The economic recession restrained growth in the western European industrial market, which was already reaching maturity. The subsequent transition of the manufacturing base to low-cost Eastern European countries has opened new prospects for market sustainability. This, in turn, is expected to continue offering growth opportunities in Eastern Europe for the automation and control solutions (ACSs) market, according to Katarzyna Owczarczyk, research analyst, Industrial Automation & Process Control, for global research and consulting firm Frost & Sullivan (www.frost.com).
Revenues from process industries in the ACSs market reached $597.9 million in 2008 and are forecast to exceed $846 million by 2015, Owczarczyk said in a recent press release. A number of factors can be attributed to Eastern Europe’s overall attractiveness, she said, including European Union (EU) membership, a broad industrial and production base, relatively low labor costs and historical and cultural connectivity with the western market and economy.
The EU accession has been one of the main factors behind positive market opportunities in Eastern Europe, according to Owczarczyk. Many end-users in Eastern Europe, through European Standards, are forced to improve their infrastructure levels to be equivalent to that of western Europe. Eastern Europe has a broad industrial and production base. Many heavy and light industry plants exist, which, once modernized, will constitute good bases for various industrial developments. Additionally, all the factories built under Communism have been privatized. However, they need to be modernized and upgraded.
In 2008, Poland, the Czech Republic, Slovakia and Hungary accounted for 66 per cent of the Eastern European ACSs market partly because they were able to transform and restructure their economies faster upon joining the EU. They have also been bolstered by the influx of foreign investment, focused on plant retrofits, thereby stimulating the ACSs market growth.
Power, chemicals, and oil and gas accounted for the largest share in the Eastern European ACSs market in 2008. This is attributed to the extensive use of Distributed Control Systems (DCSs) in these industries in their manufacturing processes. A majority of the new small- or medium-sized facilities, in many chemical and most of the power and oil-and-gas facilities, are likely to prefer typical DCSs, rather than hybrid or a system based on several Programmable Logic Controllers (PLCs), because of their reliability.
Power is also the fastest-growing market for ACSs, the revenues of which are expected to almost double by 2015. Eastern Europe faces rising prices, strict environmental targets and an impending capacity crisis in power generation due to the decommissioning of aging power plants and increasing demand. Power will sustain stability due to the continuous high demand for energy as well as the high amount of European funds available for renewable energy and government investments in transmission and distribution to improve the overall network efficiency and decrease transmission losses.
The chemicals and oil-and-gas industries are very important in the ACSs market due to existing regulations concerning environmental pollution. However, the chemicals industry, in particular, is expected to be severely affected until 2010 by the economic recession. Food-and-beverage and pulp-and-paper are comparatively smaller markets that are already well developed, but still need further investments to improve plant performance and meet continuously changing standards. PLCs are more commonly used in the food-and-beverage and pulp-and-paper industries as Eastern Europe has a large number of small food manufacturers and paper mills for which more-expensive DCSs are not required.
The smallest sectors are pharmaceuticals and water-and-wastewater. However, the latter offers significant growth potential due to the necessity for regulatory compliance with EU Directives and the availability of EU funds, which drive PLC market growth. This is because of the affordable price that makes PLCs one of the most used automation components in the water and wastewater sector, Owczarczyk said.
The Eastern European ACSs market is expected to grow steadily from 2010, driven by growing demand, especially from the power sector. Among Eastern European economies, Slovakia, Romania and Poland have the most favorable growth prospects, while countries such as Romania, Bulgaria and Hungary that have had large external imbalances caused by the economic recession, are expected to witness low or flat growth.
From a product standpoint, Manufacturing Execution Systems (MES) and Industrial Asset Management (IAM) are expected to witness high growth, as they, despite being relatively new in the Eastern European market, experienced high growth despite the economic recession, Owczarczyk said. This growth is mostly driven by the need for production optimization and compliance with quality and regulatory demands.
Frost & Sullivan