Pumps & Systems, June 2007
The globalization wave, outsourcing surge and the sizzling economies in Asia-Pacific - particularly India and China - create an attractive picture for investments in the pumps market. With its seemingly limitless supply of low manufacturing cost benefits and the favorable investment climate, the Asia-Pacific region has an immeasurable amount of potential.Indeed, the perception is that every factory closing in America or Europe is destined to reopen in India or China. However, Vietnam is expected to be one of the fastest-growing economies in Asia and is now considered the next low-cost alternative for manufacturers.
The pumps market in Asia-Pacific is currently witnessing a positive trend that is being driven by huge investments in related processing industries - especially in the water, wastewater and oil and gas industries. Increasing investments in water treatment, and the development of the chemical and oil and gas industries, are expected to provide potential revenue growth for this market over the next seven years.
Propelling Growth: Key Market Drivers
- Growing Demand for Energy Stimulates Market Growth Rate: The growing demand for energy, especially in the oil and gas, chemical and power industry, presents new business opportunities for manufacturers. Customers expect their equipment to have a longer life and higher reliability in industrial applications. This factor is driving this market to produce higher-performance pumps and optimum utilization of resources.
- Improving Economic Scenario Boosting Development: The overall pumps market is being greatly influenced by recent developments in Vietnam, Indonesia, India and China. The Asia-Pacific region is projected to remain the fastest-growing market and is most likely to remain an attractive economic region, given its lower labor costs, cost-effective land, and good geographical location.
- Industrial Expansion and New Construction Activity: The globalization of the pumps market and the need for all manufacturers to work more closely with their customers has resulted in the expansion of production facilities. Industrial and residential construction in these regions will continue to witness a strong growth in sales revenues. Demographic forces have also contributed to strengthening the housing demand, which is mainly driven by population growth.
- End-user Demands for Increased Quality and Reliability Increases Revenue: In most end-user industries, pump applications are highly price sensitive and as a result, manufacturers now focus increasingly on product quality and energy costs. This is most obvious in the cases of national key projects or foreign-invested mega projects. Hence, pump manufacturers must make considerable efforts to improve their quality and reliability by applying new materials, such as super stainless steel, zirconium and graphite.
Table 1 highlights some of the key trends and investments by major participants in the Asia-Pacific pumps market during 2006-2007.
Company | Trends |
Flowserve Corporation (U.S) | Flowserve set up a new pumps manufacturing facility in Tamil Nadu, India and Suzhou, China in April 2007. The new facility will support their existing operations in Asia-Pacific and provide pumps products for oil and gas, power and chemical industries. |
Grundfos A/S (Denmark) | Grundfos is currently building a new facility in Suzhou, China. The new facility will produce large-scale wastewater pumps and is expected to be fully operational in 2008. A research and development team focusing on wastewater solutions will also be located at the facility. |
KSB Group (Germany) | KSB secured one of the largest orders exclusively for valves in November 2006 for one of the biggest seawater cooling plants in the world, which is being built in the industrial city of Ras Laffan in Qatar on the Persian Gulf. |
Ebara Corporation (Japan) | In 2006, Shandong Boshan Pump Science & Technology Co., Ltd (SBPST), based in China, established a joint venture company with Ebara to improve its productivity, product innovation and increase its market presence. |
Table 1. Pumps Market: Recent trends by major Asia-Pacific market participants, 2006-2007.
Battleship: Competition
This pumps market remains highly fragmented, with tier one market participants possessing more than two-thirds of the market share in 2006. Most domestic manufacturers are privately-owned enterprises. With global market maturity and intensifying competition, the strategy of growth by acquisitions and mergers is being increasingly pursued by major market participants. In addition, due to increasing competition, a certain number of small manufacturers serving niche markets are expected to exit this market.
The threat from new entrants tends to be high, whereas the threat from new product application tends to remain low. New entrants typically are multinational pumps manufacturers that have witnessed rapid growth in Asia-Pacific and have a strategy to increase their presence in India and China.
Figure 1. Chemicals being unloaded from a cargo tanker at a marine dock using canned hermetic pump motors. The growing demand for energy in the chemical industry presents new business opportunities for manufacturers in this region. Photo courtesy of Peerless Electric Motors
Technology within this pumps market has not witnessed any significant change and lags behind the North American and European markets. The few technical improvements made by manufacturers mainly focus on new body material, extending the life span and improving the reliability of pumps. The major competitive factors in the market include energy costs, value-added services, prompt delivery, brand image, and price.
Conclusion: Never a Closed Door
The world pumps market continues to be mature and is dependent on the Asia-Pacific market, which is currently in the growth stage as demonstrated by its high economic growth and new construction activities in the pipeline. Due to market characteristics such as limited technology and capital, domestic pump manufacturers will be constrained to serving the medium-end and low-end markets. However, multinational companies see tremendous business opportunities in the high-end market and have planned on mega projects.
The end-user industries, such as water and wastewater treatment, chemicals and petrochemicals, and power generation are expected to offer more investment opportunities for revenue growth. With increasing competition, small-sized pump manufacturers are expected to either merge or be acquired, or be forced out of the market. As a result, market consolidation is expected to increase.
The growth opportunities in the Asia- Pacific pumps market will continue to be fast and furious through 2013.