The CECIMO General Assembly that took place in Fuschlsee, Austria on 21 June 2016 confirmed:

• The European machine tool production increased 5% to 24.3 billion euro in 2015;
• The machine tool exports are estimated to reach a record level of 19.0 billion euro in 2016;
• To tap into opportunities offered by digitisation, Europe needs to develop a new and forward-looking policy approach addressing the entire manufacturing value chain;
• European machine tool builders are concerned that production plants in Europe are slowly becoming obsolete.

Economic situation and outlook
Despite the global economy’s weakening growth and increasing volatility, the European machine tool industry ended the year 2015 on positive note. The machine tool production grew 5% to 24.3 billion euro. Economic activity in Europe shows stability and the growth is dominantly driven by strong consumer spending. The very accommodative monetary policy and recovering business confidence have also set the scene for a pick-up in investment in Europe. Combining this with the emerging markets’ calmer outlook, CECIMO estimates the machine tool production to stabilise this year, keeping its previous year’s level.

The developed markets were the main source of export growth in 2015. CECIMO exports posted 18.9 billion euro, just a fraction below the record year of 2012. Taking into account that Chinese government have so far demonstrated its ability to transform the economy relatively smoothly towards more consumption based growth, the European machine tool export outlook remains bright also this year. Machine tool exports are forecasted to grow to 19.0 billion euro in 2016.

Almost two thirds of CECIMO imports originate from other European countries. Therefore, machine tool imports to the region were supported by the stable economic conditions in Europe. In 2015, machines in value of 9.8 billion euro were imported. Despite the weakness of the euro causing imports of machines from outside the euro area to be more expensive, we expect the growth to reach to 3% in 2016.

The European machine tool consumption increased by 12% to 14.9 billion euro in 2015. The growth of consumption is expected to slow down to 1% and machines in an estimated value of 15.4 billion euro will be installed in 2016. The domestic order intake supports the forecast. The value of bookings by the domestic clients increased 2% in the fourth quarter of 2015 compared to the same period a year before. For the next three years, we forecast the European machine tool consumption to grow about 3.7% annually. “We are glad to see that the machine tool consumption in Europe shows good pace. Upgrading and modernising its production base is an essential condition to keep the competitiveness of European manufacturing sector at high levels,” added Dr Frank Brinken, Chairman of the CECIMO Economic Committee and Vice-Chairman of Starrag Holding AG.

Policy priorities

Digitisation of manufacturing 
Digitisation re-defines the rules of global competitiveness in the advanced manufacturing sector. The use of digital technologies leads to significant gains in productivity, energy efficiency and mass customization, altogether generating great avenues for the re-industrialization of Europe. Against this background, Europe is required to move faster and generate the framework conditions needed for advanced manufacturers to tap into new opportunities.

To make Europe a centre of excellence for digital manufacturing, it needs to develop instruments generating new ways of collaboration between advanced manufactures and ICT actors.  In particular, manufacturing SMEs from across Europe should be well integrated in the digital manufacturing transnational value chain. Various initiatives pertaining to digitisation have already been launched by regional, national and European authorities to help manufacturers generate innovative solutions, but to cope with the increasing pressures from competitors across the world, the EU must pool its resources and act in a coordinated manner.

Luigi Galdabini, President of CECIMO says: “We need large-scale initiatives launched by public authorities putting together various actors of digital manufacturing at transnational level. Digitisation is a key issue for machine tool builders and our companies are the heart of the value chain. For Europe to realize its re-industrialization, policy-makers must develop a holistic approach addressing the entire manufacturing value chain. To ensure that that digitisation supports Europe’s global manufacturing leadership, we need to develop forward-looking policies, instead of premature rules, underpinning the innovative character of the European machine tool builders.”

Upgrade of the machinery park  
European machine tool builders are concerned that production plants in Europe are slowly becoming obsolete. According to available figures collected by some of CECIMO National Associations, the age of the machinery park in some Member States with a strong manufacturing base has reached 19.1 years while the lifespan of a machine tool, depending on its type, is around 15 years. Despite the existence of a political will to advance manufacturing in Europe, progress on investing in new machines and equipment by industrial users has been insignificant so far. Further delays in the recovery of investments in machinery and equipment weaken the entire competitiveness of the European manufacturing industry. Filip Geerts, Director General at CECIMO, adds: “The slowdown in demand for new equipment hampers the ability of developing breakthrough production technologies, as innovation is mainly driven by customer demands and cooperation between suppliers and users in the machine tool sector. We urgently need an action plan mobilizing the EU’s major policy instruments to put an end to the lack of investment in modern production equipment by end-users. If Europe wants to stay in the global race for advanced manufacturing, it needs to maintain a strong supplier base in Europe.”

As part of the CECIMO Fall Meetings 2014, roundtable discussion was held with members of the European Parliament and the European Commission: Matching the EU environmental agenda with the trade strategy. CECIMO expressed its full support for a Transatlantic Trade and Investment Partnership agreement (TTIP) which is under negotiation between the EU and the US. “The removal of tariff and non-tariff barriers can eliminate unnecessary burdens on exporters of machine tools without jeopardizing the level of protection, safety and the performance of machines,” stated Jean-Camille Uring, CECIMO President.

Freer and more open trade between the two sides of Atlantic will create a level playing field and will stimulate competition based on the delivery of the highest level of innovation in production technologies. Martin Kapp, CECIMO Vice-President affirmed: “TTIP can play a significant role in promoting a genuine manufacturing renaissance across the Atlantic.” CECIMO advocates that the priority should be given to the harmonisation of regulatory requirements in the area of health, safety and environment, and to the use of consensus-based international standards as the basis of regulations. Moreover, appropriate consultation and notification mechanisms should be put in place to ensure the alignment of future legislations. Other priorities for CECIMO are the simplification of customs procedures, the removal of barriers to the mobility of the professional personnel and investment protection.

CECIMO also called on European policy-makers to fully integrate the global market reality when applying the Ecodesign Directive to highly export-oriented business-to-business sectors such as machine tools. Technical requirements which do not meet user demand in export markets may have a negative impact on the competitiveness of the sector. Furthermore, overly-prescriptive ecodesign rules may even compromise the productivity, accuracy and performance of machines which are the core procurement criteria for customers all over the world. More than half of the European machine tool production is exported outside the EU. “The international dimension of the machine tool business and its global competitiveness should be placed at the heart of discussions,” stated Luigi Galdabini, CECIMO Vice-President. The sector generates a trade surplus worth 9.5 billion euro and contributes to the EU trade balance.

Given the technical and market characteristics inherent to the machine tool industry, Ecodesign can be best achieved via stimulating market-based competition with reference to international standards.. Therefore, CECIMO has proposed a self-regulation measure (SRM) to the European Commission based on the principle of manufacturers’ self-assessment. CECIMO’s SRM proposal received positive feedback from member state representatives at the Ecodesign Consultation Forum in summer this year, but awaits the Commission’s final evaluation.

Ecodesign became one of the major components of the Circular Economy package recently proposed by the Commission. CECIMO is of the opinion that, in order to remain competitive, Europe has to develop along the lines of sustainable consumption and production. As the Commission and the European Parliament discuss introducing resource-efficiency criteria in the future review of the Ecodesign legislation, CECIMO called on them to carefully consider market acceptance, technology readiness, the existence of industry standards and the aspect of global competitiveness. Incentives for competition and innovation have a far greater potential to deliver resource-efficiency in industry.

The European Council of 21 March 2014 concluded that Europe needs a strong and competitive industrial base, in terms of both production and investment. CECIMO underlined that the integration of this strategic objective in all EU policy areas will be key for sustaining European leadership in the global machine tool production and exports.

During the General Assembly that took place in Prague on 24 June 2014, CECIMO’s Economic Committee confirmed that the European machine tool production increased to 22.8 billion euro in 2013, the growth supported by a wider set of countries in Europe increased the machine tool consumption of 2% last year which makes Europene machine tool industry modestly optimistic for this year, the policy areas related to improving access to finance and creating transparent trade conditions are still very important and European machine tool builders look forward to improving their export opportunities through the upcoming EMTE-EASTPO 2014 machine tool exhibition in Shanghai.

Economic situation and outlook
In 2013 the European machine tool production showed small growth and reached to 22.8 billion euro from 22.7 billion euro last year, explained by the recent return to economic growth in Europe and the improved business confidence. However the growth prospects stay modest in Europe and therefore the outlook for considerable gains in machine tool production remain low in 2014.

Transforming emerging markets have brought down CECIMO exports by 3% to 18.2 billion euro in 2013. Recent changes in government policies in these emerging countries have cut the growth of investment in capital goods in the short term. In the medium term, the growing mid-class will create an expansion of the machine tool demand because of higher consumption in the form of rising per capita spending on manufactured goods and services.

The European machine tool consumption increased 2% in 2013 after contracting in 2012. After four successive quarters of economic growth, companies are finally upgrading their production facilities. Slow but wider-based growth and other economic indicators support the on-going trend and the CECIMO’s estimation of a 2% increase in 2014.

Finally, domestic orders increased in the end of 2013, the index gained 6% and 1% in quarter to quarter comparison and on yearly basis respectively. CECIMO’s imports declined 5% to 8.0 billion euro last year. Hence we can conclude that the companies investing in machine tools mostly used their domestic suppliers. This is further confirmed by the machine tool order intake. “Demanding European buyers push local machine tool builders to constantly improve and innovate. Close cooperation with those clients ensures the competitiveness of the European machine tool industry globally. The trend to take labour costs to a large extent out of the calculation when investing in highly efficient production equipment is unbroken. Therefore, the increase in domestic investment activity is very good news for us,” explained Dr Frank Brinken, the Chairman of CECIMO Economic Committee and a member of the Board of Directors, Starrag Holding Group.

Policy priorities of the sector
The European machine tool sector is highly competitive, exporting over 80% of its production. As the key enabling sector shaping the future for advanced manufacturing, the machine tool industry has proven its adaptability and intelligence to tackle a changing environment. The importance of industry is widely acknowledged by policy makers. The European Commission has called for a “European Industrial Renaissance”, urging Europe to recognise the central importance of industry for creating jobs and sustainable growth. On the other hand, the decreasing rate of production lines upgrades threatens seriously the competitiveness of European manufacturing. It proves that more effective policies are needed on both European and member state levels. Jarmo Hyvönen Chairman of CECIMO Communication & Advocacy Committee and Managing Director of Machine Tool Center Oy adds: “The 2009 economic crisis strongly influenced the financial sector. The recapitalisation of banks and the contracting economy in regions very affected by the crisis have limited the access to finance for the European machine tool industry and its clients.” Therefore, CECIMO calls for coordinated action by the main players on the market, policy makers, the manufacturing sector and financial institutions, to improve the uptake of novel production systems and ensure the competitive position of European manufacturing.

Export markets are and will remain an important source of growth for the European machine tool industry. Broader market allows machine tool builders to achieve economies of scale and use their know-how more effectively. However, the economic crisis and political willingness to support local industry have globally created more a protectionist environment. For example, the Occupational Safety and Health Act of South Korea puts European exporters of various types of machine tools under the requirement of safety certification. There is very limited information available in other languages than Korean and, despite of analyses of several practical cases, it is still unclear what are the exact rules established by the act. Hence, CECIMO urges the European Commission to continue to support free trade based on transparent rules and to address the distortionary actions decisively. “Non-tariff barriers like certification requirements hinder trading. Taking into account that the European machine tool industry is dominated by SMEs, who lack access to  deep legal expertise abroad, transparent rules are essential,” concludes Filip Geerts, the Director General of CECIMO.

EMTE-EASTPO 2014
EMTE-EASTPO 2014 will be an important event for European machine tool builders. The exhibition is supported by CECIMO and will take place in Shanghai at the Shanghai New International Expo Centre from 14 to 17 July 2014. The first edition of EMTE-EASTPO will provide to the exhibitors an excellent opportunity to present their newest technology at a high-quality fair. “The Asian market is the biggest export market for European machine tool builders. Direct contacts with potential buyers are essential for understanding the needs of clients and the specific characteristics of the market. The EMTE-EASTPO Machine Tool Exhibition will create a perfect platform for that,” explained Mr Jean Camille Uring, the President of CECIMO and Executive Board Member of Fives Group.

According to European Association of the Machine Tool Industries, CECIMO statistics, in 2013 the European machine tool industry increased its share of the global production to 34%. Europe returns to modest growth optimism in 2014 despite slowing growth in China, its biggest market for exports.

European machine tool sector optimistic about 2014
Following an 8% growth in 2012, the European machine tool sector forecasts a small contraction in the production in 2013. Exports have been the dominant source of expansion for European machine tool builders in 2011 and 2012. Trade flows to the Americas, Russia and other CIS countries and to Asia recorded two digit growth in 2012 and supported the recovery of the industry.

The first signs of the EU and the euro area’s return of growth leave room for cautious optimism in 2014. The economic recovery will lessen the uncertainty that has until now considerably  depressed investments in capital goods and the domestic machine tool consumption. On the other hand, Asian countries also show a more modest performance.  Slowing growth in the region, especially in China, and the transition towards a consumption-based economy, curbs the European machine tool industry’s outlook for export growth. All that considered, the European machine tool market is expected to increase by 4.6% this year and outweigh the growth in several emerging Asian economies.

Machine tool production stable
Over the last two years, the European machine tool industry has seen stable production levels of above 22 million euros. Despite a modest contraction in production, CECIMO estimates a slight increase in its share of global production from 32% in 2012 to 34% in 2013. This share was 44% before 2008 but has dropped to 32% following the global economic downturn. In its aftermath, several machine tool consumers feel pressured by increasing production costs which compels them to pay more attention to productivity and efficiency. This creates important business opportunities for European leading-edge machine tools, as they can provide the solutions to ever-changing customer needs.

Business investment has been a missing element in Europe’s effort to find the path to growth. The European Central Bank has massively loosened monetary policy recording several rate cuts.  Nevertheless, private companies do not feel that the impact of policy measures  penetrate  fully  into the real economy and they are concerned that the public sector-driven surge in demand will be temporary. As a result, they have been cautious about expanding their production capacity.
CECIMO countries’ consumption recorded 12.3 billion euro in 2012 and, for 2013, we estimate machine tool consumption to contract by 4%. However, increases in domestic order intake by 8% and 16% on quarterly and yearly basis respectively support the optimistic outlook for 2014.

The European machine tool business stays highly export oriented
European machine tools keep their good competitive stance in global markets. Their outstanding export performance is reflected in the 2012 record shipment level worth 18.8 billion euros. Yet, slowing growth in the most important emerging markets of the European machine tool sector influences the forecasts for 2013. The exports are estimated to have amounted 18.3 billion euros in 2013, which is still the second best result of all times.

The cautiousness of the European industry to invest in additional production capacity has brought down the estimated import volume by 8% in 2013. Nonetheless, combined machine tool exports and imports result in the estimated record trade balance. CECIMO experts expect the European machine tool industry to contribute 10.6 million euros to the European trade
balance.

Courtesy: European Association of the Machine Tool Industries (CECIMO)