With the first three quarters in the books, it’s apparent that China’s machine-tool market can’t avoid a downturn in 2019, as annual revenue is set to decline by a slight 0.2 percent for the year, according to IHS Markit | Technology, now a part of Informa Tech.
“The uncertainty in international relations, including the Sino/U.S. trade dispute, has impacted investment sentiment, resulting in a decline in machinery demand this year,” said Lisa Wang, analyst for IHS Markit | Technology. “The Chinese government’s current stimulus package is dominated by tax cuts, business-fee reductions and other measures that steer bank lending to small- and medium-sized private firms. These measures have failed to lift business investment and consumer demand. The resulting decline of global and domestic demand has undercut the growth of machinery production in 2019.”
Under these circumstances, the machine tool business—which forms the basis of the manufacturing market—is being greatly affected by the weak demand from downstream industries. The three main downstream industries for the tools—automotive, electrical and electronics and marine—are expected to decline in 2019, as reported by the IHS Markit | Technology Machinery Production Market Tracker - Q3 2019. These three industries account for nearly half of machine tool demand.
The Chinese automobile industry by itself could account for nearly 30 percent of machine-tool market demand. Chinese auto sales have been contracting since July of 2018. Sales did rebound somewhat in September as the Chinese auto market entered its prime sales season.
However, the overall decline remains quite severe over the past 15 months, with automotive sales and production dropping—including for hybrid and electric vehicles. This will have a major impact on the market demand for machine tools.
IHS Markit | Technology forecasts the Chinese machine tools industry will be under downward pressure in 2019. The Chinese machine tools production will decline by 20.6 percent in 2019, with a negative 8 percent compound annual growth rate from 2019 through 2023.
Machinery Production Market Tracker
The Machinery Production Market Tracker - Q3 2019 from IHS Markit | Technology presents quarterly forecasts of major machinery production in Europe, Asia Pacific and the Americas. The tracker provides marketing and technical executives, financial institutions and investment managers with a current overview of global machinery production, identifying key trends over the next five years. The tracker also presents the value of automation products included in each machine by type.