Keywords: Control Valves, Oil, Gas, Process Industries, Market Research Study, Market Forecast, Market Growth
Two years of market growth in control valves came to a halt in 2014. The falling oil prices in the second half of the year negatively impacted a market already stifled by softening demand in new orders. According to a new ARC Advisory Group control valve market research study, looking ahead to 2015, the outlook is even more dire as the precipitous drop in oil prices, strong dollar, and ongoing slowdown in China are expected to wipe out the market growth experienced in 2013 and 2014.
“ARC believes that continuing low oil prices, uncertainty regarding the global economy, slowdown in emerging markets, delays/cancelations of large greenfield and retrofit projects, and pricing pressures will all work against the global control valve market in 2015. Ongoing fears that a global recession may return has companies proceeding with extreme caution for many capital investment plans. The economic slowdown in China and India is causing lower investment and industrial output. Europe continues to struggle with the Ukrainian crisis and the outcome remains uncertain. Consequently, industrial organizations are increasingly pressing suppliers to reduce the prices of their valves due to reduced market demand and reduced revenues and profits on their end,” according to Research Director David Clayton, the principal author of ARC’s “Control Valve Global Market Research Study”.
Shift in Focus to Quick ROI Projects
As the scrutiny on capital expenditures increases, ARC sees a shift in focus from lower initial cost and/or lower total cost of ownership (TCO) for automation investments to a shift in the ability of the automation equipment to provide a quick payback. More than one-half of CEO respondents to a recent ARC survey indicated that they expect a payback period of three years or less from their automation investments. In today’s uncertain economic environment, rapid payback and quantifiable return on investment (ROI) are more important than ever to cost-justify capital investments.
Control valve suppliers that can help potential customers justify the proposed investment will be in the best position to weather the most recent downturn in the global control valve market. This could involve service components to assess current capabilities, ROI studies, and SWOT-type analysis on new control valve products and/or services, automation opportunities within the plant (i.e., replacing manual valves or automated on-off valves, etc.), as well as regulatory compliance.
Increasing Pricing Pressures on Suppliers
The global control valve market continues to be fiercely competitive, with suppliers chasing opportunities around the world by establishing strong local presence and setting up service and support facilities in major regions. Recognizing the reduced market demand, customers are pressuring their control valve suppliers to increase discounts. These pricing pressures are especially evident on the major greenfield projects.
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