Based on the current casting forecast by IKB, an increase in tonnage of the global foundry industry can be expected by the end of the 2020s. However, significant regional differences in growth rates are anticipated. High uncertainties are particularly posed by geopolitical developments in Eastern Europe and Asia.
Economic slowdown and energy prices currently burden European and German production
In the short term, the economic development and the still high energy costs are burdening the German foundry industry. Production and order intake are likely to be significantly below the previous year's level on average in the industry this calendar year. The European industry association CAEF's sentiment survey recently provided signs of a slight successive improvement in the situation, which recorded an increase in the indicator for the third consecutive month in March 2024.
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Medium- and long-term industry trends provide impulses
The opportunities and challenges of the foundry industry are heterogeneous, depending on the product spectrum and customer industries. After the recent recovery, automobile production will grow only slightly in Europe and North America in the medium and long term but will remain a relevant sales market for cast products. This is especially true for iron and steel casting in the medium term, due to the slower-than-expected ramp-up of electromobility in Europe. Stronger impulses are expected from the commercial vehicle market due to upcoming fleet modernizations. A special economic boom is expected in North America in 2025 and 2026 for all commercial vehicle classes over 65 tons due to significantly stricter EPA emission standards starting from the 2027 model year. Overall, aluminum casting will continue to gain importance with the ramp-up of electromobility and the trend towards lightweight construction. The global mechanical engineering sector is expected to see a strong increase in sales by 2030. Important impulses are provided by ongoing digitization and the associated need to modernize the machinery. The global construction industry also remains on a long-term growth path, with infrastructure projects being the main driver. The planned expansion of wind energy in Europe will provide impulses for demand from the energy sector.
Casting forecast dependent on data situation and geopolitical and technological assumptions
So far, IKB's forecasts for the global foundry industry have been based on the annually published data of the Modern Casting Census. However, the production data for 2022 have not been published by mid-April 2024, contrary to the historical cycle. For this reason, the figures underlying the forecast for 2022 are partly estimates or based on rudimentary press reports. Therefore, the current casting forecast is provisional and could be adjusted if a different overall picture emerges when a current Modern Casting Census is published concerning historical production data.
Geopolitical assumptions include that the Russia-Ukraine war will end within the next two years, that the current conflicts in the Middle East will not spread to other neighboring states or will be resolved in the Gaza Strip by mid-2025, and that no new conflicts with international ramifications will break out in Asia.
The impact of the technological developments mentioned in the section on industry trends in electromobility, mechanical engineering, and the energy sector on the forecasted production figures, is based on current capacities and supply chains. Geopolitical developments, increased resilience efforts by the EU, and industrial policy programs like the IRA in the USA can therefore lead to regional shifts in the forecasted production figures.
Global Iron and Ductile Iron Casting: Contrasting Developments
In 2020, the COVID-19 pandemic caused a sharp decline in iron casting production, and by 2022 only a few regions had returned to 2018 levels. China was able to expand its dominant position in the short term but will be burdened by lower demand from the construction sector in the long term. Japan and Korea will also lose market share. The rest of Asia will develop on average, like the rest of the world. India, which has a high demand for infrastructure investments, is experiencing stronger growth; Vietnam and Indonesia will follow in the coming years. Within Europe, stronger growth is expected in Eastern European countries, including Turkey, which is still burdened by Russia's war in Ukraine. Spain could benefit in the medium term from the wind energy boom.
Aluminum casting: trend towards lightweight construction is a major global driver
The trend towards lightweight construction in the automotive sector and other application areas leads to increasing demand and material substitution, offering very good future prospects for aluminum casting. China will continue to expand its dominant market position. In the NAFTA region, Mexico is expected to achieve more growth in the medium term. Within Western Europe, positive impulses were overshadowed in 2023 by the recovery of the automotive industry from the economic development, especially from order slumps in mechanical engineering. Turkey and some Eastern European countries (e.g., Romania, Slovakia, Hungary) benefit from greenfield investments by Western European foundries for cast products for light vehicles, so medium-term overall good growth prospects exist for aluminum casting in Europe.
Conclusion: opportunities and challenges are diverse
High energy costs continue to be a burden for the foundry industry in Europe, especially in Germany. The path to the desired climate neutrality means high investment needs for the industry but also demands impulses from the energy sector. Ongoing digitization and the development of AI bring both technological challenges and sales opportunities. Part of the customer industry is shifting to other regions, but a number of new markets, especially in Asia, also offer new sales opportunities, such as Vietnam, Thailand, and especially Indonesia. However, these countries also see the emergence of new competitors, which could also become competitors in European markets in the long term. Consequently, there is an increasing need for German foundries to strengthen their economic equity, develop strategies to reduce energy and resource consumption consistently, and retain qualified personnel in the long term.
Dennis Rheinsberg
Direktor
Head of Energy, Utilities & Resources
