China is a fast growing market for pumps

China is a fast growing market for pumps. The coal-fired power sector is growing faster than many other industry segments now and represents a unique opportunity. Here is an excerpt from our Utility Fax Alert for last week. This in turn utilizes data from our Pumps: World Markets.

China to Expand Coal-fired Capacity

The State Grid Corp. of China has estimated that national electricity demand will reach 1,784 billion-kilowatt hours this year, up 8.9 percent. Meanwhile, newly installed generation capacity is expected to grow by only 4.3 percent. Power expert Zhu Chengzhang blames the 10th five-year Plan (2001-05) for the slow growth. The plan underestimated the sharp rise in demand because of a low national electricity elastic coefficient (the growth of electricity supply versus GDP growth) in 1997 and 1998 when the plan was drafted. According to the plan, electricity demand should grow 4.8 percent annually to 1,730 billion-kilowatt hours in 2005, while the generation capacity should rise 3 percent every year to reach 370 million kilowatts. Last year, the two figures already stood at 1,450 billion-kilowatt hours and 356 million kilowatts, respectively.

Sharp demand hikes, however, eventually forced the central government to urgently adjust construction plans for the 2003-05 period, so that an annual 30 million kilowatts will be added to a total of 110 million kilowatts of new capacity by 2005. The construction of 30 new power stations, with a combined generation capacity of 22.48 million kilowatts, has been approved this year. But the electricity shortage is expected to continue for years, as large thermal power plants normally take four years to construct, while hydroelectric power plants can take seven to eight years to build.

McIlvaine forecasts coal-fired power installations in each country. Here are the forecasts for China for the 1997 to 2010 period:

Coal-Fired Power - CHINA (MW)
Year	Total MW in Operation
1997	176,000
1998	190,000
1999	204,000
2000	220,000
2001	225,000
2002	250,000
2003	263,000
2004	275,000
2005	283,000
2006	295,000
2007	308,000
2008	321,000
2009	334,000
2010	350,000

During the tenth "Five-Year-Plan" period there will be a focus on the installation of desulfurization facilities on the new power generating units and existing power generating units in key areas. To this end, the State Power Corporation is to add desulfurization facilities to a total of 37 coal-fired power plants in a bid to raise the desulfurization capacity in the power sector up to 1.05Mt/a. However, to meet the targets of 2.1 million tons reduction from new plants and 1.43 million tons from existing sources, it will take 45,000 MW of FGD systems for the new plants and 32,000 MW of retrofits.

Implications of Chinese Activity on the World Market

With such a large program in China, there will be pressure put on suppliers of certain components to serve this market while still meeting the big demands in the U.S. and the growing demand in Europe. One resource is process engineering. A number of U.S. companies are involved with Chinese partners in pursuing the FGD Market. Time, which is spent on Chinese projects, is time not spent on U.S. projects. On the other hand, if the peaks and valleys can be smoothed through worldwide demand, these companies can staff up to handle the additional load. In fact, the most likely scenario is an expansion of capability. Companies such as MHI, Hitachi, IHI, Ebara, and others will be building resources for the Chinese market from their Japanese base. But this will also make them better able to serve the U.S. market.

Valves, pumps, mist eliminators, nozzles, and certain other products are likely to be furnished by offshore companies and not bought locally in the beginning. However, longer term it is likely that these components will be manufactured in China. The reason is that this will be the country with the biggest market. So the most likely scenario for the long term is that Chinese products will find use in U.S. FGD systems as well as the opposite. Furthermore, many U.S. companies will supply components globally from China. BHA is an example of one U.S. component supplier who is already well entrenched in China.

Both the Ebara electron beam system and the IHI horizontal duct scrubber are now being utilized in the Chinese market. Success in this market could lead to use in the U.S. The horizontal scrubber has potential applicability to retrofits where vertical space is limited. In general, adding $1 billion/yr. in additional equipment revenues to the market is going to encourage additional investment in new technology.

The creation of a sudden 40,000 MW FGD market in Germany caused the industry to globalize. Babcock Power, Hamon, and Lurgi all have identity one way or another with the mid 1980s spurt in the German market. Now with a Chinese market, which is going to be eight times larger, there is certain to be a major impact on the global market dynamics.

Components such as pumps which are large and subject to abrasion, require the combination skills of the global pump companies and local manufacturing and sales. Shijiazhuang Pump Industry Group Co., Ltd. (formerly Shijiazhuang Pump Works established in 1949) is a leading centrifugal pump manufacturer in China. It manufactures all series and types of Slurry Pump, Submersible Pump, Non-Clog Sewage Pump, Sewage Submersible Pump, Chemical & Petroleum Pump and various kinds of Clear Water Pump. SPGC has 210,000 square meters of plant space and 2700 employees. The company supplies Warman slurry pumps for FGD service. The company has facilities for machining and casting of gray cast iron, nodular cast iron, nickel cast iron, steel casting, stainless steel casting, high chromium casting, Ni-hard, Cr-Mo alloy as well as natural rubber and elastomer.