Europe’s machine tool builders said their exports totalled 18.8 billion Euros in 2012, 9% more than the last record set in 2008. Germany remained the world’s largest single international supplier to the sector, according to the country’s engineering federation VDMA.

Cecimo, Europe’s association of machine tool builders, said it expects production this year to reach a level similar to the one in 2012, when output grew 6% to 22.2 billion Euros.

The association noted that European machine tool producers are becoming increasingly dependent on exports, adding that it estimates European machine tool demand will be stable this year.

In Germany, the country’s exports of machine tools comprised 16.1% of all international trade in such goods, making the nation the world leader, according to the VDMA. It noted that global exports rose nearly 8% to some 931 million Euros.

According to Cecimo, the deteriorating business confidence in Europe has been leaving its mark on machine tool consumption: European machine tool consumption contracted about 2% in 2012 compared to the previous year, it said.

The machine tool sector has, since the crisis in 2008-2009, suffered from the tightening credit availability and increasingly restricted access to financial resources, Cecimo explained. The economic uncertainty suppresses investment activity of companies and, at the same time, the financial institutions apply lending criteria that exclude small and medium sized machine tool enterprises from their portfolios, because of the highly cyclical nature of their performance. The seriously limited access to credit plays an important role in contracting domestic demand and places high pressure on the machine tool sector.

Sluggish consumption in Europe is becoming a worrying trend for machine tool builders based in the area even despite the market success that they enjoy in emerging markets, Cecimo said, In some places, especially in some southern European countries, the export-output ratio hit 100%, last year. Export operations imply generally higher costs for manufacturers, thus over-dependence on exports create high pressure on profit margins.

Cecimo President Martin Kapp warned of other consequences from weak demand at home. “A dull domestic market leads, moreover, to the rupture of vital links between suppliers and their traditional customers, disrupting the innovation cycle. Innovation in the machine tool industry thrives in a strong eco-system in which producers interact closely with customers. SMEs who are the major drive of innovation and who rely heavily on the European market are particularly affected.” He added that restoring growth in domestic consumption will be vital for ensuring that future innovations continue to come out of Europe.