^ Golden future for trading companies
Article by Michel François Bolle
The 1990s and the beginning of the new millennium were definitely the golden period for valve traders, as far as I’m concerned. There was a massive spread of power plants to build all over the world. Giant waterworks projects came out fast and furious, and valve manufacturers struggled to fulfil the oil and gas industry’s rising demands.
During this time, to nail it from the beginning, it was almost impossible not to make big money selling valves. In addition to this, most of the valve manufacturers were firing up for massive global development and needed trusted local partners and brand promoters.
The gold run seemed as unstoppable as the legendary chart success of the singer Shakin’ Stevens during the 1980s in the UK and all over Europe. You might ask: ‘what is the connection between Shakin’ Stevens and the valve business?’. Well, they were both stopped by the emergence and rapid rise of the Internet, which completely changed the market rules.
Suddenly even junior purchasing managers were able to access the global valve market with a few clicks. It did not take long before the big players in the market figured out that working directly with the valve manufacturer could save them a lot of money. As a result, the trading companies came under massive pressure. For sure, valve traders had excellent local contacts, tried to defend their kingdom, and massively reduced their margins. But by the end of the day, when it came to money, the big cakes, and the giant projects, many valve manufacturers started to shortcut their partners.
Big comeback for valve traders
If I look back to the 1990s and all the trading companies I have worked with, only a few have survived and have often had to massively reduce their staff in the process. A few gambled on niche markets, which, most of the time, was an ingenious survival strategy.
“It is not surprising to see valve trading companies having technical staff with better technical knowledge than the manufacturers.“
But as usual, in a fast-changing market, when you believe that something has had its time, new opportunities pop-up almost out of nowhere. In 2021 without any doubt, valve trading companies are striking ahead for a big comeback!
There are numerous reasons for this evolution, but I consider two factors which are having a crucial impact on today’s situation. Firstly, there are fewer and smaller projects for the global valve market.
Especially in the traditional power and oil & gas industries. And secondly, many large companies (both manufacturers and valve buyers) have massively reduced their staff during the past ten years.As a result of this, at almost at all levels (valve manufacturers, engineering companies, EPC companies and end users) there is a visible lack of knowledge and experience as far as valves and valve applications are concerned. This for sure does not apply to all companies, but it is a general tendency I have clearly identified over the past years.
Another critical point that has a significant impact on the upcoming rise of the valve trading industry is that many valve buyers are obligated to reduce their overall quality costs. They are striving to reduce their number of valve suppliers, which results in massive cost reduction in terms of implementing and maintaining supplier qualifications.
It is not surprising to see valve trading companies having technical staff with better technical knowledge than the manufacturers. And in the space I orbit, I recognize more and more trading companies who are assisting their customers in writing the technical specifications for valves.
And last but not least, large valve groups and manufacturers are condemned to focus on their big projects. There will be no miracle. If you have a backlog of around 25 million, divided into four big projects of five million each, plus a few small to average orders for 1 million apiece, there is no other choice than to focus entirely on the main invoicing targets. We live in a world of forecasts, marks, targets, and shareholder value. This situation overall also offers significant new opportunities for valve trading companies.
Create added value
To make a substantial impact on the actual market, I believe that valve trading companies should focus on a number of issues (see box). I predict that applying these rules of success cannot fail in the mid-term and long-term basis. At the end of the day, it is all about ‘creating added value’! Valve trading companies must be an ‘added value provider’ for both valve users and valve manufacturers.
Valve traders who can be ‘world-class’ at any stage of the project will win the race. The market is wide open; there are many challenging opportunities that will emerge in the next few years, and I am sure that everyone doing legendary work will take a slice of the cake.