The recovery of global manufacturing will be muted this year, with ongoing semiconductor shortages, rising freight costs and growing worker scarcities continuing to create problems for manufacturers, market intelligence firm Interact Analysis states.
In its latest Manufacturing Industry Output Tracker, the organisation forecast global output would hit $41.9-trillion, compared with $39.3-trillion in 2020.
The contraction in 2020 was smaller than initially anticipated, Interact Analysis reports.
The semiconductor shortage is having substantial impact on the global automotive manufacturing industry. As automotive manufacturers in 2020 scaled back production in preparation for an expected collapse in demand for vehicles, they reduced their orders for microchips. However, the automotive slow-down was not as severe as had been feared, leaving vehicle factories unable to meet demand because their stocks of semiconductors were depleted. Demand for semiconductors then boomed as car factories suddenly ramped up orders.
Interact Analysis predicts that the semiconductor market will suffer a steep dip in 2023 as the supply situation normalises.
Rising freight rates have also significantly impacted the manufacturing sector. The cost of shipping a 40-ft container from China to the US east coast in July 2021 increased by five times, compared with July 2020, reaching a high of $20 000. There are multiple reasons for this, including staff shortages, saturated ports, soaring demand in certain sectors such as electronics, and Delta variant outbreaks.
Interact Analysis says that, with no end in sight to inflated freight rates, manufacturers are likely to look for solutions that are closer to home in the long run.
Having taken a damaging hit during the pandemic, as factories cut back on investment, the machinery sector slumped by 18% in 2020 in the face of the knock-on effects of a decline in investment from automotive and aerospace customers. However, many machinery sectors fared better, with the market for semiconductor and electronics machinery growing by 8% in 2020. By 2025, all manufacturing sectors will have recovered to 2019 levels, and some segments, such as the metallurgy machinery market, will reach the 2019 mark this year.
The global machinery market, which is currently worth $1.98-trillion, will increase to $2.11-trillion in 2021.
“While short-term machinery growth will be patchy, and highly sector dependent, I do believe that the pandemic has provided an important long-term boost for machine builders. The reason being that the experience of having to cope with large numbers of workers needing to social distance and self-isolate in 2020 has caused many manufacturers to look at how they will cope with similar events in future, and industrial automation clearly offers an important solution for companies trying to respond to these problems,” says Interact Analysis CEO Adrian Lloyd.
“Interestingly, we also predict non-manufacturing machinery segments to achieve a compound annual growth rate of 3% to 4% between 2021 and 2025, of which the mining and farming machinery markets will achieve the highest growth of 5.3% and 5.1%, respectively.”