SFSA Casteel Reporter – January 2024

It’s that time of year, when Raymond looks back at his predictions for the previous year to see if he hit or missed the mark. Also, he gives his predictions for 2024.

Cast in Steel 2024 Competition

Time is running out to sign up your team for the 2024 SFSA Cast In Steel (CIS) competition.  Sign up your team today!

Teams will create their version of a Halligan bar from design conception to performance. The performance competition and awards ceremony will be held April 22-23, 2024 at the Grohmann Museum in Milwaukee, Wisconsin.

If you haven’t already, check out episodes of Raymond’s podcast with information on the Halligan Bar with Forged In Fire’s Ben Abbott, Tradesman Fire & Fabrication’s Sergeant Andrew Pristach, and also Caelan Kennedy from SFSA.

As of January 1^st, we have a total of 41 teams.

77th Technical & Operating Conference

The T&O this past December was another success thanks to the authors, workshop presenters and T&O Committee.  With an incredible high of 67 papers presented by member foundries represented at the conference, it was a tremendous opportunity to work together in advancing our industry.  We all benefit from foundry members, academic partners, and government personnel who come together to make our industry better.  Planning is already underway for this year’s conference; tentatively scheduled for December 11-14 in Chicago.  If you would like to recommend a topic and presenter for the 78th T&O, please contact Dave.

Awards

Safety award for achievement of a Perfect Safety Record with 2022 zero DART rate: Northern Stainless Corporation.

Safety awards for achievement of a DART rate equal to or less than the 2022 national average for manufacturing (2.0): Fimex, Magotteaux Pulaski, McConway & Torley, ME Global Duluth, Midwest Metal Products, Southern Cast Products

The SFSA Board selected six individuals to receive honorary membership in SFSA for their contributions to further the society and the steel casting industry – Vasile Ionescu – Bradken London, Peter Macler – Peter Macler Associates, Zed Howell – Howell Foundry, John Workman – Eagle Alloy, Mark Fazakerley – Eagle Alloy

Scholarships

Steel Founders’ Society Foundation scholarships awarded to member interns selected to present at the T&O: Josh Gerrans-Eagle Alloy, Isaac Clyde-Harrison Steel, Logan Wehrl- MetalTek, Adam Falk-MetalTek, Hannah Muschinski-MetalTek, William Porfilio-Stainless Foundry & Engineering, Evan Stachowiak-Stainless Foundry & Engineering

Casting Design and Manufacturability AI

Automated or assisted casting design has been around for a while with topology optimization used as a design tool today.  Optimization of a part for casting, castability, has traditionally been accomplished by working with a foundry.  Recent research by ISU and Alabama have looked at automating this, and Mike Gwyn has been putting together a series of webinars.  Leveraging freeform geometry castings can provide coupled with optimizing for manufacturability (maybe initially through “rules of thumb” algorithms but eventually AI) is something we’d like to start an on-going discussion on and leverage as a research opportunity.  If you are interested in participating in this working group, please contact Dave.

Riser Sleeve Modeling

Risers (or feeders) provide a critical function in making castings.  Unfortunately, foundries have limited quality control tools for foundry products.  The challenges of wash were recently discussed at the T&O by Willy Oyarzabal and Ken Murphy.  UI has done some research to develop modeling sleeve data, and Amoldeep Jaggi presented in 2015 on testing sleeves.  However, 2022 and 2023 T&O presentations highlighted the challenge of riser performance and reliable datasets to use in simulation software.  During the recent T&O discussion session, it was suggested to establish a working group to standardize and quantify sleeve quality and effectiveness through industry round robin testing.  If you are interested in participating in this working group, Tory will be organizing the first meeting – please contact him at tory@sfsa.org.

Improving Simulation

A question posed during the simulation discussion at the T&O was, “what would you like to see simulation do/do better?”.  There were many good comments, which can be acted on by working with software developers or through research.  SFSA is planning a 2024 subject-focused meeting on casting simulation; thus, it would be helpful to rebuild and expand the list of simulation needs.  Please email your comments to Dave.

Implementing Sensors

UNI demonstrated sensor technology at the T&O workshop.  They continue to support SFSA members in using this Industry 4.0 technology by providing a turnkey solution to help the foundry start applying the Internet of Things (IoT) in both application and data analysis.  SFSA is planning a 2024 meeting on sensors to train users and build applications.  If you would like to work on a project with them, please contact Dave.

US Steel Foundry Funding

There is a growing recognition that capital intensive industries like steel foundries are essential to national and economic security.  Unfortunately, our industry need for investment and capital is poorly structured to access the funds.  To resolve this, SFSA will look to create a combined program or a syndication to consolidate needs and organize a larger program that meets policy goals.  We need your input to determine the type and size of investments needed.  If you are interested in participating, please contact Raymond at monroe@sfsa.org.

Market News

The November SFSA trends report shows that stainless casting bookings and shipments remain below year ago levels but the decline has leveled off in the last quarter of 2023. Similarly, steel casting bookings has been trending towards parity to year ago levels while shipments has continued to decline.  Reported backlog for carbon and low alloy steel and stainless has stabilized in recent months at 10 weeks.

ITR is forecasting a softening for most of manufacturing throughout 2024. For more detailed information on what lies ahead for the steel casting industry markets, the SFSA 2024 Market Forecast, updated in December by the Marketing Committee, is available online here.

Casteel Commentary

My Ideas for 2023 for the North American Steel Foundry Industry:

• The global reduction in capacity for steel castings that was most severe in North America will make the demand in 2023 for steel castings firm, continuing the trend of full production based on available supplies, logistics and workforce.  A recession this year will temper the demand but the systemic requirements for steel castings to maintain the infrastructure and material production will support the requirement for steel casting production.

Steel casting backlog remained well over 10 weeks for the bulk of the year.  While the economic slowdown has reduced the size of the backlog, production remains active.  Most plants have remained busy but profitability is still challenging and we have seen additional closures like Sivyer after the fire.  Several additional plants are struggling to remain open.

• The public policy requirements for carbon emission reduction and electrification will increase the investment in mining and infrastructure, supporting the need for steel castings.  These requirements will be postponed as it becomes increasingly apparent that the technology and resources available cannot meet the aggressive targets.  This will also require conventional investments in fossil fuel production and peak demand natural gas generation.

This is uncertain, there have been significant investments driven by funding and policy and some surprising pull backs in timetables and schedules.  The chart shows a significant increase over the past 10 years but not unprecedented growth. https://www.iea.org/reports/critical-minerals-market-review-2023/key-market-trends

• Economic and national security will require more capital investment in our industry as globalization recedes and regional sourcing become needed to reduce risk.  These capital funds will come either from longer term supplier agreements with OEMs, national security funds to ensure domestic supply or from elevated profitability from pricing that reflects inadequate capacity.

There has been some support for targeted capital investment to facilitate plants in meeting the production volumes required funded by customers.  This remains a critical and unresolved issue and has become a bigger topic as SFSA works with policy makers to facilitate the economic conditions allowing adequate profitability to support investment and modernization.

• Workforce challenges will remain systemic for future years including 2023.  Steel casting producers will be automating to reduce the labor required for production.  Plants will develop longer term plans to automate limited by the availability of funding, capable equipment and useful technology.  This will result in up-skilling and up-grading workforce requirements and allow plants to offer more compelling career paths for new employees.

Our steel casting industry is a leader in addressing the challenge of both culture and demographics in workforce recruitment and retention.  Our Cast in Steel has been expanded to include a Casting Dreams competition to reach into younger age kids to introduce them to the industry.  There seems to be a re-engagement with the non-academic tacit learners who wish to creatively be employed in manufacturing. 

• Suppliers of materials and equipment will face many of the same challenges and will need to prioritize their markets.  Establishing a strong and collaborative relationship with our suppliers will be key to ensuring our ability to produce.

Globalization has been a big factor in our supply chain and our customer population.  Re-regionalization may relocate production and distribution channels but the ownership and investment is an open question.

• Customers will be both more demanding and more flexible to support their products.  Steel foundries will need to become more engaged in understanding the requirements and developing a market structure so customers can support our investment and costs of meeting their needs.

Customers have been exploring and relocating supply chains to gain local or regional suppliers.  In North America, Mexico has been the site of significant investments to utilize their young and capable population for manufacturing.  The U.S. has seen significant new investments in manufacturing but with little being directed at traditional capital intensive industries like steel foundries.  With the limited capacity in North America and the deterioration of global supply chain reliability, it seem likely within a few years to see significant investment in our industry.  That investment is likely to include provisions for automation necessary to reduce the labor required for production.

• China will increasingly face huge challenges beyond COVID and geopolitical trade problems.  Their demographic challenge of elderly and lack of incoming workforce may be the most significant for any country globally. Their internal debts, focus on construction and infrastructure, dependence on export markets and developed economies’ knowhow remains unsustainable.  For critical supplies like steel castings, they will become a difficult source.

After years of my personal speculation, it appears that the challenge of China is going to recede.  The combination of demographics, political incompetence, economic malinvestments, lack of resources and geo-politics should cause a reduction in the concerns about China as a threat.  But, their mercantilist policies that were directed at dominating the production of intermediate industrial materials will require the re-establishment of production of those materials regionally.  It is not clear how those investments will be made or where.

• Steel casting producers will need to have a clear view of the drivers for their business and become particular and collaborative with the suppliers and customers who can work together with us in an uncertain political, economic and cultural world.

In many ways, we are likely to return to more traditional ways of business in the modern connected world.  While modern information technology will allow us to exchange more detailed and complex information seamlessly, the need to ensure integrity and reliability will reinvigorate the need to know our suppliers and customers and for them to know us.  We will be in the process with the new generation of people to reestablish the need to know and trust each other and to collaborate.

My Ideas for 2024 for the North American Steel Foundry Industry:

Instead of a laundry list oof observations about business conditions and possible issues, this year I wanted to highlight three trends that are likely to require our careful management.  In many ways, we have gone through dramatic changes in our norms and practices while retaining the forms of business and culture that have allowed us to be safe and prosperous.  We have seen significant changes in the norms and expectations in the world of finance and debt, politics and law, business and commerce, and in culture and community.

1. The market value of equities in the major markets is near historic highs compared to their sales.

The following graph shows the ratio of market capitalization to the total gross value added.  This is a rough analog to the value of the company compared to the annual sales.  Hussman has used this to indicate whether on an historic basis, equities- the value of the companies are inexpensive or expensive.  A value of one is pretty common for the historic value of companies in normal conditions.  In a detailed regression analysis, when this ratio is one, the annual return for the next 12 years is about 10%.  The analysis suggests that at the current ratio of almost 3, the average loss for the following 12 years is 4%. 

A 4% loss not a gain.

The first observation I think that is critical for us is that the equity markets are likely to see some sharp losses or little in the way of gains for the next year.  One mitigating factor for our industry is that common manufacturers are not so extremely overvalued.  Almost all of the excessive valuations are sunk into the dominant growth companies called the Magnificent Seven.

I expect financial concerns to weigh on the market as realism returns and investors expect some return on their money.

2. The de-industrialization of the U.S. economy over the past 4 decades is finally and fundamentally problematic.  

Our industry has become so limited that I think even with a significant economic event that will challenge us for a short period, our production will not be able to meet the demand.  We will be needed just to keep the lights on.  Because of this, I expect us to be in a period when the foundry will be selecting which customers to supply rather than what business to chase.

This market shift will be similar to the challenge we face in workforce.  Instead of young people anxious to find a job and we get to select the best candidates, the shortage of workers means that they will be recruited by more than one company and get to choose who they want to work for.

3. Our gross profit level for decades as an industry has been inadequate to reinvest including modernization, automation and innovation.  This is a huge problem of public policy and I have been increasingly drawn into discussions at DoE and DoD about this challenge.  The lack of capacity will likely give us an opportunity to increase our level of profitability.  We need to recognize like the machine shops that our profitability must be adequate to maintain and reinvest to be capable of future success.

Our biggest challenge in 2024 will be to achieve a profitability that allows us to re-capitalize the business and modernize and automate to meet the challenge of national and economic security.  We are needed if we are to have stability and future growth.

Raymond