Frost & Sullivan Warns of Slower Revenue Growth in South African Welding Solutions Market

Increased Investments in Mining, Energy and Public Sector to Sustain Demand for Welding Solutions

CAPE TOWN, South Africa, March 5, 2012 /PRNewswire-Asia/ -- Between 2007 and 2010, the South African welding solutions market witnessed strong and steady growth. This was driven by an increase in capital expenditure on large, infrastructure projects within the power generation and petrochemical sectors. Demand was also raised by the 2010 FIFA soccer world cup constructions, as well as an increase in end-user awareness about the benefits of advanced machines and technologies providing higher quality welds. Despite these positives, slower revenue growth is forecast for the South African welding solutions market between 2010 and 2017.

New analysis from Frost & Sullivan (http://www.industrialautomation.frost.com), Strategic Analysis of the South African Welding Solutions Market,finds that the market was worth $333.9 million in 2010 and estimates this to reach $410.9 million in 2017.

"Revenue growth is expected to slow, when compared to the 2007 to 2010 period, as a result of the completion of major greenfield commercial construction activity within South Africa," notes Frost & Sullivan's Industrial Automation and Electronics Senior Industry Analyst James Fungai Maposa. "Despite this setback, the demand for welding solutions will be sustained by an anticipated rise in manufacturing sector output, continued power plant construction activities and a rise in demand for repair and maintenance jobs within the process industries. This will, in turn, improve plant operating efficiency."

The demand for welding solutions will be largely driven by projects implemented in the power generation and mining and metals industries. This demand will also be promoted by Eskom's commitment to invest over $100.00 billion on expanding and rehabilitating the country's existing power generation and distribution infrastructure.

"Initiatives implemented by the government, such as the New Growth Path Initiative and the Industrial Policy Action Plan, are aimed at expanding and diversifying South Africa's manufacturing sector," adds Maposa. "Such initiatives are also expected to contribute to a sizeable increase in sector demand for welding solutions during the forecast period."

Funding uncertainty and limitations are major constraints to market growth during the forecast period. A consequence of the global financial crisis, and the subsequent economic recession, has been a more rigorous evaluation process by leading local and international project financiers.

"This has resulted in a few local mining and energy companies not securing the required funding to fully implement their planned expansion activities," explains Maposa. "Similar to the private sector, public sector investment has also declined with project postponements, cancellations and delays continuing to persist."

These funding limitations and restrictions are expected to have a significant impact on demand potential of the South African welding solutions market. Failure to obtain the required funding for planned infrastructure projects is set to result in a downward trend in demand for locally supplied welding solutions.

Despite this, record-high global prices of locally mined commodities have restored investor confidence. This is likely to result in some of the cancelled or postponed expansion projects, in 2009 and 2010, being implemented during the forecast period.

"Although much lower than the pre-global financial crisis era, investment within the mining, energy and public sector rose considerably in 2011," concludes Maposa. "Most of this investment was channeled towards expanding existing production infrastructure and also improving process efficiencies. Such investments will sustain the demand for welding solutions during the short, medium and long term."

If you are interested in more information on this study, please send an e-mail with your contact details to Samantha James, Corporate Communications, at samantha.james@frost.com.

Strategic Analysis of the South African Welding Solutions Market is part of the Industrial Automation & Process Control Growth Partnership Service programme, which also includes research in the following markets:  South African Automation and Control Solutions (ACS) Market, South African Supervisory Control and Data Acquisition (SCADA) Market and South African Human Machine Interfaces (HMI) Market. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.

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Strategic Analysis of the South African Welding Solutions Market
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Contact:
Samantha James
Corporate Communications – Africa
P: +27 21 680 3574
F: +27 21 680 3296
E: samantha.james@frost.com

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