Valves & Specialty Products

John Carte

Valves & Automation

valves@mrcglobalinsight.com

Global growth in valve markets for 2014 is estimated in the 3 to 5% range. Robust activity in North America will continue in the shale plays, exploration and production (E&P), oil sands and related energy markets, as well as liquefied natural gas (LNG), pipeline and chemical sector project activity. This activity is expected to put increased demand on valve suppliers to meet production schedules.

Consuming a wide variety of valves, the energy industry is reliant on many cast components. Globally, pressure continues to increase on foundry capacity. As the economy in China weakens, internal demand for cast products declines, in some cases, to the point where the only options are closure or severe cutbacks in personnel and casting production. This trend, while perhaps short term in nature, could trigger a series of cost increases on all cast products as manufacturers “compete” for casting capacity with the remaining foundries. With demand outside China steady or increasing, we could begin to see price escalation related to an imbalance between supply and demand. Recent attention has also turned to China's future capabilities for cost-effective production. Led by currency exchange rates, rising energy costs and increasing wage pressures, resulting valve price impacts could compound with increasing demand from the oil, gas and chemical sectors.

Another factor in the supply and demand challenge is tied to the increasingly demanding service conditions end-users are experiencing, including higher pressures, higher temperatures, highly corrosive and/or highly abrasive services. Fugitive emissions are also garnering increased scrutiny as industry standards now define low emission valve testing requirements. Additionally, changing product requirements have, in some instances, motivated end-users to adopt their own standards, creating potential for future disruption to supply chain integrity and distribution efficiency. These dynamics are leading some valve manufacturers to focus on producing specialized products, putting less emphasis on “commodity” valves that make up the vast majority of the units consumed in the world. If this trend continues it could impact the global availability of certain valve types.

As the uptick in US upstream and midstream business continues, lead times and availability of valve and actuation products are likely to be effected. Notably, as new, large infrastructure projects are carried out, increased demand will put pressure on manufacturing capacity throughout the raw material supply chain. Similar impacts to automated valves are also anticipated as US pipeline integrity projects continue in adherence with changing Pipeline and Hazardous Materials Administration regulations.

Valves primarily used in the downstream and chemical process industries are also feeling an uptick in demand, as low US natural gas prices fuel increased activity in the chemical sector, and refiners begin to reinvest in their facilities. While current valve manufacturing capacities appear sufficient to meet demand, project activity could disrupt supply channels and lengthen lead times.

In general, 2014 should prove to be a growth year for the valve industry as a whole. Overall lead times are extending slightly in valves required for midstream and upstream work, while, so far, remaining steady in the downstream and chemical sectors. Pricing remains stable across the board, but there are rumblings of possible increases later in the year as demand increases. Throughout 2014, MRC Global will monitor these situations in order to adequately communicate any potential impacts on the supply chain.

Download

DISCLAIMER

Copyright © 2014 MRC Global - This information is confidential and was prepared by MRC Global for the use of our customers; it is not to be reproduced nor relied on by any third party without MRC Global's prior written consent. Unless otherwise noted, all monetary references in InSight are in USD.