Market Outlook for the Valve and Flow Control Industry

In September, the Valve Manufacturers Association (VMA) and the Hydraulic Institute (HI) held their annual Market Outlook Workshop, covering key industry verticals critical to the flow control industry and open only to members of both organizations. The event was timely given the current business environment.  In this time of many moving parts geopolitically around the world, businesses are subjected to a continued air of uncertainty that makes planning for the future challenging. Several projects that were greenlit by the previous administration have been cancelled or delayed, and new priorities are in place. The rapid move to decarbonize in industry has slowed, PFAS bans  and new policies continue to be be legislated largely at the state level, but the Federal focus persists globally and to some degree in the US as well,  and tariffs continue to challenge a supply chain that never fully recovered from the difficult conditions faced during the COVID-19 pandemic.

That said, most of the presenters shared cautious optimism or signs pointing toward positive business outcomes for the year ahead. And there was a consensus that the recession that has been hanging like a potential dark cloud seems to be dissipating slightly, with none of the presenters seeing a sign of a real downturn any time soon. Nearly every speaker addressed how their vertical was impacted by the huge growth of data centers across the country and around the world.

This article will share highlights from key market segments. If you are a member of VMA or HI and couldn’t attend the virtual sessions live, you can access them online in the VMA Member’s Only Resource Library starting in December 2025.

Powering Up

The global power industry continues to grow with Industrial Info Resources’ Britt Burt sharing they are tracking over $11.1 trillion investments in active capital and maintenance projects. While renewables were a big focus in recent years and companies and individual citizens were incentivized to go green, the current administration has put the brakes on the industry in the U.S. The public opposition, supply chain constraints and large tracts of land needed are just a few of the obstacles that the industry is challenged with today. However public support and the global continued push and pressure to decarbonize will likely mean that some of these projects don’t go away for good. There are still battery energy storage projects worth over $400 billion globally in the works, with nearly half of these planned for the U.S. and Canada. Solar leads renewable projects surpassing all others but tax credits being altered many result in a change of plans. Curtailed approvals for offshore wind and renewables on federal lands have also caused the cancellation of several proposed projects.

In more traditional power markets such as fossil fuel-fired plants, the biggest share of spend is going toward plant capital expenditures (Capex) and maintenance. There is a booming demand for energy, driven largely by the new construction of over 2,700 data center projects planned just in the U.S. With an aging grid that is already somewhat unreliable, getting a stable baseload for all corners of the country continues to be a challenge. Grid congestion is another issue as new plants and capacity are added, where the current system can’t keep up with the demand.

Since 2012, 138 GW of coal-fired power plants have been retired and another 78 GW are scheduled to be retired over the next 10 years but keep getting delayed due to increasing demand on the grid. Fuel switching and repowering of plants continues to grow in popularity as coal plants move to natural gas, bringing delayed retirement of facilities and a greater opportunity for MRO business.

There are currently 169 global nuclear projects representing nearly $140 billion USD, including 102 new nuclear units planned. Canada is proceeding with advancing small modular reactors and conventional nuclear plants, and there is a great potential for SMRs to be installed in the industrial sector so that plants can generate their own power. This is still many years off as designs are just being approved and permitted, but it’s definitely something to watch.

U.S. data center infrastructure projects currently planned. Source: Industrial Info Resources

According to IIR, there are 2,745 active data center construction projects with value of $1.6 trillion and average project size of $582.8 million in the U.S. alone, with the majority of these being constructed in Texas, Virginia, Georgia and Illinois, Arizona, Pennsylvania and Ohio. The top companies funding this development are Amazon, Fermi and Tract, but the top 15 companies represent more than half of the total with nearly $1 trillion USD in active projects currently.

In the oil and gas market, John Spears, of Spears & Associates, shared that global oil demand was up 1% in the last year and is expected to be close to the same next year. Liquified natural gas (LNG) demand and capacity continues to increase in the U.S. and Canada and was up 7% in 2025 and is expected to be up 5% in 2026. The U.S. supplied a quarter of the global supply of LNG, followed by Qatar and Australia, while the European Union is the largest procurer of LNG purchasing 30% of the global LNG as it plans to cut fossil fuel usage by 2030. China is 18% of LNG sales currently, but the demand for power has them shifting to pipeline gas in many cases.

Cash flow from oil and gas operations is primarily going to Capex expenditures today. Source: Spears & Associates

Directly impacting the oil and gas industry, the recent federal budget reconciliation act, known widely as the One Big Beautiful Bill Act, included phasing out of credits for renewable energy vehicles and energy-efficient home improvements. It also mandates Bureau of Land Management and the Bureau of Ocean Energy Management lease sales and delays the previous approved methane emissions fee to 2035 while offering other incentives and accelerated reviews to benefit the industry.

Spears shared that while there is still some consolidation and merger and acquisition activity in the sector, operators are getting better at managing risk. Oil and gas prices are no longer driving upstream investment strategies, as operators are focused on profitability and shareholder returns. The rig count is flat this year, but estimates are for a rise of 10% in 2026. Gas and liquid transmission pipeline construction continued with more than 500,000 miles installed this year. The LNG sector is at full facility utilization in the U.S. and Spears said it is expected to increase by double in export capacity by 2030 while production capacity continues to grow. He also said that gas pipeline takeaway capacity constraints, gas turbine available and tariffs are the biggest external challenges for valve manufacturers today.

Water and Wastewater Expansion Continues

Returning speaker Tom Decker is still optimistic for both water and wastewater projects, based on spending nearly doubling between 2019 and 2025, much of this due to the Infrastructure Investment and Jobs Act (IIJA) passed by the previous administration. Other catalyst for growth are evident in the EPA’s Clean Watershed Needs survey that shows the U.S. wastewater system shows the need for $630 billion USD investment over the next 20 years, while the Drinking Water Needs Survey shows $625 billion needed.

EPA Drinking Water Needs and Clean Watershed Needs Survey results. Source: Thomas E. Decker Consulting

With continuing droughts and water shortages in the western US and southwest, and data center water usage is expected to double by 2030. Decker shared that one large data center uses the equivalent of 12,000 households of water. While today this is largely potable drinking water, gray water is starting to be used and may be a good alternative particularly in regions where water is scarcer.

IIJA funds expire next September but any ongoing projects may continue. Most water and wastewater funds were appropriated from IIJA but have not yet been authorized, leaving some uncertainty as to the projects coming to fruition. States have claimed nearly 70% of funds allotted from the EPA and the WIFIA program continues to be a good option for water utilities with low interest loans and long repayment terms. While rates continue to increase, affordability for consumers is becoming more challenging even though the utilities are not charging full cost pricing, according to Decker.

PFAS and lead pipes continue to be in the news, with more than 9 million lead service lines planned for replacement by 2037. And with PFAS reported in 98% of U.S. water, 2025 proposed changes will require numerical limits on only PFOA and PFOS, the two fluoropolymer compounds identified to be harmful to human health. The compliance deadline for limiting PFAS has been extended federally to 2031, but states continue to introduce their own legislation and limits. VMA will continue to advocate for the industry and report on any new or changing legislation as it is enacted.

In the construction sector, Paul Trombitas of FMI Consulting shared that numbers are on the upswing with the largest spending occurring in power and manufacturing. Water supply is a high-growth market, confirming what Decker shared and new construction of warehouses and logistics facilities as well as manufacturing plants and data centers are leading the market with data center construction of nearly $45 billion estimated next year and continuing to rise for the following five years.

Soile Kilpi, AFRY Management Consulting, shared results of an executive survey the firm conducted. More than 75% said the biggest macro issues they see are risk from cost inflation and the economy in general, while 65% cited the perceived risk based on tariffs and other legislation. Like the oil and gas market, companies are most focused on cost optimization and shareholder returns. The pulp sector is seeing modest growth for virgin fiber usage for tissue and hygienic products, and bleached pulp that often comes from China or Brazil is putting concern on U.S. tissue mills due to the rising cost of inputs due to tariffs on these countries. The packaging market continues to expand in both consumption and production, and U.S. carton board mills are benefiting from improved competitiveness globally.

Flow Control Overview

Michael Pesendorfer of Baird presented on the general state of the flow control industry based on the shares and performance of companies that Baird tracks. They are seeing an improvement in the industrial backdrop with signs of recovery in key sectors. Demand is finally normalizing post-COVID and cyclical opportunities are emerging in different sectors. While economic risk remains high, there is growth and optimism in various sectors of the market.

As for demand, it’s mixed across end markets. Short-cycle orders have improved year to date, but leading indicators are mixed with PMIs (Purchasing Manager Index) below 50 but showing signs of stabilization.

Higher interest rates are impacting capital allocation decisions, and M&A activity is increasing in some sectors as companies seek growth opportunities. Underinvestment in infrastructure and manufacturing capacity is still a significant concern, but automation, electrification and water market are key areas for growth, while the energy transition and regulatory environment present opportunities for differentiation.

What does it all mean

After listening to these presentations and reviewing the slides, there does appear to be a lot to be positive about in our industry. There is a shift in priorities with the current administration focused on different objectives than the prior administration. But the growth of data centers alone will require the water and power markets to get creative and keep adding capacity and delivery mechanisms to their infrastructure to support the massive growth occurring. The reliance on technology, especially now including AI, seems poised to continue to expand, which bodes well for many of the verticals where industrial valves and flow control products are needed. Geopolitical concerns will continue to remain a factor, but the overall feeling of uncertainty many companies and markets have felt for the past 5 years seems to finally be ebbing some. Optimism is growing and that’s good news for everyone.