Forgings Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on Forgings

• The global forgings industry is fragmented, with top suppliers, like  Bharat Forge, FAW Forge (Auto), JSW, JCFC (Heavy Equipment), constituting less than 10 percent of the total market (by volume)
•  The demand figures for forgings with end-use industries, such as  automotive, oil & gas, construction, machine tool, etc., are high with steel forgings
•  With increasing demand from various end-use industries, the forgings production is expected to reach 29.59 MMT by 2020 with a CAGR of 4.5 percent over 2017 – 2020

Forgings Production by Material

•  More than 95 percent of the forging output globally are made from Steel

Global Forging Industry: Major End-use Industry (2019 E)

• Automotive industry is the top end-use market (50 percent) for forging across regions
•  Automobiles have a number of structural forged components, requiring higher wear resistance, high impact, and sheer strength

Global Market Overview: Forgings

• China continues to dominate the market share by holding around 33% of the overall forgings market. Consequently, Asia pacific holds the largest share due to development in infrastructure, advancements in automotive and construction segments.
• The E.U. is expected to have a slight increase in production share, which is driven by the increasing economic trend in Europe.
• North America is expected to witness a significant growth due to demand in the automotive segment and holds around 18% of the global automotive market.
• India continued to ramp up production at a higher rate, relative to global growth, based on sustained internal demand and automobile-related exports
• Russia is currently buoyed by increased government spending and government demand for forgings, which is predicted to slowdown due to relative demand satiation by 2018
• Latin America is expected to witness significant growth between 2018 and 2022 due to the high demand in end use market and the contributing countries are Brazil, Argentina and Columbia.
• Automotive industry is the top end-use market (50 percent) for forging across regions. Automobiles have a number of structural forged components requiring higher wear resistance, high impact, and shear strength
• Other major end-use sectors include machine tool, construction, energy, machinery, etc. Mining machinery industry consumes about 4 percent of global forgings production
• With regards to capacity utilization, 40–45 percent of forging units are currently observed to be running at less than 75 percent capacity. Constraints for the forging industry currently include slow demand, foreign competition, energy costs, availability of labor, availability of capital, and raw material lead time
• The outlook for drilling in the oil & gas industry seems to be positive, and it is likely to increase by 10–13 percent in 2018, as the capital spend continue to increase in theupstream industry. This might have a slighter impact in the oil & gas forgings market, since oil & gas end-use market is only around 8-12 percent
• The outlook for the oil & gas downstream industry is stable and is likely to increase by 4–6 percent in 2018
• The agricultural end-use market is likely to be around 8–10 percent. Increasing demand for food and supplies drives the need for farming equipment's, which has a direct impact on the forging industry outlook.

• The global market for medical device technologies is likely to be around $500 billion and is growing with a CAGR of 5–6 percent

Emerging Technologies

Process: Powder Forging

A forging technique for products requiring variable material composition. At present, in different stages of development across the world could emerge as key technology in the upcoming years

• While powder forging is rapidly growing in developed nations, it is still in its nascent stages across developing countries
• This technology allows different material compositions across different parts of the same component
• This is useful for components, like connecting rods, whose ends are subjected to different levels of stress
• In this process, custom blended powders of various alloys are placed along a die and compacted into a rough shape and sintered. This is then placed in the final component die and hot forged
• These components require very little secondary machining and have very high precision
• In India, Mahindra Forgings is currently carrying out research on powder forgings

Consumables: Forging Lubricants

Graphite Free Lubricants

• Lubricants are important cost saving levers in die forgings. This is because a good lubricant can help improve ease of operation as well as increase die-life
• In closed die forgings, die costs account for ~15 percent of total cost. Therefore, any improvements in die-life would lead to significant cost savings
• Over the past decade, there has been a move to replace graphite lubricants, due to economic as well as environmental considerations
• Synthetic, water soluble graphite free lubricants have the following advantages over their traditional graphite based counterparts

• While synthetic lubricants have the above advantages, these have mainly been proven with respect to small – medium components (up to 12kg). More work in this area is expected in the future for large components as well

Insights: Procurement Practices & Contract Structure

• While auto contracts are long term with repeat orders, non-auto sectors, like power generation, construction & mining, involve large, one-time orders
• Chinese suppliers, in general, prefer advance payment through bank transfer, typically 30 percent on order placement and remaining before shipping
• Relevant duties and taxes are added to complete the quote
• In case of exports, export subsidies by respective governments play an important role in deciding the final price

Cost Structure

• The main cost drivers for forged components are raw material (steel and aluminum) and energy (heating). These account for nearly 80 percent of the total costs
• The grade of raw material used is important and can cause significant changes to cost structure. For example, using a lower/higher grade could result in variation of raw material proportion from 45 to 60 percent of the total cost. The number of pieces produced also affects the cost structure and total costs
• Any price hikes by raw material suppliers directly affect the total component costs, and in turn, prices
• A 10 percent rise in material cost leads to a 6 percent hike in total costs. In order to combat price rises, suppliers build price escalation clauses in contracts
• Prices could be revised quarterly/bi-annually/annually, depending on the end-use segment and relationship with customers