Plant Engineering Markets Looking Back on a Disappointing 2016: German Plant Engineers Between Hope and Trepidation
Plant engineering has fallen on hard times – Especially in Germany, Europe’s industrial behemoth, home to some of the world’s biggest chemical and pharmaceutical enterprises, engineering companies booked less orders in 2016 than in the already disappointing year before. Is the momentary slump just a cyclical downturn or do problems reach deeper?
2016 was not a good year for Germany’s plant engineers: With contracts reclining by three percent, orders have reached their lowest value since 2004. Although domestic demand and the economic situation in industrialized countries improved, several key markets in developing regions could not live up to the expectations.
New orders booked in Germany by members of the German Manufacturing Industry Association VDMA’s Large Industrial Plant Manufacturers´ Group in 2016 totaled € 18.9 billion, which was 3 % down on the previous year and the lowest level in more than twelve years. That also had an impact on employee numbers, which fell by 2 % to 57,600 employees (2015: 58,800).
"In view of the challenging environment, characterized by low raw materials prices, overcapacities, strong competition and a range of political and economic risks, we see it as a sign of great competitiveness that large industrial plant manufacturing managed to hold practically stable in its markets," said Jürgen Nowicki, VDMA Large Industrial Plant Manufacturers´ Group spokesman and Member of the Board of Directors at Linde’s Engineering Division, at a press conference in Frankfurt/Germany.
Little Reason for Over-Enthusiasm
In fact, there’s little reason for over-enthusiasm: 2017 will not see a change of tide, the association believes. Accroding to a recent survey among its members, a majority of companies expect at best sluggish sales and a declining number of employees. However, around half of those surveyed are hoping for a modest increase in new orders, Nowicki stated.
Consolidated, although on a low level is the long time problem-child of domestic orders: Bookings rose to € 3.7 billion, which – although significantly better than 2015 – is nevertheless still below the longterm average of € 4.6 billion from 2007-2016. As previously, the clear absentee is major orders for thermal power stations. "Recently, Germany´s energy transition has caused a structural collapse in conventional electricity generation, which has involved the near-total loss of the home market," said Nowicki, commenting on the current trend.
Domestic Demand Stable, Exports Disappointing
The complete opposite is true for the international sales of Europe’s export champion: A 10 percent decline to a total of € 15.2 billion reflects the weak economic development of several key-markets. The downturn in the Middle East was particularly notable, where plant construction customers have put back investments due to the low oil price. However, in emerging countries such as Brazil, India and Mexico the trend in new orders was similarly disappointing. Despite this, demand stabilized in the industrialized countries and in the Asia-Pacific region, with China the most important market. Jürgen Nowicki commented: "A number of mega-projects in Egypt and Russia ensured that export business did not contract further. At the same time, the number of major orders between EUR 125 and 500 million project value, typical for large industrial plant manufacturing and important in terms of capacity utilization, remained at a very low level."