Andamento mercato fonderie non ferrose

Market trend of non-ferrous foundries: in 2022 the production of non-ferrous castings fails to consolidate the record of 2021

Before going into the analysis of the results for 2022, it should be remembered that in 2021, of all the production sectors, the one of non-ferrous metal foundries had recorded the most intense recovery, repositioning itself on a higher level than pre-Covid and record of 2018. The vigorous rebound (+34%) was among the most lively in the entire European panorama, beating Germany (+5%), France (+3%) and even Turkey (+29%).

Even 2022, in its very first months, benefited from a positive carry-over effect inherited from 2021. Starting from the second quarter of the year, however, a widespread weakening of demand was observed, which affected all destination sectors more or less intensely.

The slowdown was partly physiological, due to the comparison with a 2021 of brilliant recovery, but it also suffered from greater uncertainty due to the outbreak of the conflict caused by the Russian invasion of Ukraine, the resurgence of the virus and the upward pressure on prices raw materials, especially electricity and gas. Furthermore, the slowdown profile, which has affected almost all the main destination sectors for non-ferrous castings, is in line with the normalization phase of world growth and is affected by the more uncertain demand conditions determined by the shortage of intermediate inputs, in particular electronics, which has had an impact above all on the automotive sector.

The production of non-ferrous castings in 2022 therefore stopped at 820,582 tons, recording an average decrease of -6.8% yoy compared to 2021.

The inflationary push, deriving from the translation of price increases along the supply chain, supported the substantial increase in turnover at current prices (+15.9% yoy in 2022) bringing it to 4.5 billion euros. This growth, in the light of the average increases in metal and energy raw materials last year, could however lead to some sacrifices in terms of the sector's margins (EBIDTA margin of 9.8% of the aluminum sector, for 2021).

The degree of saturation of production capacity stood at 75%, 8 percentage points below the utilization of 2021.

Main dynamics of production and turnover of non-ferrous metal foundries

The fifteen-year period 2008-22, which includes the effects of the sovereign debt crisis in Europe, as well as those of the 2009 global recession, the pandemic, the conflict in Ukraine and the energy shocks, saw a process of compression of the overall volumes of  non-ferrous castings in terms of tons.

The evolution of output in the years following the international crisis of 2009 shows, also for this sector (similarly to what happened for ferrous metal foundries), a real break with the production levels of the past, which fluctuated around one million of tons. Once the adjustment phase between 2010 and 2012 was overcome, the subsequent cycles also allowed for phases of ascent, but the underlying trend led towards a lower reference point for average annual volumes, which stands at around 850,000 tonnes.

In the period 2008-2022, the non-ferrous castings sector, from the point of view of volumes, developed at an average negative pace, i.e. at an annual growth rate (CAGR) of -1.3%, which led to a total loss of over 260,000 tons. The CAGR is a "smoothed" rate, because it measures the percentage change over time of a certain quantity as if it had grown at a constant rate on an annual basis and, consequently, it attenuates the volatility of the growth rates recorded during the interval on the single year.

In ten years, the turnover of non-ferrous foundries has recorded an average annual decrease (CAGR) of -0.5% in nominal terms, settling on an average level for the period of 4.2 billion euro.

The alloys and production technologies of non-ferrous foundries

In the analyzes of these two dimensions, the units under observation belong to "multi-metal" and "multi-technology" production realities, i.e. foundries dedicated to the simultaneous production of several metals using different production technologies.

Within non-ferrous castings, the average results of the sector in 2022 are mainly conditioned by the trend in the production of aluminum castings, which dominate the total volume of non-ferrous with a weight equal to 82%, but the wave of negative signs affected all the other non-ferrous alloys, albeit to different extents.

The production of aluminum castings stood at 681,904 tonnes in 2022, with a loss of over 45,000 tonnes (-6.2%) compared to 2021 volumes.

Among the most important non-ferrous metals in terms of volumes produced, thus ignoring magnesium, zinc alloys weighing 11% significantly marked the pace with a decline of -7.3%. The heaviest contraction was marked by copper-based alloys (bronze, brass) with a drop of -9.8%. This production represents a share of approximately 6% of non-ferrous volumes.

Although the die casting of magnesium alloys is predicted to be the most developed casting technology and there have been, in recent years, several important openings in favor of a greater development of the use of this alloy, particularly in the automotive sector, the production of Italian foundries remains modest, less than 1% of the total non-ferrous castings. Furthermore, in 2022 there was a further downsizing of this market niche, which experienced a vertical drop in production, reduced to 3,143 tons, down by -40.5%.

In the scenario of the technologies adopted for the production of non-ferrous castings, die casting occupies the first position (77% of the total). In 2022, approximately 632,000 tons of non-ferrous castings were made with this type of casting (-5.6% compared to 2021) in the various alloys:

- Approximately 519,000 tons of aluminum and alloys;

- 3,000 tons of magnesium;

- 88,000 tons of zinc;

- 22,000 tons of copper alloys.

Among the most common types of casting, after die casting, gravity die casting and low pressure are in second place, with a share of 21%. Overall, production in 2022 stopped at 173,000 tons, with a decrease rate of -10.6% compared to 2021. The most conspicuous decrease was recorded in the area of shell gravity (-11.7%), while low pressure technology has held up better managing to curb the descent below -4% compared to 2021.

Finally, the remaining 2% of the total production of non-ferrous castings equal to approximately 16,000 tons (-11.5% compared to 2021) was made with sand casting, a production technology that reported the most significant decline in 2022.

The target markets of non-ferrous foundries

The five traditional industrial sectors are confirmed as the main markets that feed the demand for non-ferrous castings and are grouped into as many statistical macro-categories:

- Mechanics

- Means of transport

- Construction

- Electrical engineering

- Durable goods

It should be remembered that the term "means of transport" includes castings intended for the automotive sector, components, motorcycles, buses and other vehicles used for the transport of people and things; while in the category of mechanics, in addition to various mechanics, tools, etc., earthmoving and agricultural machines are classified according to their intended use which does not include the transport of people or things, but the processing and handling of the ground.

The Italian market for non-ferrous castings, unlike the German one, is not completely dependent on the means of transport industry, better expressed with the term "automotive".

In the last decade, the weight of this sector on the overall production of non-ferrous castings fluctuates between 51% and 58% (56% in 2022), while the percentages rise significantly, even over 70%, in the specific case of aluminum alloys. In 2022, almost 460,000 tons were allocated to this sector, substantially in line with the results achieved in 2021, but 8% less than in 2018.

In the last decade, volumes have grown to reach the record level of 2018, in which 500,000 tons of production were touched, but since 2019 they have started to fall again. The average annual growth rate for the period 2013-2022 was 1%.

The building sector represents the second reference market for the Italian foundry of non-ferrous castings. Non-ferrous components destined for this sector in 2022 represented 16% of production, for a volume of approximately 131,000 tons, down by -5.6% compared to 2021.

All the other three sectors ended 2022 in highly negative territory. Electrical engineering absorbed 9% of the production of non-ferrous castings. This category includes applications for electric motors, components for internal lighting and street furniture. Overall, production destined for this application area recorded a drop of -16.1% and volumes slipped below 74,000 tons.

The use of non-ferrous castings in the production of process machines and in various mechanics has also fallen sharply. The change of -17.2% compared to 2021 brought the quantities addressed to this industrial sector below 66,000 tons of non-ferrous castings.

The category of durable goods, which includes components for household appliances, household items and metal furniture (pots and other accessories), saw its absorption capacity of non-ferrous castings decrease by almost two percentage points in 2022, going from 10% to 8% due to the intensity of the collapse, which came close to -22%.

The statistical classification "miscellaneous jobs" includes a series of products that do not find a place in the categories examined above and for which ISTAT does not currently provide details. We believe that this entry welcomes innovative applications in less typical markets for foundry productions, artistic castings, etc. In 2022, the percentage weight of this production destination remained around 3%, while the decrease recorded was -15.3%.

Raw materials, after the shocks at the beginning of 2022, prices have stabilized at values that remain high

Also with regard to the raw materials used by non-ferrous metal foundries, 2022 was a year characterized by significant inflationary pressures, due to a variety of factors.

The Russian-Ukrainian conflict, especially in its initial phase, has amplified the difficulties in obtaining materials from the countries involved, with bottleneck effects that have gradually been transmitted along the entire supply chain.

Russia and Ukraine, in addition to fossil energy sources, are in fact world leaders in the production of some basic raw materials for the industrial activity of foundries such as cast iron and aluminum ingots, and numerous other commodities: coal, nickel, copper and ferroalloys. The invasion of Ukraine immediately created great alarmism and panic: the Italian foundries initially moved to try to replace Russian and Ukrainian raw materials quickly, unleashing a race for supplies which, in turn, together with the normal which in these cases are generated on the markets, has caused a price shock for certain commodities never seen before.

As regards specifically aluminum and zinc, we can note that between March and April of last year the already red-hot prices actually reached their historical peaks. In the second part of 2022, there was a gradual waning of the impact of the increase, even if prices remained at much higher levels than those of previous years.

The prices of primary aluminum alloys in the annual average of 2022 compared to 2021 had the following inflation:

- LME: +22%;

- “Italian market 99.70 in blocks”, source Assomet: +26%.

The prices of secondary aluminum alloys in the annual average of 2022 compared to 2021 had the following inflation:

- LME: +3%;

- “Italian market Al Si11 Cu2 (Fe) Zn1,4 EN AB 46100”, source Assomet: +14%;

- “FasmarketsAluminum pressure diecasting ingot DIN226/A380”: +15%;

- “France Market, Regeal”: +7%.

The alignment of the prices of primary aluminum and secondary aluminum alloys is usually considered a market anomaly, which can occur when the price of secondary aluminum tends to follow more the trend of scrap rather than that of primary aluminum. Specifically, behind the sharp jump in the secondary sector in the January-March 2021 period, there was the recovery of Chinese industrial activity, which was expressed in that context with a growing demand for aluminum scrap. This increase in the demand for secondary aluminum had originated from the maneuver undertaken in 2020 by the Chinese government with the restrictions on the import of scrap and processing waste. The effect was the interruption of the import of scrap by China, in favor of the import of aluminum alloys. The result was a market disequilibrium between supply and demand and a growth in the prices of secondary aluminum which reached primary levels. Condition that has subsequently normalized.


Source: In Fonderia – ll magazine dell’industria fusoria italiana