More Technology-Intensive Functions Such as Automation, Control and Testing are Becoming More Prominent.
By Mark S. Kuhar
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| Ash Grove’s Midlothian plant. |
According to CW Research’s recently published “World Cement Equipment Market and Forecast Report,” the market for cement manufacturing related equipment and services is projected to reach $9 billion by 2022.
However, as greenfield cement plant projects remain scarce, upgrades to existing cement plants will become relatively more important; equipment relating to upgrades (i.e., excluding service-related spend) will move from representing a quarter of the total cement manufacturing equipment capital spend in 2017 to more than 40 percent by 2022.
Consequently, what CW Research defines as “functional” equipment (i.e., conveying, automation, filtering, environmental control, etc.) will be a central growth driver of cement plant-related equipment sales over the next five years.
Informed by extensive primary research conducted with both suppliers and end users across the cement equipment value chain, the CW Research study emphasizes that behind the growth remains an ever-expanding focus on automation, control, environmental and testing throughout the production processes to deliver higher efficiency and performance.
Robert Madeira, CW group managing director and head of research, noted, “Decision making for cement manufacturers is becoming more and more complex as players aim at achieving higher efficiency and reducing operating costs. As a result, more technology-intensive functions such as automation, control and testing are becoming more prominent, and representing an ever-growing share of the cement plant equipment spend mix.”
Project Scarcity Increasing Competition
With a global dearth of cement production capacity expansion projects, equipment suppliers have been facing a tough down-cyclical market. New equipment orders are relatively scarce, and competition to win orders is very high. The cost in U.S. dollars per ton of cement production capacity has continued to fall; the average price per ton of cement production capacity for a turnkey cement plant has fallen about 15 percent since 2008.
Given the cement plant expansion and upgrade market dynamics, CW Research expects prices to fall an additional over 5 percent.
Cement plant equipment types that do not require as complex engineering or proprietary technology – or demand from greenfield projects – such as kilns and precalciners, are expected to further commoditize and continue to face even harsher price erosion.
The expansion of the upgrade and spares segments will be underpinned by cement manufacturers’ shifting capital expenditure and strategic priorities. CW Research projects the market for upgrades and spares to amount to $3.3 billion, with China accounting for 44 percent of the market. Globally, by 2022, the upgrades and spares segments are projected to expand the fastest, reaching close to $5 billion.
Western/Chinese Equipment Price Gap Narrows
Over the last five years, competition between Western and Chinese manufacturers has intensified, but the pricing gap between them is likely to gradually become narrower in the next five years.
In 2012, the average price extended by a Chinese supplier for a new project would be less than half of its western counterpart’s. That is no longer the case. One of the consequences is that market shares for key production equipment segments are also changing, as producers jockey for relatively fewer orders compared to the preceding 5 to 10 year period.
Turnkey Western equipment producers, such as FLSmidth, ThyssenKrupp or KHD Humboldt, are becoming increasingly competitive with Chinese suppliers, including Sinoma and CNBM and their sub-units (e.g., TDCRi), reclaiming increasing shares outside China.
For large Western manufacturers, competitiveness with Chinese suppliers is oftentimes met on their home turf –through lowering production costs by moving manufacturing and fabrication the equipment to China, for instance.
Within the cement mill segment (including vertical roller mills, ball mils and roller presses), as well as the clinker cooler segments, market shares have been evolving, as CW Research points out in the report, which shows market shares for top suppliers (including Loesche, Gebr. Pfeiffer, IKN, Christian Pfeiffer, Fives FCB, FONS and many others) across key cement manufacturing segments.
The mill segment (together with a few other cement plant equipment segments, such as packing and palletizing and clinker coolers) has remained firmly in control of Western suppliers, even as Chinese engineering, procurement and construction solution providers have won the orders.
Often, even though the overall plant project is awarded to a Chinese company, the mills (and other specific sub-systems) are specified by the client to be provided by companies such as Loesche or Gebr. Pfeiffer. Conversely, some segments are firmly rooted in Asian suppliers.
Notably waste-heat recovery electricity generating systems, which derive from their widespread use in China and Japan in particular with regional champions (e.g., Anhui-Kawasaki) dominating this segment.
As observed by Raluca Cercel, associate with CW Research, “On one hand, Western cement manufacturers are trying to improve their cost efficiency, and offer lower prices in order to capture a larger slice of the market. Chinese equipment providers, in turn, are aiming to raise the quality of their equipment. This market approach caters to an increasingly discerning end user, driven by concerns such as quality and value of the equipment but also its user-friendliness and flexibility. The combination of this consumer trend with the rise of labor costs is expected to result in a gradual increase in prices.”
About the Report
For more information, go to www.cwgrp.com.
