World Machine Tool Output & Consumption Survey

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Orders for new machine tools started collapsing in late 2008, not only in the United States but throughout the developed world, and they are only now starting to show some signs of recovery.

When orders dried up so did production, and builders in many countries saw business volumes last year drop to levels not seen for five or six years. As individual companies and whole national industries struggle to cope, it seems more cutbacks and corporate consolidations are inevitable, so the effects of the Great Recession on the global machine tool industry may be long-lasting. The latest annual World Machine Tool Output & Consumption Survey shows that the total of shipments of new machines by the 28 leading producer countries in 2009 comes to $55.2 billion. That's a 32% decline from the $81.3 billion that those same countries produced in 2008.

As in any broad downturn, some nations are hit harder than others. Japan got clobbered last year. Japan had been the world's leading producer of machine tools for 22 out of the last 25 years, but now it has fallen to third place with a whopping 59% drop in output compared to 2008. The total yield from the island nation, $7.1 billion, was the lowest (in constant dollars) since 1994 with the exception of a one-year dip in 2002. Japanese machines intended for export markets were hit only slightly less hard in 2009 than equipment destined for local factories.

Germany, which has been neck-and-neck with Japan as the global production leader, experienced a 30% decline in output (measured in euros, slightly worse when converted to dollars). Italy and South Korea, also in the top five among producers, experienced similar percentage drops in their shipments. The United States, about tied with Taiwan and Switzerland in terms of output, had a 41% drop from the previous year. In fact virtually all the countries in the survey experienced declines in machine tool shipments with one glaring exception: China.

Chinese production of metalcutting and metalforming machines is estimated to have actually expanded during 2009, by 7%, according to the builders' trade association in Beijing. Its industry's buoyancy while all others were sinking made China bob to the top of the list of producers for the first time last year; a year prior it had ranked third, considerably behind Germany and Japan.

Chinese growth in equipment production is driven by two factors. First is the expansion by foreign-owned builders-ranging from Japan's Yamazaki Mazak to America's Hardinge-that have sited some of their factories there. Then, too, there is the progress of local Chinese builders-including sophisticated giants like Dalian and Shenyang but also encompassing a myriad of factories whose products are not so competitive on the international market. Driving both trends has been the seemingly insatiable appetite in recent years of Chinese machine tool users.

With the world's largest population and a dizzying pace of industrialization, since 2002 China has led the world in the consumption of new machine tools. Consumption is calculated by taking a country's local production, adding imports and subtracting exports (second table). In 2009 Chinese installations of new machines fell less than one percent from 2008, so in a year that saw every other consuming nation cut its acquisitions dramatically, China greatly expanded its leadership position by essentially maintaining an estimated $19.4 billion in consumption.

That means, according to this 45th in our series of yearly surveys, that around 35% of the dollar-volume output of all the 28 leading producers in the world (including China) was installed in Chinese factories last year.

Germany is second in consumption with $5.5 billion last year, and the United States is third with $3.4 billion (half of the previous year's), edging ahead of Japan, now fourth in consumption.

Countries included in this annual WMTO&CS generally are those that have established production capacity and therefore effective internal data collection. The authors estimate that the 28 countries that are part of the study represent more than 95% of world output, with the larger producers consuming the bulk of the annual shipments.

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