The year 2022 is drawing to a close. The year has been full of surprises, but despite this the industry’s situation has remained surprisingly good. In addition to COVID19, the war in Ukraine has caused problems with the availability of raw materials and some components, but in the end the impact has been less than feared. However, this is not the case for price levels; as availability has declined, the market has responded with large price increases. As for steel, prices have almost doubled, and the increases in many production inputs such as gases have been even higher. Rising costs have been passed on in the prices of virtually all goods and services, which in turn has caused record high inflation. To curb this, the central banks have raised the base rate several times, which causes a significant increase in financing costs for companies. The spiral seems endless and it will take time to stabilise this situation and get the market mechanisms working normally again. Unfortunately, however, there will be no return to the old cost levels as Russia will remain out of the raw material and energy markets for at least several years.
Predicting the future is still very difficult. On the positive side, we have to count the fact that energy sufficiency in Europe seems to be fairly well secured. Gas stocks have been replenished and new gas terminals are being completed to unload the gas tankers currently waiting at sea. Weather forecasts also indicate that the winter will be milder than average. There should be enough electricity in Europe, but the situation in Finland is more challenging. The root cause of the pump failures at new nuclear power station Olkiluoto 3 is still not known so the start of production will once again be delayed. Transmission links between Sweden and Finland are limited, so during a windless frost period, the availability of electricity in Finland is really critical. So let’s hope for a windy and mild winter!
Despite the difficulties, our industry has continued to manage reasonably well. Production volumes have been at a reasonable level, although many have been unable to reach their planned output due to partial shortages. Another big problem is that there are still a lot of products coming off the production lines that are left in the yard waiting for a missing part. Jame-Shaft has been able to deliver the ordered products in autumn 2022 with a good average delivery reliability of 95-97%, depending on the month. As many of our customers have had to reschedule their production, this is reflected in a decrease in our order backlog and invoicing. As a result, we are forced to reduce our capacity in December. We will keep our factory closed on the 5th and the 6th of December. We also have to decide by the end of November whether to close the factory for week 52 as well. Based on our current order backlog, this is what we will do. Because of the heat treatment, our factory has high energy costs. Electricity prices are expected to peak just around Christmas, so it would also make sense from a cost perspective to close the factory. However, if you have needs for which you have not yet placed orders and which need to be delivered by us by week 2 at the latest, please place your orders immediately so that we can estimate the necessary capacity and deliver on time.
Our customers’ forecasts for next year remain positive. We have made our own arrangements, i.e. ordered the materials and reserved our own capacity based on them. Due to the weaker demand situation, we have also made some products in stock for your projected needs. If there are any changes to the forecasts, please let us know without delay. Otherwise, our warehouse will become overstocked and the reserved capacity will not be used.
We would all be interested to know what the availability and price level of raw materials will be next year. During the autumn, prices have fluctuated up and down. This has been mainly due to fluctuations in energy prices. The prices of scrap and additives have, however, been on a slight decline. For next year, we already know that basic prices will rise significantly due to rising overheads and inflation. Capacity has also been decreased in the market, rough estimation is that in total 15-20% of European steel mill capacity is not in use at the moment. The final price level will in time be determined by all these factors. However, there have been positive developments in the availability of steel. There are isolated shortages, but the shortage lists are shorter than in early autumn.
Despite the declining order backlog, our confidence in the future is strong. There are a number of major new customer contracts in the pipeline that will start to have an impact next year. We are currently working on the first test series for several new customers. Investments also continue without interruption. During this year, we have invested especially in our special expertise, i.e. heat treatment. The new robotic induction hardening machine and the new nitriding oven are fully operational. The new carburizing tempering furnace, which is the last in line, will arrive at us according to the schedule during the beginning of the year. As previously mentioned, these purchases represent state-of-the-art technology and have been selected with particular emphasis on the most efficient use of energy in the process and other environmental factors, not forgetting, of course, efficiency and quality performance.
Our next big investments will be in the grinding department. Our machine portfolio will be strengthened with a third centerless grinder and one cylindrical grinding machine. In line with our current policy, both will have the highest possible level of automation and will be equipped with a robot. More information on these will be provided in the following press releases. Before the new machines arrive, we will significantly change the layout of the entire finishing department and at the same time reduce the environmental impact. The reason for the change in layout, in addition to the space required for the new machines, is the equipment we have acquired for the centralized processing of grinding fluids. Currently, each grinding machine has its own filtering device based on a paper filter, which removes the metal and aggregates that accumulate in the fluid during grinding. In the new system, the liquids are cleaned centrally in a high-efficiency filter unit where filters do not need to be changed but are cleaned automatically inside the unit. The purified liquid is pumped from the filter back to the individual machines. The advantage is better and more efficient filtration which reduces the need to change fluids and allows better recycling of grinding waste for reuse in steel making. Space requirements are also reduced and workers’ time is not wasted on dealing with machine-specific filter equipment.
Let’s hope that the positive momentum in our sector continues and your good forecasts hold true, despite the small decline in our order backlog. After a break of almost three years, we have finally been able to meet several customers in person. It is positive that supplier days have also started to be organised again. We also plan to organise a similar event for our own suppliers. Supplier meetings are an important part of building a network of cooperation. Unfortunately, only a few of you have had the chance to visit our factory. Come and see for yourself how our factory has developed and changed.
We wish all our customers a successful and fruitful, mild and windy winter.