Shifting Winds of Change in China’s Control Valves Market

According to a China Control Valves Market Research Report, the control valves market in China was estimated at close to RMB 3.5 Bn in 2015. But with slower growth in the economy as a whole, China’s control valve market is expected to shrink over the next five years. In the past 2-3 years, downstream industry players in traditional heavy industries chemical and metallurgy have either reduced their capital investment or have become more conservative in making new ones. Demand from these 2 industries is expected to shrink, leading to smaller market shares by 2020 (as shown in figure 1 below).

Figure 1: China Control Valve Market Breakdown by End-user Industry (2015, 2020)

China Control Valve Market Breakdown by End-user Industry

Source: GCiS Limited Publication Study on China’s Market for Control Valves (Estimates)

Despite the rather gloomy forecast for the economy in general, there are still some profits to be made in selected downstream industries like power, water treatment and pharmaceutical. In fact, these 3 industries are already growing at above average rates in 2015, at 3.2%, 7.2% and 8.4% respectively (shown in figure 2 below). Going forward, these industries would be where much of the future growth potential will be.

Figure 2: China Control Valve Market Growth Rates by End-user Industry (2015)

China Control Valve Market Growth Rates by End-user Industry

Source: GCiS Limited Publication Study on China’s Market for Control Valves

Favorable Government Policies Boosting Growth

Even though the market shares of control valves to the water treatment and pharmaceutical industries are still relatively small in 2015 (as shown in figure 3 below), demand for control valves here will grow rapidly thanks to favorable government policies.

Figure 3: China Control Valve Market Breakdown by End-user Industry (2015, 2020)

 

China Control Valve Market Breakdown by End-user Industry

Source: GCiS Limited Publication Study on China’s Market for Control Valves (Estimates)

Already, the Chinese government’s efforts against water and industrial waste pollution and stricter environmental regulations are pushing both industries and municipal governments to invest more in waste treatment equipment. The Chinese pharmaceutical industry is also seeing tremendous amounts of R&D funding as well as capital investments, and with China’s growing healthcare needs, pharmaceutical output is expected to continue growing. By 2020, GCiS estimates that the water treatment and pharmaceutical industries demand for control valves will grow in market share to 6% and 5% respectively.

World’s Largest Consumer of Energy Powering Growth

Apart from the high growth markets, the traditional power industry – already the second largest consumer of control valves in 2015 - is also expected to have stable growth in their demand for control valves. From 2006 to 2014, China’s total energy consumption had grown at a CAGR of 4.5% to more than 4200 Mn tons of Standard Coal Equivalent (or approximately 3000 Mn tons of Oil Equivalent) as shown in figure 4 below. According to Global Energy Statistical Yearbook, China is already the largest energy consumer in 2014, surpassing the United States, who only consumed about 2200 Mn tons of oil equivalent.

Figure 4: China’s Total Energy Consumption (Year 2006 to 2014, Mn tons of Standard Coal Equivalent)

China's Total Energy Consumption Year 2006 to 2014 Mn tons of Standard Coal Equivalent

Source: China Statistical Bureau

Suppliers selling to this industry will benefit from the increased government spending aimed at diversifying China’s energy mix to reduce their reliance on coal or fossil fuels. China is already expanding their clean energy sources and in the near future, around 5-6 nuclear power plants are due to open each year. Control valves in this industry are used in high pressure and extreme temperatures environments, which requires valves of the highest quality – opening up attractive market opportunities for high quality foreign suppliers.

Riding Future Winds of Growth

Going forward, the focus on environmental protection efforts will continue, prompting downstream industry players to continue with upgrading their equipment to comply with environment standards and government sector to have sustained investments in clean energy sources. This will create pockets of opportunities in a shrinking market. Control valve suppliers who offer higher quality valve solutions will become the preferred choice for downstream users.