Growth predicted in the power cables industry

A new study by Frost and Sullivan anticipates a strengthening of demand in the Independent Power Producers (IPPs) and contracting markets, fuelling growth in the overall power cables industry

The Western European power cables market is presently beset with difficulties.

Important utility markets across Europe have reduced their demand for both underground cable and overhead power lines as the market is still reverberating from the effects of privatisation.

Further complicating matters are falling prices, resulting in significant price cuts in some national markets, as well as intensifying pressure from environmental lobbies against further investment in (extra) high voltage overhead lines.

The general maturity of most European energy markets, limiting the number of long-term opportunities, is further exacerbating these problems.

Growth prospects in the power cables market are increasingly tied to replacement and upgrade sales.

Despite these difficulties, strong demand will continue for >1kV power cable with only specific sectors such as >36kV overhead power line expected to suffer from a decline in both new and replacement sales.

A new study by Frost and Sullivan, the international marketing consulting company, anticipates a strengthening of demand in the Independent Power Producers (IPPs) and contracting markets, fuelling growth in the overall power cables industry.

Furthermore, robust growth in the renewable and cogeneration sectors will revitalise power cable sales.

The 1-36kV below ground power cables sector accounts for the main thrust of revenues generated in the overall power cables market, accounted for 43 per cent of total sales in 2000.

Hot on the heels of the dominant Italian market follow Germany, the UK and Scandinavia, the study's review of national markets reveals.

The >36kV interconnector market is poised to enjoy strong growth in the near future.

Growing technical demands and new projects, such as sub-sea cable interconnection in the North Sea, will breathe new life into the market, amassing sales not far short of $1 billion in 2000.

Continuing interest in high-speed rail projects requiring base conductors will further stimulate sales.

Mounting environmental and health concerns across all areas of the Transmission and Distribution (T and D) market are also set to entice growth.

'As part of the shift away from extra high voltage (EHV) overhead power line in some countries and associated system reconfiguration, a number of new high voltage (HV) and EHV underground cable projects within and near urban areas are likely to emerge,' the study adds.

At lower voltages, interest in the fire hazards posed by cable enhances popularity of premium-priced protective sheathing.

Increasingly fierce competition in the power cable market forces manufacturers to innovate and provide additional services to end-users.

Production over-capacity and the possibility of new low-priced entrants vying to claim a larger share of the market are largely responsible for forcing prices down.

Multinationals active in the power cable market are prospering on the strength attained through recent high profile acquisitions.

Pirelli's activities count amongst the most influential in light of the company's acquisition of Siemens' power cable business and, more recently, a large part of BICC General's European operations.

Smaller manufacturers are being increasingly marginalised and consequently surviving only in specific segments, notably national markets where loyalty or technical differences mean these manufacturers can still compete effectively.

A number of changes to supply-side and end-user markets has emerged in recent years - predominantly the polarisation between large, multinational manufacturers of cable and power line and, often local, specialist smaller players.

Multinationals are increasingly able to dictate the direction of the market, in particular in terms of technical features and price whilst the smaller companies increasingly target niches.

End-users are growing in pre-eminence due to their buying power within the market.

The study concludes: 'In what is a mature sector, many are now hunting for better deals from cable and conductor manufacturers.

Price is being given a particularly high priority by many such end-users.' In some respect, this is a reflection of the already high technical and quality standards within the industry.

Providing additional impetus is the commercial orientation of numerous utilities freed from state control with many forming buyer partnerships to raise their profile in the market.

Frost and Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets, including the energy sector, for market trends, market measurements and strategies.

This ongoing research is utilised to complement a series of research publications to support industry participants with customised consulting needs.

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