In the Air

August 2023 - Stainless Steel Engineer

Pursuing the Niche Markets in Stainless Steel

In the Air, Water, Energy markets, and specifically in stainless steel there is a notable difference between sales and cost control, it is the organized attention to detail. The Stainless Steel Industry achieves EBITDA of 15-20% but should be moving the numbers 10 points higher.

The way to do it is to devote the same attention to detail. Every AWE company uses systematic cost analysis and should do the same with sales.

Another salient fact is that there is no giant stainless steel market. There are hundreds of thousands of niche markets which can be aggregated to provide a total.

World Valve Market

Individual $94,000 niches can be combined like LEGO blocks into various niche combinations.

Flowserve just purchased Velan to create the world’s 2^nd largest valve company with revenues of close to $1 billion and EBITDA of 15%. Revenues are only a little over 1% in a market of mostly industrial process applications. When you add the small discrete valves and commercial and other applications the market is over $200 billion/yr. It takes a minimum of at least 20% market share before you can hope for EBITDA in the 25 to 30% range. Velan sells double offset butterfly valves for hydrogen service and is achieving more than 20% market share in this niche. The goal is to achieve this capability across all pursued niches.

IDEX sells pumps, valves, fittings and related products and is achieving 30% EBITDA. The mission statement alludes to the niche focus.

Companies should gather comprehensive information about each niche and then pursue those which will result in high EBITDA and at least a 20% market share. Millions of statistics need to be maintained. It starts with facts which then are multiplied by factors.

A market niche of $10 million with 10 sub niches fits all the criteria as shown below.

A company with revenue of $100 million and 30% EBITDA would be targeting 50 niches and 500 sub niches. It would also need to track thousands of other sub niches which it elects not to pursue. It also needs to assess the competition and then create value propositions in each niche. These need to be validated by company employees. A Directory of Niche Value Propositions has been prepared as per the following index excerpt.

1086	KSB Sisto	hydrogen swing check valve
1087	ITT Habonim	Hydrogen cryogenic ball valves
1088	Bray	Hydrogen double offset butterfly valve
1089	Swagelok	Hydrogen needle valve
1090	Velan	Hydrogen double offset Butterfly valve
1091	Ampo	Hydrogen ball valve
1092	Marmon Ind,	Coal plant ww. treatment
1093	Camfil	GT air filter
1094	ITT	FGD knifegate valve
1095	MHI	CO2 absorber
1096	MHI	Hydrogen fired gas turbine
1097	MHI	FGD limestone scrubber

The Value Proposition summaries are included as per this example of the MHI CO2 absorber for bioenergy plants.

MHI CO2 ABSORBER VP: # 1095

Company

Location

Industry

Process

Products

MHI

Europe, Americas, Asia

Bioenergy

CO2 capture

K21 absorber

Value Proposition: With aa new absorbent MHI can capture more than 99% of the CO2 with low solvent losses

Contact: xxxxxx, Product manager, email xxxxxx phone xxxxxxxx mobile xxxxxxxxxxxxxxx

Description: KS-21™ enable the compound to absorb CO₂more effectively than other solvents. It also degrades at a higher temperature than most solvents currently in use and it has a lower vapor pressure, resulting in reduced losses. This combination makes KS-21™ more efficient: Higher regeneration temperatures can be used to release the CO₂, and since the solvent resists thermal and vaporization losses, it doesn’t need to be replenished as frequently.

The value propositions of OEMs shape the markets for the component suppliers. The MHI breakthrough to reach 99% CO2 recovery promises to make small CO2 recovery systems attractive. Waste to Energy and other smaller CO2 generators in the UK will have both a pipeline to take the CO2 away as well as an efficient way to remove the CO2. Relatively high investments are required in pumps, valves, compressors, hose, fittings and stainless steel. Companies such as Ingersoll Rand and Atlas Copco are creating niches by acquiring companies which make the pumps and valves. They can be combined with the compressors into packages.

Following the lead of the finance department the statistics can be utilized to create very specific guidance for salesmen. This salesman for a filter company sells pulse jet valves along with the filters. Hose and couplings for dust discharge are sold along with unit collectors. Pumps are sold as part of scrubber systems. The number of days to spend each year in each application is budgeted.

Promotional expenses can be determined the same way. The template allows $100,000 of promotional expense per niche. California represents 3% of the revenue or $30 million. So, the promotional budget would be $1.5 million.

The advertising and exhibition investment should ensure the validation of the value propositions for the sub-niches. The California market will benefit from some combination of local, national, and international promotion. It is likely that $1 million would be allocated to national and international promotion and only $500,000 to strictly local promotion.