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News Release from: Frost and Sullivan
Edited by the Manufacturingtalk Editorial
Team on 28 March 2002
Welding equipment makers face downturn
Embattled manufacturers of welding equipment look to public investments in infrastructure for further growth potential to offset global economic downturn, says report.
Embattled manufacturers of welding equipment look to public investments in infrastructure for further growth potential to offset global economic downturn, says report These are challenging times for manufacturers of welding equipment for construction applications
This article was originally published on Manufacturingtalk on 28 Apr 2004 at 8.00am (UK)
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The slowdown in the European construction industry combined with the global economic downturn has had a negative impact on manufacturers of welding equipment.
However, there is cause for cautious optimism.
Increased public investments on infrastructure and encouraging signs of growth from Europe's primary construction markets are expected to provide a much-needed fillip to this embattled market.
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Renewed interest in public infrastructure investments has led to many countries pumping funds into the construction of roads, bridges and other structures.
Indeed, applications in civil engineering, along with maintenance and repairs are expected to make up for the projected shortfall in demand from the new residential sector.
There has been a growing trend across many applications toward increasing the automation of welding equipment.
This has resulted in highly complex and sophisticated machinery that has stimulated higher levels of productivity.
This, in turn, has offered considerable time and cost savings to end users, thereby promoting the use of welding equipment.
Moreover, with more welding production moving off-site to workshops, there is likely to be a related rise in demand for sophisticated machinery, which is expected to support revenue growth.
Despite the increasing technological sophistication, end-user uptake of new and advanced equipment continues to be slow.
As Ozan Dogruer, Research Analyst, at Frost and Sullivan notes: "The construction industry is notorious for its dogmatic stance toward new technologies and novel processes; to change such traditional attitudes will take time".
Low replacement rates have also restrained the impetus for change.
The slow turnover rate of equipment is seen as a function of a fragmented market, where a large number of small enterprises are unwilling to continually invest in new equipment.
This situation is aggravated by the increasing quality and lifespan of welding equipment, which lessens the need for frequent replacements.
Another challenge that welding equipment manufacturers will have to face is the flight of projects to central and eastern Europe.
These potentially high growth markets, provide the most effective way of combating the stagnation that is plaguing the western European market.
Nevertheless, the positive outlook for the main construction markets in western Europe - the United Kingdom, France, Italy, and Iberia - holds out the promise of increased demand for welding equipment.
Dogruer adds: "Although some manufacturers may be exiting the market, some are still adamant to succeed and are even increasing their penetration into the market, which indicates that opportunities do still exist for those companies that are capable of seizing them".
Trends are already improving for the welding equipment market for construction applications.
Revenues generated by the construction sector are forecast to rise from $264.4 million in 2001 to $297.0 million in 2008.
Of this, the market for laser welding equipment is expected to have the brightest growth prospects.
This product segment is expected to expand substantially over the next few years because of its superior performance and widening scope of applications.
Welding equipment companies that are active in the market offer a wide range of solutions from supplying small niche applications to providing complete manufacturing solutions.
Competition is expected to intensify due to falling construction activity and the resultant contraction in demand.
A related consequence is that prices are showing a downward trend.
And with end- users continuing to demand increasing product quality and value at no extra cost, pricing strategies are expected to remain unchanged.
To survive these difficult times, manufacturers of welding equipment will need to leverage competitive advantages of price, product quality, and productivity.
"Manufacturers that are able to excel in all these areas tend to hold a competitive edge over others and are more likely to sustain long-term relationships with end users.
Although the market is currently flat, many growth opportunities still remain at the micro level for manufacturers that are capable of tracking market trends and reacting quickly to end-user needs," concludes Dogruer.
In analysing the competitors, the Frost and Sullivan Market Engineering Leadership Award 2002 is presented to ESAB for its solid performance in the European metallic welding equipment market for construction applications.
The company has continued to strengthen its position in the market through a combination of high product quality, strong customer relations and international reach.
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