Decreasing demand from automotive manufacturing is set to constrain industry growth.
Melbourne, Australia (PRWEB) February 11, 2014
After a period of heavy beatings, the Iron and Steel Forging industry is expected to emerge with a stronger and brighter outlook. Over the five years through 2013-14, industry revenue is estimated to decline at a compound annual rate of 2.3% to reach $857.4 million. Despite this, profit margins have been relatively healthy, which is mainly attributed to the ability of operators to pass on price rises to their clients. Despite the ups and downs in input prices during the past five years, many operators have been able to keep their margins positive. As a producer of primarily intermediate products, the industry is at the mercy of the performance of its downstream buyers. A poor economic climate in the past five years has exposed many downstream industries to weak demand conditions, which eroded demand for products from the forging sector. An especially feeble performance from motor vehicle manufacturing is the main reason for the demise of many operators in the past five years. Several players exited the industry after failing to fill up their order books, while others consolidated to brave a difficult period of soft demand and volatile input prices. In 2013-14, industry revenue is forecast to contract by 0.7%.
The next five years are expected to be somewhat brighter for the industry. IBISWorld industry analyst Andrei Ivanov states, “Construction activity is expected to increase, generating demand for equipment and machinery that require forged metals for production.” Growth in several niche markets, such as boatbuilding and shipbuilding, will also offer some relief to foundries struggling to buttress their bottom line. However, this may be offset by a further decline of the automotive sector and the impending closure of Ford Australia's and Holden's manufacturing plants. According to Ivanov, “Decreasing amounts of investment into mining also pose a threat to industry growth, as more projects reach capacity.”
The Iron and Steel Forging industry has a relatively low level of concentration. Although many large players are involved, their industry-related operations are generally small. According to the ABS, the majority of enterprises generate less than $2.0 million per annum. The industry is characterised by many small to medium-size players as most items produced in the industry are customised and are therefore not produced in large quantities. This limits the benefits operators can derive from operating at a large scale. Arrium Limited is the industry’s only major player. For more information, visit IBISWorld’s Iron and Steel Forging report in Australia industry page.
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IBISWorld industry Report Key Topics
Operators in this industry are mainly engaged in iron and steel forging activities. These activities involve the shaping of iron and steel into different forms. The process alters the physical properties of the metals, resulting in improved strength characteristics.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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