Q & A: KOBELCO ENTERS THE LARGE-CAPACITY CENTRIFUGAL COMPRESSOR MARKET

Takao Ohama, Senior Managing Executive Officer at Kobe Steel, Ltd., who heads the Compressor Division, talks about Kobe Steel’ future plans for its compressor business.[/caption]

Please give an overview of Kobe Steel’s compressor business.

Our formal name is Kobe Steel, but in the machinery field we’re better known as Kobelco. This is not only a brand, but represents the compressor business of Kobe Steel and its group companies. We’re Japan’s leading supplier of all types of compressors. We offer tailor-made reciprocating, screw and centrifugal compressors, as well as standard screw compressors for air and energy applications, such as standard screw compressors for refrigeration units and heat pumps. As for process gas compressors, we’ve been in this business since 1915 when we made Japan’s first reciprocating compressor. We’re the only compressor manufacturer in the world that can supply reciprocating, screw and centrifugal compressors. These nonstandard compressors make up the majority of our total compressor sales. Especially in the field of nonstandard screw compressors, we estimate that we have a 50% share of the world market.

In which markets is Kobelco particularly strong?

Outside of Japan, major markets for our nonstandard compressors are the United States, Europe, China and the Middle East. For that reason, we currently have manufacturing locations in Japan, the United States and China. Our compressors are used in making compressed air for air separation, petrochemical processes, factories and instrumentation; process gas at oil refineries and petrochemical plants; associated gas for oil and gas drilling; natural gas and fuel gas for power plants; blast furnace byproduct gas at steel plants; and other industrial applications. Our strength lies in compressors for applications that require high efficiency and special processes.

How much customization is required for your nonstandard compressors versus providing customers with standard machines?

Standard compressors are essentially off the shelf. They come with predetermined specifications and are available in a variety of models. Nonstandard compressors are custom engineered entirely to conform to global codes and regulations, and to meet customer requirements with specifications based on their experiences.

What plans do you have for your nonstandard compressor business?

We estimate that the world market for nonstandard compressors comes to around 1 trillion yen ($9 billion). Typical applications for our compressors are in petrochemical plants, oil refineries, and air separation plants in steel mills. As these manufacturing facilities grow in size, they are generating a corresponding need for larger compressors. Our latest strategy is to enter the large-capacity centrifugal compressor market. We see potential for growth in this field, especially in Asia. Our current menu for internally geared centrifugal compressors covers small-to-medium-capacity units. However, demand for large integrally geared centrifugal compressors is growing due to the increasing need for large-capacity, high-pressure and high-efficiency units. That is why we are constructing one of the world’s largest test facilities, a 40 MW test facility that can test compressors under the same or similar conditions as they will be used onsite.

What plans do you have for growing overseas locations?

In recent years, we have opened sales units in Europe, the Middle East and South America. In 2012, we established Kobelco Machinery Europe in Germany to sell nonstandard compressors and Kobelco Machinery Middle East in the United Arab Emirates to provide after-sales service for nonstandard compressors. The following year, we set up Kobelco Machinery do Brasil for marketing and aftersales service of nonstandard compressors. In total, we have seven locations for nonstandard compressors (Japan, U.S., Germany, UAE, China, Singapore and Brazil).

What is driving you to erect a new 40 MW test facility for large-sized centrifugal compressors?

Our current test facility can handle compressors up to 20 MW. But as demand for larger compressors has continued to increase, we’re now constructing a 40 MW test facility at Takasago Works in Japan that manufactures compressors, among other products. Compressors made there will be sent to the test facility to confirm mechanical stability and design performance, prior to shipment. When the new test facility goes into operation in the first quarter of 2017, we’ll be able to increase our testing capacity by 30%.

How do you view current market conditions?

Last year, orders for compressors for the oil, gas and petroleum refining industries were down on the previous year. Low crude oil prices have caused major energy companies to curtail capital investments so demand remains weak. We believe this situation will continue for the foreseeable future. On the brighter side, there are signs of recovery in the downstream petrochemical field and demand is stable for compressors for infrastructure use, such as in air separation units and power plants. Overall, we anticipate steady demand for compressors in the coming year. Demand for energy over the medium to long term will continue to grow and the current sluggish phase of the global economy will be resolved over time.