Mixed Picture for Medium-Voltage Drives

Some industries and geographies are seeing considerable growth in MV drives, while others face decline. But expect 2014 to shift toward equilibrium.

Medium-voltage (MV) drives have been a picture of ups and downs in the past year, with contrasting situations depending on geography, end market and power ratings. Overall revenues growing by 5 percent to $2.7 billion in 2013, the Americas saw considerably better growth with 23 percent; Asia-Pacific, meanwhile, contracted about 5 percent. It was the strength of the mining, oil and gas, and chemicals industries that led the way in the Americas, while significant weakness in the metals industry brought Asia-Pacific’s drop.

Unit growth was slower in 2013 than revenue growth, reflecting a shift in demand for higher-power MV drives. The middle and upper ranges of the power ratings saw the fastest growth; though other areas had revenue declines, we estimate that power ratings of 1.6-5 MW and >10 MW saw revenues grow more than 15 percent in 2013.

Globally, MV drive revenues into the oil and gas and mining industries grew by more than 15 percent, though only about 2 percent in terms of units as higher-power/higher-priced products became a larger percentage of the drive mix. In the oil and gas industry, an increase in demand for higher-power MV drives on larger compressors led to higher prices; IHS estimates that MV drives for reciprocating compressors is about $300,000, compared with about $730,000 for centrifugal compressor applications.

The move toward more MV drives for centrifugal compressors has also resulted in a higher price for the total compressor application. In the mining industry, demand for higher-power MV drives for conveyor applications resulted in revenues growing much faster than units in Latin America as well. In 2013, MV drive revenues for the conveyors grew by more than 25 percent while unit numbers grew only 7 percent.

We estimate that global MV drive revenues from the metals industry declined by 16 percent in 2013; the related application, rolling mills, also had revenues decline by nearly 18 percent. The weakness in the metals industry for equipment manufacturers is most likely caused by overcapacity in the industry. Consumption of some metals actually grew—aluminum consumption, for example, grew an estimated 6 percent in 2013.

The overcapacity in the metals industry in 2013 was a global phenomenon. Data from IHS Economics and Country Risk shows that real capital expenditures in the metals industry saw widespread declines. Equipment manufacturers for the metals industry also witnessed sales declines in 2013. In Germany, for example, metallurgical plant and rolling mill equipment sales fell 13 percent, while capacity utilization was at a historical low, according to the VDMA (German Engineering Association). China saw metallurgical plant and rolling mill equipment deliveries decline by 7 percent in 2013, and overcapacity issues in Australia’s metal industry is reflected in an announcement this year that they will cut smelting capacity by 190,000 tons. Toyota also recently announced closing down auto manufacturing plants in Australia, which is expected to result in delayed expenditures on machinery and equipment.

Despite recent weakness, as demand and supply reach equilibrium, MV drive revenues from the metals industry and rolling mills is predicted to rebound in 2014. MV drive suppliers that sell heavily into the metals industry share the positive outlook and predict that 2014 will result in revenue growth. As MV drive revenues from the oil and gas industry moderates in the Americas and overcapacity issues are addressed in the metals industry, IHS predicts that global growth will moderate, with the Americas seeing slower growth while Asia-Pacific and EMEA pick up steam.

>> Rolando Campos, rolando.campos@ihs.com, is an analyst for rotating machines and controls at IHS (http://www.ihs.com).

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