Industry Forecast
North America
Investment Casting 2016 Market Performance and Outlook
by Joseph E. Fritz, Executive Director - Investment Casting Institute Overview
C
harles Dickens could have been writing about the 2016 investment casting industry in
the opening phrases of his 1859 novel A Tale of Two Cities when he wrote: “It was the best of times, it was the worst of times…” Not to be an extremist, but 2016, more so than other recent years, demonstrated great diversity in sector performance. Aerospace
demand continues
to drive foundry capacity expansion projects, and Industrial Gas Turbines are showing signs of making a comeback, while at the same time declines in Oil & Gas exploration and production have had a collateral effect on a number of industries including Industrial Equipment, Pumps & Valves and Heavy Equipment. Medical Devices and Implants continue to show consistent growth due to aging Baby Boomers, while recreational markets saw a flattening in all areas except firearm production, which experienced bolstered growth from presidential election uncertainties.
Aerospace and Defense Commercial aerospace continued to exhibit strong growth, with a minor mid-year lull in production, ending with a strong 4th quarter. Growth continues to be driven by ongoing fleet modernization,
low fuel costs, low
single-digit interest rates and continued growth in demand for both spare and new components. Delivery of fixed wing airframes
were relatively flat (approximately 0.5%) in 2016 when compared to 2015. Casting sales generally lead airframe deliveries by several months, accounting for the industry’s strong 4th quarter, as 2017 airframe deliveries are estimated to grow by 13% over
14 ❘ January 2017 ®
2016 levels.
Deliveries are currently
outpacing retirements at a rate of 2.5 to 1, which supports continued growth in the spares market.
Sales of rotary wing aircraft have
been in decline, reflecting the impact of the Oil & Gas industry, as oil producers are a major consumer of these platforms.
The impact of past
years’ oil overproduction has resulted in manufacturers deferring planned airframe acquisitions, relying on the existing fleet of older helicopters This resulted in a 30% decline in 2016 rotary wing aircraft deliveries from the prior year. Overall, North American Foundries report 2016 growth ranging from 12% to over 20%, some citing a strong spares market others focused on new builds. As has been the case for the past couple of years, the majority of North American aerospace foundries are at or near capacity, and many are overbooked. Hence, capital investments in plant and equipment to support rising demand continues.
In consideration of the foundries
contacted in support of this analysis, their relative size and reported performance, the ICI estimates that 2016 North
American commercial
aerospace investment casting sales grew at an overall rate of 15% This industry, which typically
performs cyclically, with downturns every eight years, has not seen a significant downturn since 2001, the 2009 recession having only a short term impact to growth.
Richard
Aboulafia, Vice President, Analysis for the Teal Group, has characterized this extended period of growth from 2004 to present as a “12-Year Super Cycle”, and warns that in spite of the current 9-year backlog of orders, a downturn is overdue and will eventually occur. The question is “When?” to which both Aboulafia and Edmund S. Greenslet, Publisher of Airline Monitor, forecast a downturn to take place around 2020. The defense sector experienced a sudden return to peak production in 2016, with DoD tactical aircraft procurement nearing 400 new airframes and strong ongoing support
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