After the significant drop due to Russia’s invasion of Ukraine, the business climate of the European foundries is stabilising for the time being, despite all the uncertainties. While the assessment of the current business situation is slightly declining, the expectations for the coming six months are improving moderately. The historic drop of the FISI in recent weeks was, however, due to the latter. The fact that companies’ expectations are riding a rollercoaster given the great uncertainties is one of the few things that is momentarily certain.
The European Foundry Industry Sentiment Indicator (FISI) increased by 0.6 points in May and reaches a value of 106.1 points. After the highest loss since the outbreak of corona pandemic in Europe in March 2020 the FISI has slightly recovered.
After the decline in the previous months was caused by a war-related drop in business expectations for the upcoming six months, European foundries are now increasingly experiencing some positive effects on their business situation.
While the sanctions against Russia were steadily tightened in March and April, the problems in the supply chains and the adjustments in the prices for input materials are becoming more and more apparent for European foundries. In addition to the war, global disruptions in the logistics industry have also increased due to the harsh Corona lockdown in China. The FISI drops 2.7 points in April, the largest decline since the Covid-19 outbreak in Europe in March 2020.
The war in Ukraine creates considerable uncertainty, causing the FISI to drop in March. This is so far less related to a worsened assessment of current business situation but rather to pessimistic expectations for the upcoming six months.
The fact that the FISI in February reached its highest value since pre-Corona June has no significance in view of the Russian invasion of Ukraine. The promising data were collected before the outbreak of the war. The significant market disruptions and their impact on European foundries will become visible in the data in March.
Exploding energy prices and raw materials supply difficulties require transparency across the value chain
In deep empathy with the people in Ukraine and for the sake of the European peace order, CAEF stands behind the sanctions against Russia. However, the consequences for the European economy can only be borne, if there is an open dialogue between suppliers and customers.
The European foundries have left the difficut second half of the previous year behind for the time being. Although high energy prices and Russia’s aggressive behaviour continue to pose high risks for the European industry, European foundries from all material classes rate both the current business situation and the expectations for the next six months better than in the previous month. The latest easing of corona restrictions is predominantly welcomed.
After recent signs of a comprehensive slowdown, steel, iron and non-ferrous metal foundries assessed the current situation in December as significantly better than in the previous month. Expectations for the upcoming six months do not, however, take this selective assessment into account.
At the turn of the year, the CAEF presidency passed from Ignacio De la Peña to Chiara Danieli. In addition to the current challenges regarding the availability of raw materials and costs of energy, there is no lack of strategic demands she will have to push forward together with the CAEF General Secretariat and in close alignment with other European foundry associations.
While the assessment of the current business situation for non-ferrous metal foundries has already been deteriorating for months, a significant setback is now also setting in for iron foundries. Further rising costs for a variety of raw materials and energy are putting a great burden on foundries.