Global Market Outlook on Machining

  • 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


Market Overview-Machining

Asia Pacific had close to 40 percent of the global market share for machining in 2016, 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 the end-use sectors like automotive and electrical industries, the market is expected to increase at a CAGR of 6–7 percent and reach a value of $320.74 billion by 2018 
  • 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

Industry Drivers and Constraints


  • 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: 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


  • 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

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