You might need to start thinking about that if you haven’t already. What am I referring to – well economic wars bring into sharp focus supply chain resilience and our industry, although always reliant on supply chain resilience, will be even more under pressure in the coming months.
Around about a month ago I had to write a column similar to this one. The difference was that the world was only roughly three days into the latest conflict between the US, Israel and Iran.
We are now starting to get a clearer picture of what the consequences of this conflict look like for the world.
It must be remembered that the metal foundry industry is fundamentally recognised as the backbone of industrial economies, with some estimates stating that 90% of all manufactured goods have relied on metal castings at some point of the supply chain. Foundries supply essential cast metal components to critical sectors including engineering, power, transportation, mining and manufacturing.
With a large percentage of manufactured goods containing metal castings, this sector provides the necessary structural components, ranging from engine blocks and railroad components to industrial machinery, that thus enable the modern industrial world to function. If the goods do not contain metal, it is more than likely that they have been manufactured on equipment that is largely made up of components that have emanated from a foundry. For food items the same applies. In fact, if you look around you everything you see that has been manufactured or processed has a connection to a foundry.
Foundries are also one of the largest contributors to the manufacturing recycling movement, melting and recasting millions of tons of scrap metal every year to create new durable goods. Moreover, many foundries use sand in their moulding process. These foundries often use, recondition, and reuse sand, which is another form of recycling.
The escalation of conflict between the United States, Iran and Israel is beginning to filter through to the metalcasting sector, with the effects centred on energy, raw materials and logistics rather than direct disruption to foundry operations, for now.
The most immediate pressure point is energy. Oil prices have risen sharply in recent weeks, driven by disruption to flows through the Strait of Hormuz. For foundries, where melting remains the most energy-intensive stage of production, this has translated into higher operating costs across electric induction furnaces, arc furnaces and gas-fired systems.
In regions reliant on imported energy, the increase is feeding through into electricity tariffs and fuel surcharges. At the same time, supply chains for key inputs are tightening. The Gulf region remains a transit route for aluminium, ferroalloys and other industrial materials. Disruptions to shipping have reduced availability and introduced volatility in pricing. Foundries dependent on aluminium casting are already reporting higher premiums, while lead times for alloying elements and imported scrap have begun to extend.
Vessel movements through the Gulf have basically come to a standstill, with some cargo rerouted and insurance costs rising. Longer transit times are affecting delivery schedules, and delays in consumables and raw materials are increasing the need for buffer stock, placing additional strain on working capital.
There is also a knock-on effect from the petrochemical sector. Rising prices for resins and chemical feedstocks are pushing up the cost of binders and coatings used in moulding and coremaking processes.
This adds further cost pressure at a time when margins are already under strain. While demand has not yet shown a marked decline, there is growing concern that sustained energy inflation and broader economic uncertainty could weigh on orders from key sectors such as automotive and capital equipment.
Cost inflation will remain the dominant issue the longer the conflict continues and supply chain instability will intensify. Competitive advantages though may shift toward regions with secure energy access and local raw material supply.
Damon Crawford
Online Editor / Journalist
