 "Process equipment makers ready to ride investment cycle boom")
Major global economies such as the USA, Europe and Japan are showing signs of improvement, with experts expecting investment cycle to resume in 2014. Closer home, Cabinet Committee on Investment, which was constituted in January 2013 to fast-track approval processes of projects worth over Rs 1,000 crore that were facing regulatory or environmental hurdles, has cleared 123 projects worth Rs 4.08 lakh crore so far. The effects of this process are likely to be realised from this year, thus increasing demand for chemicals. This, in turn, is likely to give a boost to chemical process equipment market.
“We see the situation getting better, with improved liquidity in the market many projects are seeing the light of day. We are also seeing global investments in local projects. Oil majors across the globe are collaborating to set up integrated mega projects, to leverage expertise and mutually beneficial technologies,” opined Pushan Sharma, Manager- Marketing and Business Development, Godrej Process Equipment, Godrej & Boyce Manufacturing.
Not so good 2013
Slow demand from end-user industry has resulted in chemical companies shelving off or postponing their planned projects. At the same time, some projects which made progress from boardroom to drawing room got stuck in the government clearance process. All these had detrimental effect on the process equipment suppliers. “Due to slowdown in investment cycle in India the projects in refinery, petrochemical and fertiliser sector are almost stand still and baring projects at Reliance and BPCL Kochi no other big projects are taking off. The demand of petrochemical projects is very low and the waiting for huge investment clearance in above sectors may take another one year to materialise,” said G R Singh, Director - BD & Sales, Oil & Gas, Linde Engineering India Pvt Ltd – one of the leading providers of technology and engineering, procurement & construction (EPC) services to chemical and related industries.
ALSO READ: Selecting right heat exchangers, the first step to energy efficiency
The sectors such as pharmaceutical, food & beverages, cosmetics, etc which have weathered the slowdown storm have kept equipment suppliers busy. With very few big-ticket investment coming, engineering companies are banking on ever-green sectors for boosting growth. “The market for chemical process equipment is sluggish with very few major projects. However, there is some requirement for capacity enhancement and replacement. Some sectors like agrochemical, pharma, have shown a decent growth,” said V Gokul Das, Managing Director, HRS Process Systems Ltd.
Challenges a plenty
The process equipment industry faces numerous challenges in today’s marketplace. “The four most significant challenges are need for continued innovation to face intense global competition, improving productivity of its labour, consistently meeting the demands on quality in the global market place and adapting to different consumer needs,” said Jan Hedemann, Managing Director, Alfa Laval India Ltd, a leading global provider of specialised products and engineered solutions.
ALSO READ: Low-valued Re causing concern for analytical equipment makers
The process equipment industry is manpower intensive, requiring extensive project management, welding and manufacturing skills. Fewer young graduates are opting for traditional engineering streams making it quite challenging to find people with such expertise. Another challenge before the Indian chemical process equipment manufacturers is their ability to use foreign codes (eg, PED) as well as the compliance with the quality and schedule expectations of international customers.
Adding to woes is the import threat (especially from China and other Asian countries). Chatterjee explained, “Yes, China supplies the cheapest plant/equipment but as far as process technology is concerned, they are much behind Indian companies. Also, from energy efficiency point and from the point of reliability, their equipment is much inferior as compared to ours. There are many instances where Chinese company supplied the process plant and could not handover the plant with proper quality output.”
Light at the end of the tunnel
Since many of the raw materials used to make process equipment are imported, cost of manufacturing has increased with Rupee depreciating more than 20% since December 2012. On a positive note, it has made Indian equipment competitive compared to other Asian countries. Singh of Linde Engineering elaborated, “Due to devaluation of Rupee, cost of input has gone up, hence affecting the competitive needs at local level. However, opportunities are getting converted in Middle East and South East Asia market especially in Indonesia, Vietnam and Malaysia wherein Indian manufacturers can develop their market in this area because devaluation of Rupee can provide a good window for offering products of Indian manufacturers at competitive prices.”
Developed markets have been making a shift to new MoC, while in India the trend is recent. Companies who are gearing up for this change are in better position to take advantage.
ALSO READ: Turning data into 'big' profit in refining industry
Sharma said, “On the opportunity front, we see increased use of exotic material in the fabrication of process equipment. Few manufacturers across the world have the ability to successfully handle material like Inconel, Monel, Zirconium and Titanium. Having extensive experience in handling these metallurgies puts Godrej in a sweet spot to serve such requirements.”
Tapping the shale gas opportunities
The petrochemical landscape is changing in the US with the shale gas boom. Investments are coming back, reversing the earlier trend of decline. Number of mega green projects have been announced, while many of the closed plants have been restarted. This has opened huge opportunities for Indian equipment makers.
Sharma said, “The advent of shale gas has made low cost gas available. This has led to many petrochemical projects becoming viable in the US. As the technology for retrieving shale gas reaches countries such as China, Algeria and Argentina, we will see much more activity in this space.”
However, the policy for mandatory localised content has made it difficult for companies to export to such markets. “From the market point of view many countries have implemented mandatory local content regulations which make it difficult for companies like Godrej to export to such regions,” opined Sharma.
“We see the situation getting better, with improved liquidity in the market many projects are seeing the light of day. We are also seeing global investments in local projects. Oil majors across the globe are collaborating to set up integrated mega projects, to leverage expertise and mutually beneficial technologies,” opined Pushan Sharma, Manager- Marketing and Business Development, Godrej Process Equipment, Godrej & Boyce Manufacturing.
Not so good 2013
Slow demand from end-user industry has resulted in chemical companies shelving off or postponing their planned projects. At the same time, some projects which made progress from boardroom to drawing room got stuck in the government clearance process. All these had detrimental effect on the process equipment suppliers. “Due to slowdown in investment cycle in India the projects in refinery, petrochemical and fertiliser sector are almost stand still and baring projects at Reliance and BPCL Kochi no other big projects are taking off. The demand of petrochemical projects is very low and the waiting for huge investment clearance in above sectors may take another one year to materialise,” said G R Singh, Director - BD & Sales, Oil & Gas, Linde Engineering India Pvt Ltd – one of the leading providers of technology and engineering, procurement & construction (EPC) services to chemical and related industries.
ALSO READ: Selecting right heat exchangers, the first step to energy efficiency
Linde Engineering India's G R Singh
According to Singh, more than 50% capacity is almost idle and it is really becoming difficult to maintain the resources and manpower.The sectors such as pharmaceutical, food & beverages, cosmetics, etc which have weathered the slowdown storm have kept equipment suppliers busy. With very few big-ticket investment coming, engineering companies are banking on ever-green sectors for boosting growth. “The market for chemical process equipment is sluggish with very few major projects. However, there is some requirement for capacity enhancement and replacement. Some sectors like agrochemical, pharma, have shown a decent growth,” said V Gokul Das, Managing Director, HRS Process Systems Ltd.
Challenges a plenty
The process equipment industry faces numerous challenges in today’s marketplace. “The four most significant challenges are need for continued innovation to face intense global competition, improving productivity of its labour, consistently meeting the demands on quality in the global market place and adapting to different consumer needs,” said Jan Hedemann, Managing Director, Alfa Laval India Ltd, a leading global provider of specialised products and engineered solutions.
Also Read
Alfa Laval India's Jan Hedemann
Innovation in the manufacturing industry generally means production innovation, but can also include new processes or equipment. It can also include new green technologies that eliminate waste during production. Hedemann added, “The benefits of innovation may include greater ability to respond to customer demands, less waste and downtime, better product design, improved product quality, and improved relationships with suppliers and customers.”ALSO READ: Low-valued Re causing concern for analytical equipment makers
The process equipment industry is manpower intensive, requiring extensive project management, welding and manufacturing skills. Fewer young graduates are opting for traditional engineering streams making it quite challenging to find people with such expertise. Another challenge before the Indian chemical process equipment manufacturers is their ability to use foreign codes (eg, PED) as well as the compliance with the quality and schedule expectations of international customers.
Godrej Process Equipment's Pushan Sharma
“The main challenges are to provide the latest technological advanced plant and machinery to the chemical process industry which is energy efficient, eco-friendly, cost effective and produces international quality product,” said Tapas Chatterjee, Managing Director, SSP Pvt Ltd - an engineering company in the field of design, manufacture, supply, installation and commissioning of industrial projects and equipment.Adding to woes is the import threat (especially from China and other Asian countries). Chatterjee explained, “Yes, China supplies the cheapest plant/equipment but as far as process technology is concerned, they are much behind Indian companies. Also, from energy efficiency point and from the point of reliability, their equipment is much inferior as compared to ours. There are many instances where Chinese company supplied the process plant and could not handover the plant with proper quality output.”
Light at the end of the tunnel
Since many of the raw materials used to make process equipment are imported, cost of manufacturing has increased with Rupee depreciating more than 20% since December 2012. On a positive note, it has made Indian equipment competitive compared to other Asian countries. Singh of Linde Engineering elaborated, “Due to devaluation of Rupee, cost of input has gone up, hence affecting the competitive needs at local level. However, opportunities are getting converted in Middle East and South East Asia market especially in Indonesia, Vietnam and Malaysia wherein Indian manufacturers can develop their market in this area because devaluation of Rupee can provide a good window for offering products of Indian manufacturers at competitive prices.”
SSP Pvt Ltd's Tapas Chatterjee
Stringent safety & quality norms, and changes in operating conditions are forcing equipment companies to develop products using new material of construction (MoC). For example, the quality of crude available is sour in nature as compared to earlier times. As a result, process equipment with superior metallurgy such as stainless steel and Inconel are required.Developed markets have been making a shift to new MoC, while in India the trend is recent. Companies who are gearing up for this change are in better position to take advantage.
ALSO READ: Turning data into 'big' profit in refining industry
Sharma said, “On the opportunity front, we see increased use of exotic material in the fabrication of process equipment. Few manufacturers across the world have the ability to successfully handle material like Inconel, Monel, Zirconium and Titanium. Having extensive experience in handling these metallurgies puts Godrej in a sweet spot to serve such requirements.”
HRS Process Systems' V Gokul Das
Environmental norms for clean fuel and toxin free air are also leading to demand for sophisticated process equipment. “On these lines Godrej has supplied many equipment to refineries across the world to meet their clean fuel norms. We see more such opportunities arising in the near future,” added Sharma.Tapping the shale gas opportunities
The petrochemical landscape is changing in the US with the shale gas boom. Investments are coming back, reversing the earlier trend of decline. Number of mega green projects have been announced, while many of the closed plants have been restarted. This has opened huge opportunities for Indian equipment makers.
Sharma said, “The advent of shale gas has made low cost gas available. This has led to many petrochemical projects becoming viable in the US. As the technology for retrieving shale gas reaches countries such as China, Algeria and Argentina, we will see much more activity in this space.”
However, the policy for mandatory localised content has made it difficult for companies to export to such markets. “From the market point of view many countries have implemented mandatory local content regulations which make it difficult for companies like Godrej to export to such regions,” opined Sharma.