This article is based on a GCiS multi-client report: China Submersible Pumps Market Research Report.
China's submersible pumps industry is seeing strong domestic support from the municipal, construction and mining sectors. With ongoing commercial and residential development in addition to the modernization of tier 2 and 3 cities, municipal purchases especially are driving the industry. The market is fairly concentrated and competition is strong, especially in the low end of the market. High quality foreign imports represent around 5% of the market, while exports count for around 25%. Top quality products are seeing threats from illegal counterfiets, protection of IP still seen as a significant problem for foreign players to overcome.
Submersible pumps were first used in the US around the mid 1950s, long after their initial development in 1916 by Russian engineer Armais Sergeevish, who invented them for use in ships, wells and mines. Simply speaking, they consist of an electric motor and a pumping unit contained within a protective housing. Arriving first in U.S. after seeing further refinement in Europe, then later arriving in Asia, submersible pumps are used daily throughout the world to move countless volumes of clear water, raw water and wastewater, now representing the greatest component of the global pumping station market.
Submersible pumps are pumps that operate when fully submerged under water or other liquids, and are flood-proof. Pumps designed to handle solids, such as sewage pumps, represent the biggest share of the market in monetary terms; typically these pumps tend to be large in scale and expensive.
Sub pumps contain many components other than just the motor. Electrical and mechanical controls, valves and piping are all critical to reliable performance and operation. Large and small pumps are used in a variety of ways in the home, for agriculture, marine application, in commercial buildings, industrial plants and municipal sewage systems, as well as storm water drainage and flood control systems.
High quality pumps are efficient, operate quietly, safe to install, function reliably and have long product lives. Submersible wastewater pumps are used primarily for wet-pit sewage pump stations and for industrial sump or process effluent applications. A common use for small pumps is to move effluent from a GRP tank.
Product Market Segments In China
Among different product types, sewage submersible pumps see strong demand from municipal and construction industries, who typically have the highest demand for quality. Revenue from sewage and clean water submersible pumps combined accounts for nearly 95% of the total China submersible pumps market, by revenue.
Sewage submersible pumps are designed to move sewage waste and solids and are the largest pump segment by revenue. They are primarily used by municipal, construction and mining end-users. These types of pump make up around 56% of the total China submersible pumps market. The sewage pump segment is also the strongest market for foreign supplier participation, due to demand for quality and the comparatively deep pockets of municipal and construction customers. Here, foreign suppliers make up 40% of revenue. These types of pump also garner the highest export revenues, alone contributing to 15% of the total market.
Clean water submersible pumps are capable of moving clean water for many different applications in the municipal, agriculture and construction industries, making up 35% of the total market. Domestic suppliers make up 80% of segment revenue.
Hot water submersible pumps are used primarily by municipal, construction and power end-users, making up just over 3% of the total market. Domestic suppliers make up 70% of the segment revenue.
Corrosion-resistant submersible pumps are designed to handle corrosive fluids or solids and represent the smallest market segment. They are primarily used by chemical, mining and metallurgy end-users, making up just under 3% of the total market. Domestic suppliers make up 80% of the segment revenue.
End-User Market Segments In China
Among the end-user industries in China, nine have been identified as significant and independent sectors. These are: municipal, construction, mining, agriculture, metallurgy, power, chemical, petroleum and shipping.
The municipal and mining sectors are currently seeing the strongest growth, coming from demand generated by continuing urbanization and the planned growth of domestic mining over the next five years. Clean water and sewage pumps account for well over half of all municipal end-user purchases. They are the most expensive type of product and offer the highest commercial opportunity to suppliers, by product type.
GCiS interviewed a number of Chinese sub pump suppliers, asking them for their thoughts and perceptions as to where the best opportunities lie, relating to the targeting of end-user industries in the Chinese market. The municipal sector was thought to offer the best opportunities; on the whole, mining was not considered a particularly enticing area by suppliers, but this is thought to be the case mainly because most suppliers do not actively target sales to the mining industry. Despite the overall slowdown of the construction industry, it still offers a high level of opportunity due to its sheer size.
China Submersible Pump Market Value Chain
China Market Breakdown
Sewage submersible pump sales represent 57% of the total market value, clean water submersible pump sales for 37%, corrosion-resistant submersible pump sales for 3% and hot water submersible pump also accounting for around 3%. Of the total domestic market value, around 5% is from the sale of high quality imported products, while nearly a quarter of total revenue comes from exports.
Sales from domestically owned companies represent just under three quarters of total revenue. Sales from foreign companies accounted for the remainder.
In terms of the role of channel players and distributors in the market, direct sales to end-users make up just over half of sales revenue, around 55%. Sales to distributors, engineering companies and other channel players represent the remaining 45% of the market.
By end-user industries, sales to the municipal sector make up around 36% of the total, the largest segment. Sales to construction represented 25% of the total, followed by mining which makes up 11%. Sales to agricultural end-users make up around 8% of the market, metallurgy end-users 6%, power end-user 6%, chemical end-user 5% and petroleum end-users 3%.
China Submersible Pump Domestic and Export Sale Breakdown by Product Type – 2011
Challenges For Entrants and Foreign Companies
There is a high level of competition amongst suppliers, especially domestic companies producing cheaper products, which poses a significant barrier to entry into the market.
Submersible pumps are primarily sold directly to end-users, thus new entrants would need to develop their own sales network fast, use experienced pump distributors or a strategy involving both approaches. However, it will be a struggle for them to do so in a short space of time. Distributors are more expensive for customers, and though although they offer payment installment packages that are attractive to smaller customers, larger buyers do not require this kind of service.
The technology to produce high quality pumps which command the highest prices is still concentrated among a few, mainly foreign, suppliers. Some suppliers noted that there is an problem in the market with high quality foreign products being counterfeited. Grundfos and WILO are currently victims of counterfeiting because of their reputation for better quality products with a longer service life. These cheap imitations can cause several issues for suppliers, not least of all removing market share and lowering brand reputation. Any high-quality foreign suppliers planning to enter the China market will have to strongly consider how to best guard their intellectual property and ensure customers are familiar with their genuine products.
Competition from suppliers, especially in the low-end market, is intense. Foreign companies can have trouble competing with domestic rivals, as domestic products are cheaper. Some companies began to focus more on exports, because the domestic market is so competitive.