Demand drops for domestic machine tools; imports gain
By Industrial Distribution Staff -- Industrial Distribution, 10/1/1999
LIVINGSTON, N.J.--Demand for machine tools will continue to decline in 1999 but should pick up slightly during the next two years, industry analysts predict.Shipments by U.S. manufacturers are expected to fall 7.3 percent this year when adjusted for inflation, according to the CIT Group, an industry analyst and equipment financing firm. This follows significant drops in orders for domestic-made metal cutting machine tools and metal forming tools in 1998. A sharp decline in shipments early this year began to level out during the summer, however.
In addition, machine tool orders from both domestic and foreign manufacturers dropped 39 percent during the first half of the year, the Assn. for Manufacturing Technology reported.
Meanwhile, importers increased their share of the U.S. market, taking 60 percent during the first quarter versus 50 percent a year before.
Last year's financial crises in Asia and Latin America resulted in cheaper machine tool imports and drastically reduced foreign demand for U.S.-made tools. Manufacturing overcapacity also contributed to the slowdown, particularly in metalworking machinery for the automobile and semiconductor industries, as manufacturers postponed spending on new machinery.
Gene Haas, president of Haas Automation, a manufacturer in Oxnard, Calif., said the industry faces significant challenges.
"There's a lot more discounting going on across the board," said Haas. "It's a much more competitive market. I'm not sure if it's just the result of dumping from foreign competitors or general malaise."
Through September, he said Haas Automation's sales volume was consistent with last year, but unit prices were down by about one quarter. "We don't see any obvious signs of an uptick yet," said Haas. "It seems like most of the orders are price sensitive and there's always a lot of competition there for any orders."
Some analysts retain a positive outlook because of the healthy U.S. economy and rebounding Asian economies. Real domestic demand for machine tools is expected to reach $8.8 billion in 2001, below a record $8.9 billion set in 1997, the CIT Group forecasts.
"Manufacturers operate with aging machinery and thus experience rising replacement needs sooner or later," said Malory Pikar, vice president of economic research for the CIT Group. "Additionally, demands to increase productivity and quality will encourage manufacturers to upgrade to the technologically advanced machines currently revolutionizing the machine tool industry."
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