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2011Forecast—PVF


PVF sector in growth mode and is primed for 2011 breakout


comeback from a depressed 2009, and a repair, maintenance and inven- tory 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 be-


BY MORRIS R. BESCHLOSS PVF and economic analyst emeritus


U


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 inventories at the distri- bution level, manufacturing capacity was stuck in a recessionary low 70% usage, and nuclear energy and deep sea drilling were practically non-ex- istent. Therefore, 2011 would appear to be the springboard for an overdue turnaround. However, a partisan po- litical ‘gridlock’ confrontation could still upset a solid comeback period after two years of recessionary de- mand trends. Since the last couple of years


have seen the demand for energy derivatives (oil, natural gas, solar power, geothermal and hydro and electric energy) being reduced to a low ebb, the impact of the PVF sec- tor’s reversal has not been as pro- found as if this had happened in a more vibrant economy. Put in the context of limited growth anticipated in 2011, even a moderate


tween new projects and MRo di- minished to 85% maintenance and only15% capital expansion during the recession, even a minimal shift toward a historical balance would assure an expansion of PVF business in the upcoming months. However, guarded optimism for a certain rebound from the 2008-2010 bottom- ing out is best ex- plained by the major end-use industries that comprise a sector esti- mated at approxi- mately $30 billion in revenues at the prices paid by installers, con- tractors, and for main- tenance and project development. • Power. Power


generation has tra- versed maximum volatility during this century’s first decade. After the rigged pric- ing of phony shortages perpetrated by prop- erly maligned Enron, new projects were stopped or mothballed, as power generation went through a pe- riod of reassessment. This was com- plicated by an increasingly


• Moderate growth in MRO, inventories would mean double-digit growth in a slow economy


• Brakes on coal-fired power generation providing boost to natural gas for domestic power


• Ethanol questionable and subsidized, but good for ag sector and PVF providers


• Big new North American oil field to bring positive news to domestic PVF manufacturers


• Solar energy installations on a roll in Sun Belt


• Maintenance, repair in big facilities to give PVF sector a shot in the arm


• Exports of quality, U.S.-made PVF products on a roll in response to negative publicity over imports


• Be sure to visit www.thewholesaler.com for web exclusive articles and videos! •


aggressive Environmental Protec- tion Agency that demonized coal, the natural resource still used by 50% of existing power generating utilities. This has held up the development


of increased capacity, the lack of which would have played havoc under traditional growth conditions.


•THE WHOLESALER® — JANUARY 2011


tile area of power development is still meeting major institutional and populist resistance. Cost and lengthy development time factors are just about putting this powering element on the back burner, despite the pos- sibility of one or two being initiated. Storage of residual nuclear waste continues to be a major issue, dis-


recovery, requires a multitude of manufactured supplies, among which are a vast variety of pipe, valves and fittings. This is being stimulated by the need of Southeast Asia, Brazil, Russia and Eastern Europe, which depend on the American brand name for quality and service.


The export sector, which has been a major success story in America’s otherwise drooping post-recession


Although coal is still the cheapest powering element for utilities, and is in primary use by power develop- ment in the emerging nations of Southeast Asia, so-called “clean


couraging its usage in addition to the negatives already cited. • Transportation. The nation’s


automobile and truck users’ saving grace in limiting dependence on for-


coal” is a myth, and will not be ap- proved as new utilities are built, or current power generation stations are expanded. The EPA has made coal its target for elimination domestically, but this has been more than offset by foreign buyers, especially in South- east 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 En- vironmental Protection Agency. The extraction, piping and end-use instal- lation 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 nu-


clear-powered generating utilities being expanded “in place,” this fer-


eign 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 neigh- boring Canadian provinces. This will produce up to one and a half million barrels a day within the next five years, having a major salutary 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 pre- vious two million barrels a day drilling levels questionable. Whether this production returns to normal de-


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