As manufacturers recover from the recession, machinery investment is expected to rise
October 2013 - Since 2009, industries fueling the metalworking machinery manufacturing sector stalled. According to IBISWorld, revenue fell a crippling 30.8 percent as the recession affected the global economy, curbing demand in foreign and domestic automobile and construction sectors. However, the research firm’s latest report indicates growth will return in 2013 with revenue rising 2.4 percent to $29.9 billion.
In its “Metalworking machinery manufacturing in the U.S.,” report, IBISWorld expects private investment in metalworking machinery to total $27.8 billion in 2013, up from $21.9 billion in 2009. Demand is expected to remain steady. However, “Competition from cheaper imports has undermined the efforts of domestic manufacturers, and the number of industry operators has fallen at an annualized rate of 2.8 percent to 6,495 during the past five years.”
Growth for the industry is fueled by demand from automotive and heavy machinery manufacturers as well as increased government spending on defense and military/aviation measures. Commercial aviation and automotive sectors, which were hit hard by the recession, are recovering steadily. International trade remains an important factor as exports are estimated to account for 23 percent of revenue, or $6.9 billion, according to the report.
James Crompton, analyst at the business intelligence firm, says while automotive is a particularly strong influence on this sector, other industries that provide steady demand to the metalworking machinery manufacturing industry include: ship building (as component parts need to be worked and shaped), steel (and other metal), pipe/tube manufacturing, architectural and ornamental metalworking services. Additionally, machine shops, which cut raw materials into specific shapes and sizes, are primary users of metalworking machinery.
According to IBISWorld, special tools, die sets, jigs and fixtures account for the majority of industry revenue at 34.4 percent of the total $29.9 billion. Industrial mold manufacturing, manufacturers of die sets and jigs, as well as special molds needed to mass produce goods, account for 20.4 percent of total industry revenue. Cutting tools and accessories, which account for 19.3 percent of revenue, include metalworking attachments, bits, inserts, tips, drills and shanks that can be used in machining centers and mills. Other products account for 2.9 percent of total industry revenue, covering rolling mill machinery, special-purpose assembly machines, synchronous and nonsynchronous rotary- and inline-transfer machines, separately sold parts and miscellaneous machines.
Global effect and expertise
On a global scale, China’s impact on the marketplace is significant as its demand for mineral and energy resources grows. Factors such as offshoring operations as well as worker expertise will have a significant impact on the future of the sector. Technological and automated innovations such as computer-aided design, computer numerical control and computer-aided manufacturing systems have given a competitive advantage to companies invested in these forms of technology, particularly in Asia (Taiwan, Japan and Korea), says Crompton.
As a result, inflated commodity prices have led mining companies to invest in resource exploration, requiring additional equipment. Due to the lack of major metalworking machinery manufacturers in the United States, it is difficult to say if there is a particular brand or company that consumers demand as research indicates most demanded machinery is from Japan, Crompton says.
“Japan has consistently been a leading import source for the industry, and USITC data going back to 1998 shows that Japan has not once lost its position as a leading import source for metalworking machinery,” Crompton says. “Its level of imports are expected to grow at an annualized rate of 2.9 percent in the period from 1998 to 2013. Ultimately, I would say that it is not a matter of offshoring production for cost purposes, but more of a shift towards maximizing efficiency of operations.”
The report also indicates that imports and exports of metalworking machinery have risen since 1998, total imports by 3.6 percent on an annualized basis and total exports by an annualized 1.6 percent basis from 1998 to 2013, according to Crompton.
Both in North America and abroad, the increased use of computerized machinery is creating demand for more technically literate employees, he adds. “CAD and manufacturing machines require employees to enter specifications into the machine and if an employee is not able to consistently operate the computer systems effectively, there can be deadweight loss in operations,” Crompton says.
Going forward, Crompton believes the emergence of 3-D printing technology could potentially influence this industry. “While it is still a nascent industry, the implications moving forward could be immense across all manufacturing industries,” Crompton says. “Most notably, if 3-D printing technology becomes capable of manipulating and forming metal products, it could spark a massive shift in how metalworking machinery manufacturing companies develop and design machinery.” MM