installation of pipeline required to complete a number of projects. As a result of this and the aforementioned events, exploration and drilling has all but come to a complete halt, and production has been significantly reduced, furthering the decline in casting procurement. The trend is expected to continue until 3rd quarter 2020, when casting sales are expected to resume, but not at a level adequate enough to offset the prior six months’ declines. As a result, 2020 investment casting sales for this sector are anticipated to decline an additional 10-15% when compared to 2019 casting sales.


A key point to consider is that


casting sales estimated at $426 million, approximately 1% off from 2018 performance. The current outlook for 2020 is that the market for automotive castings will stay flat or exhibit marginal decline.


General Industry


On the aggregate, the General Industry market sector usually tracks to the US rate of industrial production, though sub-sector performance may vary widely. When comparing the rate of US production in 2019 to the same month in 2018, a relatively steady decline is exhibited. In 2018, General Industry Sales grew by 4.1%. In 2019, the rate of US production is anticipated to finish the year at approximately 2% higher than 2018.


A similar growth rate is


anticipated for 2020. Though most General Industry sub- sectors performed as anticipated, the Oil & Gas industry, which can have a collateral effect on other General Industry sub-sectors, such as Pumps & Valves and Transportation, fell far below expectations.


To provide a


better understanding of what is driving this decline, the Oil & Gas sector is discussed further in this analysis.


General Industry - Oil & Gas In 2019, the market for Oil & Gas investment casting underwent an unexpected decline resulting in foundries


®


serving this sector experiencing declines ranging from 25-35%. There are three main


factors affecting this decline


in performance: global economic performance, inventory levels and tariffs. In recent years, the United States had become a major exporter of energy products, and as a result, the Oil & Gas market segment is largely tied to global economic performance. While the US economy is considered to be strong, the same cannot be said for Europe and Asia. Hence the demand for oil and gas exports has fallen off significantly. The last major downturn in the industry ended in June 2016, when exploration and drilling resumed and grew at a significant rate. Producers, seeking to optimize return of investment once again returned to producing to inventory


and continued high rate


production well after energy exports began their decline.


a high level of surplus inventory in an era of declining sales.


This resulted in As a result


major producers, such as Halliburton and Schlumberger, found themselves in a position where cutbacks were necessitated.


In 2019, producers


experienced plant closures and layoffs, and casting procurement gave way to cannibalization of idle equipment. Lastly, tariffs have also taken their Affordable steel from overseas


toll.


sources was no longer available for pipelines, affecting production and


January 2020 ❘ 15


other sectors, such as Pumps & Valves and Transportation will also be affected as a result.


This collateral damage


was previously witnessed in the last downturn and the industry is currently showing signs of the same affect.


Summation In summary, Aerospace and Industrial Gas Turbine casting sales accounted for the majority of the growth experienced in 2019, while Automotive experienced a minor contraction and General Industrial products exhibited moderate growth. The Oil & Gas sub-sector is in a state of decline and is expected to have some collateral effect of other General Industry sub-sectors in 2020. Overall, it is estimated that 2019


North American investment casting sales realized approximately 4% growth from 2018 levels, achieving an estimated $6.0 billion in 2019.


A more in-depth examination of


the North American market will be presented at the Business & Leadership Development Conference in Santa Fe, NM on on April 27, 2020.


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