|Date Published: 5 Jul 2011
By Vigneshwaran Shanmugam, Research Associate
Non-destructive testing (NDT) is a very safe and efficient way of testing materials for faults. With a number of advantages over other testing methods, there is a multitude of options for the end user. Globally, the NDT market comprises of a three tiered system of competition, including large multinational companies, global companies with a limited sales and distribution network and small regional companies that cater to niche markets. This market insight will aim to capture current market dynamics and industry developments in Brazil, as well as the opportunities offered by this region to NDT vendors.
The global market for NDT equipment was estimated by Frost & Sullivan to be $1.41 billion in 2010 and is expected to grow at a compounded annual growth rate (CAGR) of 3.2%. Globally there are over 100 companies vying for a share in the market. As a result, this market is highly competitive with products and services offered in a number of segments. Of the five different technologies that Frost & Sullivan has covered within the scope of the research, the ultrasonic test segment is the largest contributor to market revenue. With a number of mergers and acquisitions taking place in the last few years, companies are doing all they can to increase their market share. Market dynamics, competitive landscape and growth opportunities vary across different NDT technology segments.
Traditionally North America and Europe have been the primary revenue contributors to this market, however in recent times growth has been driven by countries in South America and Asia Pacific. China was responsible for over half the revenues generated in 2010 due to the wide scale manufacturing activity in progress. Russia, with its vast amounts of oil and natural gas reserves, is expected to be a major contributor with new equipment being purchased due to increasing demand and replacement of outdated technology. India too is expected to be another hub for NDT activity with a huge increase in the demand for electricity leading to growth in the NDT market.
Of the many countries in South America, Brazil is the fastest growing economy today and is responsible for contributing heavily to the NDT market. The GDP of Brazil is projected to grow at a healthy rate of 5 percent, despite economic uncertainties. One can almost equate the progress of South America to the progress of Brazil. The Brazilian NDT equipment market was estimated to be around $45.5 million in 2010. With a predicted CAGR of 7.0 percent, there is a huge potential in the NDT market. At the heart of this growth are market friendly policies such as equal access to regional markets for non-resident investors as well as the governments growth acceleration program (GAP) which promotes investment in infrastructure.
The main drivers of the Brazilian economy are the oil and gas industry, the aerospace and the infrastructure industry, which require heavy investing in NDT equipment. Case in point, the major crude oil producer is Petrobras, which has a reputation for using cutting edge technology. Brazils oil & gas industry is the primary driver for NDT market revenues. The country has the second largest oil reserves in South America with an estimated 12.6 billion barrels. Similarly, Embraer is the third largest commercial aircraft company in the world and it contributes a sizeable chunk to the Brazilian equipment NDT industry apart from providing a fillip to the services industry too. Also, the dominant source of electricity is by means of hydro-electric power with a substantial 79 percent of the total electricity generation. With the rising demand in electricity, there have been a number of projects undertaken to increase electricity generation and 70 percent of which is by means of hydro-electric power.
The major participants in the NDT industry have their presence in Brazil, including AGR Field Operations, GE Inspection technologies, Olympus NDT, Sonotron NDT, and Fujifilm among others. The presence of foreign companies significantly raises the bar in terms of technology and quality levels to an extent that makes it hard for the regional players to compete. With Brazil establishing itself as a global power, the government was forced to modify its NDT equipment procurement policy, especially for military and aerospace applications, to match the stringent international standards for quality and safety.
There is no doubting the potential of the NDT market in Brazil. Challenges do exist, in the form of an unskilled labour pool and a lack of end user knowledge with respect to product differentiation. However, there are several other factors that encourage foreign direct investment (FDI), the most important being the rapid rate of infrastructure development in this country which continues to drive the Brazilian economy.