Infrastructure Project Growth Expected to Continue
Speakers at the recent Market Outlook Workshop conducted by VMA and HI have mixed predictions across industry sectors.
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In early August, the Valve Manufacturers Association and Hydraulic Institute held their annual Market Outlook Workshop in suburban Chicago. Speakers included some return favorites and a few new experts. Among the sectors covered were oil and gas, water and wastewater and construction/HVAC, in addition to presentations that offered insight across multiple industries. Overall sentiment was positive with continued infrastructure investments offering opportunities for valve and pump manufacturers, and with industrial growth outpacing GDP again, but there are a few areas that may lag or even face a downturn, according to the speakers. Read on for highlights from each speaker.

Chemical industry opportunities abound
Britt Burt, senior VP of research for the power industry at Industrial Info Resources, discussed the outlook for the chemical and power industries in the U.S. and Canada. Burt shared that momentum for projects continues to grow thanks to government incentives, investor environmental and sustainability goals (ESG) and potential construction for new plants including hydrogen, ammonia, ethylene, methanol and plastics recycling planned.
In addition to new construction or additional capacity projects, maintenance spending at plants remains strong with nine ethylene plant turnarounds already scheduled for 2025, offering both manufacturers and maintenance and repair (MRO) companies many opportunities.
Burt said the power industry has more than 6,800 projects planned in the U.S. and Canada totaling $1.39 trillion USD, and more than $8.3 trillion planned globally.
The push toward decarbonization through tax subsidies and government mandates remains the key drivers for renewable power projects, and the development of small modular reactors and other advanced reactor designs for nuclear plants continues and will support this growth. With rapidly rising electric demands in the U.S., construction of new natural gas-fired power plants is on the rise to meet these needs, and retiring of coal plants is delayed due to lack of capacity replacement power. However, these closings will continue as new power plants and grid infrastructure comes online.
U.S. oil production expected to increase again next year
In the oil and gas markets, John Spears, president of Spears & Associates, returned to the MOW this year and shared that energy valves represent 34% of the $5.6 billion U.S. industrial valve market. In Figure XX, energy valve shipments by type show a nice cross-section of valves being ordered for the energy sector. With crude oil production increasing this year and expected to increase next year, petroleum valve shipments may be up as much as 5%, according to Spears, while pipeline construction was up this year but is expected to drop in 2025.

Shifting trends in new construction types
Paul Trombitas, partner and building products sector lead at FMI Consulting, presented his company’s data and predictions for the coming years in construction and HVAC needs, including a predicted sizable growth in off-site construction of panels and modular systems built and assembled offsite and later installed on-site. Residential, nonresidential and non-building structures are all expected to increase in demand in the U.S. over the next four years, with residential leading the way. However, industry sentiment indices from FMI sources, the National Association of Homebuilders and the American Institute of Architects vary from 42 to 67, indicating varying levels of confidence currently, with the last measure being May 2024.
Trombitas spoke about where construction is occurring and defined what he called new and old economy construction. New economy where growth is occurring includes life sciences, data centers, distributed power, high-tech manufacturing and logistics, while old economy includes lodging, shopping centers and malls, offices and movie theaters.
Life sciences continue to increase with prescription drug use among adults continuing to rise. Logistics has also grown rapidly, with a huge bump during the height of the pandemic with home deliveries of nearly everything including groceries, food delivery and online retailers of all kinds. High-tech manufacturing sites continue to be constructed to meet the demands for computer chips and batteries driven by new technology including electric vehicles. Data center growth has increased due to the rapid adoption of remote working and telecommuting globally, especially during the pandemic. And building products have evolved to meet the needs of these data centers.
Buildings are also being retrofitted or improved to become smarter and more efficient in their water, lighting, HVAC and overall energy usage. Owners are looking for ways to reduce the costs of utilities and operating costs at their sites using smart technology and controls to make more data-driven decisions to manage their facilities.
FMI reported a total growth of 32% in HVAC nonresidential spending in the past four years, and predicts another 17% growth between now and 2028, with customers looking for design flexibility and energy efficiency to meet their needs.
Supply chain dynamics still abnormal post-pandemic
Michael “Pez” Pesendorfer, senior research associate at Baird, provides analysis and coverage of companies in the flow and motion solutions sector including process automation, instrumentation and controls, pumps, valves, motors and aftermarket products and services. Pesendorfer presented on behalf of himself and Michael Halloran, a regular fixture at VMA events to speak on these topics.
In this sector, Pesendorfer shared that uncertainty persists post-pandemic as demand correlations are still distorted due to supply chain dynamics not yet normalizing and China recovery lagging overall. He said while interest rates are likely at their peak, many in the market anticipated the Federal Reserve dropping interest rates as many as six times this year, but it’s only happened once since the height of the pandemic, slowing growth. However, as rates are expected to continue decreasing, expect more capital spending from companies across the flow and motion solutions sectors. Near-term uncertainty persists, but high-level tailwinds have the team at Baird optimistic.
He said that industrial companies tend to fare well with inflation, and balance sheets remain strong. The infrastructure bill and other regulatory drivers have had a positive impact, and more than $500 billion of the IRA and IIJA funding is still unawarded and unallocated, leaving room for more growth and margin opportunity particularly with AI, 5G, ecommerce fulfillment and logistics, remote connectivity and IIoT.
While there is a lot of growth potential in energy transition to hydrogen, solar and LNG, as well as storage, network support for distributed power offers huge potential. Growth is expected to continue or resume in process markets including oil and gas and chemical processing, defense and aerospace, water and wastewater infrastructure and power. But recovery is still somewhat uncertain in metals and mining, with the exception in rare earth metal opportunities offering big potential.
Pesendorfer said oil and gas midstream and upstream are stronger than they have been in a decade given significant energy market disruption and underinvestment, but factors including overall global economic recovery, OPEC actions, midstream infrastructure capacity utilization, especially in North America, and terminal and export infrastructure are less sure. And in spite of growth potential in clean or renewable energy, global demands are expected to keep increasing with broader electrification across the world and the continued need for more data centers to power the growth in AI and supercomputing needs.
Water and wastewater markets thriving
Tom Decker, principal of Thomas E. Decker Consulting, addressed the group to share his predictions for the water and wastewater markets. Decker shared that myriad problems are plaguing the U.S. water system: more than 250k pipe breaks each year; 6 billion gallons of water lost daily from the U.S. infrastructure; 20% of U.S. pipes working beyond their useful life, and heat and drought issues. According to the EPA, drinking water system needs are most pronounced in the distribution system (see FIGURE XX), with more than $625 billion needed over the next 20 years.

Like Pesendorfer, Decker pointed out that there is still a lot of unallocated and unspent money from the IIJA and IRA legislation, even with $20 billion allocated from the American Rescue Plan Act and more than $60 billion earmarked for water and wastewater available from the IIJA over the next five years, already used to fund more than 1,400 projects.
One of the biggest threats to water systems today is the pending PFAS legislation and regulations. With PFAS found in 45% of all U.S. tap water (according to Decker), even the billions allocated from the government so far isn’t enough to address the problem for municipalities and water utilities. While technology is being developed and tested to eliminate and destroy PFAS compounds in water, utilities may be at risk for liability even if PFAS is removed from their systems but not destroyed. Legislation has been drafted that would shield companies from some liability but has yet to be passed. We will continue to monitor and report on the PFAS issue, including sharing highlights from the VMA/HI PFAS Workshop this November in Alexandria, Virginia, in our next issue.
Long term, the water supply is at risk globally due to drought and other factors. Conservation is having a slight impact, but other solutions need to be explored. Among these are reuse projects and desalination, with projects planned in the U.S. and globally and more coming as new technologies are developed.
As in many industries, the aging workforce and lack of qualified workers in the water and wastewater industries are expected to have a major impact in the next decade. Increased materials cost including concrete, sand and stone, machinery and controls is also impacting project pricing. In spite of the challenges, the need for water and wastewater infrastructure repair, replacement and new construction globally continues to grow and valve and pump manufacturers should benefit from these projects.
Conclusion
The impact of the 2020 pandemic continues to affect the valve and pump industries, and manufacturing in general. But major legislative packages including the IIJA and IRA, BABA andincreasing energy needs have had a positive effect on construction and repair of major infrastructure systems across the U.S. and across all sectors. The experts mentioned above all see many opportunities ahead, but not without challenges. Increased regulations, the aging workforce, lack of qualified workers to fill those roles and others and a shift in the way people want to work (more flexibility and hybrid work is often desired by the younger generations) will continue to present challenges for the foreseeable future.
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