Industrial PVF

Industrial Hotspots

The early part of the year proved to be a rocky economic road for industrial spending in many industries across North America. Consolidation, plant closures and layoffs made too many headlines. Nonetheless, there was also good news to report, as noted in these regional and industry snapshots of projected industrial spending reported by Industrial Info Resources, www.industrialinfo.com.

Chemical Processing. Capital and maintenance spending in the U.S. and Canada for the Chemical Processing Industry (CPI) during the second quarter of 2007 looks impressively strong with the potential for an increase in project activity of more than 20%. This increase includes some 280 active projects with a construction kick-off planned for the second quarter of 2007, with a total investment value (TIV) estimated at $2.6 billion. An estimated 38% of this project activity is planned maintenance turnarounds expected to take place during the quarter, a substantial 26% increase in turnaround project activity over last year. The Southeast region, consisting of Mississippi, Tennessee, Alabama, Georgia and Florida, is home to an estimated 655 operational chemical plants. The Chemical Processing Industry (CPI) has historically contributed between $800 million and $1 billion in total project spending to the region each year over the past decade, although spending dropped off significantly to just more than $300 million in 2005. Quick improvement was seen in 2006 as total spending was expected to exceed $870 million from over 100 projects. Three companies - Formosa Plastics Corp. USA, Chevron Phillips Chemical Co. LP and Pioneer Americas Inc. - will invest a combined $642 million in projects located in Texas and Louisiana. On the West Coast, Praxair Inc. reinforces the trend of a growing demand for hydrogen by petroleum refiners, with plans to begin construction by June 2007 for a grassroots $260 million hydrogen plant in Richmond, CA. BASF Corp. plans to expand its recently acquired site in Wyandotte, MI, with an investment of $140 million starting in April.

Pharma-Biotech. The first quarter of 2007 heated up for the North American Pharmaceutical-Biotech Industry with more than $2.4 billion of capital and MRO (maintenance) projects estimated to have begun in the first three months of the year. This is a whopping increase of more than 100% compared to 2006, when 20 projects worth a cumulative total investment value (TIV) of $1.2 billion began construction in the first quarter. The Northeast region, which includes New York, New Jersey, Pennsylvania and Delaware, garnered the majority of project spending with a TIV of $882 million spread over six projects. It was sparked by the kickoff of the massive $500 million first phase of the East River Science Park in New York City.

Great Lakes. This region began 2007 with a hefty increase in construction starts over that of the previous year and the second quarter appears poised to be even better for the region. Currently, Industrial Info Resources is tracking over 400 active capital and maintenance projects worth just under $20 billion that are scheduled to begin construction during the second quarter, which is an increase of 56% over the same period in 2006. The month of May will see the bulk of the spending with $8.6 billion anticipated to be spent during that month. The months of April and June split the balance of the spending at $5.6 billion each. Illinois is leading the way by far with $9 billion worth of construction expected to begin. Indiana is a distant second with $3.2 billion, followed by Michigan - the once great Mecca of automotive spending - at $2.3 billion. Alternative fuels projects, such as a proposed coal-to-liquids conversion project in East Dubuque as well as numerous proposed ethanol plants, have proven to be a boon to Illinois. Despite spending downturns in certain markets, such as the automotive industry, other industries, like alternative fuels, are more then making up the slack for the second quarter in the region. All signs point to 2007 being the best spending year in recent memory for the Great Lakes region.

Ohio. Ohio is one of the largest states in the nation for industrial project spending. Currently, Ohio is host to more than 220 planned industrial projects totaling more than $6 billion scheduled to begin construction in 2007. The largest project on the books for Ohio is a plan by DaimlerChrysler to retool an automotive machining plant in Perrysville, OH. Another large project scheduled for construction this year is a $500 million metallurgical coke plant planned by U.S. Coking Group LLC in Oregon, OH. In a related move, Sun Coke Co. will begin construction this spring on an expansion of its new metallurgical coke plant in Haverhill, OH. The $230 million project includes a 67-megawatt cogeneration plant.

New England. New plant construction in New England looks to nearly triple the number of projects that were completed in 2006. The region has 42 new facilities carrying a TIV of $1.2 billion scheduled to be completed this year. Massachusetts expects 13 new plants to complete construction this year, while Connecticut and Maine have eight plants each.

Rocky Mountains. The Rocky Mountain region continues to show growth in industrial project spending with each passing year. The investment spending figures for 2007 indicate a dramatic increase over 2006 with an estimated $16 billion forecast to be spent on 332 capital projects that are due to be completed within this calendar year. This represents a climb of 48% over last year’s 172 projects, while TIV figures for 2007 show a whopping gain over last year’s TIV of $5 billion. Most of the grassroots power plants set to come online by the end of the year are wind farms, with 15 new facilities and a cumulative TIV of over $2 billion. The region includes Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah, and Wyoming. Up 27% from 2006, more than $23 billion has been forecast to be spent on capital projects for 2007.

Midwest. The Midwest region has exploded with industrial project development scheduled to begin construction in 2007. Leading the way is the Alternative Fuels industry, with a TIV of more than $11 billion. Not all of these projects will reach the construction stage this year and many will be delayed or cancelled due to market, permitting and/or financing reasons. All in all, the Midwest region has $35 billion worth of projects scheduled to begin construction during the year, spread over 107 projects, each with a TIV exceeding $100 million. The largest project is the reopening of an iron ore mine and construction of steel manufacturing complex in Minnesota. Iowa, with 23% of Midwest region planned project spending, will see the most work.

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