Frost & Sullivan's Analysis Of The Chinese Metallic Welding Industry
Chinese Metallic Welding Industry Powers Forward As International Investment Is Increasingly Attracted By End Market Potential Despite pressures on a global level, the Chinese metallic welding industry has continued to stage a strong advance with the market having weathered potential setbacks such as SARS and the slowdown in both the Japanese and US economies. With the progressive liberalisation of China's trading policies, the general population is seeing a gradual rise in disposable income, which is causing demand for various domestic products and services to rise exponentially. Consequently, this is stimulating rapid industrial growth, which in turn is generating increased demand for welding equipment and consumables. One of the key markets for welding equipment, the automotive industry, is experiencing significant growth and is forecast to undergo considerable expansion over the next few years. The growth in industries, such as automotive, construction and aerospace, are directly influencing the fortunes of the indigenous welding market. In addition, a growing emphasis on meeting local demands and the desire for ever more competitive production has prompted manufacturers to establish production facilities in emerging markets such as Asia, further fuelling investment in the Chinese welding industry. Frost & Sullivan's latest analysis unveils some of the key growth opportunities in the Chinese metallic welding equipment and consumables market, which is projected to increase from $705.5 million in 2002 (representing an increase of 10.5 per cent over the previous year) to $1.36 billion in 2009. The Chinese market is undergoing a profound transition from an industry characterised by simple manual equipment towards the latest mechanised and automated processes, supported by greenfield investment and the sustained growth in China’s foreign capital inflow. Growing end-user demands for higher levels of productivity and welding quality will give rise to the increasingly widespread adoption of sophisticated welding techniques and galvanise upgrades and overall investment in new welding equipment. Addressing the market’s inherent lack of high-end products, Frost & Sullivan Industry Analyst Ozan Dogruer confirms that the majority of welding equipment manufacturers offer products towards the low-end or middle-end of the product spectrum, despite the rush of foreign and domestic suppliers into the Chinese welding market. “Most high-end equipment, such as some types of laser and automated equipment, needs to be imported from developed countries. The lower total of suppliers is limiting the growth of the overall market as users utilise lower value, simpler solutions rather than more effective advanced welding technologies,” he explains. A further factor hurting earnings in the Chinese welding market is the intense price pressure from both competitors and end-users. The impact of this trend is particularly reverberating in the arc welding equipment sector and also the consumables market, which are both suffering from a degree of oversupply. “Pressure to reduce prices has acted to raise the degree of competition in the marketplace with the result that overall developments may be more limited as welding machinery producers continue to lower price levels on a regular basis in response to end-user demands for ever more competitively priced technology,” Mr Dogruer elaborates. In its review of market segment performance, Frost & Sullivan underlines the welding consumables market’s dominance, accounting for over 56 per cent of sales in 2003. This sector comprises stick electrodes, solid wires, flux cored wires and SAW wires and fluxes. Supported by significant investment in infrastructure and heavy industry, as well as the prominent shipbuilding and offshore sector, the consumables sector looks set to continue its stellar performance. The arc welding equipment sector is following a similar trend, stimulated by growth in key industrial sectors as well as rising demand for more sophisticated semi-automated and mechanised equipment. The Chinese metallic welding equipment and consumables market is populated by over 1,250 active competitors, most of them small and medium-sized private enterprises, creating a highly fragmented competitive structure. The composition of competitors is currently seeing some significant changes, as some of the traditional state-owned enterprises are exiting the market due to poor management and a lack of commercial awareness. However, the number of private enterprises and foreign competitors entering the market is steadily rising. “Competitiveness in the majority of product segments is very fierce, particularly the more mature ones, such as gas cutting and welding equipment, arc welding equipment and welding consumables. Some of the large state-owned enterprises and joint-venture enterprises are currently performing well in this market, but their competitive advantage is limited and we expect them to come under greater pressure as other competitors build a presence,” Mr Doguer warns. Tangshan Matsushita Industrial Equipment and Tianjin Bridge Group are the leading forces in the Chinese welding market. Frost & Sullivan’s study also observes a number of other manufacturers that have managed to obtain a stronger share in specific product areas, but in total terms, there is limited market concentration. The degree of competitiveness is forecast to increase over the next few years as a growing number of domestic and foreign welding equipment and consumable manufacturers are vying to exploit the growth opportunities available in the Chinese market. Overall, the key competitive factors revolve around price, product performance, product features, reputation and service. Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country. Contact Kristina Menzefricke Public Relations Manager Tel. +44 (0) 207 343 8376 kristina.menzefricke@frost.com www.frost.com ************************************************************************************************* -->> Visit us at Weldex (www.weldexp.com), the largest international welding, joining, cutting and fabrication exhibition in Birmingham, 11-14 November 2003, at stand 4212. *************************************************************************************************