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Air Valves in Piping Systems

Air Valves in Piping Systems

Liquid piping systems are prone to colle...

Are Valves from Low-Cost Countries Getting Better?

Are Valves from Low-Cost Countries Getting Better?

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Managing the Generation Gap: Much Ado About Nothing?

Managing the Generation Gap: Much Ado About Nothing?

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Industry Headlines

Emerson and BlueFin Form Strategic Partnership

Thursday, 19 April 2018  |  Chris Guy

Emerson and BlueFin have signed a working partnership agreement to deliver the Roxar gauge technology to the U.S. Gulf of Mexico (GoM) region. The part...

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Industry Headlines

Emerson and BlueFin Form Strategic Partnership

12 HOURS AGO

Emerson and BlueFin have signed a working partnership agreement to deliver the Roxar gauge technology to the U.S. Gulf of Mexico (GoM) region. The partnership will deliver a combined offering of Emerson's technology coupled with BlueFin's installation services and chemical injection systems.

BlueFin, a...

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Flowserve Expands Partnership with Unisys

1 DAY AGO

Flowserve, a client of Unisys Corporation, will expand its use of the Unisys Stealth microsegmentation solution through a new agreement to implement the solution more broadly across the enterprise. Under the new agreement , Flowserve will increase the number of servers and endpoints protected by Steal...

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OECD Natural Gas Production Up 2.4% in 2017

13 HOURS AGO

An assessment of monthly data shows that in 2017 Organization for Economic Co-operation and Development (OECD) natural gas production grew by 2.4% compared to 2016. This growth was driven by increases in production across all OECD regions, particularly in Asia Oceania (+17.7%), whilst the Americas and...

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Major Trends Changing the Chemical Industry

2 DAYS AGO

“The accelerated globalization of the chemicals market is one of four major trends that we at SAP see shaping the chemical industry through the remainder of 2018 and beyond,” writes Stefan Guertzgen, global senior director for industry solution marketing, chemicals at SAP.

“Amid such ...

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Beige Book: Solid Outlook Despite Tariff Concerns

14 HOURS AGO

Economic activity continued to expand at a modest to moderate pace across the 12 Federal Reserve Districts in March and early April. Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture and transportation expressed concern about the newly imposed and/or prop...

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IMF Predicting Global Economic Upswing

1 DAY AGO

World growth strengthened in 2017 to 3.8%, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia, a notable upswing in emerging Europe, and signs of recovery in several commodity exporters. Global growth is exp...

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

vmspr12_graham_scott

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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