The first quarter of 2024 is almost behind us. The days are getting lighter at a dizzying pace and the first signs of spring are already visible. Unfortunately, the economy is not yet showing clear signs of a brighter future! The year has started as the last one ended, in low spirits. All the time, however, expectations of an economic recovery have been growing. This is supported by a significant fall in inflation and an end to rising interest rates. The key message for the economy and investment is a unified view that the next step is to move into a period of interest rate cuts. This supports the hope that demand will pick up during 2024. At the moment, however, it is already clear that this will not yet be reflected in the order intake for the first quarter.
The good and bad news is the levelling off of raw material and energy prices. This is good in the sense that predictability is much better now than a year ago. The price level has been practically the same for the last six months. The bad news is that prices have stagnated at high levels and have not recovered anywhere near their previous levels. In addition to the general cost level, prices are being kept high by the steel mills’ own measures. Factories have limited their production by reducing staff and shifts. Smelting is also timed to coincide with cheaper energy. In addition to this, stocks have been reduced in the entire steel supply chain. Despite the rather low demand, this has led to a situation where delivery times are getting longer and delivery reliability is getting worse. Even now, we are expecting many late deliveries of raw materials that are causing problems for our production. We expect this situation to worsen rather than disappear.
The situation at Jame-Shaft follows the general trend. The end of 2023 was very quiet as customers unloaded their stocks for the financial statements. In the first weeks of 2024, delivery volumes momentarily rose to a high level, especially in weeks 2 and 3. Since then, the situation has levelled off to the current level, which is about 15-20% lower than the same time last year. On the contrary, thanks to investments, our machine capacity has increased, so there is plenty of room for growth in order volumes. However, the outlook for the future is positive. Several customers’ forecasts are moderately increasing and at the same time we are starting serial production of products for new customers. This significantly increases the utilisation rate of the machines. Despite this, we will not achieve the targeted growth in this accounting period (1.7.2023 -30.6.2024) and will have a somewhat lower turnover than in the last accounting period. Profitability has also fallen below acceptable levels due to increased costs and low volumes. As a result, we have adapted our operations as necessary and we maintain strict cost discipline in all our activities.
The availability of raw materials is becoming more difficult and delivery times are getting longer all the time. We therefore ask you to update your forecasts or otherwise share your views on your needs in 2024. Although spring is barely beginning, the delivery time for steel mills for April orders is at least August-September. To avoid material shortages in autumn 2024, we need to react now to a possible increase in demand.
Despite the sluggish situation, our faith in the future is strong and investments have continued. Most recently, a new large multitask lathe with robots has been taken into use. Its commissioning has gone quickly because it can utilize the experience and programs gained from a similar production cell acquired a few years ago. The layout changes at the beginning of the production line caused by this investment (moving nine machines to new locations) have also been completed. This has streamlined the production flow and at the same time we have made the factory even tidier. Now would be a good time to visit us here in Salo, as all the machines are in place and up and running. Regarding new investments, there is a breather and planning break. New investment projects are in the pipeline, but they will only be implemented once there is certainty of an increase in the order flow. We are also developing document management. The number of documents needed for business is growing at an accelerating rate. To ensure that the right information can be found quickly, we have started using the M-Files system. More on this in the next bulletins as the project progresses.
Let’s hope that the forecasters are right and that the economic momentum will improve and our order books will start to grow as soon as possible. Once the upturn begins, cooperation must be more active. Although our own operations react quickly to stepping on the gas, steel mills do not. In terms of forecasts and preparation, you have to be on the move early enough.
We wish all our customers a successful and prosperous 2024.
Best regards,
Mika Tuunainen
Managing Director
Jameshaft Oy