The Machine Tools Sector Stops Growing

In 2019 the Italian machine tool, robot and automation industry slowed down its course after five “good” years. The positive trend had started in 2014. On an annual basis, the total index recorded a 17.9% decrease compared with the previous year and the slowdown is expected to continue in 2020. Meanwhile Italian manufacturers ask the Government authorities to think about a new three-year innovation plan right away, capable of supporting the investments in production technologies.

by the editorial staff

The year 2019 marked the end of the positive trend, started in 2014 by the Italian machine tool, robot and automation industry. Nevertheless, the registered decrease is very moderate and shows how the values of the main economic indicators are returning to normal levels, after the exploit supported by the measures of Industry/Enterprise 4.0.
The overall outcome was affected both by the negative performance of the domestic market and by the weakness of foreign demand.
In particular, the collection of orders in the domestic market showed a 21.2% fall compared with the fourth quarter of 2018. The absolute value of the index was 172, thus still positive despite the reduction.
On the foreign front, orders went down by 13.8% compared with the period October-December 2018. The absolute value of the index stood at 91.5.
On an annual basis, the total index recorded a 17.9% decrease compared with the previous year. The result was due to the drop recorded in the domestic (-23.9%) and in the foreign markets (-15.4%).

Difficulties on the foreign front
“On the foreign front – stated Massimo Carboniero, President of UCIMU-SISTEMI PER PRODURRE – the situation is very complicated, as there are different factors contributing to the uncertainty of the mid/short-term scenario: the general economic and political instability of many areas in the world; the evident difficulty of Germany, struggling to start up again, burdened by the big question in the automotive sector regarding the development of electric vehicles; the sanctions concerning exports to important end markets for the enterprises working in manufacturing sectors, first of all Russia and Iran; the slowdown of China and the protectionist behaviour of some important countries, such as the United States”.
These are the reasons why Italian machine tool manufacturers are currently focusing specific attention on two continuously developing areas: the ASEAN countries and India. “Involved in a rapid and significant process of industrial and infrastructural development continued Carboniero – these areas have no appropriate local industry of automation and production systems. Therefore, to support their pace of development, they will have to acquire state-of-the-art technologies from abroad. The Made in Italy of the sector is a valid response to this need. The sub-Saharan African countries are arousing interest too…”.

Keep on investing: this is the imperative
The latest survey of 2014 conducted by UCIMU on the total number of machines in operation in Italy had evidenced a very dangerous ageing of the production systems installed in manufacturing facilities. In a ten-year period, from 2005 to 2014, the factories of our country had innovated very little and thus the average age of machines had turned out to be the worst ever, i.e. almost 13 years.
Then there was the disruptive effect of the Industry 4.0 measures. The tools for competitiveness implemented by the Government have surely given a good contribution to recover that obsolescence.
What should be avoided at all costs is a new investment freeze that might take our manufacturing industry back to years ago, nullifying the good results obtained thanks to the “Industry 4.0” Plan, with the risk of interrupting the ongoing process of technological transformation in our Italian industry”.
“For this reason – added Massimo Carboniero – we ask the Government authorities to think about a new three-year innovation plan right away, capable of supporting the investments in production technologies and having tax credit with differentiated rates as key measure. Only in this way, with a mid/long-term plan, the enterprises can really plan their investments and the actions to be undertaken carefully, to continue the process of transformation and upgrade of the Italian manufacturing industry, which has started, but it is certainly not accomplished”.

The slowdown is expected to continue in 2020
In 2020, the Italian industry of the sector should report a further slowdown, however remaining on very high levels, equal to those of 2017. Production will go down to 5,900 million euro (-8.4%), negatively affected by exports, expected to decrease by 5.3% and to reach 3,390 million euro. Consumption, i.e. the demand of Italian users, will stop at 4,305 million euro (-10.1%). The partial downsizing of the domestic market will have repercussions both on the deliveries of Italian manufacturers, which will drop to 2,510 million euro (-12.2%), and on imports that will attain 1,795 million euro (-7%). The export/production ratio will gain about two percentage points, accounting for 57.5%.

A look at Germany, our main competitor
As far the German machine tool market is concerned, production output was almost stable in 2019. However, the VDW (German Machine Tool Builders’ Association) is expecting production output to fall by 18 per cent in 2020.
“Actually 2019 – said Dr. Heinz-Jürgen Prokop, Chairman of the VDW turned out much better than anticipated. With a decrease of just one per cent, the production result came to almost 17 billion euros, nearly equalling the record level of 2018. The principal contributor here was domestic sales, which rose by 16 per cent. Conversely, exports were down by 9 per cent, a fall primarily attributable to a decrease of 11 per cent in deliveries to Asia and of 16 per cent in deliveries to America. Here, the regional results are dominated in each case by the largest markets: China, at minus 13 per cent, and the USA, minus 15 per cent. Europe, the largest sales region, accounting for more than half of German exports, still performed comparatively well with minus 5 per cent. Imports were unable to benefit from the good performance of the domestic market and were down by one-tenth”. The ongoing combination of a cyclical downturn, structural transformation in the automotive industry, turbulences motivated by trade policies, and last but not least the coronavirus as well, are dampening the propensity to invest all over the world.

A fast recovery is not in sight…
Despite all this, In the international rankings, the German machine tool industry has maintained its position in the top trio, with China and Japan
For large portions of the industrial sector in Germany, the lean period will continue for quite a long time,” predicts Heinz-Jürgen Prokop. Industrial production output in Germany is set to fall once more. Investments in plant and equipment at the principal customer industries will show only a marginal increase.
For machine tool consumption, following a slight decline in the preceding year, a minus of one-fifth is anticipated in 2020.

Digitalization and sustainability will support recovery
Difficult times also offer an opportunity to re-invent yourself – concluded Dr. Prokop. The biggest leverage will in future be offered by digital networking. This, he said, is the enabler for new business models, a terrain on which a whole lot can still be achieved with appropriate creativity.
More efficiency in the production operation supports sustainable management and smooths the path into the circular economy. Significant factors here include control system technology and full-coverage inter-machine communication. Wireless access to information in real time is a key factor for optimising production processes, capacities, energy and raw material consumption levels”.