The energy market - primarily oil and natural gas but also sustainable sources such as hydroelectric and geothermal - is one of the key markets that continue to generate solid demand for valves and actuators around the world and will do so for the foreseeable future.
Two reports released on Sept. 2 from consultant Frost & Sullivan present optimistic forecasts in key parts of the world. Reasons for the positive outlook in energy include countries promoting increased exploration activities offshore and in other areas and commitments to the rebuilding of infrastructure.
Also driving investments is the development of natural gas reserves in an effort to promote the fuel as a cleaner energy alternative to coal and thereby reduce air pollution and solve other environmental concerns in cities and heavily industrial areas.
In China, the oil and gas industry was the largest user of industrial valves and actuators in 2013, accounting for 25.5 percent of revenues for valve suppliers, according to a report titled "Analysis of the Chinese Valves and Actuators Market." That amounted to revenues of $4.35 billion for suppliers last year. Revenue growth is projected to reach $7.89 billion in 2020 - an 81 percent surge in just seven years.
If these figures are on target, China accounted for 22 percent of all global revenues for valve and actuator makers last year, and if current trends continue, the nation could be responsible 30 percent in 2018, based on data from the other Frost & Sullivan report released this week, "Strategic Analysis of the Global Industrial Valves and Actuators Market." The global valve and actuator market was worth $19.51 billion in 2013, across all end-use markets, the report states, and could reach $25.95 billion in 2018 - a 33 percent increase.
The global report's inclusion of data from all major end-use industries makes China's burgeoning demand for equipment in the energy industry that much stronger.
The global data tell an interesting story of demand trends, as well as constraints on supply. The author, Niranjan Paul, identifies water and wastewater installations as major users of valves and actuators in Asia-Pacific, Africa, and Latin America. Desalination plants, in particular, are integral to plans for dealing with "rapid urbanization in these regions [and water scarcity" and will be relied upon to "provide purified and potable water" for growing numbers of people.
Paul argues that greater demand for process equipment in these regions will raise demand for "wireless monitoring and advanced valve-condition monitoring capabilities." Consequently, manufacturers and other suppliers will need to provide such capabilities and, logically, have the expertise to support these technologies in these markets.
In regions around the world dealing with economic downturns, end-users will prefer maintenance of existing equipment over investments in new valves and actuators. The aftermarket business will be busy in these regions. Valve and actuator brands will also rely on a strong aftermarket demand to raise margins in areas with "aggressive pricing strategies," Paul added, especially in Asia-Pacific.
China, of course, has for many years been producing low-cost valves for end-users in North America, Western Europe, and other high-labor-cost regions. Chinese suppliers could thus be in a position to direct much of their equipment-making capacity to throughout the Asia-Pacific region, even though Chinese manufacturing labor costs continue to rise.
China, in any event, has the potential to absorb a great deal of valve equipment manufacturing capacity - both domestically and from foreign suppliers that import into its markets. According to the Frost & Sullivan report, 30 to 50 major national energy projects involving new hydroelectric and thermal power plants have been in the pipeline from 2011 to 2015, writes author Zi Ning Chong.
Modernization of infrastructure is also playing a role in valve and actuator demand. This has presented opportunities for end-users to procure the latest technologies in hardware and controls to "reduce energy consumption and overcome ... challenges such as resource shortages ..." Chong notes.
China is, and will probably always be, a challenging business environment. The market is fragmented, regulations are spotty or nonexistent, price pressure reduces margins, and many local companies knock off the designs of high-end valves and actuators, which erodes product confidence among buyers.
Chong advises that equipment manufacturers must leverage the quality and reliability of their valves and actuators and promote "integrated solutions and technological advancements" to "specific [market segments ... to steer ... businesses forward."
China State Councilor Yang Jiechi and U.S. Secretary of State John Kerry inspect exhibits in Beijing detailing joint U.S.-China energy projects. Credit: U.S. State Department