This prognosis is based on capital investment from the major customer sectors, global figures for machine tool consumption, and finally the order bookings at Germany’s machine tool manufacturers. For the investments, Oxford Economics, the VDW’s forecasting partner, was in the autumn of last year expecting a global increase of 4 per cent. The principal drivers are traditionally the automotive industry, followed by the electrical engineering and electronics industries, metal product manufacturers, and the mechanical engineering sector. Machine tool consumption is predicted to rise by 4.2 per cent. Europe tops the rankings here (plus 4.6 per cent), closely followed by Asia (plus 4.5 per cent) and America (plus 2.5 per cent).
Order bookings at German machine tool manufacturers, an indicator for medium-term business activity, showed a moderate rise of 1 per cent in 2015, to reach 14.9 billion euros. Production output and order bookings are thus settling at approximately the same level. During the first three quarters of 2015 Asia and Europe ordered 4 and 3 per cent more German machine tools respectively than in the previous year. Orders from China, which account for around a quarter of the total, were down again, this time by 8 per cent. This shows that the restructuring process in the Middle Kingdom will remain an issue for quite a long time to come. Nonetheless China remains important due to the sheer size of its market alone – the country is responsible for one-third of international machine tool consumption.
In 2015, the sector produced machines worth 15.1 billion euros
The VDW’S prognosis is based on the record year of 2015. Last year, the German machine tool industry produced machines worth 15.1 billion euros, corresponding to an increase of 4 per cent. ‘That’s once again a record figure, following the last high in 2013,’ explains Dr. Prokop. With an export ratio of around 70 per cent, and exports up by 4 per cent to around 9.4 billion euros, markets abroad made a somewhat greater contribution to the overall result than domestic consumption. Contrary to all expectations, Europe did particularly well, with a plus of 8 per cent. Asia, by contrast, a few years ago on almost level pegging with Europe, disappointed with a fall in exports of 5 per cent. China, the largest market with a share of still over one-fifth, has been severely affected.
In 2015, the sector’s workforce increased by an annual average of 1.5 per cent to around 68,500 employees. Capacity utilisation was running at an annual average of just over 88 per cent, which was about 2 per cent down on the preceding year’s level. The current figure in January, however, shows a renewed uptrend. The order backlog, at 6.8 months, was averaging half a month below the preceding year’s figure. ‘Overall, these figures show the sector has once again performed very well. Some of our member companies have reported the best year in the firm’s history,’ is Dr. Prokop’s comment on the figures for 2015.
Global business is getting progressively harder
‘Nonetheless, the business environment for our operations has become more difficult, and our options for exerting a direct influence are limited,’ says Prokop. The newly industrialising countries, in particular, are under pressure, due to the low prices for raw materials, Russia is suffering from the weak rouble and the low oil price, Brazil is mired in a serious recession, while China, with its faltering growth is weakening the most important trading partners. Then there are the numerous geopolitical uncertainties. ‘So it’s all the more important for our companies, in time of transformative global change, to be on the lookout for new long-term market potentials,’ says Dr. Prokop. This applies both to new sales markets, and to new products and services from the manufacturers.
Market potentials for German machine tool manufacturers
Iran, currently on everyone’s lips, offers potentials for German manufactures as well. In the boom times of the early 1990s, they exported machines worth almost 190 million euros. The figure for last year, by contrast, was a mere 20 million euros. The country’s machine tool consumption is expected to increase rapidly from its most recent 82 million. In particular, German vendors are anticipating good sales opportunities thanks to a very substantial demand for modernization among equipment suppliers for the oil and gas industries, and in the automaking segment. In order to reconnect with the traditionally good relationships with Iranian customers, VDW is joining forces with Messe Stuttgart to host the AMB Iran, a trade fair with an accompanying symposium, in Teheran from 30 May to 1 June 2016.
Mexico is also regarded as an exciting high-growth market, driven predominantly by the automotive and aviation industries Mexico’s machine tool consumption rose by an impressive 85 per cent between 2010 and 2014. With 1.5 billion euros, the country nowadays ranks among the world’s biggest markets for machine tools. Germany is the third-biggest supplier, with a share of 14 per cent. German exports have since 2011 climbed by more than 250 per cent. In mid-April 2016, on the initiative of the VDW and with political support, there will be a German exhibition called ‘German High-Tech in Metal Working’ under the aegis of the Expomaq trade fair in León.
Another promising region is the ASEAN bloc, whose countries represent a market volume of 3.9 billion euros. The Japanese have so far been dominating the market, not least because the Japanese automotive industry has a strong local presence. Japan supplies around half of the machine tools imported, Germany a mere 4 per cent. Nonetheless, German exports to the region have risen substantially in the past few years, and most recently totalled more than 150 million euros. ‘So greater involvement will be well worth while,’ opines VDW Chairman Dr. Prokop.
Upgrading competitive advantage with new technologies
‘If you want to continue prospering in the face of international competition, it’s increasingly imperative to offer solutions that others cannot emulate,’ adds Heinz-Jürgen Prokop. Keyword Industry 4.0: it’s becoming progressively more difficult to attain major competitive advantages in terms of machine technology. For this reason, machine tool manufacturers are well advised to broaden their viewpoints and to think in terms of holistic production solutions. If these are to be consistently adopted throughout a system, this demands profound knowledge of the process concerned in the context of what are sometimes highly disparate customer’s requirements. ‘No one knows these worlds better than we do, and this is our great opportunity,’ is Dr. Prokop’s firm conviction.
Another issue with a definite future is additive manufacturing. It enriches the range of existing conventional metalworking processes by enabling customised or complex components to be produced, for example. More and more manufacturers are accordingly examining the idea of hybrid machines, which combine conventional machining processes with additive manufactur-ing. Nonetheless, their use is viable only if it creates an additional benefit for the customers that justifies the higher production costs involved. ‘In the case of customised or complex components or in small series, this is easy to implement; in medium or large series and mass production, there’s still quite a lot left to do in order to achieve competitive unit costs,’ admits the VDW’s Chairman.
125 years of success for the German machine tool industry – 125 years of the VDW
All in all, the German machine tool industry is in excellent shape. It is doing intensive work in the fields that it can influence itself, so as to successfully compete with its international counterparts. The majority of companies are taking globalisation on board and are operating all over the world. They are training young people, researching and developing new products, integrating new technologies, and expanding their spectrum of service capabilities. ‘If they succeed, they will maintain their international competitive lead,’ is Dr. Prokop’s firm conviction.
The machine tool industry has since way over 100 years been demonstrating that it can repeatedly re-invent itself, has met and mastered numerous challenges, and never failed to upgrade its leading position in the world. This is equally true for the VDW, which in 2016 is celebrating its 125th anniversary. Over all these years, the association has provided backing and proactive support for the sector.
‘Against this background, it’s all the more important to be properly prepared to identify and maintain a shared course, and never lose sight of the shared goal. What we’re relying on here is tradition and experience. What’s also essential is flexibility and creativity if you want to continue being successful even under altered situational conditions,’ to quote Dr. Prokop.