Machining Market Intelligence

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Are you looking for answers on Machining category?

Are you looking for answers on Machining category?

  • What are the key trends in Machining category?
  • Am I paying the right price?
  • Am I working with the right supplier?
  • What are the major challenges and risks in Machining industry?
  • How is Machining industry performing?

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Report Coverage

  • Regional Market Outlook- US, China, Germany, Japan, India
  • Cost Structure Analysis of Machining
  • Commodities Price Trend
  • Price Driver Analysis

Market Size

Market Size US

$51.29Bn

Market Size China

$54.71 Bn

Table of contents

  1. Machining Executive Summary
  2. Market Overview
  3. Regional Overview
  1. Machining Market Analysis
  2. Industry Classification
  3. Global Market Overview
  4. Key End - user Industry
  5. Global Market Maturity
  1. Machining Regional Market Analysis
  2. US
  3. China
  4. Germany
  5. Japan
  6. India
  1. Porter's Five Force Analysis
  2. Drivers and Constraints
  1. Machining Cost Analysis
  2. Cost Structure Analysis
  3. Commodities Price Trend
  1. Machining Supplier Analysis
  2. Supplier Profiles
  1. Machining Industry Practices
  2. Industry Practices
  3. Value Chain
  4. Emerging Trends

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Machining Market Analysis And Global Outlook

  • The global machining industry is fragmented and currently, China holds the highest market share of 22.4 percent. However, the growth rate is expected to reduce due to factors such as, reshoring trend, increasing wages, and slower economic growth, which are compelling investors to look to alternate lower-cost locations, such as Vietnam, Indonesia and Malaysia
  • By 2020, more conventional machines will replaced by CNC technology to improve output and precision; owing to the stringent requirement from the end users

machining-market-size

Market Overview-Machining

Asia Pacific had close to 35 percent of the global market share for machining in 2018, and was the largest demand region for the industry.

  • The global machining industry is highly fragmented and comprises of several small and medium scale enterprises that offer their services
  • With a growing demand from end-use sectors, like the automotive and electrical industries, the market is expected to increase at a CAGR of 6–7 percent and forecasted to reach a value of $414.17 billion by 2022
  • In 2015, nearly 30 percent of the revenue for the machining services were from industries like heavy equipment, engineered components, watch industries, sub assemblies, defense, marine and medical device machining
  • Milling machines segment is expected to grow at a CAGR of 8-9% owing to features such as multi-functionality and reduction in setup time.
  • 5-axis machine tools have created a huge difference in machining market by increasing efficiency, reducing cycle time, reducing material wastage, etc. Such innovations in the machine tools domain is further expected to drive the machining market.
  • Precision machining comprises 70% of the machining market while conventional machining comprises 30%.
  • Medical machining falls under precision machining and constituted to 3.4 percent of the total revenue of $341.91 billion in machining services.

Market Overview-Precision Machining
(Global)

Although China has an 18 percent share in the global market for machining, the ratio of conventional to precision machining indicates slower technological advancement in the field of machining.

 

Industry Drivers and Constraints

Drivers

  • Market Maturity: The present technological substitutes like 3D printing and additive manufacturing are yet to be made commercially viable. Lack of viable substitutes are expected to sustain the machining market in the short-term

  • Outsourcing Trends: Machining suppliers from traditional manufacturing hubs, such as the US and Western Europe, are setting up manufacturing plants in low cost regions such as Eastern Europe and South-East Asia, driving the market in developing regions

  • Emerging Economies:  Competitive pricing for raw materials, low cost of labor, and energy with growth in demand from emerging economies is expected to drive innovation in this category

Constraints

  • Economic Downtrend:Challenges in the global economic recovery could adversely affect consumer spending. Medical procedures, like surgical replacements, may not be affordable by all sectors of the community. With nearly half of the global demand coming from surgical implants, this may affect the growth of this market
  • Skilled Labor: With advancement in technology in the industry, there is an increasing need for highly skilled labor. This, combined with a shortage of suitable labor, is expected to constrain the growth of the market
  • Raw Material: Suppliers are susceptible to commodity price fluctuations (especially for high mix, low volume industries), against which they cannot hedge due to their relatively low volumes of raw material purchase. These are expected to impact supplier margins and restrict the growth of the supply base

Cost Structure Analysis of Machining

Input Material Cost (Direct + Indirect)

  • The cost and proportion of input materials for machining differ based on the type of metal to be machined and the commodity cost fluctuations which are generally passed on to the customers
  • Design and complexity of the product, wastages, material availability/cost by region are other key factors influencing the cost structure

Labor and Utility Costs

 

  • This area has the highest impact on the value chain (45-60%). Labor cost plays a vital role in determination of the overall cost structure depending on the skill set involved, complexity of the end product, etc.
  • Regional price differences on labor rates and power can play a crucial factor for sourcing decisions
  • For long-term contracts, the increase in power costs are absorbed by the customer upon mutual consent; however, this does not apply to the labor costs

Overheads

Overhead cost typically ranges between 3–6 percent depending on the component, material, etc., and varies from supplier to supplier

Commodities Price Trend: HRC Steel and Nickel

HRC Steel Price Trend

  • The domestic HRC price is expected to drop. This is due to the cautious buying approach with the volatile trade relations and availability of cheaper imports. The prices are anticipated to remain stable with fears of a possible strike or lockout at U.S. Steel or ArcelorMittal USA lending support, however these labor related strikes are unlikely to cause disruptions
  • With President Donald Trump's surprise doubling of Turkey's Section 232 tariff to 50 percent, there is cautious buying. With increase in domestic supply from U.S. Steel Corp, which restarted its Granite City Works in June; and JSW Steel (USA), which will start melting in September at its newly acquired hot-roll mill in Mingo Junction, Ohio, prices are expected to be pushed down further. Moreover the lower lead times and cheaper imports despite the higher tariffs are weighing on the much higher domestic prices and are expected to reach an equilibrium in the medium term
  • In Q1 2019, prices are anticipated to rise due to higher demand post the holiday period at the beginning of the year. The additional duties will be levied only after a tariff rate quota is exceeded, based on a traditional level of imports

LME Nickel Price Trend

  • The Nickel LME inventory level is expected to decreased by 2-3 percent M-o-M and average monthly around 217,902 metric tonnes for November 2018. The former demand outlook is now under stronger scrutiny due to weaker Chinese economic data recently while the latter remains a long-term play
  • LME nickel faces greater downside risks from the decline in demand from Chinese stainless steel mills, against the optimistic demand outlook of nickel consumption in the production of electric car batteries. In addition, there is growing risks that NPI production ramp-ups in 2019 are set to minimize the supply deficit in the global nickel market
  • Demand continues to exceed available supply, as the result, he nickel market is expected to go into a structural deficit. This will be despite a continued increase in nickel prices that is being driven by a number of factors, including the continuing drawdown of available inventory.

 

 

Machining Market Frequently Asked Questions

  1. Which market region holds the highest share in the global machining industry?
  2. According to the latest machining industry news from Beroe, China holds the highest market share of 22.4 percent in the fragmented global machining industry.

 

  1. What factors are affecting the growth rate of the machining market? 
  2. Due to factors like reshoring machining industry trends, increasing wages, and slower economic growth, investors are being compelled to consider alternative lower-cost locations, such as Vietnam, Indonesia, and Malaysia. This is expected to reduce the growth rate of the market.

 

  1. What will be the global machining market size by 2022? 
  2. As per Beroe’s machining industry analysis reports, the global market size is expected to reach $414.24 billion by 2022.

 

  1. What are the key drivers for the global machining market? 
  2. The key factors contributing to the growth in machining market size are Market maturity: The lack of feasible substitutes like 3D printing and additive manufacturing will be sustaining the machining market for the short-term. Outsourcing trends: Machining suppliers are setting up manufacturing plants in low-cost regions such as Eastern Europe and South-East Asia. Emerging economies: The demand from emerging economies along with competitive pricing for raw materials and low labor cost is anticipated to be driving innovation in the machining market.

 

  1. Which are the high, medium, and low market maturity regions? 
  2. The US, Europe, and Asia are the regions with high market maturity. On the other hand, Australia and Africa have low market maturity.

 

  1. In 2015, where did the machining services generate significant revenue from?
  2. In 2015, about 30 percent of the revenue that machining services generated were from industries like heavy equipment, engineered components, watch industries, sub-assemblies, defense, marine, and medical device machining.

 

  1. At what CAGR is the milling machines segment expected to grow?
  2. Owing to features such as multi-functionality and reduction in setup time, the milling machines segment is anticipated to grow at a CAGR of 8-9 percent.

 

  1. How is the machining market distributed between precision and conventional machining? 
  2. As per Beroe’s machining industry statistics, 70 percent of the market is comprised of precision machining while conventional machining covers the remaining 30 percent.

 

  1. Are there any constraints affecting the growth of the machining market? 
  2. The machining market is facing constraints from an economic downtrend, skilled labor, and raw materials. Economic downtrend: Owing to the challenges in the global economic recovery, consumer spending is adversely affected. This can affect machining market growth. Skilled labor: With technological advancements, the need for skilled labor is increasing. But there is a shortage of suitable labor. Raw materials: Suppliers can’t hedge against the commodity price fluctuations due to low volumes of raw material purchases. This can affect supplier margins and restrict the growth of the supply base.

 

  1. What are the price trends for HRC steel? 
  2. HRC steel prices are expected to drop due to the volatile trade relations and availability of cheaper imports leading to a cautious buying approach. Although labor-related strikes are anticipated, they are not likely to cause any disruptions in the price trends.

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