Future of the Indian Valves Market - Valve World India · India is in the limelight for its...
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May 2016 14 Valve World India COUNTRY & MARKET FOCUS The indian valve market is rapidely transforming itself. Currently experiencing rapid growth and rising domestic demand, the industry has rejuventated both its product capabilities and capacity over the past decade to become a major global force. This article looks at the achievements to date and where potential lies for expansion during the coming years. By Industrial Automation & Process Control Practice, Frost & Sullivan Future of the Indian Valves Market The Indian Valves Industry has seen significant growth over past decade, successfully ca- tering to the rising domestic demand in terms of capacity and product capability, while also establishing itself as a dominant force in the global valves market. The country has developed an ecosystem for valves manufacturing, which has led to major global companies setting up oper- ations in the country. With initiatives being rolled out to foster manufacturing in the country and major projects announced to spur growth, India is in the limelight for its manufacturing capabilities and as a major market for valves. Indian Valves manufacturers, who are eager to expand glob- ally, and global companies trying to tap into the resources available in the country to use it also as an R&D and sourcing hub apart from catering to the domestic market sets the stage for the next round of growth in the sector. Indian Valves Market Outlook The Indian Industrial Valves market was estimated at INR 10,100 Cr for 2014-15. Isola- tion valves (also called On-Off valves) account for majority of the demand in the Indian mar- ket, followed by control valves. The contribution of control valves will increase in the coming years with new regula- tions on safety and the rising importance of continuous monitoring. Supply of severe service and other specially engineered valves in India is lesser than the global average due to lack of off-shore drill- ing and exploration activities. However, there is a steady progress in development and manufacturing of valves for super-critical power plants and nuclear power plants. The oil and gas (O&G) industry constitutes majority of the demand for valves in the Indi- an market, with most valves being consumed by the O&G downstream sector. Majority of the valves exported also cater to the global O&G downstream sector. The demand for valves in the power generation indus- try has not reached its full po- tential due to slower execution of projects in the sector. The Water and Wastewater Industry in India has been witnessing significant growth over the last 5 years and the demand for valves in this industry will continue to rise. Supply of valves to process industries such as sugar, paper and pulp, and metals and mining has been slack due to the lack in pace of expansion activities in these sectors. The demand for valves in pipelines for crude and LNG transportation will witness a huge demand as a robust pipeline network is being laid throughout India. Competitive Scenario The Indian industrial valves market is highly fragmented with close to 600 companies supplying valves. However, the industry is set for consol- idation as large multinational valve suppliers are in the process of acquiring smaller companies to exploit the lat- ter’s strong distribution and supply chain network. The increasing market participation has a direct impact on the margins of the manufacturers. Frost & Sullivan estimates the market is likely to witness a compound annual growth rate (CAGR) of around 6 percent from 2015 to 2020. Indian valve manufacturers have slowly and steadily pro- gressed into supplying valves to the global market and have achieved a significant amount of success. Indian valve manu- facturers have started expand- ing their footprint across the globe and are expected to play a huge role in establishing a global supply network. Policy Support and User Dynamics With an aim to increase the share of the manufacturing sector to the country’s GDP, the Government has come up with policies that will enhance the value of Indian manufac- turing. The Indian valves busi- ness will not only benefit from manufacturing related initia- tives but also from the policies created to smoothen execution of major projects and create phased urbanization. The Namami Ganga Program aims to invest INR 20,000 Cr over the next five years to conserve the Ganga. Sewage treatment plants are to be set up along the course of the riv- er; industrial water treatment for plants along the river will become a necessity. The Indian Government plans to develop 100 Smart Cities with integrat- ed water treatment and distri- bution, and power and waste management solutions, which will further spur the demand for valves and advanced con- trol solutions. India has been trying to re- duce its dependence on fossil fuels, for which there has been a large-scale emphasis on solar power generation. Stage 2 of the Jawaharlal Neh- ru National Solar Mission aims to produce 20,000 MW of grid connected solar power. Con- centrated solar power plants provide significant opportunity for valve suppliers. An invest- ment of INR 80,000 Cr is envis- aged to upgrade refineries in order to comply with the Euro VI equivalent emission norms by 2020, which will create a huge demand for efficient valve systems and valves with advanced material chemistry. The “Make-in-India” initiative will facilitate easier set-up and expansion of valve manufac- turing. Single-window clear- ances and quicker registration processes are some of the features that will help foreign companies to set up their operations in India. Common taxation regime (Goods and Services Tax) would even out the variation in taxes across geographies and products and would create a level playing field for valve manufacturers. New schemes and an initial budget allocation of INR 100.00 Cr announced in the Indian Union Budget FY2015 for ul- tra-modern, super critical, coal-based thermal power plants to promote cleaner and more efficient power plants will be a huge driver for valves used in the power sector. Regulations to ration- alize coal linkages to optimize coal transport and to enhance coal availability and stringent mechanism for quality control to increase the usage of do- mestic coal to reduce overall cost are being implemented to make the power sector more attractive. Development of Ultra Mega Power Project is planned by the Government of India to bridge the power supply and demand gap. Major plans by Nuclear Power Corpo- ration of India Limited (NPCIL) to augment the nuclear power generation capacity of the country are underway through collaborative efforts with for- eign reactor suppliers. Oil and Gas The recent successful com- missioning of Bharat Oman Refineries Limited (BORL) and HPCL-Mittal Energy Limited (HMEL) has influenced the state-owned refineries to invest in better technology through the similar model. Public and Private sector in- vestments, to increase the import capacity of LNG and to develop integrated pipeline network, will create a substan- tial demand for valves. Chemical and Fertilizers Positive developments in In- dia’s negotiations with Qatar and Iran for liquefied natural gas (LNG) will compensate the shortage of natural gas needed by fertilizer manufacturers. Water and Wastewater Steps to introduce desalina- tion as a source of domestic water supply and as an input for Power plants and O&G installations along the coast, increased activity on distribu- tion, and growing significance of water treatment have made this sector attractive for valves. Efforts to imple- ment integrated waste water management solutions to cap pollution and creation of sustainable factories will also increase the requirement of valves for water treatment. Impetus for Valves Manufacturing Attractiveness of Smart Manu- facturing Under the “Make-in-India” initiative, the Government has laid out new policy initiatives that aspire to expand the economy’s manufacturing foot- print comprehensively. This includes focus on an extensive list of discrete industries for growth in the coming years. Some of the strategic goals of this new program include enhancing job opportunities, minimizing imports, expanding exports, and creating a condu- cive environment for Industry 4.0. The objective of this initi- ative is to create Smart Facto- ries. If companies and value chain participants appreciate the benefits of this new revo- lution and adapt to the chang- es, then radical transforma- tions in the competitive land- scape can be expected. Smart manufacturing enables remote management of the supply chain, thereby dedicating lesser resources in logistics. Quality systems are bound to improve with proper review of outputs at the supplier and sub-supplier levels. As a Exhibit 1: Product Segmentation of the Indian Valves Market, 2014-15 Source: Frost & Sullivan Analysis Exhibit 2: End-user Segmentation of the Indian Valves Market, 2014-15 Source: Frost & Sullivan Analysis Would you like to receive a hardcopy of this magazine's full publication? Please include the month and year of publication and contact Mrs. Erica Riethorst at [email protected]
Transcript of Future of the Indian Valves Market - Valve World India · India is in the limelight for its...
May 201614 Valve World India
COUNTRY & MARKET FOCUS
The indian valve market is rapidely transforming itself. Currently experiencing rapid growth and rising domestic demand, the industry has rejuventated both its product capabilities and capacity
over the past decade to become a major global force. This article looks at the achievements to date and where potential lies for expansion during the coming years.
By Industrial Automation & Process Control Practice, Frost & Sullivan
Future of the Indian Valves Market The Indian Valves Industry has seen significant growth over past decade, successfully ca-tering to the rising domestic demand in terms of capacity and product capability, while also establishing itself as a dominant force in the global valves market. The country has developed an ecosystem for valves manufacturing, which has led to major global companies setting up oper-ations in the country. With initiatives being rolled out to foster manufacturing in the country and major projects announced to spur growth, India is in the limelight for its manufacturing capabilities and as a major market for valves. Indian Valves manufacturers, who are eager to expand glob-ally, and global companies trying to tap into the resources available in the country to use it also as an R&D and sourcing hub apart from catering to the domestic market sets the stage for the next round of growth in the sector.
Indian Valves Market Outlook The Indian Industrial Valves market was estimated at INR 10,100 Cr for 2014-15. Isola-tion valves (also called On-Off valves) account for majority of the demand in the Indian mar-ket, followed by control valves. The contribution of control valves will increase in the coming years with new regula-tions on safety and the rising importance of continuous monitoring. Supply of severe service and other specially engineered valves in India is lesser than the global average due to lack of off-shore drill-
ing and exploration activities. However, there is a steady progress in development and manufacturing of valves for super-critical power plants and nuclear power plants. The oil and gas (O&G) industry constitutes majority of the demand for valves in the Indi-an market, with most valves being consumed by the O&G downstream sector. Majority of the valves exported also cater to the global O&G downstream sector. The demand for valves in the power generation indus-try has not reached its full po-tential due to slower execution of projects in the sector. The Water and Wastewater Industry in India has been witnessing significant growth over the last 5 years and the demand for valves in this industry will continue to rise. Supply of valves to process industries such as sugar, paper and pulp, and metals and mining has been slack due to the lack in pace of expansion activities in these sectors. The demand for valves in pipelines for crude and LNG transportation will witness a huge demand as a robust pipeline network is being laid throughout India.
Competitive Scenario
The Indian industrial valves market is highly fragmented with close to 600 companies supplying valves. However, the industry is set for consol-idation as large multinational valve suppliers are in the process of acquiring smaller companies to exploit the lat-ter’s strong distribution and supply chain network. The increasing market participation has a direct impact on the
margins of the manufacturers. Frost & Sullivan estimates the market is likely to witness a compound annual growth rate (CAGR) of around 6 percent from 2015 to 2020. Indian valve manufacturers have slowly and steadily pro-gressed into supplying valves to the global market and have achieved a significant amount of success. Indian valve manu-facturers have started expand-ing their footprint across the globe and are expected to play a huge role in establishing a global supply network.
Policy Support and User Dynamics With an aim to increase the share of the manufacturing sector to the country’s GDP, the Government has come up with policies that will enhance the value of Indian manufac-turing. The Indian valves busi-ness will not only benefit from manufacturing related initia-
tives but also from the policies created to smoothen execution of major projects and create phased urbanization. The Namami Ganga Program aims to invest INR 20,000 Cr over the next five years to conserve the Ganga. Sewage treatment plants are to be set up along the course of the riv-er; industrial water treatment for plants along the river will become a necessity. The Indian Government plans to develop 100 Smart Cities with integrat-ed water treatment and distri-bution, and power and waste management solutions, which will further spur the demand for valves and advanced con-trol solutions. India has been trying to re-duce its dependence on fossil fuels, for which there has been a large-scale emphasis on solar power generation. Stage 2 of the Jawaharlal Neh-ru National Solar Mission aims to produce 20,000 MW of grid connected solar power. Con-centrated solar power plants provide significant opportunity for valve suppliers. An invest-ment of INR 80,000 Cr is envis-aged to upgrade refineries in order to comply with the Euro VI equivalent emission norms by 2020, which will create a huge demand for efficient valve systems and valves with advanced material chemistry.
The “Make-in-India” initiative will facilitate easier set-up and expansion of valve manufac-turing. Single-window clear-ances and quicker registration processes are some of the features that will help foreign
companies to set up their operations in India. Common taxation regime (Goods and Services Tax) would even out the variation in taxes across geographies and products and would create a level playing field for valve manufacturers.
New schemes and an initial budget allocation of INR 100.00 Cr announced in the Indian Union Budget FY2015 for ul-tra-modern, super critical, coal-based thermal power plants to promote cleaner and more efficient power plants will be a huge driver for valves used in the power sector. Regulations to ration-alize coal linkages to optimize coal transport and to enhance coal availability and stringent mechanism for quality control to increase the usage of do-mestic coal to reduce overall cost are being implemented to make the power sector more attractive. Development of Ultra Mega Power Project is planned by the Government of India to bridge the power supply and demand gap. Major plans by Nuclear Power Corpo-ration of India Limited (NPCIL) to augment the nuclear power generation capacity of the country are underway through collaborative efforts with for-eign reactor suppliers.
Oil and Gas The recent successful com-missioning of Bharat Oman Refineries Limited (BORL) and HPCL-Mittal Energy Limited (HMEL) has influenced the state-owned refineries to invest in better technology
through the similar model. Public and Private sector in-vestments, to increase the import capacity of LNG and to develop integrated pipeline network, will create a substan-tial demand for valves.
Chemical and Fertilizers Positive developments in In-dia’s negotiations with Qatar and Iran for liquefied natural gas (LNG) will compensate the shortage of natural gas needed by fertilizer manufacturers.
Water and Wastewater Steps to introduce desalina-tion as a source of domestic water supply and as an input for Power plants and O&G installations along the coast, increased activity on distribu-tion, and growing significance of water treatment have made this sector attractive for valves. Efforts to imple-ment integrated waste water management solutions to cap pollution and creation of sustainable factories will also increase the requirement of valves for water treatment.
Impetus for Valves Manufacturing Attractiveness of Smart Manu-facturing Under the “Make-in-India” initiative, the Government has laid out new policy initiatives that aspire to expand the economy’s manufacturing foot-print comprehensively. This includes focus on an extensive list of discrete industries for growth in the coming years. Some of the strategic goals of this new program include enhancing job opportunities, minimizing imports, expanding exports, and creating a condu-cive environment for Industry 4.0. The objective of this initi-ative is to create Smart Facto-ries. If companies and value chain participants appreciate the benefits of this new revo-lution and adapt to the chang-es, then radical transforma-tions in the competitive land-scape can be expected. Smart manufacturing enables remote management of the supply chain, thereby dedicating lesser resources in logistics. Quality systems are bound to improve with proper review of outputs at the supplier and sub-supplier levels. As a
Exhibit 1: Product Segmentation of the Indian Valves Market, 2014-15
Source: Frost & Sullivan Analysis
Exhibit 2: End-user Segmentation of the Indian Valves Market, 2014-15
Source: Frost & Sullivan Analysis
Would you like to receive a hardcopy of this magazine's full publication? Please include the month and year of publication and contact Mrs. Erica Riethorst at [email protected]
May 2016 15Valve World India
COUNTRY & MARKET FOCUS
result of incorporating these systems, tractability and doc-umentation improves. Smart Factories help in effective inventory management across manufacturing locations. Man-agement of the distribution system and stock control is also positively influenced by the implementation of Internet of Things (IoT). Valve Servicing, where components replace-ment and failure analysis can be performed effectively, is another area where there is a significant improvement be-cause of IoT implementation.
Increased Demand for Mission Critical Valves Low gas prices and increased participation of Indian compa-nies in off-shore drilling will create a demand for high-end subsea valves, which has traditionally been imported due to lower demand. NTPC’s advanced ultra-super critical plant development along with Indira Gandhi Centre for Atomic Research IGCAR and Bharat Heavy Electricals Lim-ited (BHEL) is in its advanced stage and will require Indian manufacturers to work with advanced materials, which can handle the high pressure and temperature requirements.
Burgeoning demand in the Indian Food and Beverage (F&B) and Pharmaceutical industry will require special process specific valves, which the Indian manufacturers can cater to by providing cost-ef-fective import substitution. Energy efficiency and safety, which the core industries have made a priority, will translate to valves with advanced safety and control systems.
Valves Manufacturing and Sourcing Hub Indian manufacturers have started expanding their foot-print across the globe and are expected to play a huge role in establishing a global supply network. The manufacturers are unable to expand rapidly and improve their manufac-turing capacity due to the varying local demand cycle; this can be offset by balancing the production between ex-port and local supply. India’s export, which predominantly concentrates on the Middle East, has now started to shift to Southeast Asia and Africa. Major global companies have set up operations in India directly or through acquisition of local companies to tap into the country’s strong manu-
facturing capability, sourcing network, and as an entry to the Indian market.
India as a Global Supplier of Valves Indian Valve suppliers should benchmark against major global suppliers in terms of manufacturing efficiency, prod-uct performance, and service delivery to be considered by the global EPC’s. Valve suppli-ers should look beyond their existing role of component suppliers and provide end-to-end solutions on product design, installation, and opera-tion. Effective project manage-ment by monitoring deadlines, taking corrective actions, and constant reporting helps the manufacturers align to the ultimate project progress. Comprehensive documentation and adopting latest quality and technical standards are key to being considered for global projects. Suppliers need to closely work on their com-pliance to the latest emission and energy regulations to be considered for global projects.
Way Forward
The Indian valves market is in its growth phase and, with ample demand for valves, it is imperative to focus on increased R&D, enhance quality of manufacturing, and establish a robust supply chain to sustain the momen-tum. Manufacturing of critical valves and process-oriented valves has been Indian man-ufacturers’ “Achilles’ Heel”, which can be overcome by investing on technology and advanced manufacturing sys-tems. Intense competition and increasing number of players is a sign that the Industry is moving toward its next level of growth.
Indian manufacturers’ should equip themselves with pro-cess knowledge and work with the EPC’s and equipment suppliers on process optimi-zation and troubleshooting. Valve suppliers should look
beyond their existing role of component suppliers and pro-vide end-to-end solutions on product design, installation, and operation enabling them to transform as solution pro-viders. Manufacturers should
start to look at valve servicing from renewed perspective aiding transfer, initially to the predictive maintenance model and finally providing asset management solutions.
About Frost & Sullivan
Frost & Sullivan’s Industrial Automation & Process Con-trol team closely monitors emerging market opportunities in industrial automation, process control, and mechanical power transmission to enable its clients have the compet-itive insights and market intelligence they need for sus-
tainable growth.
Exhibit 3: The Internet of Industrial Things, Global, 2014-15 Source: Frost & Sullivan Analysis
