Alarm­ing Raw Mater­i­als and Energy Costs Situation

The cur­rent global devel­op­ments in the raw mater­i­als and energy mar­kets rep­res­ent a sig­ni­fic­ant threat to European foundry industry con­tinu­ity. Without imme­di­ate polit­ical action, the eco­nomic recov­ery and future of skilled indus­trial work­force is at stake.

Foundries are an import­ant player of the European value chain and home to many qual­i­fied work­ers in rural areas. 70 per­cent of the approx. 4 700 foundries with 300 000 employ­ees oper­at­ing in EU are con­sidered small- and medium-sized enter­prises (SME), oper­at­ing mainly in regions, already hav­ing suffered from indus­trial decline in recent years. Their sur­vival is of utmost import­ance for regional devel­op­ment and prosperity.

Nowadays high raw mater­ial and energy prices are a bur­den which many of these SMEs are no longer able to carry under con­sid­er­a­tion that the aver­age profit mar­gin in “nor­mal times” lies only some­where between 2–3 percent.

We as European Foundry Asso­ci­ation (EFF) must expli­citly under­line our con­cerns and there­fore indic­ate that the cur­rent situ­ation com­poses a vital treat to many of our mem­ber foundries. Never in post-second World war his­tory, we had to face such an increase of prices across vir­tu­ally all rel­ev­ant input factors or that some mater­i­als are not even avail­able regard­less of their price. In par­tic­u­lar, the fol­low­ing com­pon­ents go “bey­ond the ceiling”:

1. Base mater­i­als: e.g. Fer­rous and non-fer­rous metals
2. Alloy ele­ments: e.g. mag­nesium, sili­cium, cop­per, nickel
3. Chem­ic­als and other oil deriv­ates: e.g. sand, resin, binders
4. Energy: e.g. gas, coke, elec­tri­city, oil

Just to exem­plify: the European eco­nomy might run out of mag­nesium end of this year, if imports from China remain restrained. Most factor­ies are cur­rently shut­down due to envir­on­mental issues and energy con­straints. Europe has stopped its own mag­nesium pro­duc­tion in 2001 in the after­math of Chinese dump­ing. This depend­ency comes at a high price! Mag­nesium is needed as crit­ical alloy­ing ele­ment for alu­minium and nod­u­lar cast iron.

In con­junc­tion with the Rus­sian decision not to book trans­port capa­cit­ies for gas through the Ukrain­ian pipe to Europe, a cold and dev­ast­at­ing winter lies ahead of us. Ger­many alone depends more than 50 per­cent of its gas con­sump­tion on Rus­sian imports. Moreover, nat­ural gas is play­ing a cru­cial role in help­ing the European trans­ition to low-car­bon energy pro­duc­tion and its lack would slow down this pro­cess significantly.

These are only the most recent updates in a year full of alarm­ing sig­nals from the raw mater­ial and energy sector.

Foundries oper­ate with often 80–90 per­cent metal scrap and are there­fore regarded as upcycles as well as pion­eers of cir­cu­lar eco­nomy. Des­pite strong efforts to curb energy con­sump­tion and car­bon emis­sions, most of the energy is needed in the fur­nace and heat treat­ment to pro­duce com­pon­ents such as med­ical devices, pipes, pumps or wind tur­bines. European foundries there­fore sup­port the shift towards renew­able energy pro­duc­tion but are depend­ent on reli­able raw mater­ial and prices and avail­able energy at com­pet­it­ive costs. Oth­er­wise, we will lose our European facil­it­ies within the next years.

If the European indus­trial trans­form­a­tion and its related ambi­tions towards cli­mate neut­ral­ity does not imply to trans­fer cast­ing com­pon­ents to loc­a­tions in low-cost coun­tries with low envir­on­mental and social stand­ards, author­it­ies should take imme­di­ate actions.

Down­load the press release here

EFF Con­tact:

Fynn-Willem Lohe
phone: +49 211 68 71 — 277
fynn.lohe@EFF.eu