By Michelle Goldsmith, Contributing Editor, Pump Industry Magazine
Now in its eighth year, Pump Industry’s State of the Industry explores how the industry fared in 2021, how this compared to expectations, and the challenges and opportunities 2022 is expected to bring. This year’s survey uncovered a renewed optimism and reduced uncertainty as the industry begins to emerge from the shadow of the pandemic, provided a meter of sector performance over 2021, and provided insight into the key factors expected to shape the industry over 2022.
On the whole, survey respondents were anticipating improved performance in 2022 and growth in work volumes in key sectors. And while COVID-19 undoubtedly affected the industry in 2021, the majority of respondents reported a decent year and expected things to keep improving.
Onward to the future: looking towards 2022
Despite the vicissitudes of the past few years, many within the pump industry are looking to 2022 with a renewed sense of optimism and reduced uncertainty, with 84.07 per cent of respondents reporting a positive outlook for their company for the year ahead.
This represents a significant increase in positivity compared to 2020 and 2021 surveys, when positive outlooks stood at 68.25 and 69.56 per cent respectively. In fact, more respondents reported a positive outlook for their company than in any of the previous eight years the State of the Industry survey was undertaken.
Figure 1: The vast majority of respondents have a positive outlook for 2022.
Of the remaining responses, 14.16 per cent had a neutral outlook for 2022, a slight reduction on the previous year’s 20.29 per cent, and the lowest number in the last four years, by a tiny margin. Only 0.88 per cent of this year’s respondents had a negative outlook, the same proportion as those who were uncertain what 2022 might bring.
Compared to the survey for 2021, where 7.25 per cent had negative expectations and 2.90 per cent said they didn’t know, negative outlooks and uncertainty noticeably decreased. When it comes to the effects of the COVID-19 pandemic, it appears that many respondents can finally see the light at the end of the tunnel, as the vaccine rollout continues and restrictions ease in those states where outbreaks occurred in 2021.
Some contributing factors to the increased morale within the industry could include a sense that the worst of the pandemic is over, and those whose businesses survived feeling more confident in their ability to withstand any future challenges that may arise. It’s also possible that some of those who’ve had a tough few years, yet are still active within the industry, may feel that things can only get better.
Figure 2: Respondents’ performance expectations for their companies have reached a high compared to recent years.
There is also the possibility that some businesses that were already struggling before the pandemic have closed since previous surveys, reducing the responses from those with negative company outlooks. Respondents may also hope to reap extra business resulting from federal and state governments seeking to stimulate economic recovery through funding infrastructure projects. Some companies may already be seeing increased business as a result, or have such work lined up.
The confidence the majority of survey respondents feel about 2022 could well be influenced by the performance of their businesses over the past year. Although 2021 was a ‘pandemic year’ with disrupted international supply chains, travel restrictions and lockdowns in response to virus outbreaks in New South Wales and Victoria, respondents largely reported that their companies performed as well or better than expected.
Figure 3: A majority of companies met or exceeded their expectations for 2021.
Overall, 57.52 per cent of respondents stated that their company’s performance in 2021 met expectations, compared to 32.61 percent in 2020.
Meanwhile, 28.32 per cent reported that their business exceeded expectations, compared to 24.64 per cent in 2020. The proportion of companies underperforming against expectations reduced to 14.16 per cent for 2021, from 2020’s 42.75 per cent.
These results may be partly attributed to companies being able to consider the pandemic into their 2021 expectations, whereas nobody could have anticipated its impact in 2020. One respondent explained that they’d been “unsure of what would happen due to various COVID influences, but it was not as terrible as predicted for us”. Another respondent said, “We were able to keep serving our customers with few problems due to the COVID outbreak.”
Some businesses found they were able to adapt in 2021 and make changes to keep overall performance steady throughout the pandemic. “Our structure changed to meet the shifting requirements of our customers and this ensured we retained and met our goals through trying times,” said one respondent. For some, 2021 saw a shift in demand for different product and service offerings. “Some markets fell, others grew.
Met overall budgets, but with different products and services than traditionally expected,” one respondent said. Whether 2021 performance met, exceeded, or fell short of expectations also varied by a company’s sectors and services, as well as its dependence on imports and exports. For instance, some respondents with a significant involvement in consulting, pump asset services and aftermarket needs found that work volume continued as expected, as essential pump systems still needed to be maintained and optimised.
One respondent noted that there were still “many problems in my field due to misunderstandings about pumps by the water/ installation engineers”. Factors that enabled companies to exceed expectations included a skilled workforce, growth in certain sectors, projects proceeding, and being able to provide services and products that others couldn’t throughout the pandemic.
“We had fantastic growth on PY in the retail domestic and farming sector,” said one respondent, while another noted that the steel company for which they provide pump services and after sales support made a “huge profit”. “Vertical integration gave us the ability to deliver when others were hampered by supply chain issues,” said another respondent.
The influence of supply chains on 2021 performance was reinforced by other responses, such as one respondent who largely attributed their company’s success to “industry growth and local manufacture and supply”.
Some respondents who found business fell short of expectations indicated that they had underestimated the longevity of the pandemic and its impact. “We expected normality to return early in 2021…” explained one respondent.
Disrupted global supply chains and project postponement were key factors for many companies, with respondents citing “delayed or cancelled projects” and “international supply and freight issues”. Others found the pandemic and travel restrictions affected their operations, especially when it came to seeing clients face-to-face.
Other ongoing issues for the industry, such as export constraints and Australia’s tense relationship with China, were also cited as reducing performance for respondents over 2021, as were staffing issues.
Figure 4: Most respondents believe 2022 will be a positive year for the industry.
While many respondents were optimistic about the year ahead for their own companies, there remained more uncertainty when it came to the outlook of the industry as a whole for 2022.
COVID continued to present challenges for the industry, but while some companies felt it had more of a negative affect on them, others found positives.
This uncertainty is reflected in the 19.47 per cent of respondents who were unsure about how they expected the industry to perform, similar to the 20.29 per cent last year. Still, a 62.83 per cent majority of respondents reported a positive outlook for the industry, an increase on 52.17 per cent in the previous survey.
Meanwhile, 16.81 per cent of respondents saw a neutral industry outlook for 2022, somewhat less than in the last four years. Negative outlooks for the industry dropped to 0.88 per cent, compared to 4.35 per cent last year, and represented a historic low for the survey.
The year that was: 2021 industry performance by vertical
Key to understanding the current state of the industry is evaluating sector performance over the last 12 months. Once again, we asked respondents about the volume of work experienced over key verticals throughout the year, then compared these responses to data about how each sector was expected to perform in 2021 from the last time the survey was completed.
Figure 6: Sector performance was impacted to various degrees by outbreaks during 2021, resulting in all verticals failing to meet expectations based on the pandemic situation remaining stable throughout the year.
It is important to note that the expectations from the previous year were based on the assumption that the COVID-19 situation at the end of 2020 (low to no community transmission and most state borders open to each other) would be maintained, which did not turn out to be the case.
This may explain why none of the verticals performed as well as expected through 2021. According to respondents, water and wastewater, mining, irrigation, and chemicals and pharmaceuticals sectors performed the best in 2021.
As depicted in Figure 6, the frontrunners were water and wastewater, followed by mining, which respondents predicted. The worst performing sectors were pulp and paper, manufacturing, and food and beverage, where work volumes slightly decreased overall, contrary to the previous year’s expectations.
Meanwhile, work in the power generation sector neither increased nor decreased. The sectors that experienced growth throughout 2021 were largely those that were considered essential services, reducing the impact of the pandemic and resulting mitigation measures on their operations.
Figure 7: How growth across sectors tracked in 2021 compared to recent years.
On the other hand, the sectors where work volumes shrunk, such as food and beverage, were those that may have been more heavily affected by various pandemic-related factors such as work-from-home orders, reduced retail spending, supply disruptions, and the shutdown of the hospitality and retail industries in states experiencing outbreaks. Some of the general trends in sector performance over recent years can be seen in Figure 7.
Sector performance expectations for 2022
Continuing the more optimistic theme of 2020’s survey results, respondents expect some magnitude of growth in almost all sectors over 2022.
The one exception was plastics and rubber, where they expect work volumes to neither increase nor decrease. The verticals expected to perform the best throughout the year are once again water and wastewater, mining and irrigation.
Chemicals and pharmaceuticals is also expected to experience similar growth to that of 2021. Oil and gas, pulp and paper, manufacturing, power generation, building services and HVAC, and food and beverage are expected to perform significantly better than they did in 2021.
Figure 8: Most sectors are expected to perform better in 2022 than they did in 2021.
A multitude of different global and national factors play into the performance of Australia’s pump industry at any time. The State of the Industry survey asked respondents about some of the key factors that affected industry performance throughout 2021, and those expected to play the biggest role in shaping the industry in 2022.
Due to the diverse sectors and businesses within the pump industry, various events or trends affect different industry participants differently. As a result, opinions varied as to which factors respondents considered the most significant, and in some cases, what some respondents saw as a positive was a negative for others.
The bumpy road back from COVID-19
The COVID-19 pandemic continued to affect all facets of industry throughout 2021, both locally and globally. The level of restrictions pump industry participants had to contend with locally varied considerably by the outbreak status of the states and territories in which they operated, supply chains were disrupted globally, and international travel remained largely off the cards.
With Australia’s vaccine rollout now progressing and restrictions easing within Victoria and New South Wales, respondents were generally more hopeful than in the previous survey. Nevertheless, 60.27 per cent of respondents agreed that the pandemic would continue to have significant lingering negative effects on the industry throughout 2022.
Some of the main impacts the pandemic had on respondents throughout 2021 included project postponement or cancellation, freight and supply chain difficulties, staffing issues, and difficulties accessing work sites. According to one respondent, “COVID has meant that a lot of food and beverage, and water sector clients are restricting access to their sites, so projects are being deferred”.
Another stated that over 2021 “delays in oil and gas projects due to COVID had the biggest negative impact” on their business. “Global supply chain disruption has had an effect on both supply and pricing,” said one respondent. Another respondent described the “significant impact caused by global supply chain disruption, basically longer lead times for all goods”.
A smaller number of respondents had a more positive spin on the pandemic’s effects, citing that their businesses had benefited from factors such as “delays in deliveries from competitors,” such as manufacturers based in China. As 2021 drew to a close, respondents noted that COVID-19 was “tending to have less impact on day-to-day operations,” but certain impacts were likely to remain key issues for the industry for some time.
In particular, respondents expected the supply chain, freight and pricing effects to linger. “The impact will continue in 2022, probably throughout the entire year. Increases in raw materials pricing, shipping cost increases, and material supply will be big issues in 2022,” said one respondent. Another said, “I believe that this will continue in the short term but will level out over the next 18 months as the world gets back to normal business”.
However, as one response stated, an awareness of the likely longevity of some pandemic impacts will enable industry participants to “be better prepared” to meet the challenges they pose. With Australia gradually opening back up, respondents were generally feeling positive about the prospects of increased work driven by postponed projects getting back underway, and new projects beginning over 2022.
As one respondent summarised, “Projects are starting to move now and should open up in 2022.” Overall, 67.12 per cent of respondents believed that the amount of major projects underway and being approved would be one of the biggest positives of 2022.
Figure 9: A range of different factors are expected to affect the pump industry during 2022.
Momentum in mining and resources
The mining and natural resources sectors have been key drivers of industry growth over recent years. In 2020 the pandemic hit the mining industry with significant pricing volatility and associated cash flow and liquidity issues, and these continued throughout 2021.
Despite this, it remained one of the best performing sectors for the year and is expected to rebound and continue to drive significant growth in 2022. Of the survey respondents involved in the mining sector, 45 per cent reported that work volumes remained steady over 2021, 22.5 per cent said they somewhat increased, and 17.50 per cent reported that they increased significantly. Only five per cent of respondents found a significant decrease in work in this sector, and ten per cent found they somewhat decreased.
According to Trevor Hart, Global Mining Leader at KPMG, while the pandemic increased risks associated with supply instability and economic downturns, it has also prompted enormous stimulus spending in most major economies.
“We’ve seen not just a spike in prices for iron ore but more broadly government stimulus and supply interruptions caused by COVID-19 has been driving up prices for commodities,” said Mr Hart. “Volatility in global markets has also seen investors flock to safe havens, driving strong precious metal prices, such as gold. This is not just a commodities story. COVID-19 also seems to have accelerated the focus on climate change and efforts to decarbonise.”
According to the September 2021 Resources and Energy Quarterly published by the Department of Industry, Science, Energy and Resources, export earnings reached a record $310 billion during the 2020-2021 financial year.
Iron ore export earnings reached a record $153 billion over this period, thanks to a strong demand from China and restricted market supply from Brazil due to COVID-19-related workplace issues. However, in the second half of 2021, prices declined from the highs of over US$230 a tonne seen in May.
Despite significant pricing volatility and associated cash flow and liquidity issues, the mining sector remained one of the best performing in 2021.
This can largely be attributed to falling domestic demand for steel in China and the Chinese government’s efforts to limit the country’s 2021 steel output to 2020 levels, and ramping up of a number of key government policies to limit energy use and emissions.
A rebound occurred in late-November to early-December as steel output restrictions were somewhat relaxed and production in China’s steel mills increased. Likewise, steel prices experienced a number of significant surges and declines over 2021, due to factors including changes in Chinese domestic demand for construction projects and production restrictions being tightened or loosened.
Coal exports were impacted by import restrictions as a result of tensions with China, although there was growing optimism about resuming trading towards the end of the year, after data reported that small amounts of Australian coal had cleared borders in October.
However, a volatile relationship with China is likely to continue to impact trading opportunities in an array of industries, with words exchanged between governments as 2021 drew to a close. The Department of Industry, Science, Energy and Resources states that the outlook for Australia’s mineral exports remains strong.
As the world economy rebounds, prices across a number of resource and energy commodities remain high, and the Australian dollar has slightly weakened from recent peaks. The department states that some moderation and reduced volatility in prices is likely in 2022, as supply rises and demand growth moderates.
Overall, export earnings are forecast to rise in 2021-22 to $349 billion, before falling back to around $300 billion in 2022-23. More moderate growth in steel exports is forecast for 2022 and 2023. Australian iron ore export volumes are expected to grow steadily, from 868 million tonnes in 2020- 21 to 939 million tonnes by 2022-23.
The department also expects Australia’s coal export values to reverse most of their recent pandemic-induced decline. Likewise, uranium export values are forecast to increase from a low of $465 million in 2021-22, to reach $551 million by 2022-23. Australia’s gold exports are forecast to reach a record $29 billion over what remains of the 2021-2022 financial year.
Meanwhile, the total value of Australian exports of aluminium, alumina and bauxite is forecast to increase at an annual average rate of 5.8 per cent between 2021-22 and 2022-23. Copper prices surged in 2021, and are expected to retain most of this gain.
Australia’s nickel export earnings are expected to rise on the back of growing export volumes and higher prices, and zinc export earnings to increase from $3.3 billion over the 2020-21 financial year, to around $4.1 billion in 2021-22 and $3.9 billion in 2022-23.
Rising prices for lithium are supporting the recovery of Australian producers with two refineries under construction and Australia’s lithium export earnings are forecast to increase from $1.1 billion in 2020-21 to $3.8 billion in 2022-23.
“In addition to boosting domestic consumption, globally, government stimulus measures are being directed into energy transition and infrastructure building projects,” said KPMG’s Trevor Hart.
He believes that this will continue to drive significant demand for raw materials, such as copper and nickel, over the years ahead, as will the rising demand for battery minerals and rare earths, although some sectors, such as coal, will continue to face growing headwinds.
Survey results indicate that pump industry participants operating in the mining sector were overwhelmingly optimistic about its outlook for 2022, with 64.29 per cent expecting somewhat of an increase in work volumes, 9.52 per cent anticipating a significant increase, and 21.43 per cent expecting volumes to remain steady.
The remaining 4.76 per cent expected a slight decrease, and no respondents expected a significant decrease. 49.32 per cent of respondents identified the performance of the mining industry as a key positive for 2022, while 17.81 per cent thought that it would have negative effects.
“Green minerals and the EV sector creating a drive to develop lithium, nickel, copper, graphite will affect our business in a positive manner,” explained one respondent. Respondents involved in the oil and gas sector had mixed results over 2021, despite a rebound in oil and gas prices.
For 30 per cent of respondents work volumes remained the same over the year, while 26.67 per cent reported that they increased somewhat, and ten per cent that they increased significantly. In contrast, 26.67 per cent said work in the sector had decreased somewhat, and 6.67 per cent decreased significantly.
According to one respondent, work had “been stable to a degree throughout 2021 except for oil and gas”. When it came to 2022, respondents were largely optimistic. 42.42 per cent of respondents expected oil and gas work volumes to remain steady, 39.39 per cent anticipated somewhat of an increase, and 12.12 per cent a significant increase. Only 3.03 per cent anticipated a slight decrease and 3.03 per cent a significant decrease.
The impacts of commodities prices and the Aussie dollar
While trends in commodities prices could be drivers of growth in some sectors serviced by the pump industry, such as mining, they also have potential ripple effects that could have positive or negative consequences over 2022.
For instance, extremely strong export earnings forecasts can have downsides including a potential spike in global inflation, and a resulting rise in interest rates. Additionally, increased investment in certain sectors can potentially result in decreased investment in others, creating a strong split in opinions.
For instance, one respondent cited the increasing oil price as a key upcoming challenge for their company, as it may result in a reduced focus on renewable energy projects. However, participants working in the oil and gas sector viewed price increases as a strong positive.
At the time of the survey, 23.29 per cent of respondents considered trends in commodities prices as a considerable positive for 2022, while 31.51 per cent saw them as a significant challenge.
“Reduction in the iron ore price will affect future projects,” said one respondent. When it came to the global oil price, 15.07 per cent of respondents viewed it favourably, while 34.25 per cent viewed it negatively.
Larger economic trends such as the performance of the Australian dollar were also divisive, and could be positive or negative for respondents, depending on whether they relied more heavily on imports or exports.
While 32.88 per cent of respondents believed the performance of the Aussie dollar would have a positive impact on the industry in 2022, 36.99 per cent expected it to have a negative effect. “The exchange rate has positive impacts,” said one respondent.
Meanwhile another respondent cited a “rise in AUD, which will affect us exporters” as a key challenge for the year ahead. Similarly, 16.44 per cent of respondents were positive about forecast interest rates in 2022, while 19.18 per cent considered them negatively.
Renewable energy and alternative fuels
As the drive to decarbonise world economies proceeds, many pump industry participants are hopeful of picking up work from an increasing number of renewable energy projects.
The growing global hydrogen market, especially demand for hydrogen from renewable sources, was also cited as an area likely to fuel growth.
Pump industry participants largely viewed the transition to renewable energy as an opportunity, with 43.84 per cent identifying renewable energy projects as a key positive for 2022. A much smaller 4.11 per cent were less enthused, largely due to the possibility of losing business from fossil fuels.
“Declining investment on fossil fuel technology will still impact our business in 2022,” said one respondent. Another respondent identified hydrogen projects as a key opportunity.
Steady growth in water and wastewater
The water and wastewater sector is generally one of the best performing sectors for the Australian pump industry, and survey respondents have largely reported work volumes remaining steady or increasing in this area over the years.
This was again the case over 2021, with 37.70 per cent of respondents in the sector reporting somewhat of an increase in work volumes, 19.67 per cent saying they increased significantly, and 34.43 per cent reporting they remained the same. They decreased slightly for 4.92 per cent, and significantly for 3.28 per cent.
“We are in entry level wastewater,” said one respondent, “Seems quite stable off the back of a big 2020/21”. “The demand from the water and wastewater sector is an unending business with positive growth with increase in population,” another respondent put it.
The 2021-2022 Federal Budget announced funding for a variety of water initiatives, including an extension of the On-farm Emergency Water Infrastructure Rebate Scheme for 12 months until June 2022, and up to a further $258.0 million from the $3.5 billion National Water Grid Fund towards the construction of new and augmented water infrastructure projects, including up to $160 million through the National Water Grid Connections pathway.
Respondents operating within the sector were overwhelmingly positive about its 2022 outlook, with 61.29 per cent expecting work volumes to increase somewhat, and 11.29 per cent expecting them to increase significantly.
Just over a quarter (25.81 per cent) of respondents expected similar performance to 2021, and 1.61 per cent of respondents expected somewhat of a decrease. No respondents expected a significant decrease.
Some respondents identified new water and wastewater opportunities as a key positive for their companies for 2022, citing “approval of municipal and aquatic projects, which dominate our overall turnover”.
Agriculture and irrigation grows
Agriculture was another strong performer over 2021, and similar is expected for 2022, with the sector also benefiting from the 2021-2022 Federal Budget.
Over 2021, work volumes in this area remained steady for 41.18 per cent of respondents in the sector, while 31.37 per cent saw somewhat of an increase, and 9.80 per cent a significant increase. For 11.76 percent of respondents work volumes declined somewhat, and they declined significantly for 5.88 per cent.
“We operate predominantly in the irrigation sector and have found that there is definitely an increase in demand for our services and the agricultural industry is still growing at great pace,” said one respondent. “However, since we operate in four states we found COVID-19 border restrictions extremely challenging, which definitely restricted the growth of our business.”
Another respondent said that “retail and farming pump sales were up considerably”. For one respondent “increased activity in major irrigation/agricultural projects” was a key factor that drove business over 2021. However, one respondent said that due to “the wetter seasons, irrigation has remained the same or dropped back”.
The influence of weather or climate-related factors on the irrigation sector was summarised by one respondent. “Dropping municipal dam levels creating water restrictions, public sentiment on water usage, and long-term wet weather also affects the sale of irrigation.”
Looking towards 2022, 40.38 per cent of respondents in the sector expected work levels to remain steady, while 48.08 per cent expected them to increase somewhat, 5.77 per cent expected a significant increase.
Another 5.77 per cent expected somewhat of a decrease, yet no respondents expected a significant decrease. 7.95 per cent of respondents identified the agriculture industry as likely to be a key positive for business in 2022, while only 5.48 per cent were negative about prospects in that area.
When it came to climatic conditions more generally, 34.25 per cent expected climatic conditions to have positive effects on the industry in 2022, while 21.92 per cent expected them to have significant negative effects.
Ongoing issues with competition and skilled labour
Increasing competition in a globalised market, as well as staffing difficulties, have been issues within the pump industry throughout recent times, and this was no different in 2021.
One respondent stated that “unskilled opposition entering our markets” was one of the biggest challenges of 2021, and expected that they would “continue to provide pricing pressure” in the future. Another respondent cited “staying ahead of your competition, as everyone is chasing the same opportunities” as a significant challenge in the industry.
For 2022, 39.73 per cent of respondents thought online competition was an important factor that would affect the industry negatively, while 5.48 per cent saw it in a positive light. Staff availability and finding adequately skilled personnel remains an issue for many.
A “shortage of workforce” and “smaller number of apprentices – expected to remain the same if nothing changes in the training sector,” were challenges for many respondents. One respondent identified “competition for skilled labour” to be “probably the biggest issue” for the industry in 2022.
Current trends in unemployment rates, which impact labour supply, were expected to be a key challenge for the year ahead by 28.77 per cent of respondents, while 6.85 per cent thought they would be a positive.
Global supply chain issues created a challenge for some companies.
Tensions with China
The fraught relationship between Australia and China has undoubtedly had far-reaching effects on Australian industry, the pump industry included, with 2021 seeing no thawing in relations.
Bans and increased tariffs on Australian imports to China remain in place, after coming into being after the rapid deterioration of the relationship between the two governments over 2020, following a push by the Australian Government for further investigation into the origins of COVID-19.
Nearing the close of 2021, tensions again escalated between the countries’ governments over Taiwan. China is Australia’s foremost trading partner for both imports and exports, meaning the volatile relationship has significant consequences for many industry sectors and the Australian economy in general.
Colin Heseltine, senior adviser to Asialink at University of Melbourne, states that when it comes to the economy as a whole, overall “the impact of China’s trade sanctions has been less serious than first feared (though damaging to individual companies),” noting that “with the benefit of exports of iron ore, which are essential to China and therefore not subject to sanctions, and a very high iron ore price until recently, the value of Australia’s goods exports to China actually hit a record in the first half of 2021”.
China has announced its intention to break its dependency on Australian iron ore imports by ramping up domestic production, increasing investments in overseas mines, and strengthening scrap steel recycling.
However, many commentators and investors remain sceptical about the viability of this plan. Nevertheless, taking iron ore out of the equation, the effects of a fractious relationship on Australian imports has hit some industries hard. The Australia-China Relations Institute reported that from January to September 2021, the value of 12 disrupted goods fell by $US12.6 billion ($17.3 billion), compared with 2019.
As a result, many survey respondents reported tensions between Australia and China as having significant impacts on performance over 2021, and expected this to continue in 2022. Negative impacts reported by survey respondents included “raw materials costs increasing significantly” or “skyrocketing”. “Tariffs affecting prices and longer lead times are the most noticeable effects,” said one respondent.
Other respondents said that “China has influenced local spending in mining” or that the issue had a “major effect on client confidence”.
“Almost all industries and markets have been affected negatively due to our failed relations with China,” said one respondent. “We have definitely noticed a negative impact particularly with our wine producing customers,” said another.
“These customers have lost between eight per cent and in some cases up to 90 per cent of their business due to the breakdown in the relationship with China.” Other respondents, particularly those involved in domestic manufacturing, saw upsides to the conflict. “More manufacturing is coming back to Australia and exporters are finding new markets outside China,” said one respondent. Another reported that they had seen “a lot less cheap product on sale.”
Nevertheless, over half of respondents (58.90 per cent) expected relations with China to be a key challenge for the industry in 2022, while a smaller number (10.96 per cent) anticipated positive effects. Opinion was divided as to how affairs between countries would develop into the future. For instance, one respondent was “hoping for improvements” as a result of a developing “two-way investment relationship,” while another said, “things will get worse.”
“I believe we need to either do something to improve our relationship with China (without compromising our sovereignty),” said one respondent.
“Or if that’s not possible then I think that the Federal Government needs to make significant investment into promoting our products overseas and provide accessible funding to companies for technological advances and export potential.”
Where do the opportunities lie?
In accordance with the industry’s generally optimistic outlook for 2022, survey respondents identified a number of growing areas of opportunity.
Many of these related to the aforementioned expected growth in key sectors for the pump industry.
Seizing opportunity in post-COVID economic recovery
Government investment to spur economic recovery through infrastructure projects and other funding offers substantial opportunities to those who can secure the contacts. In particular, respondents mentioned spending on power generation, agriculture and water industries. “Building and construction boom inputs” were also seen as potential drivers of business.
As restrictions ease around Australia, a general uptick in business was also anticipated by some. “Sales and services should increase due to the backlog created by the pandemic,” said one respondent.
Pumps-as-a-service and maintenance
In recent years, many end users have focused increasingly on maintenance, with capital being allocated towards asset services and aftermarket needs rather than replacing equipment. This trend was exacerbated during the pandemic and shows no sign of abating.
Pump industry participants who can pivot their businesses to meet these changing needs will be able to enhance customer relationships and unlock additional revenue and service offerings, giving them a competitive edge.
Additionally, while they may not be able to compete purely on price, those who manufacture and sell pumps and associated products within Australia can offer enhanced aftermarket services, giving them an advantage over overseas competitors.
Climate change, water security and renewable energy
As renewable energy continues to gain traction within Australia, and coal declines as a result of emissions targets and reduced profitability, opportunities can be found in this arena. Various renewable energy projects announced, underway or proposed have roles for pumps to play, the most well-known involving pumped hydro. Meanwhile, hydrogen, carbon capture and storage offer additional opportunities.
Solar pumps are increasing in use in irrigation, with one respondent saying that “solar pumping is our main growth area”. Renewable-powered heat pumps are also receiving increasing attention.
The likely effects of climate change on water security are also fuelling investment. Many respondents identified “wastewater, water scarcity and climate change” as long-term drivers of growth for the industry, as well as “increasing awareness of water value and the efficient use of it”, and saw opportunities in “irrigation water savings”, “water recovery” and “recycling and reuse”.
La Nina and current weather patterns were also noted as important factors. “Increased flows to the Murray Darling system due to higher-than average rainfall will provide opportunities in the agricultural sector,” said one respondent.
Growth fueled by in-demand resources
Industry growth driven by increases in global demand and prices for specific resources offer significant volumes of work for pump industry participants involved in relevant sectors. “I believe that as the commodities prices continue to increase the mining sector will provide strong opportunities for the pump industry,” said one respondent. Rising oil and gas prices were also cited as likely to bring additional projects and work, as were “green minerals” and proposed hydrogen projects.
Technology, innovation and efficiency
Energy efficiency improvements and smarter pump technologies were also key areas of opportunity identified by survey respondents. End user interest is growing not only in regard to new pumps, but also in the rental arena, and when it comes to upgrading and retrofitting older systems to enhance performance.
“Energy efficiency gains will always provide opportunities for suppliers in the pump industry,” said one respondent. “We have moved into an era and mindset in the pump industry now where energy efficiency is very important to end users and customers will definitely spend money to increase efficiency wherever possible.” Respondents noted that “energy efficient or low-lifecycle-cost products have a bright future” and anticipated “increased use of VSDs as the expected norm”.
Many saw future opportunities in “working with smarter, more energy efficient equipment and new technologies for operating and monitoring pump performance”, “further developments on environmental issues and reliability”, advancements in IoT, and the continued “development of new and innovative products”.
Overall, the majority of respondents expected new technologies and innovations to have positive impacts on the industry in 2022, with 52.05 per cent identifying this as one of the key positives for the year ahead, and only 4.11 per cent anticipating negative effects. Digitisation and IIoT were anticipated as positives for 19.18 per cent of respondents, while 8.22 per cent were wary of potential problems as a result.
A promising outlook for 2022
While much about the next 12 months remains uncertain, and the COVID-19 pandemic has demonstrated the potential for unexpected events to throw a spanner in the works of even the best-laid plans, there is much to be optimistic about for 2022. Participants within the Australian pump industry are well positioned to grasp the opportunities provided by economic recovery and larger economic trends and set a path to greater things.
