Economic slowdown in Germany: How industries needing Investment castings can stay unaffected.
Germany - Europe’s largest economy has officially entered into the recession. GDP fell by 0.3% in the first quarter of 2023 followed by 0.5% in the fourth quarter of 2022. Before we look into the solution of how some industries can stay unaffected, let’s look into the summaries of how it affects many industries if they use metal components or machine parts.
How industries will be affected by this economic slowdown.
Shut down of foundries:
Metal components and machine parts used in general engineering, oil & gas, heavy earth moving, food processing, medical and marine industry are casted in foundries. Many German smelters and casting foundries including a 200 year old foundry have already shut-off due to the energy crisis. The recession will lead to layoff and closure of the metal casting foundries as paying high wages and energy bills are a huge burden on them. Shutdown of foundries mean no supply or scarcity of metal components to the industries.
High production costs and tight raw material supply:
Recession has caused inflation which in turn led to higher production costs in Germany. Metal casting foundries rely on raw materials (steel, aluminium, copper, etc.) and casting alloys suppliers and scrap. Prices of raw materials are hit by the recession but the supply remains tight.
Decrease in industrial output:
Industrial output decreased during the recession. It went down 3.4% in March 2023. Production in machinery and equipment also fell by 3.4%. Export has correlation with industrial output. Downward industrial output stagnant the economic growth. It can be balanced by outsourcing raw materials or the entire processes from other economies.
Alternative sourcing from fast growing major economies like India can prove to be a shock absorber for Germany in this economic downturn. Talking specifically about metal components especially Investment castings, OEMs need to rely on foundries, which is an energy & labour intensive industry. The Indian economy has abundant availability of foundry workers and energy has a reasonable cost. According to a survey report by World Economic Outlook (April 2023) GDP growth in India has been 5.9% in comparison to Germany -1%. This shows the stability and economic absorbance level of the country. According to a report by statista.com energy prices in Germany were at $0.52/KWh (Rs 42.5 per unit) however India’s domestic power tariffs are one of the lowest at $ 0.07 (Rs 5.7). Not only by price comparison but from consumption and production/supply of energy and gas point of view, India stands in a favourable position to shift the sourcing of metal casting. Apart from labour and energy availability there are many other favourable conditions, which makes India the best place for German companies to shift their metal casting sourcing and stay unaffected from the economic downturn. For example, easy and fast logistic connectivity, advanced banking and other infrastructure, etc. make favourable conditions for germany industries to do business with Indian companies. Also, a stable government leads to good diplomatic relationships with countries across the globe. If you are looking to source investment casting from India, Austin Alloy Cast Pvt. Ltd. can help you at any stage from technical consulting to investment casting manufacturing and post manufacturing services. You can find more details on our website or contact on the details given below:
Source:
https://news.yahoo.com/gas-crisis-german-metals-foundry-104403147.html
https://www.fastmarkets.com/insights/european-metal-short-term-buying-uncertainty-2023-preview
https://www.dailysabah.com/business/economy/recession-fears-rise-as-german-industrial-output-slumps
https://www.ft.com/content/d204f3f0-f03e-4c9d-846a-eca425fb48e4
https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023
https://www.weforum.org/agenda/2023/03/electricity-generation-renewables-power-iea/
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