Rise of the Machines
Jennifer Nietz - Manager of Operations
June 2014 – This month’s industry review is on the machine tooling industry. In 2014, and really over the last 4 years, this industry has seen amazing growth. In fact, U.S. Manufacturing is driving machine tool sales to their highest levels in more than a decade. According to a recent survey and article from Modern Machine Shop, machine tool sales should rise to $7.442 billion in 2014, an increase of 19% since 2013!
Why is this? An important reason why shops are buying new machines is “process flexibility.” Another factor driving this need is the lack of skilled labor at metalworking facilities. Therefore, shops need more automation so that fewer workers can run more machines to produce more parts. Automation, whether that is pallet changers, bar feeders, robots or other equipment, is one of the hottest topics regarding capital spending. Horizontal machining centers (HMCs) will be more preferred compared to vertical machining centers (VMCs) in 2014. A significant reason for this is that horizontal machines are more easily automated than vertical machines. Trends are also indicating larger machines will be preferred to smaller machines in 2014. Better business conditions and higher profitability are making it easier for shops to afford more expensive horizontal machines and larger machines. However, lathes seem to be bucking these general trends as spending on vertical lathes and smaller lathes is growing faster than the other parts of the lathe market.
A final general spending trend in this year’s analysis found that large facilities plan on spending significantly more money. Facilities with more than 250 employees will account for nearly a third of all machine tool sales in 2014. That would be nearly a 150% increase over 2013. This makes sense given that our business index shows that the largest shops have had the best business conditions in 2013.
Which industries are buying all this equipment?
- Metalcutting- job shops will remain the largest spending industry segment in 2014. Spending at job shops will be about $2.6 billion, or nearly 33% of all spending.
- Electronics – since 2010, capacity utilization in this industry has remained between 76 and 80%. Therefore, spending is projected to increase dramatically in the electronics, computers and telecommunications markets. The industry will spend $442 million on machine tools in 2014, which would be an increase of 127 percent compared to 2013.
- Pumps, Valves and Plumbing- by now, most of us are aware of the increased investment in natural gas exploration and drilling (fracking) in the United States. However, there is insufficient storage and transportation (either pipelines or tankers) capacity for natural gas. Hence, spending on machine tools by this market is projected to jump to $420 million in 2014, which is an increase of 123 percent.
Are you a firm in this industry?
According to the below chart from the metalworking industry on IBISWorld; Metalworking Machinery is actually considered a new age economy. This means the firms in this industry benefit from personal wealth so stable macroeconomic conditions are imperative. Firms in this industry must have brand awareness and recognition in this industry to succeed. As well as, your labor skills will be a differentiating factor in setting you apart from your competition.
Questions or comments? Please contact Jennifer Nietz at jnietz@teamCOACT.com.