Bottlenecks curb growth for German machinery makers

Germany’s mechanical engineering sector is upbeat about its performance in 2021 so far and about the prospects for 2022. Large-scale plant builders, especially, have recently secured major orders. However, companies are concerned about a shortage of steel and other materials for their purposes, Kallanish hears from their federation, VDMA.

For the current full-year 2021, the association confirms its forecast of real production growth of 10% compared to the previous year. “Without the material shortages, even higher growth would be possible,” says VDMA president Karl Haeusgen. “As is the case in all industries, the supply chain difficulties for some preliminary products will continue to be felt for some time. But order books are still well filled, and we expect sales from these orders to be booked with some delay.” For 2022, VDMA expects a further increase in production of 5% in real terms.

An exceptionally high contribution from large-scale plant business filled the order books of the machinery engineering industry in September. Orders in this month increased by 65% in real terms year-on-year. Orders from abroad almost doubled. VDMA does not specify if this includes orders for metallurgical plant builders, which are represented in its division for large-scale plant building, AGAB (ArbeitsGemeinschaft GrossAnlagenbau).

While a singular month could be an outlier in this business, an upward trend has indeed been seen throughout the year. In the first nine months of 2021, plantbuilders recorded a real increase in incoming orders of 36% y-o-y. In the three-month period from July to September, the order increase was up to 50% y-o-y.

One development addressed with concern by VDMA is the drifting apart of the two economic powers USA and China. Almost half of German mechanical engineering companies source components from China or the USA that are critical for their own production. These are primarily electronic components and parts, but also raw materials such as steel and castings. “There is a risk here of being pressured by China or the USA in the event of trade disputes,” Haeusgen observes. “Companies therefore know they have to act.”

In a survey, one third of the companies polled say they intend to opt for a “forward strategy”, meaning they will increase their own investments in the USA and China, for example, by setting up or expanding local production.

Christian Koehl Germany