Copper (Cu) Tubes Market in MENA, 2017

Copper (Cu) Tubes Market in MENA, 2017

Opportunity assessment of Copper tubes in MENA covers growth trends and future market potential for copper tubes in the fast growing HVAC segment. LME stabilisation of copper price has made copper tubes projects attractive and increased demand from the HVAC segment has led to OEM expansions. For a new market entrant, it is imperative to note that LME price of copper is very volatile and hedging is required to offset risk. Prudent project management for establishing new plants and new geographic entries is important to offset price fluctuations. OEMs expansion plans to meet attractive HVAC growth rates make this market an attractive entry option.

  • Frost & Sullivan Advisory
    • Global copper tubes consumption expected to grow at 2% mainly driven by demand from housing and infrastructure development
    • Key exporters: ASEAN, USA & Europe; MENA is a growth market with 62,200 MT
    • Technical/marketing JV with global producers; closer customer touch points, ability to cater to customised specifications are critical success factors
  • Scope & Limitations
  • Key Market Takeaways-MENA
    • GCC and Egypt were major consumers; ACR accounted for 51% demand; LWC Grooved of 3/8, -and 5/8 mm popular diameters
    • Market strongly linked to AC use; real estate and construction activities result in top-notch air-conditioning requirements
    • OEMs in the UAE and the KSA working on product standardisation to comply with Government policies
    • Large pool of suppliers will assist the price sensitive MENA market to shift to renewable energy
    • Copper tubes will continue to be a major component of all cooling equipment in the long term; low threat of competition from substitute material in MENA
    • MENA has traditionally been an import dependent market; quality and price competitiveness are important criteria to be successful
    • LME accounts for 80% of cost component and has a direct impact on material carrying cost; copper remains the material of choice in MENA
    • Long term contracts exist for large OEMs; smaller producers procure 2MT MOQ
    • Large supplier base - differentiating factors are product quality, specifications, and brand image
    • Working directly and maintaining touch points with OEMs for product development will ensure higher returns
    • JVs with existing exporters; backward integration by OEMs
    • Substitute Material-Aluminium Tubes Penetration to be "Low", despite Copper's LME Price Fluctuations
    • Copper continued to be in use despite LME price fluctuations; replacement threat with aluminium is low in MENA
  • The Industry Going Forward
    • Compactness and improved quality of ACR systems achieved with the Microgroove technology can make strides in future construction and infrastructure - increased consumption of Copper tubes
    • Infrastructure development - airports, railway, road transport and metro - to result in HVAC growth
    • By 2025, 85% of the KSA will be urban; 4 MENA countries will be more than 90% urban; Bahrain with 90.0%; Kuwait with 98.6%, Lebanon with 90%, and Qatar with 97.0%
    • Of the smart city projects expected to be completed by 2025, 7 are greenfield and 2 are brownfield projects
    • 40% growth in air conditioner and refrigeration (ACR) due to smart city projects
    • Housing and infrastructure development to be regional growth drivers
    • Oil prices adversely impacted government budgets in 2016 and 2017; 5% VAT introduction in 2018 and 2019 as part of corrective measure
  • Recommendations
    • Benchmarking with global leaders for operational efficiency; always-on technical support for customers to be key success factors
    • Potential end customers should perceive a distinct advantage in sourcing from a new supplier
  • Appendix
    • List of Acronyms Used
  • Annexure-Our Services
    • Maximize opportunities from existing products and markets; systematically explore new products, markets, including Inorganic Opportunities
    • Our Growth Consulting Canvas

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