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South African ACS Markets in the Pulp and Paper Industry
Frost & Sullivan, June 2008, Pages: 151
Despite Market Maturity, Pockets of Strong Growth Potential Emerge:
The automation and control solutions (ACS) market in the pulp and paper industry in South Africa will experience slow growth, as it is nearing maturity. The market generated $22.1 million in 2007. Robust growth in end-user sectors due to capacity upgrades ensured consistent demand for these solutions throughout 2007. The market is projected to grow at a compound annual growth rate (CAGR) of 9.4 per cent from 2008 to 2014 to reach $41.6 million. There is considerable variation between the sizes of each product segment, the degree of product penetration and current and future growth rates. For instance, in 2007, distributed control systems (DCS) accounted for a substantial proportion of market revenues. However, the DCS market is relatively mature and offers comparatively limited potential for future growth. Conversely, the manufacturing execution systems (MES) market is considered to offer strong growth potential.
'Substantial market revenue will be derived from upgrading retrofits and replacement from the huge installed base, characterised by aging automation infrastructure,' remarks the analyst of this research. 'As a result, the provision of value-added products and services such as maintenance, optimisation and migration management will be the major requirement for growth in this near mature market.' Competition among suppliers is low, as larger companies enjoy strong brand loyalty. To maintain their market share, many of these companies are developing cost-effective technology, which provides more functionality for the same prices. Market development has also been driven by end users requesting better quality control solutions and lifetime cost-saving capabilities.
Need for Improved Efficiency to Support Adoption of ACS Products:
'A growing need to improve the efficiency of existing processes, especially raw material use, is driving the demand for ACS products in the pulp and paper industry in South Africa,' notes the analyst. 'These solutions allow the effective use of raw materials including fibre and energy.' The ageing of control solutions or technology obsolescence, especially in DCSs and programmable logic controllers (PLCs) that are likely to increase replacement demand in many South African mills, and approval by South African public electricity utility Eskom for larger projects within the pulp and paper industry are giving a fillip to the uptake of ACS solutions by the paper and pulp industry. Such positive trends are being reinforced by the tightening of emission norms in the European Union, which also affects the South African producers (that supply Europe), as they are being encouraged to produce environmentally friendly products. A large number of pulp and paper manufacturers in South Africa are focusing on cost cutting by reducing both the number of vendors and the diverse control systems in their plants. This has warranted a growth in the supply of integrated solutions, rather than stand-alone solutions, by suppliers. Due to this, smaller supplier companies will be forced to form strategic alliances among themselves or with bigger participants. This trend will spur market growth.
Currently, most pulp and paper mills in South Africa are semi-automated, partly because of the high cost of automation and due to the lack of skills, in terms of ACS operations. Most end users argue that full automation could contribute to unemployment, leaving jobs only for trained personnel. As the world progresses technologically, it is important for key and non-key staff to be trained in basic automation processes. Automation is important for plant process efficiency and staff training will help them understand the benefits of employing ACS in the pulp and paper industry.
Market Sectors:
- Distributed control systems (DCS)
- Human machine interfaces (HMI)
- Manufacturing execution systems (MES)
- Programmable logic controllers (PLC)
- Supervisory and control data acquisition (SCADA)
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