Valves report: August 2017
According to R.W. Baird’s Industrial Review, both quotation and order activity improved in 2Q17, but at a slower pace than in the previous two quarters. Today, the industry mood would best be described as “guardedly optimistic” in contrast to the post-election euphoria that our industry experienced at the end of 2016 and in 1Q17.
Growth expectations continue to remain very healthy with 85.0 percent of the Baird survey respondents still predicting positive growth for 2017. However, that is still below last quarter when ALL respondents expected positive organic growth for the year. Typically, these expectations move lower through the year, but actually, all indications are that the overall industrial PVF market is getting stronger. In fact, the American Supply Association’s industrial PVF distributors recently reported a solid 6.5% increase on average in year-over-year sales results through June.
Globally, Europe remains fairly stagnant, Asia is quite strong with India and China leading the way, and the Middle East and South America will continue to struggle until there is a firm pricing recovery in the global oil and gas markets.
Oil and gas
Currently, the market is improving at a rapid pace, though sustainability remains uncertain due to the recent volatility in oil prices.
These markets are continuing at healthy levels and are predicted to remain stable and positive for 2017.
These markets are by no means booming, but they are holding steady, and the outlook is for continued improvement through 2017, this according to the aforementioned Baird survey respondents.
Commercial building construction is up 4% on a year-over-year basis through May 2017. Architectural firms saw a strong increase in billings in the first half of 2017. Increased activity in this area presages actual construction by 9-12 months and points to healthy levels of construction activity for the second half of this year as well as into 2018.
There still is a fair amount of activity in the combined cycle area of this market, which has virtually eliminated any expansion activity in both the “other fossil” and/or nuclear markets. All indications are that natural gas is the clear winner as the fuel/energy source of choice in this country and this decision requires our government to approve considerable new gas pipeline construction in order for the U.S. to return to a really robust power market.
Municipal water infrastructure
There is certainly a tremendous pent-up demand for repair and replacement in this market, but nothing of significance will happen until a focused and funded commitment comes out of Congress.
Industrial valve pricing
According to the Producer Price Index, industrial valve pricing is only up an average of 2.0% since June 2016, but that may change in the near future. There was considerable price volatility in the month of July with copper rising 8% and nickel rising 10%. Due to these material increases and other cost drivers, a price increase could be in the cards as early as the August-September timeframe. It is anticipated that this increase would definitely affect brass, bronze and iron valves as well as affecting carbon and stainless valves.
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