Structural change of chemical manufacturer construction
This is basically good news for the construction industry of chemical manufacturing enterprises. However, the structural change of the industry has been going on for several years. With the continuous expansion of the project scale, it is necessary to accept greater risks. In addition, investors and plant operators are more willing to do business with global partners who take full responsibility from feasibility studies to commissioning, often including financing. Factory building companies in Europe, especially in Germany, are too small to play this role.
For years, German companies have bemoaned the growing competitive pressure. A recent study by VDMA, the German Federation of engineers, shows that competition in the world market will become more intense. Headquartered in China, Western Europe and the United States, EPC is regarded as a major competitor in the large-scale project market. Companies have felt the impact of lower oil prices as customers cancel or postpone capital expenditure projects, depending on the technology and specialization areas.
Restrictive financing conditions and unwillingness to provide alternative financing services are often the reasons why German companies fail to acquire EPC projects. A recent study by PwC, a consultancy, reveals the importance of this factor. The project financing demand of customers accounts for one fourth of the quotation demand.
Although capital expenditure in the chemical industry has increased, the trend towards large chemical manufacturers has reduced the number of medium-sized projects. Therefore, the German EPC is not only looking for differentiation methods, but also looking for new business models. For example, engineering companies want to attract customers by adding operational services to their portfolios. They are doing so in response to growing market demand. Bilfinger, an engineering and services firm, estimates that by 2020, more than 11000 chemical and pharmaceutical plants in Europe, North America and the Middle East will need to be modernized. The service business provides an opportunity to increase turnover, which is also a factor in attracting EPCs.
In addition, the presence of local service agencies provides an operational base that can be used by local sales teams to acquire new projects and activities in other regions. There is a continuing trend to increase local content in construction projects. This includes equipment procurement (usually based on the best cost national procurement strategy) and local recruitment for projects such as installation and project management. Local content is often a customer imposed requirement. This is common in Asia and the Middle East, where companies are state-owned and used as a means to stimulate the local economy.
Digitalization of chemical manufacturer: differentiation and driving force of new business model
In addition to services, EPC also sees digitization as a possible advantage to help fend off competition. In a recent study of industry 4.0 opportunities in the EPC market, VDMA reported that 72% of EPC see digital products and services as a means of generating additional turnover. Seamless and standardized interfaces in interdisciplinary engineering processes are also seen as a way to improve efficiency.
The lack of seamless data architecture is a problem in chemical engineering. The IT field is very diverse, and interface management needs a lot of work. Process flow is also very important between companies. This makes it more difficult to cooperate and create the standards necessary for effective digitization.
EPCs such as ThyssenKrupp industrial solutions realize that engineers spend 40% of their time searching for materials and documents at the installation site. Data inconsistencies and changes resulted in 20% cost overruns and delays. Engineering companies hope to take advantage of these opportunities to create new business models through digitization. One way is to analyze existing databases.
