According to Assofond’s data, production grew by 2.8% with respect to 2017, but the drive is depleted. The downturn of the automotive industry weighs the growth down
by Roberto Guccione
The study centre of Assofond, Confindustria’s association which represents Italian foundries, circulated the quarterly analysis on the state of the industry regarding the last period of 2018. The report, based on data supplied by associated industries (which account for 31% of the domestic production), provides a real-time representation measured every quarter of the trend of all main indicators in the foundry segment. The analysis of these data shows a moderate growth in 2018, but a gradual tapering of the drive which had characterized the first few months of 2018, and a hardly encouraging outlook for 2019. Production recorded a 2.8% increase with respect to 2017, in a general context of marked deceleration in the manufacturing industry. Growth is however moderate and characterized by very different dynamics in the various segments.
The indicator remains around 100 even in the last quarter of 2018, basically even with the average 2017 values and with the previous term, but at the same time it is lower than the values for the first and second quarter of 2018, respectively equal to 106 and 105 points.
“We are closing 2018 with a moderate growth;” – the president of Assofond, Roberto Ariotti, underlines – “if, on one hand, it does not satisfy us fully, on the other hand it does not represent zero growth with respect to the previous year, something which we feared after the hard times we went through during the months immediately following summer. The strong deceleration of the automotive industry is weighing down the sector, especially cast iron foundries, which are experiencing the strongest downsizing. Those working for the automotive industry are living in a climate of generalized uncertainty; orders for traditional projects stopped, and orders for new projects are delayed, since it is still not sure in which direction the car segment will head”.
The transition towards hybrid and electric sustainable mobility has begun and will be a key issue for the entire automotive components segment during the next few years.
“We are not ready to face this” president Ariotti explains, “but so far we do not know what the future will be like. For foundries, the automotive industry is a key market: 32% of cast iron castings and 57% of non-ferrous castings are destined to this segment and choices by our clients – which are heavily influenced by European policies in terms of emissions – will direct our future and the future of the entire automotive value chain. Let us just think about the consequences which the introduction of the new WLTP approval system brought about: the German car industry struggled to comply with the new standard, with a drop in registrations in Germany of about 9% during the last term of 2018. This led to very negative repercussions for all suppliers of components, including the Italian foundries, for whom Germany is a key market”.
Segments: cast iron slows down, ferrous metals hold their ground, steel bucks the trend
Breaking down the data, cast iron castings production decreases by three points and its seasonally adjusted index drops to 100, after 103 in the third quarter and 105 at the peak moment of 2018, the second quarter.
Non-ferrous metals do not manage to recover the same average levels as in 2017: the value of 99 points marks an upswing compared to the third quarter, which showed a decrease to 97 points, but does not reach the levels of the previous year, exhausting the good start of the first two quarters of 2018, at 107 and 104 points respectively.
The steel segment bucks the trend: 2018 allowed to recover the values of 2017, which was a terrible year for these foundries. The index is over 100 points for all quarters and, during the fourth, gains further ground reaching its peak, 116, after two periods of slight decrease (111 points in the third term, 114 in the second).
The overall trend, after the last recording, is clearly negative: not only, in the last quarter, the difference between this value and the corresponding period in 2017 is -5.4% which represents a further decrease on the general trend.
Revenues above the 2017 average, but foreign demand begins to decrease
During the last quarter even revenues have decreased, with respect to the previous quarter, but are still higher than the 2017 average. On an annual basis a 6.7% increase has been recorded, with cast iron at +7.9%, steel at +13.5% and non-ferrous metals at +4.4%. In seasonally adjusted terms, the index loses 5 more points, in the fourth quarter of 2018, and settles down at 103 points; less than the first quarter (105) and showing a negative progression with respect to the 110 points of the second quarter and the 108 points in the third quarter.
The trend of export revenues is more dynamic with respect to internal demand: overall revenues at the end of the year close at 103 points on the seasonally adjusted index calculated on the 2017 average, while foreign demand is higher, 108. Both are however decreasing with respect to the third quarter, a moment when the foreign components proved superior with respect to the overall average.
The growth of non-ferrous foundries slows down
The non-ferrous foundries segment keeps up a positive growth equal to 2.4% on an annual basis, but the fourth quarter of 2018 confirms the decrease which has been going on for some months. For the second term running, production levels decrease when compared to the respective 2017 periods. The decrease in the third quarter was equal to -3.6%, while in the fourth term it becomes sharper and reaches -5.8%. The 2.2% cyclical increase, that is, the positive change in the last term of 2018 with respect to the previous one, is not enough to dispel fears of a recessive picture; non-ferrous foundries do not just have to face a very favourable trend in 2017 which did not occur again in 2018, but also a progressive loss during the second and terms of 2018.
Revenues, on a yearly basis, grow more than production, and the change which has been recorded is equal to 4.4%, with a foreign demand which supports the overall demand right up to +7.3%; domestic demand, on the other hand, stops growing, with an annual change of -0.3%.