gas%20metal%20welding.jpgEngagingChina saw this coming while back, but now we hear it from the horse's mouth.

Europe's machine tool sector, hard hit by the recession, is increasingly worried that Chinese companies will take advantage of the weak conditions to acquire European rivals and so obtain advanced technology.

Rafael Idigoras, director general of Soraluce, a Spanish machine tool firm, told Spanish newspaper Diario de Gupuzcoa that Asia was one of the few bright spots for western manufacturers of machine tools.

But Asia and particularly China now posed a growing competitive threat. In 2004, Shenyang Machine Tool Group purchased German machine tool maker Schiess and Idigoras fears that other small European manufactuers are now in China's sights. He said:

Consumption will pick first in Asia, especially China and India, so we should direct our efforts there. But what is happening is that these countries, especially China, are becoming major producers of machine tool technology. In principle, it is quite basic technology but Chinese groups are buying companies in Germany, so they can now start to have access to advanced technology. Therefore, it is likely that the competition will become tougher in the coming years.”

Due to the role as “enabling technology”, machine tools have traditionally been a very cyclical sector, with clients deciding to postpone their investments in durable capital goods in periods of economic downturn or lack of business confidence.

European producers account for 44% of the world's production of machine tool but the sector is highly fragmented with around 1,400 players, most of them SMEs.

As a result of the weak demand in end user markets, European consumption of machine tools is expected to drop between 30% and 40% in 2009.

While the sector is used to vagaries of economic cycles, it has not had to contend with competition from China before, because Chinese manufacturers were not seen to have the technological skills.

Indeed, until 2007, China was a net importer of machine tools, mostly from Europe. The tables have now turned, however, and Chinese manufacturers are now seeking to aggressively expand into overseas markets.

More on Europe's machine tool sector on the website of Cecimo, the European trade body.