By: Ben Steller, AccuVal Associates, Inc.
Die cast products are made by the introduction of molten metal into a mold or die of a particular shape. Once cooled and further machined, these products go into many of the products we use on a daily basis, like automobiles and faucets. Die castings enable complex shapes to be manufactured within close tolerances, are durable and dimensionally stable, are heat resistant and are strong.
Much has changed in the die casting world in the five years leading up to 2011. Consumer spending has been on the forefront of many topics and is in the close eye of die casters across America. Automobile manufacturing, which accounts for more than 50 percent of the end user base, continues to be the main driver and has seen an increased push towards fuel efficiency with lighter vehicles. Other major markets served include aerospace manufacturing, farm, construction and mining equipment manufacturing, plumbing and valve manufacturing, to name a few.
The automotive downturn combined with outsourcing of die casting internationally has pushed many domestic die casters out of business in recent years. Looking at industry data, 2009 appeared to account for the largest decrease in industry manufacturing base. There were approximately 428 die casters left in the U.S. at the end of 2010, according to the North American Die Casting Association (NADCA), continuing the historical decline.
Another survey showed a 26-percent increase in shipments by North American die casting manufacturers in 2010 over 2009. Shipments for die cast aluminum parts to the automotive industry increased 20 percent. The NADCA estimated that the overall profitability for North American manufacturers improved by approximately 13.2 percent during that timeframe.
Die casters are in the business of purchasing metal, processing it and reselling it. In such, manufacturers are very sensitive to price fluctuations in its inputs as changes dampen or bolster profitability very directly. Aluminum is the primary input for nonferrous castings. During the past 12 months, aluminum prices had been on a steady incline. But in May, prices peaked and have been on a steady slide.
Even still, analysts are predicting that aluminum prices will remain high in 2011, increasing the cost to supply die cast parts.
The amount of late model, used die casting machines in "good" condition with shot end and control advancements currently on the market are few. In many cases, the older equipment on the market in years past has since been disposed of or scrapped.
In addition, during the economic downturn, capital spending at many companies was held to a minimum. Correspondingly, original equipment manufacturers scaled back production, decreasing the supply of machines on the market.
For customers looking at new machines, OEMs are now facing long lead times on new equipment orders, leaving end-users scrambling for additional or replacement equipment at the same time that demand has been ramping up.
All of the major automakers reported increases in vehicle sales in April 2011 versus April a year ago:
Overall, U.S. sales were up 18 percent in April compared with a year earlier, according to Autodata, a supplier of technical data to the automotive industry. This is all very welcome news for the die cast industry, the largest consumer of its products. Die casters hope this trend will continue as consumer spending improves.
Changes in design and manufacturing by auto manufacturers also have an impact on die cast demand. Increasing fuel prices and toughening emissions standards are fueling the shift towards lighter vehicles. In these vehicles, aluminum is an attractive alternative to steel because of its lighter weight. Several manufacturers, including GM, Ford, Nissan, Audi, BMW and Jaguar Land Rover, have all revealed plans to remove hundreds of pounds of weight from future models, sparking optimism among aluminum die casters.
The market for die casting machinery is steadily improving. After more than two years of soft market conditions, market participants of new and used equipment have reported increasing buyer inquiries about the availability of production machinery of all types.
In the last 5 years, there have been more than 25 public auctions of die casting machinery in addition to the privately negotiated orderly liquidations. When analyzing current market conditions and historical sales, late-model, high-tonnage die casting machines by reputable manufacturers have retained reasonable value. This is especially true regarding die cast machines manufactured by Buhler, Prince and those rebuilt/remanufactured by companies such as EPCO or Die Cast Press. Market participants have noted that die cast machines are selling well in the 1,000-ton to 3,500-ton capacity range, with noted increases in demand in South America, India and Mexico. In general, late model machines in the 800- to 1,200-ton capacity range should be very marketable. Historically, machines larger than 1,200-ton required a longer marketing period due to a more limited user base, but demand for higher tonnage machines to manufacture large automotive parts has also been improving so less of these machines are available on the used equipment market. Machines in the 400-ton to 600-ton capacity range that in previous years had low demand now have some limited demand; this is not because of growth, but instead to fill the capacity that was lost due to companies that have gone out of business.
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