Ukraine war to impact engineering production in Germany

  • Industry News
  • Mar 26,22
The war in Ukraine will have a significant impact on mechanical and plant engineering. According to the latest VDMA flash survey, 85% of companies see the war as a serious or noticeable risk to their business. The VDMA is therefore lowering its production forecast for 2022 to plus 4% in real terms.
Ukraine war to impact engineering production in Germany

The war in Ukraine will have a significant impact on mechanical and plant engineering and will once again exacerbate the difficulties in supply chains that have not yet been overcome. According to the 13th VDMA flash survey among its member companies, conducted at the beginning of March, 85% of the almost 550 participants see the war as a serious or noticeable risk to their business. The focus here is particularly on the indirect effects: almost 80% of the machinery and plant manufacturers expect serious or noticeable consequences, for example, from a further increase in energy prices, the general uncertainty amongst customers or the devaluation of the rouble. When asked about the direct effects of the Russian aggression, 45% of the companies speak of serious or noticeable effects due to the sanctions, the postponement of projects or generally lower turnover in Russia or Ukraine. 

Karl Haeusgen, President, VDMA, "For the mechanical engineering sector, doing business with Russia is not existential, but companies will have to pay a price for the Russian war of aggression, which cannot be justified by anything.”

The priority for many companies now is to ensure the safety of their employees in Ukraine and also in Russia. At the same time, they must also prepare for further gaps in the supply chains. This runs through the entire production process up to delivery and commissioning. "More than ever, therefore, there is a need for a quick peace agreement while preserving Ukraine's territorial integrity. This is all the more true as both countries play a very important role in supplying the world with foodstuffs such as grain and are dependent on deliveries from German and European mechanical and plant engineering," Haeusgen emphasised.

Production up 6.4% in 2021
According to revised figures from the Federal Statistical Office, production in the mechanical and plant engineering sector in Germany increased by 6.4% in real terms in 2021. This is almost in line with the VDMA economists' estimate. For the current year, however, the Ukraine war - in addition to other risks such as inflation, new waves of pandemics or the China-USA dispute - poses risks to further economic development that cannot be assessed. Trade disruptions and the sharp rise in energy prices will at least slow down the economic recovery.  Russia ranks only ninth in the export ranking of German mechanical engineering products (Ukraine: 31st, Belarus: 53rd). But all three countries together account for an export volume of 7.0 billion euros (2021). "In all likelihood, we will have to cut back significantly on this, to the point of a virtual standstill. Our survey also shows that the indirect consequences of the war in Ukraine, i.e. the mutual sanctions, the breakdown of business relations and the fundamental changes in geopolitical and economic conditions, are even more serious," explained Haeusgen.   

Weak fourth quarter of 2021 shows in the forecast
As a consequence, the VDMA economists are correcting the previous annual forecast for real production growth. "Instead of the originally expected growth of 7% in real terms, we now only anticipate a production increase of 4% for the current year," says the VDMA president. The decline is due on the one hand to the comparatively weak fourth quarter of 2021. As a result, the mechanical engineering sector started 2022 from a lower base, which slows down the growth rate. Added to this are the direct consequences of the war and the already noticeable uncertainty among machinery and plant manufacturers and their customers. Full order books should prove supportive. This forecast does not cover extreme scenarios such as the expansion of warlike actions to other countries, the consequences of which cannot be foreseen.

Persistent bottlenecks in the supply chains 
According to the survey, the predominant problem for companies in the machinery and plant engineering sector is disrupted supply chains. 32% of the companies see themselves confronted with serious difficulties here, 42% speak of noticeable obstructions. However, the very current development of the war and its consequences have probably not yet been reflected in this assessment. Consequently, the companies surveyed are pessimistic about the next three months. The majority of respondents (53%) expect the difficulties in the supply chains to worsen, while another 43% expect the situation to remain tense. 

Relief for electronic parts not expected until the fourth quarter of 2022
Supply bottlenecks are mainly registered for electronic components (52% serious, 28% noticeable) and for metal products (10% serious, 44% noticeable). Supplies for their own production arrive at the factory significantly delayed: in the case of electronic components, 31% of the companies report an extended waiting time of at least six months, for another 30% of the companies it is three to six months late. For metal products, about one in three companies is waiting one to three months longer, another 21% are waiting at least three months. Subject to the consequences of the war, bottlenecks are not expected to ease for metal products in particular until the second half of the year. In the case of electronic components, two-thirds of the companies do not even expect the situation to improve until 2023. As a result, 82% of the companies now have production backlogs, for example unfinished end products that cannot be completed and delivered due to a lack of materials. "Half of the companies surveyed report a backlog of up to one month's production. This shows the great challenges facing medium-sized industry again this year," said Haeusgen, President, VDMA. 

A good three quarters of the companies have learned from recent experiences and are critically reviewing their supply chains. Most of them want to ensure their supply security in the future through a broader supplier network, changed procurement principles or increased warehousing. A different geographical distribution of suppliers also plays a role in many companies. "The fact that 84% of the machine-builders surveyed nevertheless expect an increase in sales this year shows their resilience and ability to adapt to all crises again and again," Haeusgen sums up.

Courtesy: VDMA

Related Stories

Gears, Motors & Drives
Schaeffler offers innovative solution package for robotics industry

Schaeffler offers innovative solution package for robotics industry

Two precision strain wave gear series for lightweight robots and cobots ensure extensive market coverage.

Read more
Gears, Motors & Drives
Gleason to show innovative hard finishing solutions at GrindingHub 2022

Gleason to show innovative hard finishing solutions at GrindingHub 2022

Gleason’s hard finishing experts will be at the booth to discuss specific applications and answer any questions.

Read more
Gears, Motors & Drives
Schaeffler's centrifugal disc ball bearing bags innovation award

Schaeffler's centrifugal disc ball bearing bags innovation award

A ball bearing with integrated centrifugal disc from Schaeffler combines the benefits of two bearing designs for the first time. The bearing ensures lower CO2 emissions and greater range for electri..

Read more

Related Products

Double Helical Gears

GEARS, BEARINGS, BELTING & MOTION CONTROL PRODUCTS

S G Gears manufactures a range of or double helical gears.
Read more

Request a Quote

Preicision Deep Groove Ball Bearings

GEARS, BEARINGS, BELTING & MOTION CONTROL PRODUCTS

Rohit International offers precision deep groove ball bearings. 

Read more

Request a Quote

Quality Helical Gears

GEARS, BEARINGS, BELTING & MOTION CONTROL PRODUCTS

Sri Dhanalakshmi Gears offers a superior quality range of helical gears. 

Read more

Request a Quote

Hi There!

Now get regular updates from IPF Magazine on WhatsApp!

Click on link below, message us with a simple hi, and SAVE our number

You will have subscribed to our Industrial News on Whatsapp! Enjoy

+91 84228 74016

Reach out to us

Call us at +91 8108603000 or

Schedule a Call Back