One of the fascinating sidebars to the current problems, as well as opportunities confronting such major economic sectors as electrical, PHCP, PVF and industrial mill/supply distribution are the solid entities acting as the key warehousing/marketing bodies for the overwhelming central point between manufacturers and end users/installers.

Based on 2012 news reports of consolidation and positive earnings results, last year was not an aberration, but a leap forward both organically and by acquisition of this crucial pivot point of America’s giant, even if slower growing, midpoint of a multi-trillion dollar world-leading economic super structure.

Where consolidations and internal growth may have been old hat for America’s marketing economy for the past 50 years, especially in light of product-line proliferation and family estate problems, the current manifestations of record buyouts and distributor consolidations are a reaction to federal and state governments’ imposition of costly new regulations and mandated taxes, as well as employee health-care benefits becoming increasingly intolerable to the traditional tens of thousands of smaller distribution companies.

Also playing an increasing role in this evolutionary speedup are the quickening demands for faster deliveries to end users, complexity of orders, as well as more demanding quality assurance calling for greater insurance costs to the relevant distribution systems.

What has become even more important to the viability of private businesses in general, and distribution in particular, has been the need for cutbacks in personnel power. On a per capita basis, this will be critical in the smaller distribution segment since it is more prone to depend on the ever-more-expensive technology that is not cost effective for “mom and pop” operations, as they have been so endearingly referred to.

As year-end profit and loss statements summing up 2012 results for distributors have projected better than expected, much of this has been made possible by personnel reduction and the need to carry a more diversified mix of products for customer bases. This also has contributed to the organic growth of distributors able to satisfactorily perform their incremental function.

In many ways, the overall industry’s PVF sector has become a shining example of full service. Commitment required by the red-hot energy segment, including oil, coal, natural gas and renewable energy resources, needs plenty of financing outlays. This extends to extraction, refining, transmission and conversion into derivatives. Also included are national pipeline development, power generation and increasing export requirements.

It can be said of any segment of America’s unparalleled distribution economic net worth, that it’s increasing formidability and service capability is a major reason behind the ultimate service success provided by its world-renowned distribution system.

U.S. natural gas production headed for world leadership

Any doubt about the upcoming global dominance of America’s sensational outburst of natural gas production through hydraulic fracturing has been cast aside by an extensive and recently concluded study.

Focusing on the huge northern Texas-located Barnett Shale, the study concludes shale-extracted natural gas, which burst on the scene in earnest a short 10 years ago, will be obtained by this method over the next several decades, primarily in conjunction with new oil discoveries.

The Alfred P. Sloan Foundation-funded study performed by the University of Texas is the first to examine the geology and economics of shale drilling. Looking at data from actual wells rather than relying on estimates and abstractions, this conclusion asserts even faster and more comprehensive growth than ever before.

One of the most significant assessments to emanate from the study is that this dominant energy factor would be profitable at the price of $4 per 1 million Btu – the universally accepted measurement for natural gas. This is particularly encouraging since this cost is just slightly more than America’s current low prices compared to a multiplicity of natural gas selling prices elsewhere around the globe.

The shale boom has led to a reorientation of natural gas’s energy importance. This has crowded out coal as the once-preferred utility power-generation resource. It also has catapulted the U.S. into the potential position of the world’s No. 1 exporter of liquid natural gas, eclipsing Russia, Qatar, Algeria, Canada and smaller factors that have previously dominated the world’s natural gas exports. Also benefitting from such an abundance of natural gas will be chemical, steel and fertilizer plants consuming an increasingly growing volume of this natural resource.

Although the environmental impact of natural gas fracking still is being debated and viewed with suspicion by the Obama Administration’s environmentally-oriented extremists, the general monetary values to the economy, exports and the energy boom, in particular, will carry a lot of weight as solutions are sought to control America’s runaway debt and deficits.

With America’s cost-extraction advantage, the liquid natural gas export factor alone could generate untold billions of revenue dollars once the shipping docks and proper facilities are completed to confront current competitors demanding much higher worldwide prices.

Business capital spending on an accelerating roll

When analyzing the expansion of America’s vibrant, world-leading industrial sector, the key to future growth lies in expenditures for capital goods.

Based on America’s industrial firms opening their wallets early this year, the “post-recession” splurge of more than $62 billion hit a high water mark not seen since the heady days of the late 1990s and early 2000s.

Despite a slight sag in the middle of last year, monthly business capital spending has increased by 50% since the dark days of 2009’s first quarter. Although durable goods of all types dropped 5.2% in January, business investment, excluding defense and aircraft, climbed a hot 6.3%.

This is particularly good news for the future, since the regulatory and perceived hostility of the federal government gave indications after last November’s elections that the bulk of the U.S. business and industry sector was holding back until the debt ceiling and deficit, taxes, sequestrations, and both global and domestic demand can further be clarified.

There are three main reasons for cautious optimism:

1. U.S. corporations in total are awash in cash, which has been accumulating due to increased productivity and selective hiring. They also have seen exports reach new heights, while domestic demand also has exceeded expectations.
2. The “insourcing” trend also is showing signs of becoming more successful than expected. With overseas costs rising and “made in America” costs stabilized, domestic manufacturers are becoming increasingly competitive. The accelerating energy boom is a major factor, as are the growing order books from distributors, contractors and retailers universally practicing “just in time” inventory. The size of orders and extended delivery time necessary to get the best price and assured quality has pushed the pendulum increasingly toward “made in the U.S.A.”
3. Unfortunately, full-time employment by America’s 140 million potential working personnel will further be inhibited as business looks to technical and mechanical improvement on the shop floor and back office. This state of affairs is making “structural” employment in the wide arena of America’s business and industry sector a receding factor.

The “hands on” needs of yesterday’s automotive, steel and fabricated metal industries is becoming increasingly more scarce, as the usage of robotics and sophisticated computerization picks up speed.

 At this early 2013 vantage point, unemployment looks like the main negative in this year’s emerging forward motion. 

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