New orders booked by members of the VDMA Large Industrial Plant Manufacturers’ Group (AGAB) for 2021 were up 78 percent year-on-year at €21.2 billion (2020: €11.9 billion). The driving force behind this upturn was demand from abroad. It has an export ratio of 85 percent and major orders from emerging countries ensured a high utilization of existing capacities. They triggered rising demand for skilled workers. There was also an increase in orders for innovative equipment for sustainable production. Furthermore services, which accounted for 30 percent of sales in large-scale plant engineering grew last year.
“It has paid off that AGAB members have used the first year of the pandemic to digitize their workflows even more. They also developed new markets and expand their range of products for climate protection. As a result, the companies have become much more competitive and are emerging stronger from the crisis,” said Jürgen Nowicki, AGAB spokesman and CEO of Linde Engineering. By this he classifyed the market successes of the past year.
2021: International business soars thanks to major orders
Domestic orders in 2021 amounted to €3.2 billion. At the same time, demand for power plants in Germany fell to its lowest level in decades.
Nowicki: “The nuclear phase-out, the foreseeable end of coal-fired power generation and uncertainties about the future of natural gas as an energy source are key reasons for the current reluctance to invest in thermal power generation.”
There was an exceptionally strong upturn in international business in 2021. Foreign orders increased by 108 percent up to €18.0 billion (2020: €8.6 billion). The biggest growth was recorded by the countries of Eastern Europe. The orders from East Asia and the Middle East are also rising. A large proportion of the foreign orders were for major projects worth over €25 millions. They are particularly important for capacity utilization. In the reporting period there were 125 such projects. They are worth a total of €13.7 billion (2020: 70 major projects worth €5.5 billion). Some of these orders are attributable to projects originally planned for 2020. But they had to be postponed to the following year due to the pandemic.
2022: Increasing uncertainty due to the war
In January, most members of the AGAB were still very confident and expected revenues. Furthermore they expected an order intake to rise in 2022. However, the war in Ukraine and the national and international sanctions packages could now mean that the forecast made proves to be too optimistic. Nevertheless the sanctions are supported strongly by the large-scale plant engineering sector.
Nowicki: “At the moment, around three quarters of all large-scale plant manufacturers are reporting interruptions in ongoing projects in Russia and Ukraine as well as the loss of their supplier basis in the region. This dampens our expectations in terms of order intake by the end of 2023.”
EU must safeguard competitive opportunities
The unrelenting pace of change in the global economy remains a major challenge for the industry. Increasing competition and the huge financing requirements for climate transformation are offset by a slow adjustment. A further influence is the development of the regulatory framework for export and project financing. Therefore, the VDMA Large Industrial Plant Manufacturers’ Group supports the German government and the EU. Their efforts are to fundamentally reform the OECD consensus as well as to support the goal to create a level playing field on the world market.
AGAB spokesman Nowicki emphasizes: “The coverage requirements of the German ‘Hermes instruments’ must remain manageable and predictable for our complex project negotiations. Only then they can also play a supporting role, especially in the joint task of transforming toward resource-conserving production.”
Large-scale plant engineering for sustainability
The plans of many countries, to curb climate change and use technologies to save energy and greenhouse gases, are becoming more concrete.
“This offers VDMA large-scale plant manufacturers opportunities to bring new plants, services and processes to the market and enable customers to produce in a way that saves resources. “The industry is thus one of the pioneers of the global energy and mobility revolution and makes a significant contribution to society’s goal of sustainable industrial production,” emphasizes AGAB spokesman Nowicki.
For this purpose, large-scale plant engineering also supplies complete plants for the production of green hydrogen. It could play a major role in the energy market of the future.
“As a prerequisite for the establishment of such a sustainable regime, however, policymakers must create reliable framework conditions. Especially in view of the energy sovereignty Europe is now striving for,” Nowicki urges swift action. “We therefore welcome the German government’s initiatives to significantly accelerate and simplify approval procedures for renewable energy projects and for the expansion of these forms of energy in the course of the planned amendment to the Renewable Energy Sources Act.”
Industry sets its own sustainability goals
AGAB members are not only supporting their customers in decarbonization. They are rather setting their own sustainability targets. By doing so, they are taking responsibility for the climate and the environment. The milestones formulated by the companies relate both to their national and international affiliates. They are to become climate-neutral and to the entire supply chain.
Nowicki: “The share of suppliers in large-scale plant construction is over 50 percent. There is still a lot of potential to become more sustainable, particularly in the global supply chain. Starting points include purchasing recycled materials and using environmentally friendly means of transport and packaging.”
