Customers spent less on new machinery during the recession, decreasing revenue.
New York, NY (PRWEB) May 18, 2014
Although metalworking machinery represents a key capital investment for many downstream manufacturing industries, the Canadian Metalworking Machinery Manufacturing industry has consistently declined over the past five years. As imports have been meeting an increasing proportion of domestic demand and as steel prices have increased, Canadian manufacturers have faced upward pressure on product prices. “Usually, increasing costs can be passed onto downstream markets in the form of higher prices, as there are few substitute goods that can replace rotary mills and the many other types of machinery this industry makes,” according to IBISWorld Industry Analyst James Crompton. During the past five years, however, the recession limited the amount manufacturers that were willing to spend on new equipment, as reduced consumer spending in the wake of high unemployment flowed up the supply chain to reduce orders at the manufacturing level. In turn, lower-cost imports, particularly from Asian countries, have filled the demand gap for metalworking machinery at a lower price point than current purchase costs permit for Canadian manufacturers. Asian manufacturers are able to undercut Canadian prices because they exhibit higher operational efficiencies through low-cost labour, fewer regulatory oversight and greater supply-chain efficiencies.
Because of price-based competition from more affordable imports, IBISWorld expects the industry's revenue to expand at a tepid annualized rate of 0.5% over the five years to 2014, including a 0.5% jump in 2014, to reach $3.9 billion. Nonetheless, industry revenue is not anticipated to surpass prerecession levels. The nature of the global economy has caused structural shifts across many manufacturing industries that will likely fail to reverse the declining trends across the industry's other metrics. “To salvage profit, operators have been minimizing their labour forces,” says Crompton. For some companies, this strategy has proven effective, but company numbers and locations are still expected to decline, as high purchase costs resulting from low demand crippled earnings to their breaking point. In the five years to 2019, industry performance will likely remain constrained as steel prices continue to rise and imports continue to meet domestic demand.
For more information, visit IBISWorld’s Metalworking Machinery Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry comprises establishments that primarily manufacture metal-cutting and forming machine tools (except hand tools) and related products. The machine tools included in this industry are those not supported in the hands of an operator when in use. Establishments that primarily manufacture industrial molds; tools, dies, jigs and fixtures; machine tool accessories and attachments; and rolls are included in this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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