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IBISWorld publishes cutting tool, machine tool accessory manufacturing report
- October 2, 2013
- News Release
- Shop Management
Demand in the U.S. cutting tool and machine tool accessory manufacturing industry is spread across several downstream markets, domestically and abroad, so revenue tends to follow downstream production levels.
"High production encourages sales of new and replacement cutting tools and accessories, but reduced production stalls industry demand," said Olawale Harrison, industry analyst with IBISWorld. The Los Angeles-based firm has published a report, now available online at www.ibisworld.com/industry/cutting-tool-machine-tool-accessory-manufacturing.html.
Reduced production has characterized the U.S. manufacturing sector since 2008, and industry firms have experienced adverse effects. Revenue is expected to fall at an average annual rate of 1.1 percent to total $5.3 billion during the five years to 2013.
Before 2008 available credit resulted in high consumer spending and favorable demand conditions, increasing manufacturing activity in the automobile, construction, mining, and oil and gas machinery manufacturing markets. Likewise, greater consumer spending allowed businesses to reinvest their earnings in capital expenditures such as milling machines and customized systems for increasing production efficiencies. In 2009 financial conditions soured, greatly affecting the industry. Credit lines were frozen, consumer spending plummeted, and businesses began downsizing to salvage profit in the face of revenue declines. These negative economic conditions reduced demand for machined parts at tool and die businesses, while demand for custom work fell.
However, despite these negative conditions, industry profit has improved. The firms that survived the recession did so by adopting lean production techniques. In light of low sales and high input prices, costs had to be cut in the form of employment and related wage costs. According to Harrison, "Firms that failed to do so exited the industry, but surviving operators' newfound efficiencies helped industry profit grow."
Exports have been a successful venture throughout the recession, growing marginally as demand strengthens from downstream manufacturing in newly industrialized countries. As such, exports likely will continue to grow through 2018. Recovering conditions in the U.S. manufacturing sector will help industry revenue grow during the period as well.
IBISWorld estimates that more than 75 percent of all companies in the industry employ fewer than 20 people. Because of their niche manufacturing focus on cutting tool machinery and accessory manufacturing, these firms lack the capacity to garner a significant amount of the industry's potential U.S. market share. Instead, firms work locally or regionally to supply various downstream manufacturers with new tools, replacement parts, and periodic service and repair of existing machinery. Concentration is forecast to increase as larger companies seek to widen their industrial scope or bolster existing holdings by acquiring small but potentially complementary businesses in this industry.
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The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
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