A difficult international situation, a virus and trouble in different industries, it will not be an easy year for the machine tool industry. Find out why 2020 still holds a lot of potential.
The VDW (German Machine Tool Builders’ Association) is expecting production output to fall by 18% in 2020.
“This is something the sector hasn’t seen in a long time, following the boom of recent years,” to quote Dr Heinz-Jürgen Prokop, Chairman of the VDW speaking at the annual press conference in Frankfurt am Main on 13 February 2020. The decline in demand, already perceptible in the second half of 2018, really picked up speed in 2019, he went on to explain. The double-figure fall of more than one-fifth, he continued, had melted away the order backlog, and was now the determinant factor for developments in 2020.
The past year, by contrast, turned out much better than anticipated.
“With a decrease of just 1%, the production result came to almost 17 billion euros, nearly equalling the record level of 2018,” reports Dr Prokop.
The principal contributor here was domestic sales, which rose by 16%. Conversely, exports were down by 9%, a fall primarily attributable to a decrease of 11% in deliveries to Asia and of 16% in deliveries to America. Here, the regional results are dominated in each case by the largest markets: China, at minus 13%, and the USA, minus 15%. Europe, the largest sales region, accounting for more than half of German exports, still performed comparatively well with minus 5%.
Short-time working needs to be promptly extended
Imports were unable to benefit from the good performance of the domestic market and were down by one-tenth. Employment had shrunk by 3% at the end of the year. Moreover, the Ifo Institute reported an increase in short-time working to more than 18% of companies. Twice as many firms are anticipating this for the upcoming months.
“We attach maximised priority to the preservation of jobs,” emphasises Dr Prokop.
In order to avoid further payroll downsizing, short-time working should be promptly extended from 12 to 24 months, he urges.
Capacity utilisation was running at 81.5 % in January 2020
The ongoing combination of a cyclical downturn, structural transformation in the automotive industry, turbulences motivated by trade policies, and last but not least the coronavirus as well, are dampening the propensity to invest all over the world. Investments in plant and equipment are set to rise by less than 1% in the current year, according to Oxford Economics, the VDW’s forecasting partner. Only relatively small markets are in much better shape, like Vietnam, Thailand, Slovakia, Hungary and Poland. But they are quite unable to compensate for the sluggishness of the major customer nations China, USA, Italy or France. The consequence is a correspondingly substantial minus for all key statistics in the German machine tool industry during the current year: production, exports, imports and consumption.
Germany retains its top placing in the international rankings
In the international rankings, the German machine tool industry has maintained its position in the top trio, since all other producer nations are struggling with similar developments to Germany’s. On the basis of provisional data for the Top 20 producers, the VDW has calculated for 2019 a decrease in international production excluding parts and accessories of 3% to 72.1 billion euros. In the top trio, only China, with 2%, managed an increase.
“In comparison to previous growth rates, this is indeed a very modest figure,” says Dr Prokop, putting it in its due perspective.
Japan in third place even lost 5%. In terms of exports, Germany remains the world champion. Japan in second place saw a fall of 9%, similar to Germany’s, while Italy in third place suffered a fall of 2%. In terms of consumption, finally, the world’s biggest market, China, reported a decline for the second time in succession, of 8%, while the USA was likewise down on the preceding year, with a minus of 3%. Only Germany, in third place, reported a rise, of 6%.