The U.S. foundry industry faces a highly competitive and changing marketplace, reports the U.S. International Trade Commission (ITC) in its study Foundry Products: Competitive Conditions in the U.S. Market.

The ITC, an independent, nonpartisan, factfinding federal agency, conducted the investigation at the request of the House Ways and Means Committee. The report analyzes competitive conditions affecting the U.S. foundry industry in the domestic market, providing an overview of the industry and detailed analyses of selected key iron-, steel-, aluminum-, and copper-based foundry products. The report also provides profiles of major foreign industries and descriptions of relevant U.S. and foreign government policies and regulations.

The ITC reported that the U.S. foundry products industry experienced a highly competitive and changing marketplace during 1999-2003, the five years covered by the study. 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 five 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 volumes. In this environment, many firms consolidated or closed. To stay competitive, remaining U.S. producers expanded customer services, shortened lead times, and shifted to more complex cast products.

Other highlights of the ITC report include:

• The number of foundries reporting operating losses increased from 19 percent to 29 percent from 1999 to 2003. In general, aluminum foundries are in the best competitive 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.

• Developing countries such as China, Brazil, and India have a 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.

• Lower energy costs and less stringent enforcement of worker health and safety and environmental laws provide foreign foundries in Brazil, China, and India, with a competitive advantage.

• Raw material costs, generally the largest component of total production costs, are comparable among all countries, in most cases.

Foundry Products: Competitive Conditions in the U.S. Market (Investigation No. 332-460, USITC Publication 3771, May 2005) will be posted in the publications area of the ITC Internet site at www.usitc.gov. A CD-ROM or printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW, Washington, DC 20436. Requests may also be made by fax to 202-205-2104.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the Senate Committee on Finance, or the House Committee on Ways and Means. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.