Update on Oxford Economics Global Pump Market

Report

Jeremy Leonard

Director of Global Industry Services

jleonard@oxfordeconomics.com

Europump Annual Meeting – Naples, May 2019

Summary of 2019 report improvements

Global pump market data working group

• Includes members from Europump, Hydraulic Institute and Oxford

Economics with a mandate to improving the understanding and validity of

the market data in the report, as well as discussion of other

improvements.

• Three teleconferences (July, October and December), led to the following

improvement plan:

Data

• Use more granular trade data to refine market definitions

• Estimate the “addressable” market in China as opposed to the total market

• Construct end-use sector weights to enable end-use market forecasts by

pump type

Presentational

• Develop more user-friendly data analysis tool

• Provide forecasts in € for European countries in PDF report

• Include Netherlands sections in PDF report

3

Data improvements – Refining market definitions

• Detailed 10-digit trade data

allowed removal of certain

classes of hydraulic pumps

from HS codes 841350 and

841360 (mainly affecting

European countries).

• In most non-European

countries, such 10-digit data

isn’t available, so historic data

in many countries has not

changed (and hence may be

overstated somewhat)

• Detailed trade data provided

by the Turkish association led

to significant changes in

market size there.

4

Data improvements – China market

• Our estimate of the “total”

Chinese market in the 2018 report

agreed with available published

Chinese data, but was much

larger than received industry view.

• We have concluded there is a

large “grey market” of small- and

medium-sized domestic

manufacturers that are not

detectable by the bottom-up

methodology used by EIF.

• We have removed this “grey

market” from our estimate of the

Chinese market in the 2019 report

by estimating the share of total

production accounted for by

small- and medium-sized

manufacturers.

5

Data improvements – End-use market forecasts

• The 2019 report provides

forecasts for pump demand by

end use market AND pump type.

• Initial information was drawn from

EIF as a starting point for

estimating required weights for

pump type-end use market pairs.

• These were then compared to

other data sources (including a

survey undertaken by OE, desk

research company financial

reports, association websites and

other publicly available market

research) and adjusted on that

basis.

6

Global industrial outlook and

implications for pump markets

Global industry overview

⚫ The global industrial economy is in a soft patch,

but recent declines in production are not an omen

for the future.

⚫ Global PMI is off sharply from buoyant 2017 levels, but appears

to be levelling off at levels consistent with moderate expansion.

⚫ Global trade growth has also slowed sharply, though part of this

is due to a collapse in Turkey and Argentina. Tariffs have come

into force, and these are weighing on Chinese trade, with feed-

through effects to other emerging Asian economies. Further US

tariffs would add headwinds to trade growth.

⚫ European activity is the main contributor to end-of-year global

industrial weakness, but 2019Q1 data so far indicate a return to

modest expansion. But uncertainty is having a disproportionately

large effect on capex spending.

⚫ Tailwinds to US industrial activity from business tax cuts and

rising oil prices are fading, but solid domestic demand means

that US industry will continue to lead the G7 economies.

23

9

Capex demand wobbly despite bottlenecks

Oil and gas capex needs are moderating

10

Oxford Economics global industry outlook

2018 % share 2018 2019 2020 2021 2022 2023United States 15.2 4.0 2.1 1.9 1.9 1.9 1.9

Eurozone 13.8 0.9 0.3 1.8 1.5 1.3 1.1

UK 1.7 0.8 1.2 0.8 1.2 1.3 1.1

Eastern Europe 2.1 4.8 3.3 3.6 2.8 2.8 2.6

Japan 7.8 1.0 -0.4 0.0 1.1 0.9 0.7

China 24.8 5.8 5.3 4.6 4.3 4.2 4.1

India 3.2 5.2 2.4 6.7 6.2 6.2 6.2

Russia 2.2 2.8 1.7 1.5 1.5 1.3 1.2

Brazil 2.1 0.9 0.9 2.1 2.3 2.6 2.6

World 100.0 3.1 1.9 2.5 2.5 2.5 2.4

(Annual percentage changes unless specified)

World: Industrial production forecasts

Pump market growth to cool substantially this year

• Global pump consumption is estimated to have grown by 1.7% in 2018 to stand at US$47.6bn, substantially undershooting our growth expectation in last year’s report.

• Growth was uneven, with Europe and Middle East lagging and APAC/North America leading.

• Global pump demand is likely to be essentially flat this year. This is due to weaker global growth this year, sharp contractions in some emerging markets and a pullback in consumption following strong investments in the recent past.

• The actual outturn for 2017 world pump market growth was 5.3%, close to our “forecast” of 5.9% in last year’s report – illustrating the robustness of our modelling framework.

North American oil and gas weakness concentrated in

Canada and Mexico, and rotary market hit hard

13

Most of Europe to see growth this year

14

Global pump market outlook

15

A look ahead

Where we go from here

• Current 3-year contracts with Europump and HI are coming to an end

after this report, so the first order of business is to reach a decision on

whether or not to renew them.

• On the assumption of a decision to renew, we would proceed with fixing

dates for the working group meetings to discuss, organise and implement

improvements to the 2020 report.

• We would welcome additional input in terms of information and data from

national associations. VDMA, HI and Pomsad have been very supportive

in this regard, and we think that more contribution from other European

associations would greatly improve the quality and usefulness of the

report.

17

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