Opportunities in Central and Eastern Europe to Accelerate Recovery of MV and LV Power Cables Market

Assailed by an overall downturn in demand and revenue growth, the European medium voltage (MV) underground cable market (10-36kV) is poised for a comeback.

Assailed by an overall downturn in demand and revenue growth, the European medium voltage (PRWEB) October 5, 2003 -36kV) is poised for a comeback. Reinforcing the optimistic mood in the cable manufacturing industry, growth rates in the European low voltage (LV) power cables market (350V- 1KV) have picked up pace.

Both markets are now on track for slow but steady revenue expansion, asserts Frost & Sullivan, the international market consultancy, in a series of studies commissioned by Eutilia, the leading pan-European marketplace for the utility sector.

Subdued demand for MV power cables has been largely attributed to the extensively installed network of power lines in Western Europe. Mounting concerns over the environmental impact and the cost of overhead cable lines are, however, projected to underline a growing preference for underground power cables.

At the same time, new opportunities are emerging within EU accession states in Central and Eastern Europe. Compliance with EU-mandated safety and quality standards are expected to compel most Eastern European countries to replace overhead power cables with underground ones.

End-user focus on improved safety and quality also stands to benefit MV cable producers. Innovations in safety and conductivity of cables will heighten the appeal of the market. By offering higher quality products, the market can provide a better range of prices appealing to all buyers," recommends Frost & Sullivan Research Analyst, Shaun Dawson.

Buoyed by these trends, the MV underground cable market is set to emerge from its post-2000 slump. While the installation of new lines to the detriment of overhead cables is forecast to effect short-term growth, replacement cables are set to support long-term market development.

The Eutilia-commissioned research pegs revenues at EUR 337.04 million in 2002, projected to reach EUR 345.33 million in 2010. Even as unit shipments and revenues make steady gains, falling prices, which had given buyers greater leverage, are expected to stabilise.

Presently, intensifying competition has tilted the market in favour of multinationals with smaller, national cable producing companies also in the fray. Mr Dawson notes: Multinationals will continue to dominate the market and smaller local companies will continue to evolve in order to stay competitive."

A similar fissure has been evident in the LV power cables market. Here, too, the increasing ascendancy of multinationals, especially that of Pirelli and Nexans, is expected to pressurise smaller companies.

Dominant multinationals have been able to offer lower prices, making it increasingly difficult for smaller companies to compete on the basis of price. Low selling prices coupled with the high cost of manufacturing and the profusion of market participants has made it hard for any one company to significantly augment its revenue. Not surprisingly, buyers have had the upper hand in this competitive set-up.

Mr Dawson comments: This competitive polarisation has led smaller companies to adapt to the market evolution by either primarily cutting their prices further or, in the long term, merging with sister companies or even branching out into alternative products."

Despite recent declines, the market for LV power cables has not been as badly affected as that for the MV cables due to the rising use of underground and hidden cables. The 600V-1kV segment comprises the larger of the two segments in the European LV power cable market both in terms of voltage and revenue with the 350-600V segment forming the smaller sector in the LV power cable range.

The market for LV power cables experienced marginal revenue declines from 2000 through 2002. It is, however, anticipated to resume growth by the end of 2003 with this upbeat trend continuing in 2004 as the cable industry stabilises. Revenues are estimated to expand from EUR 285.32 million in 2003 to EUR 292.99 million in 2010 with marginal increases in price forecast towards the end of the decade.

A surge in construction and urban development activity is expected to fuel demand for LV power cables. The continued emphasis on quality and safety, combined with product development is also anticipated to drive market growth. Advanced products that offer additional fire safety, enhanced conductivity and that are halogen-free are expected to provide more options to buyers and benefit the whole market.

Finally, as in the case of the MV underground cables market, EU expansion into the Central and Eastern European region is set to open exciting new opportunities for LV cable manufacturers. Elaborates Mr Dawson: New member countries will have to take onboard the EUs legislation surrounding the manufacturing of cables. This will, in the long term, push the replacement rate up. Trade between the East and West will increase. Also, much-needed European social funds will help re-develop urban communities and infrastructure as a whole."

Multinational manufacturers, active both in the MV and LV cables market, have already made forays into the expansion zone. However, smaller companies operating in country-specific markets are also well-positioned to exploit the growth potential of these markets.

These analyses form part of a series of ten specialised studies on the markets for goods and services procured in the utility sector, commissioned by Eutilia and executed by Frost & Sullivan. The findings provide comprehensive insight into the supply market and are targeted at buyers and procurement departments, aiding optimisation of their buying strategy. The topics have been selected based on requirements from industry buying professionals," says Pieter Vaessen, Market Research Manager at Eutilia.

About Eutilia

Eutilia is the leading e-marketplace for utilities in Europe aiming to become an e-knowledge hub for the sector. It creates value for all participants, buyers and suppliers, by using technology to improve market and process efficiencies. In addition, it builds a community of utilities, suppliers and specialist service providers that pursue innovative initiatives of benefit to Eutilias users. Its Sourcing Optimisation Services include Market Research, Supplier Scans, Supplier Commercial Assessment, e-Tendering and e-Auctions for both core and non-core products. Its Transaction Services include procurement, catalogue services and order management.

Eutilia was incorporated in The Netherlands in March 2001, and has the financial backing of 11 major European utilities. It recently managed throughput of over one billion Euros.

Contact

Pieter Vaessen
Market Research Manager
Tel. +31 (0)71 5353157
pieter.vaessen@eutilia.com
www.eutilia.com

About Frost & Sullivan

Frost & Sullivan, an international growth consultancy, has been supporting clients' expansion for more than four decades. Our market expertise covers a broad spectrum of industries, while our portfolio of advisory competencies include custom strategic consulting, market intelligence and management training. Our mission is to forge partnerships with our clients' management teams to deliver market insights and to create value and drive growth through innovative approaches. Frost & Sullivan's network of consultants, industry experts, corporate trainers and support staff, spans the globe with offices in every major country.

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Kristina Menzefricke
Public Relations Manager
Tel. +44 (0) 207 343 8376
kristina.menzefricke@frost.com
www.frost.com