Fans of our annual ranking of the Top 50 suppliers by automation and control revenue probably already know that automation supplier revenues missed a curve in fiscal 2015. Both global and North American revenues are down significantly from 2014.
Even now, persistently low oil prices combined with persistently high supply continue to drag down the process side of the business. Though some suppliers have seen favorable exchange rates, currency woes continue to plague the business overall. Power generation is the largest consumer of process automation worldwide, and the push away from coal-fired conventional central station generation to renewables like wind and solar had an adverse impact on the process business. Those suppliers involved in the nuclear business, however, experienced moderate growth.
Oil and gas is a significant portion of the automation market. Large, integrated oil companies worldwide continued to reduce capital spending in the upstream sector by double digits, and we don’t expect this sector to recover in 2016. According to ARC Advisory Group’s market assessment, we don’t expect a major turnaround in the oil and gas sector until mid-2017—barring any major geopolitical upheaval. The oil and gas bubble burst hit some of the state-owned oil and gas companies particularly hard.
Good downstream, hybrid news
The picture isn’t all bleak for process automation, however. Even in 2015, some oil and gas sectors performed well. The midstream sector, particularly gas processing and pipelines, showed some pockets of growth. Even with looming oversupply in the LNG sector, many projects are continuing.
The downstream sector of refining and petrochemical fared much better than the upstream sector. Increased investment in this area was well publicized through some very large projects, such as the Sadara petrochemicals venture between Dow and Saudi Aramco, as well as the Reliance Industries Jamnagar Refinery expansion project in India. Both of these megaprojects established new benchmarks for scope and complexity.
Some industries in the hybrid manufacturing space, which combine process and discrete automation functionality, actually experienced moderate growth in 2015. These include both food/beverages and water/wastewater. Other hybrid industries such as life sciences/pharmaceuticals and fine/specialty chemicals experienced pockets of growth.
The discrete side of the automation business also fared better in 2015. According to ARC’s most recent report on capital expenditures, automotive industry capex has pretty much increased steadily since 2010. After a quick rebound, that growth gradually slowed, but both growth and investment continue—despite a negative exchange rate for many auto manufacturers. The electronics industry suffered in 2014, but started to recover throughout 2015. Increased investment here pushed the automation markets.