns over product quality also depend on the castings’ country of origin. Both producers and

purchasers indicated that the Chinese do not produce castings at the same level of quality as those produced

in the United States. However, Brazil and Mexico consistently provide castings, particularly of gray iron,

that are of similar quality to those produced in the United States.

Labor Availability

Labor availability is an issue for both domestic and foreign foundries. Attracting production workers

is problematic because foundries tend to be dirty, noisy places, and wages are not typically high enough to

compensate. This is the situation, for example, in parts of China (especially near the major eastern cities) and

in India because there are many other employment opportunities in both countries. The availability of

technically trained personnel is also a problem in Brazil, China, and India because of competition with higherpaying industries. Industry officials noted that Brazil lacked sufficient educational opportunities in

metallurgy, and the industry is encouraging schools to offer more metallurgical courses.

Technology

Technology transfer has tended to erode any historical U.S. technological advantage. U.S. producers'

opinions are split as to the level of technology used in domestic and foreign foundries, with roughly one-half

giving the U.S. an advantage and slightly less than one-half giving neither an advantage (see table 10-4).

Some of this ambiguity may be related to the basis of comparison. For example, according to the Chinese

Foundry Association, the Chinese industry as a whole has a low level of technology, but certain Chinese

foundries have state-of-the art technology that meets or even exceeds that used in any U.S. foundry. Certain

Brazilian foundries also use the latest technology. 

Any improvements in foundry manufacturing processes can be quickly adopted by foundries in any

country. Foundry equipment is available worldwide and countries such as China typically import machinery

from Japan, Taiwan, the European Union, and the United States. Foreign direct investment in developing

country industries has substantially contributed to technology adoption, especially in China. Many foreign

investors operate foundries in their own countries, and transfer personnel to developing countries to bring in

operating expertise.
 22 Testimony by James Mallory, Non-Ferrous Founders' Society; George Boyd, Goldens' Foundry and Machine;

Michael Kerwin, Georgetown Economic Consulting Services; and William Blackerby, ASC Industries, hearing

transcript pp. 12, 24, 71, and 80, respectively. 

 23 Prehearing submission of ASC Industries, Oct. 12, 2004, pp. 8-10.

 24 Based on 424 responses to the Commission's producer questionnaire. 

10-17

Exchange Rates

Although U.S. producers cite exchange rates as an advantage for foreign producers, fluctuations in

the value of the dollar make the competitive advantage unclear (figure 10-3). Divergent views exist relating

to the impact of China’s fixed exchange rate regime, and the economic effects of allowing the yuan to float

relative to the U.S. dollar. U.S. producer questionnaire responses, hearing testimony, and interviews indicate

that U.S. producers consider the fixed exchange rate an advantage for Chinese foundries selling castings in

the U.S. market. Four of the representatives of the foundry industry that appeared at the Commission hearing

stated that the rate at which the Chinese currency is currently pegged to the U.S. dollar has had a negative

effect on the competitiveness of the domestic foundry industry, even as the dollar has weakened relative to

other currencies.22 One representative, though, testified that the view that a floating Chinese exchange rate

will have a large effect is misguided because, for example, the Chinese currency cannot be used for

international transactions, only domestic purchases, and Chinese manufacturers face the same currency

fluctuations as domestic manufacturers when buying equipment or raw materials from third countries.23

Outlook for the U.S. Foundry Products Industry

With rising labor and raw material costs, greater price pressure, and declining profitability, the U.S.

foundry industry faces a difficult competitive environment. The domestic industry anticipates numerous

competitive challenges from factors in addition to imports during the next five years, as shown in the

following tabulation:24

Number of

Factor cited by U.S. producers responses

Healthcare/insurance/labor costs . . . . . . . . . . . . . 395

Customers moving or sourcing offshore . . . . . . . 328

Meeting environmental/labor regulations . . . . . . . 263

Lack of skilled labor . . . . . . . . . . . . . . . . . . . . . . . 187

Funds to invest in new technology/equipment . . . 187

Ability to obtain capital . . . . . . . . . . . . . . . . . . . . 115

Adoption of new technology or process

 improvements by domestic competitors . . . . 97

The domestic industry is under continuing pressure to reduce prices as customers confront intense

competition in their own end markets. Price reductions offered by many producers, combined with higher

raw material and energy costs, appear to have contributed to lower profitability. This, in turn, may have

affected the level of internal funding available for capital improvements and research and development for

product innovations and new technologies. The poorer financial condition of the industry also affects its

ability to obtain capital from external sources on favorable terms. Any compromised ability to invest in

greater automation and technological advancements, such as computer-aided design, may have implications

for the future competitiveness of the industry, as technology is considered key to global competitiveness. As

noted by U.S. industry respondents, the inability to adopt new technologies and equipment becomes more

critical if foreign competitors are able to implement such improvements.
10-18

About 19 percent of producers reported that they lacked the capital funds to counter import

competition and 36 percent have scaled back or dropped planned capacity expansions. Forty-six percent of

responding U.S. producers reported cutting back or eliminating production or closing production lines in

response to import competition. Contraction of productive capacity may reduce the industry’s ability to offer

the range of castings required by its customers, as well as raise the unit costs of remaining production to cover

fixed overhead expenses. 

Furthermore, the domestic industry’s U.S. customer base appears to be shrinking. The foundry

industry and its downstream customers have noted that price competition has forced many customers to

increase their purchases of lower-cost castings from foreign foundries. In some cases, this shift to foreign

castings has been encouraged by end-use customers trying to remain competitive in the U.S. market as their

competitors pursue lower costs overseas. Competitive pressures have also driven a growing number of the

industry’s downstream customers to move manufacturing operations offshore to benefit in part from lower

production costs. The likelihood of regaining this business becomes more remote with the actual movement

of finished and semi-finished goods production from the United States to foreign locations.

Domestically, labor and environmental issues are at the forefront of industry concerns. The ability

to manage or reduce healthcare, insurance, and labor costs is reported to be the paramount challenge facing

the industry. Healthcare and insurance costs can be controlled to some extent by reducing coverage or

shifting a greater share of the burden to employees, but neither of these actions helps to attract a skilled work

force, which is a primary industry concern. The industry must not only manage increasing employee benefit

costs, but also balance wages, which must be attractive enough to compete with other industries offering a

more desirable work environment while remaining low enough so as not to considerably raise production

costs. The U.S. foundry industry will likely continue to incur higher wage rates and benefit costs than many

of its foreign competitors. It may need to intensify efforts to implement increased automation and capital

improvements that will raise productivity levels and provide consistent product quality to offset a portion of

this differential. This appears to be somewhat problematic, considering the financial condition of some

foundries. 

80

90

100

110

120

1999 2000 2001 2002 2003

Mexico peso Brazilian real Indian rupee

Canadian dollar Korean won

Figure 10-3

Exchange rates: Quarterly indexes of the real values of the Brazilian real, Canadian dollar, Indian 

rupee, Korean won, and Mexican peso relative to the U.S. dollar, 1999-2003

Source: International Monetary Fund.
 25 The Commission’s producer questionnaire only requested data for 1999-2003 because of the timing of the

study request.

 26 Nonferrous foundries typically include pass-through provisions in sales contracts because, historically, prices

for aluminum and copper raw materials have varied to a much greater extent than those for ferrous raw materials.

Reportedly, automobile producers are becoming more amenable to allowing pass-through cost increases because of

increasing supplier bankruptcies. 

10-19

Increased raw material prices appear to have contributed to the industry's problems in 2004 and

2005.25 Ferrous scrap prices doubled, pig iron prices increased 33 percent, and aluminum and copper ingot

prices increased 20 and 60 percent, respectively, in 2004 compared with the prior year. Raw materials

account for one-third of foundry production costs, and the most significant component is metallic raw

materials. Passing on raw material cost increases to purchasers is problematic, especially for iron and steel

foundries. The costs of these raw materials have historically been relatively stable, and pass-through

provisions in sales contracts were not used. In addition, the large users are automobile producers who,

because of their market power, resist pass-through costs. Two of the largest iron foundries, each with

multiple establishments, and several other smaller producers filed for Chapter 11 bankruptcy in early 2005,

citing increasing raw material costs as the reason.26 

In recognition of the intense competitive situation facing the U.S. foundry industry, U.S. producers

have responded with a broad array of initiatives that focus on improved manufacturing processes, lowering

costs, and new business strategies. With respect to manufacturing processes, information derived from field

work and hearing testimony indicates that U.S. producers are implementing lean manufacturing and Six

Sigma programs to cut waste and product defects, improve quality, and streamline operations; increasing

automation, such as adding robots to production lines; and switching to other manufacturing processes.

Reverse engineering–the process of taking apart an item for duplication or enhancement–is another possible

avenue to improve competitiveness. Reverse engineering cuts product development time, thus getting a

competing product to market more quickly. Flexible manufacturing may also improve performance. Flexible

manufacturing is a highly automated production process that uses computer-controlled machinery to produce

small volumes of a broad range of products. Flexible manufacturing yields higher and more consistent

product quality and improved worker productivity, but requires a large capital investment.

Nearly 80 percent of responding producers are implementing cost-reduction efforts. In addition to

cutting manufacturing costs, other cost factors were identified as a source of potential improvement, with an

emphasis on efficiency gains. Better utilization of the workforce may result from increased automation or

reassessment of job functions and manufacturing lay-out. Greater collaboration with customers in early

product design and development phases could lower costs by optimizing casting design and improving the

production process, according to questionnaire respondents. Questionnaire responses indicate that formal

cost evaluation programs could also reduce manufacturing costs. Respondents indicated that all products,

even those with good profit margins, should be evaluated for improvement. Through this process, domestic

companies may learn more about their actual costs and then make the best decisions on how to reduce such

costs.

Flexible and creative business strategies play an important role in achieving operational success,

according to questionnaire responses. Many U.S. producers had already shifted production from their

traditional product lines prior to the current competitive climate. Niche marketing is being pursued by a

number of U.S. foundries that have found demand for small runs, high-technology products, or fill-in orders,

for example. Some U.S. producers have shifted their product mix to larger, more complex parts that present

a manufacturing challenge to low-cost, high-volume foreign competitors, and for which production is more

likely to remain in the United States. Such products include those with intricate shapes, greater core

complexity, and tighter dimensional tolerances; those produced from ultra-clean iron; and parts requiring a

high degree of technical collaboration with customers' engineering and manufacturing personnel, along with
 27 Alfred Spada, Marketing Director, AFS, cited in Tony Reid, “Auto Supply Company Announces Closure of

Decatur, Ill., Foundry” Herald & Review, Decatur, IL, Mar. 30, 2005, p. A1.

 28 Kenneth H. Kirgin, “11% Growth Forecast for Next 4 Years Led by Aluminum, Ductile Iron,” Modern

Casting, Jan. 2005, pp. 22-27.

 29 Jim Gillette, Auto Analyst, CSM Worldwide, cited in Reid, “Auto Supply Company Announces Closure of

Decatur, Ill., Foundry.”

 30 “Intermet Ties Losses to Scrap Costs,” American Metal Market, Feb. 20, 2004.

 31 “Intermet to Close Wisconsin Aluminum Auto Parts Plant, American Metal Market, Dec. 15, 2005; “Intermet

Closing Decatur Foundry by Year-End,” American Metal Market, Mar. 30, 2005; and “Auto Supplier Intermet Plans

to Shut Factory,” American Metal Market, Jan. 13, 2004.

 32 “Intermet Reaches Agreements with Customers to Amend Contracts,” Modern Casting, Jan. 3, 2005, found at

http://www.amm.com, retrieved Apr. 6, 2005.

 33 According to the AFS, shipments for aluminum castings for household appliances are anticipated to rise by

11.4 percent over 2004-08 and by 1 percent thereafter in the longer-run (2004-14). Kirgin, “11% Growth Forecast

for Next 4 Years Led by Aluminum, Ductile Iron.” 

10-20

flexible lead times. Foundries may also pour different or more alloys to broaden their product scope and

customer base. To increase sales, foundries may need to expand their sales forces and marketing regions to

create more sales opportunities or add a wider range of technical services to support customer needs. Foundry

closures have also created opportunities for operating foundries to gain new business and expand their

customer base, as well as purchase machinery and equipment at reduced prices.

As a result of these efforts, many foundries reported rebounding sales to their leading markets since

the economic downturn of 2001. A number of reporting U.S. foundries are profitable and experiencing

increased income. These foundries largely serve booming markets, such as that for aluminum motor-vehicle

components. Captive foundries also demonstrated improved performance as they are somewhat sheltered

from market forces. As the industry has contracted and the economy picks up, remaining foundries may find

themselves in a better position to gain new business and increase sales. 

Despite rising costs for raw materials, energy, and labor; rising pricing pressures from downstream

customers and foreign metal-casting competitors; and shrinking domestic markets over the past few years,

some industry observers suggest brighter prospects for the U.S. metal foundry industry. For example, the

American Foundry Society (AFS) anticipates that demand for metal castings will rise significantly with

expanded U.S. industrial production over the next few years. A spokesman for AFS noted that “...we’re

seeing year after year production gains in the foundry industry... We’re actually forecasting 25-year highs

for U.S. production in 2008.”27 The AFS projects continued recovery of U.S. metal castings shipments; it

expects shipments to grow by 11 percent over the next 4 years to 15.27 million short tons in 2008.28 Cast

metals for which shipments are anticipated to rise the most are aluminum (by 6.4 percent in 2005 and by 18

percent over the next 4 years) and ductile iron (by 4 percent in 2005 and by 14 percent over the next 4 years).

Less significant increases are anticipated for castings of steel (by 6.3 percent in 2005 and by 15.5 percent over

the next 4 years) and copper alloys (by 2 percent in 2005 and by an average annual rate of 0.3 percent to

2014). The exception is gray-iron castings shipments, which reached an all-time low in 2003, for which the

AFS foresees only minimal gains in 2005-08, and longer-term annual declines thereafter. An implication of

more robust demand prospects is that individual domestic metal foundry establishments can benefit if they

succeed at developing new customers by expanding their shipments into new end-use markets. An automotive

industry analyst notes29 that prospects could be brighter for foundries that produce ductile-iron and aluminum

castings. For example, according to the analyst, automotive-parts caster Intermet Corp., which cited rising

steel scrap prices as a major cause for financial losses30 and for its decisions to shut down several production

facilities31 and to seek bankruptcy protection in 2004,32 could favorably alter its competitive position by

shifting from the highly price-competitive automotive-components market into potential new end-use markets

with greater prospects for metal castings shipments–e.g., aluminum castings for household appliances.33
APPENDIX A

REQUEST LETTER FROM THE HOUSE

COMMITTEE ON WAYS AND MEANS



APPENDIX B

FEDERAL REGISTER NOTICE

33402 Federal Register / Vol. 69, No. 114 / Tuesday, June 15, 2004 / Notices 

rules. All written submissions must 

conform with the provisions of section 

201.8 of the Commission’s rules; any 

submissions that contain BPI must also 

conform with the requirements of 

sections 201.6, 207.3, and 207.7 of the 

Commission’s rules. The Commission’s 

rules do not authorize filing of 

submissions with the Secretary by 

facsimile or electronic means, except to 

the extent permitted by section 201.8 of 

the Commission’s rules, as amended, 67 

FR 68036 (November 8, 2002). 

In accordance with sections 201.16(c) 

and 207.3 of the Commission’s rules, 

each document filed by a party to the 

investigation must be served on all other 

parties to the investigation (as identified 

by either the public or BPI service list), 

and a certificate of service must be 

timely filed. The Secretary will not 

accept a document for filing without a 

certificate of service.

Authority: This investigation is being 

conducted under authority of title VII of the 

Tariff Act of 1930; this notice is published 

pursuant to section 207.21 of the 

Commission’s rules.

By order of the Commission.

Issued: June 8, 2004. 

Marilyn R. Abbott, 

Secretary to the Commission.

[FR Doc. 04–13359 Filed 6–14–04; 8:45 am] 

BILLING CODE 7020–02–P

INTERNATIONAL TRADE 

COMMISSION 

[Investigation No. 332–460] 

Foundry Products: Competitive 

Conditions in the U.S. Market

AGENCY: International Trade 

Commission.

ACTION: Institution of investigation and 

scheduling of hearing. 

EFFECTIVE DATE: June 8, 2004.

SUMMARY: Following receipt on May 4, 

2004 of a request from the U.S. House 

Committee on Ways and Means under 

section 332(g) of the Tariff Act of 1930 

(19 U.S.C. 1332(g)), the Commission 

instituted investigation No. 332–460, 

Foundry Products: Competitive 

Conditions in the U.S. Market.

FOR FURTHER INFORMATION CONTACT: 

(1) Project Leader, Judith-Anne 

Webster (202–205–3489 or judithanne.webster@usitc.gov) 

(2) Deputy Project Leader, Deborah 

McNay (202–205–3425 or 

deborah.mcnay@usitc.gov) 

The above persons are in the 

Commission’s Office of Industries. For 

information on legal aspects of the 

investigation, contact William Gearhart 

of the Commission’s Office of the 

General Counsel at 202–205–3091 or 

william.gearhart@usitc.gov. Media 

should contact Peg O’Laughlin at 202–

205–1819 or 

margaret.olaughlin@usitc.gov. General 

information concerning the Commission 

may also be obtained by accessing its 

Internet server (http://www.usitc.gov). 

Background: As requested by the 

Committee, the Commission will 

investigate the current competitive 

conditions facing producers in the U.S. 

foundry industry in the U.S. market. 

The investigation will include an 

overview of the industry together with 

a detailed analysis of selected key

iron-, steel-, aluminum-, and copperbased cast products which are 

representative of the major segments of 

the foundry industry. The Commission’s 

report will provide information for the 

most recent five-year period, to the 

extent possible, regarding the following: 

1. A profile of the U.S. foundry 

industry. 

2. Trends in U.S. production, 

shipments, capacity, consumption, and 

trade in foundry products, as well as 

financial conditions of domestic 

producers. 

3. A profile of major foreign industries 

including, but not necessarily limited 

to, Brazil and China. 

4. A description of relevant U.S. and 

foreign government policies and 

regulations affecting U.S. and foreign 

producers as identified during the 

investigation by the producers and 

consumers of foundry products, 

including appropriate investment, tax, 

and export policies; environmental 

regulations; and worker health and 

safety regulations. 

5. A comparison of various factors 

affecting competition between U.S. and 

foreign producers-such as the 

availability and cost of raw materials, 

energy, and labor; level of technology 

and changes in the manufacturing 

process; pricing practices; 

transportation costs; technical advice 

and service; and an analysis of how 

these factors affect the industry. 

6. An analysis of the purchasing 

patterns and practices of downstream 

industries. As requested by the 

Committee, the Commission will 

provide its report not later than May 4, 

2005. 

Public Hearing: A public hearing in 

connection with this investigation is 

scheduled to begin at 9:30 a.m. on 

October 14, 2004, at the U.S. 

International Trade Commission 

Building, 500 E Street, SW, Washington, 

DC. Requests to appear at the public 

hearing should be filed with the 

Secretary, no later than 5:15 p.m., 

September 24, 2004, in accordance with 

the requirements in the ‘‘Submissions’’

section below. In the event that, as of 

the close of business on September 24, 

2004, no witnesses are scheduled to 

appear, the hearing will be canceled. 

Any person interested in attending the 

hearing as an observer or nonparticipant may call the Secretary (202-

205–2000) after September 24, 2004, to 

determine whether the hearing will be 

held. 

Statements and Briefs: In lieu of or in 

addition to participating in the hearing, 

interested parties are invited to submit 

written statements or briefs concerning 

this investigation in accordance with 

the requirements in the ‘‘Submissions’’

section below. Any prehearing briefs or 

statements should be filed not later than 

5:15 p.m., September 30, 2004; the 

deadline for filing post-hearing briefs or 

statements is 5:15 p.m., October 22, 

2004. 

Submissions: All written submissions 

including requests to appear at the 

hearing, statements, and briefs should 

be addressed to the Secretary, United 

States International Trade Commission, 

500 E Street, SW, Washington, DC 

20436. All written submissions must 

conform with the provisions of section 

201.8 of the Commission’s Rules of 

Practice and Procedure (19 CFR 201.8); 

any submission that contains 

confidential business information must 

also conform with the requirements of 

section 201.6 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.6). Section 201.8 of the rules require 

that a signed original (or a copy 

designated as an original) and fourteen 

(14) copies of each document be filed. 

In the event that confidential treatment 

of the document is requested, at least 

four (4) additional copies must be filed, 

in which the confidential information 

must be deleted. Section 201.6 of the 

rules requires that the cover of the 

document and the individual pages be 

clearly marked as to whether they are 

the ‘‘confidential’’ or ‘‘nonconfidential’’

version, and that the confidential 

business information be clearly 

identified by means of brackets. All 

written submissions, except for 

confidential business information, will 

be made available for inspection by 

interested parties. 

In their hearing testimony and written 

submissions, interested parties should 

provide information regarding the six 

topics in the ‘‘Background’’ section of 

this notice and any other relevant 

information relating to competitive 

conditions in the U.S. foundry market. 

The Commission’s rules do not 

authorize filing submissions with the 

Secretary by facsimile or electronic 

Federal Register / Vol. 69, No. 114 / Tuesday, June 15, 2004 / Notices 33403

means, except to the extent permitted by 

section 201.8 of the Commission’s Rules 

of Practice and Procedure (19 CFR 

201.8) (see Handbook for Electronic 

Filing Procedures, ftp://ftp.usitc.gov/

pub/reports/

electronic_filing_handbook.pdf). 

Persons with questions regarding 

electronic filing should contact the 

Secretary (202–205–2000 or 

edis@usitc.gov). 

The public record for these 

investigations may be viewed on the 

Commission’s electronic docket (EDIS) 

at http://edis.usitc.gov. Hearingimpaired individuals are advised that 

information on this matter can be 

obtained by contacting our TDD 

terminal on (202) 205–1810. Persons 

with mobility impairments who will 

need special assistance in gaining access 

to the Commission should contact the 

Secretary at 202–205–2000.

List of Subjects 

Foundry, metal castings, and 

competition.

By order of the Commission.

Issued: June 8, 2004. 

Marilyn R. Abbott, 

Secretary to the Commission.

[FR Doc. 04–13358 Filed 6–14–04; 8:45 am] 

BILLING CODE 7020–02–P

DEPARTMENT OF JUSTICE

[AAG/A Order No. 009–2004] 

Privacy Act of 1974; Systems of 

Records

AGENCY: United States Trustee Program, 

Department of Justice.

ACTION: Notice of modifications to 

systems of records. 

SUMMARY: Pursuant to the Privacy Act of 

1974 (5 U.S.C. 552a) and Office of 

Management and Budget Circular No. 

A–130, the United States Trustee 

Program (‘‘USTP’’), Department of 

Justice, proposes to modify the 

following existing Privacy Act systems 

of record, which were last substantively 

revised on March 4, 2004, at 69 FR 

10255:

JUSTICE/UST–001, Bankruptcy Case 

Files and Associated Records; 

JUSTICE/UST–002, Bankruptcy Trustee 

Oversight Records; 

JUSTICE/UST–003, U.S. Trustee 

Program Timekeeping Records; and 

JUSTICE/UST–004, U.S. Trustee 

Program Case Referral System.

DATES: These actions will be effective 

July 26, 2004.

FOR FURTHER INFORMATION CONTACT: For 

information regarding these changes, 

and for general information regarding 

USTP’s Privacy Act systems, contact 

Anthony J. Ciccone, FOIA/Privacy 

Counsel, Executive Office for United 

States Trustees, at (202) 307–1399.

SUPPLEMENTARY INFORMATION: Two new 

routine uses are being added to the 

following United States Trustee Program 

systems of records. They state that 

information from USTP systems may be 

disclosed in connection with 

investigations and/or meetings under 11 

U.S.C. 341, so as to facilitate USTP civil 

and criminal enforcement efforts and 

compliance with the Bankruptcy Code 

and related authority. 

In accordance with 5 U.S.C. 552a(e)(4) 

and (11), the public is given a 30-day 

period in which to comment; and the 

Office of Management and Budget 

(OMB), which has oversight 

responsibility of the Act, requires a 40-

day period in which to conclude its 

review of the system. Therefore, please 

submit comments by July 15, 2004. The 

public, OMB, and Congress are invited 

to submit comments to: Mary Cahill, 

Management and Planning Staff, Justice 

Management Division, Department of 

Justice, 1331 Pennsylvania Ave., NW., 

Washington, DC 20530 (1400 National 

Place Building). 

In accordance with 5 U.S.C. 552a(r), 

the Department has provided a report to 

OMB and Congress.

Dated: June 8, 2004. 

Paul R. Corts, 

Assistant Attorney General for 

Administration.

JUSTICE/UST–001 

SYSTEM NAME: 

Bankruptcy Case Files and Associated 

Records.

* * * * *

ROUTINE USES OF RECORDS MAINTAINED IN THE

SYSTEM, INCLUDING CATEGORIES OF USERS AND

THE PURPOSES OF SUCH USES:

* * * * *

(N) Release of Information related to 

Investigations and Proceedings: 

Information from these records may 

be disclosed in the course of 

investigating the potential or actual 

violation of any law—whether civil, 

criminal, or regulatory in nature—or for 

the preparation of a trial or hearing for 

such violation. Such information may 

be disclosed to a federal, state, local, 

tribal, or foreign agency, or to an 

individual or organization, if there is 

reason to believe that such agency, 

individual, or organization possesses 

information relating to the investigation, 

trial, or hearing, and if the 

dissemination is reasonably necessary to 

elicit such information or to obtain the 

cooperation of a witness or an 

informant. 

(O) Release of Information in 

connection with Section 341 Meetings: 

Information from these records may 

be disclosed in connection with 

meetings held under 11 U.S.C. 341 and 

related proceedings, when the 

Department of Justice determines that 

the records are arguably relevant to such 

meetings or bankruptcy proceedings. 

Transcripts or other records of such 

meetings may also be disclosed upon 

request pursuant to relevant bankruptcy 

laws or rules. 

JUSTICE/UST–002 

SYSTEM NAME: 

Bankruptcy Trustee Oversight 

Records

* * * * *

ROUTINE USES OF RECORDS MAINTAINED IN THE

SYSTEM, INCLUDING CATEGORIES OF USERS AND

THE PURPOSES OF SUCH USES:

* * * * *

(M) Release of Information related to 

Investigations and Proceedings: 

Information from these records may 

be disclosed in the course of 

investigating the potential or actual 

violation of any law—whether civil, 

criminal, or regulatory in nature—or for 

the preparation of a trial or hearing for 

such violation. Such information may 

be disclosed to a federal, state, local, 

tribal, or foreign agency, or to an 

individual or organization, if there is 

reason to believe that such agency, 

individual, or organization possesses 

information relating to the investigation, 

trial, or hearing, and if the 

dissemination is reasonably necessary to 

elicit such information or to obtain the 

cooperation of a witness or an 

informant. 

(N) Release of Information in 

connection with Section 341 Meetings: 

Information from these records may 

be disclosed in connection with 

meetings held under 11 U.S.C. 341 and 

related proceedings, when the 

Department of Justice determines that 

the records are arguably relevant to such 

meetings or proceedings. Transcripts or 

other records of such meetings may also 

be disclosed upon request pursuant to 

relevant bankruptcy laws or rules. 

JUSTICE/UST–003 

1. SYSTEM NAME: 

U.S. Trustee Program Timekeeping 

Records.

* * * * *

ROUTINE USES OF RECORDS MAINTAINED IN THE

SYSTEM, INCLUDING CATEGORIES OF USERS AND

THE PURPOSES OF SUCH USES:

* * * * *

APPENDIX C

HEARING PARTICIPANTS

CALENDAR OF PUBLIC HEARING 

Those listed below appeared as witnesses at the United States International Trade 

Commission’s hearing: 

Subject: Foundry Products: Competitive Conditions in the U.S. Market 

Inv. No.: 332-460 

Date and Time: October 14.2004 - 9:30 a.m. 

Sessions were held in connection with this investigation in the Main Hearing Room (room 

101), 500 E Street, S.W., Washington, D.C. 

ORGANIZATION AND WITNESS: 

Non-Ferrous Founders’ Society (“NFS”) 

Park Ridge, IL 

James L. Mallory, Executive Director, NFS 

Collier Shannon Scott, PLLC 

Washington, D.C. 

on behalf of 

American Foundry Society (“AFS”) 

Charles M. Kurtti, President, AFS 

Albert T. Lucchetti, President, Cumberland 

Foundry Co., Inc. 

Dave Bumbar, President, Aurora Metals 

Division LLC 

George G. Boyd, President and CEO, Goldens’ 

Foundry and Machine 

Jim Keffer, President, EBAA Iron Sales, Inc. 

-1- 
ORGANIZATION AND WITNESS (continued): 

Kory Brockman, Vice President, Finance, 

Wisconsin Aluminum Foundry Co. 

Larry A. Comunale, Vice President and General 

Manager, Doncaster Southern Tool 

Randall W. Lawton, President and CEO, Bay 

Engineered Castings 

Roy Hanks, Marketing Manager, ThyssenKrupp-Waupaca 

Thomas Brown, Vice President, Benton Foundry, Inc. 

Michael T. Kerwin, Consultant, Georgetown Economic 

Consulting Services 

Paul C. Rosenthal 1 

Robin H. Gilbert ) 

) - OF COUNSEL 

ORGANIZATION AND WITNESS: 

ASC Industries, Inc. (“ASC”) 

North Canton, OH 

William T. Blackerby, Jr., Chief Operating Officer, AX 

-END -