Preface 3. Total Survey 7

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1 CAEF

2 Contents Page Preface 3 Total Survey 7 Reports of the Countries Austria 15 Belgium 17 Finland 21 France 23 Germany 29 Hungary 35 Italy 38 The Netherlands 42 Norway 43 Poland 46 Portugal 47 Slovenia 50 Spain 52 Sweden 54 Switzerland 55 Turkey 56 United Kingdom 61 Tables Total Iron Castings, Ductile Iron Castings and Steel Castings 65 Iron Castings 71 Ductile Iron Castings 77 Steel Castings 87 Non-ferrous Metal Castings 93 Copper Alloy Castings 97 Light and Ultra-light Castings 101 Zinc 105 Other Alloy Castings 109 World Production 113 Graphs 117 1

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4 Preface Once again, the CAEF - The European Foundry Association - Commission No. 7 has compiled a statistical annual entitled "The European Foundry Industry 2012" from national reports and statistical material gathered from its member countries. The main tables were supplemented by information from European foundry nations being non-members of CAEF as far as data has been available. The publication thus presents an authentic statistical picture of the European foundry industry. All the same, data in some categories, particularly those regarding output values, have remained incomplete. Despite those inadequacies the Annual Report published by Commission No. 7 remains the most comprehensive EU-wide survey of our industry. Like its predecessors, the 2012 edition contains a section of diagrams showing past developments as well as development trends over a ten-year period to demonstrate the structural changes that are going on in the European foundry industry. The Commission wishes to express its gratitude to all those CAEF member association representatives who helped in preparing these reports and figures. Düsseldorf, August 2013 CAEF - The European Foundry Association M. Schumacher H. Lickfett Secretary General Commission No. 7, Chairman 3

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6 TOTAL SURVEY

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8 TOTAL SURVEY The European Foundry Industry in 2012 The Economy and the Casting Customer Industries The Macro-economic Situation Activity has stabilised in advanced economies and has picked up in emerging markets and developing economies, supported by policies and renewed confidence. This pickup follows the slowdown in the first half of 2012, which manifested in industrial production and global trade. Investment in major economies also dipped, whereas consumption evolved broadly as expected sluggishly in many advanced economies, hobbled by low employment rates, and buoyantly in many emerging markets and developing economies, where labour markets continue to perform well. Strong actions by European policymakers helped improve confidence and financial conditions. U.S. policymakers avoided the fiscal cliff but failed to find durable solutions to other short-term fiscal risks. Japan adopted more expansionary macroeconomic policies in response to a larger-than-expected slowdown. In the meantime, policy easing in key emerging market economies has supported internal demand. Moreover, the production and consumption dynamics in many economies may have primed them for an inventory-led rebound. Forecast Gross Domestic Product (2) Consumer Prices (2) Unemployment Rate (2) Growth Rate in % Growth Rate in % In Euro Country Weighting (1) Austria Belgium Czech Republic Denmark Finland France Germany Hungary Italy Lithuania The Netherlands Norway Poland Portugal Slovenia Spain Sweden Switzerland Turkey United Kingdom CAEF (1) Source: Worldbank GDP 2012, (2) Source: IMF The Economic Situation in the Major Casting Customer Industries Vehicle Industry The international automobile markets remained stable over the year 2012 as a whole. The US, Brazil, Russia, India and China enjoyed solid growth, while the Japanese passenger car market recorded around 4.6 million new cars the highest number of new registrations since By contrast, sales in Western Europe were down by 8%. 7

9 TOTAL SURVEY On the Western European passenger car market, on the other hand, there was still no visible recovery in the last month of New registrations fell in December by around 16% to 781,800 vehicles. The markets shrank again in France (-15%), Italy (-23%) and Spain (-23%), but demand for new cars in the United Kingdom once again demonstrated a welcome increase: In December new registrations rose by almost 4%. The total UK result for 2012 came to just over 2 million units, which was a rise of more than 5% compared with the previous year. And despite the slight fall in the German figures for 2012 (- 3%), Germany continued to support the overall Western European market, which contracted by 8% in 2012 to a little under 11.8 million units. The passenger car markets in the new EU Member States also showed severe losses in December (-18%). The exceptions were Hungary and Bulgaria, where new car registrations soared to 55% and 64% respectively above the previous year s figure. Over the year 2012 as a whole, new passenger car registrations in the new EU countries fell somewhat short of the previous year s result (-3%). Global Car Sales 2012: Change Units 12/11 in % Europe (EU27+EFTA)* ,8 W. Europe (EU15+EFTA) ,1 New EU Countries (EU11)* ,8 Russia** ,6 USA** ,4 Japan ,7 Brazil** ,1 India ,3 China ,4 * without Malta ** Light Vehicles Mechanical Engineering Industry In 2012, the mechanical engineering industry succeeded in increasing its global turnover in machinery (without services) by 10% to a new record high of 2,250 billion euros. However, the international comparison was based on the euro and one has to bear in mind that the appreciation of most currencies against the euro has driven up the growth figures of the non-eurozone countries. So, the exchange rate changes made the growth rates of nearly all non-eurozone countries look better than they would have done in their national currencies. Adjusted for price and currency the industry posted a growth rate of 2% which is significantly lower than the nominal rate. Steel industry World crude steel production reached 1,548 megatons (Mt) for the year 2012, up by 1.2% compared to This is a record for global crude steel production. The growth came mainly from Asia and North America while crude steel production in the EU (27) and South America decreased in 2012 compared to Annual production for Asia was 1,012.7 Mt of crude steel in 2012, an increase of 2.6% compared to The region s share of world steel production increased slightly from 64.5% in 2011 to 65.4% in China s crude steel production in 2012 reached Mt, an increase of 3.1% on China s share of world crude steel production increased from 45.4% in 2011 to 46.3% in Japan 8

10 TOTAL SURVEY produced Mt in 2012, a -0.3% decrease from In 2012, South Korea s crude steel production was 69.3 Mt, an 1.2% increase compared to The EU recorded a decrease of -4.7% compared to 2011, producing Mt of crude steel in Germany produced 42.7 Mt of crude steel in 2012, a decrease of -3.7% on Italy produced 27.2 Mt in 2012, a -5.2% decrease over France s crude steel production in 2012 was 15.6 Mt, a decrease of -1.1%. Spain produced 13.6 Mt of crude steel in 2012, a -12.1% decrease on In 2012, crude steel production in North America was Mt, an increase of 2.5% on The US produced 88.6 Mt of crude steel, 2.5% higher than The CIS showed a decrease of -1.2% in 2012, producing Mt of crude steel. Russia produced 68.9 Mt of crude steel, a 2.5% increase on 2011 and Ukraine recorded a decrease of -6.9% with a year-end figure of 32.9 Mt. Annual crude steel production for South America was 46.9 Mt in 2012, a decrease of -3.0% on Brazil produced 34.7 Mt in 2012, down by -1.5% compared to Construction Industry At international level, data about cyclic developments in the building industry are provided mainly by the Euroconstruct group. Expanded from a core group to include almost all Western European countries (the European Union and EFTA) and a number of Eastern European states (EU-Accession countries) it represents the European region was the sixth negative year for construction in a row. Residential construction shrank by around 3.5% to 585 billion Euros in This figure is substantially below the peak value to date of 760 billion euros reached in 2007 (2011 prices). The Foundry Industry In 2012, the iron, steel and malleable foundries of the CAEF member states produced 10.8 m tons of castings. From Denmark, Lithuania, the Netherlands and Poland no data was received. Compared to the year before, this corresponds to a 7.4% decrease in production weight (after +11.5% the year before). The six countries that dominate the industry in terms of weight, namely Germany, France, Turkey, Italy, Spain and Poland, account for 84.5% of the production of ferrous metal castings. Only in Slovenia the production was up. All other CAEF member countries registered a smaller production volume (for Belgium data cannot be compared to 2011 because of different data basis). In 2012, non-ferrous metal foundries in the CAEF member states booked a production decrease of 6.4% to 3.1 m tons (figures for Denmark, Lithuania, the Netherlands and Poland were not available). The year before production grew by 9.0%. In the countries that dominate the production of non-ferrous metal castings, namely Germany and Italy, the output was down by 4.8 and 13.7% respectively. Together, these two countries account for almost 57.9% of the total volume of non-ferrous metal castings produced in the CAEF member states. In the reporting year of 2012 Belgium, Norway, Italy and Switzerland had to book negative growth rates. The most positive data were delivered from Portugal, Spain and Turkey. The number of employees in iron, steel and malleable foundries only increased in Austria and Turkey. In all other CAEF member countries employment was down compared to In 2011 the non-ferrous metal sector was dominated by a negative trend in employment. During the reported year 2012 this picture changed. Employment was up in Austria, Belgium, Germany, Slovenia and Turkey. The other CAEF member countries logged a decreasing employment. In the ferrous sector new foundries (9 units) were established in Turkey only. In Finland, Norway and Sweden the number of foundries was stable. In all other countries foundries were closed. 9

11 TOTAL SURVEY In the non-ferrous metal sector new foundries have started only in Italy (2 units). In Belgium, Finland and Sweden the number of non-ferrous foundries was the same as the year before. In all other countries foundries were shut down. The share of cast iron with lamellar graphite in the output total of iron, steel and malleable castings was down from 52% in 2011 to 50% in Correspondingly, the share of ductile cast iron (incl. malleable castings) was up to 42%. The share of the steel sector in the total output increased from roughly 8% to marginally more than 8%. The production of castings made of non-ferrous metal alloys is still dominated by light metals. The share was an unchanged 87%. Furthermore, the share of copper alloys reached more than 7%, slightly less than in The share of components made of zinc alloys was a little bit higher than the year before (6%). From the data available it appears that the export quota of the iron, steel and malleable foundries decreased from more than 44% last year to 42% in Calculation base is the foreign trade report of ten member countries. Germany is still the country that dominates the export trade in castings with a volume of nearly 1.7 m tons (-4.4%). The second place in volume, the third year in a row, was logged for Turkey: Turkey reported an export volume of 688,000 tons (-5.9%) whereas France had to deal with a downturn of more than 19% (508,000 tons). If we consider only those CAEF member states with current figures for the previous year, the value of the iron, steel and malleable castings produced decreased by 4.4%, in doing so the weight of castings was down by 7.7%. From the data that was available for a year-on-year comparison, it appears that in the non-ferrous metal sector the value of production decreased by 3.2% whereas the weight of castings produced was 2.5% lower. The Situation in the Casting Material Sectors Iron At 5.4 m tons, the output of the CAEF member states was down by 8.5% (without figures from Denmark and Poland). A sharp decrease in production was reported by Spain (-26.1%), and Switzerland (-20.8%). The highest growth rates were registered for Hungary with 77.5% and Slovenia with 30.5%. As ever, the data available for the cast-iron sector is too sketchy to allow determining the overall value of production. The output of components made of cast iron with lamellar graphite is largely destined for the motor vehicle and mechanical engineering industries. For the motor vehicle industry, the highest absorption rates were reported from Portugal (78%), Germany (66%), France (45%) and Turkey (39%) respectively. This is the same ranking as last year. For the mechanical engineering industry the highest shares in the output were posted by Finland (55%), Italy (48%), France (31%) and Turkey (30%). Ductile Cast Iron The producers of ductile cast iron (cast iron with spheroidal graphite and malleable cast iron) reported a decrease of output by 6.8% to 4.5 m tons. Once again, this calculation excludes Polish and Danish figures. The output of components made of cast iron with spheroidal graphite was down by 7.3% to roughly 4.4 m tons. At the same time, production of malleable castings decreased by 1.3%. Only Turkey and Hungary had registered a growing production volume (+5%; +34%). All other countries had to manage production losses. The most dramatic decreases were logged for Slovenia (-25%) and Switzerland (-27%). Cast iron with spheroidal graphite traditionally dominates the ductile cast iron sector with an unchanged share of 99%. Correspondingly, malleable iron as a niche product holds a share of no 10

12 TOTAL SURVEY more than approximately 1%. Nodular iron components are mainly produced in Germany, France, Spain, Turkey and Italy. Besides, Germany, Poland, Turkey and Spain dominate the production of malleable castings. As ever, components for the motor vehicle and mechanical engineering industries predominate in the production of ductile castings, with the building industry following in third place among the customer industries. If analysing the shares of motor vehicle castings in those countries for which data is available, one sees that the highest shares are reported from Portugal at 82%, Turkey at 50%, United Kingdom at 49% and Hungary at 47%. The mechanical engineering industry holds the highest shares in output in Finland (nearly 56%), Norway at 55%, Italy at 54% and Hungary at 53%. Unfortunately, it is impossible to present the share of the building industry. In this context, it should be noted that malleable casting statistics have lost some of their meaning because in some states it is impossible to break down the figures for the ductile cast-iron sector. Steel The output of steel castings decreased by 4.1% to 902,900 tons in 2012 on the basis of estimated figures for Belgium 2011 and without Polish figures. Germany, the leading producer logged a production volume on the same level as the year before. For Turkey, second in line, the production was down by 8%. Only Sweden and Switzerland could register growing volumes, nearly 3% and 4%. In those member countries for which data for a year-on-year comparison was available, the value of the output of steel casting components decreased by 1.6%, while its weight shrank by 3.3%. The number of persons employed in steel foundries declined in Belgium, France and Spain, whereas in Finland, Germany, Italy and Turkey employment increased. Non-ferrous metal castings The output of non-ferrous metal casting components in the CAEF member countries was down by 6.4% to 3.1 m tons. As before, the non-ferrous metal sector is dominated by Germany, Italy, France and Poland. The first three countries hold a share of 70% in the production total. In Portugal, Spain and Turkey a growing production volume was logged. The growth rates were 19.4%, 0.8% and 8.5% respectively. All other countries had registered production losses. Traditionally, the production of non-ferrous metal castings is dominated by light metals, with the motor vehicle industry as the foremost customer. In the year covered by this report, the output of light metal castings (aluminium and magnesium) decreased by 6.1% compared to 2011, reaching 2.6 m tons (without figures from Czech Republic and Poland). Together, Germany and Italy, the two major producers, account for 60% of the light-metal castings. The production for these leading countries was down by 4.6% respectively 13.8%. Only Portugal (+22.3%) and Turkey (+8.3%) could proclaim positive data. Among the light metal alloys, magnesium plays a subordinate role in terms of output weight. Germany is the major producer with 16,400 tons followed by Italy (6,800 tons) and Austria (5,700 tons). The second most important material category in the non-ferrous metal sector is that of copper and its alloys. Because of the missing data of four countries it is difficult to estimate the real market volume. The production level is likely to be more than 240,000t. For countries with registered production for 2011 and 2012 the level was down by 7.9%. Production increased by 35.0% in Hungary. Additionally growing production was logged for Spain (21.7%), Switzerland (10.3%), Portugal (8.7%) and Turkey (7.7%). The other countries reported production losses. The output of zinc castings was down by 5.8% with a volume of 169,000 tons (without figures from Poland, Belgium and Czech Republic). Once again, Italy and Germany are the major producers, together holding a share of 54.2% in the output total. The German figures are a conservative estimate. A revision project for data collection has started. Positive growth rates were reported for Portugal (115.7%), Sweden (19.4%) and Turkey (12.0%). The other countries had to manage negative trends. 11

13 TOTAL SURVEY The statistical data available for the category of 'other non-ferrous metal alloys' are fragmentary. In addition, some countries include copper and zinc in this category because there is no facility for segregating these. Therefore, it is impossible to analyse this category more extensively. Source: IFW Kiel, ifo Munich, Worldbank, IMF, ACEA, VDA, VDMA, Eurofer, Worldsteel, CAEF 12

14 REPORTS OF THE COUNTRIES

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16 A U S T R I A General economic situation At the end of 2012, the bottom should have been reached. Although the indicators during the 1 st quarter of 2013 were not very impressive and not all of them reached even a positive level, they do provide first signs that due to the improving global economic trend, the positive development will also stabilise in Austria. Still, the Austrian economy is only growing at a very slow pace. The labour market is mainly stable whereas financial markets show a clear upward trend. The International Monetary Fund (IMF) forecasts a real growth of the Austrian GDP in 2013 of 0.8%, i.e. the Austrian economy will grow at the same rate as in Only for 2014 there is expected a stronger expansion of the overall economic activity (1.6%) (IMF World Economic Outlook of April 2013). According to the slightly more optimistic WIFO-forecast of March, the growth of the Austrian GDP in real terms should be 1.0% in 2013 and 1.8% in 2014, with regard to the previous year. Since 2002, Austria has registered a growth advantage over the eurozone, which had been especially pronounced in 2011 and According to the forecasts until 2014, Austria will maintain this lead, albeit at a declining level. At present Austria enjoys an all-time employment high and despite the moderate economic trend the companies keep expanding their staff. Still, slight corrections are underway in the booming labour market which will result in a less dynamic expansion of employment and jobs. The IMF predicts a slight increase of the unemployment rate to 4.6% in 2013, but expects it to fall to 4.5% in By contrast, the expected unemployment rate in the eurozone amounts to 12.3% (in 2013 and 2014), almost three times the Austrian rate, which is the lowest unemployment rate in Europe. The financing environment in Austria is rather positive due to low interest rates, even if recently lending conditions have been tightened slightly and the general demand for loans is low and declining slightly. Short-term interest rates fell in 2012 to an all-time low. However, investments still show a weak trend. According to the WIFO-forecast, only in 2014 there will be a marginally stronger growth of 2.0%. There still are many risks for our economy, in particular the economic policy framework conditions and the evolution of the public debt crisis in the eurozone. For Austria, the development of our eastern and southern neighbours is of special relevance. The US-budget situation also holds some risks. The trend could surpass the expectations expressed in the forecasts if the business and consumer confidence registers a swift and decisive recovery. Main results WIFO Economic Forecast of March 2013 Change in % (over the previous year) Gross domestic product (real terms) Gross capital formation (real terms) Exports of goods acc. to Statistics Austria (real terms) Consumer spending (real terms) Consumer prices Actively employed persons Deficit (in % of GDP) acc. to Maastricht definition General situation of the foundry industry The total production in 2012 amounts to 306,478 t (-5.4% over the previous year). The total sales of the sector fell by -1.8% with regard to 2011, to a volume of 1,333 million. In 2012, the total production of iron castings dropped -6.7% to 161,485 t, with sales falling by -1.4% to nearly 439 million. The production of ductile cast iron achieved a volume of 104,527 t, i.e. a decline of -8.2% over Steel castings dropped -7.1% with regard to 2011, with a production volume of t. 15

17 A U S T R I A Grey castings also went down -2.2% compared to 2011 and obtained a production volume of 39,700 t. Non-iron castings registered a drop of the production volume by -3.9% and of sales by -1.9%. PRODUCTION OF CASTINGS 2011 : 2012 t t % Value in % % % Grey cast iron 40,583 39, Ductile cast iron (incl. malleable cast iron) 113, , Steel castings 18,575 17, , Iron castings 173, , ,856, ,693, Total zinc die-castings and 15,524 15, heavy-metal castings Light-alloy castings 135, , whereof: Aluminium die-castings 58,588 58, Permanent mould aluminium castings 69,652 64, Aluminium sand-castings 1,198 1, Magnesium castings 5,937 5, Metal castings 150, , ,544, ,918, Total 323, , ,356,401,609 1,332,611, Incoming Orders In 2012, incoming orders registered a positive trend which slowed down during the first months of Orders from the automotive sector show huge differences depending on the make and manufacturer. The crisis in Southern Europe has a big negative impact on the orders and sales of all companies with direct or indirect exports to these countries. This situation affects mainly the mechanical engineering industry, but also other sectors where iron castings are used. Employment Employment figures remain almost unchanged. The branch counts with more than 7,000 employees; the number of apprentices has risen by 3.0%. Investment plans In 2012, investments have increased slightly. In general, they stay on a permanently high level. Supply of raw materials and energy All through 2012, raw material prices have shown a lateral trend. Personnel cost The collective wage agreement establishes an increase between 3.0% and 3.3%, depending on the employment group. For the first time since the Second World War, the Austrian foundry industry has negotiated on its own. The other metal associations (who in the past had negotiated as a group) reached similar wage agreements. However, our branch was the only one to establish that 0.2% of the agreed increase can be used for individual wage increases. * * * * * * * * * * 16

18 B E L G I U M General economic situation From 2012-Q4 onwards, the GDP growth gradually pick up in the wake of an upswing in international trade. However, given the low level at the beginning of the year, GDP for the whole 2013 is not expected to be higher than in Starting from a low position, exports should start to expand again from 2013-Q1 on, in line with strengthening of foreign markets. However, for the whole year, they are expected to record a modest growth, 0,3%, compared to Consumption growth should be moderately positive, +0,3%. On the one hand, purchasing power is recovering slightly (0,4%), but, on the other hand, consumers confidence remains low, mainly due to the unfavorable situation on the labor market. In spite of mortgage interests rates at minimum level, housing investment are still expected to decrease by about 4,5%. This is the 5 th decrease in the last 6 years. Business investments are suffering from the economic context. Utilization of existing capacity is still under its long term average and decreased in the last 2 quarters. Furthermore, profitability remains subdued and banks didn t untighten their lending conditions. There from, investment should further decrease in 2013 (-1,1%). Prospects 2014 For next year, exports are expected to accelerate and the other components of GDP should consolidate. On this basis growth of GDP for the whole year should reach 1,1%. Exports are expected to further expand in line with prolonged growth of foreign markets. They should record a growth of 3,4%. Purchasing power of consumer should also gain strength during the year (1,0%), but confidence level is not expected to improve much. Consequently, private consumption shouldn t grow faster than 0.9%. Housing investment are also expected to recover only slightly with a modest growth of 0,5%. Business investment will benefit from the better economic conditions. They are expected to pick up and record an annual growth rate of 1,9%. Labour market On average for this year, employment is expected to remain at the same level as in As a result, the unemployment rate (Eurostat definition) should increase from 7,6% in 2012 to 8,3% in For 2014, employment should improve slightly with an increase of units on the whole year. This modest increase is however too small to stabilize unemployment rate which should further increase to 8,5%. Inflation As a consequence of the decrease in energy prices, inflation should further slowdown in 2013 and Growth of consumption prices is expected to remain limited: 1,3% in 2013 and 1.2% in The health index, that is not affected by price developments for petrol and diesel and forms the basis for the automatic indexation of wages, should grow by 1,2% in 2013 and 1,3% in (Source : Belgian federal planning bureau, Economic budget 06/2013) Main consumer sectors for foundry products 2010/ / / /2012 Mechanical engineering 6.3% 13.1% -1.0% -4% Construction products 2.4% 17.0% -8.7% 2% Automobile 21.1% 11.8% -5.9% -6.0% During last year, the production in the mechanical engineering sector decreased by about 1.0%. No major improvement is expected for this year, as growth of business investment is still expected to 17

19 B E L G I U M remain low in Europe. Furthermore a major player in the sector announced an important reorganization. There from, for 2013, the activity is expected to decrease by about 4%. The decrease of activity in 2012 by almost 9% in the construction products sector in Belgium is largely due to the situation of the construction sector in Europe. Companies active on export markets suffered particularly from the crisis in Spain, Greece, Portugal and Italy. Prospects for 2013 are slightly better with an expected growth of 2%. In the automobile sector, the decreasing demand for cars and commercial vehicles in Europe together with the announcement of the close-down of the biggest assembly plant in Belgium had a negative impact on the production as early as the 3 rd quarter As a consequence, activity fell sharply in the last months of the year and decreased by 5.9% on average. The coming months will remain difficult with no prospect of improvement of the demand for vehicles. Another decrease of 6% is expected in The foundry industry Production of the Belgian foundry industry settled just above tons in 2012, recording a small decrease compared with After 2 years of what seemed to be a recovery, the sector suffers now from the poor general economic climate and, in particular, from stagnation of the industrial production. The quarterly profile of activity dispatches an irregular but negatively oriented pattern. The 1 st quarter 2012 is until now the most recent period of growth. During the following quarters, including 1 st quarter 2013, the level of activity was lower than during the corresponding period of the year earlier. This profile evolution is also to be found in the various sub-sectors. Steel castings With 31,5 ktons, steel casting recorded a decrease of 6,3% in 2012, compared to The relatively strong growth during didn t go on and the production is now only 12.2% higher than in 2009, when it was at its deepest level, and still 34,5% lower compared to top year This weak global performance is due to general negative evolution in the most plants of the sub-sector. Quarterly figures show no sign of a consolidation during the first 3 months of this year. Available figures show for the 1 st quarter 2013 a negative margin compared with the 1 st quarter Iron castings Iron casting remains the biggest sub-sector of the Belgian foundry industry. During the last years it is also the one with the strongest production profile. In 2012, total production reached 67.6 ktons, which is only 1.9% lower than in 2011 and 25% higher compared to Compared to pre-crisis level however, the production is still 17,4% lower. The quarterly production indicates that the sub-sector decreased slightly during each quarter of previous year, with a stronger fall in the 2 nd quarter (-4,9%). Available figures for the 1 st quarter 2013 also indicate a somewhat stronger decrease of 3,8%. Non-ferrous castings The decrease of production in the non-ferrous casting went on in This sub-sector is the only one that didn t show any positive growth since As a consequence of the crisis, some plants in the sector stopped their activity in 2009 and 2010, when other subsectors started to recover. In 2012, the production decreased again by 11.3%, compared to The quarterly profile shows a strong degradation of the situation during the 3 rd quarter 2012, with a drop in production of more than 23%. Available figures for the 1 st quarter 2013 are indicating a fall of the same magnitude. Production: yearly figures Steel Iron Non-ferrous Total

20 B E L G I U M Production: growth 09/08 10/09 11/10 12/11 Steel -38,8 11,6 7,2-6.3 Iron -30,8 17,8 8,1-1.9 Non-ferrous -84,8-28,2-3, Total -40,1 14,3 7,6-3.5 Production: quarterly figures 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q Steel Iron Non-ferrous Total Production: growth compared with the same quarter of the previous year 1Q 1Q Q Q Q (e) Steel 9,1-3,0-31,0-4,7-4,2 Iron -0,6-4,9-1,0-0,7-3,8 Non-ferrous 1,2-7,3-23,3-17,2-24,8 Total 2,5-4,4-10,8-2,3-4,3 Cost development Energy Electricity According to Eurostat statistics, Belgian electricity market price for industrial users decreased with 4.1% in This was in sharp contrast with the European average increase of 7.4%. Gas Market price for industrial consumer of natural gas increased by about 5.2% in Belgium, slightly slower than in Europe (+7.9%). Raw materials After a strong increase in 2010 and 2011, sluggish business climate sent steel prices down in On average, steel prices were 23% lower than in Prices of non-ferrous metals also decreased in Average prices were 4% (silver) to 17% (nickel) lower than in Only the price of gold increased further with an average notation that is 14% higher than in The mainly downward trend went further on during the first 6 months of this year. Steel prices were more than 57% lower than during the same period of 2012 and most prices of non-ferrous metals further decreased as well. Wages In July 2012, wages in the foundry industry, as in the other sectors of the technology industry, were increased with 2.76%, following the automatic adaption to the increase in cost of living (indexation). For 2013, current forecast for this automatic adaption is an increase of 1,34%. 19

21 B E L G I U M Outlook For the coming months, it is expected that the activity of the foundry industry will remain subdued. Indeed, in spite of a modest improvement in the recent months, business climate surveys indicate that a majority of companies are still regarding orders as lower than normal for the period of the year. This indicator is still deeply in the red, showing only limited improvement in the demand for foundry products. Capacity utilization decreased further in January before improving in April. At 70,6%, the use of existing capacity is still far below pre-crisis average, or even the level reached during the recovery period in From the beginning of the year, average secured duration of activity displayed a positive pattern. However the improvement on the last 5 months is still only half of the deterioration registered during Foundries show no major shift of expectation regarding selling-prices for the next 3 months. A stable majority is expecting no change in the selling-prices. Level of capacity utilization (%) * * * * * * * * * * 20

22 F I N L A N D Economic Background The Finnish Technology Industry as a whole Technology industry companies recorded an estimated turnover of EUR 67.6 billion in Finland in In 2008, the corresponding figure was EUR 81.4 billion. The turnover of technology industries took a downward turn towards the end of the year. Between October and December, both new orders and order books were lower year-on-year. Orders did, however, pick up in early autumn due to individual large orders such as ship orders. The development of requests for tenders remained weak in January 2013, which makes it unlikely that orders will pick up in early The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between October and December was five per cent lower than in the corresponding period in 2011, but 17 per cent higher than in the preceding quarter. At the end of December, the value of order books was four per cent less year-on-year, but three per cent above the value reported at the end of September. Fifty-six per cent of companies reported a drop in the level of order books from September, while 34 per cent reported an increase. Twenty-six per cent of companies reported a fall in requests for tenders from October, while 15 per cent of companies had seen a rise in the number of tenders. Based on the order and tender-request trends of recent months, the turnover of technology industry companies is expected to be slightly lower in the next few months than in the corresponding period of Turnover will also remain at a significantly lower level than the pre-crisis level of autumn Many SMEs in technology industries face the increased challenges of low-level profitability and weak trends in profitability. According to data reported in December, close to 37 per cent of subcontracting companies suffer from weak profitability, while some 17 per cent report good and less than 50 per cent satisfactory levels of profitability. Personnel numbers in the industry decreased slightly last year and totaled 289,000. At the end of December, some 20,000 employees were affected by temporary or part-time lay-offs. In 2008, prior to the financial crisis, the industry employed 321,000 people in Finland. Mechanical Engineering in Finland The turnover of mechanical engineering companies (machinery, metal products and vehicles) in Finland grew by two per cent in 2012, to EUR 28.3 billion. In 2008, the corresponding figure was EUR 32 billion. The number of new orders increased between October and December, mainly due to a few large individual orders. As a result, order books improved slightly from the previous quarter, but fell short of the level reported in the corresponding period last year. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between October and December was two per cent higher than in the corresponding period of 2011, and 23 per cent higher than in the preceding quarter. At the end of December, the value of order books was five per cent less year-on-year, but two per cent above the value reported at the end of September. Judging from order trends in recent months, the turnover of mechanical engineering companies is expected to remain at a similar level in early 2013 than in the corresponding period last year. Personnel numbers in the industry remained relatively unchanged year-on-year and totalled 131,000. However, some reductions were made towards the end of the year. At the end of December, some 14,000 employees were affected by temporary or part-time lay-offs. In 2008, prior to the financial crisis, the industry employed 149,000 people in Finland. Metals Industry in Finland The turnover of mechanical engineering companies (machinery, metal products and vehicles) in Finland grew by two per cent in 2012, to EUR 28.3 billion. In 2008, the corresponding figure was EUR 32 billion. The number of new orders increased between October and December, mainly due to a few large individual orders. As a result, order books improved slightly from the previous quarter, but fell short of the level reported in the corresponding period last year. The companies that took part in the Federation of Finnish Technology Industries survey of order books reported that the monetary value of new orders in the industry between October and December was two per cent higher than in the corresponding period of 2011, and 23 per cent higher than in the preceding quarter. At the end of 21

23 F I N L A N D December, the value of order books was five per cent less year-on-year, but two per cent above the value reported at the end of September. Judging from order trends in recent months, the turnover of mechanical engineering companies is expected to remain at a similar level in early 2013 than in the corresponding period last year. Personnel numbers in the industry remained relatively unchanged year-on-year and totaled 131,000. However, some reductions were made towards the end of the year. At the end of December, some 14,000 employees were affected by temporary or part-time lay-offs. In 2008, prior to the financial crisis, the industry employed 149,000 people in Finland. The Foundry Industry in Finland Foundry industry as a whole The production of iron and steel castings was about tons which is about 14 % less compared to year Metal castings production was about tons, which is about 12 % less than the previous year. The value of the casting production of Finnish foundries dropped to 287 m (-6 % from the year 2011). The direct export of iron and steel castings was 30 % and non-ferrous castings 32 %. Grey cast iron sector in Finland Overview of the Finnish grey cast iron (including GJS foundries) production, year 2012: % Number of GJL foundries GJL production t t Value of the GJL production m m Export of GJL castings t t Employees in GJL foundries Ductile cast iron sector in Finland Overview of the Finnish ductile cast iron production, year 2012: % Number of GJS foundries GJS production t t Value of the GJS production m 91,09 m 86,30-5 Export of GJS castings t t Employees in GJS foundries Steel castings sector in Finland Overview of the Finnish steel casting production, year 2012: % Number of steel foundries Steel casting production t t Value of the GS production m 96,86 m 92,69-4 Export of GS castings t t Employees in GS foundries Non-ferrous casting sector in Finland Overview of the Finnish non-ferrous casting production, year 2012: % Number of non-ferrous foundries non-ferrous production t t Value of the non-ferrous production m 68,92 m 64,09-7 Export of non-ferrous castings t t /- 0 Employees in non-ferrous foundries * * * * * * * * * * 22

24 F R A N C E General economic situation The French economy grew by just 0.2% in 2012, much less than 1.7% growth recorded for GDP fell in Q4 of 2012 by 0% and with an expected increase of 0.3% in 2013, the French economy effectively pursued its recession. At the same time as this disappointing growth figures, manufacturing output decreased by -2.5% during 2012 (against a growth of +3% the previous year). It is projected to fall by -1.5% in 2013, but then to expand in Almost all the industrial sectors moved back in 2012, except the high added value markets (medical, aircraft and defence industry) and the railway and energy sectors. The automotive industry has been hit hard by the global recession and, more recently, of turmoil in the euro area. The growth of the exportation of goods and services slowed down during this year, by +2.6% comparing of +5.5% in In the same time, private consumption stayed stable. Yet, France faces serious long-term challenges. Fiscal consolidation remains a priority: public spending is very high as a percentage of GDP and needs to be reduced over time to ease the tax burden in the medium term. Joblessness and slack more generally will therefore continue to increase until late in the projection period, when the unemployment rate could reach 11 per cent in Unemployment rose during the year to reach a new level of more than 3 million at the end of December, around 9.9% of the population on average in With weak growth, consumer price inflation should fall gradually to below 1½ per cent per year from At the end of 2012, it was running at 2%. Facing a lack of visibility, the French companies have broken their investment. Consequently, their profit margins have been affected by the raise of the public taxes and the difficulty of finding the necessary financial supports. Nevertheless, they have largely restored. Globally, the investment grew by just 0.3% in 2012, much less than the 3.6% growth recorded for It is projected to fall by -0.1% in In 2012, unit labour cost growth at the end of the year was around +1.9% against 1.6% in The Foundry Industry as a whole Production, deliveries and orders received Due to the strong slowing down during the second semester, the foundry sector globally registered a gradual decrease of its activity in 2012 compared to 2011: The total castings production fell by -14% (tonnage) to be compared to +4.6% for the previous year The castings deliveries decreased by -13% (tonnage) and by -6.7% (turnover) Even if these global figures covered different evolutions according to the alloys and markets, the ferrous and non-ferrous castings moved back almost in the same rate: by -14.3% for the first ones and by -12.7% for the second ones. On the other hand, if we excluded the pipes and manholes covers results, the performance of the whole foundry appeared in a better shape: -11% in volume. Besides, the total production of the French foundry showed a drop with the export market much more marked than the domestic market: the global exportations in volume fall by almost -20% in The strongest production decreases have been registered: Among the ferrous alloys, by nodular iron castings, with a breaking -13.2%. Among the non-ferrous alloys, by the aluminium alloys castings, with -13%. This disappointing performance of the French foundry, after two years of growth, is largely due to the fall of the automotive market orders in the second part of 2012, this sector continuing to be by far the main customer of the foundry industry. In 2012, after two years of recovery, French automotive industry production moved back but less strongly than in , around -13% as a whole. For the private cars, the fall was particularly violent, by -14%, due to the retrenchment in private consumption and investment. The French manufacturers carried out bad performances, and their shares of market decreased. In 2013, the situation should continue to fall, by -4%, in a context of economic uncertainty related to the sharp increase in unemployment and losses in housing and stock market wealth. 23

25 F R A N C E For the commercial vehicles of less than 5 tons, the production in volume lightly decreased in 2012 (by -9%). The activity for the commercial vehicles of more than 5 tons decreased almost in the same rate, by -10%. This sector is traditionally very displayed to the backward drop of the economic activity. However, the application of the Euro 6 standards in 2013 pushed companies to anticipate their purchases at the end of the year The Renault Trucks production in France should benefit from the policy of destocking in 2012 and register a limited drop by -5% in The mechanical equipment increased by +2.8% in value compared to The sector benefited from dynamic exports, in spite of the falling French market. Among the sectors which compose it, the mining, mineral, lifting and handling materials stayed at a steady level from 2011 to In this context of slowdown of the foundry sector, only the super alloys registered a new growth in 2012, by +7% in volume and +12% in value. This marked increase is due to the very high performance of the aircraft industry, which registered a growth of +12% in volume this year. As a whole, the ferrous and non-ferrous foundries produced in total around millions tons of castings against Million tons in the previous year. Even in 2011, they did not find however yet the levels before 2008 (2.4 millions tons in 2008 and 2.5 million tons in 2007). This year, the tonnage came back under the level of 2 million tons. The deliveries reached 1.41 million in tonnage and 4.52 billion Euros in value. The French foundry is always situated in the third European rank behind Germany and Italy. (2nd for ferrous metals and 3rd for non-ferrous metals). At the world level, France remains the 10th producer: 9th for ferrous metals and 11th for non-ferrous metals (2011 data). The activity at the beginning of 2013 After the slowdown in the second half of the year, the foundry activity rose up again in the first quarter of 2013 compared to the end of With regard to the 2012 foundry production statistics for France, the early indications from the last survey conducted in April by the French organization were that the overall level of business activity for this beginning of 2013 year was down on average by 15% compared to the beginning of the previous year for the same period. Production capacities remained sub-used, the utilisation rate reaching hardly 71 % during the first quarter of 2013, always below their average of long period (82 %). Movements in production in volume from 2011 to 2012 % (2012/2011) Ferrous metal castings -10.8% Hydraulic iron castings -22.3% Non ferrous castings -12.7% TOTAL -14% Exports Movements in volume from 2011 to 2012 % (2012/2011) Ferrous metal castings -8.8% Hydraulic iron castings -28.8% Non ferrous castings -20.4% TOTAL -19.4% 24

26 F R A N C E Employment situation In 2012, the number of employees in the French foundry industry continued to decrease, by -2.5% (after -2.1% in 2011 and especially -12% in 2009) to reach around salaries at the end of the year. These figures take into account the closures of eight foundry units in 2012 and the reduction of the number of employees in most foundries especially in the automotive foundries and the pipes and manholes covers sector (around -5%). As the previous year, the globalisation of the economy and the mergers of industrial groups have led to a concentration of decision centres and to a search for rationalisation. The average working weekly time in the French foundry industry stayed around 36 hours. Production capacity and number of plants Following the results recorded in the previous year, 2012 proved to be a bad year overall for the majority of French foundries, with many far from reaching the very high levels of activity recorded in Since January 2012, there were still four ferrous and four non-ferrous foundry closures although these were typically smaller companies. In this context of slowdown of activity, the rate of use of production capacities in the foundry sector lightly decreased from 74% to 72.5% between 2011 and 2012 on average. For many managers, economic recovery is not there and in a short-term no positive evolution of their production is expected. For some which benefitted from an increased level of business, as the castings used in medical and railway applications, the consolidation of those sectors recovery is not as fast and strong as expected. Therefore, no one should be too optimistic, and long-term forecasts are difficult. The French Foundry Industry registered 410 foundries in December 2012 (<10 persons included) against 418 units at the end of Investment plans The priority is essentially to optimize recent investments and to make environmental operations. In 2012, some foundries continued to invest in extension of installations, mainly in the ferrous activity. Supply of raw materials and energy Compared to the previous year, the price of majority of raw materials stayed at lower levels in During 2011, prices had already fallen gradually throughout the year and this was true as much for the ferrous as for the non-ferrous foundries. The price of ferrous scrap, pig iron and many metallics decreased by -10% on average. In the same time, the price of many commodities fell during 2012, before recovering slightly at the beginning of the 2013 year for some of them. In the non-ferrous sector, the drop of the prices became more marked in Indeed, they were still considered to be too high with regard to the foundries demand. In 2013, the prices should continue to slow down, at least during the first part of the year. Since the beginning of 2012, electricity prices (out of distribution and taxes) continued to gradually decrease. The gas prices stayed stable in Contrary to The United-States (shale gas effect), the European gas prices remain steady due to the crude oil prices to whom they are indexed in the long term. Cost development Evolution of prices from 2011 to 2012 (year averages) in Euro 25 % (2012 average/ 2011 average) Foundry coke -10% Iron scrap 0% Steel scrap -8% Hematite pig iron -6% Nodular pig iron -6%

27 F R A N C E Pig iron: In 2012, the French pig iron index gradually decreased by -6% on average. Over the three first months of 2013, the prices continued to fall slightly (around 440 for iron castings and 447 for nodular iron castings). Coke: After experiencing in 2010 a light increase, prices strongly had jumped up in 2011, by +30%. In 2012, the prices began to slow down slightly, by -10% on average. Over the first half of 2013, the price of coke lost against 10% of its level of The situation in the materials sector Ferrous metals castings as a whole The ferrous metals production (including hydraulic and building cast iron) decreased by -14.3% in volume compared to If the delivery castings moved on the same rhythm in volume, they fell less strongly in value, by -5.4%. The exports decreased by around -19% in tonnage and -8.7% in value. As a whole, about 1.44 million tons of ferrous castings were produced in 2012 against 1.67 million tons last year. The deliveries amounted to 1.16 million tons among 0.51 million delivered on foreign markets that is 44%. Evolution of production in volume from 2011 to 2012 % (2012/2011) Iron castings -10.5% Nodular iron castings -13.2% Steel castings -5.8% Total Ferrous metal castings (Hydraulic and building sector excluded) -10.8% Hydraulic and building cast iron -22.3% Total ferrous metal castings (Hydraulic and building sector included) -14.3% Evolution of exports in volume from 2011 to 2012 % (2012/2011) Iron castings -7.6% Nodular iron castings -14.8% Steel castings -6.5% Total Ferrous metal castings (Hydraulic and building sector excluded) -8.8% Hydraulic and building cast iron -28.8% Total ferrous metal castings (Hydraulic and building sector -19.3% included) 26

28 F R A N C E Iron castings and ductile iron castings Dependent on the automotive passenger car and truck markets by almost 50 per cent, the iron foundries activity in volume fell by -11.3% (pipes and manholes covers excluded). The units belonging to the automotive companies especially marked a fall, by -27% for some of them. All-together, the automotive foundries registered a decrease of -18% in With regard to the various markets, some foundries supplying mining, minerals, and power generation applications registered suitable results. This was also true for the pump and valve sectors as well as orders for castings in the general engineering and mechanical engineering sector. Demand for castings used in the railway sector appeared to have held up quite well. The pipes and manholes covers activity hardly suffered from the strong drop of its exports in 2012, by -28.8%. There were four foundry closures during the year in the iron castings sector. Steel castings Reminder After a historic increase of +43.5% in 2010, the steel castings activity recovered in 2011 its level of 2008, registering a new booming evolution, by +27.1% mainly supported by export (+31%). Unlike most of iron foundries, steel foundries not suffered the same level of decline in 2012 and almost all of the markets supplied by the sector stayed relatively buoyant. With regard to the markets for steel foundries, orders for castings used in mining, minerals and power generation projects continued to hold up well especially for the offshore oil and gas, pump and valve castings sectors. Orders from the construction sector were still generally subdued. Steel foundries supplying the railway sector still benefitted from an increased level of business while foundries working for construction vehicles reported a level of activity in strong reduction, especially those who use investment castings process. As a whole, steel castings production lightly decreased by -5.8% in volume and rose by 1.8% in value. Non-ferrous metal castings as a whole Production of non-ferrous metal castings is still dominated by light metals (Aluminium and magnesium), most of the output being absorbed by the automotive industry. In this sector, zinc alloys form the second most important activity. In 2012, deliveries in volume decreased by -15.6% and by -8.4% in value. Total non-ferrous castings production recorded a fall of -12.7% in volume. These figures cover various evolutions according to the alloys and markets (aluminium and light alloys: -12.9%, copper: -11.4%, zinc: -11.3% and others non-ferrous metals: -6.6%). Looking at the sector in more detail however, it is evident that light alloy foundries were the activity the most affected by the reduction of orders considering its dependence for the automotive sector almost by 90 per cent. As a whole, the aluminium alloys castings deliveries moved back in 2012, by -16.2%, reinforced by the bad performance on the foreign markets (-21.2%). In the same time, the bronze and zinc castings production decreased at the same rhythm, by around - 11% in volume. Unlike the others non-ferrous castings, the super alloys activity supplying the high added value markets (medical, aircraft and aerospace industry) had a generally good year, recording a new growth in 2012, by +7% in volume and +12% in value. Using 84% of super alloys, the investment casting sector rose by +5.2% in On the other hand, the orders for automotive sector fell by -15%. It was also interesting to note that the investment castings exports rose only by +1% in 2012 while the deliveries on the French market increase by +8% in the same period. 27

29 F R A N C E Movements in production in volume from 2011 to 2012 % (2012/2011) Copper castings -11.4% Aluminium castings -12.9% Zinc castings -11.3% Other metal castings (lead ) -8.5% Super alloys +7% TOTAL -12.7% Exports movements in volume from 2011 to 2012 % (2012/2011) Copper castings -7.2% Aluminium castings -21.2% Zinc castings -15% Other metal castings (lead ) -34% Super alloys +5% TOTAL -20.4% * * * * * * * * * * 28

30 G E R M A N Y The German Economy and the Casting Customer Industries Macroeconomic developments The German economy continued to grow on an annual average in The price-adjusted gross domestic product (GDP) increased by 0.7% compared with the previous year. In the previous two years, GDP growth had been much larger (4.2% in 2010 and 3.0% in 2011), but that was due to a catching-up process following the worldwide economic crisis of In the second half of the year, however, the economic activity in Germany slowed down considerably. On the use side of the gross domestic product, foreign trade proved to be very robust, considering the difficult external environment. In 2012, in price-adjusted terms, German exports of goods and services were up a total 4.1% on a year earlier. At the same time, imports rose by just 2.3%. The balance of exports and imports contributed 1.1 percentage points to GDP growth in 2012 and, consequently, was once again the main driving force for economic growth in Germany. Domestic demand developed in different directions. Final consumption expenditure of households (+0.8%) and of government (+1.0%) increased, whereas capital formation did not contribute positively to GDP growth for the first time since the economic crisis of Instead, it decreased in part markedly. Gross fixed capital formation in construction fell by 1.1% and gross fixed capital formation in machinery and equipment by as much as 4.4%. A characteristic feature of the production of the gross domestic product in 2012 is that the economy was divided into two parts. In the service branches, price-adjusted gross value added rose, in part considerably, on However, both industry, excluding construction ( 0.8%) and construction ( 1.7%) went negative. Total price-adjusted gross value added of all economic sectors rose 0.7%, as did the GDP. The number of persons in employment reached a record level for the sixth consecutive year in 2012 (41.6 million). Labour productivity (price-adjusted gross domestic product per person in employment) was down 0.3% in When measured per hour worked by persons in employment, however, labour productivity increased by 0.4% because the increase in the number of total hours worked by persons in employment was smaller than the increase in the gross domestic product. The government budgets continued their consolidation in According to provisional calculations, general government comprising the central, state and local government as well as social security funds recorded a net lending of 2.2 billion euros at the end of the year. Compared with the previous year, the central government considerably reduced its deficit again, whereas local government and especially the social security funds achieved a large surplus, as they did in When measured as a percentage of the gross domestic product at current prices, this is a 0.1% surplus ratio of general government. For the first time since 2007, general government showed a balanced budget for Short term outlook (Results of the April 2013 Ifo Business Survey): The Ifo Business Climate Index for German industry and trade fell in April. Although the majority of companies assessed their current business situation as good, they were far more cautious than last month. Their expectations regarding future business developments were also lower. The German economy is taking a breather. In manufacturing the business climate indicator fell significantly. Manufacturers were less satisfied with their current business situation. The six-month business outlook clouded over once again. Capacity utilisation edged downwards. Export expectations rose after last month s decrease. In wholesaling last month s sharp decline continued in April. Wholesalers expressed far greater pessimism about both their current business situation and their business outlook. In retailing, on the other hand, the business climate index only edged down slightly. Retailers were somewhat more satisfied with their current business situation. However, they expressed greater pessimism about their future business developments. After hitting a historical high last month, the business climate index in construction fell. Construction companies assessed their current business situation slightly less positively. They also lowered their expectations with regard to future business developments. The situation in the major casting customer industries In the year 2013 domestic production of passenger cars will remain broadly stable, rising slightly by 1 per cent to just over 5.4 million units. As expected, new registrations of passenger cars in Germany reached a volume of around 3.1 million units for the entire year This represents a modest fall of almost 3 per cent compared with the 2011 figure (3.17 million new registrations). 29

31 G E R M A N Y In 2012, 6% fewer new trucks of up to 6t were registered in Germany, corresponding to 225,660 units. The heavy class of six tons plus shrank by 10.0% to units. The bus market, on the other hand, expanded by 2% to 5,140 new registrations. In the German mechanical and systems engineering industry, production increased in 2012 by almost 2%, adjusted for inflation. At the same time, the VDMA does not rule out that growth rates might turn negative on a year-on-year basis in the months to come because the total order volume declined by c. 3% in Production is expected to grow again by 2% in real terms in In 2012, the output of crude steel in Germany came down by 4% to 42.7 million tons, although it is true that new orders in the steel industry stabilised in the fourth quarter of Compared to the same quarter in the previous year, they expanded by seven per cent to 9.3 million tons, while the order backlog soared by twelve per cent to 8.4 million tons. After two good years of recovery in succession, the residential building sector once again grew by at least 2-3% in The volume invested in this segment of the construction industry reached more than 127 billion euros, which makes it the dominant factor in this industry. Conversely, the volume invested in building construction (residential buildings excluded) declined by almost 4%, reaching c. 59 billion euros. Even though the share of public building in this sector amounts to less than 20%, the 14% decline in public investment had an enormous effect. Investments in civil engineering shrank by c. 6% to nearly 32 billion euros. In this segment, public and private investments are approximately balanced, although the fact that the public authorities are strapped for cash led to a decline of more than 8%. Developments in the foundry industry In 2012, Germany's iron, steel, and malleable foundries received orders for around 4.26 m. tonnes of castings. Compared to 2011, this marks a decrease of 12.3%. Orders from the biggest customer industry, motor-vehicle engineering, were 14.7% lower than the year before (2.30 m. tonnes). At 1.11 m. tonnes, the volume of orders from the mechanical-engineering industry was down by 14.6% compared to the previous year tonnes of parts for miscellaneous applications were ordered, a level that is 1% less than in the preceding year. Germany's foundries focused on non-ferrous components received an order volume of 1.00 m. tonnes. The demand was down by 7.8%. With approx. 78% of incoming orders the vehicle industry is dominating the non-ferrous sector. The demand shrank by 8.2% ( tonnes). The foundries related to mechanical engineering received orders with a volume of tonnes (-10.2%) tonnes of miscellaneous parts were ordered, a decrease of 6.3%. In 2012, the weight of castings produced by Germany's iron, steel, and malleable foundries amounted to 4.28 m. tonnes. Compared to 2011 this corresponds to a 5.9% decrease. If we look at the two major customer industries, motor-vehicle and mechanical engineering, the output destined for the motorvehicle industry contracted by 6.8% to 2.28 m. tonnes, while that for the mechanical engineering sector decreased by 7.1% to 1.15 m. tonnes. The output of castings for miscellaneous purposes (including rolls, moulds and castings for buildings as well as pipes and fittings) reached a volume of tonnes, 1.6% less than in the year before. In 2012, 39% of the total sales volume was exported directly (ferrous castings). All in all, 1.67 m. tonnes were sold to customers abroad, representing a 4.4% decrease. At the non-ferrous side the share of exports is significant lower (14-15%) because of the strong demand of domestic car manufacturers. By the end of 2012, back orders equalled a weight of more than 1.69 m. tonnes of castings, 7.7% less than at the end of 2011 (ferrous). The non-ferrous back orders had a volume of nearly tonnes (+15.6%). Capacity utilisation in the iron, steel, and malleable foundry industry amounted to 85.3% in 2012, in comparison to 2011 this means an downturn of 2 percentage points. Capacity utilisation in the nonferrous industry improved driven by castings for the automotive industry. The companies logged a rate of 84.1% in In comparison to 2011 this is a decrease of nearly 3 percentage points. The employment situation As of December 31, 2012, Germany's foundries (ferrous and nonferrous) employed about persons, 0.6% more than at the end of 2011 (survey cut-off at <50 employees per company). This figure corresponds with the number of foundries (432). 30

32 G E R M A N Y At the end of 2012, more than 600 foundries (ferrous and nonferrous) were operating in Germany. Investment plans In 2012, m. was invested by Germany's foundries. The investments were up by 5%. It is expected that investments will grow by 5 % in Supply of raw materials and energy It is a characterising feature of many raw materials and energy carriers that both supply and demand are not price-sensitive. One might (almost) say that supply volumes as well as demand volumes are price-independent. This stands out particularly clearly in the case of scrap, a raw material that is very important to our industry: No-one 'produces' scrap. Rather, scrap is a 'necessary evil' that is left over from other industrial activities. Companies in the metal-working industry even endeavour to keep the quantity of scrap to a minimum, no matter what its price. On the other hand, there is a demand that is almost without substitution alternatives. If 25t are needed, they will be bought at any price. If, given these conditions, it is the price that is supposed to balance supply and demand, wide fluctuations are inevitable. Even infinitesimal changes in the quantities supplied or demanded may cause prices to increase or in fact decline steeply. Moreover, ups and downs are regularly exaggerated by speculation. There is one more point to make as far as 2012 is concerned: measured by the standard of prices that were still common only a few years ago and also by the standard of economic framework conditions, prices are (still) very high at present. What is more, there are many cases where sound reasons are never given for either their level or their development. Cost developments In 2012, developments in the total cost of production once again took widely different courses, depending on the degree to which the production of castings depends on raw materials, energy, or labour, and also depending on the raw materials or energy carriers employed. The influence of rawmaterial price developments was as great as before, with all foundries being confronted by violent price fluctuations. Conversely, it was the foundries whose production is labour-intensive which had to cope with the biggest cost increases. They were hit particularly hard by one of the biggest pay increases in percentage terms since In addition, their output declined by 5.8% while their fixed cost began to rise again. If, leaving aside the cost of raw materials, we concentrate on the development of manufacturing costs, we find that the latter went up by around 2.3% in Metallic input materials Because of the steep increases of recent years, metallic input materials by now have reached a share of about 25% in the total cost of production in many cases, ranking second in importance only after payroll costs. Against this background, the ability to calculate cost is indispensable for success. However, the unusually wide price fluctuations on the commodity markets frustrated all attempts to make plans, even plans that reach only a few months into the future. Moreover, foundries have no way of 'cushioning' these wide fluctuations which, consequently, have to be factored into the price of castings as early as possible by way of material price tags. There mere fact that an increase of no more than 10% in the prices of raw materials causes the total cost of production to go up by about 2.5% shows why it is necessary to calculate raw-material costs separately on a day-to-day basis. In many cases, such an increase alone would completely wipe out the often meagre profit margins in our sector. Raw-material prices are subject to marked cyclical fluctuations. In the current cycle, prices apparently reached their zenith in Since that time, they have been inclined to go down, with some occasionally wide fluctuations in between. In 2012, the dollar prices of many raw materials have been declining by around 10%. At the same time, when the world market prices for aluminium and copper reached their lowest level in summer, the euro was inclined to flag versus the US dollar, a weakness which compensated most of the price drop on the domestic market. 31

33 G E R M A N Y While steel prices similarly declined, the prices of foundry steel scrap and pig iron did not. Remaining extraordinarily stable throughout 2012, their level went down only a little even at the end of the year. At present, only an economic upswing might trigger a sustained and/or renewed price increase. Payroll costs The uncommonly steep increases in the prices of raw materials and energy have caused the share of payroll costs in the total cost of production to decline in recent years. However, as the share of payroll costs in the total cost of production is almost 40%, their significance in our industry is as overwhelming as ever. Any change influences the total cost of production significantly and immediately. Against this background, it is imperative to pay particular attention to their development. There are many factors affecting payroll costs, among which collective agreements deserve particular mention because they specify yearly changes in pay and collectively-agreed non-wage labour costs. Another important factor is non-wage labour costs that are prescribed by law (social insurance contributions). Further factors that influence the development of payroll costs (per hour or per capita) over the year include working time lost due to sickness, the number of public holidays, overtime and shift bonuses, and other (voluntary) benefits funded by employers. Regarding the reduction of the employers' share in the non-wage labour costs that has been a declared political objective for quite some time, a little progress was made (at least temporarily) in 2012: Pension insurance contributions, of which the employer pays half, have been lowered from 19.9 to19.6% of gross pay. Financed by the employer alone, the insolvency insurance rate was increased from 0.0 to 0.04% of gross pay under the pay-as-you-go system. On April 1, 2012, a new collective agreement was concluded. It has a life of 13 months and will terminate on April 30, It provides for: A 'zero month'. In April 2012, the 'old' pay tables will remain in force. A linear pay increase of 4.3% with effect from May 1, If we compare benchmark figures, i.e. payroll costs in January and December, we arrive at an increase of 4.2% in Given that payroll costs have a share of 40% in the total cost of production, this means that the cost of production has gone up by 1.68% in If we relate payroll costs with their share of somewhat more that 50% to the cost of manufacturing (i.e. the total cost of production minus raw-material costs), we arrive at a 2.1% increase in On November 1, 2012, moreover, a regulation providing for industry surcharges to be paid for temporary workers came into force. It postulates an industry surcharge of up to 50% of the hourly pay stipulated in collective agreements for temporary workers employed in the metal-working and electrical industry. This increases the cost of employing temporary workers for prolonged periods to a marked extent. This being so, foundries that permanently employ temporary workers on a large scale will have to take the following into account in their plans: If, for example, temporary workers account for 10% of the workforce, payroll costs will go up by as much as 5% because of the industry surcharges that will fall due. Energy Measured by the standard of the peak prices that had to be paid for various energy carriers in the summer of 2008 and the price slump that followed, some prices have climbed almost to the top again in Crude oil, for example, had to be paid for at a rate of 110 to 120 $/barrel in many months. Because of this, and because of the (compared to 2008) lower dollar value of the euro, the price of fuel oil ranged between 90 and 95 cents per litre in Germany for many months. This level was topped only in the middle of 2008 for a short while. If we look at the annual average, the price of fuel oil in 2012 even was the highest ever paid. As ever, the price of natural gas followed that of crude oil with the usual time lag, although at 5% its price increased a little more than that of oil. Given that the global economy is still inclined to falter, prices in 2013 might not be able to retain their current level. 32

34 G E R M A N Y Coke prices reached their zenith in the middle of Although they have been declining since that time, their level is still rather high at around 400EUR/t. Looking at this year's developments, we may assume that prices went down by somewhat more than 10% in Finally, the price of electric energy rose by 0.5% according to the Federal Statistical Office. Depending on the ratio at which the various energy carriers were employed, energy costs increased by up to 4% in 2012 in some instances and even declined by 5% in others. Very likely, the increase in the cost of energy was steepest for those foundries that use gas for melting. Conversely, those that use coke for melting in a cupola furnace even enjoyed some relief. Outlook 2013 In 2013, costs may be expected to increase by another 2.9%. The exact figure will probably depend crucially on the energy carriers employed. Especially in those cases where electric energy is used for melting, costs may go up more steeply. The same holds true whenever operations with a labourintensive production employ many temporary workers on a permanent basis, for industry surcharges may then rise as high as 50%. Against the background of the uncertainties involved in forecasting future cyclical developments, it is as difficult as it ever was to prognosticate the development of raw-material and energy prices at the beginning of Moreover, there is no evidence to suggest that price fluctuations might become less intense. Consequently, it appears particularly advisable to pass on charges in the cost of metallic input materials promptly to the customers by way of material price tags. The Situation in the Material Sectors Iron Throughout 2012, production decreased by 7,5% to 2.39 m. tonnes. The output of motor-vehicle components was down by 5.7% to more than 1.59 m. tonnes. The volume of casted parts for mechanical-engineering shrank by 11.2% to tonnes. Other grey-iron components (including moulds and railway parts, fittings and components for the steel industry) reached an output volume of tonnes (-10.4%). Iron foundries received orders for 1.49 m. tonnes of castings from the motor-vehicle industry, a 14.0% decrease. Down by 20,7% compared to the order volume received the year before, the demand of the mechanical-engineering industry reached a volume of tonnes. Orders for parts for miscellaneous applications made of cast iron reached a volume of tonnes, 13.0% less than in the preceding year. At the end of December 2012, the order backlog amounted to tonnes, 9.1% less compared to the end of December Spheroidal and malleable iron At 1.79 m. tonnes, the production of ductile iron castings was down by 11.2% compared to the year before. Producers of spheroidal-graphite iron castings logged a level of 1.75m. tonnes. Malleable iron foundries registered a volume of tonnes. The output of motor-vehicle components was down by 9.4% to more than tonnes. The volume of casted parts for mechanical-engineering shrank by 3.7% to tonnes. Other components reached an output volume of tonnes (+3.9%). At the ductile sector the volume of incoming orders reached 1.79m. tonnes (-11.2%). Ductile iron foundries received orders for tonnes of castings from the motor-vehicle industry, a 16.1% decrease. Down by 17.3% compared to the order volume received the year before, the demand of the mechanical-engineering industry reached a volume of tonnes. Orders for parts for miscellaneous applications made of ductile cast iron reached a volume of tonnes, 6.4% more than in the preceding year. At the end of December 2012, the order backlog amounted to tonnes, 5.7% less compared to the end of December Steel Throughout 2012, production of steel castings stagnated at tonnes (-0.2%). The output of motor-vehicle components grew by 2.2% to tonnes. The volume of casted parts for mechanicalengineering grew by 4.3% to tonnes. Other components reached an output volume of tonnes (-2.2%). 33

35 G E R M A N Y At tonnes, the volume of orders received by the producers of steel castings in 2012 was decreasing by 7.4% compared to the year before. Steel foundries received orders for tonnes of castings from the motor-vehicle industry, a 15.2% decrease. Down by 11.9% compared to the order volume received the year before, the demand of the mechanical-engineering industry reached a volume of tonnes. Orders for parts for miscellaneous applications made of steel castings reached a volume of tonnes, 3.6% less than in the preceding year. At the end of December 2012, the order backlog amounted to tonnes. The order cushion was 7.9% lower compared to the end of December Non-Ferrous Metal Castings In 2012 the production of aluminium castings was down by 4.9% ( tonnes). For the magnesium sector the production reached a level of tonnes (+10.4%). The output of copper castings shrank by 1.8%. The level was tonnes tonnes of zinc castings were produced, marking a decrease of 4.7% (Copper and Zinc volumes are underestimated! The statistic will be restructured. This process is on the way). Aluminium foundries received orders for tonnes (-9.1). Nearly 88% of the demand ( tonnes) came from the vehicle industry. Up by 2.4% compared to the order volume received the year before, the demand of magnesium castings reached a volume of tonnes. Orders for parts made of copper castings reached a volume of more than tonnes, the same level as the year before. Foundries producing casted parts from zinc logged an order level of tonnes (+2.9%). As described Copper and Zinc volumes are underestimated! The restructuring process has launched. Source: BDG, Stat. BA, VDA, VDMA, HDB, WV Stahl * * * * * * * * * * 34

36 H U N G A R Y General Situation In 2012 GDP declined by 1.7 per cent in Hungary, which was even higher than the 1.5 per cent drop was forecasted. At that time it was considered a particularly pessimistic forecast by government officials. Consumption and investments also continued to decline. GDP adjusted for terms of trade (1.2 per cent) dropped by almost 3 per cent in Although the Hungarian economy avoided financial crises between 2010 and 2012, it sank into stagnation, from which it cannot get out with the help of its current economic policy. Hungary is threatened by long-term lagging behind the region and lack of perspectives. Capital and labour are leaving Hungary. Long-term national interests are completely overlooked. Legal uncertainty, unpredictability and bad tax policy hamper economic growth, and the expected general government deficit can only be achieved by more and more restrictions. Owing to measures infringing or abusing the law no significant new investors wish to come to Hungary without appropriate international guarantees. Fiscal experiments on the Hungarian economy have caused terrible damage. Extra taxes on sectors with high potential to modernization have paralyzed the business world. Low-wage employment costs increased extremely (by more than 25 per cent in 2 years in parallel with 7-8 per cent nominal GDP growth) and the companies affected became uncompetitive or were forced to make their activities grey. The perverse redistribution of income benefiting high-income people has contributed to the further splitting of society. The excessive involvement of the state in regulation, ownership and the everyday life of citizens hinders competition and the evolution of independent, responsible citizenship. Destructive anti-market and anti-foreigners slogans only serve the financial interests of a narrow business group. A similar experiment with the central bank could cause an even more serious confusion. At present this is the highest risk and the main reason behind the about 8 per cent weakening of the Hungarian forint against other currencies of the CEEregion in March. In recent weeks, a number of institutions and the market reacted negatively to Hungarian politics. In addition to sharply criticizing the Hungarian constitutional amendment, the European Commission predicted general government deficits above 3 per cent of GDP in both 2013 and 2014, and, together with the IMF, they recommended growth-friendly adjustments. In response to the risks of personnel and institutional changes in the central bank, as well as the Cyprus crises, the forint weakened against the euro even to over HUF305. Now the Hungarian economic policy follows only (the otherwise conflicting) goals of the forthcoming elections: avoiding the excessive deficit procedure and redistributing incomes accompanied by populist rhetoric. The global economic crisis is far from over. Financial markets have stabilized since the summer of 2012, the risk of the breakup of the Economic and Monetary Union (EMU) has decreased, and European crisis management institutions have gained strength. However, these changes have not yet had an impact on the real economy sector. As a consequence of the widening social crisis, it is more and more difficult to make the necessary adjustments and reforms accepted by the public. Europe has succeeded in making a mountain out of the molehill of financial problems of a tiny island (Cyprus) and shaking the confidence of small depositors in the guarantee scheme. The European Commission reduced its growth forecast for 2013; however, following a decline in 2012, stagnation can be expected this year. The general government deficit relative to GDP of the EU member states decreases; however, government debt relative to GDP will still slightly increase due to stagnating GDP and recent bank consolidation measures. The 0.75 per cent benchmark rate of the European Central Bank may decrease to 0.5 per cent in the near future. There is no imminent inflation risk. The euro/dollar exchange rate and the oil price remain basically unchanged. In March the economic sentiment index reached its quite low peak level of a year ago. Consumer expectations have continued to rise for almost six months, whereas the business confidence index stagnated in These different trends indicate the launch of an economic policy influenced by the forthcoming elections. Although the Hungarian economy is beyond the lowest point of the business cycle, no substantial recovery or growth can be expected. 35

37 H U N G A R Y Facts Gross Domestic Product 101,3 101,6 98,3 Agriculture (1) 83,7 127,2 78,7 Industry (2) 113,4 105,7 98,8 Construction (3) 91,1 92,1 93,6 Retail and wholesale trade (4) 98,4 99,6 98,9 Transport and storage (5) 100,5 100,7 98,4 Information and communication (6) 104,8 102,2 103,5 Financial services (7) 95,7 93,3 97,0 Real estate activities (8) 100,2 98,4 98,9 Professional, scientific, technical and administrative services (9) 96,9 98,1 99,3 Public adminsitration, education, healthcare (10) 97,2 99,9 100,2 Arts, entertainment (11) 103,4 103,0 98,7 Core growth (2)+(3)+(4)+(5)+(6)+(7)+(8)+(9) 103,4 100,9 98,8 GDP domestic demand 99,5 99,4 96,3 Private consumption 97,3 100,2 98,0 Gross fixed capital formation (investments) 90,3 94,5 96,2 Foreign trade in goods Exports 116,8 110,2 100,9 Imports 115,0 106,9 100,0 Consumer price index (preceding year = 100) 104,9 103,9 105,7 Unemployment rate (annual average) 11,2 10,9 10,9 General government balance in per cent of GDP (ESA) -4,2 4,2-2,5 The tendencies of the Hungarian foundry industry showed small but already significant average growth of the different foundry sectors during the years of 2010 and The first quarters of 2012 were still positive but more moderated as before. In the Hungarian Foundry Manager Index December 2011 December you can see the tendencies: 6,5% decreasing in average, at the ferrous (FE) foundry section 11% decreasing, esp. the performance of the grey iron foundries stagnated and the steel casting is falled with 455 at all; all together the decreasing for the Non-ferrous (Non-FE) foundries is 3,1%. Four of the SME foundries has finished the activity of them last year and during the first quarter of this year. Tha basicaly export orientated Hungarian foundries have relative stabil market position but about the low HUF EURO exchange rate they are loosing now the extra profit of them. It is more than average that the budgets for 2013 are created as a hopefull list of wishes or as a driving in the fog. It is sure because of the very strong Hungarian export dependence at the foundry sector means: everything is depending of the market situation of the countries to where the Hungariean casting exports are fulfiled. See the table as follows. 36

38 H U N G A R Y Hungarian casting production, Value in tons Denomination Grey iron casting 49,230 31,133 25,834 28,921 27,629 29,019 Nodular iron castings 20,011 15,750 13,970 24,354 23,171 16,287 Compacted graphite iron castings 361 1,589 1,251 1,410 4,248 3,545 Alloyed iron castings 173 Malleable iron castings Total iron castings 69,635 48,488 41,066 54,700 55,060 49,035 Unalloyed steel castings 3,321 4,224 3,052 3,134 3,261 2,923 Alloyed steel castings 2,619 3,414 2,643 2,767 2, Total steel castings 5,940 7,638 5,695 5,695 6,027 3,535 Aluminium gravity die castings 53,919 40,823 49,063 46,323 43,721 51,665 Aluminium pressure die castings 43,011 49,298 30,857 42,898 55,448 44,275 Aluminium sand castings Total aluminium castings 97,276 90,342 80,101 89,423 99,412 96,128 Bronze castings Brass castings 1,010 1, ,347 Zinc castings 3,566 2,950 3,738 3,580 3,710 4,367 Magnesium castings 189 Other heavy metal castings Total heavy metal castings Incl. investment cast. 12 5,933 4,847 5,442 5,012 5,180 6,424 TOTAL 178, , , , , ,122 Investment casting all together in total * * * * * * * * * * 37

39 I T A L Y Macroeconomic developments Weak performance for the economy Year 2012 marked an increase in global GDP by 3.2% compared to 2011, down if comparing to the change in the previous year 2010 (+3.9%): the decrease is explained mainly by the negative trends of Euro area and United Kingdom ( -0.4% and -0.2%). The general context marks a weak aggregate demand, as well as the main macroeconomic indicators. In October 2012, the world trade grew by 0.4% on a monthly basis, down from +0.5% on average in the third quarter of the same year. Similarly, the global inflation grew by 3.2% year on year compared to +3.4% in the previous month, i.e. September Slight positive signals from industrial production that have, in reference to October 2012 data, recorded a monthly change of +0.2% compared to no change reported in the third quarter. The PMI, Purchasing managers index (composite index of manufacturing activity of a country) increased from 51.6 to 52 points between November and December: the increase is due to the manufacturing sector (from 49.7 to 50, 2) and the index of the service sector that has remained largely unchanged. The Situation in Italy Italy, in 2012, confirmed the bad period: during the third quarter GDP fell by 0.2% from the previous quarter and by 2.4% over the same period of This is the fifth consecutive quarter of negative change. Both household consumption, gross fixed investments and government spending have undergone percentage decreases, otherwise, the contribution to GDP growth in the trade balance and the stock was a positive sign, respectively +2.1% and + 0.7% in comparison with the previous period. The OCSE leading indicator was stable in September and October on 99 points, rose to 99.1 in November. The seasonally adjusted index of industrial production decreased by 1.0% compared to October, while on an annual basis was down -7.6%. There are negative trends in all the major industries groups. The most marked decrease relates intermediate goods (-9.8%) but significant decreases were also recorded for Energy (-7.7%) capital goods (-7.2%) and for goods consumption (-5.6%). The new manufacturing orders in October reported a slight decline on an annual basis to -0.1% (-12.8% in September). In the same month, retail sales are declining on a monthly basis was -0.9% and amounted to -3.6% on a trend basis. The labor market remains one of the main weaknesses of the country: in November, the unemployment rate remains stuck at 11.1%. The index of consumer prices, in November, had a decline, reaching +2.6% from +2.8% in October. The foreign trade still support the productive activity: foreign demand continues to make a positive contribution to economic activity. In recent months, the increase in exports was driven by sales to countries outside the EU, between January and October, the current account deficit of the balance of payments to GDP ratio has declined by more than two percentage points over the same period of 2011 as a result of the improvement in the trade balance. The confidence feeling among firms and consumer The index of business confidence in December, remains in negative territory, but there was a slight improvement compared to the previous month (from -16.7% to -15.9%). Expectations of manufacturing enterprises worsen, but improve assessments on orders. The mood of consumers is instead in a slight improvement, going, between November and December, from -40.4% to -38%. At the territorial level, confidence increases in the north-east, center and South while in decreases the North-west. The decline in economic activity may stop during the second half of The scenario described by the ratio of the Bank of Italy, however, foreshadows a return to growth in the second half of the year, with wide margins of uncertainty. The cyclical upturn would be made possible by the gradual recovery of investment, following the normalization of financing and the recovery of demand in the euro area, as well as the partial improvement in confidence. In this context, the dynamics of the product would still be negative on average in 2013, and would return slightly positive in The risks, however, are still high. The major risk factors are related to the downward trend in domestic demand and credit conditions: the return to positive rates of accumulation could be delayed by less 38

40 I T A L Y favorable evolution of business expectations, the effects on the activities of banks deterioration of balance sheets and increased customer risk may be more persistent. A better performance could instead result from a further strengthening of the prospects for the euro area. A synthesis framework for the Italian Foundry in 2012 In terms of number of foundries, in ferrous and non-ferrous domain there are no significant changes to be recorded between 2011 and 2012, the number of foundries is 1,111 foundries. It should be noted however that the people employed in the various sectors have suffered declines in both cases: for ferrous metal foundries the change is equal to -1.1%, while for non-ferrous metal foundries the change comes to -2, 9%. In 2012 workers directly employed stood at 28,745, divided into 14,182 workers in ferrous metal foundries and 14,563 in non-ferrous metals foundries. The average productivity per worker is higher in the field of ferrous metal foundries. The declines in terms of tons produced is not a good thing, throughout the foundry industry was down by 11.5% and amounted to 1,960,915. The overall turnover follows a similar trend with a 9.0%, dropping to less than 7 billion euro Change vs 2010 Foundries Ferrous Metal Foundries Iron Steel Precision Non Ferrous Metal Foundries Al and alloys Mg and alloys Zinc+Brass Bronze and copper alloys Other N.F.metals Direct workers Ferrous metals Foundries Non ferrous metal Foundries Within the sectors of ferrous metals, the most obvious setback occurred in the production of iron castings which marked a 10.2% in 2012, well below is the scale of steel sector - 2.0%, while the production of precision castings is in contrast trend with a +1%. In no case, however, no sector was able to recover production levels of 2008, from the beginning of the long crisis, the percentage change for the three sectors is as follows: 33% (iron castings) -22% (steel castings) -16% (precision castings). The nearly 120,000 fewer tons of pig iron produced shall be divided between ductile iron castings, which include both the malleable iron, which suffer the greatest variation and -11.4% and gray iron castings which fell by -9, 5% in In the area of steel castings there was a significant increase in the production of carbon steel with a +18.4%, while alloy steels and stainless steels are both declining. The proportion of carbon steels of the total annual production is thus closer to that of year The production of non-ferrous castings recorded the largest decrease, down 13.7%, a figure not encouraging because it marks a further decline after two years to 2009 they had seen positive percentage. The two main metals, aluminum and zinc, respectively are losing -13.9% and -10.9%. 39

41 I T A L Y CASTINGS PRODUCTION IN ITALY (TONS) The curve of the production trend is back to bend down and towards to values very far from the peak recorded in 2007, the percentage change in fact amounted to -29%. The difference between the average for the decade prior to 2008 and the average of the following years ( ) amounted to 22% and explains the thud between 2008 and % ITALIAN CASTINGS PRODUCTION (% CHANGE YEAR/YEAR) 20% 10% 0% -10% -20% -30% -40%

42 I T A L Y Foreign trade - Ferrous Castings Exports during 2012 fell by 1% in terms of volume, while had an increase of 8% in terms of value. Respectively the situation shows about 374,793 tons exported and an income of more than 2 billion. The same behavior is observed for imports: the volumes fell by 4%, while purchases increased by +6%. In the end, if you look at the balance between imports and exports, calculated as the difference between imports and exports, tons purchased are greater than those sold 410,000 tonnes compared with 374,793 tonnes, but this difference is lower than -29% compared to 2011 In contrast, the balance in terms of values in EUR, where the difference between sales and purchases, shows an increase of +12%, but here the balance is positive with more than 2 billion of exports compared to slightly more than 1 billion of imports. Metal ferrous foundries change vs 2011 Imports volumes (t) -4% Export volumes (t) -1% Total (t) -29% Imports value ( ) +6% Exports value ( ) +8% Total ( ) +12% Direct Transformation Inputs (ferrous castings) Variations of output leading costs and index variation for foundries with electric furnace and cupola furnace. IDT Change (%) 2012/2011 Change (%) 2013/2012 (1st Q) Recarbursing graphite 10% - FeSiMg 6% -3% Other materials (FeSi) -15% -4% Metallic charge (excluding pig iron & steel scraps) -2% -3% Electrical power 22% 10% Natural gas 19% 8% Foundry coke -4% -8% Filters & exothermic sleevs 3% 2% Franch sand - 4% Core binders 6% 2% Green sand binders - - Consumer price index 3% 2% IDT Index (for electrical foundry) 9% 4% IDT Index (for cupola foundry) 4% - * * * * * * * * * * 41

43 T H E N E T H E R L A N D S General economic situation In 2012 the Dutch Government deficit decreased to 4.1 percent of GDP while Government debt rose to 71.2 percent of GDP. The Dutch Government deficit and debt have now exceeded the European norms for the fourth year in a row, according to these figures released by Statistics Netherlands (CBS) at the end of March Government spending increased slightly in 2012, exceeding income by 24 billion euros. The cost incurred from the Exceptional Medical Expenses Act rose sharply by nearly 3 billion euros, which is over 10 percent. However, spending on basic health insurance was stable for the first time in years. The higher unemployment rate meant an extra 0.8 billion euros in spending on benefits, an increase of nearly 20 percent over As in 2011, Government investments, salaries and subsidies were reduced. The Dutch Government income rose by 5 billion euros over 2011, thanks to the higher revenues from wages and income taxes and social premiums. These yielded an extra 4 billion euros, mainly in health insurance premiums, in respect to Natural gas revenues also yielded an extra 2 billion euros. There was again less income from corporate taxes. The reduction in the rate of conveyance taxes half way through 2011 was still noticeable in 2012, as revenues were down by 0.8 billion euros. In the fourth quarter of 2012 Government income rose sharply as the VAT rate was raised and taxes on banks were introduced. These two together, put an extra 1.5 billion euros in State treasury. The Dutch Government debt has risen to 428 billion euros by the end of 2012, an increase of 33 billion euros over December The debt rose by more than the deficit. This is because the Government provided support funds to countries in difficulty through the European Financial Stability Facility (EFSF) and by giving support funds to the new European Stability Mechanism (ESM). Together this added up to over 9 billion euros. In 2012 the ING bank repaid some of the support funds, which they received in With these 1 billion euros, the Government lowered her debt. Forecast of the general economic situation in the Netherlands in 2013 and 2014 The GDP is expected by the CPB Netherlands Bureau for Economic Policy Analysis (CPB) to decrease in 2013 by 0.5 percent, for 2014 they predict a GDP growth of 1 percent. An unemployment rate of 6.25 percent is foreseen by the CPB Netherlands Bureau for Economic Policy Analysis (CPB) in 2013, for 2014 this percentage is expected to increase up to 6.5 percent. The Dutch Government deficit predicted by the CPB Netherlands Bureau for Economic Policy Analysis (CPB) are 3.3 percent of GDP in 2013 and 3.4 percent in The foundry industry in The Netherlands in 2012 (and forecast 2013 and 2014) The Dutch foundry industry in general was facing economic difficulties in Some foundries however have customers in good performing markets and were doing well. But most foundries were having a hard time, especially in the second half of The cause of this situation is the difficult overall European economic situation. The forecasts for 2013 and 2014 are difficult to tell. Much will depend on developments in Europe to solve the financial and economic crises. Currently, the short term as well as the long term are both highly uncertain. Much depends on the economic performance of the customers of the foundries. The Dutch foundries are highly export driven. * * * * * * * * * * 42

44 N O R W A Y General Economic Development Activity growth in the Norwegian economy fell towards the end of 2012 and is expected to show a moderate development going forward. In the short term, domestic demand will stimulate growth. Our projection of economic trends in the years ahead is slightly more negative than previously. According to the Labour Force Survey, unemployment increased towards the end of 2012, and growth in mainland Norway s GDP in the fourth quarter was lower than the trend growth despite adjustments for random events in the form of lower growth in power production. However, growth is expected to increase again slightly in 2013 and surpass trend growth. Main economic Indicators E GDP Mainland Norway Unemployment rate Consumer prices Investment in the Oil-sector Norway s trading partners in long-term downturn The economic downturn among Norway s trading partners is set to continue well into Together with continual losses of cost-competitiveness in Norwegian businesses, this will lead to a weak development in traditional Norwegian exports. From 2014, however, growth in demand in Norwegian export markets will gradually pick up, leading to higher growth in traditional Norwegian exports going forward. Mortgage rates set to fall further Low international interest rates stemming from the weak global economic situation, in addition to a strong krone, low inflation and moderate pressure in the labour market, have resulted in a very low base rate in Norway. Together with increased confidence in the interest rate market and an absence of expectations of higher base rates in the short term, this has stabilised the money market rate at around 1.9 per cent for the past year and a half. This level is set to remain roughly the same throughout The krone is, nevertheless, expected to strengthen going forward. Mortgage rates follow the money market rate to a large extent with a time lag, but the premium on the money market rate has increased recently. Thus, the interest rates faced by households will fall only slightly at the start of 2013, while mortgage rates as a yearly average could fall just below the 2012 level. The base rate is expected to gradually rise in the next few years, and the money market rate will reach at least 4 per cent in The premium on the money market rate is expected to gradually be reduced from the current level, leading to an estimated annual average mortgage rate of 5.5 per cent. High real wage growth and low inflation Following several years of relatively high wage growth, a strong krone and weak demand, various export-oriented industries in the manufacturing sector are now struggling with profitability. Combined with a slightly less tight labour market, this could mean a further fall in wage growth from last year s 4.0 per cent. A substantial carry-over means that wage growth is unlikely to fall below 3.8 per cent. However, with an estimated 1.5 per cent rise in consumer prices, there will also be a considerable increase in real wages in Wage growth is then expected to climb in pace with improvements in the global economy and a gradually weaker krone. Inflation, however, is also set to increase. Real wage growth may thus remain at around this year s expected level of 2.3 per cent in the next three years. High income growth in households leads to high growth in consumption The high growth in households real incomes is expected to continue, but higher interest rates will eventually curb the development. A considerable share of household incomes is saved, but the ratio of savings to income is likely to fall slightly in the years ahead. A clear growth in consumption is therefore expected going forward. The marked population growth in Norway is expected to increase both 43

45 N O R W A Y income and consumption per capita by over 1 percentage point less than for the households as a group, as shown in the tables. Falling growth impulses from the petroleum sector Investments in the petroleum sector have increased by more than 14 per cent in the past two years, and although oil prices are expected to fall, investments will continue to increase, but at a slower rate. Investment in mainland industries is also expected to increase somewhat, but much less than in previous economic upturns due to the weak international impulses. Moderately expansive fiscal policy Projections show moderately expansive impulses from the fiscal policy for the coming years. Public consumption is likely to grow less than mainland Norway s GDP, while the real growth in public investment and in transfers to households is expected to remain high. Central government s oil revenues will continue to be high in the years ahead, thereby increasing the Government Pension Fund Global substantially. The structural non-oil public deficit may therefore drop to between 2.5 and 3 per cent of the Fund s value, both in 2013 and in the years ahead. Growth in employment and low unemployment Employment has risen substantially during the upturn, but growth slowed markedly during the second half of Employment is set to continue increasing at a moderate pace. Unemployment has increased somewhat recently, and is expected to worsen slightly on an annualised basis compared to last year, remaining at around the same level to the end of the projection period Record-high production for ships, boats and oil platforms in the first quarter of 2013 Seasonally-adjusted figures for the first quarter of 2013 show a further increase in output for industries such as machinery and equipment, ships, boats and oil platforms and repair and installation of machinery. A continued high workload has resulted in record-high output levels for ships, boats and oil platforms in the first quarter of Since 2005, industries like machinery and equipment and ships, boats and oil platforms have experienced a production growth of 90 and 97 per cent respectively. On the other hand, industries like non-ferrous metals experienced a continued downturn in production in the first quarter of Compared with figures from 2005, basic metals have had a production drop equivalent to over 21 per cent. The differences between industries linked to the Norwegian oil and gas industries and more traditional Norwegian export industries have thereby continued to increase also in this period. Foundry Industry The total value of the foundry production in 2012 was almost 9% lower than in % of the foundries expect an increase of tonnage in 2013 while almost half of the foundries expect an increase in profits and order income. One iron foundry will close in The Norwegian ship building market is an important marked for Norwegian foundries. 85% of this market is the building of ships for the offshore oil sector. A relatively good activity is expected in this marked the coming two years. The Norwegian foundries export approximately 60% of their production and Sweden, Denmark and Germany are the most important markets. The general level of costs and labour cost is an increasing problem for Norwegian companies and also for the foundries. Also the strong currency is a problem. 44

46 N O R W A Y * * * * * * * * * * 45