65
MARKET OVERVIEW
Contraction in energy demand in the first three quarters of the year accentuated geographical
differences and competitive pressures
During 2012, the markets in which the Prysmian Group’s
Utilities business area operates confirmed and in many
cases amplified the signs of uncertainty already appearing
in the second half of 2011. Both the power distribution and
generation markets experienced a decline in demand during
the first nine months of the year and stability in the fourth
quarter, with competitive pressures and differences between
the various geographical areas becoming even greater in the
last three months of the year.
Activities in the High Voltage market - traditionally highly
international both in terms of demand and supply -
were particularly affected by the global macroeconomic
environment and generally slowed compared with the prior
year.
Faced with general uncertainty about future energy
consumption and access to funding, the largest Utilities,
particularly in Europe and North America, adopted an
extremely cautious approach to new investment projects.
Industry demand was therefore limited to rationalisation and/
or maintenance projects - to improve efficiency and reduce
energy generation costs - in Europe, and North and South
America, or to the extension or completion of major initiatives
in the Middle East. Utilities in growing economies, like China
and India, became more and more demanding on the price
front, not only due to an increasing number of competitors but
also because of the need to limit financial exposure in the face
of uncertain investment returns.
With reference to the Submarine cables business line,
demand rose in 2012 thanks to investments by Utilities to
build new offshore wind farms and commence major new
interconnection projects.
Although this trend was particularly evident in parts of the
world, such as North Europe, the Arab Emirates and emerging
countries in Southeast Asia, where demand for energy has
grown over the past two years, new initiatives also emerged
in areas most affected by the financial crisis, like the
Mediterranean, thanks to infrastructure upgrade projects.
Demand in the Power Distribution business line generally
contracted throughout the period, interrupting the upward
trend in volumes initiated in the prior year.
Energy consumption in the major European countries
declined in the second half of the year, adversely affecting
demand by the major Utilities. The latter have maintained
an extremely cautious approach in view of the difficulties in
forecasting future growth, or else they have concentrated on
restructuring to improve efficiency and reduce costs of supply.
The competitive environment in terms of price and mix has
remained challenging almost everywhere.
In contrast, markets in North America showed slight signs of
a recovery during 2012, after a three-year period during which
operators had reduced work on grids to the bare minimum.
Likewise, the Brazilian market showed signs of vitality in
the first nine months of 2012 and remained largely stable
during the quarter just ended. Thanks to growth in domestic
energy consumption, demand was up on the prior year, even if
accompanied by stiff price competition.
The Network Components market can be broadly divided
into products for high and extra high voltage networks and
products for medium and low voltage use.
As regards the former business line, demand was affected,
especially in the two central quarters of the year, by the
contraction in the High Voltage sector, linked to the type of
investment projects by the major Utilities. Instead, demand was
stable or slightly higher for submarine accessories, as a direct
consequence of projects currently in progress around the world.
The Utilities’ growing focus on price and the challenging
competitive environment in the high voltage cables market
partially spilled over into the Network Components market.
The market for medium and low voltage accessories confirmed
the positive trend in volumes initiated in the prior year, despite
the decrease in demand in the Power Distribution business
line. The positive trend reflects the fact that these products
are normally used in ordinary maintenance of secondary
distribution grids, and are essential for ensuring normal power
supply.
