September 2015 - Water Market Insights 161

This 40 minute webinar will review changes to the forecasts in Industrial Valves: World Market. Explanations will be given for key factor selections such as oil prices and Chinese economic growth. Examples of the type of information to be presented are shown below.

The market for industrial valves is impacted by many different factors. Some of these factors are constantly changing. Two of the biggest changes in the last month have been the economic slowdown in China and the lower prices for oil and gas.

Valve sales in 2015 will be $57 billion of which China will account for 17 percent. If Chinese economic growth continues at 7 percent over the next four years, there will be an expansion of the valve market by $12 billion. Under a zero annual economic growth in China the world valve market would only grow $5 billion/yr. by 2019. This takes into account not only the lower purchases in China but reduced purchases by suppliers to China.

It now looks as if the economic growth for China in 2016 will be less than the anticipated 7 percent. Predictions range to as low as 2 percent. This could be followed by a return to 7 percent growth in succeeding years including 2019. However, the political and financial management of the economy is facing a confidence crisis which it must weather if it is to resume its previous growth levels. There are also questions about the reliability of some of the government statistics which are used to assess growth. It is, therefore, necessary to look beyond the easily available statistics and to continue to analyze the fundamentals. Even though the stock market has dropped dramatically in the third quarter of 2015, it still remains at high levels compared to previous years. Consumer demand is high and with reductions in interest rates industrial expansion will be encouraged.

The drop in oil prices to under $40 /barrel late in the third quarter 2015 has immediate impacts on the valve market. Drilling activity has been reduced. A number of large projects have been delayed or cancelled. However, the overall impact on the valve market is softened by the fact that the majority of valve are sold for applications unaffected by oil prices.

The market for industrial valves will grow by 16 percent from 2015 to 2019 at oil prices of $80/barrel during the period. At $40/barrel, the growth will only be 9 percent.

The industrial valve market is led by oil and gas which represents 15 percent of the present market. However water and wastewater, power, refining, petrochemical and other industries account for 85 percent of the market. The impact of future oil prices on the market can be best predicted by estimating the impact on the individual segments.

Oil and gas can be divided into two segments. The aftermarket and routine purchases for small projects represent two-thirds of the total or 10 percent of the present total pump market. The longer term large project revenues represent only 5 percent of the current market. If the price of oil were to continue to remain at $40/bbl through 2019, revenues in this segment would shrink over the period.

The chart shows percentages of the present 2015 market for the year 2019. At $40/barrel oil the long range valve product revenue from the oil and gas large project segment would shrink by 60 percent from 5 percent of the current market in 2015 to an amount in 2019 which is equivalent to 2 percent of the 2015 market. On the other hand, the oil and gas aftermarket and market for small projects would grow slightly during the four year period. In fact, the market for pipeline valves will be positively impacted as low cost oil and gas needs to be moved to more places.

The petrochemical market will grow faster at $40 oil. Municipal water and wastewater will be unaffected by the fluctuation in oil prices. Lower prices will result in more gasoline being consumed and more oil being refined. The power market will be impacted by greater use of gas turbine combined cycle power plants but total revenues for valves in the power industry will not be impacted greatly by fluctuating oil prices.

McIlvaine will continue to assess the likely changes in oil prices based on the following factors:

o Hydraulic fracturing breakeven point is $30 to $50/barrel equivalent based on improved management practices and the extraction of more products from existing wells.

o Bechtel experience with coal seam gas to LNG in Australia indicates lower break even costs than subsea extraction.

o China coal to syngas and chemicals could be an alternative which is more than competitive at $40 oil. McIlvaine has recommended marrying the two stage (HCl/SO₂) scrubbing along with conventional hydrochloric acid leaching to extract rare earths and generate by product revenue.

o The slowdown in China could impact demand as could economic problems in Greece and other countries.

o Demand is a function of industrial activity. There is little equipment needed to extract Saudi oil. On the other hand, over 2,000 companies rely on the Alberta oil sands market for their revenues. The greater the industrial activity the greater the oil demand.

o Saudi Arabia could choose to restrict production. In many ways the situation is analogous to the gold in Ft. Knox. You could sell it at any price and generate positive cash flow. However, it is a precious and finite resource which is important to future generations.

o Market driven companies will typically be reactive rather than proactive and will only increase drilling after oil prices rise to a level to make drilling profitable.

Some of these developments are more predictable than others. The low oil prices lead to lower extraction activity which eventually leads to shortages and higher prices. On the other hand, wars, oil spills and earthquakes cannot be easily predicted. As a result, there will be the need for continuous changes in the forecasts to take into account the surprises.

The presentations which will convince a prospect to consider a specific product or service are too often only shown to a few customers. We can record these presentations for less than $1000 each and post them to YouTube. With coverage directly on YouTube plus links from the McIlvaine website and your website, you can gain as many as 1000 viewers. What other medium can give you the attention of an interested prospect for $1. In addition to English, your salesmen in China or other countries can provide a duplicate presentation in the local language. For more information on this program contact Bob McIlvaine at: rmcilvaine@mcilvainecompany.com 847 784-0012 ext. 112.

World Market for Air and Water Monitoring to Rise to be $31 - $33 Billion in 2019 Depending on the Chinese Growth Rate

China will spend more than $1.7 billion for power plant air and water monitoring in 2015. This represents 40 percent of the world’s power plant air and water monitoring purchases. The total monitoring market for all industries will be $29 billion of which China represents 17 percent. China will be the leading continuous emissions monitoring purchaser in 2015 with forecasted purchases of $750 million. Residential/commercial HVAC air monitoring purchases in China will be $1.9 billion in 2015.

The uncertainty relative to future growth in the Chinese economy makes the prediction of the 2019 world market more difficult. At an economic growth rate of 7 percent in China, the world market in 2019 will be $33 billion.

At 7 percent annual economic growth through 2019 continuous emission monitoring and residential HVAC expenditures will be at about the same level as in 2015. The reason is that 2015 revenues are at a high point and cannot be expected to keep increasing. At a 2 percent economic growth rate in China, there would be a substantial reduction in air and water monitoring purchases in that country. The result would be a world market in 2019 of only $31 billion.

McIlvaine is revising air and water monitoring forecasts quarterly in N031 Air and Water Monitoring: World Market. This example focused just on the Chinese economy could be misleading due to the fact that many variables have to be taken into account in each quarterly change. China is a leading purchaser but other trends could be more significant.

One of the significant variables is the price of oil. The oil and gas industry is a mid-range purchaser of air and water monitoring. These prices also indirectly impact other market segments. The political situation in Southern Europe, Russia and other countries is important and constantly changing.

A huge but declining air pollution control (APC) market in China will create a tsunami which will exceed the Japanese and European APC tsunamis of previous decades. This is the prediction of McIlvaine Company in Air Pollution Management. (www.mcilvainecompany.com)

What is an APC tsunami and what is its cause? The tsunami is the sudden appearance of many new foreign players in a domestic market. The cause is that national regulations create temporary large markets. When these markets slow, the suppliers look elsewhere to sell their products.

The U.S. has experienced two such events. Flue gas desulfurization (FGD) was developed in the U.S. and applied to 10 percent of the 300,000 MW coal-fired base in the 1975 timeframe. Japan then decided to install FGD immediately on all its 30,000 MW of coal-fired capacity. So it was the world’s largest market for several years. Mitsubishi, Chiyoda and Hitachi all entered the market. When the Japanese market subsided, they started pursuing the U.S. market and over the years became major suppliers.

The world precipitator market was dominated by two U.S. companies: Research Cottrell (RC) and Western Precipitation (WP). As a result of European tsunami, they disappeared under the waves. Their demise was more than just the aggressive activity of European suppliers. Europe mandated continuous compliance for particulate control. No such requirements existed in the U.S. Flimsy wire rappers supplied by RC and WP would break and were no match for the rigid frame European design. Flӓkt (Sweden) very quickly became the top U.S. precipitator supplier.

The Japanese market for coal-fired boiler air pollution control is one tenth the size of the U.S. market. The European market is equal to the U.S. The Chinese market is four times the U.S. in the long term and twenty times the U.S. in the short term. So the Chinese tsunami potential is huge. The top ten air pollution control companies in China are all in the top twenty worldwide even though all their business is in China. The huge retrofit program has created an unsustainable bulge in the market. The economy is also slowing and there will be no more years with 100,000 MW of new coal-fired power plants.

Much of the Chinese technology was originally under license, but improvements to the technology have been made. One major supplier requires its engineering staff to spend 30 percent of its time on development of improved products. One example of an improved product is a hybrid precipitator-fabric filter licensed from U.S. DOE. The Chinese supplier has commercialized this with many successful installations. The U.S. Dry Fork power plant dry scrubbing system duplicates an installation in China.

The magnitude of the tsunami can be measured in SCR catalyst capacity. World demand in 2010 was 130,000 m³. Chinese SCR catalyst production was zero. Due to retrofits there was a Chinese need for as much as 200,000 m³ in just one year. China now is the world production leader. However, catalyst only needs to be replaced every six years, so China already has excess capacity. The situation relative to systems and components is even more calamitous. Systems last 25 years.

Coal-fired boilers are the largest application for air pollution control. Future new equipment markets are spread throughout the developing countries. However, there is a very large upgrade and maintenance market in the U.S. and Europe. The Chinese tsunami will necessarily be focused on the existing U.S. plants.

The worldwide APC new system capability already exceeds the needs over the next decade. On the other hand, the upgrade and maintenance demand is going to exceed supplier capability. Plant owners want to focus on their core business and would like to outsource as much of the air pollution control activities as possible. The result will be a Chinese Total Solutions tsunami which provides all upgrading, operations and maintenance needs.

”Power Plant Pumps” is the Hot Topic Hour on September 10, 2015 at 10:00 a.m. CST

A webinar on September 10 at 10:00 a.m. central time will cover the options and issues regarding selection of fossil-fired power plant pumps. There is a very ambitious goal to provide a website with the most comprehensive information on power plant pumps. This is part of a whole knowledge system to provide Alerts, Answers, Analysis and Advancement in every aspect of power. Owners and operators around the world have free access to 44I Power Plant Air Quality Decisions (Power Plant Decisions Orchard) and 59D Gas Turbine and Combined Cycle Decisions. The Power Plant Pumps Decision Guide is one of the subsidiary websites in both these knowledge systems.

This webinar will be focused on creating a Power Plant Pump Route Map and Summary which will help decision makers navigate the website. The first inputs to this Route map are displayed at Power Plant Pumps Route Map.

Jose Gutierrez, Director/Business Development, ITT Corporation & Xylem/ Goulds Vertical Products

Kei Koeda, Manager, International Sales & Marketing, Hydraulic & Energy Business Group, Business Division, Energy & Environment, Mitsubishi Heavy Industries, Ltd.

Jason M. Hoover, Leader – Medium Voltage Drives, USA, Siemens Large Drives

Allen Daniszewski, National Sales Manager – Industrial Products, SPX Process Equipment –Delavan Operations

The website already exists but there is conflicting information. For example, the introduction of ceramic impellers for FGD slurries needs to be more closely examined. These more detailed subjects will be pursued with continuing correspondence and future webinars.

McIlvaine webinars offer the opportunity to view the latest presentations and join discussions while sitting at your desk. Hot Topic Hours cater to the end users as well as suppliers while the Market Updates cater to the suppliers and investors. Since McIlvaine records and provides streaming media access to these webinars there is a treasure trove of value only a click away. McIlvaine webinars are free to certain McIlvaine service subscribers. There is a charge for others. Hot Topic Hours are free to owner/operators. Sponsored webinars provide insights to particular products and services. They are free. Recordings can be immediately viewed from the list provided below.

DATE	UPCOMING HOT TOPIC HOUR	UPCOMING MARKET UPDATES
September 10, 2015	Power Plant Pumps A decision guide for pump selection for intake, cooling, ultrapure water, steam and wastewater from coal and gas turbine power plants. More information Click here to register
September 11, 2015		Valve Market Forecast Changes The oil prices and Chinese economy will be two of the drivers evaluated as the basis for adjustments in the 2016-21 forecasts for industrial valves. More information Click here to register
September 24, 2015	Power Plant Water Monitoring A decision guide for selection of monitoring equipment for intake water, cooling, ultrapure water steam and wastewater from coal and gas turbine power plants. More information Click here to register
September 25, 2015		Pump Market Forecast Changes The oil prices and Chinese economy will be two of the drivers evaluated as the basis for adjustments in the 2016-21 forecasts for pumps. More information Click here to register
October 1, 2015	Power Plant Water Treatment Chemicals A decision guide for selection of chemicals to treat intake water, cooling, ultrapure water steam and wastewater form coal and gas turbine power plants. Click here to register
October 2, 2015		Fabric Filter Market Forecast Changes New technology such as ceramic catalytic filter elements, the Chinese economic slowdown, oil prices and other factors will be explained in terms of their impact on the 2015-21 market for fabric filters, bags, media and fibers. Click here to register
October 22, 2015	Precipitator Improvements Decision guide to dry, hybrid and wet electrostatic precipitators for solid fuel combustion, refining and other industries. Focus will be on improvements to the electricals and components. Click here to register
November 12, 2015	Dry Scrubbing Expansion of the dry scrubber decision guide for power plants, incinerators, and other applications involving SDA, CFB and DSI. Click here to register
December 3, 2015	NO_x Reduction Decision guide to selection of SCR and SCR systems, ammonia injection, reagents, catalysts for power plants refineries, incinerators, chemical plants and other applications. Click here to register