By Kari Williamson
The South African welding solutions market witnessed strong and steady growth in the period 2007-2010., driven by an increase in capital expenditure on large, infrastructure projects within the power generation and petrochemical sectors.
Demand was also raised by the 2010 FIFA football world cup constructions, as well as an increase in end-user awareness about the benefits of advanced machines and technologies providing higher quality welds.
Despite these positives, slower revenue growth is forecast for the South African welding solutions market between 2010 and 2017. The market was worth US$333.9 million in 2010, and could reach US$410.9m in 2017.
"Revenue growth is expected to slow, when compared to the 2007 to 2010 period, as a result of the completion of major greenfield commercial construction activity within South Africa," says Frost & Sullivan's Industrial Automation and Electronics Senior Industry Analyst James Fungai Maposa.
"Despite this setback, the demand for welding solutions will be sustained by an anticipated rise in manufacturing sector output, continued power plant construction activities and a rise in demand for repair and maintenance jobs within the process industries. This will, in turn, improve plant operating efficiency."
Power, mining and metals
The demand for welding solutions will be largely driven by projects implemented in the power generation and mining and metals industries. This demand will also be promoted by Eskom's commitment to invest over US$100 billion on expanding and rehabilitating the country's existing power generation and distribution infrastructure, the analyst believes.
"Initiatives implemented by the government, such as the New Growth Path Initiative and the Industrial Policy Action Plan, are aimed at expanding and diversifying South Africa's manufacturing sector," adds Maposa. "Such initiatives are also expected to contribute to a sizeable increase in sector demand for welding solutions during the forecast period."
Funding uncertainty
Funding uncertainty and limitations are major constraints to market growth during the forecast period. A consequence of the global financial crisis, and the subsequent economic recession, has been a more rigorous evaluation process by leading local and international project financiers.
"This has resulted in a few local mining and energy companies not securing the required funding to fully implement their planned expansion activities," explains Maposa. "Similar to the private sector, public sector investment has also declined with project postponements, cancellations and delays continuing to persist."
These funding limitations and restrictions are expected to have a significant impact on demand potential of the South African welding solutions market. Failure to obtain the required funding for planned infrastructure projects is set to result in a downward trend in demand for locally supplied welding solutions.
Record-high prices
Despite this, record-high global prices of locally mined commodities have restored investor confidence. This is likely to result in some of the cancelled or postponed expansion projects, in 2009 and 2010, being implemented during the forecast period.
"Although much lower than the pre-global financial crisis era, investment within the mining, energy and public sector rose considerably in 2011," concludes Maposa. "Most of this investment was channelled towards expanding existing production infrastructure and also improving process efficiencies. Such investments will sustain the demand for welding solutions during the short, medium and long term."
