Equipment Sales Soar in Asia While Consumables and Repairs Grow in U.S. and Europe

Source: 
McIlvaine Company

The world has emerged from recession and this has unleashed expenditures to expand and maintain production. However, there is a marked difference in the activity depending on the region. In the United States and Europe, the expenditures have been centered on repair and improvement of existing facilities. In Asia, the money is flowing toward new plants.

A good example of the difference is semiconductor activity between the U.S. and China. This year China will invest 60 percent as much in semiconductor capital equipment and cleanrooms as the U.S. But, when it comes to expenditures for repairs and consumables, U.S. chip plants will spend six times as much as their Chinese counterparts. By 2008 expenditures for repairs and consumables will still be three times greater in the U.S. But new equipment sales will be 50 percent greater in China. In the online World Industrial Analysis, McIlvaine Company compiles forecasts for equipment and consumable expenditures for industrial and municipal facilities for 80 countries and sub regions.

For most equipment and consumables expenditures, revenue projections can be made based on basic units of production. Municipal drinking water is tracked in millions of gallons/day (mgd) of existing and new capacity. The situation is more complex when it comes to municipal sewage treatment. Some expenditures can be related to the amount of sewage transported. Others can be related to the amount undergoing primary treatment. Still others are related only to those activities involving secondary treatment.

2006 Treatment flows (1000 MGD)

U.S.
Germany
China

SewageTransport
New/Total
0.8/40.6
0.2/12.8
2.5/29.6

Primary Treatment

New/Total
1.1/38.9
0.2/12.2
2.5/20.2

Secondary Treatment
New/Total
1.6/34.4
0.2/11.0
3.1/18.0

From these basic factors one can say that for equipment such as lift stations which are associated with transport, the Chinese market in 2006 will be 12 times greater than Germany whereas, in terms of lift station repair, the Chinese will be 2-3 times larger than the German expenditures. In terms of sludge dewatering associated with secondary treatment capital, expenditures will be 15 times higher in China whereas, polymers and other treatment chemicals will only be 1.5 times greater.

There is the same difference in expenditures for coal-fired electricity generation.

2010 Coal-fired Power Generation (1000 MW)

U.S.
Germany
China

Addition
6
17
1

Total in Place
348
350
 60

The U.S. and China will spend approximately the same amount for repairs and consumables to existing coal-fired plants in 2010. But the Chinese will be investing almost three times as much in new facilities as the U.S. They will be investing 17 times as much in new facilities as Germany.
Utilization of these basic factors is sufficient for all products and services where the penetration rate remains constant. Examples of where the penetration rate changes are membrane filtration for wastewater plants and SO2 scrubbers for power plants.

2006 Membrane Sales (1000 MGD)

U.S.
Germany
China

Transport Flow
New/Total
40.6
29.6
12.8

Penetration %
4.3
0.8
0.8

Membrane Flow
1.6
0.2
0.1

2010 Scrubber Installations Coal-fired Power Plants (1000 MW)

U.S.
Germany
China

Generation Capacity

348
60
350

Penetration %
46
100
17

Scrubber Capacity

160
60
59

So even though China will have five times as much coal-fired capacity as Germany in 2010, the scrubber capacity will be equal. Therefore, purchases of pump parts, limestone, nozzles, and other consumables will be comparable.
There are some industries where both the new equipment and consumables purchases are both higher in Asia than elsewhere. Flat Panel Display and disk drive manufacturing facilities are in this category.
There are some examples where the U.S. leads in both categories. Biotechnology is a prime example.

There are some industries where the activity is concentrated in another region. Oil and gas production is largest in the Middle East. Mining is largest in South America. But in general, the U.S. and Europe lead in repair and consumables purchases and Asia leads in new equipment.
For more information on World Industrial Analysis visit http://www.mcilvainecompany.com/air.html#N039

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