Severe Service Valve Market is Large and Challenging

McIlvaine Company is conducting extensive analyses of severe service valves for applications in many industries. Initially, we focused on the definition and one application (molecular sieves switching valves). Here is a summary of the analysis and a link to the full analysis.

http://www.mcilvainecompany.com/Decision_Tree/subscriber/Severe_Service_Valve_04_14_16.pdf

There are many difficult applications for valves. High temperatures, abrasive solids, corrosive fluids, and rapid cycling are just some of the conditions which challenge the industry. Both isolation and control valves must be designed appropriately. The valve industry has referred to these applications as “Severe Service.” The problem is that there is no precision relative to the definition. The annual market for these valves is anywhere from $6 to $14 billion/yr. depending upon how you define SSV. As a result, we are working with the industry to obtain consensus. We were delighted to learn that Ross Waters president of CGIS has been active in defining severe service valves. His company has extensive and lengthy experience in the supply of severe service valves in multiple industries in various countries. We interviewed him on the subject and obtained some insightful answers.

We then chose one application:  molecular sieve switching valves to serve as an example.

Historically the rising stem ball valve (RSBV) has been used in this application. But the selection is complicated and depends to some extent on the severe conditions.  Flowserve generalizes that this valve with its friction-free linear movement and mechanically energized metal seat has proven it to be the most suitable design for optimal long-term performance in severe applications, Cameron also recommends the rising stem ball valve.  Cameron says it provides tight shutoff, withstands frequent cycling, and handles high temperatures better than other valve types in this service.

ValvTecnologies draws some different conclusions based on specific experiences. They say that more long-term success has been realized with metal seated quarter turn ball valves and can cite installations were the rising stem ball valves have been replaced. ValvTechnologies’ zero-leakage carbide coated metal seated ball valves were selected and installed for a major operator’s sour gas plant in Monkman, British Columbia, replacing rising stem ball valves that lasted one year in service. These valves feature the same design proven since ValvTechnologies’ produced the seat supported fixed ball design.

The first installation in a molecular sieve lasted eight years after its initial installation, providing severe service zero-leakage isolation. Given a conservative one day shut-down per year to replace other designed valves in a plant processing 220mmcfd of saleable gas at $750,000 per day, that is $6.0Min improved efficiency over the course of eight years.

International Strategy is Critical for Survival in the Flow Control and Treatment Industries

Whether you sell pumps, valves, filters, fans, compressors, treatment chemicals, scrubbers or centrifuges, you cannot focus on just the U.S., China, or EU market. Here are some examples of major opportunities elsewhere:

The U.S. has placed a moratorium on new coal-fired power plants but China will build far more than the EU or that the U.S. will retire. Vietnam, Indonesia and Myanmar are building power plants with a combined capacity of 150,000 MW.

China is the largest fish farming country, but Indonesia is also large. The industry is moving to sophisticated recirculating systems with a big investment in flow control and treatment equipment.

Australia, a leader in iron ore and coal mining, has become a recent player in LNG with successful conversion of coal bed methane.

Individual projects can measurably impact the market in a given year. There are nine large Canadian potash projects underway with a combined capital investment of over $30 billion. The largest project will require a $4 billion investment. Algeria’s state-owned Sonatrach has let a series of contracts to Amec Foster Wheeler to provide front-end engineering and design (FEED) for three grassroots refineries that will add a total of 15 million tons/year in refining capacity in the country. These few projects represent a significant percentage of the yearly flow control and treatment revenues for the worldwide industry.

Coal-fired projects in Indonesia could result in an investment of over $100 billion. Vietnam is vacillating on plans which would require a coal-fired power plant investment of over $200 billion. Delay or cancellation of large projects can materially affect the revenues of the flow control and treatment suppliers.

Flow control and treatment companies need to pursue the world market. There are 196 countries with more than 50 major industries who purchase flow control and treatment equipment. Many of these countries are quite small. McIlvaine forecasts divide the world into 80 purchasing entities which include 72 separate countries and 8 country groups. The pump forecast example below shows pump sales in Pakistan will be $216 million in 2021, but sales will only be $22 million in a group of countries labeled “Other Western Europe.”

The countries aggregated in the Other Western Europe category are Andorra, Faroe Islands, Gibraltar, Greenland, Guernsey, Iceland, Isle of Man, Jersey, Lichtenstein, Luxembourg, Malta, Monaco, San Marino and Vatican.

The average for the 80 entities in a $60 billion annual market is 0.75 percent. While, as individual countries, many in the “other” category are insignificant, as a group they are relevant. This is particularly true for the Other Africa group which accounts for 0.75 percent of the total market and the Other Middle East group which in the aggregate is bigger than the average.

McIlvaine has created a program to help international flow control and treatment suppliers maximize the global opportunity. It is described at:  Detailed Forecasting of Markets, Prospects and Projects

Bob McIlvaine is available to answer your questions and can be reached at 847-784-0012 ext. 112  rmcilvaine@mcilvainecompany.com

$14 Trillion to be spent on Power Plant Equipment and Repairs in the Next 25 Years

Electricity production will be up 100 percent by 2040. This will require an investment of $14 trillion in new hardware and repair parts for existing equipment and systems. Coal-fired generation will grow by 10 percent. One would, therefore, expect that investment in coal-fired power generation would be less than in other technologies. However, when you take into account repair and upgrades, coal-fired power will require more in investment than any of the alternatives.

World coal powered generation capacity is 2.2 million MW today and is slated to rise by only 10 percent or only 200,000 MW during the next 25 years. The investment needed to keep an old power plant running from age 50 to age 75 and to be upgraded to the likely emission limits, will be nearly equal to the $2 million/MW cost of a new power plant over a 25 year period. This means that $4.4 trillion will need to be invested in coal-fired power. Much of that will be in Asia where many new power plants will be built. Net capacity will drop in Europe and the U.S. This does not mean that the two areas will not be spending money on coal-fired power plants. The U.S. moratorium on new coal-fired power plants and the necessity to maintain 200,000 MW of coal-fired capacity means that the U.S. will have to spend $400 billion just to keep the old power plants running and meet increasingly stringent environmental standards.

Nuclear capacity is slated to increase from 392 GW in 2013 to more than 620 GW in 2040. But its share of global power generation will rise just one percentage point to 12 percent, because almost 200 reactors of the 434 operational at the end of 2013 will be retired, they will need to be offset by new power plants. Total investment will exceed $2 trillion over the next 25 years.

The gas turbine combined cycle power generation market will grow by more than 300 GW to over 2 million GW by 2040. Replacements, upgrades and retirements all result in a net capital investment of $2.2 trillion.

Biomass capacity will be 300 GW in 2040. Wind capacity will be 1300 GW and solar 1000 GW.

By 2040 Chinese energy production will be twice that of the U.S. but per capital consumption will still be only half that of the U.S. The gas turbine market in China will be bolstered by the Chinese coal-to-gas program which will deliver gasified coal to turbine generators throughout the country.

India today is home to one-sixth of the world’s population and is its third-largest economy, but accounts for only 6 percent of global energy. Demand for coal in power generation and industry will surge increasing the share of coal to almost half of the energy mix and making India the largest source of growth in global coal use. By 2040, Asia is projected to account for 80 percent of coal consumed globally. Coal will remain the backbone of the power system in many countries.

Many components of coal and gas turbine generating plants need to be replaced frequently. Catalyst for a coal-fired power plant is replaced every 3-5 years and every 10 years for a gas turbine power plant. Boiler feedwater valves will be replaced more frequently in a gas turbine power plant due to the constant cycling and phenomena such as Flow Accelerated Corrosion (FAC). Slurry pumps, ball mills, fans and air pre-heaters in coal-fired power plants are in periodic need of replacement parts. Both coal and gas turbine operators are now more likely to use zero liquid discharge (ZLD) systems which are high maintenance systems.

Coal-fired power plants are switching from electrostatic precipitators to fabric filters. This results in biannual purchases of new bags. Gas turbine plants now favor high efficiency inlet filters which are more expensive and need more frequent replacement than the low efficiency alternative.

The power plant generation market was reviewed in a McIlvaine Hot Topic Hour on April 7.

McIlvaine publishes market reports with detailed forecasts of the power market. They include:

59EI Gas Turbine and Combined Cycle Supplier Program

N043 Fossil and Nuclear Power Generation: World Analysis and Forecast 

42EI Utility Tracking System

Flow Control and Treatment Companies will benefit from a Digital Crystal Ball

The digital age has created the ability to make fortune telling a reality. The real life version of a crystal ball is the wealth of information available to predict markets, projects and identify decision makers. This information can be used to change the way flow control and treatment products are marketed.

Long range purchasing plans can be determined by an organized analysis of information which can be obtained directly from available documents or through individuals who have specific insights.

The local salesman can make a call on a municipal wastewater treatment plant but would be unlikely to provide the same value gained from the directors meeting minutes which outline the failure of the competitor’s equipment and his proposal to fix it.

The power plant modification permit request which details the cost and performance of various options provides the needed insights on product and timing for a potential supplier.

One way suppliers take advantage of the availability of information is to purchase sales leads.  Typically the company spends lots of money on these leads and not on market research.  In one sense, the leads are the market research.  In fact, published studies purport to link the number of sales leads to the size of future markets.

This approach has a number of undesirable aspects:

1.     The large expenditure for sales leads draws funds away from critical market research.

2.     Sales leads are not qualified.  High margins and order conversion result from picking and choosing projects.

3.     Since the sales lead is also being viewed by the competitors, there will be pricing pressure and lower success rates.

4.     The timing of sales leads is often right if you are selling a commodity, but if you are selling based on your product differentiation, you are too late.

5.     Many companies have distributors and representatives who are being paid to uncover leads.  Sales lead expense is justified based on evaluating distributor performance rather than on boosting sales.

If you are selling a commodity, product and price is the basis of success then the sales lead route is probably still the best option. But, if you sell a product based on lowest cost of ownership and not initial price, then you should consider a whole new route using the digital crystal ball.

Detailed Forecasting of Markets, Prospects and Projects is your digital crystal ball because:

1.     Forecasts can be provided for the precise product at the State and province level.

2.     Project alerts provide the time to convince the customer to consider total cost of ownership and to issue bid specifications accordingly.

3.     The large end users, OEMs, and AEs are identified.  Since they purchase more than 50 percent of the flow control and treatment equipment, the focus on them is critical.

4.     The opportunity to connect with the end user through white papers and webinars improves the margin and success potential.

5.     The ability to demonstrate lowest cost of ownership is the secret to success in the global market.

For more information on this program contact Bob McIlvaine 847-784-0012 ext. 112 rmcilvaine@mcilvainecompany.com

Bob McIlvaine
President
847-784-0012 ext. 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com