Foundry industry plans to increase output in 2024

It is difficult to talk about specific growth figures amid uncertainty – both in general and with energy supply in the fall-winter

Ukrainian defense plants, machine-building enterprises and the restoration of destroyed infrastructure depend on casting. Although since the beginning of the war the Ukrainian foundry industry has lost about 50% of its capacity, and the existing enterprises are operating at 30-50% capacity utilization, the industry expects an increase in production by the end of this year. However, it is too early to talk about possible growth dynamics, as there are long 4 months ahead, when there may be serious problems with energy supply.

Main problems

The main problems of the foundry industry include the following:

1. Difficulties in working with the defense industry complex (DIC). Although the “defense industry” needs a wide range of foundry products, the industry’s potential is far from being fully utilized. Besides, from the very beginning of the war, the industry has faced a lot of problems – managerial chaos in the specialized state bodies, various bureaucratic obstacles, including difficulties with the passage of documentation, imposition of intermediaries, etc.
2. Electricity shortage. The foundry industry is highly dependent on a stable power supply. A foundry furnace is not a machine that stops by itself if the light is cut off. It is several tons of steel melted to 1500 °C, which will turn into a huge and dangerous technological problem in the event of a sudden power cut. All other production and technological processes at the foundries are also tied to the use of electricity and gas. Apart from the power supply itself, we are concerned about the price of electricity, which is being persistently increased for the industry. First, in June they increased the required share of electricity imports to 80% in order for enterprises to avoid blackouts, and then in mid-July they proposed to unify the tariffs for distribution. We managed to convince them not to bring the tariff classes closer together, as this could lead to increased energy costs of enterprises and worsen the competitiveness of products, up to the shutdown of some of them.
3. Shortage of personnel. Despite the adoption of several decisions (inclusion of a number of enterprises in the category of critical for the economy, etc.), but the problem of staff shortage at foundry enterprises has a massive character. Today, the enterprises’ utilization averages from 30% to 50% depending on the type of products. In other words, the enterprises could increase the production volume, but due to the lack of specialists they cannot perform this or that work, take this or that order. At the same time, many positions cannot be replaced either by female or unskilled labor, because it can take years to train production workers in narrow specialties.
4. Difficulties with logistics. Now about 80-85% of the produced foundry products remain inside the country, another 15-20% are exported. Over the last year, exporting enterprises have become more complicated in their relations with consumers due to problems at the borders, which led to reorganization of routes and increased logistics costs, longer terms and untimely delivery of products.

Casting consumers

Now there are two main groups of casting consumers. The first in terms of order volume and key in terms of importance is the defense industry. Currently, the increase in production for defense purposes has stalled for certain reasons, but we hope that the existing problems will be eliminated in the near future. Our positive expectations are based on the fact that a little earlier, there was a tangible increase in demand for defense products.

Another direction is the numerous sub-branches of machine building (agricultural, wagon and power engineering), infrastructure construction, power engineering, etc. The dynamics of these sub-branches are very different. Their dynamics are very different at present, but the demand for foundry products will be particularly high as part of the post-war reconstruction of destroyed infrastructure.

We already now need to think that this process was ensured by the products of Ukrainian enterprises and not by importing on credit all products from our partners. A corresponding state strategy should be developed, which should be the responsibility of the specialized Ministry of Strategic Industries of Ukraine.

Forecast 2024

We expect an increase in production in 2024, but today it is objectively difficult to predict anything accurately. In 2023, the output of foundry products amounted to approximately 300,000 t. In the current year, we planned to issue 380-400 thousand t of casting. But now no one knows what the fall-winter will be like and the situation with energy supply. Of course, if there are long-term outages, then you can forget about the rhythmic work of enterprises.

The foundry industry is very important for the country’s defense capability and post-war reconstruction. Now the industry is developing not thanks to it, but in spite of it – because there are proactive owners and managers of foundry enterprises who try to break through the walls of bureaucracy and offer their products.