Metalworking Machinery Manufacturing in The US Industry Report

Metalworking Machinery Manufacturing in the USSeptember 2013 1
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Transition metal: Demand will strengthen, but

overseas competition will limit growth
IBISWorld Industry Report 33351
Metalworking Machinery
Manufacturing in the US
September 2013
James Crompton
2 About this Industry
16 International Trade
31 Key Statistics
Industry Definition
18 Business Locations
31 Industry Data
Main Activities
Similar Industries
20 Competitive Landscape
Additional Resources
20 Market Share Concentration
31 Annual Change
20 Key Success Factors
3 Industry at a Glance
31 Key Ratios
32 Jargon & Glossary
20 Cost Structure Benchmarks

22 Basis of Competition
4 Industry Performance
23 Barriers to Entry
Executive Summary
24 Industry Globalization
Key External Drivers
Current Performance
Industry Outlook
10 Industry Life Cycle
25 Major Companies
27 Operating Conditions
27 Capital Intensity
12 Products & Markets
28 Technology & Systems
12 Supply Chain
28 Revenue Volatility
12 Products & Services
29 Regulation & Policy
13 Demand Determinants
30 Industry Assistance
14 Major Markets
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
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About this Industry

Industry Definition
Companies in this industry primarily

manufacture power-operated tools that
are used for finishing or shaping metal
parts, which are then used to manufacture
other machines. Industry products
include: metal cutting tools, special dies,
Main Activities
The primary activities of this industry are
coil handling equipment, and wire

drawing and fabricating machines. This
industry excludes companies that
primarily manufacture power tools and
other general-purpose machinery
accessories (IBISWorld report 33399).
Manufacturing special dies, tools, die sets, jigs and fixtures

Manufacturing metal-cutting and forming machine tools
Manufacturing industrial molds
Manufacturing cutting and machine tool accessories
Manufacturing rolling mills and other metalworking machinery
The major products and services in this industry are
Cutting tool and machine tool accessory manufacturing
Industrial mold manufacturing
Metal-cutting and forming machinery
Rolling mill machinery
Special tool, die, jig and fixture manufacturing
Similar Industries
33321 Woodworking Machinery Manufacturing in the US

This industry manufactures machinery specifically for working with wood.
33322 Plastics & Rubber Machinery Manufacturing in the US
This industry manufactures machinery specifically for working with plastics and rubber.
33399 Power Tools & Other General Purpose Machinery Manufacturing in the US
This industry manufactures power-driven hand tools, welding equipment and soldering equipment.
Additional Resources
For additional information on this industry

www.amtonline.org
Association for Manufacturing Technology
www.ntma.org
National Tooling and Machining Association
www.pma.org
Precision Metalforming Association
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Metalworking Machinery Manufacturing in the US September 2013
Industry at a Glance
Metalworking Machinery Manufacturing in 2013
Key Statistics
Snapshot
Revenue
Annual Growth 08-13
Annual Growth 13-18
Profit
Exports
Businesses
$29.9bn -1.1%
1.4%
$6.9bn 6,495
$1.9bn
Demand from machine shop services
Revenue vs. employment growth
% change
There are no
Major Players in
this industry
20
30
10
20
10
% change
Market Share
10
20
30
0
10
20
40
Year 05
07
09
Revenue
11
13
15
17
30
Year
19
07
09
11
13
15
17
19
Employment
SOURCE: WWW.IBISWORLD.COM
p. 25
Products and services segmentation (2013)
2.9%
Demand from machine

shop services
19.3%
Demand from automobile

engine and parts
manufacturing
Rolling mill
machinery
Cutting tool and machine

tool accessory manufacturing
34.4%
Special tool, die, jig and

fixture manufacturing
Private investment in
metalworking machinery
Trade-weighted index
World price of steel
20.4%
Industrial mold
manufacturing
23.0%
Metal-cutting and
forming machinery
p. 4
SOURCE:
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SOURCE:
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Industry Structure
Life Cycle Stage
Decline
Regulation Level
Light
Revenue Volatility
High
Technology Change
Capital Intensity
Low
Barriers to Entry
Low
Industry Assistance
Low
Industry Globalization
High
Concentration Level
Low
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 31
Medium
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Industry Performance
Executive Summary | Key External Drivers | Current Performance

Industry Outlook | Life Cycle Stage
Executive
Summary
In the five years to 2013, the

Metalworking Machinery Manufacturing
industry has been recovering from the
recession. The industry produces poweroperated tools and machine accessories
used for finishing or shaping metal parts.
Machine shops are a key source of
demand for metalworking units; industry
companies develop tools and equipment
that downstream producers, including
motor vehicle parts manufacturers, use.
Additionally, activity in manufacturing
industries, domestically and abroad,
filters into this industry in the form of
private investment in metalworking
machinery. In 2009, industry operators

faced a disastrous year, with revenue
falling 30.8%, as the global recession
squeezed demand in foreign and
domestic automobile and construction
sectors. As a result of these weak demand
conditions early in the period, revenue is
expected to decline at an annualized rate
of 1.1% in the five years to 2013.
However, IBISWorld expects growth to
return in 2013, with revenue increasing
2.4% to $29.9 billion.
Private investment in metalworking
machinery is expected to total $27.7
billion in 2013, up from $19.0 billion in
2009. As manufacturing industries

recover from the recession, demand will
be steady for industry manufacturers due
to the widespread use of their products.
Nevertheless, competition from cheaper
imports has undermined the efforts of
domestic manufacturers, and the number
of industry operators has fallen at an
annualized rate of 2.8% to 6,495 during
the past five years. If the current
workforce becomes more productive,
companies can employ fewer workers. In
order to boost profit and combat high
input prices, notably steel, wages are
expected to decrease at an average annual
rate of 2.3% to $8.0 billion in 2013.
IBISWorld anticipates that moderate
growth will continue in the five years to
2018. Robust demand from Asian
markets and rising commodity prices
will likely drive renewed investment
across the mining and energy sectors,
sustaining demand for metalworking
products that manufacture related
equipment. In the latter half of the next
five years, industry revenue will level off,
as competition from emerging markets
in Asia increases, and the continued
relocation of American production to
overseas factories reduces the potential
revenue base. Still, as the global
economy improves and downstream
demand for machinery and equipment
rebounds, IBISWorld forecasts industry
revenue to increase at an annualized rate
of 1.4% to $32.1 billion.

Machine shops are a key downstream
market for industry manufacturers.
These shops use metalworking machinery
products such as lathes, milling machines
and drill presses to shape materials.
Demand from machine shop services is
expected to increase during 2013,
representing a potential opportunity for
the industry.
Demand from automobile engine

and parts manufacturing
Original equipment manufacturers of
motor vehicle parts require a number of
metalworking machines to produce
engines, bodies and other vehicle parts.
Therefore, rising demand from motor
vehicle parts manufacturers positively
affects industry demand. Demand from
automobile engine and parts
Renewed
demand across downstream

manufacturing industries will boost growth
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manufacturing is expected to increase

during 2013.
Private investment in
metalworking machinery
Trends in private investment in
metalworking machinery positively affect
movements in industry revenue. Higher
private expenditure on metalworking
machinery leads to greater demand for
metal parts provided by the industry. Key
downstream markets include
construction, mining, and automobile
industries. Private investment in
metalworking machinery is expected to
increase during 2013.
Trade-weighted index
The trade-weighted index (TWI) measures
the value of the US dollar relative to the
currencies of its largest trading partners.
Since the metalworking machinery

manufacturing industry maintains a high
level of international trade, volatility in
the TWI exposes the industry to trade risk.
As the TWI increases, the price of US
exports increases, making them less
attractive to purchasers abroad, and
imports more attractive to domestic
markets. The TWI is expected to increase
during 2013, representing a potential
threat to the industry.
World price of steel
Steel is a major input in the production of
metalworking machinery. Consequently,
the price of steel can have material effects
on profit and revenue for companies that
produce this machinery, with rising steel
prices limiting potential margins. The
world price of steel is expected to
increase during 2013.
Demand from automobile engine and parts
manufacturing

30
50
20
25
10
% change
% change

continued
0
10
25
20
30
Year
07
09
11
13
15
17
19
50
Year
07
09
11
13
15
17
19
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Current
Performance
The Metalworking Machinery

Manufacturing industry creates
machines that ultimately construct other
mechanical devices. For example,
industry player Kennametal produces
computer-controlled turning, boring,
milling and drilling machines that can
turn a solid chunk of steel into an engine
block, manifold or crankshaft. The same
machines may also create molds or dies
that are then used to stamp out shapes
and patterns in other raw materials on
assembly lines. In this way,
metalworking machinery represents a
primary input in most industrial
processes that output machinery, metal
products, vehicles and heavy equipment.
In 2013, industry revenue is expected to
rise 2.4% to $29.9 billion, as operators
benefit from increasing demand from
machine shops, recovering automobile
sales and renewed investment in
metalworking machinery. These
Downstream demand
returning
Prior to 2008, growth for the Machine

Shop Services industry (IBISWorld
report 33271) was strong because
increase was fueled by the robust
performance of heavy machinery
manufacturers. Traditional major
markets, such as automobile and
machinery manufacturers, were growing
in step with market demand. Meanwhile,
increased government spending on
defense and military aviation further
contributed to demand growth for
machine shops. During the year,
underperforming downstream industries
outweighed the more resilient segments.
Sectors, such as commercial aviation and
automotive manufacturing, were hit
particularly hard by the economic
downturn, but conditions in these
markets stabilized and improved toward
the end of 2010. Demand for machine
shop services has continued to recover as
its own markets have stabilized. This
advantages, however, are unlikely to

make up for losses incurred during the
recession; IBISWorld expects revenue to
decline an annualized 1.1% over the five
years to 2013.
Although the price of steel (a major
input for many industry products) has
fallen at an annualized rate of 2.3% in the
five years to 2013, prices remain
historically high. These high steel prices
have spurred competition from industry
imports, as downstream markets sought
cheaper substitutes in the wake of rising
domestic machinery prices. However,
due to economic concerns in the
European Union and Japan, increases in
imports from 2010 to 2012 are expected
to ease with a 12.3% drop in 2013. These
anxieties have negatively impacted
imports from Japan (down 14.5% from
2012) and Germany (down 3.8% from
2012), which are the two largest import
sources of the industry.
Demand
for machine shop

services is recovering,
spurring industry demand
factor is expected to benefit the
industry, given that machine shops are
this industrys largest market.
Before the governments Cash for
Clunkers program provided a muchneeded boost to the automotive sector,
the domestic automotive industry went
through a period of gradual decline,
culminating in its near collapse in early
2009. The ensuing decrease in demand
from automotive manufacturing
contributed to a 30.8% drop in
industry revenue in 2009. US
manufacturers struggled to adapt to
rising petroleum prices and
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Downstream demand
returning continued
environmental concerns, relying on the

American big-car legacy to generate
sales. Instead, US consumers shifted
their preferences from SUVs and other
larger automobiles to smaller, more
fuel-efficient automobiles. Japanese
manufacturers responded to these
changing consumer preferences by
aggressively increasing their market
share during this time. US manufacturers
also succumbed to relatively higher labor

and legacy costs. As a result of these
changes, automobile production has
fallen during the past five years, reducing
demand for machinery from this industry
in turn. Demand for new and
replacement manufacturing, metal
fabricating and other equipment related
to auto making fell accordingly, but
overseas demand has grown.
Export demand
remains solid
International trade represents an

important market for this industry. In the
five years to 2013, exports are expected to
decline at an annualized rate of 0.5% to
about $6.9 billion. Rapid
industrialization and population growth
in emerging and newly industrialized
markets, particularly China, have
supported demand for mineral and
energy resources. Consequently, these
trends inflated commodity prices and led
mining companies to invest heavily in
resource exploration. In particular,
strong activity in the coal industry
resulted in high investment in
metalworking machinery by mining
equipment and service companies. The
increased demand in machines used for

extraction helped bolster industry
revenue through demand for machines
that make drill bits and drilling
equipment. Also, the trade-weighted
index has favored overseas buyers, with a
depressed US dollar giving foreign
currencies more buying power than
during previous periods. Although
economic conditions are picking up and
improving circumstances for industry
exporters, the abundant supply of quality
foreign goods is expected to persist in the
period. Consequently, imports in the
five-year period to 2013 are expected to
grow at an annualized rate of 2.1% to
about $16.1 billion.
Profit and
participation
Industry profit (earnings before interest

and taxes) is expected to equal 6.5% in
2013, compared with 3.5% prior to the
recession. In 2008 and 2009,
profitability was hurt by reduced sales
volumes and higher steel prices, which
raised purchasing costs and the final
price of goods. This consequently sent
downstream markets in search of cheaper
machinery from foreign manufacturers.
In response, metalworking machinery
manufacturers sought to mitigate falling
sales and rising purchase costs by
reducing employee numbers and
lowering wage costs, helping profit
Higher
steel prices led

to higher-priced goods
and falling demand for
domestic machinery
margins rebound. In the five years to
2013, employment is expected to fall at
an annualized rate of 3.8% to 136,664
workers. Along with falling employment,
the number of industry operators has
declined in the five-year period at an
annualized rate of 2.8% to 6,495.
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Industry
Outlook

Manufacturing industry is expected to
grow moderately during the five years to
2018. If steel prices continue their ascent
and downstream markets opt for cheaper
imports, domestic producers will
continue to face intense competition.
Renewed demand from machine shops,
an upturn in automobile sales and a
relatively weak US dollar will contribute
to moderate growth. In 2014, the
industry can expect continued recovery
from recessionary lows, with revenue
forecast to grow 2.8% as the economy
improves and demand for machinery and
equipment rises. Moreover, rising export
sales will remain a key driver of revenue
growth. In the five years to 2018, revenue
is projected to increase at an annualized

rate of 1.4% to $32.1 billion.
Private investments
to grow
Stronger business conditions and better

access to credit will likely encourage
investment in new metalworking tools.
In turn, rising capital expenditure in the
manufacturing sector will raise demand
for this industrys machinery. Private
investment in metalworking machinery
is expected to grow at an annualized rate
of 2.0% in the five years to 2018. As
demand for the construction and
automobile sectors picks up, those
companies will likely invest in new
metalworking machinery crucial to their
operations. In addition, commodity
prices are forecast to plateau at high
rates over this time, which will keep
revenue for the mining sector high and
allow mining machinery companies to

invest in metalworking tools. Defense
and aerospace manufacturing are also
expected to provide another steady
source of demand for machine tools
during the next five years, as will a
forecast cyclical upturn in nonresidential
construction markets. Growth in all of
these downstream markets will
encourage machine shops, the industrys
primary market, to capitalize on new
and replacement machinery, in order to
meet higher demand. However,
increasing import competition is
expected to drive the number of industry
operators down at an annualized rate of
0.9% to 6,214.
Cars to help drive

demand
After years of volatility, the automobile

manufacturing industry can expect a
more optimistic future. IBISWorld
projects significant growth in the hybrid
and fuel-efficient car market. Many
automakers launched electric cars in
2012, underpinning strong demand for
machine tools and other metalworking
machinery to make related parts. In

particular, improvements in auto designs
will boost demand for metalworking
machinery capable of handling lighter
materials and thinner shapes. IBISWorld
expects demand from automobile parts
manufacturing to increase at an
annualized rate of 3.8% through 2018.
Revenue vs. exports

20
% change
10
0
10
20
30
40
Year 05
Revenue
07
09
11
13
15
17
19
Exports
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Trade to remain
crucial
IBISWorld projects the US dollar to

remain weak through the coming five
years, though it will appreciate relative
to the previous five years. The weak US
dollar will continue to boost exports,
stimulating industrial output and
manufacturing in general. Robust
demand from Asian markets and rising
energy prices are projected to drive
renewed investment across the mining
and energy sectors, underpinning
demand for metalworking products.
Exports are anticipated to grow at an
annualized rate of 1.2% through 2018
Profit to remain under Profit is forecast to be relatively stagnant

during the next five years. Companies
pressure
will have a difficult time passing along
higher steel prices to customers because
continued high levels of cheaper imports
compete directly with domestic
producers. As exports increase their
share of revenue and imports grow to
dominate domestic demand, companies
that lack foreign contacts will likely face
pressure to merge with better-connected
companies, or exit the industry entirely.
At the same time, the industrys
structural shift from a supplier of
Robust
demand from Asian

markets and rising energy
prices will support growth
and total an estimated $7.3 billion.
Meanwhile, imports are expected to
make gains as a share of domestic
demand, rising to about 44.1% in 2018,
up from an estimated 41.0% in 2013. In
the five years to 2018, imports are
expected to rise at an annualized rate of
4.0% to about $19.6 billion.
domestic markets to an exporter, will

likely constrain growth in employment
and wages. In light of persistently high
and rising steel costs, companies will
seek to streamline production processes,
which will limit the need for human
labor. In the five years to 2018,
employment is expected to be stagnant,
falling at less than 0.1% to 136,373, while
wages are expected to rise at an
annualized rate of 0.7% to about $8.3
billion. Companies will also likely
relocate manufacturing activities
overseas to lower operating costs.
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Industry value-added growth lags US GDP growth
Life Cycle Stage
Import penetration is increasing

The number of companies is declining
% Growth in share of economy
The emergence of 3D printing technology

is a threat to this industry
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic

importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Decline Industry

Revenue grows slower than economy
Falling company numbers; large firms dominate
Little technology & process change
Declining per capita consumption of good
Stable & clearly segmented products & brands
10
Quantity Growth
Many new companies;

minor growth in economic
importance; substantial
technology change
Aluminum Manufacturing
Machine Shop Services
Plastics & Rubber Machinery Manufacturing
Iron & Steel Manufacturing

Woodworking Machinery Manufacturing
-5
Decline
Shrinking economic
importance
-10
-10
-5
10
15
20
% Growth in number of establishments

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Industry Life Cycle

This
industry
is D
eclining
This industry is in the decline stage of its

life cycle. Growth in industry value
added (IVA), which measures the
industrys contribution to the US
economy, lags US GDP growth. During
the 10 years to 2018, IVA is expected to
decline 1.0% on average annually. In
comparison, US GDP is forecast to rise at
an average rate of 2.1% annually during
the same period. Further, falling
numbers of US companies and
increasing import competition are
detrimental structural changes to the
industry. The industrys reliance on
downstream markets negatively
impacted performance in the five years
to 2013. Additionally, the advent of 3D
printing technology is expected to
displace demand for this industrys
products moving forward.
During the 10 years to 2018, imports of

metalworking machinery are projected to
increase at an annualized rate of 3.1%.
Also, the number of businesses is forecast
to decline at an annualized rate of 1.8%
during the 10-year period, and
employment is expected to decline at an
annualized rate of 1.9%. Small and
medium-size firms have ceased operations
in the wake of weakened downstream
activity, and some of the larger firms in
the industry have attempted to merge and
acquire smaller players to increase market
share, but most of these are overseas
operations. The shifting focus of the
industry away from US-based production
and downstream markets has encouraged
operators to relocate their operations
overseas to be closer to consumers of
metalworking machinery.
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Products & Markets
Supply Chain | Products & Services | Demand Determinants

Major Markets | International Trade | Business Locations
Supply Chain
KEY BUYING INDUSTRIES

31-33
Manufacturing in the US
Metalworking machinery products are directly or indirectly used in the production of countless
end products in a wide variety of manufacturing industries
33271
Machine Shop Services in the US

Machine shops require metal-cutting tools and form a primary market for the industrys
products.
KEY SELLING INDUSTRIES
Products & Services
33111
Iron & Steel Manufacturing in the US

This industry supplies metalworking machine industry with steel bars, bar shapes and plates
(except castings, forgings and fabricated metal products).
33131
Aluminum Manufacturing in the US

This industry supplies cutting tool and machine tool accessory manufacturers with aluminum
and aluminum-base alloy sheets, plates, foil and welded tubing in their manufacturing
processes.
33149
Nonferrous Metal Rolling & Alloying in the US

This industry group supplies tungsten-carbide metal powders to cutting tool and machine tool
accessory manufacturers.
33231
Structural Metal Product Manufacturing in the US

This industry group provides other fabricated products (except fluid-power products and
forgings) to the metalworking machinery group.
33272
Screw, Nut & Bolt Manufacturing in the US

This industry group supplies metal bolts, nuts, screws, washers, rivets and other screw-machine
products to machine tool manufacturers.
33299b
Ball Bearing Manufacturing in the US

This industry supplies mounted and unmounted ball and roller bearings to machinery
manufacturers.
33531
Electrical Equipment Manufacturing in the US

This industry group supplies numerical controls for metalworking machinery.

IBISWorld estimates that special tools,
die sets, jigs and fixtures account for the
majority of industry revenue at 34.4% of
the total. This segment is made up of
many small players that are contracted
by metal- and plastic-casting operators.
Major casters include motor vehicle and
parts manufacturers as well as casters
supplying metal-fabricating industries.
Molds for plastic products are primarily
used by injection-molding
manufacturers. This segment has
begun to recover as demand from
automakers and construction
companies accelerates from

recessionary shocks.
Metal-cutting machinery
and forming machinery
Metal-cutting machinery includes metal
machining centers for shaping materials
through a cutting force or action.
Machining centers are typically
multifunction, numerically controlled
machines that act as lathes, grinders,
polishers, buffers, honers, lappers, bores,
drills, gear-cutting machines and others
with a cutting function. Metal-forming
machinery forms metal into shapes
through the use of machines that punch,
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Products & Markets
Products & Services

continued
Products and services segmentation (2013)
2.9%
19.3%
Cutting tool and machine

tool accessory manufacturing
Rolling
mill machinery
34.4%

20.4%
Industrial mold
manufacturing
Total $29.9bn
shear, bend, form and press metals
(excluding forging and die-stamping
presses). Parts and other forming
machinery are also included. The wide
variety of expensive and necessary
machinery commonly sold from this
segment help it command 23.1% of total
industry revenue.
Industrial mold manufacturing
Like the manufacturers of die sets and
jigs, downstream markets sometimes
require special molds to mass produce
goods. Unlike die sets and jigs, industrial
molds have a limited life because changing
product specifications will require a new
mold. This business segment comprises
20.4% of total industry revenue. An
improving automobile manufacturing
industry has positively impacted this
industry segment.
Demand
Determinants
23%
Metal-cutting and
forming machinery
accessories segment includes

metalworking attachments, bits,
inserts, tips, drills and shanks that can
be used in various machining centers
and mills. The versatility of this
product segment, alongside a wide
range of offerings and improving
downstream markets, have helped
drive its share of industry revenue
upward to 19.3%.
Cutting tools and machine

tool accessories
The cutting tools and machine tool
Other products
Other machinery includes rolling
mill machinery, special-purpose
assembly machines, synchronous
and nonsynchronous rotary- and
inline-transfer machines, separately
sold parts and miscellaneous
machines. The segment excludes
handheld and ultrasonic machinery.
Rolling mills include machinery that
rolls hot or cold metals into tubes
and other shapes, and this
segment makes up 2.9% of total
industry revenue.
Metalworking machinery is used across a

wide range of manufacturing industries,
including automotive, construction,
mining, defense, machinery, metal goods
and other consumer goods. Thus,

demand is determined by the level of
activity in these downstream markets.
The capital intensive nature of these
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Products & Markets
Demand
Determinants
continued
Major Markets
downstream markets indicates that

demand is influenced by economic
conditions such as business sentiment,
disposable income, unemployment,
population growth, interest rates and
capital expenditure. Because the
automotive and construction industries
play a large role in the metalworking
machinery downstream market, demand
for these industries influences
metalworking machinery manufacturers
margins and profitability.
The fragmented nature of the industry
ensures that price and quality
competition among market players is

fierce. As metalworking machinery
companies continue to move production
outside of the United States, domestic
operators will face increasingly tough
price competition. Furthermore, due to
the long-lived nature of metalworking
machinery, industry customers typically
do not need to continuously update their
machinery, which dampens industry
revenue growth. As technology and the
quality of metalworking machinery
improve, IBISWorld expects that the life
cycle of industry products will increase.
Major market segmentation (2013)
21.9%
Other markets
30.0%
Machine shops
23.1%
Exports
Total $29.9bn
Metalworking is the craft and practice
of working with metals to create parts
or structures. The term covers a wide
range of work, from large ships, bridges
and oil refineries all the way to jewelry.
Therefore, it includes a wide range of
skills and the use of many different
types of tools. Machines shops are
usually the primary destination for
metalworking machinery. In addition,
many economic sectors use
metalworking machinery to create
products, including manufacturers of
construction, automotive, and mining,
oil and gas equipment.
25.0%
Automakers
Machine shops
Machine shops, also known as tool and
die shops, employ skilled technicians
known as machinists. Machinists use this
industrys products to fabricate metal
shapes, molds and consumer goods from
raw inputs, usually steel, aluminum or
other alloys. Because machine shops exist
for the sole purpose of machining items
through the use of this industrys
equipment, IBISWorld estimates this
segment to dominate the market. As a
primary end consumer, machinists share
of the market is expected to remain
relatively steady at about 30.0%.
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Products & Markets
Major Markets
continued
Automakers
The automotive sector uses metalworking
machinery to manufacture metal chassis
that are used to build vehicles. US
automotive production recently declined,
with the Big Three automakers all facing
financial difficulties as a result of the
recession. In 2009, the government
worked with these companies to help them
restructure and focus on the manufacture
of more fuel-efficient vehicles. As the US
economy recovers from the recession, the
automotive sector is expected to grow as
consumer sentiment and access to
consumer credit improve.
Exports
Exports have been a significant market
segment for the five year period to 2013.
Growth in newly industrialized countries,
notably China, has spurred demand for
metalworking machinery. As populations
of emerging markets gain exposure to
capital and credit, the demand for items
such as automobiles is expected to
increase. According to data from the US
International Trade Commission, Mexico
and Canada are the top two destinations
for US-made metalworking machinery,
and China has increasingly become a
destination for exports, with an
annualized growth rate of 12.6% in the
five years to 2013.
Other markets
Construction, mining, oil and gas are
the dominant sub-segments of the
Manufacturing industrys downstream
markets. The construction sector uses
metalworking machinery to produce
heavy machinery and to fabricate metal
frameworks for walls and concrete
bases. As the US economy recovers from
the recession, housing starts are
expected to continue increasing in
the next five years, resulting in
increased demand for metalworking

machinery products.
Mining industries use a range of
metalworking tools to fabricate metal
structures for mine-specific jobs. A boom
in commodity prices increased
exploration and mining activity in the
United States until 2009, when prices for
many commodities plummeted and
mining activity slowed. IBISWorld
expects that demand from mining
operators will decrease moderately due to
sluggish commodity price recovery in the
five years to 2013.
Like mining, the oil and gas sector uses
metalworking machinery to fabricate
metal into structures that are used to
support drill heads and manufacture
pipeline. As the United States plans to
become less reliant on foreign countries
for its oil and gas supplies, more drilling
in America is likely to occur during the
next five years, resulting in an increase in
oil and gas industry revenue. During this
period, oil and gas are projected to create
the most growth for the industry. As
downward pressure in mining offsets
upward trends in oil and gas, this
segments share of industry revenue is
expected to remain relatively flat.
The other market segments that affect
the industry include agriculture,
automotive repair, defense, jewelers,
educational institutions and
manufacturing industries that fabricate
metal as part of their overall activity. In
particular, a growing trend of automotive
and motorcycle customization has
increased the technical needs of
customization shops. Increasingly, these
companies are investing in state-of-theart, high-dollar metalworking machinery.
Such investments allow these companies
additional flexibility for in-house
fabrication of customized parts. This
segments share of revenue is expected to
increase during the next five years.
WWW.IBISWORLD.COM
Products & Markets
Industry data reveals high levels of

international trade within the
industry. During the past five years,
exports have accounted for between
one-fifth and one-quarter of industry
revenue. Meanwhile, imports have been
gaining ground, consistently accounting
for well over one-third of domestic
demand during the period. The tradeweighted index helps determine trade
volumes across all industries.
International Trade
Level & Trend
xports in the
E
industry are H
igh
and S
teady
Imports
in the
industry are H
igh
and I ncreasing
Exports
Mexico, Canada and China represent key
export markets for metalworking
machinery made in the United States.
Mexico and Canada benefit from shared
borders with the United States, which
facilitate shipping and provide efficiency
for both sides of the supply chain through
lower costs and reduced transport times.
Also, the North American Free Trade
Agreement lowers regulatory pressures
between North American countries,
Exports To...
thereby further facilitating trade. Levels of

trade with Mexico and Canada have
remained steady since 2008. China,
meanwhile, has exhibited phenomenal
industrial growth during the past decade,
thus raising the countrys demand for
improved manufacturing capabilities.
Since 2008, industry-specific exports to
China have risen at an annualized growth
rate of 12.6%, now giving it an estimated
export market share of 13.1%, up from
8.2% five years ago. IBISWorld expects
that exports as a share of total industry
revenue will rise to 22.9% from 22.2% in
2008. A weaker dollar has influenced this
increase in exports, as goods manufactured
in the United States have become relatively
cheaper to foreign consumers.
Imports
Regarding imports, the Japanese have
long been noted as the worlds largest
producer of machining tools, with
companies like Makino, Nachi-Fujikoshi
and Fanuc leading the way. The
Imports From...
9%
China
9%
36%
Canada
5%
13%
All others
Germany
China
13%
Germany
15%
Canada
46%
All others
22%
Mexico
Year: 2013
Total $6.9bn
SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA
34%
Japan
Total $16.1bn
SOURCE: USITC
WWW.IBISWORLD.COM
Products & Markets
advanced technologies available in

Japans supply chain thanks to local
electronics industries help Japanese
manufacturers produce superior
products with the latest advancements.
Germany, Canada, and China round out
the top four importers of this industrys
machinery. Imports have been growing
at an annualized rate of 2.1%, with
Chinese imports growing at an
annualized 12.4% since 2008. Imports
as a percentage of domestic demand has
trended upward to 41.0% from their
2008 level of 37.1%. The five years
leading to 2013 have seen a great deal of
volatility in imports. In 2009, imports
dropped 35.2%, only to see jumps of
26.2% and 46.4% in 2010 and 2011,
respectively. As the effects of the
Industry trade balance

10
5
0
$ billion
International Trade
continued
5
10
15
20
25
Year 05
Exports
07
09
Imports
11
13
15
17
19
Balance
recession subside, these numbers are

expected to normalize as economic
conditions stabilize.
WWW.IBISWORLD.COM
Products & Markets

Business Locations 2013
West
New
England
AK
0.0
Great
Lakes
WA
ND
MT
0.8
Rocky
Mountains
ID
OR
0.9
West NV
0.2
2.9
SD
0.2
WY
0.2
MN
0.0
0.1
Plains
CO
0.6
KY
0.5
OK
0.6
NC
1.7
TN
AZ
NM
1.2
0.1
Southwest
TX
2.7
HI
0.0
Additional States (as marked on map)

1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.3
3.0
0.5
2.0
2.5
0.0
SC
Southeast
0.7
MS
AL
0.8
1.0
GA
1.0
0.4
LA
0.1
FL
1.8
Establishments (%)
0.7
0.4
AR
0.1
2.3
8.0
WV VA
0.7
1.2
2.0
CA
West
10.4
MO
KS
0.8
OH
4.6
8.8
6.0
IN
IL
0.3
UT
PA
16.8
1.2
0.2
1 2
3
NY
3.8
5 4
MI
4.8
IA
NE
0.1
WI
ME
MidAtlantic
9 DC
0.0
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
WWW.IBISWORLD.COM
Products & Markets
Distribution of establishments vs. population

50
40
30
20
10
Southwest
Southeast
Rocky Mountains
Plains
New England
Mid-Atlantic
Great Lakes
0
West
Across the country, the location of raw

materials and, to a lesser extent,
wholesalers and export markets (i.e.
ports) influence the location of
manufacturing establishments.
Companies located near sources of key
inputs and downstream markets benefit
from greater efficiencies in transport,
which helps improve profit. As a result,
tend to cluster in urban or highly
industrialized areas near downstream
manufacturing markets. According to
data from the US Census Bureaus
Country Business Patterns report, the
Great Lakes (45.4%), the Mid-Atlantic
(12.2%) and the Southeast (11.8%)
regions exhibit the highest
concentrations of industry locations.
Business Locations
Establishments
Population
Great Lakes
Overall, Michigan exhibits the highest
concentration of industry locations by
state, with 16.8% of the nations
located there. In particular, this region
exhibits a high concentration of
establishments due to its proximity to
automobile manufacturers and the
industrys largest export destination,
Canada. Furthermore, the Great Lakes
region has the highest concentration of
Iron and Steel Manufacturing
(IBISWorld report 33111). Because
both iron and steel are primary inputs
into the metalworking machinery
industry, this proximity is
advantageous to market participants.
Other states in the region with high

concentration levels are Ohio (10.4%),
and Illinois (8.8%).
Mid-Atlantic
After the Great Lakes, the Mid-Atlantic
region consists of the second highest
concentration of metalworking machinery
manufacturers at 12.2%. This is
attributable to a high concentration of
industrial centers, such as Pittsburgh, and
the high concentration of iron and steel
manufacturers. Port cities such as
Baltimore and New York City also provide
logistical efficiencies in international
trade that make it an attractive region for
industry participants.
WWW.IBISWORLD.COM
20
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks

Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration
in
this industry is L ow
Key Success Factors

IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
Concentration in the Metalworking

Machinery Manufacturing industry is
low. At an estimated 2.8% market share,
Kennametal is the largest industry
operator in the United States. This
industry is highly fragmented, with
more than half of all companies
employing fewer than 10 people. This
industry is fragmented due to the
specialized nature of downstream
markets. The variety of downstream
markets, such as automotive, airplane,
defense, construction, mining, energy
and gas, give smaller firms an
advantage by specializing in individual
product segments rather than
producing a vast array of machinery.
The number of enterprises operating in
the industry has declined at an
annualized rate of 2.8% during the five
Access to the latest available and most

efficient technology and techniques
Access to the latest technology is
required for companies to make
innovative improvements in product
capabilities and/or specifications in
order to meet downstream demands for
high quality products.
Proximity to key markets
Metalworking machinery manufacturers
benefit from being close to their main
downstream markets, such as in the
Great Lakes region of the United States,
where there is a high concentration of
automobile manufacturers.
Enterprises by employment size

No. of employees
Share (%)
0 to 4
5 to 9
10 to 19
20 to 99
100 to 499
500+
37.5
19.2
17.9
18.1
4.7
2.5
SOURCE: US CENSUS BUREAU
years to 2013. Furthermore, the

relocation of manufacturing operations
from the United States to countries
with lower operating costs has
encouraged concentration. For example,
only two of nine of Hardinges
manufacturing locations remain in the
United States.
cultivating and maintaining strong

customer relationships in a highly
fragmented market because
customers are spread across
several industries.
Effective quality control
Successful companies maintain detailed
and extensive quality control systems
that enable them to cultivate and
maintain important downstream
client relationships.
Having contacts within key markets

There is a distinct advantage in
Proximity to transport
Increasing levels of trade dictate that
industry companies establish themselves
in regions where key export markets can
be reached easily in order to minimize
transportation costs.
Profit
In 2013, Metalworking Machinery
Manufacturing profit margins are
expected to reach 6.5%, up from 3.5% in
2008. This increase can be attributed to

lower wage costs and greater labor
productivity (as measured by revenue
earned per employee) in the five years to
WWW.IBISWORLD.COM
21
2013. High levels of competition pressure

industry operators to compete via price
and quality for market share, but
improving technology enables workers to
be more productive.
Because the world price of steel and
iron are major cost inputs for
metalworking machinery products, these
are costs that confront every operator in
the industry. By reducing the overall
amount spent on labor, and increasing
the amount spent on high-precision
machines, companies can more efficiently
manage production. Notably, the
industry operated at a loss of 0.9% on
average in 2010 as sluggish demand
weighed on industry operators and the
world price of steel rose 16.0%.
Purchases
Purchases consistently account for the
majority of an average metalworking
manufacturing companys revenue. In
2013, purchases are expected to make up

40.0% of total revenue, a decline of 3.4%
from 2008. Raw materials used for the
manufacture of machining tools include
steel, iron, ore concentrates, compounds
and secondary materials containing
tungsten, tantalum, titanium, niobium
and cobalt. Many of these materials may
be supplied by sources outside the United
States. The raw materials market as a
whole is highly cyclical, and at times,
pricing and supply can be volatile due to
natural disasters, general economic and
political conditions, labor costs,
competition, import duties, tariffs and
currency exchange rates. This volatility
can significantly affect purchase costs.
Wages
Wages constituted 26.7% of total industry
revenue in 2013, down from 28.4% in
2008. The majority of wage and salary
costs are incurred in manufacturing
Sector vs. Industry Costs

Average Costs of
all Industries in
sector (2013)
100
7.7
10.4
80
Percentage of revenue
Cost Structure
Benchmarks
continued
Industry Costs
(2013)
6.5
Profit
Wages
Purchases
Depreciation
Marketing
Rent & Utilities
Other
26.7
60
59.9
40.0
40
20
2.6
2.8 1.5
15.0
3.0
3.0
0.4
20.4
0
WWW.IBISWORLD.COM
22
Cost Structure
Benchmarks
continued
because these positions often require

technical skills to operate the machinery.
The recession sparked a sharp downturn
in employment and wages in the industry,
as downstream demand from the
construction and automobile industries
sharply retracted. Industry employment
and wages plummeted 14.8% and 23.1%,
respectively, in 2009, coinciding with a
30.8% drop in revenue in the same year.
As general business conditions have
improved, demand for metalworking
machinery has encouraged companies to
slowly begin hiring more employees.
Furthermore, while wages still consist of a
sizeable portion of revenue, improved
technology has enabled workers to
become more productive.
Depreciation, rent and utilities
Depreciation is a proxy for the cost of
capital equipment over time. Capital
equipment includes all the machinery
necessary to manufacture metalworking
equipment. In 2013, depreciation is
expected to account for 3.0% of total
revenue, up from 2.8% in 2008.
Likewise, rent and utilities expenses are
Basis of Competition
Level & Trend
ompetition
C
in
this industry is
Highand the trend
is I ncreasing

Manufacturing industry has a high level
of competition. There are many small,
regional competitors, more than half of
which employ fewer than 10 people, that
compete with each other and imports of
industry products.
Internal competition
Internal competition stems from
vying for local and regional market
share. Quality, reliability, price, delivery
time, service and technological
characteristics are the main bases of
competition. Machine price, reliability
and performance are critical for
customers. Other important features
expected to reach 3.0% in 2013,

compared with 2.8% in 2008. Because
the industry is so fragmented and is
made up of many small operators,
these numbers reflect the large number
of smaller companies, which do not
typically expand beyond local regions
of operation.
Other costs
Other costs include temporary staff,
computer hardware and software,
communication services, repairs and
maintenance, and refuse removal
(including hazardous materials).
Combined, these costs are expected to
make up 20.4% of total revenue in 2013.
Temporary staff and repairs and
maintenance have increased their shares
of revenue. An increase in temporary
staff can help keep long-term wage costs
down, and after the recession, companies
needed to protect profit margins from
decreased demand and foreign
competition. Furthermore, rising steel
and iron prices encourage companies to
minimize expenses in order to bolster
profit margins.
include cutting accuracy, useful tool life,

the availability of replacement parts and
access to factory service and product
support. Product bundling is also
important to competitive success, as it
enables firms to capture market share by
further maintaining low prices and
developing quality relationships with
downstream buyers.
With changes in the types of ferrous
and nonferrous metals used in customer
industries, the introduction of improved
product designs and the acquisition of
product lines at different price points are
key to maintaining and increasing market
share. Furthermore, because of the
technical nature of the work required to
produce metalworking products, access to
WWW.IBISWORLD.COM
23
Basis of Competition
continued
skilled labor is key to remaining

competitive. In such a crowded market
space, companies must capture limited
regional market share from competitors.
The regional advantages of operators near
automobile manufacturers, for example,
are limited and advantageous. Therefore,
the limited markets of this industry,
mainly to machine shops and specific
industrial activities (e.g. auto
manufacturing, mining, construction),
encourage market participants to compete
in very segmented regional areas.
External competition
Although there are few substitutes for the
type of metalworking tools this industry
produces, imports form a large basis for
Barriers to Entry
Level & Trend
arriers to Entry
B
in this industry are

Lowand S
teady
Barriers to entry in the Metalworking

Machinery Manufacturing industry are
low. Employees operating within this
industry are not required to have a license
to operate, but a high level of engineering
and metalworking specialization and
skills are necessary. In some areas of this
industry, technical knowledge is a
medium barrier to entry. The highly
fragmented nature of this industry means
that product quality and reputation are
key in achieving success. As such, the
large concentration of firms around
industrial centers and manufacturers
encourages high levels of competition as
small firms compete for limited
downstream market opportunities.
Access to materials, notably steel
and iron, provide barriers to entry
external competition. Price-based

competition has increased due to lower
domestic demand and higher levels of
imports as a percentage of sales. The
percentage of imports to domestic
demand has increased steadily during the
past five years, now satisfying 40.3% of
domestic demand, up from 37.1% in 2008.
The ability of foreign manufacturers to
compete more aggressively on the basis of
price reflects operational efficiencies
achieved through lower wage costs, fewer
regulations and supply chain efficiencies
that lower costs. In turn, operational
savings are passed onto the consumer in
the form of lower product prices. Imports
are forecast to continue gaining as a share
of domestic demand.
Barriers to Entry checklist

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
Level
High
Low
Decline
Low
Medium
Light
Low
for firms that cannot negotiate

effective contracts with suppliers,
especially as imports increase in
importance in the industry. Firms
with global operations gain
advantages due to their exposure in
overseas markets.
WWW.IBISWORLD.COM
24
in
this industry is
Highand the trend
is I ncreasing
International trade is a
major determinant of
an industrys level of
globalization.
Exports offer growth
opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.
Trade Globalization
200
Going Global: Metalworking Machinery

Manufacturing 2002-2013
Global
Export
150
100
50
0 Local
0
equipment manufacturers are located in

Japan, Germany and China. Major
international businesses in this globalized
industry include Noritake and Toyoda
(both in Japan) and Klockner-Werke AG
(Germany). China has increased its share
of both imports and exports within the
industry. Furthermore, Chinese imports
increased at an average rate of 12.4%
during the five-year period to 2013, and
Chinese exports have increased at an
annualized rate of 17.0% over the same
period. The increasing importance of
emerging markets is apparent as
consumer demand, especially for
automobiles and construction, in these
markets influence production levels in the
United States and abroad.
Manufacturing
Import
40
80
120
Imports/Domestic Demand
160
200 Export
Exports/Revenue
Level & Trend

lobalization
G
Globalization in this industry is high and

increasing. In 2013, exports are expected
to account for about 22.9% of industry
revenue. Over the same period, imports
as a percentage of domestic demand are
expected to equal 40.3%, and imports will
increase at an annualized rate of 1.5%.
Due to the high levels of trade in the
industry, the trade-weighted index is a
key driving factor in industry
performance. Beyond levels of
international trade, the industry also
exhibits globalization through the
operation of offshore and outsourced
locations. For example, only 13 of
Kennametals 24 manufacturing locations
are located in the United States. The
majority of metalworking machinery and
Exports/Revenue
Industry
Globalization
Global
150
100
50
0 Local
0
2013
2002
40
Import
80
120
160
Imports/Domestic Demand
WWW.IBISWORLD.COM
Major Companies
There are no Major Players in this industry | Other Companies
Other Companies

Manufacturing industry is highly
fragmented, and there are no companies
that command more than 5.0% market
share. More than half of all companies in
this industry employ fewer than 10
people, while less than 5.0% employ
more than 100 people. Kennametal is the
largest company in the industry based on
its US manufacturing operations. Elmirabased Hardinge has an estimated share of
less than 1.0% of total industry revenue
because only one of its manufacturing
facilities is located in the United States.
Kennametal Inc.
Estimated market share: 2.8%

Founded in 1938, Kennametal Inc. is a
metalworking and tool production
company based in Latrobe, PA. The
company specializes in advanced
engineering and creating products for
manufacturing, mining, construction,
power generation and other industries.
The company employs about 12,900
people worldwide, of which 4,700 are
located in the United States. Just over
half of the companys industry-related
manufacturing occurs in the United
States, with the remainder of production
based in China, India, Germany, Israel,
Italy, Poland, Spain, the United Kingdom
and Canada.
In the five years to 2013, Kennametals
industry-relevant revenue is expected to
grow at an annualized rate of 1.4%. The

sharp downturn caused by the recession
negatively impacted Kennametals
performance over the five-year period
from 2008 to 2013. Although the
companys overall revenue has exceeded
its prerecession levels, the long-lived
nature of many of the companys products
burdens continued growth. However, due
to the companys size in relation to other
industry operators, Kennametal
maintains a competitive advantage in its
ability to attract larger clients.
The companys fortunes turned
dramatically when the economy entered
the recession, since demand from key
buying markets such as automakers and
construction declined significantly.
Industry-specific revenue declined an
estimated 20.1% in fiscal 2009. In March
2012, the company acquired an Indianabased materials provider, Deloro Stellite,
thus furthering vertical integration and
increasing economies of scale. IBISWorld
expects the company to generate an
estimated $846.7 million in industryrelevant revenue during 2013, which is a
decrease of 5.4% from 2012.
Hardinge
Estimated market share: Less than 1.0%

Since 1890, Hardinge Inc. has
manufactured machines used in the
industry. Based in Elmira, NY, Hardinge
Kennametal Inc. (industry-relevant segments) financial performance**

Year*
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Revenue
($ million)
(% change)
Operating Income
($ million)
(% change)
790.1
631.5
639.9
882.9
894.5
846.7
N/C
-20.1
1.3
38.0
1.3
-5.3
74.5
-31.5
31.7
118.2
136.1
96.9
N/C
-140.0
200.5
272.9
15.1
-28.8
*Year-end June, **Estimates

SOURCE: IBISWORLD
WWW.IBISWORLD.COM
Major Companies
Other Companies
continued
produces high-precision and general

precision turning machine tools.
Hardinge maintains manufacturing
facilities in China, Switzerland, Taiwan,
England and the United States. Of the 12
total properties owned by Hardinge, only
two are located in the United States. In
2012, about 75.0% of sales were to

customers outside of North America and
about 80.0% of products were
manufactured outside of North America.
Hardinge acquired Jones & Shipman and
Usach Technologies Inc. in 2010 and
2012, respectively.
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility

Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is L ow
The US Metalworking Machinery

Manufacturing industry has a low level of
capital intensity. IBISWorld estimates that
for every $1.00 spent on wages, industry
operators will spend $0.11 in capital
investment. This is an increase from
2008, when for every $1.00 spent on
wages operators spent an estimated $0.10
in capital investment. In the same period,
the total amount spent on wages as a
percentage of revenue has fallen 11.0%.
The negative shocks of the recession
forced a sharp contraction in demand for
metalworking machinery products, and as
a result employment dropped 14.8% in
2009. The industry has increased capital
expenditures by 12.0% since 2008.
Even though the vast majority of
capital expenditures in the industry is
Capital intensity
Capital units per labor unit

0.5
0.4
0.3
0.2
0.1
0.0
Economy
Manufacturing Metalworking
Machinery
Manufacturing
Dotted line shows a high level of capital intensity

on machinery, constituting 86.6% of

total expenditures, labor is an important
input into production. While production
Tools of the Trade: Growth Strategies for Success

Investment Economy
Recreation, Personal Services,

Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Metalworking
Machinery Manufacturing
Woodworking
Traditional Service Economy
Capital Intensive
Labor Intensive
New Age Economy
Iron & Steel Manufacturing

Aluminum Manufacturing
Machine Shop Services
Plastics & Rubber

Wholesale and Retail. Reliant

on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
Change in Share of the Economy
WWW.IBISWORLD.COM
Capital Intensity
continued
processes in this industry rely on

large-scale investment in capital
equipment, human labor is required to
operate increasingly advanced
machinery, as computer numerical
controlled (CNC) machines become
more widespread. Increasing price
pressure from imports stress the
importance of production efficiencies,
and by reducing wages, which have

decreased at an annualized rate of 2.3%
between 2008 and 2013, companies can
invest in high-precision machinery that
require less physical labor to operate.
Greater labor efficiency enables
operators to remain competitive, and
future investment in computer operated
machines is expected to continue.
Technology
& Systems
According to their annual reports, the

largest companies in the Metalworking
Machinery Manufacturing industry
increasingly outlay significant resources
for research and development (R&D). For
example, Kennametals R&D expenditure
from 2010 to 2011 grew 18.9%, and from
2011 to 2012, grew 15.0%, up to a total of
$38.3 million. Hardinge increased
spending on R&D in 2012 to $12.1
million, up 23.5% from expenditures in
2008. As such, IBISWorld estimates the
industry employs a medium level of
technology, with the largest operators
undertaking the most research and
development projects.
The major technological developments
in the industry have been the adoption of
computer-aided design and computeraided manufacturing (CAD/CAM) and
numerically controlled machine tools.
Larger companies in the industry tend to
have CAD facilities and lease CAM to
contract toolmakers. In the manufacture

of dies and molds, new-generation
computer-based technologies include
programs using CAD/CAM tools on a
computer and programmed into
numerically controlled milling machines.
The dies produced in this manner are
very accurate, and they reduce time and
labor costs. Conventional, manually
controlled tool-making techniques
inevitably result in asymmetry in the
dies, and heavy use and wear led to
production problems, scrapping and
added costs to subsequent processes.
New technologies, such as ultrasonic
machinery, can be used for the machining
of alternative materials, non-ferrous and
precious metals, ceramics and tungsten
carbide. With the increasingly
computerized nature of the production
process, employees are capable of
generating more revenue while producing
higher quality products.
Fluctuations in downstream demand,

price movements for raw materials and
credit markets contribute to high
volatility for the Metalworking Machinery
Manufacturing industry. During the
five-year period to 2013, the industry
experienced an average revenue volatility
of 18.2%. For example, in 2009, revenue
plummeted 30.8% as a result of the
recession. However, in the following two
years, revenue rose 13.3% and 15.9%,
respectively. As such, this average

revenue volatility figure is largely
influenced by the recession. Moreover,
downstream manufacturing, mining and
construction markets are highly cyclical,
with activity tending to follow general
conditions in the global economy.
Likewise, markets for raw materials
operate on a cyclical basis, and factors as
varied as natural disasters and labor
costs can send prices for raw materials up
Level
The level
of
Technology Change
is M
edium
Revenue Volatility
Level
The level
of
Volatility is H
igh
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or down unexpectedly. Exchange rates

also contribute to volatility in the
industry, impacting the relative
competitiveness of exports and imports.
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
The high level of trade in the industry,

especially in imports, makes exchange
rates an important factor in profitability
for companies that engage in trade.
Volatility vs Growth
1000
Revenue volatility* (%)
Revenue Volatility
continued
Hazardous
Rollercoaster
100
Manufacturing
10
1
0.1
Stagnant
30
10
Blue Chip
10
30
50
70
Five year annualized revenue growth (%)

* Axis is in logarithmic scale
Regulation & Policy

Level & Trend
he level of
T
Regulation is
Lightand the
trend is S
teady
Environmental standards
Companies are subject to various federal,
state and local laws and regulations
relating to the protection of the
environment. These laws and regulations
impose limitations on the discharge of
materials into the air and water.
Companies must comply with
Environmental Protection Agency (EPA)
regulations or risk the negative
consequences of monetary fines and loss
of reputation. Government regulation has
prompted most companies to develop
environmental, health and safety policies
and procedures designed to ensure the
proper handling, storage and disposal of
hazardous materials. These procedures
increase operating costs through
additional personnel and procedural costs
such as ongoing monitoring and testing.
Product standards
On an industry level, the National Fire
Prevention Association (NFPA) sets
standards regarding factory safety and

product limitations. The American
National Standards Institute (ANSI) then
coordinates these and other US standards
with international standards so American
products can be used worldwide. At the
same time, the International
Organization for Standardization (ISO)
coordinates with countries to define, set
and ensure standards between countries.
Product standards are set at three
levels: industry level (NFPA develops
these); national level (ANSI approves
these); and international level (ISO sets
these). Further, product standards fall
into three basic categories:
communication standards that define the
basic terms and symbols used to identify
product characteristics; design of
standards to establish dimensions,
tolerances or other physical
characteristics of products; and
performance standards that provide a
voluntary method of rating products.
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Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is L owand the
trend is S
teady

Manufacturing industry receives little
direct assistance. Trade associations
like the Association for Manufacturing
Technology (AMT, formerly the
National Machine Tool Builders
Association) provide education and
support services through sites online
and annual conferences. AMT also
works to lobby for favorable standards
and regulations that will enable
machinery made in America to be more
easily exported to overseas markets.
Indirectly, there are a number of tariffs
designed to increase the
Key Tariffs
Goods
Interchangeable tools
Interchangeable dies
Mold for metal/metal carbides
Low Rate High Rate

5.7
3.9
3
6.3
4.5
3.5
SOURCE: USITC
competitiveness of US-made machines

against the threat of cheaper imports.
These tariffs apply to several industry
facets, including dies, tools, molds
and carbides.
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Key Statistics
Industry Data
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Sector Rank
Economy Rank
Revenue
($m)
29,819.3
31,768.2
31,956.4
32,019.3
31,643.7
21,904.0
24,825.5
28,759.7
29,249.3
29,946.0
30,790.5
31,347.0
32,126.8
32,309.3
32,147.8
56/418
295/1305
Annual Change
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Sector Rank
Economy Rank
Revenue
(%)
6.5
0.6
0.2
-1.2
-30.8
13.3
15.8
1.7
2.4
2.8
1.8
2.5
0.6
-0.5
226/418
745/1305
Key Ratios
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Sector Rank
Economy Rank
IVA/Revenue
(%)
37.12
37.34
37.15
36.11
34.74
38.29
31.57
35.05
36.53
36.24
31.65
30.60
31.88
31.37
31.04
62/418
544/1305
Industry
Value Added
($m)
11,068.3
11,860.9
11,871.7
11,561.0
10,992.9
8,388.0
7,837.3
10,080.0
10,685.4
10,853.4
9,743.8
9,593.0
10,240.6
10,135.7
9,977.9
27/418
239/1305
Establishments
8,547
8,417
8,181
8,010
7,719
7,344
7,035
6,886
6,794
6,717
6,675
6,624
6,590
6,494
6,405
12/418
414/1304
Industry
Value Added
(%)
7.2
0.1
-2.6
-4.9
-23.7
-6.6
28.6
6.0
1.6
-10.2
-1.5
6.8
-1.0
-1.6
253/418
883/1305
Establishments
(%)
-1.5
-2.8
-2.1
-3.6
-4.9
-4.2
-2.1
-1.3
-1.1
-0.6
-0.8
-0.5
-1.5
-1.4
321/418
1081/1304
Imports/
Demand
(%)
29.06
29.50
32.37
36.86
37.06
36.02
38.81
44.44
45.21
41.04
41.20
40.24
40.90
42.12
44.05
108/388
116/447
Figures are inflation-adjusted 2013 dollars. Rank refers to 2013 data.
Enterprises Employment
8,240
175,797
8,111
174,183
7,890
173,681
7,736
167,558
7,480
165,650
7,124
141,179
6,833
129,404
6,678
137,300
6,565
136,399
6,495
136,664
6,454
137,465
6,408
137,681
6,373
138,638
6,297
137,768
6,214
136,373
11/418
16/418
360/1304
268/1305
Exports
($m)
5,818.6
6,378.1
6,990.1
6,438.5
7,013.0
5,200.0
6,126.2
7,049.0
7,038.2
6,851.4
7,238.3
7,273.4
7,419.8
6,960.8
7,267.7
45/388
53/447
Imports
($m)
9,832.3
10,624.6
11,948.2
14,936.1
14,503.6
9,402.4
11,862.4
17,367.3
18,326.5
16,074.0
16,502.6
16,207.2
17,098.9
18,447.9
19,591.7
32/388
35/448
Wages
($m)
9,935.2
9,923.0
9,666.7
9,383.7
8,999.3
6,920.5
7,216.7
7,865.5
7,906.7
8,008.5
8,144.9
8,224.9
8,355.8
8,353.3
8,290.2
13/418
198/1305
Domestic
Demand
33,833.0
36,014.7
36,914.5
40,516.9
39,134.3
26,106.4
30,561.7
39,078.0
40,537.6
39,168.6
40,054.8
40,280.8
41,805.9
43,796.4
44,471.8
45/388
52/447
World price
of steel
(Index)
147.2
159.7
174.2
182.9
220.6
165.2
191.7
216.2
208.0
196.4
192.3
196.8
200.6
205.6
214.8
N/A
N/A
Enterprises Employment
(%)
(%)
-1.6
-0.9
-2.7
-0.3
-2.0
-3.5
-3.3
-1.1
-4.8
-14.8
-4.1
-8.3
-2.3
6.1
-1.7
-0.7
-1.1
0.2
-0.6
0.6
-0.7
0.2
-0.5
0.7
-1.2
-0.6
-1.3
-1.0
298/418
252/418
1036/1304
950/1305
Exports
(%)
9.6
9.6
-7.9
8.9
-25.9
17.8
15.1
-0.2
-2.7
5.6
0.5
2.0
-6.2
4.4
325/388
369/447
Imports
(%)
8.1
12.5
25.0
-2.9
-35.2
26.2
46.4
5.5
-12.3
2.7
-1.8
5.5
7.9
6.2
375/388
429/448
Wages
(%)
-0.1
-2.6
-2.9
-4.1
-23.1
4.3
9.0
0.5
1.3
1.7
1.0
1.6
0.0
-0.8
211/418
799/1305
Domestic
Demand
(%)
6.4
2.5
9.8
-3.4
-33.3
17.1
27.9
3.7
-3.4
2.3
0.6
3.8
4.8
1.5
369/388
418/447
World price
of steel
(%)
8.5
9.1
5.0
20.6
-25.1
16.0
12.8
-3.8
-5.6
-2.1
2.3
1.9
2.5
4.5
N/A
N/A
Exports/
Revenue
(%)
19.51
20.08
21.87
20.11
22.16
23.74
24.68
24.51
24.06
22.88
23.51
23.20
23.10
21.54
22.61
140/388
156/447
Revenue per
Employee
($000)
169.62
182.38
183.99
191.09
191.03
155.15
191.84
209.47
214.44
219.12
223.99
227.68
231.73
234.52
235.73
346/418
754/1305
Wages/Revenue
(%)
33.32
31.24
30.25
29.31
28.44
31.59
29.07
27.35
27.03
26.74
26.45
26.24
26.01
25.85
25.79
22/418
380/1305
Employees
per Est.
20.57
20.69
21.23
20.92
21.46
19.22
18.39
19.94
20.08
20.35
20.59
20.79
21.04
21.21
21.29
335/418
529/1304
Average Wage
($)
56,515.19
56,968.82
55,657.79
56,002.70
54,327.20
49,019.33
55,768.76
57,286.96
57,967.43
58,599.92
59,250.72
59,738.82
60,270.63
60,633.09
60,790.63
143/418
424/1305
Share of the
Economy
(%)
0.09
0.09
0.09
0.09
0.08
0.07
0.06
0.08
0.08
0.08
0.07
0.07
0.07
0.06
0.06
27/418
239/1305
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Jargon & Glossary
Industry Jargon
COMPUTER-AIDED DESIGNThe use of computer

technology for the design of real and virtual objects;
abbreviated CAD.
JIGA custom-made tool used to control the location
and/or movement of another tool
IBISWorld Glossary
BARRIERS TO ENTRYHigh barriers to entry mean that

new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITYCompares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
LATHEA machine used for shaping a piece of material,

such as wood or metal, by rotating it rapidly along its
axis while pressing a fixed cutting or abrading tool
against it.
INDUSTRY REVENUEThe total sales of industry goods

and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
EMPLOYMENTThe number of permanent, part-time,

temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
LIFE CYCLEAll industries go through periods of growth,

maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
ENTERPRISEA division that is separately managed and

keeps management accounts. Each enterprise consists
of one or more establishments that are under common
ownership or control.
NONEMPLOYING ESTABLISHMENTBusinesses with

no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
ESTABLISHMENTThe smallest type of accounting unit

within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
PROFITIBISWorld uses earnings before interest and tax

(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
DOMESTIC DEMANDSpending on industry goods and

services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EXPORTSTotal value of industry goods and services sold

by US companies to customers abroad.
IMPORTSTotal value of industry goods and services
brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
VOLATILITYThe level of volatility is determined by

averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
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Metalworking Machinery Manufacturing in the USSeptember 2013 1

Transition metal: Demand will strengthen, but

IBISWorld Industry Report 33351

2 About this Industry

20 Market Share Concentration

20 Key Success Factors

32 Jargon & Glossary

20 Cost Structure Benchmarks

Key External Drivers

10 Industry Life Cycle

12 Products & Markets

28 Technology & Systems

12 Products & Services

29 Regulation & Policy

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Metalworking Machinery Manufacturing in the USSeptember 2013 2

About this Industry

Companies in this industry primarily

The primary activities of this industry are

coil handling equipment, and wire

Manufacturing special dies, tools, die sets, jigs and fixtures

33321 Woodworking Machinery Manufacturing in the US

For additional information on this industry

Metalworking Machinery Manufacturing in the US September 2013

Annual Growth 08-13

Annual Growth 13-18

Demand from machine shop services

Revenue vs. employment growth

Products and services segmentation (2013)

Key External Drivers

Demand from machine

Demand from automobile

Cutting tool and machine

Special tool, die, jig and

Life Cycle Stage

Metalworking Machinery Manufacturing in the USSeptember 2013 4

Executive Summary | Key External Drivers | Current Performance

In the five years to 2013, the

machinery. In 2009, industry operators

2009. As manufacturing industries

Demand from machine shop services

Demand from automobile engine

demand across downstream

Key External Drivers

Metalworking Machinery Manufacturing in the USSeptember 2013 5

manufacturing is expected to increase

Since the metalworking machinery

Demand from machine shop services

Key External Drivers

Metalworking Machinery Manufacturing in the USSeptember 2013 6

The Metalworking Machinery

Prior to 2008, growth for the Machine

advantages, however, are unlikely to

for machine shop

Metalworking Machinery Manufacturing in the USSeptember 2013 7

environmental concerns, relying on the

also succumbed to relatively higher labor

International trade represents an

increased demand in machines used for

Industry profit (earnings before interest

steel prices led

Metalworking Machinery Manufacturing in the USSeptember 2013 8

The Metalworking Machinery