At 24.3 billion euros, domestic incoming orders from members of the VDMA Large Plant Construction Working Group in 2023 were 15.7 percent above the level of the previous year (2022: 21.0 billion euros). The value represents a long-term high and is based on both large and mega projects for sustainable systems as well as orders for services and spare parts.
“The use of innovative technologies in project management as well as the companies' strategic orientation towards new markets and climate-friendly technologies have contributed significantly to this growth,” says Jürgen Nowicki, Chairman of the VDMA Large Plant Engineering Working Group (AGAB) and CEO of Linde Engineering.
Orders from industrialized countries
Domestic orders rose by 45.4 percent in 2023 to a record value of 9.6 billion euros (2022: 6.6 billion euros). In addition to a large number of small and service orders from the energy sector, this was triggered by several large orders for sustainable systems, particularly from the steel industry. At 14.8 billion euros, foreign incoming orders in 2023 were 2.5 percent above the level of the previous year (2022: 14.4 billion euros).
The AGAB members have thus succeeded in compensating for the loss of the Russian market and the declining demand from China and India by acquiring new customers in other regions of the world.
Western Europe USA is experiencing high demand
The VDMA large-scale plant manufacturers were particularly successful in Western Europe and North America in 2023. The companies there booked orders worth 7.7 billion euros (2022: 7.2 billion euros). The most important individual market was the USA with orders worth 2.4 billion euros (2022: 2.2 billion euros), followed by Italy with 1.1 billion euros and Great Britain with 860 million euros.
On the American market, the investment incentives provided by the “Inflation Reduction Act” had a positive effect on demand for equipment.
“The figures show that our members have managed to compensate for the loss of previously important markets in a short space of time. The key to this is agility: Plant manufacturers have set up their organization in such a way that they can act flexibly in volatile markets,” explains Nowicki.
Increased acceptance of transition technologies CCS and CCU
In the current market environment, new opportunities are opening up for the industry - especially due to the increasing need for sustainable production facilities and power plants.
Transitional technologies in which carbon dioxide is captured and stored (CCS = Carbon Capture and Storage) or used for other industrial material purposes (CCU = Carbon Capture and Utilization) are gaining acceptance, especially in the USA and Europe.
In a remarkable decision, Germany has readjusted its previous position and now wants to enable the use of CCS and CCU. The focus for the use of the technology should be on emissions that are difficult to avoid, for example in the steel or cement industries.
“Behind this change of mind is the realization that the transition to a climate-neutral industry cannot be achieved suddenly, but only gradually through a mix of green and fossil energy sources with integrated CO2 storage. Otherwise, both the competitiveness of Europe as an industrial location and the ambitious climate goals by 2050 would be at risk,” says Nowicki.
Artificial intelligence
Large-scale plant engineering is increasingly focusing on AI and testing different scenarios to increase productivity.
“Significant progress has already been made through the use of AI in the programming of systems and in software development,” says Nowicki.
The members of AGAB observe the dynamic development of technologies and deal with new fields of application, for example in the area of project purchasing and engineering.
“In the future, AI promises significant leaps in productivity for plant engineering by supporting engineers in carrying out complex planning tasks,” adds the AGAB chairman.
Modernization of the OECD consensus in large-scale plant engineering
The project business of VDMA large-scale plant construction is dependent on reliable and practical political framework conditions. However, in the area of government-sponsored export financing, there is only a limited level playing field for companies from OECD countries in global competition.
“We therefore welcome the modernization of the OECD Consensus implemented last year. The scope of application could not be expanded to include development cooperation or investment guarantees. “The rules are now more flexible and better suited to offering more competitive conditions compared to non-OECD competitors such as China,” explains Dr. Harald Weber, Managing Director of AGAB.
VDMA calls for the deepening of the European internal market
Large-scale plant engineering, whose technologies can also make a decisive contribution to Europe's path to a climate-neutral future, is joining the calls of European business associations to further deepen the internal market. “The dynamics of European integration must be renewed,” says Weber, especially with a view to the existing obstacles to the posting of workers within Europe and refers to the paper signed by the VDMA.
Optimism in the industry
Most AGAB members expect sales to remain constant or increase in 2024 and are also optimistic about order intake, especially when it comes to demand from Europe.
This confidence is based on the fact that VDMA large-scale plant engineering can offer its customers innovative technologies for clean energy production and the decarbonization of industrial processes. There is also the potential of the service business and innovative technologies such as artificial intelligence.
“The prospects for large-scale plant construction are promising; after all, the industry plays a key role in achieving the 1.5 degree target. This opens up growth prospects, with climate neutrality being the common goal of all AGAB members,” says Jürgen Nowicki.
