Europe underpins the order situation in Germany’s machine tool industry

During the first quarter of 2015, order bookings for the German machine tools industry were down by 8 per cent compared to the first quarter of 2014. Domestic orders fell by 19 per cent, while orders from abroad shrank by 2 per cent.

“Compared to a strong first quarter in 2014, demand for machine tools is currently taking a breather,” commented Dr. Wilfried Schäfer, Executive Director of the sectoral organisation VDW (German Machine Tool Builders’ Association) in Frankfurt am Main. The fall in demand, he said, results primarily from the significant downturn in domestic orders, crucially reflecting the high base effect of last year’s strong equivalent period.

Compared to the first two months of 2015, however, March reveals a perceptibly better picture. “The German economy is trending upwards, as the latest IFO Business Climate Index makes clear. Due to the weak euro and the low raw material prices, we anticipate that domestic demand from our high-export-ratio customer sectors, too, will gather momentum in the months ahead,” said Wilfried Schäfer.
In March, orders from abroad achieved turnaround, rising by 6 per cent, whereas in January and February the figures were still in the minus range. It is primarily the orders from the Eurozone that underpinned demand for machine tools in the first quarter of 2015, with a plus of 26 per cent. The continuous growth in orders since the autumn of last year confirms that European customers are more optimistic, and that the investment backlog in the Eurozone has been overcome. This is also reflected in the Purchasing Manager Index, which has most recently picked up again in the industrial sector.

The explanation for the overall drop in orders from abroad during the year’s first quarter is that demand from Asia, in particular, was tentative. But the recently held CIMT in Beijing, China’s premier trade fair for machine tools, provides grounds for optimism. The Chinese government’s declared goal is a quality thrust in the industrial sector, for concomitantly enhanced competitiveness on the global market. One of the key factors for the requisite modernisation and diversification of China’s industrial sector is state-of-the-art production technology. “For this technological transformation, China is increasingly prioritising quality before quantity. This trend will also benefit the German machine tool manufacturers with their high-tech products. This can be substantiated not least by noting that since the second half of 2014 orders from China are again starting to show a significant increase,” explained the VDW’s Executive Director.

But Wilfried Schäfer also sees abundant potential in the USA as the second-most-important market: “Following a strong preceding year, it’s above all the favourable euro-to-dollar exchange rate that in the months ahead can be expected to boost business with the USA.”

23 firms showcase their capabilities at the VDW’s symposium in Seoul

For decades now, South Korea, as an up-and-coming industrialised nation, has ranked among the most important markets of the future, not least in the high-tech sector. It is regarded as fiercely contested. Nonetheless, the country offers great economic potential. This has long since been taken on board by the German manufacturers of high-precision, high-performance machine tools, who aim to further intensify their business with South Korea in the future.

270 customers familiarised themselves with the broad spectrum of corporate capabilities
Following a successful first event in 2012, this year 23 German manufacturers of machine tools showcased their products, solutions and services at the Technology Symposium hosted by the VDW (German Machine Tool Builders’ Association) in Seoul on 17 and 18 March. 270 representatives from South Korean companies responded to the VDW’s invitation. They came predominantly from the automotive industry, the general mechanical engineering sector, and the metalworking industry.

The German firms participating were Alzmetall, DMG Mori Seiki, FFG-Werke, Grob-Werke, Heckert, Heller, Hermle, Index-Werke, Kapp Group, Leistritz, MAG IAS, Mauser-Werke, Open-Mind, Peiseler, Profiroll, Samag, Schütte, Siemens, Schwäbische Werkzeugmaschinen, Trumpf, United Grinding Group, Waldrich Coburg and Weisser.

The symposium was opened by Carl Martin Welcker, the VDW’s Vice Chairman and Managing Partner of Alfred H. Schütte GmbH & Co. KG, Cologne.“German machinery manufacturers can look back on a lengthy tradition of trading relations with South Korea. It’s not only the quality and the sophisticated technological solutions, but above all the broad spectrum of specialised machines that will enable usas German vendors to continue to survive and flourish in the fierce competitive environment involved,”he said in his speech of welcome.

“The event was fully booked in next to no time,” said Klaus-Peter Kuhnmünch, who’s responsible at the VDW for organising the symposia, confirming the high perceived importance of the South Korean market for German manufacturers.

One in six machine tools comes from Germany
2013 and 2014 were boom years for South Korea. Last year, for example, machine tool consumption rose by 5 per cent to reach 3.6 billion euros. For 2015 and 2016, the VDW’s British forecasting partner, Oxford Economics,expects a significantly more vigorous dynamic, with growth rates of almost 10 per cent.

The most important foreign supplier is Japan, which accounts for up to half of South Korea’s imports. The German sector is the second-biggest supplier, and following a record year in 2013 mean while accounted in the following year for 17 per cent of total imports. For German vendors, the task now is to keep on tapping this huge potential.“South Korea is one of the most up-and-coming regions in South-East Asia. Despite the relatively strong domestic machine tool sector, we see firstly particular potential for marketing specialised systems technologies. These include, for instance, the process technology required for coating cylinder bores as a part of our turnkey competence for crankcase The most important foreign supplier is Japan, which accounts for up to half of South Korea’s imports. The German sector is the second-biggest supplier, and following a record year in 2013 meanwhile accounted in the following yearfor 17 per cent of total imports. For German vendors, the task now is to keep on tapping this huge potential.“South Korea is one of the most up-and-coming regions in South-East Asia. Despite the relatively strong domestic machine tool sector, we see firstly particular potential for marketing specialised systems technologies. These include, for instance, the process technology required for coating cylinder bores as a part of our turnkey competence for crankcase production lines. Secondly, we are also aiming to meet the expressed demand for complete machining on a single piece of kit with our range of five-axis milling/turning centres,”reported Andrew Parkin, Executive Manager for Asia at Gebr. Heller Maschinenfabrik GmbH in Nürtingen.

In the Asian export rankings South Korea lies second
South Korea has in recent years evolved into a significant growth market for the German machine tool industry. Starting from 25th place in the rankings for the most important sales markets and 162 million euros in 2008, German exports have risen by almost 13 per cent to most recently around 183 million euros last year. Currently, the country lies 15th in the export rankings, and is behind China, but well in front of India and Japan,the second-most-important customer in Asia. The most significant export technologies, besides parts and accessories, are machining centres, laser machines, grinding and gear-cutting machines.

What South Korea’s industrial customers appreciate most about German machine tools is their high levels of availability. ForTae-IL- Hyun, Project Managerat the South Korean component supplier Hyundai WIA from Uiwang, German machine tools are more flexible, faster and more accurate than their competitors’ products. “These positive characteristics also justify a higher purchase price,” to quote symposium participant Hyun.

Keep an eye on South Korean competitors
Nor are the South Korean competitors sleeping, e.g. in Germany. Meanwhile, South Korea ranks 5thin terms of German machine tool imports, with an import volume of almost 148 million euros last year, which corresponded to an increase of 48 per cent compared to the preceding year. “For orders from the low-tech category and in the medium segment, it’s primarily important not to lose sight of the competitors from South Korea in our own country. Here we must regain ground, so as not to cede the national sales market without a fight to the competitors from South Korea,”confirmed Dr. Benedict Korischem, Managing Director of Peiseler GmbH & Co. KG, Remscheid, when interviewed during the symposium.

South Korea’s machine tool manufacturers have to change
The VDW’s partner for organising the symposium was the German-Korean Chamber of Industry and Commerce in Seoul. To quote Executive Director Barbara Zollmann: “The VDW’s symposium came at the right time. South Korea has arrived at a turning point. The machine tool industry has to transform itself from a “fast follower” to a “first mover” if it wants to survive and prosper in the face of growing competition from Asia. This is conditional upon capital investment and innovations. German machine tool manufacturers can support South Korean firms in this process, and help them to obtain competitive advantages.”

Ideal networking forum for the South Korean market
Klaus-Peter Kuhnmünch from VDW rated the VDW’s symposium in South Korea as yet another success. “Our events are exclusive networking forums for our members, and offer direct access to top-ranking customers from the markets concerned,” he said.

For eleven years now, the VDW has been organising German technology symposiain important growth markets. They aim to assist the German machine tool industry to penetrate these markets and to showcase for the users there the sector’s professional competence and corporate capabilities. So far, symposia have been held in Brazil, China, India, Mexico, Poland, Romania, Russia, Thailand, Turkey and South Korea. In line with sustainability thinking, the symposia are repeated at certain intervals, as is the case this time in South Korea.

Boosted by developments in the oil price and the euro exchange rate

The German machine tool industry is anticipating a three-per-cent rise in production output during 2015. “The low oil price and the fall in the euro’s exchange rate are invigorating capital investment and thus also increasing the demand for machine tools,” says Martin Kapp, Chairman of the VDW (German Machine Tool Builders’ Association), speaking at the organisation’s annual press conference in Frankfurt am Main.

Oxford Economics, the VDW’s forecasting partner, is predicting an improvement in the global business cycle during 2015. Firstly, this will benefit the major user sectors for machine tools. In Germany, the automotive industry and the mechanical engineering sector (who together buy about 70 per cent of machine tool production output) are each expecting growth in their own production volumes.

Secondly, pundits are forecasting a moderate global recovery in demand on a relatively broad base for 2015, driven primarily by America. Thanks to the ongoing process of re-industrialisation in the USA, the market is set to expand beyond its traditional drivers: the automotive and aircraft construction industries. Capital investment by the automotive industry, moreover, is underlining the particular importance of the NAFTA region. The result is high double-figure growth rates for machine tool orders in Germany.

European demand was hit painfully last year by developments in Russia. Nonetheless, orders from some nations of Eastern Europe are already showing rises in a medium-double-figure order of magnitude. In Italy, government subsidies for capital investment in the shape of reduced-rate loans have proven beneficial. Good business with Switzerland is owed to close entrepreneurial interweaving between German manufacturers and their Swiss subsidiaries. In 2015, a moderate recovery in European demand is expected.

This also applies to Asia. Thanks not least to China and Korea, machine tool consumption stabilised last year. So recently there has been a concomitant rise again in orders placed with German manufacturers.

“We are cautiously optimistic about the ongoing year, since the German machine tool industry is in good shape, as a vendor of production equipment for the entire world,” is Kapp’s summary. The sector is fully aware, though, he added, that the numerous crises around the globe continue to entail manifold risks, and that it is still waiting for clearer growth signals in many important markets.

2014 saw the first decline in three years
Last year, the German machine tool industry saw its production output fall for the first time in three years. With a minus of one per cent, production output came to 14.4 billion euros, the second-highest production figure that the sector has ever achieved.

Exports fell by three per cent to 8.9 billion euros. Inside the triad, deliveries to Europe came out best, with growth of 1 per cent. Both Asia and America performed less impressively. The export ratio, however, remained very high overall, at around 67 per cent.

Imports suffered less severely, rising by four per cent. Almost 70 per cent of imports come from Europe; Switzerland remains the most important supplier.

The order backlog, averaging 7.3 months over the whole of 2014, was slightly down on the preceding year’s figure. Capacity utilisation continued high, averaging 90.1 per cent over the year. Employment remained gratifyingly stable, with the workforce totalling 71,600 people. “We aim to offer highly skilled and optimally paid jobs, which we are well able to do. What’s more, we do not release our skilled employees in terms of fluctuating production output. The metalworkers’ labour union IG-Metall should bear this in mind, and refrain from inflated demands that do not accord with the reality of an uncertain business outlook with presumptively falling sales prices,” added Kapp.

Germany remains the world champion exporter
In the context of international competition, the sector has put up a very good performance. In its rivalry with the Japanese, it has retained its top ranking in exports, despite a decrease of five per cent (excluding parts and accessories), with a share of 21.2 per cent in global exports. The Japanese are benefiting from the weak yen, and have increased their exports by seven per cent when calculated in euros.

German manufacturers, with a share of 17.7 per cent, also rank among the Top Three of the world’s biggest producers, behind China and Japan. The Japanese achieved substantial growth, thanks not least to a high double-figure rise in their own machine tool consumption.

Worries about the Russian market, opportunities through TTIP
“The biggest currently discernible risk for our sector is our business with Russia,” says VDW Chairman Kapp. Russia is (or rather was), with a volume of 500 million euros and a share of currently 5.5 per cent, the third-largest market. Severe setbacks were already occurring in 2013, due to a marked weakness in growth, declining interest from investors, who were withdrawing their capital, rising interest rates, and finally the free-fall of the rouble. Since the beginning of 2013, its value against the euro has meanwhile halved. In the same time period, Russia’s industrial production output shrank. Orders for German machine tools fell to less than half the figure for 2013.

“It remains for us to hope that the ongoing negotiations for a political solution will soon meet with success,” says Kapp. Even then, he adds, it will take a long time before business has normalised, since the confidence and financing crises will take even longer to heal.

Machine tool manufacturers see major opportunities for business with the USA, by contrast, thanks to the prompt conclusion of the Transatlantic Trade and Investment Partnership (TTIP.) The focus here is on unrestricted market access at the same conditions as for domestic manufacturers. The harmonisation of technical standards, in particular, enables German firms, without any additional outlay, to offer their products a good 20 per cent cheaper on average. With a share of around ten per cent, the USA is the second-biggest market for the German machine tool industry.

Self-regulation of energy-efficiency has to be mandatory in Europe
German manufacturers score highly in the global competitive environment, thanks to their role as technology leaders. They are successful not least because they are selling maximised efficiency, and are contributing towards minimising waste of all kinds. Nonetheless, the European Commission wants to regulate the energy-efficiency of machine tools. For this purpose, the European industrial sector has proposed a self-regulatory initiative (SRI). Within the framework of the official consultation forum with the EU Commission, it was rated positively in mid-2014 as the only plausible option for regulation.

Self-regulation means that market monitoring will be handled by the sector itself. To ensure its continuing viability, 80 per cent of the market players concerned have to sign up to self-regulation. They are not, however, obligated to participate.

In order to achieve its goal, the association prefers what is called the third way. This provides for a statutory framework in which regulation is binding for all parties involved. The formulation and design of technical measures will then be delegated once more to the sector itself. The present EU Directive on eco-design already provides for corresponding “generic measures”. “Unfortunately, these have as yet not been seriously discussed by the Commission as an alternative to an actual ordinance or to self-regulation,” says a regretful Kapp. “However, we would like to see an open, result-driven dialogue, leading to a pragmatic, goal-focused mode of implementation.”

Thailand is the gateway to the South-East Asian economic area: gigantic growth potential, an affordable manufacturing location, a smoothly functioning infrastructure, an extensive network of component suppliers, a liberal economic system, these are facts that indicate a profitable market to enter. Thailand, however, is simultaneously a challenge and an opportunity. At least, this is how Reiner Fries, Managing Director of the machine tool manufacturer Schwäbische Werkzeugmaschinenfabrik GmbH from Schramberg-Waldmössingen, sees it: “For our company, it will be of major importance in the future to grow concurrently as

Thailand itself develops, and thus maintain our own position against our competitors.”
Reason enough for the entrepreneur to take part in the VDW’s Technology Symposium in Thailand. 14 front-ranking German machine tool manufacturers showcased their corporate capabilities and their product and service portfolios in Bangkok on 12 November 2014. 150 high-profile representatives of Thailand’s industrial sector, from the automotive industry and its component suppliers, the aviation and electrical engineering industries, the metalworking sector and mechanical engineering sector, plus tool and mould manufacturers, accepted the invitation extended by the VDW (German Machine Tool Builders’ Association).

The machine tool market in Thailand, particularly, is a fiercely contested one. Leading-edge technology from Germany faces stiff competition from affordable Asian machines, which dominate the market.

It’s precisely here that German entrepreneurs like Fries see an opportunity. With requirements for quality and productivity expected to tighten in the automotive industry and among its component suppliers, as well as in the electrical engineering sector, German vendors will be particularly well placed to establish themselves as a permanent presence on Thailand’s market. Schwäbische Werkzeugmaschinenfabrik has already responded to this opportunity, and is represented in Thailand with a service partner experienced in the products concerned.

Thailand is one of the biggest markets for machine tools
“In 2013, with around 2.5 million vehicles produced, Thailand was the world’s ninth-biggest manufacturing location for automobiles,” explained Klaus-Peter Kuhnmünch, who at the VDW is responsible for the German technology symposia. This is why customers from the automotive industry and its component suppliers were particularly targeted for this event. In parallel to the country’s economic upturn, the local machine tool market has also developed most impressively. In the past few years, Thailand’s imports of machine tools have grown by a breath-taking 88% to reach 2.4 billion euros. This means the country is the world’s fourth-largest importer of machine tools. From the German machine tool industry’s viewpoint, Thailand has likewise in the past few years gained significantly in perceived importance, and continues to justify optimism for the future.

Wullop Liwiwathanapornchai, a representative of Thailand’s Ministry of Industry, views this development as highly auspicious. “The symposium comes at precisely the right time, since Thailand’s industrialisation is steadily advancing. In order to drive this process successfully forward, particularly in the automotive industry, our companies need high-tech machines from Germany.”

A thrust to challenge Japan’s domination of the market
For years now, the market in Thailand has been significantly dominated by Japanese machine tool manufacturers. For them, Thailand occupies a special status, since the Japanese automotive industry is strongly positioned there. In 2013, Japan accounted for 57% of Thailand’s entire machine tool imports, followed by vendors from Asia and the USA. German manufacturers ranked 6^th, with a market share of 3%. This dominance of Japan is something the Germans will have to challenge, and fly the flag more vigorously in Thailand than hitherto.

How the market position is to be sustainably improved is outlined by Andrew Parkin, Managing Director of Heller Asia: “Despite Japan’s strong position on the market, we are confident that with our own highly qualified workforces and our good service support capabilities we can gain more ground here in Thailand. Our goal is to further reinforce and steadily expand our market share as a can-do vendor of holistic solutions for metal-cutting applications.”

German machine tool industry with powerful allies
The symposium was organised on the spot in conjunction with the German-Thai Chamber of Industry and Commerce, and supported by prestigious local institutions from the industrial sector and the research community. It was being held in Thailand for what is already the second time, after 2010, and thus underlines the country’s importance as one of the major industrialised nations in South-East Asia. The German side was represented by the following companies: Alzmetall, Emag, FFG-Werke, Gleason-Pfauter, Heckert, Heller, Index, Mikron, Profiroll, Samag, Siemens, Schwäbische Werkzeugmaschinen, Trumpf and United Grinding.

Dr. Willi Nef, Deputy Sales Manager at Mikron GmbH in Rottweil, was participating in the symposium for the first time, and this is his verdict: “The event offers an ideal platform for familiarising yourself with the situational complexities of the local market, but also for exchanging news and views with your German counterparts, who are facing similar challenges. The matchmaking organised beforehand with the local customers was very helpful for clearing up open questions and making some initial business contacts.”

Jörg Buck, Executive Director of the German-Thai Chamber of Industry and Commerce, concurs: “The very good attendance at the VDW’s symposium shows that the topic of ‘Innovations in Production Technology’ in Thailand is in tune with contemporary concerns. The kingdom will in future, too, be prioritising a high-tech strategy, encouraging further automation of the traditionally strong domestic component supplier sector.” The enthusiastic response from Thailand’s trade associations and entrepreneurs has shown that there is keen interest in German technology. The symposium laid a good foundation for expanding what are in any case good sales opportunities for the German machine tool industry in Thailand, said Buck.

Finally, Kuhnmünch from the VDW pointed out that German manufacturers are approaching the Thai market with a long-term strategy. “We are confident that German manufacturers, thanks to their long years of experience in the international automotive industry and among component suppliers, can be dependable partners in upgrading and expanding Thailand’s industrial production capabilities,” he stressed. The VDW is emphatically supportive of this thrust, and is available as a contact point for prospective customers from Thailand.

The VDW has revised its production forecast for 2014

In the third quarter of 2014, order bookings in the German machine tool industry fell by 8 per cent compared to the third quarter of 2013. Domestic orders were 9 per cent down on the preceding year, export orders 7 per cent lower. For the first three quarters of 2014, order bookings were 1 per cent up on the equivalent period in 2013 overall. Domestic orders rose by 8 per cent, while demand from abroad dropped by 3 per cent.

“Order bookings have not come up to expectations so far in 2014,” says Dr. Wilfried Schäfer, Executive Director of the trade association VDW (German Machine Tool Builders’ Association) in Frankfurt am Main. Most recently, following a strong first half of the year, domestic orders took a downturn in the year’s third quarter. Growing uncertainty on how the global economy will develop is downgrading the propensity to invest among German customers, a situation exacerbated by the crisis in the Ukraine, the dormant state of business with Russia, and the cautious development in China.

This is also showing up in order levels from abroad. Although the smoothed curve, adjusted for seasonal effects, has for some months now been pointing upwards, the anticipated vigorous upturn has not yet materialised. This is being mirrored in the ups and downs of the monthly figures. There was surprising encouragement from the euro nations. Here, orders have been rising for a good four months and most recently, in the year’s third quarter, increased by 12 per cent. The nations of Eastern Europe, in particular, specifically Poland, Hungary and Czechia, are reporting excellent growth rates.

A look at the technologies involved reveals that project business for forming technology, especially, is decreasing, due to a weak month in September. As a general principle, demand in this segment is characterised by marked cycles, triggered by the procurement behaviours of the biggest customer grouping, the automotive industry. Forming technology accounts for 25 to 30 per cent of total production output.

Turnover in the year’s first three quarters finished at minus 6 per cent. “Against this background, and given the weak trend in order bookings, we do have to downsize our production output forecast for 2014 of 3 per cent growth, a figure that in the year’s first half was still a realistic one,” says the VDW’s Executive Director Wilfried Schäfer. The VDW is now predicting an roughly unchanged total production output for 2014. This means the result would continue to lie at the preceding year’s high level of 14.6 billion euros.

On 12 November 2014, the VDW (German Machine Tool Builders’ Association) located in Frankfurt/Main, Germany, in cooperation with the German-Thai Chamber of Commerce (GTCC), invites Thai industry representatives and manufacturing experts to an exclusive German production technology Symposium in Bangkok.

Under the theme of “Innovation in Production Technology – Machine Tools from Germany”, a total of 14 internationally renowned German manufacturers present their products, solutions and services for an efficient and modern production. More than 200 participants and key stakeholders from relevant companies and associations of the Thai automotive- and supply industry, general engineering sector, machine and metal-working industry are expected to attend the high-level event at the InterContinental Hotel Bangkok.

German experts from the following companies will present their latest production technology solutions: Alzmetall Werkzeugmaschinenfabrik und Gießerei Friedrich GmbH & Co. KG, EMAG Holding GmbH, FFG-Werke GmbH, Gleason-Pfauter Maschinenfabrik GmbH, Heckert GmbH, Gebr. Heller Maschinenfabrik GmbH, Index Werke GmbH & Co. KG, Mikron GmbH, Profiroll Technologies GmbH, SAMAG, SIEMENS AG, SW Schwäbische Werkzeugmaschinen GmbH, Trumpf Werkzeugmaschinen GmbH & Co. KG, and United Grinding Group. Parallel to the exclusive presentations of the German companies, an individual ‘Business Match Making’ session between Thai and German companies takes place, which is organized by the GTCC.

Subsequent to the Symposium, the VDW invites all participants to a cocktail & networking reception acting as a platform for an informal exchange of opinions between the participants of the German delegation and the (potential) Thai customers.

In the second quarter of 2014, order bookings in the German machine tool industry rose by 1% compared to the second quarter of 2013. Domestic order bookings were 16% up on the preceding year, whereas export orders fell by 7%. For the first half of 2014, order bookings were 6% up on the preceding year’s figure overall. Domestic order bookings rose by 18%, while demand from abroad was down by 1%.

“German machine tools were still in demand during the year’s first half”, comments Dr. Wilfried Schäfer, Executive Director of the sectoral organisation VDW (German Machine Tool Builders’ Association) in Frankfurt am Main. Demand from domestic customers in particular, he adds, has picked up perceptibly, whereas demand from abroad has slid into minus territory. “The general uncertainty due to numerous trouble-spots is causing foreign customers to hold back on new investment projects”, says Schäfer. This is being reflected particularly in the year’s second quarter, by falls in machine tool orders from countries outside the eurozone. In the eurozone itself, by contrast, there is a returning uptrend, with a plus of 13%.

Sales finished the year’s first half with a black zero. “For the production output, we are nonetheless staying with the growth forecast of three per cent in the ongoing year”, emphasises VDW Executive Director Schäfer. However, he adds, this is an ambitious target, and conditional upon another recovery in demand from abroad.

In the first half of 2014, sales shifted towards the German market, mirroring the development in order bookings. Exports, by contrast, are showing signs of deceleration. One of the causes involved is the fall in deliveries to China, South Korea and India. “Business with Asia is proving more sluggish than we’d hoped”, says Schäfer. Nonetheless, international industrial production output and capital investment are expected to gain in momentum during 2014. The USA remains the growth driver for demand recovery among German manufacturers, while Europe is suffering from stagnation overall.

Orders received by the German machine tool industry in the first quarter of 2014 were 10% up on the previous year. Domestic orders were 20% higher than last year, whereas orders from abroad increased by 5%.

“The domestic market is a major source of demand for the machine tool sector right now,” said Dr. Wilfried Schäfer, Executive Director of the VDW (German Machine Tool Builders’ Association) in Frankfurt am Main, commenting on the result. Order levels began to rise at the end of 2012 and this ongoing trend confirms just how optimistic German clients are at the moment and how the domestic reluctance to invest is now well and truly over. This is also reflected by the sentiment levels in industry which have risen again recently.

A good example is the fact that the machining equipment sector, with its broad client base, has moved ahead to take the leading position, in contrast to last year. Orders have risen here by 14%. There was demand for a wide range of technology, especially turning and grinding machines plus machining centres. Forming equipment orders, by contrast, were 4% up on the previous year. Many orders were received in particular for sheet metalworking machines designed for a wide range of applications. Following last year’s boom, the demand for pressing equipment has declined slightly.

No clear increase in demand as yet been noted from foreign customers. Orders from the euro zone in particular were down by ten percent. “We are pinning our hopes on Asia and America,” explains Schäfer. The 9% increase seen in orders from outside the euro zone in the first quarter, by contrast, was much stronger.

All in all, the growth in production is quite healthy, he said. “The first quarter has given the green light to increased production in the current year,” con-firmed the VDW Executive Director. All assumptions, however, are based on there being no negative impact from international developments. If the conflict with Russia continues to escalate, this could carry a major risk for both sides. Russia is the third largest foreign market for the German machine tool industry and Germany is the biggest supplier to Russian industry. “The situation is already creating uncertainty in the financial markets,” says Schäfer. And this could spread very quickly to the real economy.

Background
The German machine tool industry ranks among the five largest sectors in the country’s mechanical engi-neering segment. It supplies production technologies for metalworking applications to all categories of manufacturer, and makes a crucial contribution towards progressing innovation and productivity in the in-dustrial sector overall. Due to its absolutely key position for industrial production output, its development is also an important indicator for the economic vigour of the country’s industrial sector as a whole. In 2013, the German machine tool industry produced machines and services worth around 14.5 billion euros, and was employing about 71,600 people (annual average for 2013, firms with more than 20 staff). This corresponded to growth of 2%.