Rising prices for raw materials<\/a> and energy resources in the context of declining demand for finished products due to the stagnation of Ukrainian engineering, has only worsened the situation in the domestic foundry industry<\/a>. As a result, 18% of foundry enterprises have not been able to resume work after last year’s lockdowns. The situation on the domestic market gives little reason for optimism. <\/p>\n\n However, there are encouraging signals from outside. In the markets of Lithuania, Poland, Germany, Switzerland, in Asian countries, as well as in the CIS, there is a revival of demand for suitable castings. This gives Ukrainian foundries a chance to increase exports by 15-25%. <\/p>\n\n How not to lose it? GMK Center asked Olena Isayeva<\/strong>, owner of the Ukrfavorit company, which specializes in supplying materials and equipment to Ukrainian foundries, and also provides technical maintenance services. <\/p>\n\n \u2013 2021 shocked all industrial enterprises with rising prices for raw materials and energy, increasing overhead costs, not only in Ukraine, but also throughout the world. In the last four months alone, prices for energy have increased by 17%, for metals and alloys by 20%, for scrap metal by 20%, and for chemical industry materials by approximately 40%. Freight transportation by road has become more expensive by a quarter, and container transportation has increased by five times. <\/p>\n\n Our company is no exception: our main supplier, a British company, has increased prices by 38%. Further forecasts are also disappointing. Due to the shortage of raw materials for the chemical industry, supplies will increase in price by another 20% in June 2021. <\/p>\n\n Due to the increase in raw material prices, industrial enterprises have had problems. For example, many have valid contracts signed before the increase in raw material prices. This is especially true for export contracts. Now, supplier enterprises have to either offset the increase in prices through a mark-up or negotiate with partners. Foundries were unprepared for such a sharp increase in raw material prices. <\/p>\n\n \u2013 They are very difficult to find. The fact is that the cost of producing a suitable casting is 17% made up of the cost of energy carriers, 40% of the cost of basic materials \u2013 charge, ligatures, modifiers, ingots, etc. Another 25% are wages and taxes, and the remaining 18% are overhead costs: transportation, maintenance, depreciation, etc. So foundries have to increase prices for suitable castings for the end consumer. <\/p>\n\n But, of course, you can always do something. For example, you can optimize the chemical composition of high-strength cast iron, replace pig iron with scrap metal, which is 20% cheaper. It is also important to form a warehouse of finished products and a warehouse of raw materials. This will help to fix prices at a certain level and become a leader in stable supplies when competitors’ product prices are increasing. <\/p>\n\n \u2013 The main trend of 2021 for the Ukrainian market will be a change in the composition of the metal for the production of suitable castings. It is gradually being replaced by high-strength cast iron, which is less capricious: it is resistant to corrosion and scorching. And the production of cast iron parts will be replaced by the production of aluminum parts. <\/p>\n\n Another trend that will prevail in the foundry market in 2021-2023 will be the initial orientation towards European and global standards in the organization of any production. This is a guarantee that products that have high quality, confirmed by certificates, will be sent for export.<\/p>\n\n Increasing exports, searching for new European and Asian markets is the next trend. The share of exports, in my opinion, should be at least 60% of the total volume. This is my observation. All my foundry clients, whose supply portfolio is calculated in this way, feel very confident and do not depend on the change of government in Ukraine, on the elections, on the economic crisis. <\/p>\n\n Entering the European market is not a quick and expensive process. But investments in the long term will definitely yield positive results and ensure the dynamics of production development. <\/p>\n\n \u2013 Plant managers say that investments in the foundry industry are truly necessary given its current state. Investments need to be made in modern equipment that will ensure high quality products at lower costs, as well as in energy conservation and environmental friendliness of production. <\/p>\n\n The European market and consumers have long been interested in cooperation with Ukraine, but they are not satisfied with the quality of products. Moreover, Western partners are frightened by Ukrainian political and economic unpredictability. There are already stable and reliable foreign participants in the foreign market, and Ukrainian foundry manufacturers have yet to conquer it. Considering that it is necessary to invest now, and the result will not appear soon, few owners and investors dare to modernize equipment and switch to working with modern materials. <\/p>\n\n Most Ukrainian manufacturers, instead of investing in modernization, think about how to survive and maintain existing production. On the contrary, in Europe, in particular in the UK, on \u200b\u200bthe contrary, there is a strong investment in the technological process, the human factor is minimized whenever possible, automation is introduced. This increases productivity and reduces the time for manufacturing castings and other products. I believe that Ukrainian enterprises also need to leave their comfort zone and change production: modernize it with new capacities, equip a ventilation system, etc. <\/p>\n\n \u2013 First of all, available financing. State programs, international donors, grants. Foundries say that state programs would help the industry get back on its feet. Manufacturers need help purchasing equipment. European models are high-quality, but expensive. The state could provide tax breaks for importing equipment for foundries, ensure a minimum percentage of lending, and reduce customs duties in the event of purchasing foreign technical solutions. <\/p>\n\n What else the state should pay attention to is the revival of the prestige of the foundry profession, the system of specialized higher and vocational education, which trained personnel for the metallurgy and foundry industry. In the last ten years, the training of technical specialists in the country has virtually ceased. <\/p>\n\n Our company, in parallel with its main activity, carries out personnel training, provides assistance in improving the qualifications of both employees and managers. In addition, we actively cooperate with the Association of Foundries of Ukraine, make our proposals on how the government can help the foundry industry, work with international donors to provide grants to foundries. Only in this way, by joint efforts, attracting the attention of all possible stakeholders, can we achieve success. <\/p>\n\n \u2013 The main activity of the company \u201cUkrfavorit\u201d is the organization of supplies to Ukraine of materials for the implementation of the HTS process (a method of manufacturing rods and molds for casting from loose self-hardening mixtures. \u2013 Ed<\/em>. ) in the production of metal castings that meet European standards. We supply binder resin systems, distribution coatings, refractory coatings, equipment for the HTS process: sand regeneration systems, sand mixers, HTS process control systems. <\/p>\n\n Among small and medium-sized customers who are currently mastering the CTC process, the most popular is the binder (resin) for the Resol-CO 2<\/sub> process (a binder system designed for the production of cold-hardening mixtures that are hardened with carbon dioxide. \u2013 Ed<\/em>. ). Such material is the easiest to master and does not require in-depth knowledge of the CTC process. Among large enterprises, the most popular are binders (resins) for the alpha-set and furan processes. <\/p>\n\n Over the last quarter, our customers have gradually become more active and increased their consumption of foundry materials.<\/p>\n\n \u2013 In total, we have 102 clients. Of them: <\/p>\n\n Our large customers are, for example, ArcelorMittal Kryvyi Rih, Metinvest, Dniprovazhmash, etc. Many small customers who are developing dynamically. Over the past four months, our small customers have increased their material consumption by 76%. <\/p>\n\n \u2013 There are six companies in Ukraine that sell foundry materials from major global manufacturers. We hold a leading position in the supply of binders for foundry production with a market share of 32%. <\/p>\n\n \u2013 Our market consists of imports brought in by distributors and direct supplies of molding materials for foundries. In 2020, approximately 4 million 500 thousand kg of materials were imported. If we compare 2019 and 2020, we will see that the market fell by 15.27%. In 2019, 5 million 200 thousand kg of materials were imported. <\/p>\n\n \u2013 If we talk about molding materials imported to Ukraine, then approximately \u20ac5.7 million.<\/p>\n\n \u2013 Yes, but they are of very low quality. In addition, the enterprises that produce them do not have the opportunity to increase capacity based on the needs of foundries. <\/p>\n\n \u2013 In 2008, I started my own business in Donetsk, creating LLC \u201cUkrfavorit\u201d. So I proved by my own example that there is no gender in business issues. Therefore, a fragile woman can manage an enterprise related to the machine-building industry, in particular casting. <\/p>\n\n In 2014, due to the unstable situation in Donetsk, the Ukrfavorit company moved to Melitopol, Zaporizhia region. Those were difficult times for all of us. I had no right to leave my colleagues, so 32 people became residents of Melitopol at one point. <\/p>\n\n For 13 years, Ukrfavorit has taken a well-deserved place among the enterprises operating in this market segment. The company is a distributor of the English company Eurotek Foundry Productsltd. We supply materials and equipment for the foundry industry of Ukraine. In addition, the company provides technical service to foundries, controlling production operations, equipment operation and the technological process as a whole. <\/p>\n\n We are also engaged in training. For those who want to learn more about casting in cold-hardening mixtures, familiarize themselves with the materials and features of the technological process, “Ukrfavorit” has developed a series of informational and practical videos. You can watch them<\/a> on our website. <\/p>\n\n The company is the sole general sponsor of the largest foundry exhibition in Ukraine “Litex” (Dnipro) and participates in professional international conferences and industry exhibitions around the world. Currently, we have 21 employees. <\/p>\n\n \u2013 The crisis had almost no impact on the company’s activities. Even at the beginning of the pandemic, all safety measures were taken, some employees were transferred to remote mode, employees of the shipping and logistics department also did not contact the office. Work and communication with clients during the period of travel restrictions not only did not stop, but on the contrary, significantly increased. All client consultations were carried out online, we urged clients not to stop production. In the end, only a few small companies stopped, the bulk continued to work with us. <\/p>\n\n For 2020, we received the following economic indicators (compared to 2019):<\/p>\n\n \u2013 Judging by the first quarter of 2021, there is a noticeable revival of the market. I believe that the industry will show growth compared to 2020 at the level of 20%. <\/p>\n\n But I want to note that, without confidence in the future and in the stability of the situation in the economy and politics, it is difficult to make any forecasts. The situation in industry remains extremely difficult. I still hope for the state’s attention to the industry, because there is a pressing need for an effective state program for the development of industry. Foundries need both targeted assistance and state orders. State programs could provide significant assistance to foundries, for example, when purchasing equipment. If the work of enterprises is established, customers and sales markets will find their suppliers themselves. <\/p>\n\n \u2013 2020 was a difficult year due to the pandemic, with numerous temporary shutdowns of enterprises. 18% of enterprises have not been able to resume work yet. Therefore, many industries have focused on selling leftover products in warehouses. However, the automotive and agricultural segments, as well as other industries, continue to develop. Therefore, in 2021, the \u201ccompressed spring principle\u201d may well work. The leftovers of finished products and raw materials have been \u201cwashed out\u201d, and the shortage of blanks will be acutely felt. <\/p>\n\n Unfortunately, our domestic market factors are negative. Foundry production is associated with the machine-building industry, and it is not in the best shape now. The domestic market is weak, the need for cast iron is decreasing. Large consumers of cast iron, such as Ukrzaliznytsia<\/a>, on which many small enterprises depend, completely stop organizing tenders or force suppliers to work on terms that are unfavorable to them. This is compounded by the lack of foundry specialists. Like many other representatives of working specialties, they are trying to go abroad to work. <\/p>\n\n However, external factors are encouraging. There is a revival of demand on the world market for suitable castings in countries such as Lithuania, Poland, Germany, Switzerland, in Asian countries, as well as the CIS. This will allow Ukrainian enterprises to increase exports by 15-25%. <\/p>\n\nHow do foundries feel about the surge in raw material prices?<\/strong><\/h4>\n\n
Are there any ways to optimize costs?<\/strong><\/h4>\n\n
What trends prevail in the foundry market?<\/strong><\/h4>\n\n
Are foundries ready to invest in purchasing new technologies?<\/strong><\/h4>\n\n
What can help them with this?<\/strong><\/h4>\n\n
Tell us about the demand for your products. What is in the greatest demand, what brings in the greatest revenue, what are the dynamics of demand? <\/strong><\/h4>\n\n
What companies do you work with most often?<\/strong><\/h4>\n\n
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Do you have many competitors on the Ukrainian market?<\/strong><\/h4>\n\n
How do you estimate the size of your market?<\/strong><\/h4>\n\n
Can you give an approximate estimate of the market in money terms?<\/strong><\/h4>\n\n
Are there Ukrainian analogues of the products you offer?<\/strong><\/h4>\n\n
Tell us about the company “Ukrfavorit”. How many years have you been on the market, how many employees do you have, what brands do you represent? <\/strong><\/h4>\n\n
How did you survive the past year? Did the crisis affect your work in any way? <\/strong><\/h4>\n\n
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What are you looking forward to in 2021?<\/strong><\/h4>\n\n
What, in your opinion, are the prospects for the Ukrainian foundry market in general?<\/strong><\/h4>\n\n