Palo Alto, Calif. – March 20, 2007 – The Chinese market for positive displacement and centrifugal pumps is huge, though highly fragmented. Rapid infrastructure development in processing and other related industries largely drives this market.
New analysis from Frost & Sullivan (http://www.industrialautomation.frost.com ), Chinese Positive Displacement and Centrifugal Pumps Market, reveals that the market earned revenues of $5.06 billion in 2006 and estimates this will reach $14.96 billion in 2013.
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The major target markets for pump manufacturers include water and wastewater treatment, power generation, chemicals, petrochemicals, oil and gas. Demand from these segments expects to increase, though the growth rate may decline in the next few years. Among these, the wastewater treatment segment will likely offer the greatest scope for revenue growth.
“The Government is investing large amounts of funds into water treatment in order to achieve the goal that the average concentrated sewage treatment must reach from 60 percent to 80 percent in 2010, to match the rate of urbanization,” says Frost and Sullivan Research Analyst Vickertal Chen. “The launch of a national key project named ‘South-to-North Water Diversion Project’ is also anticipated to boost revenues.”
The construction of chemical manufacturing facilities to meet the shortage of chemicals such as ethylene, exemplifies another segment promoting market revenues. Within the next five years, fifteen large-scale ethylene related projects in the coastal areas and the ‘West-to-East Natural Gas Transmission’ project will likely drive the demand for pumps.
However, with stricter controls in several industries on many investments, demand expects to fall. Further, with the production of sturdier pumps with longer lives, replacement rates decrease, consequently reducing the rate of procurement.
Other challenges include the intense focus of domestic pump manufacturers on the low-end market causing over capacity, an unbalanced product mix and fierce price wars prompted by intense competition thereby hampering healthy market development.
“In order to improve their position in a highly price-sensitive market, most participants in the low-end market are providing extremely low prices which leave slim profit margins for manufacturers,” observes Chen. “Such vicious price wars lead to lower revenues for the total market and diminishing product quality.”
To improve market shares and compete favorably with the better quality products offered by multinationals, domestic pump manufacturers should emphasize technological improvement and advanced manufacturing practices. They should also improve the product mix to gradually penetrate the mid market or even high-end market sectors.
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Chinese Positive Displacement and Centrifugal Pumps Market, P041
Market Consolidation and Rapid Growth Rate Mark the Chinese Market for Positive Displacement and Centrifugal Pumps
The Chinese market for positive displacement and centrifugal pumps is a vast, though highly fragmented one, with most participants being domestic companies catering to the medium- and low-end market. However, a number of multinational companies are entering the fray, with their eye on high-end business opportunities, initiating major acquisitions and mergers, and forcing smaller domestic participants out of the market. This is increasing the market concentration rate. The booming Chinese economy is building business and consumer confidence, leading to an increase in investments. Subsequently, there is positive infrastructure development in several processing industries, and the market has been undergoing a rapid rate of growth in the past few years. This growth is expected to continue, although at a declining pace.
Two major application segments that use pumps are water and wastewater treatment facilities and chemical and petrochemical industries. The demand from these sectors is expected to continue. “Sewage treatment facilities have failed to keep up with the rapid rate of urbanization, and with the growing environmental awareness, the government is channeling large amounts of funds into infrastructure development for wastewater treatment and urban water supply systems,” notes the analyst of this research service. “These projects are expected to provide considerable opportunities for revenue growth in the Chinese positive displacement and centrifugal pumps market.”
Product Innovation and Quality Improvement Essential to Meet the Challenge of Multinational Companies
The establishment of manufacturing units in China by major multinationals has severely hampered the competitive edge of domestic manufacturers. By taking advantage of the low labor and logistics costs, which earlier were exclusively associated with the Chinese pump manufacturing companies, the multinationals are garnering larger market shares. Pump manufacturers are also facing extreme pressure from end users to reduce prices and provide high-quality products.
[inspic=155,left,fullscreen,300]This challenge can, however, be offset by constantly striving to meet end-user demands and sustain development through product innovation. “The strategy of product innovation helps companies differentiate their products and effectively avoid the price war caused by intense competition,” suggests the analyst. “In order to improve quality, manufacturers need to train engineers with specific skills in design and manufacturing, and reengineer the whole manufacturing process.”
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