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Mountain Stream Group: Portfolio Sample - Valve Industry Market Research


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Select pages from a 62-page, follow up market research study Mountain Stream Group conducted to determine a.) the size of the control valve market as it relates to positioning and proportional control, b.) who the players are, and c.) what the opportunities and challenges a new company might find.

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Mountain Stream Group: Portfolio Sample - Valve Industry Market Research

  1. 1. TABLE OF CONTENTS Subject Page Purpose......................................4 Methodology ..............................4 HR Textron Purchase ...................5 Control Valve Industry ................6 SunStream Scientific Identity .....23© 2009. All right reserved. Mountain Stream Group, Inc.
  2. 2. PURPOSE METHODOLOGYDuring our teleconference of January To obtain the necessary information to2nd, there were 4 basic questions or achieve the goal of this study, Mountainrequests made by you and your partner. Stream Group, Inc. employed a multi- stage approach, which included:1. What is HR Textron’s involvement in the market and where do they see • contacting various trade groups and the servopneumatic market going? organizations,2. What is the makeup of the control • searching the Internet to find valve market and what type of pertinent data and information specifications are they looking for? related to the study’s goals, Size, actuation type, etc. • having discussions with key industry contacts.3. Develop a set of specifications to which SunStream should build The following are the findings. product to.4. Find testing facilities that can test the valve, cylinder and/or valve- cylinder combination to establish and/or confirm what the product can do.5. Additionally, SunStream had asked if there is any data on the size of the rod end alignment coupler market. © 2009. All right reserved. Mountain Stream Group, Inc.
  3. 3. SALE OF HR TEXTRON Effective April 3, 2009, HR Textron, Inc. the sale and ownership change, HR has changed ownership from Textron Textron was one of seven operating to Woodward Governor Corporation. businesses in the Textron Systems unit. The company’s name is now Wood- According to the sale announcement ward HRT, Inc. The focus of the new HR Textron’s 2008 total sales were company is the aerospace & aviation approximately $260 million or 12.3% industry and will be part of of the unit’s total. Woodward’s Airframe Group. HR Textron has been in the industrial However, according to my contact at servo valve market for nearly 25 years. HRT, they are currently working Today, HR Textron states of that through an integration of the servopneumatic valves account for Woodward HRT business with other approximately 25% of their industrial parts of Woodward and there is no servo valve segment business, and the decision on how the businesses will be servopneumatic segment is seeing reorganized. In the meantime, they modest growth. are continuing to operate our company as before. While the focus Just as others have said and we will be the aerospace & aviation indus- documented in the report, they believe try, they plan to continue production of the success and growth of this technol- servohydraulic and servopneumatic ogy lies in communication, promotion valves for their industrial customers. and education. Textron Corporation’s annual report states defense, aerospace and general aviation markets provided 15% of Textron Systems revenues of $2.216 million in 2008. Additionally, prior to© 2009. All right reserved. Mountain Stream Group, Inc. 05
  4. 4. Key control valve industry facts.1. There is no single trade organization that covers this industry worldwide.2. There are at least 7 market research companies who study this industry. Each has a different definition of the industrial control valve industry and particu- larly the automated control valve segment.3. The industrial control valve industry is fairly large with anticipated worldwide shipments ranging between $6 billion and $77 billion.4. The US control valve market is estimated to be $3.8 billion in 2009 with $1.2 billion in automated valves. The automated valve segment is the fastest growing segment due to process and plant automation.5. The US market accounts for between 25% and 35% of the total worldwide volume.6. In 2010, China is expected to overtake the US as the world’s largest control valve market with over $5 billion in shipments.7. Seventy-five percent of control valves are on/off applications.8. Twenty percent of automated control valves use linear actuation.9. Growth of the control valve market is being stunted by the global economic recession.10. There is a 6 to 9 month lag time for the industry for when the industry will turn around. It’s anticipated growth will begin once again in the Q2 of 2010.11. The industry consists of a lot of small and fragmented companies.12. The top 3 control valve manufacturers are: Tyco, Emerson and Flowserve.13. The VMA reports in 2009 the top industries by usage of control valves are Water & Wastewater (18%), Chemical (16%), Petroleum Production (12%), Petroleum Refining (12%) and Power Generation (11%).
  5. 5. CONTROL VALVES Market size depends on the source and market definition. Editor’s Note: All sales, revenue and shipment VALVE TYPES figures stated in the report are US dollars. As reported in our December 2008 Ball valve, for on/off control without pressure drop. study, The Freedonia Group estimates Butterfly valve, for flow regulation in that the global industrial control valve large pipe diameters. market would exceed $77.6 billion in Choke valve, a valve that lifts up and 2011 for standard multi-turn, conven- down a solid cylinder which is placed tional quarter-turn, automatic control, around or inside another cylinder which has holes or slots. Used for high pressure automatic regulator, and automatic drops found in oil and gas wellheads. actuators. This study states Asia Pacific Diaphragm valve, some are sanitary is the largest segment at 34% followed predominantly used in the pharmaceutical by Western Europe at 27% and North and foodstuff industry. America at 25%. Expansion valve, used pressure reduc- tion of fluid in general. Type of restrictor valve to reduce refrigerant pressure and While North America is the 3rd largest temperature in short period of time in market segment, the United States is adiabatic expansion. one of the largest valve producers. Gate valve, mainly for on/off control, Together the US, Germany, Italy and with low pressure drop. Globe valve, good for regulating flow. Japan produced nearly half of the Knife valve, for slurries or powders global valve shipments in 2006 on/off control. according to Freedonia. China is Piston valve, for regulating fluids that quickly becoming a key valve manu- carry solids in suspension. facturer with production of $5.6 billion Pinch valve, for slurry flow regulation. Plug valve, slim valve for on/off control in 2006. Other notable valve producers but with some pressure drop. are France, Russia, Taiwan and the United Kingdom — each with more© 2009. All right reserved. Mountain Stream Group, Inc. 07
  6. 6. than $1.6 billion in annual shipments.That’s just one of many studies on theindustrial valve market. Other studyproviders include ARC Advisory Group,European Industry Forecasting, Frost &Sullivan, Global Industry Analysts,McIlvaine, and Supplier Relations US.Each company has a different definitionof what products make up the industrialvalve market, and a different outlook ofwhat the worldwide industrial valve andactuator market size is, or will be in thefuture. The following are highlightsfrom these various studies. The statedestimates are all based on studies donebefore the recession hit. Automated ball valve with rack & pinion actuation. European Industry Forecasting estimates the world industrial valve & actuator market at about $29 billion with $8.5 billion in Europe, $3.1 billion in Africa/Middle East, $9 billion in Asia and $8.3 billion in America. This estimate focuses on 7 valve types: gate/ globe/check, quarter-turn, diaphragm/ pinch, safety/relief, pressure reducing and control valves, and on/off actuators. The Frost & Sullivan 2008 World Indus- trial Valves and Actuators Markets report studied quarter-turn, multi-turn, self-acting and control valves, and actuators (electric, pneumatic and hydraulic). They state the global market was $26.69 billion in 2007 and estimates the market to be $49.18 billion in 2014 — a 9.1% growth rate. Automated choke valves are used in the gas/oil production. © 2009. All right reserved. Mountain Stream Group, Inc.
  7. 7. The Industrial Valves World Markets study by McIlvaine states the global market for automatic & regulating control, ball, butterfly, gate & globe, industrial plug, and other valves was $47.2 billion in 2008, and projects the market to be $56.3 billion in 2012. ARC Advisory Group has the narrowest definition for control valves — regulat- ing the rate of fluid flow as the position of the valve plug or disk is changed by an actuator. ARC’s 2008 Control Valve Worldwide Outlook study says this narrowly defined market reached $4.8 billion and projects it will grow to $6.4 in 2012. Automated knife gate valves are used to control slurries in industries like pulp and paper. They found the North American market has the largest share at 35% followed by Asia Pacific at nearly 28% and Europe at 16.1%. In their 2008 Industrial Valves: A Global Strategic Business Report, Global Industry Analysts (GIA) forecasts the global valve market will reach $72 billion by 2010. The product segments they analyzed for the report include: globe and check valves, ball valves, control valves, butterfly valves, water- works valves, solenoid valves, nuclear valves, and other valves. GIA states Europe is the largest industrial valves Automated globe valves are used to control the flow of market at 38%. liquids and gases .© 2009. All right reserved. Mountain Stream Group, Inc. 09
  8. 8. Reitz International — a Chinese controlvalve manufacturer — states in a June2009 press release that the worldmarket for automatic control valves was$10 billion in 2002 and it’s estimatedto grow to $23 billion in 2008. Theyalso stated the European market wasexpected to be $4.1 billion in 2008. AChinese valve blog has a post — whichsites the same information as Reitz —stating the control valve market shareis broken down as follows: Middle East,Europe, Africa 37.3%; North America36.8%; Japan 13.5%; Asia other10.7%; Latin America 1.7%.Note: The information sited by both sourcesvaguely references a study by ARC Advisory Slide gate valves are designed to shut off product flow from outlets of storage bins, silos, conveyors, and other discharge points handling dry bulk materials. Group, however, the data doesn’t mesh with that of the ARC study and in a conversation with an ARC representative they had no idea where the data came from as well. Suppliers Relations US states in a 2008 report the industrial valve market for the United States was $12.4 billion. In a Q2 2009 update, they revised this revenue figure to $11.6 billion with an estimated gross profit of 37.14%. Valve Manufacturers Association of America (VMA) data states their mem- bers had shipments of $4 billion in 2008 to Canada and the United States.Automated diaphragm valves provide throttling and on/off They further stated that their membersservice in applications ranging from water treatment to produced 80% of the total shipments ofchemical abrasion processes. © 2009. All right reserved. Mountain Stream Group, Inc.
  9. 9. PRODUCT TESTING Failure and functionality characteristics testing to standards. As we stated in the original report there they were highly capable of testing are several new standards for product pneumatic components and systems, failure and functionality characteristics the accuracy and repeatability resolu- testing that will affect the design of the tion (0.001”) was out of their abilities SunStream Scientific products and the since they didn’t have the equipment to sales literature that goes with them. test to those resolutions. The only firm These standards include the following: with any knowledge of servopneumatics and who had the capability to test the • ISO 10041-1 and 10041-2 product was the fluid power research institute in Germany called IFAS - These standards describe how to Institute for Fluid Power Drives test, collect and present the and Controls. operational, control and flow char- acteristics of a servopneumatic In order for us to obtain a proposal (electro-pneumatic) 3-port or 5-port from them we had to put the following directional control valve. testing plan together. • ISO 19973-2:2007 Phase 1: Valve/Cylinder capabilities This standard describes how to test vs. manufacturer’s claims directional control valves for life- 4 sizes (1-1/4”, 2”, 3-1/4” & 4”) cycle reliability. a. Acceleration (claim is ± 3g) b. Velocity (claim is >80 in/sec) • ISO 19973-3:2007 c. Accuracy of position (claim is 0.020”), This standard describes how to test d. Repeatability (claim is 0.001” or less), cylinders with piston rods for life- e. Hysteresis (claim is <0.2%), cycle reliability. f. Response time (claim is <3 msec with no overshoot) We used these standards in our attempt g. Settling time to find a testing facility that could test (claim is @90 psi supply pressure and 65 lb load; the SunStream Scientific products. All of 0.0100”(40 msec); 0.0010” (140 msec); 0.0003” (240 the testing laboratories in the United msec)) States knew absolutely nothing about these standards. Additionally, while© 2009. All right reserved. Mountain Stream Group, Inc. 59
  10. 10. h. Phase shift (claim is 15O at 5 Hz) Phase 4: Valve/Cylinder Reliabilityi. Cycle time (claim is 9 inches of point-to-point Testing to ISO 19973 travel in <400 msec @ load=100lb, supply pres- sure=80 psi, 2” bore x 10” total stroke length) Put the valve/cylinder through the complete battery of testing per ISOPhase 2: Valve/Cylinder capabilities 19973. The manufacturer estimates the tested to ISO 10041-2, MTTF is 10 million cycles. 19973, and 10099 Phase 5: Servopneumatic valve testingAttempt to test the product to as many to ISO 10041 & 19973of the principals of the above standards Remove valve from the cylinder. Manu-a. Accuracy-is it possible to achieve facture a sub-base and test valve to the <0.020”? above standards and develop the allb. Sensitivity, the appropriate charts per ISO 10041.c. Linearity,d. Response time with no loade. Settling time with no loadf. Leakage rate at nullg. Coil resistanceh. Coil inductancei. Leakage rate across the cylinder pis- ton per ISO 19973 and 10099.j. Threshold at -3dB, 90O phase lag and full stroke (Is it possible for the cylinder to achieve 100Hz?)Phase 3: Valve/Cylinder capabilitiesa. Develop velocity and acceleration curves (no load) at various pressure settings starting at 2-3 bar with 2-3 bar increments up to 17 bar (if you can produce 17 bar).b. Determine the minimum pressure the cylinder will move at with and without load (testing for friction),c. At maximum frequency what happens to the valve/cylinder in its ability to achieve accuracy, repeata- bility, hysteresis, etc. © 2009. All right reserved. Mountain Stream Group, Inc.