The market activity is expected to continue being robust based on the long term metals demand projections, declining ore grades and tightening environmental regulations. However, in the short-term, issues related to the somewhat uncertain outlook of the global economy and availability of customers' financing may delay or postpone their planning and decision making process.
Quarterly order intake will continue to fluctuate considerably depending on the progress and maturity of sales negotiations, permitting and the availability of customers' financing. Currently, project financing is available especially for companies with good cash flows and investments in projects in the emerging countries. However, more complex structures of the financing packages and stricter permitting requirements, especially in large investments, lengthen customers' ordering process.
Tightening efficiency and environmental regulations and the declining ore grades continue to attract investments in plant modernization, optimization, services and increased automation. In addition, rising energy prices are driving the industry to improve processes in order to achieve lower unit costs. Global relocation of production is driving the investments to new capacity.
Non ferrous Solutions
The strong activity in the non-ferrous technology market is expected to continue. Not only are gold, copper, silver and platinum group metals projects being activated and developed, but also zinc and some nickel projects are coming to the market. Investments in new mines and concentrators are progressing fast and the investment activity in the downstream metals refining technologies is continuing. Competition remains tight in new projects; however, there are no material changes to the competitive landscape. Long term fundamentals remain strong as ore grades decline; thus more processing capacity and advanced technology solutions will be needed in both concentrators and metals refining. Meanwhile, environmental regulations grow tighter and the cost of energy and water rise; increasing the need for new and modern technological solutions.
Ferrous Solutions
The demand growth for iron ore and coking coal used in steel production, is expected to continue. The demand for stainless steel raw materials also shows strong growth and the activity in ferroalloy projects is increasing for instance in China where the authorities are creating tighter environmental and energy efficiency requirements. Outotec received its first ferrochrome project in China in the third quarter and sees further demand. Brazil, India and South Africa continue to rapidly develop their infrastructure and to utilize their large natural resource base. There are several iron ore processing plant expansions and new investments under development particularly in Brazil and India. In addition, the depletion of lump ore deposits is driving sinter and pellet plant investments in India. Outotec's sustainable solutions both in iron ore as well as ferroalloys sintering and palletizing technologies continue to be in strong demand because of their energy efficiency, capacity and environmental aspects. This trend is expected to continue gaining momentum to reduce energy consumption of existing facilities as well as build environmentally more sustainable solutions. In the future, unconventional techniques, such as the direct reduction of iron ore, offer increasingly more opportunities to use lower grade raw material resources as well as optimized energy production and the reduction of CO2 emissions. Deliveries in the Ferrous Solutions business area are mainly large, turnkey projects and fluctuations in sales and profit recognition based on the timing and completion level of a particular project are inherent in this type of business.
Energy, Light Metals and Environmental Solutions
Rising oil prices and the depletion of oil reserves increase the demand for alternative energy sources, such as oil shale, oil sands and biomass. The world's recoverable oil shale and oil sand resources are at least ten times greater than those of conventional oil reserves, with large deposits found in the US, Canada, Brazil, China, Jordan, Russia and Estonia. Outotec and Eesti Energia have jointly developed a new technology solution, Enefit, utilizing Outotec's circulating fluidized bed technology. This technology will be used in Eesti Energia's oil shale plant currently under construction in Narva, Estonia. The Enefit technology can be applied anywhere in the world for processing oil shales as well as oil sands in the future.
The demand for aluminum is also growing. Consequently, aluminum and thus bauxite and alumina projects are expected to further activate. The Middle East is leveraging its advantageous energy position by building new smelters and refining capacity. Outotec with its digestion and calcinations technology, an application based on circulating fluidized bed technology, is providing key solutions to the alumina refining process. Furthermore, with its carbon plant solutions, Outotec is a vital partner to the aluminum industry.
The business area's environmental solutions include sulfuric acid plants as well as applications for gas cleaning and heat recovery systems. The outlook for the sulfuric acid technology market remains positive due to the strong activity in copper projects which require sulfuric acid in hydrometallurgical processes. Additionally sulfuric acid is produced as a by product in pro metallurgical processes including those which minimize the impact on the environment. The sulfuric acid market is also driven by an ongoing need from the fertilizer industry. In addition to sulfuric acid plants, any metallurgical process requires off-gas cleaning and effluent and water treatment technologies to reduce its environmental impact.
New opportunities in environmental technologies, such as materials recycling and waste management, are steadily increasing. Interest in industrial waste water treatment solutions is also growing. The technologies acquired by Outotec in the reporting period further strengthen the business area's portfolio.
Services
Outotec's Services business is driven by a life cycle service concept and capacity utilization rates. In addition to operational spares, life cycle services include increasing capacity utilization levels, modernizations, upgrading existing operations as well as new capital investment projects. Customers' need for spare parts, services and modernizations are expected to further increase due to re-commissioning of production lines and higher capacity utilization rates. The scope of services varies from single spare parts to outsourced service agreements. This industry trend creates new growth opportunities on many levels and supports the company's goal to be a life cycle partner for its customers. The businesses acquired in 2010 further strengthen Outotec's service offering and strengthen its capabilities globally.
