2001 Industrial PVF Forecast: Maybe this year
For the last several years, members of the industrial pipe, valves and fittings industry have optimistically projected improvement in the market. But with the possible exception of stainless-steel companies -- which had nowhere to go but up -- PVF firms repeatedly have had to bite the bullet and say, "Well, maybe next year ... "
The situation is no different for 2001. Some industrial-PVF distributors have already seen changes in their customer base that will kick start their sales. Thad Chesson, vice president and treasurer of The Massey Co., Mount Holly, N.C., reported a depressed industrial market and lack of project work in its market. But he sees improved prospects in Massey's chemical-plant customers during the last quarter of 2000, and he expects that improvement to hold into the new year.
"It seems chemical plants are now owned by people who want to be in the chemical business," he said. "Several years ago, they wanted to get out of it."
Expectations of industrial-PVF wholesalers vary by region. The Northeast is booming with activity in the biotech and pharmaceutical industries, and Jim La Porte Sr. of Bergen Industrial Supply (Elmwood Park, N.J.) said that his company has about all the business it can handle. Bergen's contractor customers are very busy with major projects for Merck, among others. Bergen's inventory is seeing rapid turnover, too. Three-fourths of what the company orders goes out to customers as soon as it arrives at the warehouse.
"The pharmaceutical companies are spending not millions but billions of dollars," La Porte said. "Most of our contractors are working, and they need everything from 36-in. pipe, valves and fittings down to 1/2-in. Merck has 1,200 pipefitters going through the gate every day."
La Porte sees e-commerce as another wild card over the next few years. "I think smaller companies will be ready before the bigger ones. We're spending a lot of money on it, but we will be ready."
Bergen expects a good year in 2001. "We're optimistic. Everything is in place, and we've even picked up some new customers, which is a novelty around here."
On the other side of the country, Earl Cohen, president of Kelly Pipe in Santa Fe Springs, Calif., said his company has been enjoying relatively good times due to the upswing in oil and natural-gas production. The company added oil-country product lines in May, which have worked very well, Cohen said.
Kelly's other business, though, has only been "OK," he added. "The prices on carbon pipe has fallen. Every day we hear another, cheaper price. The blame has been passed from Japan to Korea to Taiwan to mainland China. In the process, Chinese products have become acceptable in some areas, and those prices are unbelievably cheap. Up until now, the domestic manufacturers have been able to stay reasonably competitive on welded pipe, but it seems now that the imports have broken a level that U.S. mills can't compete with."
Cohen hopes that recent and future anti-dumping suits will help. "Maybe in a while, we'll have the hole plugged. In the meantime, we have a lot of inventory. We hate to see the price go down with so much pipe in our yard."
On the up side, though, Cohen reported that highway and bridge construction as well as high-rise building are still relatively strong in California.
"Our company is very diversified, and we won't panic. We won't get the margins we'd like, but that's the nature of the beast. This is a cyclical business."
No one knows the cyclical nature of the PVF business better than Jim Bokor, president of Buffalo, N.Y.-based Robert James Sales. The stainless- and alloy-steel segment of the industry is arguably its most volatile. 2000 brought improved pricing after a period of prices that were badly depressed. With the price of nickel dropping again, Bokor expects to see renewed erosion on pricing and margins for his company's products.
"That's not a lot of demand out there," he said. "Don't ask me why. We can't manufacture demand, and the manufacturers that cut their prices are only hurting themselves."
However, in mid-December, Bokor saw a significant increase in the number of quotations his company was asked to make. "Next year may be better than people think, as far as business anyway. But pricing is still under pressure."
Bokor also observed that it seems that declines in pricing happened much more quickly than during previous slowdowns. He is hopeful, though, that the active semiconductor industry will continue for the next couple years, and he agreed that pharmaceutical is booming. In fact, Robert James just opened a branch dedicated to that market in Raleigh, N.C.
"We are also absolutely sold out at our manufacturing facility in Houston," Bokor added. "There's a lot of pent-up spending that has to happen soon. End users can't keep putting Band-Aids on this stuff."
The national viewThe Valve Manufacturers Association of America predicts an overall 2% increase in shipments of industrial valves, with 2001 shipments reaching $3.12 billion. With last year's rise in oil prices, the biggest increase is projected for the petroleum-production market, although even that is expected to grow no more than 2%. The next largest increases are only 1% each in water and sewage; power generation; refining; commercial construction; and food and beverage. Corresponding decreases will be seen in pulp and paper; oil and gas transmission; gas distribution; iron and steel; and chemical applications.
The Federal Reserve Bank of Dallas predicts that high worldwide demand for oil and natural gas and a shortage of tankers to transport crude oil will keep prices up for several years to come, despite suggestions to the contrary by the spot and futures markets. If that projection holds true, PVF wholesalers and other suppliers to oil fields and refiners should continue to see a healthy demand for their products. But the petrochemical industry feels the crunch of higher energy prices. Overall, the Dallas Fed expects favorable economic conditions for the energy-exporting states of Louisiana, New Mexico, Oklahoma and Texas.