2011 Industry Forecast


PVF sector in growth mode and is primed for 2011 breakout By Morris R. Beschloss, PVF and economic analyst emeritus


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nder normal circumstances, 2011 should surely be a major economic rebound year for all aspects of the pipe-valve- fittings sector. After almost two years of minimal inven-


tories at the distribution level, manufacturing capacity was stuck in a recessionary low 70% usage, and nuclear energy and deep sea drilling were practically non-existent. Therefore, 2011 would appear to be the springboard for an overdue turnaround. However, a partisan political ‘gridlock’ confrontation could still upset a solid comeback period after two years of recessionary demand trends. Since the last couple of years have seen the demand for ener-


gy derivatives (oil, natural gas, solar power, geothermal and hydro and electric energy) being reduced to a low ebb, the impact of the PVF sector’s reversal has not been as profound as if this had happened in a more vibrant economy. Put in the context of limited growth anticipated in 2011, even


a moderate comeback from a depressed 2009, and a repair, main- tenance and inventory rebuilding of 2010, would call for a growth in the low double digits, with the end-use needs of even a slowly-expanding economy going forward impressively. With the traditional 50/50 split between new projects and MRO diminished to 85% maintenance and only15% capital expansion during the recession, even a minimal shift toward a historical bal- ance would assure an expansion of PVF business in the upcoming months. However, guarded optimism for a certain rebound from the 2008-2010 bottoming out is best explained by the major end- use industries that comprise a sector estimated at approximately $30 billion in revenues at the prices paid by installers, contractors, and for maintenance and project development. • Power. Power generation has traversed maximum volatility


during this century’s first decade. After the rigged pricing of phony shortages perpetrated by properly maligned Enron, new projects were stopped or mothballed, as power generation went through a period of reassessment. This was complicated by an increasingly aggressive Environmental Protection Agency that demonized coal, the natural resource still used by 50% of exist- ing power generating utilities. This has held up the development of increased capacity, the


lack of which would have played havoc under traditional growth conditions. Although coal is still the cheapest powering element for utilities, and is in primary use by power development in the emerging nations of Southeast Asia, so-called “clean coal” is a myth, and will not be approved as new utilities are built, or cur- rent power generation stations are expanded. The EPA has made coal its target for elimination domestically, but this has been


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more than offset by foreign buyers, especially in Southeast Asia. • Natural Gas. This has taken front and center row as the powering element of choice due to its relatively low cost, its newfound abundance through the shale “fracking process,” and minimal tolerance from the Environmental Protection Agency. The extraction, piping and end-use installation of natural gas will provide a major lift to PVF product usage, as its expected major expansions in 2011 and 2012 take hold. • Nuclear Power.With 104 nuclear-powered generating util-


ities being expanded “in place,” this fertile area of power devel- opment is still meeting major institutional and populist resis- tance. Cost and lengthy development time factors are just about putting this powering element on the back burner, despite the possibility of one or two being initiated. Storage of residual nuclear waste continues to be a major issue, discouraging its usage in addition to the negatives already cited. • Transportation. The nation’s automobile and truck users’


saving grace in limiting dependence on foreign oil has been a reduction of 15% from the 21 million barrels usage of gasoline a day, just three years ago. Abetting the supply/demand balance has been the discovery of the largest land-based find in years, the Bakken Belt, which is now in the process of being developed in the Dakotas and Montana. It also extends into neighboring Canadian provinces. This will produce up to one and a half mil- lion barrels a day within the next five years, having a major salu- tary effect on the usage of PVF products domestically. Although the moratorium on deep sea drilling in the Gulf of


Mexico has been lifted, the absence of drilling rigs transferred to Brazil’s Petrobas offshore fields makes a return to previous two million barrels a day drilling levels questionable. Whether this pro- duction returns to normal depends on the latent hostility that the current Administration harbors against this method of oil recovery. It’s doubtful that the U.S. will return to six million barrels a


day domestically under present circumstances. However, a sub- stantial decrease in highway car and truck traffic will put less demand pressure on U.S. domestic oil storage facilities. With the Canadian oil sands industry continuing to expand,


U.S. companies are being called upon to provide product and expertise, even though an increasing volume of the converted oil product is headed for China, which has invested in rail lines and a port in British Columbia. A U.S. pipeline to deliver product to Oklahoma and Texas-based refineries is still under dispute, due to the need for Environmental Protection Agency clearance. Continued on page 62


January 2011/Page 61


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