World demand for valves to reach $94bn through 2015 [Oil & Gas News]

WORLD demand for industrial valves is expected to increase 5.4 per cent per year to reach $93.5 billion in 2015, says a new forecast. Gains will be driven by continuing robust growth in the Asia-Pacific region, as well as strong recovery in the US and West European markets from a weak 2010 base.

In the developing world, especially in China and India, valve suppliers will gain from rising urbanisation.

Additionally, valve demand growth in the US will outpace the global average through 2015 due to recovery in the domestic economy after the 2007-2009 recession.

In Japan and Western Europe, valve demand will also recover from recent declines, but advances will continue to considerably lag the world average through 2015, says the World Industrial Valves, a new study from The Freedonia Group, a Cleveland-based industry research firm.

According to the study, the oil and gas industry will see strong growth in valve demand, with increasing offshore, shale and tar sand related exploration activities helping boost sales of higher-end products.

Among the countries that will record robust increases in the unconventional oil and gas sector are Brazil, Canada, Nigeria and the US.

The nuclear power market for valves will see weak gains in the developed world in the aftermath of the 2011 Fukushima disaster in Japan, predicts the study.

Weakness in the nuclear power generation sector will be offset by increasing valve sales to coal-fired and combined cycle natural gas power plants.

Another trend highlighted in the study is that the global market for automatic valves will outpace that for conventional valves, due to the continuing efforts of process manufacturers to improve operational efficiencies.

The strongest gains will be registered in sales of separately sold automatic actuators, which are used together with standard valves to allow for automated valve functions, and are less expensive than automatic control and regulator valves with actuators pre-installed.

Nevertheless, conventional valves will account for 54 per cent of world valve demand in 2015, with suppliers benefiting from the lower cost of these products relative to highly engineered automatic valves, the report says.

TAPPING MIDEAST MARKETThe future outlook for the Middle East region is mostly bullish, even as the world faces the threat of a second recession due to the debt turmoil in Europe.

Its large number of industrial projects and efforts to localise the supply chain provide good growth potential for the Middle East's valves and actuators market.

This refers more likely to the 2012 scenario, however, when growth rates are expected to reach pre-downturn levels.

The year can expect only slow to medium growth, owing to the continuing tight-credit situation and the scaling down of projects due to excess global capacities and low world demand.

The future outlook is mostly bullish, nevertheless, even as the world faces the threat of a second recession due to the debt turmoil in Europe, according to research and consultancy firm, Frost & Sullivan.

Industry experts believe so, as opportunities for valves, which control the flow or pressure of fluid, and actuators (which convert energy into motion) are guaranteed whenever and wherever the need to control, isolate or protect industrial processes arises.

For Tyco Valves & Controls, for example, the main growth opportunities with regard to its products lie in the oil and gas, construction and process industries, says Christophe Melinette, managing director, Tyco Flow Control Middle East.

Melinette adds that these industries include HVAC&R and building services projects and large-scale applications, such as district cooling systems. He says the company's operation in major industry sectors "enables us to apply our knowledge and experience to the Gulf market."

O&G, NON-O&GThe Gulf Arab nations, particularly Saudi Arabia, will propel industry growth in the Middle East, whose industrial valves and actuators market is seen to earn $2 billion by 2016 from over $1.2 billion in 2009.

And whilst future growth in this market will continue to depend largely on the oil and gas industry, large-scale infrastructure development and rapid industrialisation mean there is tremendous opportunity as well in the non-oil and gas market.

In a summary of its report, titled "Middle East Industrial Valves & Actuators Market", Frost & Sullivan says other industrial sectors, such as power and water desalination, are seen to drive market development.

Egypt is a huge market as well, says Dubai-based Fadi Alameddine, managing director of FlowLine Controls, citing the country's various ongoing and planned projects on waterworks, infrastructure, climate control and oil and gas.

But he says it is mainly Saudi Arabia that will drive the industrial valves market, to feed the demand of its waterworks and other sectors involving oil and gas, food and dairy, pharma and petrochemicals.

"We're increasing our investments in the region," Alameddine says. Already, FlowLine has branches in Saudi Arabia and Qatar, had invested for a laboratory in Dubai and still wants to consider other Gulf markets.

Control valves ... focus is on safety manufacturing

"We haven't had much time to look into Oman," he stresses. "At this stage, we should be looking probably into Kuwait and Oman."

Other markets in the rest of the Middle East (ROME), which had previously been shunted by investors, such as Iraq, may also present immense potential for market growth in the future.

"These changes, along with changing commercial dynamics, could affect the competitive structure of the market, as companies from South Korea, India and China increase their local presence," Frost & Sullivan says in its report.

LOWPriced VALVESThe study, which enumerates the other ROME countries it has covered as Iran, Yemen, Syria, Jordan and Lebanon, stresses it was the recent recession that facilitated the popularity of low-price valves in the Gulf and the wider Middle East region, as end-users have become sensitive to cost.

Most of these inexpensive valves come from China and India.

And the growing competition from low-cost valve and actuator companies is where the major near-to long-term issues will arise, the study says.

Other factors that will have significant effect upon current market dynamics are: "the low impetus on oil exploration in Saudi Arabia due to the existing surplus, the moratorium on gas exploration in Qatar and the politico-economic instability in Iran and Iraq, amongst others".

New market entrants that can address cost concerns may thrive, but still it is the most experienced and robust companies that are more prepared to adjust to market changes, Melinette says.

"Ultimately, valves and actuators form critical components within many projects, requiring reliable products that offer reassurance and peace of mind," he adds.

"For many customers, support and guidance, particularly with regard to maintenance cost calculations and areas that less-established suppliers may not have the resources to fulfill, can be hugely important."

The moratorium on Qatar's further development of its vast North Field gas reservoir will not be lifted until at least 2013, when all the planned projects in the area will have brought on stream.

The government says it had to study further on how to maximise gas production and, at the same time, preserve the reservoir for future generations.

Frost & Sullivan says that whilst Saudi Arabia will continue to be the largest valve market in the Middle East, the Qatari market is expected to grow rapidly, post-2013, owing to the projected growth in global demand for natural gas after 2012.

The research firm also has the observation that the "addressable actuators market", which was worth $260 million in 2009, accounted for a small share of the total Middle East valve and actuator demand, since most new project orders were placed with the international locations of suppliers. But there might be a shift in market behaviour, it warns.

"This trend is expected to change as the market grows, with end-users insisting on better regional presence and capabilities," it says. "Companies would also attempt to gain a competitive advantage by tier local presence as seen by the increase in local valve supplier representation over the past few years," the report says.

The addressable actuators market accounts for new project and after-sales actuator demand met through international orders and local procurement.

This also includes the demand met between divisions of a company. The non-addressable market refers to demand met from the internal production of actuators within the valve manufacturing company.

TIER II & TIER III PLAYERSAccording to the study, valves and actuators competitive landscape is witnessing a growing number of Tier II & III players.

Valve companies that cater to manual and actuated valve demand are witnessing a growing demand for customised and actuated valves.

Being a high value segment, companies are trying to position themselves advantageously to address this market.

This demand trend is also facilitating the entry and growth of smaller, specialised international market players, it says.

The larger share of the high-value control valves segment is consolidated among a few major players such as Emerson, Dresser and Severn Glocon, among others.

Within the on-off valves segment, companies with a strong ball valve portfolio were among the top companies within the market such as Tyco, Cameron and Pibiviesse, among others, it observes.

Companies within the overall actuator landscape are relatively small in number with a few major players operating within this segment such as Tyco (Biffi), Rotork, Emerson and Cameron, among others.

However, the electrical actuators market witnesses a larger number of players, including major companies such as Rotork, Auma and Tyco, among others, says the report.

FAST VALVESWhilst a consolidated customer base and the continuing efforts to reduce costs do, indeed, pose a major challenge to the industry, the need to produce innovative solutions is also a serious issue that begs for attention. "One major challenge is to find electric valves that are as accurate and fast as pneumatic valves," Alameddine says.

"The industry must also look for more green solutions. In other words, how do we add intelligence to actuators?"

Melinette has the same opinion, saying: "Manufacturers must constantly work to maximise efficiency, maintain product quality and help their customers to achieve cost-savings.

Tyco works closely with its customers to address various challenges. "As a global manufacturer, we aim to share our expertise and knowledge with our local customers, and there are few suppliers that can offer this level of service."

The innovations in materials and valve construction represent an opportunity for change, he says, since basic valve designs have not changed so much over time.

Tyco's CompoSeal valve, for instance, is made of composite materials that make it lighter and more cost-effective than traditional valves, making it an ideal solution for HVAC&R applications.

"The biggest changes quite often take place within actuation and control systems, as the industry adapts to new technologies, such as wireless controls and valve monitoring," he stresses.

Developments such as this have helped Tyco expand its range of services to offer, amongst other things, predictive maintenance solutions. Besides offering specialist site services, Tyco, being an original equipment manufacturer, uses its own engineers to maintain valves and control systems, including non-Tyco products.

"Our commitment to the Middle East market is reflected in both our financial performance and heritage throughout the area, and we look forward to developing our position across the region," Melinette says.

In 2009, Tyco generated 27 per cent, or over $4.7 billion, of its earnings from operations in Europe, the Middle East and Africa.

SEA AND ANZ VALVES MARKET Meanwhile, the industrial control valves market in Southeast Asia and Australia and New Zealand is on course to achieving the forecast revenues of $1.85 billion in 2017, mostly due to the sustained demand from conventional end users such as oil and gas, paper and pulp, and mining, especially in Australia.

The receding effects of the economic downturn have pumped up the demand for control valves again.

New analysis from Frost & Sullivan Southeast Asia and Australia New Zealand industrial control valves market, finds that the market earned revenues of $825 million in 2010 and estimates this to reach $1.85 billion in 2017.

"As markets gradually limp back to normalcy, end users will be attracted to control valves' benefits of direct savings by way of fewer valve failures, reduced downtimes, technical support, and process improvement," says Frost & Sullivan research analyst Krishnan Ramanathan.

"Newer and more advanced control valves are being introduced to cater to an expanding end-user base," he adds.

Control valve manufacturers are focusing more on safety, as nuclear energy is becoming a major source of power generation in several countries.

Another area of revenue generation is industrial control valve asset management, as cost avoidance is a key focus area for companies that are still shaking off the effects of the slowdown.

The recovery in the control valves market is likely to be protracted, without any spurts in growth in the next two to three years, as revenues have barely reached the pre-2008 levels.

As in almost every market during the downturn, the lack of credit had resulted in lower investments in R&D (research and development).

Smaller participants with sparse R&D resources were especially hard hit by the competition from larger participants.

However, the market is highly fragmented despite most end users preferring to obtain all their resources from a single manufacturer.

"Countries such as Singapore, Malaysia, Thailand, Australia and New Zealand are home to several multinational companies in the control valves sector and companies have started investing in newer technologies," notes Ramanathan.

"While retrofits can serve as a source for control valves in developed regions such as Australia and Singapore, newer projects will serve as a driver in the developing markets of Indonesia and Thailand," he adds.

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