Power cable market recovery to accelerate

Assailed by an overall downturn in demand and revenue growth, the European medium voltage (MV) underground cable market (10-36kV) is poised for a comeback.

Assailed by an overall downturn in demand and revenue growth, the European medium voltage (MV) underground cable market (10-36kV) is poised for a comeback.

Reinforcing the optimistic mood in the cable manufacturing industry, growth rates in the European low voltage (LV) power cables market (350V-1kV) have picked up pace.

Both markets are now on track for slow but steady revenue expansion, asserts Frost and Sullivan, the international market consultancy, in a series of studies commissioned by Eutilia, the leading pan-European marketplace for the utility sector.

"The European market for low voltage power cables (350V-1kV)", is the first of four specialist reports on various aspects of utility procurement.

Subdued demand for MV power cables has been largely attributed to the extensively installed network of power lines in Western Europe.

Mounting concerns over the environmental impact and the cost of overhead cable lines are, however, projected to underline a growing preference for underground power cables.

At the same time, new opportunities are emerging within EU accession states in Central and Eastern Europe.

Compliance with EU-mandated safety and quality standards are expected to compel most Eastern European countries to replace overhead power cables with underground ones.

End-user focus on improved safety and quality also stands to benefit MV cable producers.

"Innovations in safety and conductivity of cables will heighten the appeal of the market.

By offering higher quality products, the market can provide a better range of prices appealing to all buyers", recommends Frost and Sullivan Research Analyst, Shaun Dawson.

Buoyed by these trends, the MV underground cable market is set to emerge from its post-2000 slump.

Although the installation of new lines to the detriment of overhead cables is forecast to effect short-term growth, replacement cables are set to support long-term market development.

The Eutilia-commissioned research pegs revenues at Eur 337.04 million in 2002, projected to reach Eur 345.33 million in 2010.

Even as unit shipments and revenues make steady gains, falling prices, which had given buyers greater leverage, are expected to stabilise.

Presently, intensifying competition has tilted the market in favour of multinationals with smaller, national cable producing companies also in the fray.

Dawson notes: "Multinationals will continue to dominate the market and smaller local companies will continue to evolve in order to stay competitive".

A similar fissure has been evident in the LV power cables market.

Here, too, the increasing ascendancy of multinationals, especially that of Pirelli and Nexans, is expected to pressurise smaller companies.

Dominant multinationals have been able to offer lower prices, making it increasingly difficult for smaller companies to compete on the basis of price.

Low selling prices coupled with the high cost of manufacturing and the profusion of market participants has made it hard for any one company to significantly augment its revenue.

Not surprisingly, buyers have had the upper hand in this competitive setup.

Dawson comments: "This competitive polarisation has led smaller companies to adapt to the market evolution by either primarily cutting their prices further or, in the long term, merging with sister companies or even branching out into alternative products".

Despite recent declines, the market for LV power cables has not been as badly affected as that for the MV cables due to the rising use of underground and hidden cables.

The 600V-1kV segment comprises the larger of the two segments in the European LV power cable market both in terms of voltage and revenue with the 350-600V segment forming the smaller sector in the LV power cable range.

The market for LV power cables experienced marginal revenue declines from 2000 through 2002.

It is, however, expected to resume growth by the end of 2003 with this upbeat trend continuing in 2004 as the cable industry stabilises.

Revenues are estimated to expand from Eur 285.32 million in 2003 to Eur 292.99 million in 2010 with marginal increases in price forecast towards the end of the decade.

A surge in construction and urban development activity is expected to fuel demand for LV power cables.

The continued emphasis on quality and safety, combined with product development is also expected to drive market growth.

Advanced products that offer additional fire safety, enhanced conductivity and that are halogen-free are expected to provide more options to buyers and benefit the whole market.

Finally, as in the case of the MV underground cables market, EU expansion into the Central and Eastern European region is set to open exciting new opportunities for LV cable manufacturers.

Elaborates Dawson: "New member countries will have to take onboard the EU's legislation surrounding the manufacturing of cables.

This will, in the long term, push the replacement rate up.

Trade between the East and West will increase.

Also, much-needed European social funds will help redevelop urban communities and infrastructure as a whole".

Multinational manufacturers, active both in the MV and LV cables market, have already made forays into the expansion zone.

However, smaller companies operating in country-specific markets are also well positioned to exploit the growth potential of these markets.

These analyses form part of a series of ten specialised studies on the markets for goods and services procured in the utility sector, commissioned by Eutilia and executed by Frost and Sullivan.

"The findings provide comprehensive insight into the supply market and are targeted at buyers and procurement departments, aiding optimisation of their buying strategy.

The topics have been selected based on requirements from industry buying professionals", says Pieter Vaessen, Market Research Manager at Eutilia.

Back to top