CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

CBI MARKET SURVEY

The castings and forgings market in the UK

Publication date: April 2010
Report summary This CBI market survey discusses the following highlights for the castings and forgings sector in the UK: The UK engineering industry is a major end-user of castings and forgings. Although showing one of the strongest declines in the EU for some of the engineering categories, the UK engineering industry is still among the largest in the EU. In the period 2004-2008, UK production of metal castings strongly declined (-18% per year). At the same time the production of forgings increased by 2.5%. Both industries ranked sixth in the EU in 2008. The UK was the fourth largest importer of castings, forgings and subcontracting in the EU, and between 2004 and 2008 import value increased by an average 5.6% per year. Imports from Developing Countries (DCs) increased much faster (+14% per year). As a result the share of DCs in import value increased from 9.4% to 13% in 2008. China accounted for 44% of all imports coming from DCs, followed by Turkey (15%), India (14%) and South Africa (6.4%). Some DCs that saw a large increase in their share were Chile and Egypt. This survey provides exporters of castings and forgings with sector-specific market information related to gaining access to the UK. By focusing on a specific country, this survey provides additional information, complementary to the more general information and data provided in the CBI market survey The castings and forgings market in the EU, which covers the EU in general. That survey also contains an overview and explanation of the selected products dealt with, some general remarks on the statistics used as well as information on other available documents for this sector. It can be downloaded from http://www.cbi.eu/marketinfo. 1 Market description: industrial demand and production

Industrial demand Because no official statistics regarding the demand for castings and forgings are available, this survey focuses on a major end-user industry that offers good opportunities for DC exporters: the engineering industry. Since this industry uses many cast and forged parts, the production output of the engineering industry is a good indication for the demand for castings and forgings in the UK. The UK engineering industry accounts for roughly 20% of locally produced ferrous metal castings and for about one third of all forgings. Refer to Table 1.1 for more information on the market size of the most relevant engineering categories, as well as the estimated shares of castings and forgings and sheet metal in these categories.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Table 1.1

UK engineering production of most relevant categories, by share of castings and forgings and sheet metal, 2004-2008, million

Share of* Production castings and sheet CAGR** forgings metal 2004 2008 04-08 Pumps and compressors 50-70% 5% 3,229 3,001 -1.8% Lifting and handling equipment 15% 30% 4,005 1,953 -16% Cooling and ventilation equipment 10% 50-60% 3,038 2,703 -2.9% Driving elements 50% 5% 913 1,118 5.2% Machine tools 40-50% 10% 824 732 -2.9% Valves 60-70% - 1,149 1,318 3.5% Machinery for food processing 25% 25% 883 871 -0.3% Agricultural machinery 20-25% 40-50% 397 395 -0.1% Machinery for textile production 60-70% 30% 254 109 -19% Agricultural tractors 35% 10% 960 963 0.1% Electric motors and generators 30-40% 20% 1,913 1,640 -3.8% Electric domestic appliances 5-15% 25% 1,798 1,041 -13% Source production data: Eurostat Prodcom (2009) * Based on estimations of industry experts and the German Foundry Association. Some of the categories do not have a high share of castings and forgings. Nevertheless, these are selected because of their high share of sheet metal, which can be seen from the extra column on sheet metal share. ** Compound Annual Growth Rate

Engineering category

Several categories contain a relatively large share of castings and forgings or sheet metal. Comparison with other large European engineering countries shows that the UK recorded the strongest decline in the production of machinery for textile production (-19% per year) in the period 2004-2008. Furthermore, the production of lifting and handling equipment (-16%) and electric domestic appliances (-13%) showed a strong drop. Some categories which still showed an increase in production were driving elements (+5.2%) and valves (+3.5%). The position of the UK in the EU in these most relevant engineering categories was as follows: Pumps and compressors: fourth position with 6.6% EU production share, behind Italy (14%) and France (7.3%), but ahead of the Netherlands (3.7%) and Denmark (2.8%). Lifting and handling equipment: seventh position with 4.9% share, behind Austria (5.7%) and the Netherlands (5.7%), but ahead of Finland and Sweden (both 4.4%). Cooling and ventilation equipment: fourth position with 6.9% share, behind Italy (20%) and France (12%), but ahead of Spain (6.3%) and the Czech Republic (5.1%). Driving elements: fourth position with 4.1% share, behind Italy (14%) and France (10%), but ahead of Slovakia (4.0%) and Sweden (3.3%). Machine tools: seventh position with 3.0% share, behind Belgium (3.3%) and the Czech Republic (3.2%), but ahead of France (3.0%) and the Netherlands (2.1%). Valves: fourth position with 5.7% share, behind Italy (27%) and France (12%), but ahead of Spain (3.5%) and Denmark (3.2%). Machinery for food processing: sixth position with 5.6% share, behind France (10%) and Spain (6.2%), but ahead of Denmark (5.5%) and Belgium (2.7%). Agricultural machinery: thirteenth position with 2.4% share, behind Hungary (2.7%) and Spain (2.6%), but ahead of the Czech Republic (1.6%) and Ireland (0.6%). Machinery for textile production: ninth position with 1.7% share, behind Sweden (2.5%) and Denmark (1.7%), but ahead of Poland and Austria ( both 1.3%). Agricultural tractors: fourth position with 9.2% share, behind Italy (25%) and France (13%), but ahead of Austria (6.9%) and Finland (5.4%). Electric motors and generators: sixth position with 4.8% share, behind Italy (10%) and France (5.9%), but ahead of the Czech Republic (4.1%) and Finland (3.9%). Electric domestic appliances: sixth position with 4.7% share, behind France (6.7%) and Spain (5.2%), but ahead of Slovenia (3.7%) and Hungary (2.7%).

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Forecast Each of the above mentioned engineering categories has its own market characteristics and demand drivers. The year 2009 showed a large decline in both production volume and value in the engineering industry. This was the result of the economic recession which has had an impact on the demand for both capital goods and consumer durables produced by the engineering industry. According to the European Engineering Association (Orgalime), the outlook for 2010 is good, but it remains difficult to give a solid forecast. Hopeful signs are the effectiveness of governmental incentives for the automotive sector and smaller sized engineering projects. In addition, there is the positive development in the price of raw materials, such as non-ferrous metals and steel, which have decreased compared to the alltime highs of 2007-2008. Market segmentation As far as data are available, the market segmentation of some of the most important processes and materials covered by this survey is discussed in this section. Since no exact segmentation data for steel castings and non-ferrous castings in the UK is available, in the following the shares in total UK demand for steel and for aluminium (most important nonferrous metal) per industry are given. Castings As shown by the data in Table 1.2, the engineering industry accounts for 26% of nodular iron castings and for 22% of iron castings. The automotive industry in the UK is an even larger demand driver accounting for 49% of nodular iron castings and for 34% of iron castings. In addition, the engineering industry is a major driver for malleable iron castings. Please note that these data are only for domestically produced castings, as other data are not available. Table 1.2 UK ferrous* metal casting production, by segment, 2008, shares

Pipes and Construc- Engineering Automotive fittings tion** industry industry Other*** Iron 14% 11% 22% 34% 19% Nodular iron 5.0% 26% 49% 21% Malleable iron 13% 56% 13% 18% Source: Committee of European Foundries Associations (2009) *data of non-ferrous metals are not available. **including industrial and domestic products. ***this category includes ingot moulds and several industries such as the aeronautics and the electronics industries.

Forgings Unfortunately, no segmentation data for forgings are available. However, according to industry experts, it can be assumed that the major end-users of forged products are the automotive industry and the engineering industry, accounting for about one half and one third respectively. Other industries that may have a small share are railways, aerospace equipment, construction, maritime and the power generation industry. Steel In 2008, the construction industry accounted for 29% of UK steel demand. This share increased since 2005, mainly at the cost of the automotive industry. The engineering industry took a second place (25%), followed by automotive (15%), metal goods (8.0%), cold forming (5.0%) and forging and stamping (4.0%). The balance was left for several industries and segments such as wire drawing and oil and gas.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Aluminium Total demand for aluminium was approximately 850 thousand tonnes, of which about half was recycled metal. According to the UKs Aluminium Federation (ALFED), nearly a quarter of total demand for aluminium was generated by beverage cans and foil products. Other large markets are the construction industry and the transport sector (road, rail, aerospace and marine), which both accounted for approximately 20% of total demand. In the construction industry, a large share is consumed in the form of extruded and rolled products. In the transport sector more than half of the aluminium consumption is used in the form of semi-finished products while the remainder is destined for castings. Production Castings In 2008, the large UK foundry industry ranked sixth in the EU, behind Spain and Poland, but ahead of the Czech Republic and Sweden. Table 1.3 shows an indication of the production of metal castings in the UK. The data have been collected by the British Cast Metals Federation (CMF) and are based on data of member companies. In 2008, the UK production of metal castings totalled 588 thousand tonnes. The group of ferrous metals showed a strong decline of 19% annually in production volume in the period 2004-2008. The largest part of this decline occurred in 2007, with an annual decrease of 35%. In the period 2004-2008, the group of non-ferrous metals also showed a decrease (12% per year). Also here the largest part of the decline occurred in 2007, with an annual decrease of 25%. This decline in production volume in 2007 in the UK is somewhat misleading, since it was caused by a one-time adaption of the volume by the CMF, as they underestimated the volume decline in the years before 2007, as the result of the many foundry closures in the period 2002-2006. Table 1.3 UK production volume of metal castings by type, 2004-2008, 1,000 tonnes
2004 2005 2006 2007 2008 1,277 1,149 1,098 718 588 1,046 572 362 14 98 905 531 362 12 878 421 335 10 112 552 190 280 4 78 452 162 215 3 72 CAGR -18% -19% -27% -12% -31% -7.4% -12% -6.5% -12% -20% -16%

Total Ferrous Iron Nodular iron Malleable iron Steel

Non-ferrous 231 244 220 166 136 Copper alloy 16 15 13 13 12 Light and ultra light 190 206 185 140 114 Zinc 12 10 23 21 20 Other 2 2 2 2 1 Source: Committee of European Foundries Associations (2009)

Pumps and valves for petroleum and offshore oil and gas applications accounted for the main part of demand for iron castings. Other demand drivers for iron castings were the engineering sector and the railway sector. Regarding steel castings, there was a strong demand from mining, minerals and power generation projects. Besides, there have been strong orders for castings from the steelmaking sector, the defence sector and from the oil, offshore, pump and valve castings sector. The light and ultra light alloy foundries were faced with a decreasing demand in the period 2005-2008, despite good demand from a number of industries. Reason for the decrease was the continuing weak demand from the passenger car industry, as this industry continued to be

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

under pressure due to the recession and severe overseas competition in the period mentioned. Other non-ferrous foundries reported decreasing demand as well. Especially zinc die casters suffered severe competition from foundries in China and Eastern Europe. China continued to be the main competitive threat for this sector, although some customers are also looking to other countries such as Vietnam and India. After a significant number of closures in the period 2004-2008, the UK was still home to 239 ferrous metal foundries in 2008, down from 280 in 2004. The iron foundries that closed between the third quarter of 2005 and the fourth quarter of 2007 accounted for approximately one third of iron castings production in the UK. The foundries in question produced both grey and ductile iron castings and a number of these closures related to medium to large volume production facilities with Disa moulding lines. Additionally, it is interesting to note that most of the closed foundries were foreign owned. It can be concluded that many of the foundry closures in the UK mentioned before were part of global relocation decisions. Particularly, low added-value serial production has been relocated to low-cost countries (LCCs). In the coming years, some more closures may be expected, as the UK is still home to some low added-value serial production. For example, the UK still has a strong domestic supply base of castings for the manhole cover, water and drainage segment, despite the intense competition from LCCs. The UK is home to about 200 non-ferrous metal foundries. In the years 2005 and 2006, several foundries were closed, partly as a result of the bankruptcy of the automotive company MG-Rover in 2005. Forgings Table 1.4 shows an indication of the volume of forgings production in the UK. In 2008, the 55 members of the National Metal Forming Centre produced 325 million tonnes of forgings, after an average increase of 2.5% per year in the period 2004-2008. While the period 2004-2007 showed an upward trend, 2008 showed a drop in production by 5.8%. The medium-sized UK forge industry ranked sixth in the EU, behind the Czech Republic and Spain, but ahead of Poland and Sweden. As shown in Table 1.4, in the period 2004-2008 drop forging, press and upset forging annually increased by 6.5% and open die forging increased by 3.8%, while cold forging strongly decreased by 23% annually. The average output per forge showed a continuous increase in the period 2004-2008, while the number of employees per forge decreased year on year to 100 in 2008. This is an indication of an increasing efficiency in the UK forge industry. Although the average output per employee increased year on year, it remained at a relatively low level (59 tonnes), lower than in the Czech Republic and Poland, for example. Table 1.4 UK production volume of forgings by type, 2004-2008, 1,000 tonnes
2004 2005 2006 2007 2008 294 294 342 345 325 198 198 248 265 255 198 198 248 265 255 56 56 41 25 20 56 56 41 25 20 37 37 53 45 43 21 21 26 27 22 16 16 27 18 21 3 3 0 0 7 CAGR 2.5% 6.5% 6.5% -23% -23% 3.8% 1.2% 7.0% 24%

Total Drop forging, press and upset forging Production of forging industry (subcontracting) Cold forging Production of cold forging industry Open die forging Ring rolling Other open die forging* Close die forging for non-ferrous metal Source: Euroforge (2009) * excluding forged steel bar, blanks and railway rolling stocks.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Interesting players Foundries Some examples of UK foundries are: Chamberlin & Hill - http://www.chamberlin.co.uk - specialised castings and safety/security products to a wide variety of industries. Doncasters - http://www.doncasters.com - manufactures precision components and assemblies for a wide range of sectors. Eurac Group - http://www.eurac-group.com - specialised in the manufacturing of brake discs and drums; the company comprises two foundry operations (PDC in the UK and BAK in the Czech Republic) and two machining companies (HPM in the UK and PBS in Germany). Newby Foundries - http://www.newbyfoundries.co.uk - leading manufacturer of grey, ductile and alloy iron castings. The company is also involved in global sourcing. WB White Foundry - http://www.wbwhitefoundry.co.uk - specialised in grey iron, aluminium and alloy castings. William Cook Cast Products - http://www.william-cook.co.uk - specialised in steel castings. William Lee - http://www.wmlee.co.uk - grey and ductile iron castings. Some examples of UK forges are: Brockhouse - http://www.brockhouse.co.uk - one of the leading UK forges with more than 15 years of expertise in sourcing from DCs. Clydesdale Forge - http://www.clydesdale-forge.co.uk - part of the Caparo Group, which manufactures and supplies engineering and steel products. Firth Rixson - http://www.firthrixson.com - open-die and closed-die forging for a wide range of industries. In 2010 the company will start with the construction of a new closed die forging operation in Georgia, USA. Philidas Fasteners - http://www.philidasfasteners.co.uk - specialised in cold forging. Sheffield Forgemasters Rolls - http://www.sheffieldforgemasters.com - specialised in steel forgings, also produces castings. Stokes Forgings - http://www.stokesforgings.com - hot and precision closed die forging. Most of the above mentioned websites offer comprehensive information on production capacity, products made as well as details of the production process and equipment. Trends and characteristics The major trends and characteristics that influence the castings and forgings demand and production in the UK are: Product innovation focuses on better features at a lower price. For virtually all components it is a trend to offer increased features and functionality combined with cost reduction. For example, in pneumatic cylinders or actuators, costs have been steadily reduced by improvements in materials - such as a shift from steel barrels and die-cast end caps to extruded aluminium - and the introduction of advanced moulded polymer materials for the internal piston and bearings. Growing number of innovative applications for light and ultra-light castings. This trend is expected to continue, as the UK automotive industry seeks new ways to save weight by using aluminium and magnesium applications in order to gain fuel efficiency and performance. The economic crisis may have caused a drop in demand in the automotive sector, but at the same time companies use this period to introduce product innovations It is expected that other segments will benefit from these experiences as well, since light and ultra-light castings are useful for a wide range of applications in, for example, the aviation and engineering sectors.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Reduction of waste. The care for the environment and the increasing material costs drive companies to reduce waste. A good example is the innovative helical drive gear of the company South Wales Forgemasters (http://www.swforgemasters.co.uk). Traditionally, such components are made by boring solid metal, which is inevitably wasteful. However, SWF has invented and patented a method of pushing out the core during the forging process, allowing the surplus hot metal to fill the mould. The level of waste has been reduced so dramatically that a billet of only 5.2 kilos is needed to produce the 4.9-kilo component. Reduction of energy consumption at foundries and forges. Forced by the increasing energy prices and raw material prices in the period 2004-2008 (despite the temporary ease during the recession, see Chapter 4) and the stringent environmental legislation, UK companies look for ways to reduce their energy consumption. This is particularly the case for those companies that have to use large amounts of energy as part of their production process, such as in the hot forging industry. One of the UK hot forges that aims at reducing its energy usage is Doncaster Precision Forgings (http://www.doncasters.com) in Sheffield. At the site of Doncaster in Sheffield, large investments in energy saving have been made, among which the conversion of two gas fired furnaces to recuperative burners with upgraded insulation and the installation of highly efficient electric furnaces for a specific application. In order to continually monitor and reduce energy consumption, the company also works with an energy management company.
Cut the costs but enjoy the same quality is what UK suppliers of castings and forgings are looking for. According to a spokesman of a global sourcing company of castings, forgings and metalworking parts, competitively sourcing within the UK is getting more and more difficult. Therefore sourcing in Low Cost Countries is increasingly becoming common practice. At the moment East European countries like Turkey, Bulgaria, Romania, Slovenia and Slovakia are popular countries for sourcing. Capability of machinery, knowledge and expertise, quality certifications and price are important aspects for choosing a DC sourcing partner. Aspects that DC companies could improve are the state of their factory buildings and their websites (important first point of contact!). According to the spokesman, attending industrial subcontracting fairs and Chambers of Commerce are good ways to get in touch with European buyers. He sees good potential for DC exporters since they have managed to improve their manufacturing capabilities (also of added-value production) in recent years and are able to produce the same quality components, but at a more competitive price.

Opportunities and threats Trends and market developments offer opportunities and threats to exporters. A given trend can be a threat to some and an opportunity to others at the same time. The following trends should, therefore, always be analysed in relation to your specific circumstances. The main opportunities and threats for DC exporters are the following: The price pressure on components and systems in the last decade as a result of strong global competition, in combination with the size of UK engineering industry, has made room for an increase of sourcing in DCs. The UK is still home to some low added-value serial production of castings. This offers opportunities for DC foundries that can take over this kind of production. Although showing one of the strongest declines in the EU for some of the product categories, the UK engineering industry is still among the largest in the EU. There is a rising demand for innovative applications of aluminium and magnesium, although this will be at the expense of ferrous metal castings. Often, DC companies are not capable of supplying the desired quantity and quality of cast and forged products that is necessary for the UK market. Refer to From survey to success: export guidelines for more information on how to overcome these hurdles and to become a successful exporter to the UK. Refer to Chapter 7 of the CBI market survey covering the EU market for more information on opportunities and threats.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Useful sources Aluminium Federation (ALFED) - http://www.alfed.org.uk Cast Metals Federation (CMF) - http://www.castmetalsfederation.com Confederation of British Metalforming (CBM) - http://www.britishmetalforming.com Engineering and Construction Industry Association (ECIA) - http://www.ecia.co.uk Engineering Industries Association (EIA) - http://www.eia.co.uk 2 Trade channels for market entry

Trade channels The most common trade channels for DC exporters are direct sales to end-users, trade via traditional importers, traditional agents, or subcontracting to UK producers. Although there are several options, supplying directly to end-users has some advantages and could be one of the most interesting trade channels, because there is a larger chance of a long-lasting relationship. DC exporters should therefore put efforts into building up supplier relationships with endusers. Refer to the CBI market survey covering the EU market for a detailed explanation of relevant trade channels in this market. Some examples of companies in the UK that may be interesting to DC exporters are: Arrows International - http://www.arrowcastings.co.uk/aboutai.html - supplier of fully machined components. Due to ongoing customer requests, Arrow International was set up to source components which could not be manufactured by Arrow Castings. The company regards itself as one of the largest sourcing agents of castings in the UK, importing an average 130 tonnes per month. They manage accounts for many companies, large and small by sourcing a range of castings and forgings, making use of a network of manufacturers throughout the UK and CEE countries. Asco Fixings - http://www.ascofixings.co.uk - import and distribution; castings and forgings. Barden - http://www.bardenbearings.co.uk - production; bearings. Casting Technology - http://www.castingstechnology.com agent/importer; castings. Components Worldwide - http://www.componentsworldwide.com - production and import; metal components. Cooper Roller Bearings - http://www.cooperbearings.com - production; bearings. Darian Trading - http://www.darianglobalsourcing.co.uk import and distribution; castings and forgings. David Brown - http://www.davidbrown.com - production; transmissions. Expocet - http://www.expocet.com - sales agent for seven UK companies, among which are an iron foundry and a steel and stainless steel foundry. Fenner - http://www.fenner.com - production; heavyweight beltings. Forged Products - http://www.forged-products.co.uk imports; castings and forgings. In addition the company serves as an agent for the Italian foundries Ire-Omba and Metallurgica Minotti and for the Italian forges Fomas and Forgiatura Marcora. GKN - http://www.gknplc.com - production; transmissions. John Crane - http://www.johncrane.co.uk - production; mechanical engineering. Joy Mining Machinery - http://www.joy.com - production; mining machinery. Majorfax - http://www.majorfax.co.uk - import and distribution; ferrous and non-ferrous castings. Nacco Materials Handling - http://www.nacco.com - production; handling equipment. Stannah Lifts - http://www.stannah.com - production; lifting equipment. The 600 Group - http://www.600group.com - production and distribution; mechanical engineering.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

From practice - China and India are the main supplying countries, according to one of the British importers. This importer is specialised in matching UK demand and global supply. The company receives a customers request for a certain tailor-made part and provides the component, sourced from the most competitive supplier, selected from its global supply base. Although China is the country that is normally used as a supply base, the company sometimes also selects Indian foundries and forges to supply the UK customer. The DC foundry or forge is always visited and audited before supply starts. Generally, the components are completely finished, are of a quality according to the customers specification, and do not need any more working or finishing in the UK. On time delivery is very important. The company often uses a local sourcing agent, if available, when looking for new suppliers in DCs. Therefore, the advice to DC exporters is to present your company in a professional manner on the internet and with sourcing agents in your own country. It is also important to be present at trade fairs. Beside Subcon, which is one of the most important fairs in the UK, other trade fairs are mentioned in Chapter 6.

Price structure Different prices and margins apply throughout the various trade channels. In general, margins in the UK follow EU levels and trends. Please refer to Section 3.2 from the CBI market survey covering the EU market for castings and forgings for a further explanation on these margins. Selecting a suitable trading partner There are many ways to find potential trading partners in the UK. Beside meeting prospects at trade fairs, the Internet is a highly valuable source. The following relevant websites may be very useful to find potential UK trade partners: Applegate Directory - http://www.applegate.co.uk - database with UK based companies. British Electrotechnical & Allied Manufacturers Association (BEAMA) http://www.beama.org.uk - click on Membership directory. British Gear Association (BGA) - http://www.bga.org.uk - click on Membership. British Metallurgical Plant Constructors' Association (BMPCA) - http://www.bmpca.org.uk click on Member Listing. British Pump Manufacturers Association (BPMA) - http://www.bpma.org.uk - click on BPMA members. British Textile Machinery Association (BTMA) - http://www.btma.org.uk - members are listed on the left-side of the screen. British Valve & Actuator Association (BVAA) - http://www.bvaa.org.uk - see Members. Engineering Industries Association (EIA) - http://www.eia.co.uk - click on buyers guide. Find the Needle - http://www.findtheneedle.co.uk - search companies by using keywords castings or forgings in the Search Products field. UK Steel - http://www.uksteel.org.uk - click on buyers guide. Usually, agents are member of one of the three UK agents associations: British Agents Register - http://www.agentsregister.com. Manufacturers Agents Association of Great Britain and Ireland - http://www.themaa.co.uk. National Sales Agent Register - http://www.sales-agents.com. Refer to Chapter 3 of the CBI market survey covering the EU market for a list of general sources and sources in your own (DC) country. Refer to Chapter 6 of this survey for main sales promotion tools. 3 Trade: imports and exports

Imports In 2008, the UK was a large importer of castings, forgings and subcontracting products, ranking fourth in the EU, behind France and Italy, but ahead of Belgium and Spain. Between 2004 and 2008 total import value annually increased by an average 5.6% to 27 billion in 2008. The product group shares were as follows: Iron and steel products: 22% of total. Annual increase in import value of 5.5%. Parts of machinery, railway equipment or vehicles: 37% of total, +5.0%. Articles of iron, steel or base metal: 16% of total, +5.4%.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Plastic and rubber products: 11% of total, +1.1%. Light and ultra light products: 8.8% of total, +9.2%. Copper and zinc products: 4.8% of total, +23%. Imports by and leading suppliers of castings and forgings to the UK, 2004-2008, share in % of value in 2008
2004 2006 2008 Leading suppliers in 2008 Share mln mln mln (share in %) (%) 13,862 15,190 16,392 Intra EU Germany (20), France (8.3), Italy (6.4), 62 Belgium (5.3), the Netherlands (4.2) 5,504 6,804 6,833 Extra EU USA (15), Japan (2.8), South Korea 26 ex. DC (1.1), Switzerland (1.1), Norway (1) 2,005 2,815 3,400 DC China (5.7), Turkey (1.9), India (1.8), 13 South Africa (0.8), Brazil (0.3), Saudi Arabia (0.3), Thailand (0.3), Egypt (0.3), Ukraine (0.2), Malaysia (0.2) 3,890 4,156 4,389 Intra EU Germany (19), Belgium (9.5), Spain 75 (8.1), France (7.9), Italy (6.4) 495 568 603 Extra EU South Korea (2.7), USA (2.4), Russia 10 ex. DC (1.9), Taiwan (1.2), Canada (0.5) 354 667 889 DC China (4.8), Turkey (3.4), India (2.2), 15 South Africa (1.8), Ukraine (1), Brazil (0.5), Serbia (0.4), Indonesia (0.2), Egypt (0.1), Belarus (0.1) 3,959 3,749 4,673 Intra EU Germany (17), France (7.3), Italy (5.4), 47 the Netherlands (2.6), Sweden (2.2) 3,539 4,446 4,432 Extra EU USA (29), Japan (4.5), Canada (1.9), 45 ex. DC Singapore (1.7), Switzerland (1.5) 684 786 845 DC China (3), India (1.4), Turkey (0.7), 8.5 South Africa (0.7), Saudi Arabia (0.6), Brazil (0.3), Mexico (0.3), Thailand (0.3), Malaysia (0.3), Oman (0.1) 2,145 2,363 2,415 Intra EU Germany (17), Italy (7.3), France (6.1), 56 the Netherlands (5.4), Ireland (2.7) 667 768 798 Extra EU USA (6.9), Japan (3.6), Taiwan (2.8), 18 ex. DC Hong Kong (0.9), Norway (0.8) 720 985 1,142 DC China (17), Turkey (3.5), India (3.1), 26 Thailand (0.5), Malaysia (0.5), Mexico (0.4), South Africa (0.3), Brazil (0.2), Vietnam (0.1), Egypt (0.1) 2,178 2,444 2,142 Intra EU Germany (25), Italy (10), Belgium (8.9), 76 France (8.6), the Netherlands (6.4) 422 501 483 Extra EU USA (8.7), Japan (3), Switzerland (1.4), 17 ex. DC Israel (1.2), South Korea (0.8) 105 170 200 DC China (3), Turkey (1.3), India (1.1), 7.1 Thailand (0.3), Saudi Arabia (0.3), Brazil (0.2), Indonesia (0.2), Malaysia (0.1), South Africa (0.1), Oman (0.1) 1,247 1,702 1,722 Intra EU Germany (26), France (14), Italy (5.4), 73 Spain (4.9), the Netherlands (4.1) 324 427 421 Extra EU USA (10), Norway (3.3), Switzerland 18 ex. DC (1.6), Russia (0.8), Japan (0.5) 80 130 202 DC China (3.4), Turkey (1.9), India (1.1), 8.6 South Africa (0.9), Croatia (0.5), Brazil (0.2), Oman (0.2), Malaysia (0.1), Egypt

Table 3.1
Country Total

Iron and steel products

Parts of machinery railway equipment and vehicles

Articles of iron steel or base metal

Plastic and rubber products

Light and ultralight products

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Country

2004 mln 443 58 62

2006 mln 776 95 78

2008 Leading suppliers in 2008 mln (share in %) (0.1), Thailand (0.1) 1,052 Intra EU 94 Extra EU ex. DC 122 DC Germany (25), Belgium (17), France (15), Sweden (8.3), Italy (5) Russia (3.6), USA (2.1), Switzerland (0.6), Taiwan (0.3), South Korea (0.2) Egypt (3.6), China (2.3), Turkey (1.4), India (1.1), Serbia (0.4), South Africa (0.3), Thailand (0.2), Malaysia (0.1), Mexico (0.1), Vietnam (0.1)

Share (%) 83 7.4 9.6

Copper and zinc products

Source: Eurostat (2009)

Imports from DCs Between 2004 and 2008, imports from DCs annually increased by 14% in value. Compared to 2004, the total share of DCs in import value increased from 9.4% to 13% in 2008. The development of the DC share per product group was as follows: Iron and steel products: growing from 7.5% to 15% in value. Parts of machinery, railway equipment or vehicles: remained virtually stable at 8.5%. Articles of iron, steel or base metal: growing from 20% to 26% in value. Plastic and rubber products: growing from 3.9% to 7.1% in value. Light and ultra light products: growing from 4.9% to 8.6% in value. Copper and zinc products: declining from 11% to 9.6% in value. China accounted for 44% of all imports coming from DCs. China was followed by Turkey (15%), India (14%), South Africa (6.4%), Brazil (2.3%), Saudi Arabia (2.1%) and Thailand (2.0%). The Chinese share in DC exports to the UK did not grow as fast as in the EU on average (10% per year compared to 16%). The DCs that saw a larger increase of their share were Chile and Egypt. Exports In 2008, the UK was a medium-sized exporter of castings, forgings and subcontracting products, ranking fifth in the EU, behind France and Belgium, but ahead of the Netherlands and Spain. Between 2004 and 2008 total export value annually increased by 5.1% to 25 billion in 2008. The product group shares were as follows: Iron and steel products: 26% of total. Annual increase in export value of 7.9%. Parts of machinery, railway equipment or vehicles: 46% of total, +3.9%. Articles of iron, steel or base metal: 12% of total, +5.7%. Plastic and rubber products: 8.4% of total, +1.6%. Light and ultra light products: 5.8% of total, +8.8%. Copper and zinc products: 1.9% of total, +0.9%. Opportunities and threats The UK is the fourth largest importer of castings, forgings and subcontracting products in the EU. The UK ran trade deficits (more imports than exports) for articles of iron, steel or base metal (1.3 billion), light and ultra light products (908 million), copper and zinc products (805 million) and plastic and rubber products (737 million). The total import value of all product groups increased by 5.6%. However imports from DCs grew much faster (+14%) and as a result the total share of DCs in import value increased from 9.4% to 13%. This is a higher share than in the EU on average (11%). The UK ran trade surpluses (more exports than imports) for parts of machinery, railway equipment or vehicles (1.5 billion) and iron and steel products (429 million).

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Useful sources EU Expanding Exports Helpdesk - http://exporthelp.europa.eu go to: trade statistics Eurostat - official statistical office of the EU - http://epp.eurostat.ec.europa.eu go to themes on the left side of the home page go to external trade go to data - full view go to external trade - detailed data. Understanding Eurostat: Quick guide to easy comext http://epp.eurostat.ec.europa.eu/newxtweb/assets/User_guide_Easy_Comext_20090513.p df 4 Price developments

Major factors that affect the costs and revenues of UK castings and forgings production are developments in the economy, raw material and energy prices and wage costs. Of course, these factors also influence each other, but some observations can be made for each factor: Growth of the UK economy has come to a standstill during the economic recession and is expect to show only small recovery in 2010. Until 2008 raw material prices soared, from the fourth quarter of 2008 prices came in a downward spiral during the economic recession. These prices are expected to recover only slowly in the period 2010-2012, when world markets for raw materials will seek a new balance in supply and demand. Energy prices and developments therein follow developments in the oil price and conditions in the global economy. However, they differ from country to country. The prices of energy in the UK are at an average level within the EU. They can be found at Energy.eu http://www.energy.eu/#industrial. After a price dip in 2009 due to the recession, energy prices are expected to increase at least by 20% by the end of 2010 in case of continuing economic recession, or by more than 30% in case of gradual economic recovery. Wage costs account for 15-40% of the average production costs in the industry. In 2008, the UK ranked twelfth in the EU with regard to wage costs per man-hour (25), which was less than in Ireland and Italy but more than in Spain and Greece. Please refer to the CBI market survey covering the EU market for castings and forgings for a detailed explanation on these major trends. Useful sources Some sources for information about developments in prices are: CAEF Eurofoundry - http://www.caef-eurofoundry.org London Metal Exchange - http://www.lme.co.uk Eurostat - statistical office of the EU - http://epp.eurostat.ec.europa.eu - by comparing import value and volume, it is possible to get an idea of the development of import prices. 5 Market access requirements

As a manufacturer in a DC preparing to access the UK, you should be aware of the market access requirements of your trading partners and the UK government. Requirements are demanded on legislation and on labels, codes and management systems. These requirements are based on environmental, consumer health and safety and social concerns. You need to comply with EU legislation and have to be aware of the additional non-legislative requirements that your trading partners in the EU might request. For information on legislative and non-legislative requirements, go to Search CBI database at http://www.cbi.eu/marketinfo, select castings and forgings and the UK in the category search, click on the search button and click on market access requirements.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Useful sources Additional information on packaging can be found on the ITC website on export packaging: http://www.intracen.org/ep/packaging/packit.htm. There are tariffs in the range of 0-6% for most castings and forgings. There are no quota. Details for your specific product(codes) can be found at http://exporthelp.europa.eu. 6 Doing business

General information on doing business, like approaching potential business partners, building up a relationship, drawing up an offer, handling the contract (methods of payment, and terms of delivery) can be found in CBIs export manuals Export Planner and Your image builder. Furthermore, cultural awareness is a critical skill in securing success as an exporter. Information on cultural differences in the EU can be found in Chapter 3 of CBIs export manual Exporting to the EU. These manuals can be downloaded from http://www.cbi.eu/marketinfo go to search publications. Sales promotion For DC exporters trade fairs, trade press and website promotion are among the most important promotional tools; they are briefly discussed below. Trade fairs Visiting and participating in a trade fair in the EU can be an efficient tool to communicate with prospective customers. It provides more facilities for bringing across the message than any other trade promotional tool. It can also be an important source of information on market development, production techniques and interesting varieties. Relevant trade fairs are: Mach - http://www.mach2010.com - manufacturing technologies, including a metals section, held biennially, even years, in June, Birmingham. Subcon - http://www.subconshow.co.uk - subcontracting, held annually, in June, Birmingham. The European trade and exhibition services company (ETES; http://www.industry.co.uk) is the organiser of several regional manufacturing and engineering fairs. Visiting trade fairs in other EU countries could be an option as well. Please refer to Auma (http://www.auma.de) and EventsEye (http://www.eventseye.com) to find more information on relevant fairs. The largest engineering trade fair in the EU is Hannover Messe (http://www.hannovermesse.de), which is held annually, in April, in Hannover (Germany). Trade press An interesting story on your company or new product introduction will boost the companys image. In that respect, building up contacts with the trade press will be helpful and should be used whenever possible. The magazines with global coverage may present country-specific information, such as the Foundry Trade Journal (http://www.foundrytradejournal.com; monthly printed version). Furthermore, some relevant UK magazines are: Engineering Capacity - http://www.engineering-capacity.co.uk - monthly; subcontracting. Industrial Technology - http://www.industrialtechnology.co.uk - monthly; product design engineers and machine builders. Machinery - http://www.machinery.co.uk - monthly; engineering news. MWP - http://www.metalworkingproduction.co.uk - monthly; metalworking. Plastic & Rubber Weekly - http://www.prw.com - weekly. The Engineer - http://www.theengineer.co.uk - biweekly; engineering. Website promotion These days, it is an absolute must to have a professional website, which is aimed at your main target groups. Make it interactive and promote it properly. More information can be found in the CBI Export Manuals Website Promotion - How to promote your website in the EU and eGuide castings and forgings: How to benefit from identified e-business opportunities in castings and forgings available at http://www.cbi.eu/marketinfo.

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CBI MARKET SURVEY: THE CASTINGS AND FORGINGS MARKET IN THE UK

Other useful sources Beside a number of relevant sources already mentioned in previous chapters, other useful sources that contain market information and information on doing business in the UK are: British Metallurgical Plant Constructors' Association (BMPCA) http://www.bmpca.org.uk/metallurgical-resources.php - industry news, business contacts and a long list of other relevant UK associations. MEPS - http://www.meps.co.uk - steel industry analysis and publications. UK Trade & Invest - http://www.ukinvest.gov.uk - investment related information. Furthermore, refer to Kwintessential for practical tips on business culture and etiquette in the UK: http://www.kwintessential.co.uk. Click on Country Profiles at the section Intercultural resources and tools and click on the UK.

This survey was compiled for CBI by Facts Figures Future in collaboration with Effox Turbine and Gietech. Disclaimer CBI market information tools: http://www.cbi.eu/disclaimer

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