Global Machine Tool Business Set to Gather Momentum

EMO Hannover 2017, held from September 18-23 in Germany, serves as an important indicator for technical trends and innovations in the field of production technology. “Experts expect networking during this event to trigger a quantum leap forward in terms of improving productivity and competitiveness among users in all sectors,” reported Dr. Wilfried Schäfer, the executive director of VDW (German Machine Tool Builders’ Association; Frankfurt, Germany), speaking at the EMO press conference in Chicago on March 9. “This could also trigger an upturn in capital investment.”

Dr. Schäfer explained how economic pundits anticipate global market improvements, with overall investments rising by 1.5 percent and machine tool consumption by 2.1 percent. Europe is expected to increase by 4.1 percent, with the principal drivers being Italy, Spain and France, all three major machine tool markets. Other markets in Eastern Europe are also boosting this trend. Asia and America will achieve rises in their machine tool consumption by 1.7 and 0.9 percent, respectively.

The U.S. economy has recorded a continual uptrend for seven years now, driven primarily by private consumption. By contrast, investment activity in the American industrial sector is sluggish. Important sectors like mining, oil and gas production are currently in a phase of consolidation, an important source for observing developments in the global economy, and capacity utilization in many parts of the U.S. industrial sector is unsatisfactory. Falling corporate profits and weak demand from abroad are causing genuine concern.

But the U.S. automotive industry is doing well. Sales of cars, SUVs, and other light vehicles are reaching record levels. Favorable gasoline prices, attractive financing conditions and moderately rising incomes are boosting sales. With the trend towards downsizing, new technologies are being adopted on a broad front in the U.S. automotive industry, such as turbocharging, direct fuel injection or start-stop systems, which means capital investments are pre-programmed.

In the U.S., 80 percent of the vehicles sold there are manufactured there as well. Leading-edge production technology is much in demand in the nation’s automotive factories, and there is plenty of catching up to do. This is why almost all manufacturers have announced major projects for modernizing and upsizing their production capacities. According to Oxford Economics, the U.S. automotive industry will increase its capital investment by one percent in 2017. Technologies for reducing fuel consumption, and lightweight components, are much in demand. The focus here is on machining aluminium, combinations of lightweight materials, and carbon. This also applies to aircraft manufacturers that intend to invest 5.6 percent more this year.

Demand for machine tools is being substantially boosted by parts of the U.S. mechanical engineering sector. Investment is predicted to come especially from producers of food and packaging machinery, textile and plastic processing machines. The U.S. imported more than 60 percent of its machine tool consumption, totaling around $8 billion, in 2015. With a share of 16 percent, Germany ranks second among the major supplier nations after Japan. In 2016 the U.S. was the second-most-important export market for Germany, with a share of almost 12 percent. Machines, parts and accessories worth just under $1.1 billion were supplied, an increase of 11 percent. Demand was chiefly for parts and accessories, machining centers, bending machines, laser systems and grinding machines.

“The German machine tool industry is very well anchored among the major American automakers, their component suppliers, the aviation industry, and the mechanical engineering sector,” explained Dr. Schäfer. “U.S. manufacturers of production technology need to intensify their focus on international markets.” Their position in the global market demonstrates how internationally competitive they are: With a volume of almost $5.4 billion and a share of more than 7 percent, they rank among the Top Ten of the most important manufacturers worldwide. They export around 43 percent of their production output.

Deliveries to Germany fell by a double-figure percentage in 2016. Germany ranks sixth among the most important markets for U.S. equipment manufacturers. The U.S. ranks eighth among the most important suppliers for Germany’s industrial sector. In 2016, machines worth round $128.5 million were imported to Germany from the U.S., primarily parts and accessories.