Upturn, downturn
30 Oct 2008
Shrugging off months of dire warnings for the economy overall, pump and valve manufacturers, especially those selling to the oil & gas sector, are preparing for the next 12 months with a fair degree of optimism - several major players contacted by Process
Shrugging off months of dire warnings for the economy overall, pump and valve manufacturers, especially those selling to the oil & gas sector, are preparing for the next 12 months with a fair degree of optimism - several major players contacted by Process Engineering suggest.
But it's not all plain sailing, notes Ashley Shepherd, UK sales manager at peristaltic pumps company Watson-Marlow, who reports "considerable variation" across different process sectors in terms of market performance.
For example, Shepherd said, the company's sales are up in the pulp, paper and packaging sectors and also the engineering market. It is also, he said, doing surprisingly well in the construction products sector, with sales up 30% despite the current climate.
Watson-Marlow has had some very good projects this year in the process sector, These, said the manager, include the water - particularly sludge - market, where, for example, the company gained its first order from the Yorkshire Water framework agreement.
Against this, Shepherd said: "We are finding that, despite positive forecasts by independent industry analysts there is a downturn in the chemical - particularly companies in the North West - and food markets.
Following several high profile plant closures in the food sector, companies are reluctant to spend money at present, the Watson-Marlow manager explained. "We think this is directly attributable to the current economic climate and perhaps lower sales of prepared ready meals, for example."
There are also concerns about the pharma market, given that Pfizer and GSK have announced the closure of UK facilities during the last 12 months. Nevertheless, Shepherd added that Watson-Marlow's sales in this market are up by 36% already this year, in part due to strong demand for its tubing products.
Interestingly, Shepherd said Watson-Marlow is seeing an increased demand from customers in the South of England - south of Birmingham - across all sectors.
Looking at prospects going forward, Shepherd said: "As the economic climate becomes that much tougher for process equipment companies, we are seeing greater importance placed on some of the 'softer' business issues.
"For example, we are improving customer service by adding to our sales/applications team. We are also reducing commercial risk to those companies who are wary of opting for a new [peristaltic] pump type by offering free pump trials. The market is becoming increasingly risk-adverse, so this kind of offer is very important to us going-forward."
Within the UK valves industry, meanwhile, Tomoe managing director Willie Duncan said the sector is currently enjoying stable market demand, helped by improving business in the North Sea and continuing strong business at London-based EPCs. This, he indicated, would more than offset "a fall-off in demand in the building and HVAC markets and also the general food industries, such as brewing and sugar."
Duncan went on to point out that a number of major contractors are coming to the end of certain huge projects. "In general, therefore, things may not be as good as they have been in the UK, but demand should remain constant for the next couple of years," he commented.
Internationally, Tomoe's managing director said the company is seeing a significant increase in business from the Middle East, India, former Soviet Union, North and South America and Australia, with the Far East also starting to thrive.
"Conditions in the international market are as good as they have been for a number of years," Duncan explained. "Our research is suggesting that international demand will continue to grow over the next 12 months. We already know that the oil and gas industry intends to invest heavily in plant and equipment and be very active until at least 2015."
LNG is a particular niche that is expanding, providing the industry with more opportunities, said Duncan. Tomoe, he added, has also noted a dramatic increase in orders for valves to be used in desalination, HVAC, district cooling systems and water and waste treatment projects, specifically in the Middle East.
Back in the pumps sector, Danish major Grundfos reports significant growth in the process market. The company said it expects this growth to continue over the next 12 months, helped by demand for its full-line pump supply offerings.
"Highest demand for our products has been from the food, beverage and pharmaceutical industries, with a particular bias towards energy-efficient solutions" noted Andy Shearer, Grundfos director of sales, industrial end-user market. He added that he had not seen signs of weakening demand in any process market.
There is strong demand for single-source, long-term partners who can meet all pump requirements across an entire site, said Shearer, who cited how Grundfos is fulfiling this role for the new Constellation Europe wine filling and distribution facility at Avonmouth.
In total, Grundfos supplied over 100 pumps, both utility/service pumps and the hygienic process pumps, for the plant, which is currently nearing completion. The facility will process all Constellation's wine business, from wine intake, storage, bottle and bag-in-box filling, as well as distribution.
Energy efficiency was another key requirement on the Avonmouth project, and Shearer believes that this issue will continue to drive both new pump selection and the replacement market for old, inefficient and oversized pumps.
Pumps and valves manufacturer KSB, meanwhile, is on track to achieve record sales revenue in the current year, and is investing around Euro70 million in new production and testing facilities at its German locations. The Frankenthal-based company linked the positive trend to several major orders in the energy sector and higher sales revenue from the industry and water segments. Orders in hand continue to increase, it added, due in particular to demand for pumps and valves for power stations that will not be constructed before 2009.
Typifying market demand for KSB products was a recent major order for 64 stainless steel pumps and around 1,000 butterfly valves for a new seawater desalination plant to be built in western Algeria, the company said.
At SPX Process Equipment, Steve Digby, Bran + Luebbe UK sales manager, and Jim Miller, sales & product manager, Plenty Mirrlees Pumps, have not seen any "discernible weakening" in any market for their products.
"The situation across most areas is relatively stable at the moment and we are taking positive action to ensure that our market share grows," they stated. "To this end we are strengthening our sales teams in order to develop more applications and create greater awareness of our products in identified existing and emerging markets."
Digby and Miller went on to note particular growth in the Middle East region, with robust demand for both pump brands.
"Sales encompass many market sectors, not just our traditional markets in oil and gas recovery and processing. Exhibiting at Adipec in Abu Dhabi in November will give us the opportunity to announce the expansion of our facilities in this geographical area. With more people and technical resources on the ground, we shall be looking to develop the many process applications that are emerging here," they commented in a joint statement.
For his part, Tony Harrison, operations manager, ARI-Armaturen, said: "A slowdown in commitment from customers in early 2008 has resulted in a short-term dramatic upturn in recent months.
Recent ARI projects include the supply of manual isolation, flow control and safety valves to a float line, glass-making plant in Russia, in partnership with Air Products. It has also recently installed a heat exchanger system at international frozen food producer, Findus Foods.
The food and drink processing sector also remains buoyant and the company expects demand for its products to remain stable for the foreseeable pharmaceuticals market isn't as strong as it was this time last year and there isn't much growth in the sector as a whole.
Meanwhile, Harrison sees increasing emphasis on sustainable resources, including significant interest in biofuels. "This area of the industry will become increasingly important over the next 12 months, particularly as the cost of oil continues to rise. This is going to be an important and evolving sector for the UK economy," he forecast.
Overall, Harrison said that, "Although we are experiencing a good year to date, we do forecast a tightening up in the industry as a whole towards the end of this year. This means that maintenance work will become increasingly important as a source of revenue for the valve and pipeline industry."
The ARI manager also noted a significant change in the way the process industry has been operating over the past year: "Whereas we used to deal with a substantial amount of project work, we are now experiencing an increase in general maintenance work and upgrading of existing plants.
"There seems to have been a shift in the industry as a whole from new major projects to more focus being placed on maintenance and upgrading of existing plants. Inevitably, plants running for longer will experience breakdowns, and we are ready to respond to this situation with increased stocks of our standard products, and reduced delivery times on customised items such as control valves and safety valves."
Another noticeable change in the market is the length of time between customers enquiring about a product and placing an order. It is now common for us to wait for anything up to six months, said Harrison.
Similarly, Peter Everett, chief executive officer of UK valve distributor HS Pipequipment, believes that increased capital and operational investment in the oil, gas and petrochemical industries is creating new challenges in the area of procurement.
"The location, size of projects and fluctuations in commodity prices and currencies are making procurement decisions increasingly complex, while fast tracking of major investment programmes is affecting the availability of materials," Everett commented.
According to the CEO, the role of stockists and distributors has become more important. The loss of skills from the UK engineering sector means that customer technical and procurement resources in the industry have become stretched. This, he said, has resulted in a greater emphasis on the role and responsibility of distributors and suppliers.
"Issues of health and safety issues are also vitally important; documentation of the procurement, manufacturing and testing process of valves must be completed shortly after delivery," continued Everett. "Valves have to be made to exact specifications as defective products could prove to have serious consequences."
Tomoe sales and marketing manager Neil Harden on site at the Maua Jurong shipyard in Rio de Janeiro, where the company supplied a 24-inch, double-flanged, class 1500, triple offset, butterfly valve to handle liquid hydrocarbons on the giant new Petrobras P54 floating production storage and offloading vessel. This project will generate oil from 13 deepwater wells in the Campos Basin, off the south eastern coast of Brazil; it has a daily capacity to produce 180,000 barrels of oil and compress six million cubic meters of natural gas.
But it's not all plain sailing, notes Ashley Shepherd, UK sales manager at peristaltic pumps company Watson-Marlow, who reports "considerable variation" across different process sectors in terms of market performance.
For example, Shepherd said, the company's sales are up in the pulp, paper and packaging sectors and also the engineering market. It is also, he said, doing surprisingly well in the construction products sector, with sales up 30% despite the current climate.
Watson-Marlow has had some very good projects this year in the process sector, These, said the manager, include the water - particularly sludge - market, where, for example, the company gained its first order from the Yorkshire Water framework agreement.
Against this, Shepherd said: "We are finding that, despite positive forecasts by independent industry analysts there is a downturn in the chemical - particularly companies in the North West - and food markets.
Following several high profile plant closures in the food sector, companies are reluctant to spend money at present, the Watson-Marlow manager explained. "We think this is directly attributable to the current economic climate and perhaps lower sales of prepared ready meals, for example."
There are also concerns about the pharma market, given that Pfizer and GSK have announced the closure of UK facilities during the last 12 months. Nevertheless, Shepherd added that Watson-Marlow's sales in this market are up by 36% already this year, in part due to strong demand for its tubing products.
Interestingly, Shepherd said Watson-Marlow is seeing an increased demand from customers in the South of England - south of Birmingham - across all sectors.
Looking at prospects going forward, Shepherd said: "As the economic climate becomes that much tougher for process equipment companies, we are seeing greater importance placed on some of the 'softer' business issues.
"For example, we are improving customer service by adding to our sales/applications team. We are also reducing commercial risk to those companies who are wary of opting for a new [peristaltic] pump type by offering free pump trials. The market is becoming increasingly risk-adverse, so this kind of offer is very important to us going-forward."
Within the UK valves industry, meanwhile, Tomoe managing director Willie Duncan said the sector is currently enjoying stable market demand, helped by improving business in the North Sea and continuing strong business at London-based EPCs. This, he indicated, would more than offset "a fall-off in demand in the building and HVAC markets and also the general food industries, such as brewing and sugar."
Duncan went on to point out that a number of major contractors are coming to the end of certain huge projects. "In general, therefore, things may not be as good as they have been in the UK, but demand should remain constant for the next couple of years," he commented.
Internationally, Tomoe's managing director said the company is seeing a significant increase in business from the Middle East, India, former Soviet Union, North and South America and Australia, with the Far East also starting to thrive.
"Conditions in the international market are as good as they have been for a number of years," Duncan explained. "Our research is suggesting that international demand will continue to grow over the next 12 months. We already know that the oil and gas industry intends to invest heavily in plant and equipment and be very active until at least 2015."
LNG is a particular niche that is expanding, providing the industry with more opportunities, said Duncan. Tomoe, he added, has also noted a dramatic increase in orders for valves to be used in desalination, HVAC, district cooling systems and water and waste treatment projects, specifically in the Middle East.
Back in the pumps sector, Danish major Grundfos reports significant growth in the process market. The company said it expects this growth to continue over the next 12 months, helped by demand for its full-line pump supply offerings.
"Highest demand for our products has been from the food, beverage and pharmaceutical industries, with a particular bias towards energy-efficient solutions" noted Andy Shearer, Grundfos director of sales, industrial end-user market. He added that he had not seen signs of weakening demand in any process market.
There is strong demand for single-source, long-term partners who can meet all pump requirements across an entire site, said Shearer, who cited how Grundfos is fulfiling this role for the new Constellation Europe wine filling and distribution facility at Avonmouth.
In total, Grundfos supplied over 100 pumps, both utility/service pumps and the hygienic process pumps, for the plant, which is currently nearing completion. The facility will process all Constellation's wine business, from wine intake, storage, bottle and bag-in-box filling, as well as distribution.
Energy efficiency was another key requirement on the Avonmouth project, and Shearer believes that this issue will continue to drive both new pump selection and the replacement market for old, inefficient and oversized pumps.
Pumps and valves manufacturer KSB, meanwhile, is on track to achieve record sales revenue in the current year, and is investing around Euro70 million in new production and testing facilities at its German locations. The Frankenthal-based company linked the positive trend to several major orders in the energy sector and higher sales revenue from the industry and water segments. Orders in hand continue to increase, it added, due in particular to demand for pumps and valves for power stations that will not be constructed before 2009.
Typifying market demand for KSB products was a recent major order for 64 stainless steel pumps and around 1,000 butterfly valves for a new seawater desalination plant to be built in western Algeria, the company said.
At SPX Process Equipment, Steve Digby, Bran + Luebbe UK sales manager, and Jim Miller, sales & product manager, Plenty Mirrlees Pumps, have not seen any "discernible weakening" in any market for their products.
"The situation across most areas is relatively stable at the moment and we are taking positive action to ensure that our market share grows," they stated. "To this end we are strengthening our sales teams in order to develop more applications and create greater awareness of our products in identified existing and emerging markets."
Digby and Miller went on to note particular growth in the Middle East region, with robust demand for both pump brands.
"Sales encompass many market sectors, not just our traditional markets in oil and gas recovery and processing. Exhibiting at Adipec in Abu Dhabi in November will give us the opportunity to announce the expansion of our facilities in this geographical area. With more people and technical resources on the ground, we shall be looking to develop the many process applications that are emerging here," they commented in a joint statement.
For his part, Tony Harrison, operations manager, ARI-Armaturen, said: "A slowdown in commitment from customers in early 2008 has resulted in a short-term dramatic upturn in recent months.
Recent ARI projects include the supply of manual isolation, flow control and safety valves to a float line, glass-making plant in Russia, in partnership with Air Products. It has also recently installed a heat exchanger system at international frozen food producer, Findus Foods.
The food and drink processing sector also remains buoyant and the company expects demand for its products to remain stable for the foreseeable pharmaceuticals market isn't as strong as it was this time last year and there isn't much growth in the sector as a whole.
Meanwhile, Harrison sees increasing emphasis on sustainable resources, including significant interest in biofuels. "This area of the industry will become increasingly important over the next 12 months, particularly as the cost of oil continues to rise. This is going to be an important and evolving sector for the UK economy," he forecast.
Overall, Harrison said that, "Although we are experiencing a good year to date, we do forecast a tightening up in the industry as a whole towards the end of this year. This means that maintenance work will become increasingly important as a source of revenue for the valve and pipeline industry."
The ARI manager also noted a significant change in the way the process industry has been operating over the past year: "Whereas we used to deal with a substantial amount of project work, we are now experiencing an increase in general maintenance work and upgrading of existing plants.
"There seems to have been a shift in the industry as a whole from new major projects to more focus being placed on maintenance and upgrading of existing plants. Inevitably, plants running for longer will experience breakdowns, and we are ready to respond to this situation with increased stocks of our standard products, and reduced delivery times on customised items such as control valves and safety valves."
Another noticeable change in the market is the length of time between customers enquiring about a product and placing an order. It is now common for us to wait for anything up to six months, said Harrison.
Similarly, Peter Everett, chief executive officer of UK valve distributor HS Pipequipment, believes that increased capital and operational investment in the oil, gas and petrochemical industries is creating new challenges in the area of procurement.
"The location, size of projects and fluctuations in commodity prices and currencies are making procurement decisions increasingly complex, while fast tracking of major investment programmes is affecting the availability of materials," Everett commented.
According to the CEO, the role of stockists and distributors has become more important. The loss of skills from the UK engineering sector means that customer technical and procurement resources in the industry have become stretched. This, he said, has resulted in a greater emphasis on the role and responsibility of distributors and suppliers.
"Issues of health and safety issues are also vitally important; documentation of the procurement, manufacturing and testing process of valves must be completed shortly after delivery," continued Everett. "Valves have to be made to exact specifications as defective products could prove to have serious consequences."
Tomoe sales and marketing manager Neil Harden on site at the Maua Jurong shipyard in Rio de Janeiro, where the company supplied a 24-inch, double-flanged, class 1500, triple offset, butterfly valve to handle liquid hydrocarbons on the giant new Petrobras P54 floating production storage and offloading vessel. This project will generate oil from 13 deepwater wells in the Campos Basin, off the south eastern coast of Brazil; it has a daily capacity to produce 180,000 barrels of oil and compress six million cubic meters of natural gas.
