Development of the machine tool market in Turkey and Bulgaria

MachinesTechnical ArticlesSouth-East European INDUSTRIAL Мarket - issue 4/2021 • 03.11.2021

In 2021 the global machine tool market looks quite different from the early forecasts made by analysts during the previous decade. One of the main reasons for this, among many other natural business causes, is a large-scale event of international significance that no one could predict, giving rise to long-term consequences for both the most advanced and the emerging economies in the world.

Undoubtedly, this is the coronavirus pandemic, which rearranged the global market and affected all industry sectors in each and every country. Bulgaria and Turkey are no exceptions. Having strong traditions in the manufacture and trade of metalworking machines, these two countries are also facing the challenge to restore the stability of their domestic markets and develop new strategies for the foreign ones in order to return to their pre-pandemic economic sustainability. A number of limiting and stimulus factors are driving the current development of this dynamic segment in the two neighboring states. The ongoing technological evolution due to Industry 4.0 and the growing demand for automated machines and systems in more and more branches and enterprises (which in turn are also looking to invest in highly efficient means to increase productivity and competitiveness) on a global scale is among the leading drivers of the slow but steady market recovery, noticed by analysts.

 

Global challenges and trends

Among the industries severely affected by the COVID outbreak is the machinery sector and in particular – the machine tools segment. After 2018, when the global machine tool market reached an all-time high, followed quite a long period of stagnation, numerous lockdowns at a national level, closure of factories and plants and termination of entire productions.

But the economic effects of this pervasive crisis are far from only negative, market studies indicate. Experts note that as a result of global measures to prevent the spread of the outbreak, many companies have restructured their production to meet current demand trends, increased their level of digitalization and automation, and continue to look for effective ways to turn economic difficulties into competitive advantages.
Today market analysts begin to register the first results of the continuous efforts to redirect the potential of the industry to working models that generate higher growth in sales of metalworking machines.

According to a recent research by Markets and Markets, post COVID-19, the global machine tool market size is projected to reach USD 68,9 billion by 2021 from an estimated USD 65,6 billion in 2020, at a CAGR of 5,0%. Another survey, conducted by the same agency, adds that the global machine tools market is projected to grow from USD 77,0 billion in 2019 to USD 98,3 billion in 2027 at a CAGR of 3,2% during the forecast period. The growing manufacturing industry and technological advancements in machine tools, such as multi axis and robotic arms, are some of the major factors driving the growth of the machine tool industry globally, experts note.
“Primary industry users like automotive, aerospace and defense, railways, capital goods, and consumer durable sectors have a high demand for machine tools. The automotive industry is adopting the integration of technologies such as AI, IOT, robotics, etc., which will serve the demands of the end users. The growth in different vehicle segments across the globe is expected to drive the demand for machine tools”, the report further explains.

 

Innovation, digitalization and smart industry developments

Investment in innovation in many parts of the world continues to grow despite huge economic and social losses, according to this year’s edition of the Global Innovation Index, produced by the World Intellectual Property Organization (WIPO). According to the Global Innovation Index 2021, North America and Europe continue to dominate innovation.
Bulgaria (35) this year climbs five places in the ranking compared to 2019 and two places compared to 2020. The country ranks second among 34 middle-income countries and 23rd among 39 economies in Europe.

Turkey ranks 41st. Together with Vietnam and India, it is among the only three countries that are systematically advancing and have the potential to change the balance of power in the field of innovation, WIPO experts comment.
The report “Regional Circular Economy Status Quo – Bulgaria 2020”, conducted under the Interreg Europe programme, adds more information regarding the modernization in the sector, oriented both to improvement of the market positions of the companies and to meeting the standards of circular economy.

“In pursuit of sustainable change in the machine building industry in Bulgaria the companies are developing innovative solutions for machine tools as well as for production processes. Digitalization of the industry is also very important factor to increase the sustainability of the sector. Circular models demonstrated by the companies include technology and innovations powered by the evolution of Industry 4.0. State-of-the-art technologies such as the Internet of Things (IoT) and machine learning increase in accuracy of machine tool frames, the usage of mechatronics and recycling of components and equipment, reverse logistics are supporting the circular economy practices”, the document says.

As an emerging economy, Turkey also aims towards the development of more high-tech products with high added value, shows the “Turkey’s Smart Manufacturing Roadmap”. Whereas more economically advanced countries see smart industry developments as an opportunity to increase their competitiveness, for Turkey they provide opportunities to increase the share of high technology products in the total volume of production. With a full application of Industry 4.0 concepts, the Turkish production industry is expected to achieve a productivity growth between 5 – 15% in the upcoming years.

 

Machine tool market in Bulgaria

Bulgaria’s strategic geographic location in Southeastern Europe and its European Union (EU) membership provide locally-registered companies with a market of more than 500 million potential clients, according to a current report by SeeNews – the business Intelligence platform for Southeast Europe. The key advantages of the country and its machinery sector include: well-educated, experienced and affordable workforce; existing infrastructure for the needs of the machine building industry; easy access to large markets such as EU, Russia and the Middle East; proximity to the automobile clusters in Central and Eastern Europe; significant number of technical universities and colleges; transfer of know-how from major machine-building international companies, operating in the country; financing under EU structural funds, etc.

Bulgaria has a lengthy history and experience in the machinery sector, dating back to 1948, when the industry began to grow rapidly. In the period 2000 – 2009 the machine building sector marked a steady growth with major foreign companies entering the Bulgarian market. The industry was hit by the global economic downturn but in 2011 it started to recover with foreign investments gathering pace, the SeeNews report adds.

In 2017, the machinery sector generated total revenue of BGN 3,282 billion, contributing nearly 4,0% to the country´s gross domestic product. The sector employed more than 30 000 people, or almost 6,0% of the total for the manufacturing industry, data shows.

The Manufacture of machinery and equipment sector in Bulgaria was represented by 984 companies at the end of 2017, compared to 972 in the previous year. Today most of the nearly thousand companies in the industry are based in the capital Sofia, followed by Plovdiv and Stara Zagora, both in southern Bulgaria. As a whole, Bulgaria exports machinery to 158 countries.

“During the period 2013 – 2017, the number of foreign companies on the Bulgarian market increased considerably, due to the favorable business conditions for the foreign investors in the country. The Bulgarian machinery sector is export-oriented due to the weak local demand and the high number of subsidiaries of foreign companies. The EU member states accounted for 74,2% of the Bulgarian machinery exports with the main markets being Germany, Romania and Italy”, reports says.
According to the National Statistical Institute (NSI), today the import-export assortment of Bulgaria in the segment of metalworking machines includes the following subcategories:

  • Metalworking machines, removing material and operating by laser or other beams, ultrasound, electroerosion or similar methods; water jet cutting machines;
  • Machining centers, aggregate machines – single-position and multi-position, for metal processing;
  • Lathes with metal removal;
  • Drilling, scraping, milling or threading machines for metalworking;
  • Machines for cutting, sharpening, grinding, polishing or other finishing operations for metal-working;
  • Scraping, shaping, gouging, broaching, gear-cutting and other metal-cutting machines;
  • Machines (including presses) for winding, bending or straightening metal;
  • Machines (including presses) for drilling or notching metal;
  • Other metalworking machines operating without material removal;
  • Parts and accessories for metalworking machines.

 

NSI’s current reports show that the import and export of machinery, equipment and vehicles, including machine tools, to and from third countries by sectors of the Standard Foreign Trade Classification has increased significantly in the period January – August 2021 compared to the same period the previous year. Statistics say that the export (FOB) in 2020 amounted to BGN 2052,9 million and to BGN 2459,8 million in 2021 which indicates a 19,8% rise. The import of the same group of goods in 2020 amounts to BGN 2879,0 million and in 2021 it’s BGN 3708,2 million. Here the growth is even more pronounced – as much as 28,8%. The data are an expression of a stable positive trend of market recovery after the COVID crisis, which is the result of purposeful joint efforts both at the national and at the industry level.

 

Turkey and its machine tool market

Turkey is a natural land bridge, connecting European, Middle Eastern, African, and Central Asian markets, giving the country excellent geographical and economic advantages. This key global position and its central location create an efficient and cost-effective export hub and market for major trade partners.
According to Market Prospects – a knowledge platform established for industry, dedicated to providing all new knowledge about machine tools, to find tight opportunities, the Turkish government actively encourages foreign export-oriented companies to engage in production activities in 19 free zones, 322 organized industrial zones, and 56 technology development zones.

Automobile manufacturing, aerospace products, and general industrial equipment are among the most significant branches of the engineering industry. These departments, together with the subcontractors who supply them, constitute the customer base for machine tool supply. Therefore, it is usually regarded as a strategic department of a country.

The Turkish manufacturing market has many advantages. The country is in an established customs union with the European Union and has signed free trade agreements with nearly 30 countries. The workforce is young and can speak multiple languages. In addition, there is a continuous improvement of onshore and offshore logistics infrastructure. Plus, the domestic market is relatively large, and the number of young middle-class people who use technology is constantly increasing.
The development of the Turkish machinery industry began in the 1960s. Since the early 1990s, the Turkish machine tool industry has been able to meet new market demands.

During this period Turkish machine tool manufacturers have been working hard to produce better innovative machine tools with higher technology. At present, Turkey relies on Turkish-made machine tools, and is the 12th largest manufacturer among the world’s 28 top machine tool manufacturers, global rankings show.

“By 2019, the machinery manufacturing industry had already accounted for 4,5% of Turkey’s overall manufacturing industry. It is now able to produce machinery and high-quality parts and accessories at competitive prices, with more than 1000 manufacturers”, Market Prospects further informs.

According to a report by the Ministry of Economy in the Republic of Turkey, today the Turkish machine tools industry manufactures and exports various kinds of machine tools including; CNC and conventional machining centers, lathes, milling machines, grinding machines, bending machines, bordering machines, honing machines, presses, shears, press breaks, CNC brakes, CNC cutting machines, profile cutting machines, band saws, seaming machines, welding machines (MIG-MAG, TIG-WIG), planning machines, thicknessing machines, rip saws, resawing machines, CNC/conventional gear hobbing machines, spindle molding machines, corner notchers, calibrating and polishing machines, chamfering machines for stones, trimming machines for stones, splitting machines, log carriages, dust sucking machines, parts and components of machines tools (electronic components, computer controls, CNCs, NCs, cam switches, tool holders, chucks, load lifting magnets, magnetic chucks, mandrels, hydraulic cylinders and spare parts, bar feeders for CNC lathes, tooling dies, universal frames/cabinets, CNC cabinets, work benches, material cabinets, tool cabinets etc.) and other metal, stone, glass, wood and plastic processing machines.

The Turkish machine tools industry exports a large number of high-tech machining centers as well as metal-forming type machine tools. Machine tools that are exported are mainly metal-forming types.
The Turkish machine tools industry exports its products to more than 150 countries worldwide. Among the main export destinations are Germany, USA, Russian Federation, Poland, Italy, Spain, Algeria, Canada, France, Iran, Bulgaria and Saudi Arabia. Turkish machine tool manufacturers keep a careful eye on international trends in manufacturing quality, safety and environmental practices.

 

Import and export statistics

According to customs import and export statistics, from January to November 2020, Taiwan’s exports to Turkey amounted to USD 970,18 million, an increase of 4,8% from USD 925,37 million in the same period in 2019. Of the top five export products, only machinery showed an increase in exports. Machinery products export value reached US 333,22 million, an increase of 55,3% from the export value of USD 214,48 million in the same period in 2019. This was the main growth driver for Taiwan’s exports to Turkey, published data shows.

In addition, according to the statistics made by The Machine Tools Industrialists and Business Association (TЭAD), from 2015 to 2019 the production and export of domestic machine tools has gradually grown, showing that in Turkey, the machine tool industry has gradually become internationally competitive.
According to market analyses, in the first half of 2020, due to the impact of the COVID-19 epidemic in Turkey, many factories stopped working. The production and exports of domestic machine tools experienced a significant decline of 1 to 20% compared with the same period in 2019, while imports have shown slight growth.

After factories gradually resumed work in June 2020, the situation gradually improved in the second half of the year. In the first half of 2020, the top 10 export markets for Turkish machine tools were mainly European and American countries. In the first half of 2020, Taiwan took the lead in importing machine tools from Turkey, accounting for 17% of Turkey’s machine tool exports, followed by Germany (13%), Japan (11%), Italy (11%), China (10%), and South Korea (10%). In terms of Turkey’s machine tool imports, Taiwan’s machine tool exports to Turkey in the first half of 2020 reached USD 78,35 million, an increase of 35% over the same period in 2019, surpassing Germany to become Turkey’s largest source of machine tool imports, reports show.

The Turkish government has set an aggressive goal to develop the country into an economy with a gross domestic product (GDP) of USD 2 trillion by 2023. The continuous development of the Turkish economy and the rapid improvement of transportation have attracted international manufacturers interested in relocating production activities to the local area for development.

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