IMS finds medium voltage soft start market sparks solid growth
Oil and gas sector of the market continues to drive growth in the medium voltage market.
The worldwide market for medium voltage soft starters was worth an estimated $170 million in 2010, with more than 5,000 units shipped during the year. Sales of these products contracted significantly in 2009 as a result of the global economic downturn, and the market recovery in 2010 was very gradual.
However, high commodity prices and robust demand from regions like Asia Pacific and the Middle East are expected to help the market grow by nearly 10% in 2011. As long as commodity prices remain at their current levels or move higher, and if growth in emerging economies does not slow significantly, the market should experience several years of healthy growth through 2015. These are some of the latest findings from the 2011 Medium Voltage MCCs & Soft Starters study just published by IMS Research.
The Chinese market for medium voltage soft starters was the largest in the world in 2010, valued at more than $41 million and representing nearly one quarter of the total revenues. The US market was second largest, valued at an estimated $34 million during the year which was 20.0% of the global market. The Central and Eastern Europe regional market is the third largest because it includes the Russian market, which is estimated to be substantial due to several indigenous suppliers active in the Cheboksary region of the country. This regional market is estimated to be valued at over $33 million in 2010, representing another 20% of total market revenues. Western Europe and the Middle East also account for notable parts of the global market, with respective shares of 11% and 7% of total revenues.
Alex Chausovsky, Research Director for the Electric Motors Group of IMS Research, spoke with CFE Media about the emerging markets for medium voltage, and how the U.S. market figures to fare in the near term:
CFE Media LLC: It’s no surprise to see the medium voltage market growing in developing countries, but what is driving the continuing growth in the U.S.?
Alex Chausovsky: The oil and gas sector of the market, which is quite substantial particularly in Gulf states like Texas and Louisiana, is the main driver of growth in the U.S., in my opinion. Water and wastewater has also been doing well in the country, even though much of the government-allocated funding is still caught up in red tape and has not been released. This bodes well for continued growth in the future.
CFE: The growth in medium voltage seems to parallel the growth in the energy commodity markets. Is there any sign that the growth is slowing?
Chausovsky: In the short term, yes. There is still a significant amount of uncertainty regarding the sustainability of the economic recovery. With the recent declines in oil prices, investment is likely to slow a bit as well in the second half of 2011. However, in the longer term, I believe oil and commodity prices are expected to continue an upward trend, as emerging economies in China, India and Brazil continue to increase their demand for these products, thereby driving prices higher.
CFE: Notably absent from the list is South America, yet we hear about new energy sources there all the time. Is this is the next big emerging market?
Chausovsky: The full version of the report actually presents that Brazil and the rest of Latin America are expected to have some of the highest growth rates from 2010 to 2015. Revenue growth is projected to be on par with China and Rest of Asia, and only a few percentage points below the Middle East.
CFE: What opportunities exist for manufacturers of medium voltage soft starters? What is the best way they should take advantage of this growing market?
Chausovsky: Motor driven system energy efficiency has received a significant amount of attention recently, culminating in an International Energy Agency report that states that these systems account for about 45% of total global electricity consumption. The study also stated that if these systems were to be operated at peak efficiency, we could potentially lower demand by as much as 10-15% worldwide. Although medium voltage soft starters are not as adapt at saving energy as medium voltage drives, they do offer an energy saving component as they gradually ramp up the voltage to the motor during its start. This message should be included in the conversations that suppliers of these products have with their existing and potential customers.
CFE: Even if economic growth slows, there seems to be no slowing the energy market right now. Is this market recession-proof?
Chausovsky: As witnessed in 2009, when the global medium voltage soft starters market declined by more than 20%, it is far from recession proof. It’s linked to the business environment for large projects in industries such as metals, mining, and oil & gas. There are some portions of the market which are more stable, such as power generation and water and wastewater, due to their links to population growth and increasing urbanization, and some that are more volatile, such as oil and gas, and mining, which are more susceptible to wild swings in energy and commodity prices.