Asia Pacific/Middle East

John Bowhay

Asia Pacific & Middle East

asiapac@mrcglobalinsight.com

AUSTRALIA/NEW ZEALAND

Traditionally differentiated by its eastern and western coasts, Australia has seen increasing alignment between these two regions due to activity in the liquefied natural gas (LNG) and mining industries. In Western Australia, operations have continued with primary demand from oil and gas interests, though initial forecasts are indicating some weakened requirements for calendar first half 2014. Labor costs and currency exchange rates remain challenging throughout Australia, affecting export markets. Similarly, ongoing discussions centered on the potential abolishment of carbon and mining taxes could have significant impact on the future of Australian industrial commerce.

Asian mills continue to run below full capacity, facilitating mostly stable lead times for components. However, the expanding number of international projects flowing through European mills is likely to result in pressure on fulfillment timelines, with impacts to future lead times with a rise in demand. MRC Global continues to recommend regular and timely forecasting for all pipe, valve and fitting products to ensure sufficient allocation of products, especially for non-standard items.

Generally speaking, lead times in the Australian market are expected to remain stable, with expedited deliveries available at cost-effective rates. Moreover, price trends are expected to remain flat, despite cost increases to some raw materials. It appears, for the meantime, a trend in persistently low pricing will continue with spare mill capacity in Asia.

New Zealand's economy is expected to exhibit signs of expansion as the country transitions out of recovery following a string of 2011 earthquakes. Growth is expected in many regions, with the rebound of housing and overall market conditions. The most significant activity is expected in the construction industry, particularly in the city of Christchurch, which requires extensive re-building.

ASIA/SOUTHEAST ASIA

For 2014, facilities in Asia and Southeast Asia which currently support the global oil and gas industry, are projected to be especially active. Driven by demand for FPSO (floating, production, storage and offloading) vessels, jack-up rigs and LNG fabrication, countries from Korea to Singapore are likely to remain busy fulfilling demands to support projects throughout the world. More specifically, Singapore is expected to maintain stable operations within the upstream and downstream sectors, while activity in Thailand is optimistic and largely concentrated on offshore opportunities, despite recent political instability.

Throughout the year, MRC Global anticipates strong inventory levels for most PVF products. Some expectations for longer lead times are being communicated for larger valves, but adequate inventory levels should support forecasted demand. For commonly sourced valve classifications, delivery lead times into Asia and Southeast Asia are in the 20 to 22 week range for cast valves and the 14 to 18 week range for forged valves.

MIDDLE EAST

The Middle East is expected to remain a hub for oil and gas activity into the foreseeable future. Consistently productive areas have maintained stable activity levels and PVF demands are expected to continue to be generated from a collection of applications. Notably, LNG and GTL (gas to liquid) plants in the nation of Qatar have received substantial attention as significant shutdown work begins in assorted locations. Well known for its global leadership in the export of LNG, Qatar has also announced several multi-billion dollar infrastructure projects in preparation to host the 2022 World Cup.

Oil confidence continues to grow in Northern and Southern Iraq, particularly for the petroleum rich Iraqi Kurdistan. In the coming years, Iraq is expected to experience considerable growth as the nation begins to build-out in post-war areas. Generally speaking, the Iraqi environment remains semi-secure with increasingly optimistic forecasts for economic upturn.

To the south, Saudi Arabia is expected to remain the region's largest oil producer. Forecasted to maintain regular, substantial activity levels, the greatest activity is likely to originate from within the upstream and downstream sectors.

Lead times and price trends for the Middle East echo those in Asia Pacific. Forecasted requirements are expected to be readily available and extended lead times for most products are not anticipated. However, non-forecasted demand, particularly for large valves, could experience longer lead times well into the latter half of 2014. MRC Global will continue to take the necessary measures to satisfy any increasing demands while monitoring market trends for impacts to valves in the Middle Eastern marketplace.

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