European machine tool makers warn of industry slowdown

Two recent industry reports pointed to signs of a slowdown in machine tool sales in Europe amid speculation of a possible recession in the European economy. The German Machine Tool Builders Association (VDW) pointed out in the report that the demand faced by its member companies has recently declined significantly compared with the strong growth in the first half of this year. Meanwhile, the European Association of Machine Tool Manufacturers (CECIMO) also pointed out that dire prospects in the financial sector have cast a shadow over the positive results of the world's top machine tool trade fair, EMO. Uncertainty in financial markets has spread to the industrial sector and may affect the growth rate of the industry in 2012. In contrast, according to statistics from the American Machine Tool Distributors Association and the American Manufacturing Technology Association, orders for machine tools and related equipment in the United States reached $607 million in September this year, an increase of 22.9% from $461 million in August, and an increase of 22.9% from September 2010. Orders rose 51.9%. From January to September 2011, the new orders of the US machine tool industry were 4.074 billion US dollars, an increase of 91.9% over the same period in 2010. In Germany, according to VDW statistics, in the third quarter of 2011, the new orders of the German machine tool industry showed some slowing down after the strong growth at the beginning of the year. Nevertheless, from January to September 2011, German machine tool orders increased by 74% year-on-year. Wilfried Schfer, executive director of VDW, pointed out that since the beginning of this year, the German machine tool industry has performed well in orders, but the growth rate has declined quarter-on-quarter, especially in the third quarter. In October, the capacity utilization rate of the German machine tool industry reached 95.5%, a significant increase from 75.4% in October 2010. At the same time, from January to September, the output of German machine tools increased by 36% year-on-year. According to VDW's forecast, the output of German machine tools will increase by 33% year-on-year in 2011, which is better than the previous expectation. Nonetheless, VDW members all lowered their growth forecasts for the coming months. Given the ongoing uncertainty in financial markets, especially the spreading debt crisis in Europe, companies are expecting a gloomy outlook in the months ahead. These external factors have been superimposed on normal cycle demand trends, Schfer noted. But these effects vary for different machine tool manufacturers. For enterprises that produce customized machines, the development of the enterprise will be relatively stable due to the long production cycle and the products are mainly used in industries such as automobile, energy and aircraft manufacturing. CECIMO pointed out that the current financial market situation poses a threat to the development of the manufacturing industry. Because banks will be unable or unwilling to provide loans to machine tool manufacturers and their downstream users. The lack of funds will cause serious harm to the development of the industry. Nonetheless, the strong growth in machine tool orders in Europe starting in 2010 and continuing into 2011 provided the basis for an increase in overall CECIMO production. At present, the output value of European machine tool manufacturers this year has increased by 4.1 billion euros (about 5.5 billion US dollars) compared with 2010, and the total output value in 2011 is expected to reach 20.7 billion euros (about 15.5 billion US dollars), with a growth rate of about 25%.