12042016Sun
Last updateFri, 02 Dec 2016 4pm

i

Valves in a Cement Slurry Line

Valves in a Cement Slurry Line

Basically everywhere you look in modern ...

Triple Offset Butterfly Valves

Triple Offset Butterfly Valves

Since their introduction to the market m...

Digital Valve Control Leads to Increased Plant Availability

Digital Valve Control Leads to Increased Plant Availability

Surge is characterized by fast flow reve...

Cast vs. Forged: The Ongoing Debate Takes a New Direction

Cast vs. Forged: The Ongoing Debate Takes a New Direction

In the valve industry, the cast versus f...

The Weekly Report

New Products

  • ja-news-2
  • ja-news-3

Industry Headlines

Industry Headlines

VMA Members Among Plant Engineering 2016 Product of the Year Finalists

2 DAYS AGO

Several VMA members are among this year’s Plant Engineering Product of the Year finalists. Emerson has products nominated in four different categories, while Siemens has several products nominated in a total of three different categories. Chesterton and Hunt Valve have products up for awards the...

Readmore

MSS Publishes Revised American National Standard for Steel Pipeline Flanges and Receives ANSI Approval

3 DAYS AGO

The Manufacturers Standardization Society (MSS) announces that the substantially revised Standard Practice, SP-44-2016, Steel Pipeline Flanges, has been approved by the American National Standards Institute (ANSI) as a Revised American National Standard (ANS).

The first edition of MSS SP-44 was publish...

Readmore

U.S. Chemical Industry Remains Optimistic for 2017

2 DAYS AGO

Moving into 2017, the U.S. Chemical Processing Industry continues to enjoy optimism about future investment, according to Industrial Info's 2017 Global Industrial Outlook . Much of this activity stems from the continued low cost of natural gas liquids (NGLs), a primary feedstock for building-block che...

Readmore

Hydraulic Institute Celebrates Centennial with New Logo

3 DAYS AGO
Hydraulic Institute Celebrates Centennial with New Logo

The Hydraulic Institute (HI) will celebrate its centennial in 2017 with a new logo as part of a larger initiative to position HI for the next 100 years of service to the pump industry. The new logo is a key element of HI’s overall brand refresh and redesign process.

The logo includes a hidden &ld...

Readmore

U.S. Adds 178,000 Jobs, Unemployment Rate at 4.6%

1 DAY AGO

The unemployment rate declined 0.3% to 4.6% in November, and total nonfarm payroll employment increased by 178,000, the Department of Labor reported today. Employment gains occurred in professional and business services and in health care.

Employment in construction continued on its recent upward trend...

Readmore

Third Quarter GDP Revised Up to 3.2% Growth

3 DAYS AGO

Gross domestic product (GDP) in the U.S. increased at an annual rate of 3.2% in the third quarter of 2016, according to the second estimate released by the Department of Commerce. In the second quarter, real GDP increased 1.4%.

This new GDP estimate is based on more complete source data than were avail...

Readmore

A Conversation with R. Scott Graham: Analyzing the Valve World

vmspr12_graham_scott

Some analysts consider the valve market a hard one to track because there are so many players in the field and the business cycles are so long term.

 

But Scott Graham, senior analyst for Jefferies & Company, Inc. and a recent speaker at VMA’s Leadership Forum, says those factors are precisely what makes the market interesting.

“The fragmentation of the industry and its long cycles work to the benefit of many valve companies,” Graham says.

Valve manufacturing ranges from the highly specialized to the ubiquitous or more standard product, he says.

“The former benefits larger companies as long- and late-cycle commodities processing projects are hatched. These projects are often complex and require valves that meet exacting standards. The latter benefits the entire sector as valves are needed in multiple industrial applications.”

The companies that will be the most successful, however, are those with a geographic footprint, he says.

“Most of the spending in flow management is occurring outside mature markets. A local presence is required to tap opportunities. At the same time, we have seen steady, slow consolidation since access to credit can be limited for smaller companies. The larger companies with a localized footprint and access to credit have more working capital, which customers are looking for,” he says.

“The companies that will be the most successful are those with a geographic footprint.”


THE MARKETS

Graham, who has been an analyst more than 15 years (12 years of which he’s spent analyzing industrial stocks), holds an MBA and is a certified public accountant. He says the industrial sector is recovering from the world’s economic downturn and is spending to increase capacity, particularly in the commodities processing areas, which are the backbone of emerging market infrastructure. In fact, he said most of the end-markets he tracks are entering a new capital spending cycle.

For example, in oil & gas, “we are in about year two of a four-to-five-year capital spending (capex) cycle, in my view. The first half of that cycle, the spending was towards getting rigs up—spending at the well head,” he says. “As this cycle progresses, spending moves out to the production and distribution portions of the market, and valve manufacturers will benefit from this.” At the leadership forum, Graham estimated about a 5% growth in global oil & gas for 2012.

Although power generation lags oil & gas, it’s also entering a favorable period, Graham says.

“Power generation is more of a stand-alone market. This cycle, particularly in mature markets, requires a few years of economic improvement or stricter regulatory standards before capital spending increases,” he says. “We believe we are reaching that point in mature markets. Many power generation facilities in the U.S. are too close to using reserves, which runs the risk of costly outages and brown-outs. We expect spending in power in mature markets will see 3% to 5% growth in capex for 2012,” Graham said. He thinks outside of the U.S. and Europe, power spending will rise in the upper-single digits.

The chemical and petrochemical markets have much earlier cycles than either oil & gas or power generation, which means they are already well underway to recovery, though the markets are slowing down. Graham said at the forum that capex increased by more than 25% in the third quarter of 2011 and is expected to grow 5% to 10% in 2012.

The trend, however, is that, as markets get increasingly complex in their needs, production is moving closer to feedstock, especially in developing regions such as the Middle East, Asia and increasingly in South America. That creates new opportunities for valve companies in those areas of the world. Meanwhile, in North America, gas shale has opened up investment opportunities, but because of the low price of gas, the most immediate investments will be for turning gas into liquids, not pulling new sources out of the ground, Graham says.

In the refining world, Graham says that while the business has suffered in recent years, he sees significant opportunities in the near future.

“In the U.S. and Europe, the difficulty and cost of permitting means we won’t see much building in the near term—most of the new capital being spent is not in this country. But we will see brownfield spending to increase capacity. Moreover, we are starting to see a lot of new refinery projects announced in other areas of the world where oil and petrochemical products are increasingly needed. This, too, creates opportunities for valve companies,” Graham says.

The water/wastewater situation is different. Worldwide needs for water/wastewater cannot be denied nor can pent up demand in the U.S. Graham said that the industry will grow about 6% a year going forward with growth in BRIC countries two to three times higher. In the U.S., however, “you have to understand that even though municipalities and water utilities have funds that are separate from other budgets, the reality of the situation is that teachers aren’t going to be fired so a water main can be put in. In mature markets, water is a priority fix [an old main might be repaired], but it’s not a priority spend [a new one probably won’t be put in].”

Overall, for valves, he says the market will remain a good one for investment.

“You can’t do anything in flow processing industries without valves and we know there is reasonable stability in this market,” he concludes.


Genilee Parente is managing editor, Valve Magazine. Reach her at This email address is being protected from spambots. You need JavaScript enabled to view it..

  • Latest Post

  • Popular

  • Links

  • Events

Advertisement

Looking for a career in the Valve Industry?

ValveCareers Horiz

To learn more, watch the videos below or visit ValveCareers.com a special initiative of the Valve Manufacturers Association