Last updateFri, 28 Oct 2016 1pm


Mining: Are We There Yet?

Mining: Are We There Yet?

In the U.S., mining is largely about oil...

Warriors, Welding and Wooing the Workforce

Warriors, Welding and Wooing the Workforce

For the last several years, one of the b...

New Test Standards for Low-E Compliance

New Test Standards for Low-E Compliance

Creating practical, unified standards fo...

The Weekly Report

New Products

  • ja-news-2
  • ja-news-3

Industry Headlines

U.S. Economy Grew 2.9% in the Third Quarter

Friday, 28 October 2016  |  Chris Guy

Real GDP in the U.S. increased at an annual rate of 2.9% in the third quarter of 2016, according to the advance estimate released today by the Departm...



Industry Headlines

Honeywell and Flowserve Collaborate on IIoT Solutions


Honeywell and Flowserve will collaborate to provide Industrial Internet of Things (IIoT) for industrial customers. The collaboration will be part of the Honeywell INspire program, Honeywell's joint customer development program for its IIoT ecosystem.

Honeywell and Flowserve have a long history of colla...


Train Named Executive President of Emerson Automation Solutions


Emerson recently named new senior leadership appointments to its Office of the Chief Executive who now report directly to chairman and CEO David N. Farr, and help develop and guide the company’s global strategies.

Michael H. Train’s new title is executive president of Emerson Automation Sol...


Offshore Production Nearly 30% of Global Crude Oil Output


Global offshore oil production (including lease condensate and hydrocarbon gas liquids) in 2015 was at the highest level since 2010, and accounted for nearly 30% of total global oil production. Offshore oil production increased in both 2014 and 2015, reversing consecutive annual declines from 2010 t...


New 2017 Construction Starts Increasing 5% to $713 Billion


The 2017 Dodge Construction Outlook predicts that total U.S. construction starts for 2017 will advance 5% to $713 billion, following gains of 11% in 2015 and an estimated 1% in 2016.

Manufacturing plant construction will increase 6%, beginning to recover after steep declines in 2015 and 2016 that refle...


U.S. Economy Grew 2.9% in the Third Quarter


Real GDP in the U.S. increased at an annual rate of 2.9% in the third quarter of 2016, according to the advance estimate released today by the Department of Commerce. This is the highest figure in two years and slightly better than economists had predicted. In the second quarter, real GDP increased ...


Richmond Fed: Manufacturing Rises But Remains Sluggish


Manufacturing activity fifth district (MD, DC, VA, WV, NC, SC) remained sluggish in October, according to the most recent survey by the Federal Reserve Bank of Richmond. New orders and backlogs decreased this month, while shipments flattened. Hiring activity strengthened mildly across firms and wage i...


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


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.”


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


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