The last quarter of 2023 has already begun, unfortunately in a somewhat subdued atmosphere. 2022 was a good year for our sector, although we were hampered by the Russian invasion of Ukraine, which caused problems with the availability of raw materials and components. Already in early 2023, the first signs that the good cycle was coming to an end began to appear. The market began to show signs of nervousness and large stocks began to be unloaded. The turnaround has been sharp, but manufacturing volumes remained at a good level in the spring due to large order backlogs. This autumn, shrinking order backlogs and a sharp drop in sales in many sectors have led to a reduction in production and, unfortunately, news of change negotiations has increased. However, it is generally believed that this time the duration of the downturn would be relatively short, and the fall would not be as severe as during the financial crisis of 2008/2009.
As you will recall, in spring 2022 steel prices almost doubled and electricity and gas prices increased even more. Current forecasts suggest that energy prices in the coming winter would be much more moderate than in the previous winter. This is because we are now better prepared for winter and our stocks are full. Steel prices started to fall in the summer of 2022, but rose to new record highs during the rest of the year. The steep downward trend in steel prices that started at the beginning of the year has continued so far, but the latest indications are that prices will rise again as winter sets in. Forecasts indicate that such a sharp price spike is not expected, but on the other hand, the fall in prices seems to have at least changed directions and steel prices are still at a very high level. Business costs are also being driven up by high inflation, which fortunately seems to be on a downward trend, and wage increases. Both are at the European average in Finland.
Predicting the future seems harder and harder. If the forecasts of various research institutes are to be believed, the turn for the better will come in the autumn of next year. Based on our clients’ forecasts, there should be a clear recovery in volumes as early as spring 2024. However, the current situation at Jame-Shaft is that volumes are well below last year’s level. The last financial period (1.7.2022-30.6.2023) was the largest in the company’s history, with a turnover of €28.3 million. We were slightly behind budget as our customers’ purchases were generally below the forecast level. Due to higher costs and lower sales in the spring, earnings fell, and the profitability targets were not met. As a result, operations have begun to adapt to current demand and all activities are subject to strict cost discipline. In order to be able to size up the measures correctly, we need your help – forecasts and all other information on next year’s situation are now invaluable. Let’s hope that the general forecasts are right, and that the economic recovery will start as soon as possible next year.
We also ask you to take into account that Christmas and the end of the year are approaching. Due to the low order book, the current plan is to close down all our operations for at least week 52 and possibly longer depending on the situation. In practice, this means that products needed in early January must be ordered well in advance so that production can start in early December and be either ready or half-finished before Christmas.
Despite the uncertain situation, our confidence in the future is strong and investments will continue uninterrupted. Our latest investment came in the summer in the grinding department. In June, a robotic cylindrical grinder and a robotic centreless grinder arrived to increase our grinding capacity. Both are now in full production use. With an increasing number of machines and automation, our grinding capacity has grown significantly. A new large multifunctional lathe with robots is coming this year. This has caused a major domino effect in our factory, with a total of nine old machines having to be moved. At the same time, the layout of the entire production front end becomes clearer, and the flow of production improves.
During this year, we have calculated our own carbon footprint. The calculations were made according to the GHG ( Greenhouse gas protocol) classification method using the Y-HIILARi calculator developed by the Finnish Environment Institute. The result for both Scope 1 (fossil fuel use) and Scope 2 (purchased electricity) is zero as we only use fossil-free electricity. The raw material makes up the majority of the final carbon footprint of our end product, the pin or sleeve. The decisive factor here is whether the steel is made from recycled scrap or from virgin ore in a blast furnace. The type of energy used to produce the steel also plays an important role. If the carbon footprint of the entire manufacturing process is to be reduced, more attention must be paid to the origin of the steel.
Even though the economic situation is a bit down, Jame-Shaft has also had reason to celebrate. The company celebrated its 30th anniversary in May of this year. To mark the occasion, an open day was organised in August for the families of the company’s staff. A total of around 200 people attended the warm-hearted event. The program, especially aimed at children, included ponies, football, a rally car, a factory tour, getting to know forest machines and magic. There was also a wide range of refreshments and snacks on offer. In the evening, the staff had a garden party with good music and food. We also participated in the Subcontracting 2023 fair where we had the pleasure of meeting many of you. Thank you to everyone who visited our stand
Let’s hope that next winter, despite the worsening economic situation, will be a positive one, preferably on a growth path. After a long break, we have been able to meet several customers in person. However, we still hope that as many of you as possible will come and see the changes and improvements made to our factory. Now is the right time to develop and deepen cooperation.
We wish all our customers a successful and productive end of year 2023.
Best regards,
Mika Tuunainen
Managing Director
Jameshaft Oy