2015 metalworking capital spending survey & forecast © 2014 gardner business media, inc. all...

2015 METALWORKING CAPITAL SPENDING SURVEY & FORECAST

www.gardnerresearch.com© 2014 Gardner Business Media, Inc. • All Rights Reserved

1 of 27

2015 METALWORKING CAPITAL SPENDINGSURVEY AND FORECASTPRESENTED BY: Steve Kline

© 2014 Gardner Business Media, Inc. • All Rights Reservedwww.gardnerresearch.com



2 of 27

ECONOMIC CYCLE OF CAPITAL SPENDING

• Most important economic data for forecasting capital spending globally

• Arrows show the lead/lag relationships between data points

• Scale shows the time relationship between data points



3 of 27

GLOBAL MACHINE TOOL CONSUMPTION/PRODUCTION

• Metalcutting and metal forming machines

• Data based on top 25 reporting countries to Gardner’s WMTS

• Accounts for roughly 95% of global machine tool market

• World consumption to grow 3.9% in 2015, which is down from 6.6% in 2014

• Production almost always changes at same rate as consumption

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

0

9,000

18,000

27,000

36,000

45,000

54,000

63,000

72,000

81,000

90,000

World Production World Consumption

Mill

ions

of R

eal U

SD



4 of 27

REGIONAL MACHINE TOOL CONSUMPTION

• North America up 24.4%• Europe up 1.3%• Asia down 1.3%• South America down

18.4%• 2015 global increase in

consumption centered in North America• US up 30%• Mexico up 10%• Canada up 10%

Jan-

74

Jan-

76

Jan-

78

Jan-

80

Jan-

82

Jan-

84

Jan-

86

Jan-

88

Jan-

90

Jan-

92

Jan-

94

Jan-

96

Jan-

98

Jan-

00

Jan-

02

Jan-

04

Jan-

06

Jan-

08

Jan-

10

Jan-

12

Jan-

14

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

North America Europe Asia South America

Mill

ions

of R

eal U

SD



5 of 27

TOP 5 MACHINE TOOL CONSUMING COUNTRIES

• US #1 for first time since 2000; first time above $10.5 billion since WW2

• China on the decline since 2011

• Germany down but still historically strong

• Japan moderate growth but still relatively weak

• South Korea second strongest year ever

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

0

1,500

3,000

4,500

6,000

7,500

9,000

10,500

12,000

13,500

15,000

China United States Germany South Korea Japan

Mill

ions

of R

eal U

SD



6 of 27

CHINA

• 2014 flat• 2015 down 10%• Money supply growth

slowing and rate of growth near two decade lows

• Industrial production growth slowing and slowest growth in more than a decade

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-50

-40

-30

-20

-10

0

10

20

30

40

50

-200

-160

-120

-80

-40

0

40

80

120

160

200

M1 Industrial Production MT Consumption

Lead

ing

Indi

cato

r (12

-mo

ROC)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



7 of 27

GERMANY

• 2014 up 12%• 2015 down 8%• Money supply growth

about average but slowing significantly

• Capacity utilization growing faster but looking to peak

• Industrial production growing but likely has peaked

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-30

-24

-18

-12

-6

0

6

12

18

24

30

-100

-80

-60

-40

-20

0

20

40

60

80

100

M1 Capacity UtilizationIndustrial Production MT Consumption

Lead

ing

Indi

cato

r (1

2-m

o RO

C)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



8 of 27

JAPAN

• 2014 up 40%• 2015 up 6%• Money supply growing

at a steadily accelerating rate but has peaked

• Capacity utilization growing at historically strong rate but has peaked

• Industrial production growing at fastest rates in almost five years but peaking

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-35

-28

-21

-14

-7

0

7

14

21

28

35

-100

-80

-60

-40

-20

0

20

40

60

80

100


Lead

ing

Indi

cato

r (12

-mo

ROC)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



9 of 27

SOUTH KOREA

• 2014 up 13%• 2015 up 2%• Money supply growing

significantly but has peaked

• Capacity growing at a very slow rate and should grow even slower

• Industrial production growing at a minimal rate

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-60

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

150


Lead

ing

Indi

cato

r (12

-mo

ROC)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



10 of 27

MEXICO

• 2014 down 8%• 2015 up 10%• Money supply growing

at an accelerating rate and should continue

• Capacity utilization contracting, but at a slower rate

• Industrial production growing marginally faster than previous year

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

150

-90

-75

-60

-45

-30

-15

0

15

30

45

60

75

90


Lead

ing

Indi

cato

r (12

-mo

ROC)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



11 of 27

THE CAPITAL SPENDING SURVEY

• Survey forecasts planned spending for machine types, industries, regions, and plant sizes

• Survey goes to plants that subscribe to Modern Machine Shop, Production Machining, Moldmaking Technology, and Automotive Design & Production

• Machine tool survey sent to 28,000 facilities• Tooling/workholding survey sent to 10,000 facilities• Forecasts are created by projecting reported results across plant size



12 of 27

FORECAST ACCURACY

• Machine tool survey average error of 13% (ex. 2002, 2009)

• Tooling/workholding survey error rate almost double

• Unit forecast closer than survey in five of the last seven years

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Equipment Survey GBM Unit Forecast Tooling and Workholding Survey



13 of 27

U.S. MACHINE TOOL CONSUMPTION

• Capital Spending Survey 2015 projection is $8.8 billion

• 3rd highest year since 1980

• Increase of 37% from 2014

• 14 times consumption has increased more than 37%

• Average increase is 30%19

3719

3919

4119

4319

4519

4719

4919

5119

5319

5519

5719

5919

6119

6319

6519

6719

6919

7119

7319

7519

7719

7919

8119

8319

8519

8719

8919

9119

9319

9519

9719

9920

0120

0320

0520

0720

0920

1120

1320

15

0

2

4

6

8

10

12

14

16

18

20

Nominal Consumption Real Consumption Avg. Real Consumption

Met

alcu

tting

Equ

ipm

ent (

billi

ons

of re

al $

)



14 of 27

U.S. TOOLING/WORKHOLDING CONSUMPTION

• Capital Spending Survey 2015 projection is $4.8 billion

• Highest year since at least 2002

• Increase of 7% from 2014

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0

1

2

3

4

5

6

Nominal Consumption Real Consumption Avg. Real Consumption

Tool

ing

& W

orkh

oldi

ng S

pend

ing

(bill

ions

of r

eal $

)



15 of 27

MONETARY BASE LEADS MACHINE TOOL CONSUMPTION

• Assuming QE ends in October

• Since 2009 monetary base is growing faster than historic average typically

• Monetary base leads machine tool consumption by 24 months

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-100

-80

-60

-40

-20

0

20

40

60

80

100

-125

-100

-75

-50

-25

0

25

50

75

100

125

Monetary Base MTC USMTO - Units USMTO - Dollars

Adju

sted

Mon

etar

y Ba

se (1

2-m

o RO

C)

Real

Mac

hine

Too

l Con

sum

ption

(12-

Mo

ROC)



16 of 27

BACKLOGS LEAD CAPACITY UTILIZATION

• Backlogs lead capacity utilization by 7 months

• Capacity utilization should reach 80% for first time since June 2000

• Capacity utilization could average more than 80% for 2015 for first time since 1998Ja

n-75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-100

-80

-60

-40

-20

0

20

40

60

80

100

-20

-16

-12

-8

-4

0

4

8

12

16

20

MBI

Bac

klog

Inde

x

Dur

able

Goo

ds C

apac

ity U

tiliz

ation



17 of 27

CAPACITY UTILIZATION LEADS MACHINE TOOL CONSUMPTION

• Capacity utilization leads machine tool consumption by 10 months

• Every time capacity utilization grows faster than 4% machine tool consumption increases at least 16%

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-20

-16

-12

-8

-4

0

4

8

12

16

20

-125

-100

-75

-50

-25

0

25

50

75

100

125

Capacity Utilization MTCUSMTO - Units USMTO - Dollars

Dur

able

Goo

ds C

apac

ity U

tiliz

ation

(12-

mo

ROC)

Real

Mac

hine

Too

l Con

sum

ption

(12-

mo

ROC)



18 of 27

MACHINE TOOL DEMAND CURVE

• 60% of the time consumption is above $8 billion when capacity utilization is above 80%

• 2015 would be 7th year of over consumption

• 4 years with more over consumption than forecast for 2015

60% 62% 64% 66% 68% 70% 72% 74% 76% 78% 80% 82% 84% 86% 88% 90%0

1

2

3

4

5

6

7

8

9

10

11

12

13

2015

Capacity Utilization (annual average)

Real

Mac

hine

Too

l Con

sum

ption

(bill

ions

of $

)



19 of 27

METALWORKING BUSINESS INDEX LEADS MACHINE TOOL CONSUMPTION

• Business index leads machine tool consumption by 10 months

• Business index likely to peak in the next couple of months

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-50

-40

-30

-20

-10

0

10

20

30

40

50

-125

-100

-75

-50

-25

0

25

50

75

100

125

MBI MTC USMTO - Units USMTO - Dollars

Met

alw

orki

ng B

usin

ess

Inde

x (1

2-m

o RO

C)

Real

Mac

hine

Too

l Sal

es (1

2-m

o RO

C)



20 of 27

DURABLE GOODS PRODUCTION LEADS MACHINE TOOL CONSUMPTION

• Durable goods production continues to set record highs

• Production should accelerate through 2014 and decelerate in 1H 2015

• Production leads machine tool consumption by 15 months

Jan-

75

Jan-

77

Jan-

79

Jan-

81

Jan-

83

Jan-

85

Jan-

87

Jan-

89

Jan-

91

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

Jan-

13

Jan-

15

-25

-20

-15

-10

-5

0

5

10

15

20

25

-125

-100

-75

-50

-25

0

25

50

75

100

125

Production MTC USMTO - Units USMTO - Dollars

Dur

able

Goo

ds P

rodu

ction

(12-

mo

ROC)

Real

Mac

hine

Too

l Sal

es (1

2-m

o RO

C)



21 of 27

MOTIVATION TO BUY A MACHINE

• Increase capacity at or above levels from mid 2000s

• Reduce costs has steadily fallen since 1993

• Process flexibility has stabilized

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

New machine to reduce costs Increase machine/equipment capacityMachine/process flexibility New products, modelsTighter quality standards Make instead of buy



22 of 27

MAJOR METALCUTTING EQUIPMENT TYPES

• Trends• Turning over

milling• Smaller over larger• Vertical over

horizontal• Additive is an indication

of interest• Interest in ancillary,

special, or dedicated machines is high

Equipment Type 2010 2011 2012 2013 2014 2015

Machining Centers 1,680.1 2,694.7 2,796.6 3,065.6 3,147.0 3,226.1

Turning Centers 647.8 1,230.3 1,317.2 801.7 1,128.9 1,582.1

Lathes 503.0 1,550.6 1,675.9 1,171.2 968.7 1,475.8

Grinding 131.8 254.3 458.8 391.3 455.6 697.0

Additive 44.0 47.7 37.0 267.4

EDM 58.1 60.4 106.7 92.5 133.3 204.6

Screw Machines 115.8 55.9 78.5 86.2 151.8 182.0

Other Metalworking 613.9 556.5 702.2 804.8 434.9 1,187.0

Total 3,750.6 6,402.7 7,180.0 6,460.9 6,457.2 8,822.0



23 of 27

MAJOR TOOLING TYPES

• Trends in tooling reflective of trends in machine types• Turning over

milling• Other tools such as

saws and taps

Equipment Type 2010 2011 2012 2013 2014 2015

Milling Tools 330.0 473.8 492.4 422.0 1,049.9 737.3

Drills 247.9 345.5 403.7 352.1 572.0 671.7

Stationary Tool Inserts 529.7 666.6 726.8 607.7 267.4 475.8

Turning Tools 146.3 184.2 167.3 234.2 205.9 324.2

Rotary Tool Inserts 516.9 629.8 552.4 475.6 268.6 309.6Grinding Wheels & Others Abrasives 157.1 121.7 81.6 119.2 171.4 161.4

Toolholders 133.4 214.1 235.1 259.0 240.4 146.9

Tool Presetters 42.0 33.0 51.3

Other Tooling 293.5 385.4 427.3 475.6 429.8 580.7

Total 2,354.8 3,021.1 3,086.6 2,987.4 3,238.4 3,458.9



24 of 27

MAJOR WORKHOLDING TYPES

• Increase in automated systems/transfer lines and decrease in flexible fixtures since 2012

• Chucks and other turning down the last two years

Equipment Type 2010 2011 2012 2013 2014 2015

Milling/Drilling 687.3 797.3 1,001.9 1,063.5 819.7 879.7

Turning 347.7 505.7 499.6 658.0 290.2 211.0

Grinding 86.4 84.2 85.0 122.7 58.5 39.1

EDM 13.0 17.6 20.9 50.9 32.0 22.6

Other 130.4 81.3 160.6 230.3 124.7 100.3

Total 1,264.8 1,486.1 1,768.0 2,125.4 1,325.1 1,252.7



25 of 27

TOP INDUSTRIES – MACHINE TOOLS

• Die/Mold• 2015 – $932.5• Up more than 50%

• Dropped from top industries• HVAC• Petrochemical

Processors

Industry 2010 2011 2012 2013 2014 2015Metalcutting Job Shops 1,139.9 2,063.3 1,835.5 1,803.1 2,233.4 2,469.7Machinery/Equipment 209.4 1,016.0 810.4 591.7 713.0 1,216.3Automotive 210.0 544.4 785.9 1,172.1 561.1 759.3Pumps/Valves/Plumbing Products 307.3 174.6 991.4 209.4 364.4 688.3Forming/Fabricating (non-auto) 421.2 491.5 581.9 504.5 244.4 493.6Industrial Motors/Hydraulics/ Mechanical Comp. 140.1 397.6 335.2 34.4 146.6 461.2Electronics/Computers/ Telecommunications 157.3 379.3 421.1 202.1 383.4 351.4Other Manufacturing 149.1 71.5 124.7 369.7 137.7 333.1Custom Processors 6.0 24.4 116.2 327.9Aerospace 346.0 802.5 494.8 538.6 167.4 307.4Primary Metals 0.7 2.3 280.0 230.0 290.2Non-Manufacturing 120.4 298.3 242.6Medical 35.4 155.3 228.1 113.0 264.1 207.4Oil/Gas-Field/Mining Machinery 319.9 58.4 42.3 139.7 235.1 165.8Off-Road/Construction Machinery 104.6 46.8 202.6 101.7 122.8 163.3Hardware 36.3 12.3 30.4 53.2 7.3 88.4Plastic/Rubber Product 1.5 26.3 25.0 77.3



26 of 27

CONCERNS

• Sub-prime lending is driving automotive• Large aerospace orders that are notoriously cancelled• The end of QE?– Rising interest rates– Rising dollar– Falling stock market

• China real estate bubble• European (global?) bond bubble



27 of 27

ADDITIONAL INFORMATION

• To receive my monthly email update on metalworking send me an email – [email protected]

• Check out all of our market research at www.gardnerweb.com (coming soon www.gardnerresearch.com)

• Check out my blog at www.gardnerweb.com/economics/blog

http://www.gardnerweb.com/

http://www.gardnerresearch.com/

http://www.gardnerweb.com/economics/blog

2015 metalworking capital spending survey & forecast © 2014 gardner business media, inc. all...

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