Los Angeles, CA (PRWEB) March 25, 2013
Although metalworking machinery represents a key capital investment for many downstream manufacturing industries, the Canadian Metalworking Machinery Manufacturing industry exhibits an ongoing state of decline. The short explanation for this trend lies in imports' growing share of domestic demand. As steel prices have increased during the past five years, Canadian manufacturers 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. During the past five years, however, the onset of the global recession limited the amount manufacturers 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, cheaper imports, particularly from Asian countries, have stepped in to fill the demand gap for metalworking machinery at a lower price point than current purchase costs permit for Canadian manufacturers,” says IBISWorld industry analyst Josh McBee. Asian manufacturers are able to undercut Canadian prices because they exhibit higher operational efficiencies through low-cost labor, fewer regulatory oversights and greater supply chain efficiencies.
Because of price-based competition from cheaper imports, IBISWorld expects the industry's revenue to decline of at an annualized rate of 4.4% during the five years to 2013. In the near-term, some recovery is expected, as spikes in import demand level off from a low recessionary base. As such, the industry's revenue is expected to gain 2.3% in 2013 and total an estimated $3.3 billion. Still, the nature of the 21st 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. In an effort to salvage profit, operators have been reducing their labor forces, which in turn reduces wages. For some companies, this strategy has proven effective, but company numbers and locations are still expected to decline, as high purchase costs in the face of low demand crippled earnings to their breaking point.
Concentration in the Canadian Metalworking Machinery Manufacturing industry is low. In 2013, there are no companies capable of generating a significant market share equal to 5.0% or more of overall industry revenue. According to McBee, more than 70.0% of the industry consists of companies that employ less than 10 people, and about a third of all companies are owner-operated nonemployers. As such, the industry exhibits a high degree of fragmentation that increases competition, as small companies specializing in niche products vie for market share in geographic markets bound by city and province borders. 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 primarily engaged in manufacturing 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 primarily engaged in manufacturing industrial moulds; tools, dies, jigs and fixtures; machine tool accessories and attachments; and rolls are included.
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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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US and Canadian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.