COVID-19 Impact on Aluminum Casting in Chemicals and Materials Industry
Aluminum casting refers to the type of metalworking process which consists of the involvement of pouring liquid metal into the mold or in any specific form. They are mainly used in the manufacturing of complex as well as detailed parts efficiently. It only uses aluminum or aluminum alloys as liquid metal which is poured into molds. The usage of aluminum casting ranges from the automotive sector, building & construction, among others. Its usage in car engines as well as in other car-related cast products has been considered to be the biggest consumer of aluminum casting products. Due to the COVID-19, the automotive, building, and construction industry along with other industrial activities has witnessed a slowdown especially in the second quarter of the year 2020. The slowdown started with the US-China trade war and accelerated with the spread of coronavirus. The automotive industry involves a variety of materials that involve the usage of aluminum casting in which various products are produced from a variety of processes. Thus, any impact on the automotive industry has a direct impact on the demand for aluminum casting products.
The domestic aluminum casting product makers are suffering from lower profit margins and are worried that their margins will face more dip in the future if the lockdown again happens. Thus, because of the outbreak of COVID-19, the global market for aluminum casting has slowed down and can only recover if the parallel industries such as building, construction, and automotive industry will be on track.
AFTERMATH OF COVID-19 AND GOVERNMENT INITIATIVE TO BOOST THE GLOBAL ALUMINUM CASTING MARKET
The first and foremost step that the government is planning to take towards the comeback of the aluminum casting industry on track is to make the automotive making industry less dependent on imports. The government has taken various measures to maintain the demand and supply of materials. It is supporting the local producers of aluminum casting and intermediates which are involved in the production of the aluminum casting. For this, the government has decided to extend financial and procedural support to domestic companies to kick start local production. The government is considering various stimulus packages to boost the materials. Along with that to cope with the situation, the government is planning to provide some fiscal initiatives to manufacturers including tax cuts and exemptions, to recover from the disruption.
STRATEGIC DECISIONS FOR MANUFACTURERS AFTER COVID-19 TO GAIN COMPETITIVE MARKET SHARE
The breakout of coronavirus has shaken the entire industry. Due to this pandemic, most of the production got hit and has created a situation of panic in the entire world. Thus, to maintain the demand and supply various strategic decisions are taken for the manufacturers. The availability of raw materials at a reasonable rate will help manufacturers to obtain raw materials at a much lower cost and can save huge amounts of loss incurs to them. Along with that, the manufacturers try to divide the risk of dependency by involving more than one supplier in any dealing. Also, the government of various countries has extended support to small and medium enterprises so that dependence on imports can be reduced, and domestic demand can be catered to domestically.
IMPACT ON PRICE
Due to COVID-19 and other macroeconomic events, the supply chain of aluminum casting materials has seen disruption among various manufacturing sectors. This disruption has led to unforeseen price volatility and has also reduced negotiation potential for prospective buyers. The price of aluminum casting and related products is continuously decreasing since the outbreak of coronavirus has incurred in the economy. The construction materials are also witnessing a dip in the pricing and are expecting a hike by the end of the year 2020 like before. The hike in automotive materials pricing may increase the price of aluminum casting materials and may also help manufacturers in maintaining their profit margins.
IMPACT ON DEMAND
Aluminum casting has witnessed a dip in the demand in various regions due to weak requirements from end-user in the industry especially automotive, building & construction, and in several other industries. Due to the economic and infrastructural slow down the demand for construction materials, especially from building & construction, has decreased which eventually has reduced the consumption of the advanced materials used in them.
The decline in various manufacturing sectors due to lockdown & limited working labor has affected the demand among end-users of the market and impacted the overall demand.
IMPACT ON SUPPLY CHAIN
Due to the outbreak of COVID-19, the supply chain has suffered abruptly. Manufacturers have stock but they are not getting demand for it. So, there is a situation of oversupply in the market. In this situation, both manufacturers and consumers are facing the timely availability of raw materials.
The restriction over transportation and labor availability is another factor that has affected the supply chain of aluminum casting. At several parts, the manufacturers are struggling for raw material reach and at the same time, some are struggling with delivering the product. Thus, the impact on supply is not due to one factor but is facing a hit from manufacturing points.
The unfortunate event has led to a disturbance in the availability and the pricing of aluminum casting. Though the imbalance between demand and supply and its impact on pricing is considered to be short-term, it will not have a long-term impact on price.
Due to the weak production of aluminum casting products throughout the globe, the demand for aluminum casting has gone down tremendously, with a continuous drop in demand among end-users in the market. Though, the government is taking steps such as relaxation on tax, fiscal deficit, and others to minimize the impact.