MRC Global InSight

Valves, Automation, Measurement & Instrumentation

Global demand for valves and on/off actuation products was relatively strong through 2018. The global outlook for 2019 remains somewhat uncertain as the predictions on the price of oil varies from ~$45 per barrel up to mid-$70’s per barrel, which has a direct impact on the capital budgets of the major producers. We believe the U.S. will remain active driven by demand in the upstream shale plays, the midstream build-out and downstream upgrades and turnarounds. We believe Europe, Western Canada and Asia will have more modest capital project activity, but downstream activity should remain brisk.

In the U.S., the Section 301 tariffs continue to impact the valve industry as a large percentage of industrial steel valves, and valve parts, originate in China. The U.S. President recently delayed the decision to add another 15% tariff on certain valve types by three months. The additional tariff would have impacted certain valve types that already had a 10% tariff, resulting in a 25% minimum increase. The administration will evaluate the progress of the Chinese trade negotiations to determine the next steps on the Section 301 tariffs.

The demand from all sectors is strong in the U.S., and we expect to see steady demand from the upstream sector during the first half of 2019. Demand for valves, automation, measurement and instrumentation (VAMI) products is especially strong in the shale plays and particularly in the Permian Basin, where rig counts remain steady and the number of drilled uncompleted wells (DUC) continue to grow. In the midstream sector, multiple major projects are either underway or proposed to bring liquids from the Permian Basin to the U.S. Gulf Coast. We expect this liquid pipeline activity to remain strong through 2019.

In the downstream sector, refining turnaround activity is expected to remain robust in 2019. Downstream petrochemical and chemical companies are preparing for the second wave of a construction boom. Five ethylene crackers came on-line between 2017 and 2018 with more than six million tons/year output, and five more crackers are planned through 2019 and 2020. This new capacity is expected to hit 12 million tons/year by 2021. The output from these crackers has also generated several new intermediate, monomer and plastic production units. The demand for valves and automation for both MRO and projects is strong, and we expect this trend to remain over the next few years. Additionally, due to increasingly strict pollution control enforcement by the U.S. Environmental Protection Agency (EPA), more customers are operating under EPA consent decrees. This will require enhanced leak detection and repair (LDAR) monitoring as well as a significant amount of documentation for valves being repaired or replaced. We anticipate more valves will be replaced rather than repaired for companies working under these consent decrees.

Internationally, the upstream sector has finally shown some recovery in the Norwegian Continental Shelf (NCS) and the North Sea. The downstream sector is also active with significant brownfield expansions in both Asia and Europe. The midstream sector, specific to transmission lines and pipeline valves, is slow in Europe but continues to be quite active in Asia.

There is strong demand for valves and automation products in the North American midstream, pipeline and gas utility sectors, and we anticipate this growth will continue through the first half of 2019. Ongoing and newly approved pipeline activity, both for new projects and mandated integrity work, continues to provide steady demand for valves and actuators for these applications. We expect demand will continue to rise over the next 12 to 24 months. Pipeline sizes have increased and MRC Global has expanded our inventory as a result. We have increased, our inventory position on pipeline ball valves up to 42”, slab and expanding gate valves to 24”, as well as double block and bleed plug valves used in most terminals. We also added a full range of high pressure gas actuators to support our FastTrack program for actuated valves.