Analysis of the Italian foundry market in the fourth quarter of 2024: sharp contraction, between a stagnant market and rising energy costs
In the fourth quarter of 2024, the cyclical variation in production (in tons) of Italian foundries is zero (+0%) compared to the third quarter, after two periods in negative territory. The trend values are confirmed as negative for the fourth consecutive period and the -8.9% drop on the same quarter of 2023 does not signal any point of discontinuity, especially if observed in conjunction with the cyclical data.
The latter, in fact, reveals a still very complex picture: despite the greater number of days worked compared to the third quarter, which included the month of August in which company closures and stoppages for maintenance activities are historically concentrated, the situation remains flat and shows no signs of recovery.
We also see similar dynamics from the point of view of turnover, but the decline is even more marked: between the fourth and third quarters, a further -4.0% is lost and the trend curve also signals a deviation similar to that of the previous quarter (-11.6%).
The data emerging from the latest analysis of the Italian foundry market in the fourth quarter of 2024 carried out by the Assofond Study Center therefore once again highlight a dynamic of great difficulty for the entire sector, which finds itself caught between the grip of a general decline in demand on the one hand and a growth in production prices on the other, driven by significant increases in energy.
"We find ourselves in an unprecedented situation, with energy costs in foundries skyrocketing while at the same time market demand is drastically declining," underlines Assofond President Fabio Zanardi. In 2022, at the height of the energy crisis, we had solid demand and the important support of tax credits. Two factors that, together, allowed us to overcome the moments of greatest difficulty. Today we are in a completely different situation and we are no longer able to sustain the competitiveness gap that separates us from our main competitors. It is increasingly urgent to intervene at a European level to harmonize energy prices and give new life to the entire manufacturing industry of the continent, which if nothing is done will continue to pay the price towards the United States, China, but also countries on the borders of Europe, such as Turkey, which are gaining significant market shares.
Production and turnover: sector dynamics
Cast iron and steel foundries are those that are suffering the most: the economic situation is essentially zero (-0.1%) and the deviation from the production of the fourth quarter of 2023 is equal to -11.5%.
Non-ferrous foundries partially offset the general result: compared to the castings produced in the third quarter, the positive sign can be seen (+0.3%) and at the same time the negative on the trend value is thinning out (-1.6%).
The trend of Italian foundries is therefore differentiated by sector, with the majority of foundries that responded to the survey (45.7%) indicating a drop in production levels. The main reason for this trend is the reduction in market demand (56.5%). Furthermore, there is no shortage of foundries that indicate voluntary interruptions (4.3%). The fact that a considerable number of companies (40%) indicate an increase in production is easily explained by the greater number of days worked compared to the previous quarter: in fact, 70.6% of the companies that recorded a positive trend justify the result obtained in this way.
Turnover is down on the previous quarter in both sectors: for ferrous foundries it reaches -4.6% and for non-ferrous ones the decline is equal to -2.3%. The trend is also negative in both cases: in the ferrous sector (-12.7%) a slightly improving recessive dynamic is observed, but only due to effects contingent on the quarter, given the further cyclical loss; among non-ferrous foundries, however, a rather marked worsening is observed that began after the second quarter and that marks the worst negative in this latest survey (-8.9%).
The cyclical decline in turnover affects the absolute majority of the foundries in the sample (57.1%), and is motivated by the vast majority of companies (81%) with the reduction in quantities shipped.
Climate of confidence
In December, the Act index, which measures the general sentiment of the sector over the reference period, stands at 42.3 points. The figure is in line with that of the previous month, and therefore returns a negative assessment, as has happened in all the last six months, during which the foundries have never assumed a positive judgment: the index has in fact never been above 50 points. The Six index, which measures the expectations of companies for the following six months, also remains below the sufficiency threshold (48.1 points) but is growing compared to the November survey.
Italian foundry labor market
The analysis of the Italian foundry market conducted by the Assofond Study Center also maps the trend of the labor market in the sector every six months. In the second half of 2024, the absolute majority of foundries (68.6%) looked for new staff. The most sought-after profiles are specialized workers, indicated in 60.6% of the responses, followed by unskilled workers (27.3%) and office workers (9.1%). The selections made, however, return partial satisfaction on the part of the companies (58.3% of the responses); only in 25% of cases was the outcome of the search for staff judged to be fully positive.
The impact of energy costs on foundries
One of the most critical elements that emerges from the analysis of the Italian foundry market in the fourth quarter of 2024 is undoubtedly the impact of energy costs on foundries. Unlike what happened in 2022, when despite the spikes in energy prices, demand remained strong and companies could benefit from tax credits, in 2024 the sector finds itself facing two major challenges at the same time: still high energy costs and sharply declining demand.
This combination of factors is putting a strain on the competitiveness of Italian foundries, especially when compared with international competitors who benefit from significantly lower energy costs. The situation requires structural interventions at European level to harmonize energy costs and allow the continental manufacturing industry to compete on equal terms with the main global competitors.
The pressure of energy costs for foundries therefore represents one of the main causes of the market contraction, a situation that will continue to penalize the sector in the absence of targeted and timely interventions by the institutions.
Source: M. Brancia for In Fonderia – Il magazine dell’industria fusoria italiana