With Significantly Reduced Capital Investments Floating Around, Demand for Heat Exchangers Droops by a Languid -10.5%
The global market for Heat Exchangers is expected to slump by a hurting -10.5% in the year 2020 and thereafter recover and grow to reach US$23.2 billion by the year 2027, trailing a post COVID-19 CAGR of 4.1% over the analysis period 2020 through 2027. Global economic activity is slumping with GDP growth forecast to dip as low as -4.9% in the year 2020. The manufacturing industry, which is the largest end-user of heat exchangers, is the worst affected given its complex supply chains, labor intensive processes, and interdependencies. Division of labor, modular manufacturing strategies, outsourcing to reduce costs and increase the efficiency, consistency, and quality of each operations, have made the manufacturing sector most vulnerable amid the lockdown restrictions. An indication of the grim state of affairs is the fact that global manufacturing PMI is already declining and will fall to an estimated all-time low in 2020 as compared to the 53.8 in 2019. With roots in China, the world's supply chains are facing unprecedented disruption and shutdown. Interwoven with a demand crisis, the supply chain shocks are exerting a compounded blow to manufacturing companies worldwide. A combination of all the aforementioned macro-economic issues alongside more specific factors such as suspension of the transportation and changes in demand patterns have dealt a debilitating blow to the manufacturing industry.
The falling PMI indices indicates severe contraction of manufacturing activity including new orders, production, employment, supplier deliveries, inventories, customers' inventories, commodity prices, order backlog, new export orders, and imports. Business investment confidence is tumbling amidst poor demand, falling profits, liquidity crunch and a reeling global economy. The "great lockdown" of 2020 has crushed the global economy and with it the manufacturing sector. The COVID-19 pandemic will have lasting long-term economic, social and political impact. As upstream, midstream and downstream sectors of manufacturing feel the ripple effect of disruption, heat exchangers also a key part of the value chain is expected to feel the heat. In response to the global shocks, the chemicals industry is forecast to witness a -14.8% decline in CAPEX in 2020, as companies reduce & postpone CAPEX plans. Oil market volatility & reduced energy demand send O&G companies into survival mode reducing the industry's CAPEX by over 18.8% in the year 2020. Lockdowns, business & office closures & a steep recession have severely impacted energy consumption, bringing out power generation as the biggest loser in this crisis. With billions of dollars in CAPEX vanishing across end-use markets, heat exchangers a part of the capital goods industry, is expected to suffer over $2 billion in revenue losses in 2020.
In the post COVID-19 period, innovative heat exchanger companies can steal opportunities offered for smart, advanced heat exchanger solutions capable of providing value via production improvements and efficiencies. Oil companies which are scrambling to be better prepared for the next price crash by breaking even at prices as low as US$45 per barrel of Brent crude. The scenario will drive demand for energy efficient heat exchangers given their ability to make an impact on profitability of oil firms as heating and cooling remains the most expensive part of oil production and processing. Other major trends in the market will include growing prominence of robotic and intelligent process automation in the era of smart factories and the ensuing rise in commercial value of AI based heat exchanger control and monitoring; focus on heat recovery and utilization of sensible and latent heat from flue gas led by the robust outlook for clean coal power and the ensuing demand for heat exchangers in coal fired power plants; stable economic growth in East Asia and South Asia and development of energy infrastructure in these regions, strong manufacturing base and growing government policy led support for upgrades and modernization. The market, especially in the developed regions will witness greater demand for equipment that complies with strict regulatory and safety norms. The undeniable productivity benefits of industrial energy efficiency measures will spur the commercial value of energy efficient heat exchangers especially in developed countries where the growing popularity of energy audits is supporting increased spending on energy efficiency technologies. In Asia-Pacific growth will be led by recovering CAPEX and OPEX investment climate in the sector; and favorable government led policies that prioritize industrial, manufacturing and process sectors for their ability to generate benefits of dynamic economies of scale, innovation/technology diffusion and spillover of a broad range of benefits for the economy and its growth
Competitors identified in this market include, among others,
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