The increased use of lighter metals will boost demand, but offshoring will hurt revenue
Los Angeles, CA (PRWEB) January 20, 2013
The Nonferrous Metal Foundry Products Manufacturing industry relies heavily on demand from the industrial sector, especially automobile manufacturing. According to IBISWorld analyst Agiimaa Kruchkin, “When the economic crisis battered the car manufacturing industry, demand for industry products suffered.” Over the five years to 2012, revenue is projected to decline at an average annual rate of 4.9%. However, as market conditions have improved along with rising industrial activity, this rate of growth hides major performance gains over 2010 and 2011 as automotive demand resurfaced.
Over 2012, revenue is expected to fall 6.5% to $11.7 billion due to a contraction in market aluminum prices, the industry's primary metal. “The industry is heavily affected by nonferrous metal prices because it purchases, processes and resells these metals,” says Kruchkin. Nonferrous metals, such as aluminum, brass, copper and titanium, are distinguished from ferrous metals, such as steel, in that they do not contain iron. Industry players can often pass higher input costs to customers, but rising costs can be detrimental if they are coupled with low demand. As evidenced in 2008, prices rose because of increased international demand for metals like aluminum, but domestic demand shrank. Aluminum prices plummeted 35.3% as global demand retreated in 2009. However, in 2010 and 2011, the price of aluminum rebounded strongly on the back of healthy demand from automobile and other manufacturing, both domestically and abroad. Over recent years, many firms have been unable to deal with mounting costs and weak revenue. Slim or negative profit margins have led to industry exits or acquisition by larger players. Furthermore, major customers in automobile manufacturing have increasingly outsourced their purchases to foundries in countries like China and Mexico. Following more than a decade of continuous contraction, the number of enterprises is expected to fall at an average annual rate of 3.1% to settle at 1,010 during the five years to 2012.
The level of industry concentration is low, with the largest two firms generating a fraction of industry revenue in 2012. Most industry firms and establishments are small, largely due to the high level of investment required to open and operate a foundry. Roughly 54.0% of industry firms have fewer than 20 employees, while 86.0% have fewer than 100. In the past decade, industry concentration has increased slightly as both enterprise and establishment numbers have continuously contracted. Over the five years to 2012, the number of industry firms is estimated to have declined at an average annual rate of 3.1% to 1,010. The trend of consolidation is expected to continue as customers seek to achieve operating synergies and value-stream efficiencies through business combinations and vertical integration (i.e. large manufacturers acquire foundries), build stronger customer relationships by following their downstream customers as they expand globally and shift production among locations. The need for suppliers to provide customers with single-point integrated systems on a global basis has also fueled industry consolidation.
Growth in demand from automobile manufacturers and nonferrous metal price increases will drive industry performance in the coming years. Furthermore, the increased use of lighter metals, such as aluminum, in automobile bodies will contribute to the competitiveness of nonferrous metals against steel. However, industry revenue is forecast to rise minimally over next five years as global competitive pressures limit growth.
For more information, visit IBISWorld’s Nonferrous Metal Foundry Products Manufacturing in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry primarily melts and pours nonferrous metals into molds of a desired shape to make castings. The castings are made from purchased metals or in integrated secondary smelting and casting facilities. The main nonferrous metals used by the industry are aluminum, copper, magnesium, titanium and zinc.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.