Strong growth potential in the industrial hydraulics sector

Global revenues for the industrial hydraulics market are expected to exceed $10 billion by 2013, which is a growth of 30% from 2010's revenues.

Robert Carter, Principal Analyst, IMS Research

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The industrial market for hydraulic components is generally perceived to be a small, low growth portion of the global hydraulics market. However, the study released last month showed that global revenues reached almost $8 billion in 2010 and that this is expected to grow to exceed $10 billion in 2013. This represents growth of over 30% in three years. This is not low growth, and the statistics suggest that these additional revenues are not necessarily earmarked for the three leading hydraulics suppliers.

The high growth expected in the market at first looks surprising considering that hydraulics is a traditional technology, and competition from more fashionable alternatives such as electronics is limiting growth to levels below that of general industry. However, sustained market recovery during 2011 alone resulted in almost 14% revenue growth. Then on top of this, there is a rapidly expanding market base in Asia Pacific, and high levels of investment expected globally in oil, gas and mining projects in 2012. Thus by 2013, global market revenues are expected to be $2.3 billion larger than 2010. This is a substantial amount of revenue, and analysis of global share shows that it isn’t necessarily going to fall into the hands of the leading 3 hydraulics suppliers. While it is generally perceived that Bosch Rexroth, Parker Hannifin, and Eaton dominate the global market for industrial hydraulics, the report shows that these companies collectively accounted for less than 50% of global revenues for pumps, motors, cylinders and valves in 2010. This left over $4 billion accounted for by companies that all had less than 3.5% share. This is good news in the sense that it shows this show’s that these companies do not dominate supply to an exclusive degree. However, also highlights the potential difficulty for companies targeting high growth in this area.

This fragmented share is thought to be a result of the large number of low volume, localized contracts that constitute the industrial market. In fact, this is why many hydraulics suppliers have deliberately chosen to avoid the industrial sector altogether, focusing predominantly on the mobile sector where high volume contracts are available. This highlights that growth in the industrial hydraulics market would be incremental and take significant investment of both time and resource to accrue the high number of new customers required to increase sales substantially.

However, this also leads us onto the positive. In this period of economic uncertainty, manufacturers of all types of automation components are attempting to diversify the market sectors they address in order to limit dependency on any particular one. It is the strategic marketing equivalent of increasing the number of ‘baskets’ in which to carry ones ‘eggs’. Pursuing growth in the industrial sector of the hydraulics market would heavily encourage this type of growth model, effectively acting as its own insurance.

So considering this, it would appear that targeting growth in the global industrial hydraulics sector, is not just feasible, but also quite an attractive option for suppliers to consider, should they have the required time and resource available.