Keywords: Control Valves, Positioners, Actuators, Energy, Infrastructure
Control valve shipments returned to pre-recession levels during 2011, however, risks remain. High oil prices due to growing demand from emerging nations and continuing political turmoil in the Middle East could upset growth. US unemployment rates continue to be a deterring factor, as does the European debt crisis. The slowdown in China and India further increases the risks facing control valve vendors. Due to the numerous risks, many vendors are wondering where, and how much, to invest in their manufacturing capacity and after-market service capabilities according to a new ARC Advisory Group study.
Key highlights for the control valve market in 2011 include growth in both established and emerging economies, especially for energy and infrastructure related applications. Although control valve shipments were down in 2010, the majority of suppliers enjoyed a rebound in new orders over the course of 2010, with a corresponding increase in order backlogs. This growth in incoming orders during 2010 translated to a growth for control valve shipments to many of the developing regions in 2011. Many of the developed regions also rebounded back to healthy growth in 2011 as many suppliers’ aftermarket business come back on-line. The European debt crisis loomed throughout the year, but did not have a significant negative effect on control valve shipments in 2011.
“The ongoing European debt crisis is a legitimate concern going forward, however, as is the softening demand from China and India. China's GDP growth has slowed to its lowest rate since the depths of the global financial crisis in 2009. Second-quarter growth of 7.6 percent, down from 8.1 percent, in the previous three months was in line with expectations, but dampened hopes that the world's second largest economy would alleviate the economic uncertainty looming over the global markets,” according to Senior Analyst David Clayton, the principal author of ARC’s “Control Valve Worldwide Market Outlook”.
The electric power, oil & gas, and refining industries led the way during 2011 as the global control valve market bounced back from the most recent global recession. Asia’s ongoing demand for energy will require more oil and gas, driving up demand and long-term energy prices. Finding new oil deposits is becoming more difficult and is more challenging to extract. Many of these new oil fields produce heavy oil rather than lighter sweet crude oil, which increases refining costs due to emissions from its high sulfur content and renders traditional refining methods ineffective. This will increasingly spawn investment in new refineries to refine this heavy oil near deposits in Canada, Latin America, and the Middle East. At the same time, environmental concerns are increasing, creating significant opportunities for control valve suppliers. The return to growth in the oil & gas market is especially helpful for control valve suppliers due to the industry’s need for specialty valves suitable for harsh operating environments. Although much of the growth in the global oil & gas industry is coming from the Middle East, shale gas is a niche market experiencing strong growth in the US and Europe.
Many electric power projects were postponed during the most recent global financial crisis, but this business is bouncing back quickly. The rebound to growth for the electric power industry is aided by the fact that the time from design to operation for utilities is relatively quick compared to that of a refinery. Regulated industries such as power and water utilities must meet new regulations such as emissions standards quickly or be fined. The nuclear power industry is an entirely different animal, but a traditional coal-based power plant can be up and running in two years. Adding capacity such as gas driven turbine generators projects can happen even faster, which is much quicker than a typical Greenfield oil & gas project.
The chemicals (mostly petrochemicals) business in the US and Western Europe also experienced a return to growth in 2011. After years of delaying MRO projects, many chemical and petrochemical manufacturers are now investing in repairing or upgrading their control valves. The automotive industry’s return to growth is another factor supporting growth in the global chemicals market.
2011 saw a return to growth across all four major world regions. The growth in incoming orders most control valve suppliers experienced during 2010 translated to growth in control valve shipments to many of the developing countries during 2011. Many of the developed regions also rebounded back to healthy growth in 2011 as suppliers’ aftermarket business come back on-line. The European debt crisis loomed throughout the year, but did not have a significant negative effect on control valve shipments in 2011.
Ongoing financial instability continues to plague global markets. The global economic uncertainty triggered by the European deficit crisis had a negative impact on the automation market in Japan during a time the country was already suffering from a series of economic setbacks. The rebound in the tar sands projects in Canada, however, helped fuel a rebound in control valve shipments in North America. Growth in aftermarket services from North American manufacturers further fueled growth in North America control valve shipments. Latin America continues to invest in its oil & gas and petrochemical industry capacities while also seeing its pulp & paper industry come back on line as a result of recent high pulp prices.
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