Metal Forging and 21st Century Price Wars

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Forging is one of the world’s oldest trades, and dates back as far as the 12th century. Almost a thousand years later, the industry is still flourishing though it’s certainly evolved well beyond the days of blacksmiths, hammers, and anvils. In the 21st century, metal forging has developed into a highly advanced (and high-in-demand) process with a total production capacity of 30.14 million metric tons across the globe, and a forecasted CAGR of 9.42 percent. Without question, this growth is great for the progression of The Global Forging Industry as a whole. The problem is that because of the demand and lucrativeness of the market, its vendor landscape is extremely fragmented.

Indeed, the Global Forging Industry Market is made up of hundreds of local, regional, and international vendors, all of whom offer similar products. This creates intense competition among the vendors and they are forced to differentiate their products to gain industry shares. The most obvious way to do this, is through competitive pricing. Unfortunately, this is not an option for some vendors because the cost structure used to set final forged product prices is quite rigid due to its dependence on the following operational expenses:

  •  Materials
  •  Labour costs
  •  Transportation costs
  •  Electricity costs
  •  Miscellaneous overheads

These cost structure components give vendors in the APAC a distinct advantage because labour, electricity and rent costs are available for about 50 percent less than the going rates in other parts of the world. Therefore, if vendors in the Americas and the EMEA regions want to offer their forging services at the same rate as their competitors in the Asia Pacific, they must drastically decrease their profit margins. As it is, almost all of the top market shareholders including Bharat Forged, Nippon Steel and Sumitomo Metal, and ThyssenKrupp have significant manufacturing bases in the APAC.

This is not to say that vendors in other regions are without any potential for growth. With much success, some vendors are opting to focus less on price competitivity, and more on developing specialized and innovative metal forging services that in short, are worth the extra buck. Additionally, many smaller enterprises are entering mergers and strategic alliances with international vendors which help both companies remain competitive in the industry.

At the end of the day, despite the densely competitive nature of the Global Forging Industry Market, there’s no denying the opportunities of profit and growth for vendors who strategize effectively. After all, considering the fact that the industry has been steadily growing for almost a millennium, it’s clear that the most important market challenge-consumer demand-has already been taken care of.

For more info, view our 2012-2016 report on The Global Forging Industry Market.