Pumps under pressure

The world market for industrial pumps was worth US$29 billion in 2006, according to market researcher McIlvaine Company, with just 10 companies supplying 50% of this total. The firm predicts that sales will hit US$38 billion by 2011, with centrifugal pumps accounting for 70% of this figure.

Municipal wastewater is the fastest growing end-use application, followed by municipal drinking water and then the oil and gas market. The power sector is forecast to be the fourth largest market segment in 2011.

Sales of valves are inextricably linked to developments in the pumps market, and this sector is expected to climb from being worth US$43 billion in 2006 to some US$52 billion in 2010.

China’s vast expenditure on water and wastewater facilities and its huge pumps and valves requirements for coal-fired power plants and petrochemical, steel and iron manufacturing is driving much of this growth and it is set to overtake the US as lead centrifugal pumps consumer in the next few years.

Region shines

The surge in demand for pumps and valves is as much visible in the Middle East as elsewhere in the world. The region is experiencing a multi-billion dollar wave of commercial and residential development projects, which has triggered a massive programme of water and wastewater infrastructure investments.

Urbanisation creates huge needs for both primary and secondary treatment plants, in addition to the expansion of water production and distribution systems.

“The Middle East is a huge and a fast-growing market. Oil and gas is one of the big markets for pumps here, but there are also infrastructure projects for water and sewerage. Water includes desalination projects and water supply to houses. The collected water is sewage and this requires treatment plants. Then there is water reuse for irrigation and water re-polishing for district cooling: all these applications need pumps,” explains Erwin Maier general manager for pumps and valves manufacturer KSB.

Fotis Poulopoulos, general manager at Grundfos Gulf Distribution adds: “The building and utility sectors are driving the boom in pumps sales. In the construction sector, there are four main applications for pumps: water boosting in high rise buildings; air conditioning or cooling; drainage; and firefighting.

Delays mount

The strength of demand from these areas is such that manufacturers are straining to match supply to market requirements. Pumps producers are further hampered by the global squeeze on key raw materials.

Consequently, efficient supply chain management is becoming a critical aspect of the pump business in the Middle East.

“We are trying very hard to meet the demand in the market,” remarks Poulopoulos, whose company sells around 20 million pumps worldwide each year.

“The business potential is huge. There is not a shortage of pumps, but there are difficulties and some delays. The difficulty is meeting the tight time schedule of projects over here.”

Maier agrees: “Delivery times are too long as factories are too full. Buyers require very short delivery times and reliable delivery times. A client the other day said ‘don’t come with excuses that castings will not be delivered in time – we know this already but we want pumps in time’.”

Castings are made from casted iron, which is in short supply as foundries the world over are fully booked to capacity due to rampant industrial growth in China and other resource hungry economies.

Delivery times for pumps are getting longer as a result. The longest wait is for cooling-water intake pumps, which can be as much as 18 months. Small or medium-sized pumps can be supplied in 4-12 weeks depending on the product.

Competition climbs

The strong demand and tight availability of pumps in the Middle East has opened the door for new players to move into the market, which is driving down prices at a time when production costs are rising.

“American companies see a big chance to step into the market with their products, even though technically they are not on the same standard,” continues Maier. “They can offer very competitive prices because of the dollar situation.”

With more than 10,000 industrial pumps producers in the world it is no surprise competition for orders is fierce. Industry players paint the image of a cut-throat pumps market in the Middle East, where price wars are a real and every day occurrence.

But imports of inferior-quality pumps are now a growing problem for the region.

“The pumps industry is facing attack from copycats,” reveals Poulopoulos. “There is a very big production of imitation pumps in China, India and other countries.”

Hydrolink’s Colin Addison agrees: “In the open tender market the best price wins the order, but it might not be the best overall package. Three out of four times, the cheaper pump will cost more to maintain. You need to be sure to select the right pump for the right job. There are major pump problems in Dubai and a systemic lack of process skills; we get called in to solve them all the time – that is our company’s expertise.”

Service and efficiency

This increased competition has led many pumps suppliers to work hard at improving product designs and to place a greater emphasis on offering service packages in order to stand out in the market and win customer loyalty.

The average lifetime of a pump is 20-30 years and during that time the bearings and couplings in particular will need to be maintained and replaced.

“Normally the warranty for our pumps is 8,000 hours,” says Mohammed Salameh sales manager at Danfoss in the Middle East region.

“We guarantee the pump will work fine during that time as long as the customer is following our recommendations and rules for using our pumps. What we are looking for is a good pretreatment and protection devices. After 8,000 hours we prefer to open the pump and make cross checks on the internal parts.”

Low maintenance and high reliability are the main criteria a purchaser in the Middle East looks for in a pump, alongside a good price.

Previously, the energy consumption performance of a pump was not an important consideration in this region due to the easy access to cheap fuel supplies.

But that is beginning to change now, as Maier explains: EPC contractors didn’t use to care about efficiencies, they just bought the cheapest pump, but there are more and more build and operate tenders around now.

If the EPC contractor is also responsible for operation and has to buy the energy, they now want to have very good efficiency. So there is a change in this market now to look for better efficiency and reliability.

In response, producers are designing ever more energy efficient pumps. “We have designed a new high-pressure pump range for reverse osmosis with the highest efficiencies in the market, adds Maier.

“We have also developed a device for energy recovery, this is a pressure exchanger, and we are just starting to market this product.”

“We have installed some in Oman recently, in Sur, but we have to get more reference plants in the Middle East. We are the only manufacturer that can supply the complete high-pressure unit including recovery, which means we can guarantee energy costs.”

Smart pumps

For pumps that already have reached optimum efficiency, manufacturers are looking at new ways to improve the technology, namely by developing smart pumps with automated control systems that enable the flow to be easily adjusted.

“Today at least 20% of global energy consumption is used for running pumps,” remarks Poulopoulos. “That is a huge figure which is why the pumps industry is working to reduce energy consumption.”

“You reduce the energy by increasing the efficiency, but product efficiency has already reached its peak which is why you are seeing a new trend to have more efficient operating systems for pumps. It is not the pump itself but the system operation; efforts are being made to make pumps include electronic devices to control the operation of the pumps: to make smart pumps that understand what the system needs and to operate accordingly.”

These smart controllable and programmable pumps are widely deployed in Europe, but the market is still somewhat in its infancy in the Middle East, primarily because of the higher initial outlay.

However, contractors are slowly beginning to appreciate the cost-savings and improvements in reliability these pumps can bring.

“The prestigious buildings such as Burj Dubai are already using them, so too the big district cooling systems, but as yet they are not widely used in the villas, which would be a huge market,” says Poupoulos.

“But with the green build movement the concept is coming,” he adds.

He is confident that the Middle East pumps market has many more years of growth ahead.

“It was a global boom, but now we are seeing recession signs in Europe and the United States. There was a tailwind in the whole market during the last five years, but now we are seeing some difficulties in some core markets. However, the Middle East will remain strong as the potential for further growth exists and the liquidity exists.”

“Only political instability could create problems in the business environment here. There are some worries about the cost of production, but still the impact in the Middle East will be much less than elsewhere; we will see some signs but it will be a very light impact,” he comments.

With projections that the GCC region will invest more than US$1.8 trillion in infrastructure projects in 2008 alone, the business potential for pumps suppliers is huge.

And by hammering home the message that cheap low-quality pumps bought today are tomorrow’s maintenance headaches, established producers should be able to resist the influx of low-quality pumps into the Middle East.

Afterall, there could be no greater false economy in a region where temperatures peak at more than 50 degrees Celsius and where a defective pump in a desalination facility, district cooling plant or power station could spell disaster.