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As to be expected in these challenging times for the world, foundry production rates have decreased in all regions, with a decline in automotive production and the temporary paralysing of normal life following extreme lockdown measures earlier in 2020, which saw many manufacturing facilities dramatically reduce activities to meet various national legislative requirements imposed in the fight against the spread of COVID-19. Following the monumental adjustment that business and societies had to make in the first and second quarters of the year (depending on location), the summer months saw a slight improvement, which continued into autumn, but a lack of confidence has re-emerged as countries react to further waves of coronavirus with continued restrictions creating yet more uncertainty.
Europe
The Association Technique de Fonderie reports that the foundry sector and wider French economy is in “a more difficult situation than in 2018.” Having witnessed ongoing decreased foundry production levels for some years, 2020 has exacerbated the dilemma. On a positive note, French foundries concentrate on maintaining capacity to produce complex, high value castings, thanks to a high technical legacy in the French cast metals sector.
Italy reports “the worst result since the 2009 crash” for Italian cast iron foundries at the end of 2019 and with the obstacles of 2020, with all markets – mechanical engineering, industrial vehicles, earth-moving equipment, agricultural machinery, machine tools and construction – witnessing significant downturns. ASSOFOND reports an expected decline from -20 per cent to -30 per cent for Italian foundry production. Between January and April 2020, iron casting production decreased by 42 per cent and non-ferrous production decreased by 32 per cent.
In Germany the 82 per cent average foundry production capacity utilisation levels experienced between 2014-2019 have been slashed to 63 per cent. Order levels in German foundries in June of this year fell by 31 per cent. The coronavirus pandemic has also caused a decrease in the number of orders in Polish foundries along with disruptions in supply chains. It is expected that the production volume in the first part of the year in foundries dropped by an average of 30 per cent, resulting in a decrease in sales volume. The Polish Foundrymen’s Association reports a concern that many companies may reduce the number of employees. They warn: “It is worth emphasising that the biggest challenge for many foundries will also be to maintain cashflow.” Whilst Romanian foundry production had stabilised, albeit at a low level, in 2019, it is envisaged that this will decrease by around 25-30 per cent because of the global pandemic. Being a predominantly export-oriented country, with exports of goods and services accounting for about 65 per cent of GDP in 2019, Belarus is also concerned about the prospects for the coming year.
Buoyed by economic success in 2019, which has been hailed as a “year of recovery” for the Turkish economy and one in which Turkey secured the position of third highest volume of casting production in Europe, more recent signs show a deceleration because of the slowdown in the automotive industry. A slight recovery in the Austrian economy early in 2020 was brutally ended with the outbreak of the COVID-19 crisis. The decline did not just start with the lockdown in Austria and Europe, the lockdown in China and the associated decline in demand from Asia had already greatly impacted the industry. Austria was already experiencing signs of a recession prior to the current climate. The Austrian foundry association warns: “The current crisis must not hide the fact that structural and external problems had worsened industrial sentiment long before the COVID-19 crisis. Even if the negative effects of the coronavirus crisis settle down, still a big ‘if’ associated with it, then the pre-crisis problems arise again. For the foundry industry, the weak demand was already noticeable in 2019.” There are, however, indications that the situation will improve offering hope of a turnaround. Sales in the Austrian foundry sector showed an unprecedented decline by about 30 per cent in the first half of the year, and foundries expect a decline of 26 per cent in the second half of the year compared to the previous year.
An economic slowdown is expected in the Czech Republic in coming years, mirroring developments in the country’s main trading partners. In 2020 and 2021, the economy is projected to continue to grow at a slower pace, at 2.1 and 2.2 per cent respectively (Commission Winter 2020 forecast). Domestic demand growth will moderate but is likely to remain the main growth driver. Investment is expected to decelerate in 2020. Global developments, trade uncertainties, a tight labour market and the transition to a greener economy pose challenges to growth. Total foundry production was lower in 2019 than in the previous year. There was little optimism for 2020 and then the pandemic further accelerated the situation.
The Spanish foundry sector has experienced a clear slowdown linked to the evolution of Spanish exports and the economy and, most notably, a slowdown in automotive production throughout 2019. Optimistic thoughts of a slow growth period at the beginning of the year were thwarted by the impact of the COVID-19 crisis, which has altered all the forecasts for the foundry industry. Due the country’s dependence on seasonal activities such as tourism, retail, transport, accommodation and food services (some of the most affected by the global pandemic), current predictions for the country show Spain as amongst the countries in the Eurozone with one of the worst growth forecasts. The outlook for the next three years will be marked by containment, with production levels below the ones achieved in 2019 and a path of recovery is expected for the biennium 2022-2024 with the reactivation of sectors such as automotive, wind energy, chemical, machine tooling, oil and gas, etc. More than 80 per cent of cast metals production in Spain is exported. Though the manufacturing figures for cast components for the automotive industry have increased in some cases (especially since July), other industries have suffered a lower number of orders in the second half of the year. The Spanish foundry association, Tabira enthuses: “There is renewed optimism that from 2021 onwards, production levels will recover little by little to those in 2018”.
Export is a major factor for Hungarian foundries, which have experienced a relatively steady market position during recent years. However, following six good years, Hungarian foundry production figures decreased in 2019 and there are of course moderate expectations for this year.
Although the UK ceased being a part of the European Union on 31st January 2020, it remains inextricably linked to Europe and is still embroiled in negotiating an EU withdrawal agreement. Such uncertainty led to a difficult year in 2019 with stockpiling activities affecting later output and order performance. However, the foundry sector responded with stable production levels and continued investment in plant and equipment. During 2019, despite the general stable situation for most foundries, some foundry closures and consolidations took place. At present it is estimated that output for the year may be reduced by around 30 to 40 per cent in the UK.
In 2019 the total production of castings in Finland decreased by around ten per cent on the 2018 figures. A similar trend is seen in Sweden where total foundry production decreased by around three per cent in 2019, mainly connected to the stagnation of the Swedish economy. The Swedish Foundry Association predicts a possible decline in the range of 30-50 per cent for 2020.
Rest of the world
In South Africa, lockdown measures restricted manufacturing industry to operating at 30 per cent staff levels to minimise the spread of the virus. As this was impractical for foundries, there has been a significant impact in terms of ability to operate effectively.
Price fluctuations in Korean foundries are believed to largely depend on the impact of the situation in China. For instance, in areas where Chinese production is decreasing, some work is available for Korean foundries with small profit margins, but these instances are few and far between. The Korea Foundry Society is predicting “a future production panic”. The sector has witnessed foundries with increasing debts and several foundry closures.
Japanese foundries were already suffering from reduced production levels in 2018 and 2019 and 2020 will continue this trend. The installed capacity of the Indonesian metal casting industry is predicted for ferro casting to be 550,000 tons/year, aluminium casting 250,000 tons/year. In 2020 Indonesia was hit by the pandemic, resulting in the foundry industry operating at around 16-50 per cent of its production capacity, social distancing regulations saw workforces limited to half that of usual numbers.
The foundry industry in the United States saw positive growth continue through 2019, with strong demand in several manufacturing sectors, led by automotive, aerospace, and water infrastructure. Reshoring by US based companies contributed to the increase in casting demand, along with the new USMCA trade agreement with Mexico and Canada, which was completed in December 2018. However, the number of facilities continues to decline and the impact of this year’s production disruptions in terms of COVID-19 and the presidential election are yet to be assessed.
There is currently a decline in small and medium-sized enterprises in neighbouring Mexico, but since 2012 there has been an increased development of large companies or global industrial groups that have invested in the expansion of their plants, as well as domestic investment abroad, thereby increasing their installed production. Most companies in Mexico offer additional services with machining workshops. However, much of Mexican foundry production is reliant on the automotive industry with 63 per cent of castings destined for that sector; Around 54.5 per cent are for the domestic market with the rest exported mainly to the US, Japan, Germany, Korea, Central America and the rest of Europe.
Egyptian foundry production has also suffered this year. However, plans for a new 30,000t/year automotive foundry for iron and steel castings at Helwan Iron Foundries in Cairo, are continuing. In addition, another automotive foundry has been contracted at Delta Steel Mills with a total capacity of 20,000t/year; production is planned to start by the end of 2021. The Egyptian Company of Aluminum has also announced it will invest in a new, modern foundry for aluminium wheels with an annual production of one million wheels in the first stage, to be doubled in the second stage.
China and India
As expected, China’s industrial growth witnessed a sharp decline in the first two months of 2020 as it was the first region to battle the impact of COVID-19. Foundry exports from the area are widely affected by the current situation. The Foundry Institution of Chinese Mechanical Engineering Society reports: “Based on current control measures and initial results in China, we believe the impact on the industry is temporary, and the market tends to be stable and has a good prospect in the long run.” China is also confident that the continuous investment by the Chinese government in key areas such as new infrastructure (5G, ultra-high voltage, inter city traffic, charging stations, big data centres, artificial intelligence, industrial network, etc.) will create on-going opportunities for the foundry sector.
Despite the downturn in the automotive sector, the Indian foundry industry is hopeful, also in part, thanks to government focus on improvement on infrastructure in the country. The Institute of Indian Foundrymen says: “The demand for iron and aluminium castings could grow by 35-40 per cent in the next three to four years from that of current levels. The government is fast tracking infrastructure projects, there are some green shoots visible in mining, earthmoving, construction of roads and rural housing etc., which will push demand from earthmoving and allied equipment.” Export demand has increased in recent years and is still described as “good” despite the offshoring supply concerns raised this year following the realisation that extended supply channels are vulnerable when challenged by a globally disruptive force.
Automotive
Obviously, the considerable European slowdown in the automotive industry has had a significant effect on the European foundry sector.
The fortunes of French automotive foundries are being affected by the trend for delocalisation. The predicament is echoed across Europe with the Italian Association of the Automotive Industry (ANIFA) reporting that in 2019 there was a 14 per cent decline in the number of vehicles being made in Italy – most notably there was a drop of 19 per cent in passenger cars.
Slovenian automotive foundries also witnessed a drop in demand resulting in a reduced export activity for the Slovenian foundry sector, creating one of the lowest growth rates in the country of the past ten years. The German automotive industry is a significant customer for Slovenian foundries, thus the reduction in demand has caused a decrease of 60-80 per cent with some foundries closing down production for several weeks. The Slovenian Foundrymen Society reports that optimism has however returned. “After the relaunch of automobile industries in May, the production slowly restored. Our biggest foundries from the automotive industry segment reached above 70 per cent production before the pandemic, by the end of June. They could reach 90 per cent orders by September. If car sales strengthen by the end of the year, we expect the fall of this year’s production and sales to be around eight per cent.”
Many car plants in the UK took extended closures around Easter, with new car registration dropping by 97 per cent in April 2020 compared to April 2019 and car showrooms closed because of the social distancing and lockdown restrictions imposed by the government. Light commercial vehicle registrations were also down more than 86 per cent in April compared to April 2019.
The outlook for the automotive industry is quite ambitious, as by 2030 it is estimated that the electric vehicles market could reach a quota of 24 million/vehicles per year. Logically, this means a change in vehicle designs and replacement parts development and will require the foundry sector to adapt to accommodate new technologies. Tabira reports that Spanish foundries are monitoring this move and are developing some initiatives to explore the impact and the new opportunities.
The slowdown is not confined to Europe. In India, which had benefited from a reasonable growth rate, automotive production and demand registered a steep downward trend, with what the Institute of Indian Foundrymen reports as a “lack of clarity on EV mobility” resulting in concern in Indian automotive foundries and thus impeding major investment.
The continued move towards the next-generation of automotive technology has dominated Japanese auto manufacturers in recent years. There is growing concern amongst Japanese automotive foundries as to how this will translate for their future development needs. The automotive industry is not only pursuing the move to electric vehicles, but also developments in connectivity, autonomous, and shared and service in the Japanese car market. Consequently, foundries have been changing their basic strategies for future casting production plans to accommodate the new and future production demands. In April 2020, the production of automobiles was down by 53.3 per cent in Japan compared to April 2019, and the effect of the pandemic to the automotive industry is anticipated to continue for a while, so the production figures for castings is predicted to be drastically down in 2020.
In terms of the current situation for Japanese automotive castings, in April of this year there were declines in all alloys of: 20 per cent (grey and SG iron castings), 31 per cent (aluminium) and 33 per cent (diecastings).
In Switzerland, the foundry sector reports that customers from the automotive industry: “hugely stepped up the pressure again for price reductions to finance the upcoming investments in the new technologies like electromobility, autonomous and connected driving. Lightweight measures have become standard and a commodity.”
Other contributing factors
South African foundries continue to identify energy and skills shortages as some of the major challenges the foundry sector is facing. To mitigate against the skills shortages, the National Foundry Technology Network, in collaboration with industry stakeholders, is developing younger people with core foundry skills. Artisanship training in moulding and patternmaking is offered at college level to bridge the skills shortage in the country.
Continued investments in automation in Sweden are quoted as having reduced the need for manual labour. However, the higher unemployment figures because of the stagnation in the economy has made it easier to recruit. The industry still has difficulties in recruiting younger and well-educated employees. To address this, in 2019 a web-based distance education package for HPDC was launched as a result of a European project.
In Japan there has been an ongoing increase in options to educate and train young foundry workers with a special educational course and advanced educational course on all casting technologies since 2007.
A range of training, education and skills development options are continually being developed in the UK through the Institute of Cast Metals Engineers and Foundry Training Services at the National Foundry Training Centre, a purpose-built facility to support the UK’s foundry sector. The World Foundry Organization (WFO) also has a training and professional development working group, consisting of members from around the world.
Turkish foundries suffered due to the costs of the import of raw materials. A sharp increase in both energy and gas prices was sustained in 2019. In comparison with the previous year, electricity and natural gas market prices for industrial facilities were up by 25.4 and 26.2 per cent, respectively in 2019. Energy costs of foundries were reported to increase by 17.1 per cent on the Euro basis in 2019.
According to the Austrian Energy Agency, energy prices in Austria in 2019 continued to rise compared to 2018. Due to a series of price increases in 2019 and the previous separation of electricity prices in October 2018, the price of electricity rose sharply. At the same time, the price of gas also became somewhat more expensive year-on-year.
The proposed new energy policy from the Australian government, which may see electricity prices reduce for the first time in years, is holding up some investment in Australia as the industry looks to replace existing ageing equipment. The National Australian Foundry Institute reports: “Energy cost is the most feared cost in the industry currently. Energy cost has double on average in the last ten years and some state policies have the potential to drive prices up further.”
Rising energy costs also continue to plague the Spanish foundry sector as oil, electricity and gas prices have experienced continuous rises in recent years. The EU has seen continued growth in electricity prices, and Spain is one of the countries where additional taxes are applied. In short, the rate paid by Spain is 22 per cent higher than the European average and 30 per cent higher than Germany.
Exchange rates continue to have an effect: The Swiss Foundry Association says: “In addition to the global slump in business development, the falling margins due to the successively repeated strengthening of the Swiss franc against the euro also had a negative impact on the annual result.” The rising cost of raw materials is the “primary expense driver” in the US, accounting for 51 per cent of operating costs. Political and economic instability have also had negative effects on the foundry industry and are cited by countries, including Spain and the UK as of particular concern.
Limiting numbers of workforce to meet social distancing guidelines, additional cleaning and hygiene tasks, cracks in the supply chain and shipment issues have all played their part in creating obstacles for the industry to overcome this year. In all parts of the world, foundries, their suppliers and their customers have had to adapt facilities and, in some cases processes, to meet their moral and legal obligations to protect employees and visitors from virus infection. It is a battle that rages on, as does the need to provide high quality, engineered solutions to all of the world’s problems.
Political turmoil has also affected Belarus and the US.
The future is cast
Those supplying critical industries have in many cases had to increase volumes and meet even tighter deadlines to produce urgently needed medical supplies. In itself, this has been an enormous task and is balanced with others in the sector whose production was temporarily halted due to lack of demand or legislative barriers.
In many respects the cast metals sector has responded swiftly and efficiently to an extraordinary situation, whether speeding up or downing tools for a period. However, despite the ongoing issues of 2020, investment does continue and foundries around the world have used this year to re-assess future plans and look to new technologies to help maintain world-class solutions to produce complex, strong and durable components. Industry 4.0, artificial intelligence, connectivity, data interpretation, environmental commitments and 3D printing are all having an impact on how we manage our facilities. Health and safety and PPE is nothing new for our industry, this is how we operate. However, the extent to which the sector has had to adapt this year and manage global supply chains whilst operating in a local and regional bubble is quite frankly remarkable. Of course flexibility is inherent in a foundryman’s DNA.
As the world battles ongoing disasters and humanitarian engineering becomes increasingly part of our obligation, it is hard to imagine a more worthy “team player” than the foundry sector; an industry which takes scrap and recycles it into components for life-saving and life-enhancing equipment, an industry which takes practical people and develops them into entrepreneurs, craftsmen and skilled engineers, and an industry that takes what is thrown at it and designs its way to success. Now that’s an industry you want to be associated with!
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