VDMA Large-scale plant engineering holds its own with solutions for decarbonization in a difficult market environment
The VDMA Large-scale Plant Engineering Group (AGAB) registered orders worth € 21.0 billion at their European headquarters in 2022 – 0.8% less than in 2021 (€ 21.2 billion). Despite a multitude of challenges, the large-scale plant engineering sector thus successfully mastered the difficult year 2022 and holds its own in the market. “In addition to the digitalization and automation of many workflows as well as the use of innovative technologies in the engineering and construction of plants, the companies’ focus on sustainable technologies has paid off in particular,” said Dr Hannes Storch, Deputy Chairman of AGAB and Managing Director of Outotec GmbH & Co. KG, referring to the business development of the past year.
High demand from the domestic market and from industrialised countries
Domestic orders doubled to € 6.6 billion in 2022 (2021: € 3.2 billion), the highest level since 2011. This upswing was triggered by mega orders for the grid connection of several offshore wind farms in the German North Sea. At € 14.4 billion, foreign order intake was 20% below the level of the previous year (2021: € 18.0 billion). This decline is primarily due to the loss of the Russian market: Foreign orders adjusted for the Russian business increased by 23% in 2022.
The VDMA large-scale plant engineering companies were particularly successful in the industrialised countries last year. For the first time since 2008, they received orders worth more than € 7 billion. Around 60% of this volume came from customers in Western Europe. In the USA, orders reached a record level of € 2.2 billion. Member companies also reported growth in the Middle East and in emerging markets such as Brazil and India.
Large-scale plant engineering enables the decarbonization of many industries and of the mobility sector
The markets in large-scale plant engineering are changing more than ever – and not just because of the Ukraine war. The market environment in 2022 was again characterised by pandemic-related catch-up effects and projects for the digitalization and decarbonization of industrial processes. Storch: “AGAB members set standards here, for example in the supply of refineries for synthetic fuels as well as plants for CO2-free energy generation. VDMA largescale plant engineering is also one of the global sustainability pioneers in the construction of climate-neutral steelworks and cement plants, as well as in the sustainable extraction of non-ferrous metals.”
Bridging technologies help in the transition to a sustainable economy
In addition, plants for hydrogen, which is to play a central role in decarbonization as an energy carrier in the future, were also delivered in 2022. So far, however, there is still a lack of large-scale plants with which green hydrogen can be produced on a gigawatt scale. Until that happens, greater use of blue hydrogen and blue ammonia, whose CO2 is captured and stored using carbon capture and storage (CCS) technology, is inevitable. “The transition from an economic model based predominantly on the use of fossil energies to one based exclusively on the use of renewable energies can only succeed through a gradual conversion and a mix of green and fossil energy sources with CCS,“ analyses Dr Storch.
Legal certainty needed for mobile working abroad
The profound change in the world of work after the pandemic calls for new fiscal framework conditions. Why? The solution of mobile working, made popular by technological progress and the shortages of skilled workers, entails the risk of unintentionally establishing taxable permanent establishments abroad when crossing borders. However, the time-intensive construction sites that characterise large-scale plant construction already led to a large number of permanent establishments abroad and thus to additional administrative work – compared to many other sectors and the competition outside the OECD. Additional taxable permanent establishments should therefore only come into existence after a certain number of mobile working days abroad to avoid further administrative burdens due to unwanted wage tax obligations in other states. National regulations alone are not sufficient for this.
“The VDMA large-scale plant engineering sector is therefore pushing for an internationally coordinated approach – at least within the European Union, ideally between the OECD member states,” says Storch, summarising the requests of the large-scale plant engineering sector.
2023: Orders expected to increase
Most AGAB members anticipate constant or even increasing orders in 2023 and are predominantly optimistic regarding order intake. This confidence is mainly fed by the fact that VDMA large-scale plant engineering can offer its customers innovative technologies for clean energy generation and the decarbonization of industrial processes. In addition, the companies are consistently expanding their service business and are actively participating in the development of a circular economy in Europe by building plants for recycling materials. “The prospects in large-scale plant construction are promising; after all, the industry sector 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,” is Dr Storch’s encouraging conclusion.
