The Current State of Die Casting in Mexico and the USA
As the die casting industry emerges from the Covid 19 pandemic, we provide a brief overview of the state of die casting in the USA and Mexico. This article looks at current challenges for the North American die casting industry and where the road ahead may lead.
Die Casting in Mexico in 2021 and Beyond
Mexico’s die casting industry is currently ranked as the tenth most important in the world. The country is also ranked as the seventh-largest global producer of aluminum castings. Foundries throughout Mexico produce a wide range of products for the aerospace, automotive, and appliance industries. There are over 100 die casting plants based in Mexico with 25,000 companies related to the Mexican die casting sector, creating around 350,000 jobs.
The rise of Mexico in the metalworking industry is mainly due to increased domestic and international demand for lightweight car and auto aluminum die cast parts. Since 2011, the Mexican aluminum industry experienced a yearly growth rate of 13 %. From 2010 to 2016, 26 new foundries were built in Mexico. In recent years, there has been a dramatic increase in tier 1, tier 2, and tier 3 high pressure die casting suppliers.
As of 2020, the aluminum die casting industry accounted for approximately 80 % of the automotive parts produced in Mexico and added USD7 billion to the nation's GDP. Overall, 63 % of castings produced in Mexico are for the auto industry. 54 % of these products are for the domestic market, with the remainder being exported to the USA, Germany, Japan, Korea, Central America, and Europe. The Mexican aluminum die casting industry continues to expand throughout areas such as Nuevo Leon, Estado de Mexico, Distrito Federal, Coahuila, and Baja California.
The Mexican die casting industry was impacted by the Trump government’s renegotiation of the 1994 NAFTA agreement in 2018. NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) which called for up to 45 % of a car sold in the USA to be built in a country where a worker could earn a salary of at least USD16 per hour. However, the deal also included the elimination of tariffs on car production.
Although 2019 was a strong year, the Mexican die casting industry suffered significant losses during 2020. The Covid19 epidemic has caused supply chain issues that are still ongoing. North America as a whole experienced a 67 % rise in pandemic-related supply chain disruptions during 2020. Shortages in a wide range of goods were recorded as being up by a staggering 638 % in the first half of 2021. Additionally, the current dip in Chinese production of silicon and magnesium has resulted in significant price rises and shortages in much-needed materials.
Despite these challenges, die casting in Mexico looks set to remain one of the world’s most important die casting producers. Current efforts in partnership with the USA to address the restoration of supply chains are sure to bear fruit at some point. The recent devaluation of the peso continues to ensure that labor costs in Mexico stay low.
Demand for lightweight parts and components in the domestic and international auto market looks set to grow due to tightened restrictions on vehicle emissions. Despite recent legal and regulatory obstacles facing the domestic Mexican renewable energy industry, international demand for die cast components required for wind turbines and solar power arrays is set to increase. It can be expected that the die casting industry in Mexico will recover from its recent losses and continue to thrive in the years to come.
Die Casting in the USA in 2021 and Beyond
Metal casting is described by the North American Die Casting Association as the USA’s ‘most fundamental industry’. It is estimated that there are over 300 die casting companies in the USA with approximately 400 individual die casting plants. The die casting industry contributes USD8 billion to the American economy each year. Around 50,000 jobs in the USA are related to the die casting industry.
The majority of products produced by die casting companies in the USA are for the automotive and construction industry. The automotive industry accounts for 68 % of all aluminum die cast products manufactured on the USA with housing taking up 9 %. The housing market leads the way in demand for zinc die casting products, accounting for 45 % of the overall demand. Automotive parts account for 26 %.
As with Mexico, die casting foundries in the USA experienced significant growth in 2018. This growth was predicted to remain at 6.1 % throughout 2019. However, according to data from the Aluminum Association, 2.87 billion pounds of aluminum die castings were shipped by American die casting plants in 2019, as opposed to 3.12 billion pounds in 2018. Zinc die casting shipments did rise slightly in 2019, though, with an increase of 383 million pounds from 2018‘s figure of 379 million pounds.
Sales in the USA die casting industry were on the rise in early 2020 but as the Covid19 pandemic took hold foundry sales began to drop. Overall, die casting shipments in the second quarter of 2020 were down by over 47 %. There was some improvement in figures by the third quarter of 2020, though, and growth has been steady throughout 2021. However, industry analysts expect that it will still take some time before sales reach pre-pandemic levels.
Ten USA die casting foundries closed during 2020, a figure only slightly higher than normal. As the industry struggles to regain ground, more foundries are closing or consolidating during 2021.
As well as die casting foundries, recent events had an impact on other metalworking sectors. In August, Grede Holdings LLC announced it would close its foundry in Columbiana, Alabama. Waupaca Foundry likewise announced that it would close its iron factory in Lawrenceville, Pennsylvania in August. Grede CEO Cary Wood stated that the decision was due to "… market conditions, including the Covid19 pandemic." Rick Sutton Waupaca Foundry’s Vice President of Operations said that "The global pandemic heightened the need to find solutions to better serve our customers."
The USA die casting industry has struggled to cope with rising material prices and supply issues caused by the pandemic and decreasing production rates in China. Profitability projections for 2021 are not expected to be able to be achieved, and sales volumes are not expected to recover until the second half of 2022. Despite this, there are reasons to be optimistic when comparing the outlook for the USA casting industry to their counterparts in Mexico.
During a High-Level Economic Dialogue (HLED) in September 2021, the USA and Mexico agreed to create a bilateral working group on supply chains. Additionally, the American Foundry Society together with 100 other organizations are calling on President Biden to address the truck driver shortage. These efforts should go some way to restoring normality to supply.
Energy costs in the USA as compared to Mexico are lower, the USA has more access to skilled workers and the latest technology, making it better positioned to take advantage of the coming trends towards additive manufacturing. Additionally, increasing domestic and international demand for electronics, auto parts, and continued worldwide investment in renewable energy should assist the USA die casting industry in its recovery.