Keywords: Baltic, Baltikum, Estonia, Latvia, Lithuania, Tallinn, Riga, Vilnius, Estland, Letland, Litauen, Machines, Sub-Contracting, Metal

Transcription

1 Keywords: Baltic, Baltikum, Estonia, Latvia, Lithuania, Tallinn, Riga, Vilnius, Estland, Letland, Litauen, Machines, Sub-Contracting, Metal Abstract: A breif overview of the Machines Industry and Sub-Contracting sector in the three Baltic countries Date

2 MACHINES INDUSTRY AND SUB-CONTRACTING Metal and machinery have historically been one of the leading production sectors in Estonia, Latvia and Lithuania. Today, the sector is a modern industry interacting with Scandinavian and Western European industries. Introduction Between 2003 and 2008 growth in the metal sector boomed (mainly basic metals and metal products) in all three countries and the annual production increased more than 2.4 times in the period. The boom in the building/construction sector was the main factor of the growing demand for metal structures. As many other countries, starting from mid-2008 the Baltic states experienced a slowdown in the manufacturing industry due to the global economic crisis. The main reasons were insufficient market demand and strict credit/financial conditions. Furthermore, an increase in prices for gas and heating has had an impact on the general level of final costs. Many industrial segments still suffer from a low domestic demand. However, most of local metal companies have seen an increase in export from the end 2010, suggesting a recovery in the sector. Market indicators The sector is well represented in all three countries. In the Baltic region there are some 2,349 active companies (more than 90% are SMEs) and over 33,600 specialists are employed. The main export countries are: the Baltic States, Germany, Denmark, Finland and Sweden. Main figures Estonia Latvia Lithuania Total Number of active companies ,349 Number of employees 11,458 10,658 11,500 33,616 Average gross salary, EUR per month Total production, EURm Source: Estonia Statistics (2010), Central Statistical Bureau of Latvia, Lithuania Statistics (2012) The leading companies are equipped with CNC machines and centres for precise processing of metal components, profiles, testing and quality control. The sector has a good supply of skilled workers and engineers. For example, in Lithuania 73 % of the adult population have at least an upper secondary education diploma and the country is among the EU top 5 countries according to the percentage (18 %) of all students studying in engineering and production. Foreign businessmen and missions visiting the region have emphasized that there is a good balance between the local prices and production flexibility. They complement the wide technological possibilities, culture of communication and skills of the employees. Market trends The sector of metal and machinery showed a strong and stable growth until mid Then activities in different segments started to slow down, especially orders from foreign partners. However, the situation changed to a positive trend in Export markets stabilized starting from the 4th quarter of A lot of companies succeeded in finding new markets as well. At the same time, domestic consumption, which is closely connected to the construction segments, has not recovered yet. As a consequence export, which takes most of metal production, will be the main driver for the metal sector.

3 Dynamics of the annual production, EURm Country Products Estonia Basic metals Metal products Latvia Basic metals Metal products Lithuania Basic metals Metal products *Net sales Source: Estonia Statistics, Central Statistical Bureau of Latvia, Lithuania Statistics (2012) Initially experts forecasted that the sector might start growing again not earlier than at the end of beginning of However, real figures provide more optimism and show that the sector is recovering faster than analysts have predicted. Metal companies have noticed an increased number of orders. Many of them and their customers, who earlier had suspended their activities, are updating the stock. The most rapid development is expected in segments such as manufacturing of fabricated metal products, components for transport and energy sectors and assembling of motors and equipment. Market trends are influenced by the general situation in the economy and they are slightly different in the three Baltic countries. In 2010 and 2011 in Latvia there has been impressive growth in the industry, with preliminary assessments of 2011 indicating that the total value of production should reach the previous peak in 2008, and exports levels even exceed it. During the last few years, the Latvian metalworking industry has undergone restructuring and modernization, resulting in fewer employees and better productivity. Thus, as mentioned, the total value of production is close to the pre-crisis levels, while the number of employees is almost 25 % lower. However, since 2010 a gradual increase in employment has started taking place. In the Latvian economy, the sector has maintained a stable share of 2.5 % even during the restructuring. As a very export-oriented industry with 80 % of production sold in foreign markets, the share of Latvia s total exports in 2011 reached 30 %, which makes it the leading export sector of Latvia ahead of wood processing, which accounts for 27 %. In Lithuania the total industrial production increased by 7.4 % in Sales of machines and equipment grew by 27.6 % and metal products by 17.9 %. These two segments are two of the top three segments, the third one being furniture, which have demonstrated the highest annual sales figures in According to statistics over 65 % of metal companies reported a surplus (this figure was 45 % in 2010) and their annual income from sales increased by 23.2 % in A rapid development has been characterising the metalworking industry in Estonia for the last decade, where the average growth rate has been nearly 25 % a year. In 2011, the increase in basic metals was 68.1 % and in metal products it was 26.9 %. The growth in export is the main driver behind this, but the domestic demand is also starting to affect the overall growth in the sector. Market assessment Danish capital is already one of the most active in the local market, especially in the areas of metal components, electrical equipment and auto-motor parts, which show the highest figures of productivity and profitability in the whole production industry. The slowdown of the economy releases extra resources in the market. This might be the right time for Danish companies to consider more outsourcing projects due to the current large amount of production capacities and labour force that are available. The sector is orientated towards the global market. The greatest potential for Danish companies in the Baltic regions metal sector is within: Estonia: The most common products are metal and building constructions, metal processing, metal packaging, galvanized steel, aluminium alloys, technological pipelines, bulk towers etc. In addition, there are companies that manufacture more specific products and services, e.g. the manufacture and installation of

4 storage tanks for dangerous fluids. Companies are especially skilled in tooling, shipbuilding and machining of precision parts for instruments. Most machine building and metalworking companies are located in Tallinn area and Ida-Viru county while the main part of vacant production capacity currently is located further outside Tallinn. Latvia: Casting of iron, steel, non-ferrous metals and plastics, machining by CNC machines, sheet processing especially in deep drawing, surface treatment like electrolytic galvanizing and hot deep galvanizing. There are also possibilities in forging, stamps and dies, and other fields of the sector. Latvian metalworking companies dominate in Liepaja, Jelgava and Riga region. Lithuania: Production and installation of medium size and large metal structures, stainless steel and metal sheet products for food, agriculture and chemical industries, iron and aluminium casting, various welding and painting processes. Cable harnesses, transport electronics, manufacturing of containers, production and assembling components for motors are the leading segments in terms of high efficiency. The sector is decentralised and the main companies are located in the five major cities: Vilnius, Kaunas, Klaipeda, Siauliai and Panevezys. The presence in the market of Danish companies such as Pumac A/S, CSK Stålindustri, Danfoss A/S, Grundfos DK A/S, Løgstor A/S, Sanistal A/S, Jensen Metal A/S and others prove that the Baltic metal sector is attractive for business co-operation and investments.

5 The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and investment promotion agency of Denmark. The Trade Council benefits from around ninety Danish Embassies, Consulates General and Trade Commissions abroad. The Trade Council advises and assists Danish companies in their export activities and internationalisation process according to the vision: Creating Value All the Way. The work in the Trade Council follows specific procedures and quality guidelines. In this way our customers are secured the best possible quality under the varying working and market conditions at any given point of time. Ministry of Foreign Affairs of Denmark Danmarks Ambassade, Vilnius T. Kosciuskos Gatve Vilnius Tel: Fax: vnoamb@um.dk