After two years of brutal environment further worsened by rising oil prices, the compressors market is poised to experience positive growth in select industries and regions in the short term. Furthermore, increasing demands from process industries such as oil and gas, chemicals, and power generation, new product innovation, the need for energy efficient solutions and growing demand for industrial Internet of things (IIoT) and big data analytics are driving the market for compressors. In the medium to long term, new refinery construction in Middle East and Asia , expansion of liquefaction and regasification plants across the world, increasing industrialization in emerging regions, growing focus on energy efficiency and the explosion of IIoT, predictive analytics and big data are the main driving forces.
Key trends in the compressor market:
- Mild Rebound
While the market is expected to perform better in 2017 than in 2016, the outlook remains uncertain. Brexit and the volatility in China and Latin American markets are the key trends that are expected to negatively impact the outlook.
- Investments Pick up
As oil prices stabilize, there is increasing investment in various energy sectors. This is expected to positively impact the compressor market in the latter half of 2017 but the global compressor market is expected to remain flat in 2017.
- Asia-Pacific Leading the Pack
Regionally, Asia-Pacific is expected to outperform other regions. European region is expected to experience larger negative demand as Brexit, low oil prices, and geopolitical issues are expected to negatively affect investments. North America, Latin America, and the Middle East markets are expected to remain flat.
- Demand for Smaller Industrial Air Compressors
As investments pick up, demand for smaller compressors is expected to pick up. Once larger projects are announced, demand for larger and engineered compressors will increase in late 2017 and early 2018. As a result, industrial air compressors are expected to perform marginally better than process gas compressors.
- Uberization
IIoT and digital transformation are ushering in a set of disruptive technologies which are transforming manufacturing and process industries and upending the existing vendor ecosystem. Compressor manufacturers and service providers will experience “uberization”, where a competitor with an entirely different business model disrupts the existing ecosystem.
Technology Trends
In a competitive world, process enterprises have to improve their business performance by optimizing the operation of critical equipment in order to achieve higher profitability and provide more value to their customers. As a result, improved plant profitability is at the forefront of today’s performance-driven enterprises. As rotating equipment such as compressors are an integral part of the process industries, management of these assets to prevent downtime is of prime importance to end users seeking to increase reliability and profitability of their plants. As such, they require solutions that not only aid in reducing breakdowns but also in bringing down the total lifecycle cost by managing various activities. Moreover, challenges such as decline in maintenance expertise due to an aging workforce and rising energy costs further limit end users’ ability to achieve their goals.
Digital transformation caused by convergence of industry forces is driving unprecedented change. Data is the new currency, and there is demand from end users to generate and mine the data to convert it into actionable insights. This will be transforming the compressors market and it is poised to experience strong growth in the next few years. This is driving the need for big data analytics solution for compressors. With respect to IIoT, companies are facing a dizzying array of technologies and solutions, not all of which will have an impact on their business model or industry. It is vital that companies distinguish between incremental technology advances (such as remote monitoring, wireless) that require minimal resource investment and those game-changing emerging technologies (such as predictive analytics services and smart maintenance) that will disrupt their way of doing business. Companies who succeed in doing this are better positioned to overcome the challenges that emerge from that disruption, and take advantage of select opportunities for growth.
Regional Trends
- North America
The US economy will enjoy a mild cyclical rebound in 2017 and then return to a lower growth rate more in line with long-term potential. Though end users are investing in construction, they are cutting back other capital expenditures. As a result, compressor market is expected to experience slow growth in the short term. Orders for machinery and equipment have dropped by five percent over the past 12 months. The oil price increases and bottoming of commodity prices are expected to drive the revival of Canadian economy bringing in new investments. This is expected to drive industrial activity and the market for compressors.
- Latin America
Despite downside risks, the Mexican economy is poised to rebound in 2016 on account of increased consumption demand, exports, and public sector spending on structural reforms in 2017. Increased demand for Mexican goods from the United States is likely to support a modest manufacturing growth of approximately 3% in 2017. Furthermore, the Mexican Government strongly promotes manufacturing exports to Asian economies that have high demand patterns. This may result in increased exports to China, India, Indonesia, and so on in the short run. The Brazilian economy will return to modest positive rates of expansion in 2017, strongly aided by a recovery in industrial production, a trade surplus position, a more competitive exchange rate (following a 45% devaluation of the BRL over the past five years), a pro-investment infrastructure boom and an only modest recovery in domestic consumption as a result of lower interest rates.
- Europe
The German industrial growth is projected to remain strong with low interest rates and a positive fiscal policy. Exports may remain subdued as demand from emerging markets and other European countries are expected to strengthen only slowly. Outlook for domestic demand is weak and this is expected to weigh in on the growth prospects. Growth will slow markedly in 2017 as more companies start to pull out from Britain. Household incomes will be squeezed by higher inflation and businesses will hold back on investment decisions because of uncertainty about Brexit.
- Middle East and Africa
Growth in Saudi Arabia is expected to be weaker than previously forecast in 2017 as oil production is cut back in line with the recent OPEC agreement, while civil strife continues to take a heavy toll on a number of other countries. World Bank estimates UAE’s growth to recover slowly, averaging 2.5% between 2016 and 2018. However, it has been ascertained that economic activity is slowing as the public purse is tightened; private sector needs to take over as the engine of growth. Increased engagement with the private sector can help to identify and address impediments to growth. South Africa’s economy is services based with 69.1% of GDP based on services, 28.5% based on industry, and the remainder on agriculture. Its economic growth has been constantly declining from 2.2% in 2013 to 1.5% in 2014 and expanding by 1.3% in 2015. Furthermore, estimates project the economy to grow by 1.1% in 2017. Boom in auto sales between 2010 and 2015 is driving up demand for energy. By 2025, this demand will increase two-fold more than the current rate of consumption.
- Asia-Pacific
China is expected to experience rebound in 2017 amid concerns of overheating and uncertainty. Continued government stimulus, weaker yuan, low? credit, and low oil prices are fueling the growth in construction sector and driving industrial demand. Rising wages, lackluster international demand for Chinese exports, political issues and higher debt are key concerns. Increasing industrialization and growing awareness on energy savings have led to advancements in compressor technology and widened the potential of the centrifugal compressors market in India. The shift to high-capacity centrifugal compressors in the process industry will add to manufacturers’ revenues and ensure market development in the country. Despite the weak and uncertain nature of global recovery, the resilience of the Indian economy and robust growth momentum have helped India to remain a beacon of growth.
Conclusion
- After a gloomy forecast in 2016, the industrial activity is projected to pick up pace in 2017, especially in oil and gas, petrochemical and power generation sectors.
- Oil prices are stabilizing and it is expected to fuel investments in various industries in 2017, as projects are brought up online.
- Despite the weak and uncertain nature of global recovery, robust growth is expected in the United States, India, and several other countries
- Due to slowdown in global growth, particularly in China, end users are reluctant to make new investment.
- Advanced services such as predictive monitoring make it important for compressor manufacturers to converge with automation vendors to provide an integrated solution to end users.
