Analysis of the Development Situation Presented by the German Machine Tool Industry in 2010

Recently, at the 2010 Stuttgart International Metalworking Exhibition (AMB2010), Wilfried Schäfer, executive director of the German Machine Tool Manufacturers Association (VDW), analyzed the development status of the German machine tool industry and predicted the development prospects of the industry. In the first half of 2010, various economic data presented by the German machine tool industry were better than expected, especially the market demand increased again. Capacity utilization and order volumes have gradually recovered from their troughs. Machine tool exports also stopped falling in the second quarter. Despite this, German machine tool production will still show negative growth this year. Specifically, in the first half of 2010, German machine tool orders increased by 58% year-on-year, of which domestic orders increased by 51% and overseas orders increased by 61%. Machining technology, in particular, grew by 75%, benefiting from a boom in orders. In the first six months of this year, overseas orders doubled. And forming technology grew by 25%, mainly for the automotive industry, so business is very active. Due to the long negotiation cycle in the early stage, and the long time and high cost in the design stage, it takes longer to complete the molding business. Forming processing accounts for about 27% of the total output. In July, the industry's capacity utilization rate rose to 76.3%, 10 percentage points higher than the same period in 2009. At the same time, orders on hand have also begun to climb, with orders on hand for 6.9 months as of the end of June. However, industry employment fell again to 63,100 in June-July after a slight rebound for two consecutive months. According to an analysis by the ifo institute, more and more companies will not cut their number of employees in the next three months. Although all figures are up again and heading in the right direction, machine tool production in the first half of the year was still down 20% year-on-year. That's because the machine tool industry, the 'heart' of manufacturing, is a late-cyclical industry, more elusive than its customers. Ifo's research shows that after 2009, the industrial and trade business climate of the downstream user industry began to recover steadily. From January to July 2010, its orders increased by more than 25%. Among them, machinery and equipment manufacturing, aerospace technology, metal processing production and other industries have shown a trend of gradual prosperity; metal product manufacturing, electronic industry and automobile industry have also shown growth. At present, many users have raised their production expectations, among which machinery manufacturing has recently increased its growth rate from 3 percentage points to 6 percentage points. Nevertheless, the output value of German machine tools will still decline this year, as an increase in orders does not equate to an increase in turnover. In the machine tool industry, production cycles can range from 6 weeks to 2 years. Moreover, many orders cannot be fulfilled this year, especially when the supply of many components is currently facing shortages. As a result, VDW expects German machine tool production to fall by 12% in 2010 to around 9 million euros, which will certainly be the lowest in recent years. In the first half of the year, the main driving force for the growth of German machine tool demand came from overseas orders. According to preliminary statistics, orders from the BRIC countries including Brazil, Russia, India and China are all growing. At the same time, investments from South Korea and Japan showed significant growth. Orders from Europe, the largest market for German machine tools, continued to increase, especially in Switzerland, Austria, Poland and Italy. The increase in overseas demand is also clearly reflected in the increase in exports. Exports in the second quarter of 2010 reached the level of the same period last year, but overall exports fell by 13% in the first half of the year as the market did not recover in the first quarter. The most important driving force for the Asian market comes from China, and the position of the Chinese market will continue to strengthen in the future. At present, German machine tool exports to China exceed 1/4 of its total exports, while the Asian market accounts for about 40% of its share. The country with the strongest machine tool industry in the world, the German industry recovered faster than expected and better than its competitors.