Machinery Sector Picks Up
August 29, 2014
Business has picked up for Polish companies producing machinery. After a disappointing 2013, the results of the first few months of this year in the sector inspire optimism.
Last year was not the best for Polish companies that deal with the production of machinery and heavy equipment, usually for other industries. The slowdown in Europe, including in the Polish economy, resulted in reduced investment by companies in new machines. The results of the downturn were particularly evident in the first half of the year, when the declines in the production of machinery and equipment in Poland exceeded 10 percent in some months, and the sector as a whole recorded an 8-percent drop. In the second half of the year, the situation began to improve and the decline decelerated to around 1.5 percent. Throughout the year, the value of production sold by the sector dropped by around 6 percent compared with 2012. This confirmed the opinion that demand for various types of machinery and equipment is one of the barometers of the economy. According to Poland’s Central Statistical Office (GUS), in 2013 production decreased in product groups such as industrial engines, agricultural machinery (including tractors) and construction machinery. On the other hand, the number of machine tools produced, for example, increased.
This year the situation looks much better. The pronounced recovery in the Polish economy (the country’s GDP grew 3.3 percent in real terms in the first quarter) was reflected in a clear upturn for domestic companies producing machinery.
The first quarter saw an almost 14-percent increase in sold production; in March the increase was around 20 percent in year-to-year terms. This offers hope for a lasting improvement in the sector.
Statistics show that the decline in production recorded in the last several years is primarily due to lower sales on the domestic market. Increasingly stronger on the Polish market are foreign companies, mainly those from Western Europe, which account for more than 75 percent of Poland’s total machinery and equipment imports. The largest imports are recorded in product categories such as engines and turbines, pumps and compressors, metalworking machines and farm machinery. Meanwhile, Polish producers must look for opportunities to sell their products abroad to compensate for their being crowded out from the domestic market. Exports have become the key sales channel for many Polish producers. In some market segments, exports account for 70 percent of total sales.
“Old” EU countries absorb just over half of Poland’s total machinery and equipment exports. Germany is still the main market; last year it was responsible for nearly 25 percent of the total value of Polish machinery and equipment exports. However, non-EU markets have gained the most importance in recent years. Last year, the second-largest foreign market for Polish producers was Russia, with a share of around nine percent. Other important destinations for Polish products were Ukraine and Belarus.
The Ukraine crisis, however, has caused a sharp decline in demand from Eastern European partners. And it’s hard to predict if the former trade ties can be rebuilt. Luckily, there is a chance to increase Polish exports to various European Union countries whose economies have improved markedly. According to experts, the recovery on the European market will be accompanied by a marked improvement on the domestic market, where the demand for various types of machinery and equipment is expected to grow as a result of better macroeconomic data, accompanied by improved business sentiment among Polish companies.
Although competition in the industry runs high, Poland can be an important player on the global market if it proves able to take advantage of its primary strength—a large number of well-educated workers.
Regional director at Trumpf Polska:
Demand for innovative machines for the processing of sheet metal—based on both laser and conventional technology—has grown on the Polish market for years.
In recent years, this demand has stabilized and significantly increased thanks to funds from the European Union and the growing awareness of Polish industry about the need to have modern machinery.
Trumpf Polska has been offering machines and automatic systems for sheet metal working on the domestic market for many years.
Benedykt Sikora, CEO of Asbud:
There is currently a standstill on the Polish market for construction machinery. While things are a bit better than last year, the kind of buoyancy seen just a few years ago is still a long way off. This situation is the result of the fact that infrastructure projects, including road projects, have been cut back in Poland. What poses a problem for the sector is the small number of tenders for construction work. In addition, it is foreign companies that are better positioned to secure financial guarantees and loans, as a result of which they are usually able to secure bigger tenders. Most often these companies do not buy the machinery and equipment they need in Poland. They prefer to bring used equipment from abroad for their projects.
Fortunately, there are many indications that the situation in the construction industry, and consequently in the construction machinery segment, should improve in the future. At least some of the projects being prepared for this year will be carried out by small and medium-sized Polish companies, which will be working as subcontractors, for example. And in order to be able to carry out contracts companies will have to renew their machinery.