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| Keywords of this article:
machine tool
precision
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| Issue date:01/03/2009 |
| Chinamac Journal (CMJ) - Mar 2009 Issue |
| Source:Chinamac Journal |
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| Li Keifo, Consulting Editor2008 was a turning point for China's machine tools market. In order to forecast the situation in 2009, we look at the market from a macro-economic angle, and examine the trends of major user industries. |
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| In the first half of the year, market situation remained favorable and key enterprises witnessed a 30% growth in output value of metal cutting machine tools in China. |
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Since 1999, China's machine tool (including metal cutting and metal forming machine tools) market has maintained a fast-growing stage. 2008 represents a turning year for China's machine tools market. In the first half of the year, market situation remained favorable and key enterprises witnessed a 30% growth in output value of metal cutting machine tools compared with the same period of previous year. In the latter half of the year and from September particularly, machine tools market turns bad. However, if calculated on American dollar basis, sales revenue of machine tools still saw a growth of more than 20% year on year, amounting to USD 13.96 billion.
2008 exhibits an important feature in the slowdown of machine tool production and sales, that is, fast decline in output growth rate and slow decline in output value growth rate. This is mainly because demand of machine tool products showing two-aspect now: one aspect is the significant decline in sales volume for general-purpose machine tools (general-purpose lathes, milling machines and drilling machines) and economic CNC machine tools, while the other aspect is the remaining-fast sales growth of high and medium-end CNC machine tools, such as large-size (heavy-duty), high-precision, high-speed, hybrid, multi-axis linked machine tools and special-purpose machine tools, etc.
Obviously, China's machine tools market in 2008 was experiencing a compellent adjustment on product structure. This should be attributed to two factors: one is that financial crisis has great impact on small and medium enterprises and especially those in South China, leading to dramatic shrinkage in demand for low-end products; and the other factor is that with high-speed expansion for China's machine tools market in recent years, output of low-end machine tools has become excessive rapidly.
Triggered by governmental interest discount for importing high-end machine tools, China's machine tool import witnessed over a 6% growth in 2008 compared with previous year, hitting USD 7.59 billion in value. Particularly, average unit price of imported machine tools rose by 20% or above, while it is also outstanding that it has accelerated upgrading in product structure.
Despite the decline, growth of China machine tool export still exceeded 20%, amounting to USD 2.11 billion. The ratio of low-value machine tools shrank while that of CNC machine tools increased; and at the same time, export to USA shrank while export to India, Brazil and Russia witnessed sharp growth. Since Q4, however, export order intake of machine tools shrank and overseas receivables and stock increased. This all represent an unfavorable trend of machine tool export.
In 2008, though the growth rate for machine tool consumption declined to 17.5% from 23.3% in the first half of the year, yet consumption value went up to USD 19.44 billion, much more higher than that in any other country around the world. Market share of China-made machine tools went up to 60%.
Market evolution
1. From macro-economic perspective
China is enacting plans and policies to adjust and promote key industrial sectors, of which, automotive, equipment manufacturing and shipbuilding are important consumers for machine tools. Besides, China is organizing the implementation of 16 national key technical projects and the RMB 22.1 billion "High-end CNC machine tool and basic manufacturing" project got started in early 2009. Also, the other 15 key technical projects would provide potential demand of machine tools valued at about RMB 10 billion.
Of the policies and measures enacted in 2009 to stimulate economic growth, two measures directly benefit China machine tools industry. One is VAT reform effective on January 1 this year, which allows enterprises to deduct tax for purchasing machinery and equipment from sales tax. Obviously, this will reduce the tax burden of enterprises in equipment investment and encourage enterprises to upgrade their equipment. The other is that the Ministry of Industry and Information Technology in enacting instructions and investment guidelines for enterprises to perform technical reform, proposing Central Finance to organize a RMB 15 billion special fund every year as loan interest discount for technical reform to trigger RMB 300-400 billion investment in technical reform for enterprises, of which, investment for equipment upgrading will have a large share.
2. From industrial trend of key users
As the largest consumer for machine tools, the automotive industry failed to accomplish target for production and sales in 2008. However, China took a series of measures in January this year to reduce purchase tax rate and encourage farmers to buy automobiles in rural areas in attempt to foster automobile consumer market. Meanwhile, Central Finance will organize a RMB 10 billion special fund to support automobile enterprises to perform proprietary innovation and technical reform, and to develop new-energy vehicles and components as well. As estimated, the automotive industry will maintain considerable scale of investment in machine tool equipment. What they need are high-efficiency, high-precision and flexible CNC machine tools and special equipment. The whole set of production lines and press machines are also needed.
China's marine industry has witnessed rapid growth in recent years. However, significant downturn in international shipbuilding market will have bad impact on China's export-oriented shipbuilding industry. In addition, China's production capacity and product structure for shipbuilding equipment are far from enough to meet shipbuilding requirements. Therefore, critical equipment they need includes heavy-duty, high-precision, high-end CNC machine tools.
In the coming next three years, China's planned investment in railway will exceed RMB 3.5 trillion, including RMB 600 billion planned to be completed in 2009. The focus of investment in rail industry is the construction of express passenger transport network. High-speed train production enterprises and relevant enterprises will be benefited from this investment. This will create a great demand for medium and high-end CNC machine tools, coupled with medium and high-end metalworking equipments.
Various projects in the aerospace sector will continue as planned. Research of large-size passenger planes in the aviation sector has been started. Aviation and aerospace industry not only need high-precision and super-precision CNC machine tools, but also large-size, heavy-duty, high-speed, high-efficiency and multi-axis linked CNC machine tools. China's aviation industry is implementing digital manufacturing project and its demand for high and medium-end CNC machine tools is absolutely increasing.
Equipment manufacturing industry has relatively delayed response to financial crisis as it only saw significant profit decline in 2008. But their production and sales growth are estimated to drop by 15% or so in 2009.
As a whole, machinery enterprises will have weaker desire in equipment investment this year, particularly in general-purpose machine tools and economic CNC machine tools. However, there will be some investment highlight within the machinery industry this year and such enterprises as nuclear power and wind power equipment producers will be benefited.
Forecast for China's machine tools industry in 2009
Since last September, machine tool sales and output value have exhibited a trend of accelerating decline month on month with significant shrinkage in order intake. By the end of last year, as reported, orders of general-purpose machine tools and economic CNC machine tools experienced a drop of 45%, while orders of medium and high-end CNC machine tools reduced by 15%.
It is expected that the policies to stimulate economic growth will take effect in the latter half of this year. Since there is always a time gap between order intake and delivery of machine tools, except heavy-duty machine tools that are expected to witness substantial growth in output value, all other machine tools will continue their decline in output and sales, but the possibility of negative growth rate is small.
This year, it is difficult to keep the growing trend in import value as that of last year because: (1) Government cancels interest discount for high-end import machine tools; (2) Government cancels super-favorable treatment to foreign-invested enterprises in import tax for machine tools; (3) China-made machine tools have made some improvement to substitute imported machine tools and increasingly more international leading manufacturers are setting up product base in China; and (4) Shrinkage in processing-trade orders for mechanical and electric products will lead to corresponding shrinkage for machines imported for processing trade.
In the face of the overall downturn in the global machine tools market this year, overseas machine tool manufacturers would work harder in grabbing the market share in China. Based on these factors, decline in machine tool import value will be under 20% in 2009 but import value will still reach USD 6 billion or above.
Supported by higher tax refunding rate for export, and through implementation of market diversification strategy and improvement of export product structure, negative growth for China's machine tool export is expected to be low in 2009 even if it occurs. Meanwhile, growth for machine tool consumption value will continue to drop and be slower than machine tool output value.
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| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "Chinamac Journal (CMJ)", Adsale Machine-Building Website - www.AdsaleCMJ.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
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