Striving for efficiency
Manufacturers must look to product innovation to remain competitive
With the market still recovering from the delayed impact of the recession, manufacturers must look to product innovation to remain competitive, as end users are seeking to ensure energy efficiency.
Water is a precious resource in the Middle East, and is guaranteed to keep utilities providers spending on infrastructure for some time to come.
As pumps and valves are an integral part of the systems delivering and making use of water, they are in demand, and the region has been a reprieve for suppliers struggling for business in other parts of the world.
“The Middle East has fared the best compared to other markets mainly due to the fact that water in the Middle East is scarce and hence expensive”, says Imtiyaz Kudchikar from Lutz-Jesco, a pumps manufacturer.
Market players say the global recession hit the region with a one year delay, but did not stay around for long. “Due to the good recovery of oil prices by mid-2009, the downturn in the region only lasted nine to ten months,’ says David Sonzogni of Emerson Leroy-Sumer, who manufacture electric motors used in pumps, and recently supplied the district cooling pump motors and circulation pump motors for the Burj Khalifa in Dubai.
While oil prevented the crisis from entrenching itself in the region, commodity prices were also a major reason why projects were delayed, according to Sonzogni. “The big project owners, and the oil companies, thought that if they waited for six months, the price for concrete and steel would go down and they can get the job done at a discount.”
But because projects which were close to completion were not stopped due to the downturn, it took some time for these delays to make a dent in regional orders. “Since Emerson gets its orders at the advanced stage of an MEP contract, we have had very good sales in 2009,” says Sonzogni.
On the flip side, this delayed effect meant that orders started to run dry in the fourth quarter of 2009, and are still not back to normal now. Things are about to change again, however, as a flurry of utility and oil and gas projects have been announced in the fourth quarter of 2009, with district cooling being one sector where the recovery is most palpable.
As sales volumes slumped, suppliers tried to salvage some business by providing additional services to their customers. “In Dubai and Bahrain, were there wasn’t much growth in the last two quarters, we improved those installation we have installed and serviced the customer,” says Kudchikar.
Crisis or no crisis, conserving energy is one issue that buyers of pumps and valves are becoming increasingly sensitive to.
While the region may not suffer a shortage of crude output, utility providers are struggling to supply ever-expanding cities and industrial complexes. “DEWA and the others aren’t trying to conserve energy because they want to save the world, they have no choice,” comments one source. Private companies are similarly looking to make a saving.
“Energy efficiency is a big issue at the moment, and end users are putting a lot of pressure on us to come up with cost efficient products, which can be used for the long run,” says Surith Nair from AEON, a manufacturer of valves. Aeon is currently looking to develop a range of energy efficient products to cater for this demand.
“Customers are looking for better insulation material, and higher efficiency pumps and valves,” says Sonzogni. Emerson Leroy-Sumer wants to capitalize on this trend by offering energy efficient motors to their customers in the region.
As end users are looking to make savings on energy, are they equally keen to keep equipment costs down? Kudchikar believes so: “People are now going for cheap products, and we can’t compete with some Chinese and Italian manufacturers on price. Their products are now widely accepted here, customers accept a product life of only three to four years.”
But others disagree. “End users know what they want. Quality is very much in their mind, I don’t think anyone can push in if they don’t have the quality at hand,” says Nair.
For him, one of the challenges his company is facing is complying with the cornucopia of different specifications that governments and the private sector require. “Every end user has own specification to comply, and each market has their own requirements.”
With all this to keep in mind, it is certainly not a time for manufacturers of pumps and valves to slash their research and development budget.