AFTERMATH OF THE GLOBAL OIL CRISIS

OPPORTUNITIES EMERGE FOR PUMP SUPPLIERS AS THE MARKET STRUGGLES TO RECOVER

By JOANNE GOH

The latest Centrifugal Pump Database from IHS Markit shows that the global centrifugal pump market at $25.8 billion in 2016, down 3.4% from 2015. Current revenue is forecast to grow at a 4.1% compound annual growth rate (CAGR) to $32 billion by 2021. The market is not expected to reach 2014 revenue levels until 2021.

The oil and gas industry collapsed towards the end of 2014, which led to revenue declines for several major pump suppliers heavily exposed to the energy sectors. Manufacturers that rely on the commercial and domestic markets gained market share, as these industries outperformed the overall average. New project announcements for both the upstream and downstream industries dropped 5% from 2015 to 2016, and project-detailed design activity in engineering, procurement, and construction (EPC) firms was low.

With significantly decreased order activity, the average selling prices (ASP) for all types of equipment used in the oil and gas industry declined sharply, including the ASP of centrifugal pumps, estimated to have declined by about 10.7% from 2015 levels. The centrifugal pump market in oil and gas applications continued to decline in 2017, with revenues down 8% from 2016. Despite a recent recovery in oil prices from a low point in January 2016, IHS Markit expects the OPEC price is unlikely to rise above $60/bbl in 2018. Investor confidence has not fully recovered; therefore, the demand for centrifugal pumps remains subdued. The forecast is for slight growth of about 1% for centrifugal pump revenues in 2018.

On the other hand, onshore upstream capital expenditure (CapEx) increased by 16% in 2017, leading to stronger upside demand for centrifugal pumps in this application. The centrifugal pump market in onshore upstream applications will have the fastest growth among other oil and gas processes, with revenue growth of 5.1% predicted for 2018. Urbanization and population growth While centrifugal pump demand in many regions and industries declined, high-performing markets, such as commercial HVAC, domestic, and municipal water and wastewater sectors offset the losses in 2016. This acted as a counterbalance against the decline in oil and gas in recent years. The commercial HVAC market for centrifugal pumps is fore- cast to expand quicker than other industries. Growth of the centrifugal pump market in this sector will grow the fastest in the Asia-Pacific region. The Philippines and Vietnam are expected to be the fastest growing countries in 2017 and 2018, a result of rapid expansion in technology and manufacturing sectors.

Europe, the Middle East and Africa will experience an increase in commercial building construction, spearheaded by Qatar and its preparations for the upcoming World Cup, as well as an initiative to diversify its economy. Furthermore, rapid urbanization and infrastructure development in the Middle East continue to in- crease demand for pumping systems. In the municipal water and waste water section, growth opportunities are mainly in emerging countries, driven by rapid growth in industrialization, despite the lingering financial and global economic crisis in many regions. The same goes for the centrifugal pump market in the food and beverage sector; developing markets in Asia-Pacific continue to be the backbone of market growth. Urbanization and the growing number of restaurants, restaurant chains, and fast food centers, along with the increased number of food processing facilities, create increased opportunities for centrifugal pumps in food and beverage on a global level. Competitive environment Mergers and acquisitions will increase as larger centrifugal pump companies acquire smaller companies due to strong competition and fluctuating commodity prices.

Joanne Goh is a Manufacturing Technology Analyst at IHS Markit, a market intelligence provider for industrial automation equipment, with an expertise in motors and motor controls. For more information on the centrifugal pump market, visit https://technology.ihs.com/582278