Increasing Hose + Coupling Profit in the Power Industry

The power industry’s market for hoses and couplings has been impacted by both COVID-19 and the ongoing wildfires in the U.S.A. Investment in hoses and couplings by power industry purchasers will be down in 2020 due to postponement of both capital and repair projects. This decrease in investments will be compounded by hose and coupling industry personnel’s inability to meet in person or attend industrial exhibitions.

By Robert McIlvaine, President & Founder, The McIlvaine Company

Effects of COVID-19 The impact of the pandemic is affecting various segments differently. If looking at countries as a segment, they have each experienced unique difficulties which affect them in various ways. The impact on India and the U.S. for example, will be negative while China is moving forward as planned.

When considering the effect of the pandemic on fuel types, nuclear projects are not impacted whereas renewable projects have been delayed in some countries. Similarly, the following sectors are experiencing various impacts as well

  • New companies are the most impacted. Very few hoses and couplings are being sold to new power companies who have never purchased the applications before.
  • The market for hoses and couplings for new power plants owned by existing operators is relatively small, but has been impacted.
  • The market for replacement hose and coupling is larger and less impacted.
  • The market for repairs and service is large and the least impacted.

In general, there are high performance and general performance hoses and couplings. With high performance hoses and couplings the decision can be made to delay replacement instead of repairing them. When general performance hoses and couplings fail they are normally replaced rather than repaired. There has therefore been a greater impact on high performance hose and coupling markets.

Effects of Wildfires

The wildfires in Australia, California, and elsewhere are being blamed on climate change and specifically fossil fired power generation. This ongoing danger has therefore led to the delay of gas turbine and coal fired plant projects.

Hose and coupling companies are therefore facing several years where revenues from the power industry will not be increasing. However, profits can be increased. Hose and coupling companies that adapt with new ways to target prospects, and communicate with them, will have an advantage which can lead to greater markets shares, margins, and profits.

90% of the power industry hoses and couplings are purchased by less than 1,000 companies. Hose and coupling suppliers can easily identify the prospects and even the processes used in each plant. Figure 1 shows an example of coal fired plant operators with planned additions between 6,000 – 7,000 MW.

With knowledge of the existing capacity at any point in time the expenditures for new hoses and couplings, replacements and repairs can be made. Figure 2 highlights some tabulations for Eastern European countries.

Using Market Research

Market research has been used as a peripheral tool by hose and coupling suppliers for many years. Now it can be used as the foundation of a program to successfully pursue the Most Profitable Market (MPM). There is already enough information available through media, associations, conferences, and internet resources, to determine the best prospects. Figure 3 highlights the difference between the present approaches to navigating a market, versus the MPM approach; it is an approach based on customer knowledge and not sales leads.

Ending Note

The Coronavirus and climate change present challenges to hose and coupling companies. Those that best meet these challenges can increase market shares, gross margins, and profits.

Reference

  1. Hose and Coupling: World Markets published by the McIlvaine Company

About the author:

Bob McIlvaine founded the McIlvaine Company in 1974 and oversees the work of 30 analysts and researchers. He has a BA degree from Princeton University.