MRC Global InSight

Valves, Automation, Measurement & Instrumentation

The production pause created by COVID-19 that affected our valve, automation, measurement and instrumentation (VAMI) group of products has passed. The supply chain for these products was disrupted for four to six weeks, and countries that were heavily impacted, such as China and Italy, have been allowed to reopen and are working steadily back to full capacity. Unless there is a new spike in COVID-19 cases at their locations, our manufacturers do not expect further supply chain impacts as a result of the COVID-19 pandemic.

We do not anticipate any significant changes to tariffs in 2020 to the U.S. valve and automation industry. The Section 301 List 3 tariffs of 25% imposed by the U.S. government and directly impacting Chinese suppliers remain in place. Always subject to change, the total Chinese tariff is set at 30% for the foreseeable future.

Demand for VAMI products has declined in-line with the North American and global decline in oil and gas activity and CAPEX reductions.

Upstream Production

Global valve and automation demand in the upstream production sector is soft with the largest reduction in North America. International demand has also decreased but has been more resilient than North America, where declines in the rig count at least appear to have bottomed out. Weak demand and over-supply have resulted in a large inventory of oil and consequently a weak oil price as of the end of August.

Midstream Pipeline

Midstream pipeline construction activity has fallen in 2020. Completion of pipelines in the U.S. has maintained a reasonable amount of business but that will fall off as infrastructure build-outs are completed and enter the startup phase. The U.S. has been one of the most active midstream areas in the world for the last several years with new oil and gas production requiring pipeline capacity to transport it to market. As a result, the liquid pipeline sector has the strongest demand for API 6D slab gate, expanding gate and expanding plug valves in main line and tank farm applications.

Demand in this sector for larger diameter and higher pressure (900#) valves has softened, but there is still some activity related to liquid pipeline infrastructure requirements. Castings and main valve components for this sector are generally not sourced from China and, as a consequence, were not impacted by the original arrival of COVID-19 in Asia. The major gas transmission sector is typically supplied with large diameter API 6D welded body ball valves through 42” in multiple acceptable brands from inventory. Actuation for this sector typically follows manufacturer lead times, however MRC Global has a unique FastTrack offering of electric, pneumatic, gas hydraulic and direct gas actuator inventory available for quick adaption and shipment in as little as 24-36 hours. MRC Global’s 127,000 ft2 in-house valve modification center provides expert support and fast turnaround times to our customers in this sector.

Gas Utilities

Gas utilities valve and actuator demand continues to grow in North America with expanding distribution, storage and transmission capacity. Increased demand for ball valve and actuator products through the spring and summer months is normal with a drop off in the fall and winter when it is time to flow gas. Demand for 24” and smaller valves remains stable.

Downstream & Industrial

Demand for VAMI products in the downstream and industrial sector has been the least impacted in the oil and gas market. Turnarounds and brownfield projects have been delayed, but the maintenance, repair and operations (MRO), requirement to maintain the safety and efficiency of plants is a continuing necessity and drives some demand. Commodity valves for this sector are generally sourced from China, and we do not expect any further tariff impacts in the U.S. and no price insulation globally due to weakened demand.