Get Ready: 2014 Market Outlook

That said, there are still bumps on the road to recovery from the recession, and Alan Beaulieu of the Institute for Trend Research repeated his warning that there will be another mild recession in the latter part of 2014. But rather than considering the slight downturn a negative, he said, smart businesspeople should use the time between now and the expected boom years beginning in 2015 to prepare their businesses. Included in these preparations are investing in customer market research, hiring and training good employees and spending money on new products, marketing and advertising.

There is also little growth expected in the North American power market, according to Kevin Geraghty of NV Energy during his second appearance at the Market Outlook. “Bottom line,” he said, “our best bet for valves in power is still international, especially international coal. New coal in the U.S. is dead and existing coal is on life support, but it will hang on for awhile. While there is growth in renewables, they mostly don’t need valves.”

Geraghty echoed the sentiments of other presenters when he stated: “Gas, that’s the story. In the U.S. we pay less than everywhere else, and if it stays this low, manufacturing should come back. The ability to prove and deliver on this resource will determine how much electricity is derived from natural gas.”

Richard Ranger of the American Petroleum Institute pointed out that it is not just shale gas, but also shale oil that is booming right now. Between 2006 and 2008 there was only 5 million bpd of crude oil produced in the U.S., but by 2014, that number is expected to rise to nearly 8 million bpd. Most of that growth is in tight oil. In 2014, more than 65,000 million cubic feet of natural gas per day will be produced. Most of this growth is directly attributed to the technological advances. It is possible that, by blending the U.S. and Canadian output, North America could be energy self-sufficient by the end of the decade.

One big challenge for producers is that hydraulic fracturing receives a lot of negative press. Because there is a huge amount of activity during the drilling and development phase, it is very noticeable and intrusive on local communities, so smart public relations and stellar safety and environmental records are paramount. “A local spill or accident is not local,” he said. “Much of this work is subject to 24/7 attention of the media. They are being watched.”

According to Bernstein, green building will affect the valve business. Geothermal, greywater recycling and new HVAC systems will be among the opportunities for manufacturers. He pointed out that economic factors influence specification rates.

Specifiers are less concerned with specifying a particular type of valve in down markets, although ball valves are somewhat less affected by market fluctuations. Another huge factor for manufacturers is the trend toward BIM (building information modeling), which focuses on assemblies and systems rather than discreet materials and products.

Tom Decker of Brown and Caldwell repeated his assertion from last year’s event as well, saying that growth in the water and wastewater business is still tied to the international market. However, the rapidly deteriorating infrastructure in North America will soon bring an upsurge in domestic projects and opportunities for manufacturers.

The hydrocarbon processing business, however, is poised for a revival. According to Mark Peters of Pennwell Publishing, the U.S. is reversing 40 years of oil production declines and natural gas is poised for long-term recovery. The recent predictions show the U.S. surpassing Saudi Arabia as the largest oil producer and the IEA already shows that the U.S. has surpassed Russia as the largest gas producer. The implications go way beyond energy, he asserted.

According to Peters, more refining capacity will be added to handle increased oil production and potential for export, and additional pipelines and gas processing facilities will be needed to handle changes in the flow of raw material and finished products. Petrochemical facilities will be upgraded and expanded, and there is great potential for new plants in the U.S. Northeast.

Mark Eramo of IHS Chemicals echoed the positive outlook by pointing out that the inexpensive feedstock is leading to resurgence in the chemical industry in the U.S. “Improving economic fundamentals are expected to enhance the pace of demand growth prospects, and unconventional feedstocks will play a larger role in shaping the global industry. At the end of the day, it is the profit cycle dynamics that will fuel the growth. There will be an overall market recovery delayed on slower demand and acceleration of capacity.”

With this growth comes the need for more valves, actuators, and controls, and a positive though somewhat restrained period of growth for manufacturing throughout the U.S.

According to Alan Beaulieu, be ready and take advantage of the upswing that will start in 2015 and last until 2019. To learn more about what will happen to the economy and other end-user industries, be sure to check out the fall issue of VALVE Magazine, mailing in early October.

Kate Kunkel is senior editor, VALVE Magazine. Reach her at kkunkel@vma.org.