In the second half of 2024, the number of new orders in total manufacturing declined, and so did the metals sector. Export orders were especially disappointing. The metal sector is struggling with declining demand, rising costs, low profitability and increased competition. The number of bankruptcies shows clear growth. We have also seen a decline in employment for a long time. Especially temporary contracts are not being renewed.
Sector analysis: Metal sector
Metal industry: challenges and opportunities for 2024-2025
This article contains:
Key insights
- Rising costs, declining demand, and increased competition are driving bankruptcies and payment delays across the metals sector.
- Demand for metals critical to renewable energy and EVs is rising, pushing companies to adopt sustainable practices and invest in innovative production methods.
- Trade disputes, geopolitical tensions, and emerging technologies like AI and automation are reshaping the industry.
The sector is suffering greatly from the slowdown in the global economy and the ongoing malaise in Germany. On top of that comes Trump's recent election win. He has announced a hefty increase in import tariffs. He wants to introduce an import tariff of 25% for Chinese products and 5% for products from the rest of the world. If this raises the trade disputes with China and Europe, the tariff for Chinese imports could rise to 60% and for Europe to 10%.
Such measures mean a big tick for the metal and machinery sector. Relatively many products go to the US. Higher import tariffs suddenly make them a lot more expensive. That costs competitiveness. On top of that, China has less products to sell in the US. In response, China will try to sell even more in Europe (at dumping prices). SMEs as suppliers to large corporations will certainly feel the consequences.
Increasing bankruptcies
Less demand and lower prices within the sector are the result of a slowdown in the global economy. Major economies, including the U.S. and China, are striving to reduce dependence and strengthen their own domestic industries. The result is less demand (for base metals, semi-finished and finished products) and lower prices. In addition, costs (labor and energy) are rising and competition is intensifying. All in all, profitability is under severe pressure, with companies experiencing payment problems more quickly. Consequently, we are seeing a marked increase in defaults and bankruptcies in the sector.
Key trends
Demand for metals essential for renewable energy and electric vehicles continues to grow, thanks in part to government initiatives to encourage the transition to a low-carbon economy.
In a Net Zero scenario, demand for these critical materials could quadruple by 2040 compared to 2020. Companies are encouraged to embrace innovations and invest in efficient and environmentally friendly production methods.
Environmental requirements (including for water use, biodiversity and carbon emissions) are putting additional pressure on the sector to operate more sustainably. This presents not only challenges but also opportunities for companies at the forefront of sustainable innovation.
Geopolitical tensions
Global conflicts, such as the war in Ukraine and tensions between the U.S. and China, are having a major impact on the metals industry. These geopolitical risks lead to supply chain disruptions and cause fluctuations in raw material prices. The volatility increases long-term risk and requires companies to have a strategy to effectively deal with these price fluctuations.
Digitization
Innovations such as artificial intelligence (AI), machine learning and automation are gaining ground in the metals industry, not only to reduce costs but also to work more efficiently. The introduction of smart factories, predictive maintenance and Industry 4.0 facilitates process automation and helps prevent production disruptions. These technologies improve transparency and flexibility. This is essential at a time when rapid delivery and operational efficiency are increasingly important. However, smaller companies may struggle to keep up with the high investment requirements, which can lead to a division within the industry.
Product-as-a-Service
The rise of product-as-a-service models offers new opportunities for flexibility within the industry. It allows customers of machine manufacturers to pay for only the capacity they actually use, which is especially attractive with expensive machines and equipment. Smart machines with predictive maintenance reduce downtime by detecting potential failures in advance, increasing efficiency and lowering costs. This shift allows for better utilization of production capacity and enables companies to respond more flexibly to market demands.
Consolidation
- High investment requirements for technology and sustainability are leading to economies of scale within the industry.
- Mergers, acquisitions and strategic collaborations allow smaller players to be acquired or merge with larger players to share costs and develop greater clout. In addition, many companies are expanding their operations into international markets, allowing them to spread risk and benefit from economies of scale.
- This consolidation and internationalization will further strengthen the competitive position of European companies in the global market.
Peak of bankruptcies is still to come
- Our own research shows that the wave of bankruptcies worldwide is not yet at its peak. The peak is yet to come. This also applies to the Benelux (Netherlands +4% in 2025, in Belgium +21%; In the Netherlands, the increase in recent years was the highest in the euro zone, hence +4% is not so high now). Our research also shows that invoices are getting paid later and later.
- That later payment is extremely inconvenient for many companies. Working capital comes under pressure as a result. Companies are thus putting each other in trouble. With the logical consequence that the chance of non-payment and bankruptcy increases. Even healthy companies can be affected. A large unpaid invoice is a nightmare for many entrepreneurs. Our researchers explicitly warn against the increase of large bankruptcies (too big to fail no longer exists).
How can metal companies protect themselves?
The ever-increasing bankruptcies should be a warning to anyone doing business within the metal sector. The chances are increasing that they will be left with unpaid invoices. That blow can hit hard. The consequences can be absorbed with a trade credit insurance. We have a solution for every type of business. Whether an invoice is paid or not is no longer a concern, companies are sure of their money with our trade credit insurance. This provides security and removes anxiety. We take over the debtor risk from the company. Don't customers pay? Then we compensate the affected company. In addition, we offer companies that take out a trade credit insurance with us information about the creditworthiness of their (potential) customers. On a daily basis, we analyze the financial situation of customers and prospects.