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Valve Basics Training Helps Fill Industry Skills Gap

Valve Basics Training Helps Fill Industry Skills Gap

One of the most keenly felt needs in tod...

An End-User’s Perspective on Valve Selection and Risk

An End-User’s Perspective on Valve Selection and Risk

I am not a valve expert, although I ofte...

New Test Stamp and More Updates on Pressure Vessel Codes

New Test Stamp and More Updates on Pressure Vessel Codes

A new test organization program and stam...

The Role of Valves in HAZOP Studies

The Role of Valves in HAZOP Studies

Process hazard analysis (PHA) is require...

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Lee Howard Named President of Rotork Controls

1 DAY AGO
Lee Howard Named President of Rotork Controls

Lee Howard has been named president of Rotork Controls , overseeing both the U.S. and Canada. He replaces the recently retired Bob Arnold, a former VMA chairman, who served as president of Rotork Controls since 1988.

Lee was born in Wales and is a native of the UK. He previously served as managing dire...

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Val-Matic Names Mark Troyanowski VP of Sales & Marketing

2 DAYS AGO
Val-Matic Names Mark Troyanowski VP of Sales & Marketing

Val-Matic Valve & Manufacturing Corp. has appointed Mark T. Troyanowski as vice president of sales and marketing. Mr. Troyanowski joined Val-Matic earlier this year and previously worked in various sales management roles at other manufacturing companies.

Over his career, he has participated in seve...

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Chemical Activity Barometer Suggests Accelerated Business Activity

11 HOURS AGO

The Chemical Activity Barometer (CAB) expanded 0.4% in August following an upward revision for July. This marks the barometer’s sixth consecutive monthly gain. Accounting for adjustments, the CAB is up 3.2% over this time last year, the strongest year over year growth since January 2015. All d...

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Innovation Could Lead to Significant Cuts in Chemical Manufacturing Energy Use

14 HOURS AGO

Scientists from ExxonMobil and Georgia Tech have developed a new technology that could significantly reduce the amount of energy and emissions associated with manufacturing plastics. If brought to industrial scale, this breakthrough could reduce industry’s global annual carbon dioxide emissions ...

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Manufacturing Output Up, Firms Signal Softer Expansion in New Work

16 HOURS AGO

U.S. goods producers saw a further upturn in overall business conditions during August, though the rate of improvement was softer than seen in July. While output continued to rise markedly, total new work rose at a slower pace and employment expanded at the weakest rate in four months. Meanwhile, co...

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Leading Economic Indicators Gained Ground in July

5 DAYS AGO

The Conference Board Leading Economic Index (LEI) for the U.S. increased 0.4% in July to 124.3, following a 0.3% increase in June, and a 0.2% decline in May.

“The U.S. LEI picked up again in July, suggesting moderate economic growth should continue through the end of 2016,” said Ataman Ozyi...

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A Conversation with R. Scott Graham: Analyzing the Valve World

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Some analysts consider the valve market a hard one to track because there are so many players in the field and the business cycles are so long term.

 

But Scott Graham, senior analyst for Jefferies & Company, Inc. and a recent speaker at VMA’s Leadership Forum, says those factors are precisely what makes the market interesting.

“The fragmentation of the industry and its long cycles work to the benefit of many valve companies,” Graham says.

Valve manufacturing ranges from the highly specialized to the ubiquitous or more standard product, he says.

“The former benefits larger companies as long- and late-cycle commodities processing projects are hatched. These projects are often complex and require valves that meet exacting standards. The latter benefits the entire sector as valves are needed in multiple industrial applications.”

The companies that will be the most successful, however, are those with a geographic footprint, he says.

“Most of the spending in flow management is occurring outside mature markets. A local presence is required to tap opportunities. At the same time, we have seen steady, slow consolidation since access to credit can be limited for smaller companies. The larger companies with a localized footprint and access to credit have more working capital, which customers are looking for,” he says.

“The companies that will be the most successful are those with a geographic footprint.”


THE MARKETS

Graham, who has been an analyst more than 15 years (12 years of which he’s spent analyzing industrial stocks), holds an MBA and is a certified public accountant. He says the industrial sector is recovering from the world’s economic downturn and is spending to increase capacity, particularly in the commodities processing areas, which are the backbone of emerging market infrastructure. In fact, he said most of the end-markets he tracks are entering a new capital spending cycle.

For example, in oil & gas, “we are in about year two of a four-to-five-year capital spending (capex) cycle, in my view. The first half of that cycle, the spending was towards getting rigs up—spending at the well head,” he says. “As this cycle progresses, spending moves out to the production and distribution portions of the market, and valve manufacturers will benefit from this.” At the leadership forum, Graham estimated about a 5% growth in global oil & gas for 2012.

Although power generation lags oil & gas, it’s also entering a favorable period, Graham says.

“Power generation is more of a stand-alone market. This cycle, particularly in mature markets, requires a few years of economic improvement or stricter regulatory standards before capital spending increases,” he says. “We believe we are reaching that point in mature markets. Many power generation facilities in the U.S. are too close to using reserves, which runs the risk of costly outages and brown-outs. We expect spending in power in mature markets will see 3% to 5% growth in capex for 2012,” Graham said. He thinks outside of the U.S. and Europe, power spending will rise in the upper-single digits.

The chemical and petrochemical markets have much earlier cycles than either oil & gas or power generation, which means they are already well underway to recovery, though the markets are slowing down. Graham said at the forum that capex increased by more than 25% in the third quarter of 2011 and is expected to grow 5% to 10% in 2012.

The trend, however, is that, as markets get increasingly complex in their needs, production is moving closer to feedstock, especially in developing regions such as the Middle East, Asia and increasingly in South America. That creates new opportunities for valve companies in those areas of the world. Meanwhile, in North America, gas shale has opened up investment opportunities, but because of the low price of gas, the most immediate investments will be for turning gas into liquids, not pulling new sources out of the ground, Graham says.

In the refining world, Graham says that while the business has suffered in recent years, he sees significant opportunities in the near future.

“In the U.S. and Europe, the difficulty and cost of permitting means we won’t see much building in the near term—most of the new capital being spent is not in this country. But we will see brownfield spending to increase capacity. Moreover, we are starting to see a lot of new refinery projects announced in other areas of the world where oil and petrochemical products are increasingly needed. This, too, creates opportunities for valve companies,” Graham says.

The water/wastewater situation is different. Worldwide needs for water/wastewater cannot be denied nor can pent up demand in the U.S. Graham said that the industry will grow about 6% a year going forward with growth in BRIC countries two to three times higher. In the U.S., however, “you have to understand that even though municipalities and water utilities have funds that are separate from other budgets, the reality of the situation is that teachers aren’t going to be fired so a water main can be put in. In mature markets, water is a priority fix [an old main might be repaired], but it’s not a priority spend [a new one probably won’t be put in].”

Overall, for valves, he says the market will remain a good one for investment.

“You can’t do anything in flow processing industries without valves and we know there is reasonable stability in this market,” he concludes.


Genilee Parente is managing editor, Valve Magazine. Reach her at This email address is being protected from spambots. You need JavaScript enabled to view it..

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