At an international level, the machinery and plant manufacturing sector was amongst those branches of industry affected most by the financial and economic crisis 2009. After overcoming the crisis, partial areas of the sector proved to be driving factors of growth, however. This is true in particular for the German machinery and plant manufacturing sector, which traditionally has a very global focus. For example, the member companies of the Working Group Large Industrial Plant Manufacturing (AGAB), associated with the German Machinery and Plant Manufacturers Association (VDMA), achieve an export quota of approximately 80% () based on an annual order volume exceeding € 25 billion.

The so-called BRIC countries (Brazil, Russia, India and China) continue to be the most important individual markets worldwide for large industrial plant manufacturing. Increased total order values are also being reported from Indonesia, Taiwan and South Korea. Dieter Rosenthal, Member of the Managing Board of SMS Siemag AG and spokesman of AGAB says, “East and South Asia are currently important sales regions for large industrial plant manufacturing. The expansion of infrastructure and ambitious industrial projects are driving the demand.”

According to the working group, the market for smelting works and rolling mills has picked up slightly after the dramatic downturn in 2009. After the global crude steel production in 2010 increased by 11% to a new record of 1.414 billion tonnes in comparison with 2009, moderate growth of actual steel consumption is expected for 2011. Further forecasts assume that the growth rates will remain below pre-crisis level in the medium term.

On the international level, the degree of capacity utilisation in the steel industry amounted to an average of 80% in 2010, about 5% higher than in 2009. Correspondingly, a slight decrease in worldwide over-capacities, mostly distributed between Europe and the USA, was reported. According to AGAB, the willingness to invest was still low in comparison to the situation before the downturn and was concentrated mostly on strategic new plant projects and plant modernisations. As compared to 2009, the total order value for smelting and rolling technology increased by 38% to € 3.1 billion. However, these values were still significantly below the record level achieved in 2008.

China is one of the most important markets for smelting and rolling technology. The state-prescribed consolidation and closure of many small, older systems was juxtaposed by the construction of new modern plants. According to the AGAB, the decrease of import shares accelerated by industrial policy naturally strengthens local suppliers and increasingly complicates the import of smelting and rolling technology. There are also first signs of a slightly diminishing domestic economy, and as a result, Chinese plant manufactures are pushing more towards the world market.

Crisis-proof Growth in India
Like China, India was less affected by the 2009 crisis than Europe or the USA. As a result, the Indian steel industry, oriented strongly towards the domestic market, was able to show positive developments and could maintain its ranking as a major manufacturer on an international scale thanks to high levels of utilisation. Due to the fact that India is planning to triple its annual steel production over the coming years, AGAB foresees further positive outlooks for smelting and rolling technology. As far as South East Asia is concerned, mainly South Korea and Taiwan are important buyers of the German smelting and rolling technology. All in all, the Asia Pacific region was the world’s most important market for smelting works and rolling mill construction in 2010.

The situation in Europe and North America is different. Before the backdrop of decreased steel production as compared to 2007 and 2008, the focus of the European business was more on modernisation of partially obsolete plants. The trend towards continuously improved steel qualities positively affects the willingness to invest of the European steel producers, opines the AGAB. While the North American market has mostly weathered the significant decrease of 2009, some over-capacities still exist. Therefore, the US-business limits itself mostly to service delivery and the modernisation of older plants, with the exception of some strategic new plant projects.

Brazil grows in Importance
Thanks to the continuous positive development, the Latin-American market is considered a driver for growth. This is true in particular for Brazil, which is investing in new plants thanks to its solid economic situation and large deposits of iron ore. In addition, Brazil has the largest domestic market in South America, abundant crude oil deposits, a large volume of biomass, as well as significant potential for hydropower. Over the past years, this was also a benefit for the ABAG member companies in terms of increasing order volumes, including major orders for several rolling mills.

The recovery in the severely recession-affected CIS countries is progressing slower than in Europe. Nevertheless, some projects put on ice in 2010 are reported to have been revived. The association thinks that the financing of industrial plants will continue to be problematic, however. Thanks to attractive, state-supported financing opportunities, this could be a benefit for the upcoming Chinese competitors.

Experts estimate that Russia will continue to remain an important market despite retrogressive demand. In 2010, Russian orders of metallurgical plants decreased significantly as compared to the previous year, because the major corporate steel groups throttled their expansion plans in response to the infirmity of major consumer sectors. AGAB feels certain, however, that the plant business will pick up again in the medium term. Reasons for this outlook include the major need for modernisation of the Russian industry and the good financing opportunities due to the abundance of natural resources.

The order volume in 2010 took a serious nose-dive in Eastern Europe, as well. For numerous countries in this area, the recession had delayed effects and led to declining investments, mainly in the private sector. The flagging demand for plants from Eastern Europe in 2010 also affected the smelting and rolling plant construction sector. Although it received new orders, it only managed to achieve less than 2/3 of the previous year value.

Good Outlook in the Medium Term
Full order books from the time before the crisis and employment measures ensured that the domestic construction sector for metallurgical plants was able to weather the decline comparatively well and even post a good result for 2010. According to AGAB, the sector used the temporary drop in orders to optimise its internal processes and work on innovative developments. This is true also for quality and performance improvements in the plants as well as for further developments in the area of environmental protection. All in all, the forecast for smelting and rolling plant construction is favourable for the medium term, even if the current number of new plants is restricted to strategic projects and the current focus is more on modernisation measures. In the long term, the increasing demand for steel in countries with great need for infrastructure, such as India, is expected to bring about new plant construction projects.

Highly Competitive Pressure Internationally in the Area of Large Industrial Plant Construction
In the judgment of the AGAB, the structural changes of the market looming since 2009 are leaving increasingly serious marks in the area of large industrial plant construction on an international level. While the number of established market participants from Europe, the USA and Japan has remained almost unchanged, new competitors from East Asia have arrived. While demand has only risen slightly, the higher number of suppliers offering large industrial plant construction internationally has led to a noticeable increase of competitive pressure.

A joint competitor analysis of the ABAG and Management Engineers Consulting Company published in the middle of the year arrives at the conclusion that it is mostly the new competition from China and South Korea that puts pressure on the established suppliers. The study shows that the Chinese manufacturers of large industrial plants in particular are aggressive when it comes to pricing and willingness to take risks with regards to project planning and realisation. The analysis states furthermore that Chinese companies are trying to set new standards relating to efficiency and speed of execution. On the other hand, their innovative power is reported to lag far behind Western European standards.

Currently, South Korean suppliers are very successful in the area of chemical plant construction, in particular. According to the analysis, cooperation requests and first joint projects with German companies in sectors such as smelting and rolling works construction prove South Korea’s willingness to expand. If successful, the competitive pressure from Asia could increase. However, the higher competitive pressure for German companies continues to come from European competitors in many areas of large industrial plant construction. Western European suppliers are still being considered the leaders in the development of new and market-relevant solutions. In the area of innovation capacity, European plant manufactures are considered at a significantly higher level than suppliers from China, South Korea, Japan or the USA.

Upswing on the Market for Tube Welding Plants
The statements made with regards to large industrial plant construction or the smelting and rolling technology sector generally also apply to the partial segment of tube system construction. Among the major suppliers in this segment is SMS Meer GmbH from Mönchengladbach, which is an affiliate of SMS group () from Düsseldorf. After a difficult 2009 fiscal, SMS Meer was again on a growth trajectory in 2010. The company reported increased demand mainly from China, India, the Near East, Brazil and Western Europe.

At the balance-sheet press conference in the middle of 2011, Dr.-lng. E. h. Heinrich Weiss, President of SMS group, said, "The ramifications of the worldwide economic and financial crisis could still be felt on the market for tube welding plants in 2010. In this segment, business was focused mainly on plant modernisation projects.” Management of SMS believes that the recovery of the global economy will also reach the market for tube welding plants in 2011. The outlook is much more positive than a year ago. The demand for industrial tube equipment rose noticeably in 2010, and the willingness to invest has improved significantly. According to the company, the market for spiral tubes has undergone positive development in 2010.

New PQF Rolling Mill for 20” Seamless Tubes
SMS considers PQF technology (Premium Quality Finishing Mill) still as the major growth driver for seamless tube systems. According to the manufacturer, about 32% of the plants installed all over the world are using this procedure. And together with its predecessor technology, the MPM procedure (Multistand Plug Mill), the company reaches a world market share of more than 50%. Admittedly, the Chinese market is considered mostly saturated. Because of this, it is said that the first major Chinese tube manufacturers are planning to build up capacities abroad.

Of the 20 PQF mills installed worldwide, the first plant began its operation in the western hemisphere in 2010, by the way. It is the plant of the world’s largest seamless tube manufacturer Tenaris in Veracruz, Mexico. The strong demand for this technology is due to the continuous expansion of the measurement range, SMS opines. During the current year, the world’s first PQF mill for 20"-tubes is expected to be commissioned in Jiangsu Tianhuai, China. The company states furthermore, that customers would benefit from material savings, better quality and lower energy consumption.

Optimistic Outlook with Reservations
Generally, SMS group expects further growth in India, China, South America and the Near East. The reason: These regions show a comparatively low per capita utilisation of steel, which means that further investments can be expected. However, before the backdrop of the unresolved debt crisis in Europe and the USA, the political instability in the Near East and the high volatility of the raw material prices, there remains insecurity with regards to the further growth of these markets in the view of the company.

The manufacturers will introduce new and innovative solutions at the international tube trade fair Tube (26 to 30 March), where the tube industry will again gather for the world’s largest showcase of the sector. The focus of the event is on plants and machinery for the production and processing of tubes as well as services, used machinery and much more. The diversity of the tube universe is presented at Tube 2012 in Düsseldorf.

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