Structural Analysis of Italian Foundries: A Sector in Profound Transformation

In recent years, the global economy has experienced profound instability. The pandemic, the energy crisis, and geopolitical tensions have generated shocks that have severely impacted European manufacturing, with direct effects on the foundry sector as well.

In Italy, after the rebound in 2021, GDP growth has progressively weakened, impacted by both inflation and the reduction in international demand. In this uncertain environment, a profound transformation of Italian foundries has occurred, affecting not only their end markets or competitiveness, but also their very demographic structure.

A Complex Macroeconomic Environment for Foundries

In the fifteen years between 2008 and 2022 (the current cutoff date for ISTAT structural data), the global economic environment has experienced continuous crises and epochal transformations. Understanding this macroeconomic scenario is essential to interpreting the internal dynamics of the sector and the recent history of Italian foundries.

The period under review has gone through several critical phases:

• 2008-2010 – Global recession: the financial crisis caused a drastic reduction in demand and production, accompanied by significant difficulties in accessing credit.
• 2011-2013 – Austerity: restrictive policies further limited growth, reducing purchasing power and domestic demand, and worsening the competitiveness of companies.
• 2014-2017 – Gradual recovery: a progressive increase in demand, albeit with uneven dynamics. At the same time, the growing adoption of digitalization and technological innovation, including robotization and artificial intelligence, began to redefine production processes.
• 2018-2019 – Environmental pressures: The sector faced increasing sustainability regulations, which required significant investments to reduce environmental impact, increasing compliance costs.
• 2020-2021 – Pandemic: A further setback halted production and disrupted supply chains, slowing economic recovery.
• 2022 – Energy crisis: The invasion of Ukraine triggered an unprecedented energy crisis, difficulties in sourcing raw materials, and widespread inflation across all production costs.

In this context, the energy transition, with its policies favoring renewable energy, represented both a challenge and an opportunity for structural renewal.

Demographic Profile of Italian Foundries: The Contraction in Numbers

Over the period 2008-2023, the total number of foundries decreased significantly and almost continuously, from 1,225 to 861 companies. This represents a 30% reduction, equal to 364 fewer units, with a CAGR (Compound Annual Growth Rate) of -2.3%.

The most critical moment occurred in 2021, when 100 companies were lost, equal to 10.09% of the total. This decline can be attributed to the delayed effects of the pandemic, rising energy costs, supply chain tensions, and unstable demand.

The loss particularly affected non-ferrous metal foundries, which absorbed 88% of the 2021 closures. This result can be explained by the sector's unique characteristics:

• Strong production fragmentation;
• Predominance of microenterprises with fewer than 9 employees;
• Lower resilience to external shocks.

The ferrous metal foundry sector, on the other hand, has shown greater stability, thanks to a rationalization process already underway in previous years.

At the same time, the number of employees in the sector has also decreased significantly, from 34,696 in 2008 to 23,866 in 2023, a loss of 31% (10,830 employees) and a CAGR of -2.6%. The peak of the contraction occurred in 2020 due to the pandemic (-16%).

Again, the non-ferrous metals sector experienced the most pronounced decline (-34%), compared to the ferrous metals sector (-26%). In the five-year period 2018-2023, the reduction in employees accelerated, with an overall CAGR of -4.1%, reaching -5.8% for the non-ferrous metal foundries sector.

Transformation of Italian Foundries: Fewer Companies, but Average Size Stable

Despite the decline in the number of companies and employees, the average size of Italian foundries (employees per company) remained essentially stable between 2008 and 2023, standing at 28 employees per company.

However, this overall figure conceals significant differences between sectors:

• Ferrous foundries: average size of 58 employees, indicative of larger companies with greater production capacity;
• Non-ferrous foundries: average employment of only 21 employees.

Among non-ferrous foundries, those classified under the "Other Non-Ferrous Metals" segment are the only ones to have experienced significant long-term change: the average size decreased from 22 to 17 employees between 2008 and 2023 (-22.2%). This trend may reflect a structural contraction in the sector, with a loss of production scale or greater market fragmentation.

Concentration of Value in Structured Enterprises

A structural analysis of Italian foundries highlights a greater density of economic production in medium- and large-sized companies:

• Enterprises with 50-249 employees: despite representing only 10% of the total, they generate 43% of revenue and 49% of gross operating profit (EBITDA);
• Microenterprises (fewer than 10 employees): representing over half of the companies (51%), but contributing only 5% of revenue and 4% of EBITDA;
• Enterprises with over 250 employees: representing 1% of the total, but generating 20% ​​of revenue and 19% of value added, albeit with a relatively lower impact on EBITDA (13%).

These data confirm that, in the foundry sector, economic performance is strongly linked to the size of the company. Economies of scale favor more structured companies, which concentrate the majority of the value produced despite representing a clear numerical minority.

European Comparison: Germany, Italy, and Turkey

The Italian demographic picture becomes clearer when compared with the other two major European casting producers belonging to the EFF, the European Foundry Federation: Germany and Turkey.

The European ranking of the main casting producers has undergone radical changes in recent years, with Turkey experiencing a strong rise:

2013:

• Germany: 34% of total EFF production
• Italy: 13%
• France: 12%
• Turkey: 10%

2022:

• Germany: 28% (leadership maintained but with a reduced share)
• Turkey: 21% (overtaking France in 2015 and Italy in 2018)
• Italy: 14% (third place)
• France: 11% (fourth place)

Together, these four countries account for 74% of ferrous and non-ferrous casting production in the EFF area.

Three structural models compared

Significant differences emerge from the perspective of industry structure:

Number of firms:

• Italy: 861 foundries
• Turkey: 987 foundries
• Germany: 526 foundries

Total employees (2023):

• Germany: 67,372 employees
• Turkey: 36,195 employees
• Italy: 23,866 employees

Average size:

• Germany: 128 employees per company
• Turkey: 37 employees per company
• Italy: 28 employees per company

Prevailing structure:

• Germany: medium-sized family-run businesses (91% with up to 500 employees)
• Italy: micro and small businesses (51% with fewer than 10 employees)
• Turkey: intermediate structure with companies slightly larger than Italy

International comparisons reveal very different patterns. Germany has a few, but larger, companies with significantly higher average production per company: a model that favors economies of scale, investment capacity, and greater long-term solidity.

Italy maintains a highly fragmented structure: nearly a thousand foundries with an average size of just 28 employees. This penalizes average production per firm, even though labor productivity remains at good levels, a sign of specialization and adaptability.

Turkey, with a similar number of firms to Italy, has slightly larger firms and similarly high productivity per worker.

The Future Challenges of Foundries: Between Fragmentation and the Need for Growth

Italian fragmentation has been, and continues to be, a strength in terms of flexibility and niche specialization during the crisis years. However, it risks becoming a limitation in a historical period characterized by far-reaching challenges:

• Green transition: significant investments in environmental sustainability;
• Digitalization: adoption of advanced technologies and Industry 4.0;
• International competition: competitive pressure from emerging economies.

If Italian foundries fail to strengthen their size—through internal growth, mergers, or partnerships—their ability to sustain investments in advanced technologies and sustainability will be limited.

Microeconomic efficiency and high labor productivity are important characteristics that emerge from the structural analysis of Italian foundries, but size could reduce the ability to translate these results into systemic competitiveness in the long term.

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