Generator set market projected to rebound in 2017

IHS Markit projects a return to growth in 2017 for the generator set market as oil prices rise and industrial capital expenditure (CapEx) improve.
By Greg Johnson, senior analyst, IHS Markit August 31, 2016

IHS Markit projects a return to growth in 2017 for the generator set market as oil prices rise and industrial capital expenditure (CapEx) improve. Courtesy: IHS MarkitThe global market for generator sets, used for backup and onsite power generation, has been extremely volatile in recent years. For most suppliers 2015 was a difficult year, because of weak demand resulting from falling oil and commodity prices. Increased competition and overcapacity further contributed to a 12.6% decline in global generator set revenue in 2015, from $17.9 billion in 2014 to $15.7 billion in 2015.

Due to several challenges revenue is forecast to decline by an additional 2.3% in 2016. However, IHS Markit projects a return to growth in 2017, as oil prices rise and industrial capital expenditure (CapEx) improve. From 2015 to 2020, generator set revenue is forecast to grow modestly with a 4.3% compound annual growth rate (CAGR) to around $19.3 billion.

Revenue from the infrastructure, marine and shipbuilding, oil and gas, and power industry sectors is forecast to grow faster than the average, led by infrastructure and oil and gas (midstream) which are expected to grow at a compound annual growth rate (CAGR) of 6.5 and 6.3%, respectively, from 2015 to 2020. Large infrastructure projects across Asia and the Middle East will continue to drive generator set sales. The marine sector is also forecast to return to growth, after several years of decline.

Supply has become more concentrated due to several mergers and acquisitions that occurred over the past few years in North America. However, supply to individual countries and regions is still quite fragmented, with hundreds of small generator set assemblers vying for business around the world. The road ahead is bumpy for generator set suppliers in the short term; but growth prospects appear favorable from 2017 onward, assuming a return to higher oil price levels and increased capital investment.

Greg Johnson, senior analyst, IHS Markit. IHS Markit is a CFE Media content partner. Edited by Chris Vavra, production editor, CFE Media, cvavra@cfemedia.com.

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