October 2015 - Fabric Filter-Precipitators Insights 59

Half of All Flow Control and Treatment (FCT) Purchasing Decisions Are Made Remotely

The choice among suppliers for an FCT product is more often made outside the local sales area. This means that coordination of local sales people is routinely necessary. Furthermore, market forecasts and sales quotas based on where the products will be used have to be adjusted to take into account the remote influence. A big portion of sales can be in large projects. Most of these involve remote influence.

Large companies are moving toward global sourcing. A few hundred large companies purchase 40 percent or more of FCT products. These large purchasers also are the ones with the large projects. Most large project purchasing decisions are made by groups and not individuals.

Local Influence vs. Purchasing Company Size for Flow Control and Treatment Equipment

100%
	Small companies with 60% of the market
↑
Local Decision Making Influence
50%
		Large companies with 40% of the market
↑


↑
	Project Size →

Smaller companies tend to make purchasing decisions in the country, province or state in which the product will be used. In larger companies, decisions are frequently made by corporate people in another locality. Another factor is project size. The larger the project, the more likely the decision will be made in part by people not at the point of use. McIlvaine has determined that anywhere from 50 to 200 large companies account for 40 percent or more of the purchases in any of the flow control and treatment product areas.

When the influence of EPC and system suppliers are included, the relative percentage of local decision making is further reduced.

Percentage of Purchasing Decisions Made at Another of the 95 Countries, Regions and Provinces rather than at the User Plant

	Small Company (Purchases)		Large Company (Purchases)
	Local Decision	Remote Decision	Local Decision	Remote Decision
Large Purchaser			20	40
Small Purchaser	60	10
OEM, EPC	5	10	5	15
Consultant	5	10	5	15
Total for Category	70	30	30	70
Total for Market which is 60/40 Small	42	18	12	28
In the total market, 54% of the decisions are local and 46% made remotely

For a major system or component, 46 percent of the decisions are made remotely. This number is much higher when components such as pumps and valves for new plants are evaluated. Seventy percent of the decisions would be made remotely. Often a valve is assembled in a component in one location and then shipped to the end user. The component supplier will make the ultimate purchase but the end user man have substantial influence on the valve choice.

Most of the decisions will be made locally for repair parts and replacement valves, pumps, nozzles, etc. The exception would be large companies that are moving to global sourcing.

Sales management needs to take into account the remote influence and large project impacts.

The first step is to create detailed forecasting of markets by use in all the sales territories. McIlvaine has divided the world into 95 significant territories (9 regions in the U.S. and 6 regions in China). This spreadsheet then becomes the template for adjustments by remote influencers and large projects.

The sales effort at the global sourcing headquarters for Arcelor Mittal which has more than 100 steel plants and coal mines needs to be proportional to the remote influence. A large project such as the $3 billion potash mining project in Canada or $20 billion coal gas pipeline in China must also be taken into account.

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Purchases of fabric filter systems will exceed $8 billion in 2015. One hundred thirty-three companies will account for more than $4 billion in purchases. Steel, stone and power industries comprise two-thirds of the entire market. These three industries are relatively consolidated, so by tracking the activities of the major producers, the supplier reaches the majority of the market.

The following chart shows purchases by individual companies and groups. The list is ranked by 2015 contribution to purchases. The largest individual purchaser is Eskom with 10 percent of the system purchases.

Fabric Filter Purchases 2015
Company	% of 2015 Fabric Filter Market	Application	% High Temp
50 Power Companies with 2015 Purchases	20	Coal-fired	90
Eskom	10	Coal-fired	90
Cement Companies, ranked 7-50	5	Cement	60
Top 10 Mining Companies in 2015	4	Mining	60
Top 10 Chemical Companies in 2015	4	Chemical	40
Steel Companies, ranked 2-6	3.3	Steel	60
Top 10 WTE in 2015	3	WTE	95
Arcelor Mittal	1.3	Steel, Coal-fired Iron Ore	50
Lafarge	1.2	Cement	60
Holcim	1.2	Cement	60
CNEM	1.2	Cement	60
Anhui Conch	1.2	Cement	60
Total (133 Companies)	55.1		60

The cement industry accounts for over 20 percent of fabric filter purchases. The 2014 production was 4.2 billion tons. Lafarge accounted for 5 percent of the total production. Lafarge accounts for 1.25 percent of the total fabric filter purchases. Holcim, CNBM and Ahui Conch each purchase more than 1 percent of the collectors and bags.

World crude steel production reached 1,662 million tons (Mt) for the year 2014, up by 1.2 percent compared to 2013. Arcelor Mittal produced 6 percent of the total, whereas the next eight companies average 3 percent each.

ArcelorMittal purchases a high percentage of the total fabric filters because of its involvement in several industries. It has both iron ore and metallurgical coal reserves and is among the largest iron ore producers in the world. Iron ore mining operations are located in the United States, Canada, Mexico, Brazil, Liberia, Bosnia, Ukraine, Algeria and Kazakhstan. In Canada, the company is developing a large greenfield project on Baffin Island. Metallurgical coal mining operations are located in the United States and Kazakhstan.

The potential in the power industry is huge. Ninety percent of coal-fired power plants still use precipitators. If all power plants converted to fabric filtration, the investment would be $80 billion just for the hardware and over $200 billion for the installed systems. The systems would clean 8 billion cfm of flue gas and would require 4 billion square feet of filter bags. The challenge is to determine how fast and how much capacity will switch. The potential in China is the largest, but this year Eskom in South Africa will be the biggest purchaser.

The large purchasers such as Arcelor Mittal are moving toward global sourcing. One reason is to determine total cost of ownership for products and services purchased. Individual plants without the analytical resources are forced to buy based on lowest price. The companies who pursue these large purchasers and can demonstrate lowest cost of ownership will boost sales and margins.

The fact that power plants in many different countries have shifted to fabric filters is indicative of the most important development in the history of the industry.

There is great concentration among OEMs. FLSmidth supplies a very significant percentage of filters for their cement kiln systems. However, they make both collectors and bags. Other kiln suppliers are major purchasers of filters. Large power plant suppliers such as B&W and Alstom make their own collectors but buy bags.

The 200 largest end users, architect engineers and OEMs make 75 percent of the decisions relative to fabric filter purchases. This is a small enough group that detailed forecasting can be achieved at modest cost compared to the potential to increase in sales and create greater sales efficiency.