The bottom line:
- IHS Markit expects average selling prices for medium voltage motors to decline year-over-year by 2.3 percent by the end of 2016.
- A return to growth is expected for average selling prices in 2018, with a projected increase of 1 percent.
According to the IHS Markit Medium Voltage Motors Intelligence Service - Annual, for the first time in over a decade prices for motors are expected to decline in late 2016. Low input costs are the main culprit for this decline, most notably copper, steel, and wire cable prices. Additionally, slowing demand is contributing to price declines for medium-voltage motors. Due to global regression in capital expenditures, manufacturers are warehousing surplus units, and bidding low to win projects, with the expectation of repeat business. The current downturn in commodity prices has led to a consistent erosion of medium-voltage motor average selling prices (ASPs).
Constrained capital expenditures is the leading cause for increased supplier inventory, and as a result, decreasing ASPs. Slowing growth in China, a market that makes up one-third of the medium-voltage motors market, has left suppliers searching for new opportunities to off-load inventory. Sluggish growth, coupled with the negative effects of Brexit on European investment, compounds the end result, leaving suppliers with no choice but to decrease prices to gain what projects are available in the current economic climate.
Though prices are subdued in the near term, the bottom may be insight with commodity prices and capital expenditure spending expected to increase, albeit slightly, moving forward into 2017 and 2018. As the global oil and gas industry rebounds, an industry that is estimated to make-up over 20% of the medium-voltage motors market, so will the average selling price of medium-voltage motors in the coming years.