Tool industry on a recovery course – but uncertainty factors are increasing
After tool sales in 2019 rose slightly compared to the previous year by 2.1 percent to approx. EUR 5 billion, the impact of the Corona pandemic also hit the German tool industry severely from spring 2020.
The current FWI survey for the period January to September 2020 shows dramatic declines in new orders compared to the same period of the previous year: In the case of domestic orders, 47 percent of companies reported a slump of more than 10 percent and for foreign orders 51 percent of the companies. Even if the assessments of the current situation are better from month to month depending on the respective target sectors, these losses can no longer be compensated by the end of 2020.
In September 2020, the FWI business climate increased by more than 70 points in the fourth month in a row, reaching -4.1 points. The low point in April 2020 was -77 points. The curve still shows a V-shaped course. This trend was predicted by the positive balance of expectations in the FWI surveys since May 2020. By comparison, it took almost a year during the financial crisis in 2008/2009 for the FWI business climate to return to the neutral zero line after a similarly low fall as in 2020.
In September 2020, only 24.6 percent of the companies rated the current situation “unsatisfactory”. The share of tool manufacturers with short-time work fell from 70 percent in the meantime to about 51 percent in September.
The pointer of the FWI economic watch has been in the quadrant of the upswing period since May 2020 due to the positive balance of expectations. The positive expectations over the past few months have been reflected in an improved assessment of the current situation and has thus proved true: The balance of assessments of the current situation has improved again by 7 points since August 2020 and is now at -13 points.
But the crisis has not yet survived: In September 2020, the expectations of the companies were again worse than in the previous month: Only 20.6 percent of the companies (three percent less than in August) expect economic recovery in the next six months. Over 60 percent of the companies expect no changes and approx. 18 percent expect a deterioration in the business situation.
Further uncertainty caused by political influences in important export markets such as the USA and Great Britain will certainly contribute to this. The 2020 unusual or postponed trade fairs also lack an important marketing tool.
Moreover, the economic situation of the individual companies is strongly influenced by the situation in the respective target sectors. Tool manufacturers, who have specialised in the automotive and aviation industry, suffer particularly in the current and certainly medium term. Suppliers of the crafts and the construction industry, however, are doing better.
German tool exports and imports
According to projections by the FWI, tool exports in 2019 still reached the value of around EUR 4 billion, 1 percent higher than in the previous year. Mainly due to the pandemic, exports fell below the previous year’s figure by 13 percent in the 1st half of 2020.
Tool imports in 2019 amounted to 2.4 billion euros and exceeded the previous year’s level by 2.8 percent. In the 1st half of 2020, they decreased by 10 percent.
USA is the main exporting country
The most important exporting country is the USA. Tool exports to the USA increased by 10 percent in 2019 compared to the previous year and accounted for 8.9 percent of the total exports of tools. In the 1st half of 2020, exports to the USA decreased by 15 percent.
Since October 2019, punitive tariffs from the USA have been in force on some core grades such as pliers, screwdrivers and axes. The imposition of punitive tariffs on industries that have not benefited from the EU’s subsidisation of Airbus, but in particular their limitation to German tools, violates the spirit of free and fair world trade. Customs duties lead to a significant decline in exports to the US and to financial losses by tool manufacturers, which are all the more important in view of the other uncertainties in the markets and the pandemic. After hopes of an early end to the punitive tariffs have been shattered, some of the investments already planned have been and will be reduced by the producers concerned. This, in turn, has an impact on suppliers and on the long-term competitiveness of producers.
Consequences of Brexit for the German tool industry
Over the past ten years, the UK has climbed from tenth place to sixth of the most important export partners for German tool manufacturers, with a share of total exports of 5.2 percent.
In 2019, they increased by 9.5 percent year-on-year to Germany’s tool exports to Great Britain and reached a value of EUR 209 million. This increase can partly be explained by the fact that companies have increased their stocks in order to bridge resolution problems after a disorderly Brexit.
In the 1st half of 2020, exports to the United Kingdom fell by 23 percent, significantly more than total exports.
As negotiations between the EU and the UK continue, there is still uncertainty and uncertainty about the rules in force from 2021 onwards in many areas. The main concerns are problems and delays in the practical implementation of customs formalities and import controls.
Tool distribution under Corona conditions: Trade fairs are missing
The restrictions imposed by Corona on the classic ways of sales and customer contact have significantly accelerated the trend towards digitisation. According to a survey by the Federal Statistical Office, mailing and internet retail grew by about 21 percent from January to July 2020. This order of magnitude certainly also applies to the tool trade.
Classic ways of approaching customers such as trade fairs and customer visits are mainly missed by smaller companies, which are often unable to successfully carry out their own offers such as in-house trade fairs.
Around 110 tool and dowel manufacturers with production in Germany are organised at the FWI. The tool industry generated sales of 5.0 billion euros in 2019 and employed around 32,400 people. Maintaining the wide variety of German manufacturers, designing fair competition and strengthening Germany’s production location are the main objectives of the association.
In addition, there are 50 extraordinary members of the FWI. Some of these are industrial companies close to the tool and its distribution channels, but also service providers and foreign companies.
Stefan Horst, Managing Director FWI
Elberfelder Str. 77
Telephone number: 02191 438-21
Fax: 02191 438-79