European exchangers heat up
8 Oct 2003
Amassing revenues worth $3.02 billion in 2003, the European market for heat exchangers is set to benefit from an anticipated economic rebound in 2005. Specific product segments, such as all-welded exchangers, brazed exchangers and air cooled heat exchangers, are all poised for noticeably stronger revenue growth, injecting vigour into overall sales.
According to latest findings by Frost & Sullivan, the limited life-span of heat exchanger products and Europe's large installed base augur well for the health of replacement demand. In 2010, Frost & Sullivan believe that total revenues will have reached $3.49 billion.
As some users of shell and tube exchangers shift to all-welded products, boasting greater ease-of-use and a higher degree of temperature and pressure tolerance, overall demand for product replacement will be provided with fresh impetus.
Environmental concerns over cooling and thermal pollution are generating revenue growth for hybrid cooling towers and air cooled heat exchanger products. Increased sewage pasteurisation may benefit spiral heat exchangers in the future too. Equally, EU and US regulations limiting the sulphur content of petrol and diesel fuels are driving investment in fuels refining applications.
Mik Sabiers, Research Manager at Frost & Sullivan, notes that the imminent accession of the Central and Eastern European countries to the EU will heighten the growth potential in the European heat exchangers market as the struggle to comply with western standards drives above-average revenue growth from users in the Eastern European market. Projections are for the Eastern European market to expand at more than twice the rate of the more mature western European regions.
Moreover, market participants are increasingly faced with competition from players in the Pacific Rim countries, as well as Eastern Europe, offering heat exchanger products at prices below those of existing competitors. At present, low-cost competitors constitute a small proportion of sales, and doubts about product quality remain. However, it is likely that international competitors will represent a greater threat in the future.
In 2003, revenues in the shell and tube exchangers market, constituting the dominant product segment in the overall heat exchangers market, were estimated at $926.9 billion. Growth in this sector was weak during 2003, at less than one per cent, and is likely to remain poor in 2004. In the longer term, improving economic conditions and product replacement should contribute to slowly accelerating growth.
Amassing revenues worth $650.5 million in 2003, the air cooled heat exchangers sector ranks in second place. Growth was relatively slow during the year, but is expected to improve, driven by recovery in the HVAC and refrigeration sector, and a shift in favour of closed circuit cooling.
Frost & Sullivan's study identifies Germany as the most important region in the European heat exchangers market. German revenues accounted for an estimated 29.1 per cent of total sales in 2003. However, poor economic growth spells lacklustre developments and an eventual decline in Germany's relative share of future revenues.
In 2003, other significant regional markets include France, the UK and Italy. Despite slowing demand from domestic end-users, the UK market is expected to benefit from the strength of its contractors in winning overseas markets. The revenue significance of the French market is expected to fall, reflecting limited demand from the country's chemicals sector.
Four leading competitors enjoy a distinct share based on success across different product markets - GEA and its subsidiaries, Alfa Laval, SPX (incorporating Balcke Durr and Marley Cooling Systems) and Hamon (incorporating FBM Hudson). A number of additional market participants are prominent in specific product or country markets. Companies falling into this category include Baltimore Aircoil, Faco, Fincoil, Goedhart, The Guntner Group, Lu-Ve Contardo, Tranter (including SWEP), and WTT.
The main competitive differentiator in the heat exchangers market revolves around manufacturer reputation. 'Many customers will direct business to companies that have been able to establish a reputation for technical expertise, quality and performance in specific areas. The customer base is also focused on directing orders to manufacturers that can offer value-added in terms of systems construction,' Sabiers said.
'Finally, another key competitive issue in the market is price. All manufacturers need to follow flexible pricing strategies to ensure that they offer competitively priced heat exchangers, and maintain a competitive edge against a backdrop of continued change in the market environment and intensifying presence of suppliers from other regions,' he concluded.
