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INDUSTRY FORECAST: Tracking important market sector trends


Maintenance professionals and industry manufacturers/distributors remain unsure about the economy and what next year will hold. Looking over the 2010 horizon, The Freedonia Group Inc. has been tracking the U.S. demand for bearings, as well as for heating, ventilation and air conditioning equipment/industrial valves through to 2013.

Bearings
According a new Freedonia Group study, ball, roller and plain bearing demand in the U.S. is projected to expand 3.0 percent per year through 2013 to US$10.6 billion. Sales increases for ball and roller bearings, including both mounted and unmounted types and associated parts, are expected to outpace those of plain bearings, reaching $8.5 billion in 2013.

Advances will be supported by sales of high-value, large diameter bearings as the wind energy and heavy equipment markets expand. Continued, albeit moderating, growth in the production of aerospace equipment and machinery will also support gains. Recovery in motor vehicle production from the low levels of 2008, particularly in heavy truck and bus manufacturing, will also benefit bearing suppliers.

Market gains will be dampened, however, as U.S. companies in a variety of bearing-using industries continue to move manufacturing operations to offshore areas where labour costs are lower. The strongest market gains through 2013 will be posted by roller bearings, benefiting from renewed strength in U.S. production of motor vehicles and from sales of advanced, high-value products for applications, such as wind turbines and heavy machinery.

Demand for mounted bearings and bearing parts will also outperform bearing demand overall. Mounted bearing demand increases will be spurred by original equipment manufacturers’ (OEM) desires to simplify their production processes and reduce future maintenance requirements. OEM bearing applications, which currently account for 78 percent of all demand, will approximate the performance of maintenance, repair and operations through 2013.

Sales conditions will be particularly strong in the automotive and engine, turbine and power transmission equipment manufacturing markets. Bearing demand for maintenance, repair and operations will be bolstered by growing maintenance expenditures for aerospace equipment and construction machinery.

HVAC equipment
Demand in the U.S. for HVAC equipment is forecast to increase 4.5 percent per year to $17 billion in 2013. Public and private rebates, credits and other incentives will encourage owners to upgrade to models with efficiency ratings that are at or above ENERGY STAR levels. Ongoing changes in U.S. federal regulations regarding minimum efficiency requirements for many of these systems, and the phase-out of ozone-depleting refrigerants with chlorine will also favourably affect sales of HVAC equipment.

In 2008, heat pumps accounted for the largest share of heating equipment value demand and will achieve a 52-percent share in 2013. Additionally, heat pumps are expected to post the strongest gains through 2013. Heat pump demand benefits from their ability to provide efficient heating and cooling in moderate climates, as well as the increasing availability of low temperature and geothermal versions.

While warm-air furnaces will continue to account for the second largest share of heating equipment sales, this segment is expected to lose market share because of lower efficiency compared to heat pumps. Still, sales will be supported by their relatively low initial cost and amenability to installation with other central home and building comfort systems.

Unitary air conditioners will remain the largest segment in the cooling equipment market, accounting for over 70 percent of total value demand in 2013. Gains are expected to be slightly above average over this period. Room air conditioners are expected to post the strongest gains through 2013, as quieter and more efficient units become available.

Industrial valves
Industrial valve demand is forecast to increase less than one percent per year to $15.2 billion in 2013. Although gains will not match those registered during the 2003-2008 period, slowing growth will largely be due to changes in average valve prices. Much of the robust market expansion during the 2003-2008 period was due to value gains supported by price increases, which were caused by rising raw material costs.

Through 2013, unit prices are expected to remain flat or drop in response to decreasing raw material costs. In fact, in inflation-adjusted terms, valve demand will strengthen through 2013, bolstered by acceleration in construction expenditures. Demand for standard valves is forecast to outpace that of automatic valves. More buyers will opt to purchase the less expensive standard valves as non-residential fixed investment slows, possibly upgrading them with separately sold actuators at a later date.

Steel and steel alloys will remain the most commonly utilized valve construction materials due to their durability and strong performance in high-temperature, high-stress applications. Although valve performance will continue to be improved by advances in non-traditional materials (i.e. plastics, titanium and other metal alloys), steel and steel alloys will still make up nearly one-half of valve demand in 2013.

Process manufacturing industries and utilities are the dominant markets for industrial valves because of their heavy fluid handling requirements. However, demand gains in these markets will be modest, as production increases in most process manufacturing industries are expected to moderate and growth in utilities construction spending will not be as strong as during the 2003-2008 period.

The fastest gains through 2013 will be posted in the construction market, with industrial valve sales expanding 2.4 percent per year. In 2008, original equipment manufacturing applications accounted for more than two-thirds of total industrial valve demand, and are expected to remain the dominant source of valve sales for the foreseeable future.

www.freedoniagroup.com