Abstract
Product Replacements Likely to Counter Poor Economic Conditions
Replacements and product upgrades are expected to provide a strong thrust to
the European heat exchangers market. The European economy has seen poor economic
developments over recent years and this has negatively impacted overall
industrial growth and consequently, the heat exchangers market in the region.
Declining end-user markets, falling prices, and a shift in favour of
cost-efficient plate-style exchangers have further influenced trends. However,
welded plate exchangers in the chemicals and fuels processing market and the
food and beverage sector are anticipated to offer some respite from these
challenges. Low interest rates that reduce the cost of servicing loans are also
expected to positively impact the market by boosting investments in new plants
and refurbishments.
This research from Frost & Sullivan evaluates the current and future
prospects of the European heat exchangers market in eight main segments: shell
and tube heat exchangers, gasketed plate and frame heat exchangers, semi-welded
plate exchangers, all-welded plate exchangers, brazed plate exchangers,
air-cooled heat exchangers, cooling towers and heat recovery systems. It
discusses the challenges and drivers that are likely to assist market
participants in formulating their future sales strategies. Additionally, the
research provides market revenue forecasts and geographical and technological
trends in each segment.
Increased Demand for Product Replacements Undermines Growth Potential of
Established Participants
Heat exchangers have a limited lifespan and this is likely to act in favour
of the replacement sector. Moreover, there has been a growing tendency for shell
and tube exchangers to shift to all-welded products, generating greater demand
for product replacements. However, revenue in this sector is likely to be widely
dispersed, as opposed to other sectors such as gasketed plate and frame, brazed
plate, and air-cooled heat exchangers, where competitor market share is
relatively concentrated.
"To capture greater market share and protect revenue, competitors are
resorting to price-cutting measures," says the analyst. Companies that are
unable to offer these prices risk being edged out of the market altogether.
Further, the entry of new participants into fast-growing product sectors also
lowers prices and erodes the growth potential. To prevent smaller participants
from penetrating the market, established competitors could focus on improving
quality and customer service benefits.
Concentrating on High-tech Applications Integral to Fighting Price Erosion
Even as market entrants unwittingly abet price erosion and pose a threat to
existing participants by introducing newer technologies, they are likely to be
disadvantaged by the strength of established suppliers. Most end users are
extremely influenced by manufacturer reputations and tend to opt for products
from companies that offer technical expertise, quality, and performance in
specific areas. In a bid to capture market share, new entrants tend to resort to
price-cutting measures that ultimately harm the industry and their own
interests.
"As products within traditional sectors become increasingly commoditised,
concentrating on high-tech application areas such as chemicals, fuels processing
and utilities sectors could be considered the best bet for entrants," notes
the analyst. Although growth in these sectors is slow and customers are likely
to be reluctant in trusting a newcomer with high-end technology, pharmaceuticals
and bioscience applications could provide entrants with an opportunity for
technology-based product differentiation.
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