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Consultant: European machinery market facing a 'correction'


The machinery market in Europe is set to contract in the coming years, by as much as 10 percent, according to an industry expert.

Cesar Rodriguez Gabilondo, the CEO and founder of MachinePoint Consultants, has warned that a combination of excessive production capacity and the slow demand for plastic products will likely lead to a "10 percent correction" in the general machinery industry in Europe, triggering a decline in prices and lower demand.

"I may be wrong, but I expect that the 2019-20 crisis for the machinery industry will be triggered by a 2-3 percent demand contraction of industrial products after materializing any combination of global risks," Rodriguez said.

The risks could include trade wars, a no-deal Brexit, Italian euro crisis, the immigration crisis, a slump in emerging markets such as Turkey or higher oil prices, fueled by sanctions on Iran, he said.

"In the last eight years machinery production has grown 26 percent compared with 6 percent of non-durable manufactured goods in Europe," noted Rodriguez, adding that orders placed at the end of 2017 and during the first half of 2018 will also join the grid to "a tremendous world-wide capacity in production increase."

Meanwhile, in 2017, plastics product manufacturing of 19 major European countries remained stagnant with an increase of only 0.57 percent, the MachinePoint CEO added.

Reports by European association for plastics and rubber machinery manufacturers (EUROMAP) and Eurostat suggest that machinery production grew 7 percent in 2017, and the Germany machinery trade body VDMA expects a 4 percent growth for 2018.

The overexpansion, according to Rodriguez, is due in part to the "well-intentioned European governments" which encourage increased productivity and price competitiveness in industries.

These include Italy's "super-amortization" scheme for capital equipment investments in Industry 4.0 and subsidies from the Hungarian government for capital equipment investments.

"Norway is another example where the machine production over the last year grew 100 percent more than the manufacturing production," Rodriguez noted.

Such stimuli can, however, generate large market imbalances.

Similar to the steel market, which prompted the G20 countries to withhold industrial subsidies amid a Chinese surplus, the MachinePoint CEO sees overcapacity in the plastics or beverages industry.

"All together this makes an irrational industrial surplus that has been pushing global production of non-durable consumption goods and is partly responsible for the low inflation world-wide," he noted.

Based in Valladolid, Spain, MachinePoint purchases, sells and relocates used industrial machinery in the plastics, packaging, food and beverages markets.

Rodriguez's comments tally with Euromap's warning of a possible slow-down in the market, despite full order books.

In its general assembly June 15, Euromap said long delivery times and shortage of skilled workers could lead to a slow-down in the machinery market, despite the "unusually long boom."


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