Air and Gas Compressor Manufacturing

Over the five years leading up to 2020, the Air and Gas Compressor Manufacturing sector has dropped. In most industrial applications, compressors and associated items are critical components. The performance of the industry varies according to domestic industrial production capacity, private equipment investment, and demand from rising markets.

In 2015 and 2016, the business was hit by sharp drops in the price of major commodities, as well as worsening demand from the local and international energy industries. Oil prices, on the other hand, increased in 2017 and 2018, contributing to the industry’s development in both years. Oil prices have plummeted as a result of the COVID-19 (coronavirus) pandemic.

Prices have fallen as a consequence of increased oil production and low demand, which has had a negative impact on this business. Furthermore, throughout the last five years, the industry’s performance has been marked by fluctuating operating circumstances.

Because the coronavirus pandemic in 2020 reduced total output in the economy, which is a significant driver of sector success, industry income is predicted to drop 7.9% in 2020 alone. Over the five years to 2020, industry sales is predicted to drop by 3.8 percent on an annualized basis to $9.2 billion.

The Air and Gas Compressor Manufacturing business is predicted to expand over the next five years, owing to increased demand from major industrial and general manufacturing industries as the economy improves. Following the coronavirus epidemic, the economy is predicted to recover in 2021. As the industrial output index rises, a rebounding economy is predicted to boost industry development over the next five years, up to 2025.

Recovering crude oil and commodity prices are expected to boost demand in the upstream energy and mining industries in the near future, resulting in more sales of new centrifugal compressors and other big compression systems. Nonetheless, higher demand from general industrial industries, such as pharmaceutical manufacturing, is expected to enhance sales of vacuum pumps, reciprocating compressors, and other industrial equipment.

Furthermore, aftermarket sales of replacement parts and attachments, which are predicted to account for 10.9 percent of industry revenue in 2020, would likely stabilize revenue and profit in the sector. Over the five years to 2025, industry revenue is predicted to increase at an annualized pace of 2.8 percent to $10.6 billion.

Due to cyclical demand from important markets, the Air and Gas Compressor Manufacturing business has had a mixed performance throughout the five years leading up to 2020. Compressors are mechanical devices that raise the pressure of a gas, while pumps are a large category of gear used to pressurize or convey liquids or gases.

This sector includes the manufacture of aftermarket and replacement components, as well as different gas compression and vacuum systems, such as reciprocating and centrifugal, rotary screw, and other fully assembled rotating equipment. The manufacturing of compressors used in refrigerant systems, which is included in the Heating and Air-Conditioning Equipment Manufacturing business, is notable for being excluded from this sector.

Because compressors are used in almost all industrial and general manufacturing processes, demand for industry goods is directly proportional to total production activity. Compressors and vacuum pumps, for example, are used in a variety of industries, including petroleum extraction and power production, as well as semiconductor fabrication and air separation.

During the majority of the five-year period, improving economic circumstances raised the demand for these markets’ goods, resulting in increased demand for compressors and associated items. The COVID-19 (coronavirus) pandemic, on the other hand, has generated poor economic circumstances for the year 2020.

Due to much lower demand from the energy sector and poorer sales to other industrial and process industries, industry operators saw their operational circumstances quickly deteriorate near the conclusion of the year. Despite the fact that rising consumer spending raised the demand for compact compressor systems used in general-purpose and technical applications, these factors were insufficient to counterbalance lower demand from industrial sectors.

Overall, these variables, together with the coronavirus pandemic in 2020, are expected to cause industry revenue to drop by 3.8 percent annually to $9.2 billion in the five years leading up to 2020, according to the study.

COVID-19 PANDEMIC

In 2020, the coronavirus pandemic is predicted to have a negative impact on the economy and industries. In 2020, the pandemic will most likely be the main factor behind the results. Since the beginning of March 2020, about 40.0 million individuals have applied for jobless benefits. Because of the economic uncertainties, businesses are attempting to decrease expenses.

The industrial output index is anticipated to fall by 5.2 percent, while the national unemployment rate is predicted to rise by 179.8 percent, reducing output and demand in this sector dramatically. Manufacturers have been forced to operate at a lower capacity due to social distancing norms.

Customers in this business have also closed since they couldn’t thrive in a low-demand business. Overall industry demand is predicted to shrink considerably in 2020, as enterprises aim to be more thrifty during times of economic uncertainty, and demand from downstream sectors is projected to diminish.

DEMAND FROM THE DOWNSTREAM

Because the success of a broad variety of downstream sectors drives compressor demand, the industry’s performance has been uneven during the last five years. In general, the industrial production index (IPI), which gauges the output of domestic manufacturing, gas, power generation, and mining sectors, tends to follow changes in the IPI. During the last five years, the IPI has dropped by 0.1 percent on an annual basis.

This reduction was aided by falling global commodity prices and lower mining output. In keeping with these trends, the industry’s sales fell 9.6% in 2015 and then further 13.5 percent in 2016. Revenue, on the other hand, increased by 3.9 percent in 2017 as a result of increased demand from major cyclical markets.

High oil prices and expanding worldwide demand for petroleum products drove robust demand from the oil and gas industry through the middle of the era, supporting both local and international investments in upstream petroleum infrastructure. During this time, rising short-term demand for high-capacity axial split centrifugal compressors and other value-added rotating equipment was driven by fast-expanding investments in unconventional oil extraction methods.

Because heavy oil extraction is more difficult than ordinary crude oil extraction, industry players have spent much in the research and development of innovative compression systems that can withstand very corrosive and abrasive conditions. Despite this, early in the decade, dropping crude oil prices made such capital expenditures in unconventional oil production less lucrative, stifling demand for compression systems in this industry.

Late in the time, owing to the coronavirus epidemic, oil prices plummeted, causing demand to fall. Drilling activity has also decreased during the same time period, resulting in a backlog of orders for centrifugal compressors and other big compression equipment, putting downward pressure on industry income.

The sector recovered from large reductions in 2015 and 2016 thanks to an uptick in crude oil prices in 2017. Oil price volatility throughout this time period, on the other hand, hasn’t benefited this business. The fall in crude oil prices and a drop in downstream demand for industrial goods, notably owing to the coronavirus pandemic, are predicted to reduce income by 7.9% in 2020 alone.

INDUSTRY AND TRADE STRUCTURE

While domestic sales account for the majority of revenue in the Air and Gas Compressor Manufacturing market, exports continue to be a crucial driver of industry success. Exports are expected to fall at a 6.2 percent yearly pace to $4.2 billion in the five years leading up to 2020, which is bad news for sector operators.

Exports’ proportion of industry income fell from 51.1 percent in 2015 to an expected 45.1 percent in 2020 over this time period. Prior to the coronavirus pandemic in 2020, export volume has decreased dramatically owing to an appreciating US currency, which has destroyed demand from non-US oil extraction and mining clients, which is the major market for exported compressors.

Imports are predicted to rise by 2.7 percent on an annualized basis to $6.7 billion in the same time period, accounting for 56.6 percent of domestic demand in 2020.

As a result of the hard operating environment, numerous bigger corporations have focused on purchasing smaller rivals, while others have concentrated on combining operations or halting output at failing plants. Furthermore, many smaller businesses have been compelled to combine with bigger rivals or abandon the market entirely.

In the last five years, notable acquisitions include Atlas Copco’s acquisition of Edwards in 2014 and Siemens Energy’s purchase of the Dresser-Rand Group in mid-2015. Ingersoll-Rand and Gardner Denver merged in 2020, which was a significant and recent merger. As a result, during the five years leading up to 2020, industry participation is predicted to drop by 1.6 percent annually to 249 enterprises.

During the same time period, employment is expected to drop by 4.3 percent to 20,298 people, as current businesses engage in new recruiting methods to fulfill increased demand in the first half of the five-year timeframe. Finally, the average industry profit margin has decreased from 5.4 percent of sales in 2015 to an expected 4.6 percent of sales in 2020. The coronavirus pandemic, which has created poor economic circumstances, is to blame for the significant drop in 2020.

As demand from major industrial industries recovers and operators continue to develop innovative compression solutions for general applications, the Air and Gas Compressor Manufacturing sector is predicted to rise over the next five years, through 2025. Following the COVID-19 (coronavirus) pandemic, the economy is predicted to recover, increasing total demand for the sector and creating good economic circumstances.

Furthermore, the industrial production index is predicted to rise, which is directly tied to the industry’s performance. Given the vast range of uses for air and gas compressors, the expected broad expansion and recovery in the US economy is expected to contribute to increased domestic demand for industrial goods during the next five years.

Nonetheless, the industry’s success is expected to be hampered in the near future by persistent uncertainty in the local and international oil and gas markets. Oil and gas prices, on the other hand, are likely to recover in the early stages of the forecast period after the coronavirus pandemic. Furthermore, ongoing global industrial expansion is expected to boost demand for industrial goods outside of the United States.

Exports are likely to rise during the next five years as the trade-weighted index falls and the dollar falls in value. Nonetheless, local and international demand for industrial goods is predicted to increase in tandem with domestic and worldwide economic development, as well as eventual recoveries in processing sector demand.

As a consequence, revenue for the sector is expected to grow at a 2.8 percent annual pace to $10.6 billion by 2025. The industry profit margin is expected to improve as the number of industry operators grows and demand improves, allowing enterprises to operate with better profit margins.

DOMESTIC SALES ARE REBOUNDING

Demand for air and gas compressors, industrial spraying equipment, vacuum pumps, and associated aftermarket components will be driven by a variety of domestic sectors during the next five years, up to 2025. The industry’s output is predicted to rise as the economy improves, but oil and gas prices are predicted to remain stable. Over the next five years, the industrial production index, which measures the output of domestic industrial sectors, is expected to rise by an annualized 1.2 percent, benefiting industry revenue.

During this time period, the value of utilities construction is expected to rise as population growth and improved tax income drive more investment in infrastructure projects. Given the indispensability of air and gas compressors in waterworks, power generating, and gas transmission applications, this will continue to be a significant market for air and gas compressor makers.

Finally, increased demand for industrial goods is expected to be boosted by expansion in the service sector and residential and nonresidential building activities. To better meet the increased demand, the number of industry establishments is predicted to climb at an annualized rate of 0.6 percent to 295 facilities during the five years to 2025 as industry sales to these downstream markets expand. Meanwhile, employment in the sector is expected to increase by 1.6 percent annually to 21,987 people during the same time period.

DEMAND IN THE OIL AND GAS SECTOR IS REBOUNDING

Almost all of the sector’s downstream sectors are expected to increase gradually in demand for industrial goods. Due to a recovering economy, demand for oil and gas is expected to increase substantially during the next five years, up to 2025.

The fast growth of hydraulic fracturing activity and large-scale development of shale oil and gas wells resulted in a major surge in demand for machinery and equipment, including air and gas compressors, from this market during the first half of the preceding period. Following a drop in oil prices in 2020, a comeback is projected. This will only raise demand in the oil and gas sector, which will in turn raise demand in the whole business.

TRADING CONDITIONS THAT ARE FAVORABLE

Over the five years to 2025, exports, which have historically been a significant driver of the Air and Gas Compressor Manufacturing industry’s success, are expected to expand at an annualized pace of 3.7 percent to $5.0 billion. As a consequence, by 2025, exports are predicted to account for 47.2 percent of total income. After the coronavirus epidemic has been contained, the global economy is anticipated to recover in 2021.

After being interrupted in 2020 as a result of social distancing procedures and fears of the coronavirus spreading, global supply lines will begin to re-establish themselves. Exports of manufactured goods to emerging and developing nations are likely to rise, as the dollar weakens against the currencies of the US’ key trade partners, making US goods more appealing since they are cheaper.

This is expected to promote industrial export growth while simultaneously lowering imports. Over the five years to 2025, imports are expected to decline at an annualized rate of 1.4 percent to $6.3 billion, creating a potential income opportunity for sector operators. Another important aspect influencing predicted revenue growth in the business is a reduction in foreign product rivalry.

Air and gas compressors, as well as components for air and gas compressors and industrial spraying equipment, are manufactured by the Air and Gas Compressor Manufacturing business. The industry of air and gas compressor manufacturing has reached the end of its life cycle. In the ten years leading up to 2025, industrial value added (IVA), a measure of an industry’s contribution to the broader economy, is expected to shrink by 0.8 percent on an annualized basis.

In comparison, the US economy is expected to expand at a 1.5 percent annualized pace for the same time period. While IVA growth is expected to be lower than GDP during the next ten years, this is mostly due to cyclical demand from the industry’s core markets, such as process industries (such as oil and gas extraction and mining) and industrial equipment production.

Oil and gas pricing, as well as total industrial output, are critical to the industry’s success. In 2015 and 2016, the industry’s income was harmed by lower energy costs. Because of the decrease in oil prices, the coronavirus pandemic is predicted to affect industrial performance in 2020.

Industry revenue is predicted to rise under good economic circumstances as the economy recovers in 2021 and industrial output grows. The sector is predicted to grow steadily in the aftermath of the epidemic. Over the next five years, the industry is predicted to increase by 2.8 percent on an annualized basis, compared to a 3.8 percent decline in the previous five years.