Winter is coming bro and this is where things could get interesting. Europe is going into it with gas storage at only around 69% when the 5 year average for this time is something like 85%. Gas prices are already around €81/MWh, up 150% from last year. And the EU is still going ahead with phasing Russian gas out, which is supposed to remove something like 33 bcm a year of Russian pipeline gas + LNG by 2028.
This matters for manufacturing even more than people can assume. Foundries, forging shops, aluminium plants, chemical plants, glass, steel etc eat ridiculous amounts of energy. Just two days ago Ineos said it's mothballing 3 chemical plants in the UK because of energy costs. UK gas is something like $23.5/MMBtu right now vs less than $3 in the US lol.
European foundries are already struggling with high energy costs, low capacity utilisation and cheap imported castings. Even their auto supplier industry is in trouble. CLEPA says 1 in 4 European auto suppliers expects to actually lose money this year and 76% expect margins below 5%.
And this is already sending work towards India. Indian vendors like MM Forgings, Uniparts and Nelcast themselves said they're getting new enquiries/orders from Europe and North America. Emkay literally mentioned EU foundries closing because of high energy costs, labour shortage and financial stress. Even after US tariffs Indian suppliers were apparently still giving customers something like 30% cost advantage to North American OEMs.
Financial stress, labour shortages and rising costs are squeezing Western auto suppliers, prompting global automakers to widen their vendor base and source more components from India, even as Indian exporters face tariff headwinds in the US.
www.livemint.com
Now think about Eastern Europe. Poland, Czechia, Slovakia, Hungary and that whole Central/Eastern European belt has been an important low cost manufacturing backyard for Western European industry for years. Forgings, castings, machined parts, auto components etc. They were sitting between expensive Western European manufacturing and Asian sourcing.
But their old advantage becomes harder to maintain if European gas stays expensive and Russian pipeline gas keeps disappearing from the system. Central and Eastern Europe is actually one of the areas the IEA specifically points out as still being relatively exposed to Russian pipeline gas.
That's where I think India has a pretty interesting opening. Western OEMs can simply start moving individual castings, forgings, machined components, transmission parts, axle parts, engine parts etc to Indian vendors whenever the European supplier becomes too expensive or shuts down.
And it's already happening.
Europe bought around $7.36 billion worth of Indian auto components in FY26, up 9% from $6.75 billion in FY25. Now you've got European foundries under pressure, auto suppliers losing money and Indian forging/casting companies openly saying they're getting more business from there.
It'll be interesting to see how much more Western OEM sourcing moves to Indian foundries, forging companies and machining shops.
@CallSignMaverick @GatlingGunZ @Vikramaditya1 @lightoftruth
