The positive forecast Alan Beaulieu of ITR Economics shared was welcome news at VMA’s 2017 Leadership Forum.
“You’re going to like 2017 and 2018,” he said. “Consumers are in great shape, retail sales are at a record high level, housing starts are positive, interest rates remain favorable, employment and wages are rising, and banks are lending.”
However, it is not all smooth sailing. One of the concerns for many in the valve industry is the price of oil, which is still hovering around $50. On a positive note, Beaulieu pointed out that the U.S. has 300 years’ worth of oil reserves, whereas Europe has only about 30 years. That gives the U.S. a decided advantage because it is energy independent.
The economy is expected to improve in 2017 and 2018, but there will be a mild consumer-led recession in 2019. It will not be likely to impact the valve industry much, and Beaulieu projects that metal valve production will increase over the next two years. He also recommended that any capital investments be made now because capex rates are very low. “There has never been a better time to invest in improvements,” Beaulieu advised.
While much of the projection is positive for the immediate future, Beaulieu pointed out that there are concerns.. China’s debt situation is even worse than the U.S. and the banking system is filled with fraud. “It all leads to a ticking bomb,” he concluded.
The other concern is getting laborers to fill manufacturing jobs. And if you do find employees,” you will be paying them more or you will be losing them” he warned.
Finally, Beaulieu noted ITR’s prediction for a major depression starting in 2030 still stands. However, he said, until that happens, “Expect more upside than down over the next 12 years.”
Greg Johnson of United Valve said he does not expect the Trump administration cuts in EPA funding to affect the fugitive emissions requirements because the changes have already been made and actions have begun to enforce limits.
Traditionally, oil refineries and petrochemical plants were the main points of interest for inspection, but consent decrees have been issued to other systems because of piping system FE leakage including a meat packing plant, for ammonia, a steel mill plant for benzene and an automobile manufacturer and a paint manufacturer, for solvent emissions. The common denominator was that they were all leaking volatile organic compounds or hazardous air pollutants into the atmosphere. The worst offenders are linear valves, which constitute 60% of valve population in refinery and petrochemicals.
Once a consent decree has been issued, the offending user must admit to guilt and agree to fix the leaking valves. It must guarantee the valves will not leak at more than 100 ppm for five years and valve packing manufacturers must guarantee, by signing a legal document, that the packing will not leak. It is a huge undertaking to check the torque on every single one of the linear valves in a plant.
While these are difficult, the most difficult valves to test and certify are upstream wellhead valves because of the extremely high pressures. Correct dimensions, torques and tolerances are absolutely critical to successful FE containment, as is quality manufacturing and repeatability.
There are several questions about the future of FE testing. Whether argon could become a viable test gas and whether the EPA will adopt the 100-ppm acceptable leakage rate nationwide are both unknown at this time. Johnson does believe there will be more replacement of large OD gate valves with ¼-turn products. He also believes there could be more of a push for bellows seal-valves because they work very well, but anything above two inches is very expensive.
End User Perspectives
A panel of end users from the power, water, and oil and gas sectors convened during the meeting to share their outlook for the coming year.
Lyle White, vice president and global director of business development of power generation services at Black and Veatch, pointed out the new energy paradigm is forcing big changes in the power industry. “If we don’t get proactive about how we do our business with energy, we will be at the back of the pack. Smaller is better, and we must adapt to innovations like distributed power and generation coming from small plants and renewable resources close to the end users.”
White believes that control technology is key to advanced power generation and distribution programs, and that monitoring of the performance of power assets will be more regular and done remotely. Opportunities for suppliers to the industry will come from existing power asset enhancement rather than new builds. Equipment and systems will have more demand on performance.
Thomas Decker of Thomas E. Decker Consulting said of the water and wastewater market, “We need to make our case louder and more robust because water is hidden. We take it for granted.” He noted that, compared to other developed nations, U.S. water infrastructure is pretty far down the list. Canada is in better shape than the U.S. and in the midst of a multi-billion-dollar program to improve their infrastructure.
Decker addressed attendee concerns that the repeal of WOTUS (Waters of the United States Act) will have an impact on equipment sales. “No, not to any degree,” he said. “What could hurt is that among the new proposals is to eliminate tax-free interest on municipal bonds. Naturally, the interest rates would rise and that could cost $16B over the next number of years.
Decker also noted that the proposed one trillion-dollar infrastructure plan is mostly for roads, bridges, airports, ports and oil pipelines. Water will not be a priority.
John Spears of Spears and Associates advised that U.S. oil production peaked in the second quarter of 2015 and declined through the fourth quarter of 2016 but has since begun to rise in response to increased drilling activity. U.S. oil production is forecast to increase 35% to 3.2 million bpd from 2016-2020 and this increase is expected to drive growth in liquid line pipeline construction. In more positive news, Spears said he expects North American drilling activity to jump 56% in 2017 to a total of about 1,000 active rigs and 27,500 new wells. This is because breakeven prices have been reduced to below $50/bbl in many basins due to reduced pricing and increased efficiency. However, some of the cost savings extracted from the oil services sector over the last two years will be reversed in 2017 as activity and the demand for people and equipment increases.
Cliff McLaughlin of Eastern Controls pointed out that now there is much more focus by manufacturers’ representatives on application specific products. “A lot has changed with the internet. Leads and opportunities occur later in the cycle, after purchasers have already done research online,” he said. “Customer expectations of today’s rep are that we have to know what we’re talking about, and response has to be fast. You have to help solve problems. Customer service today must be exceptional.”
On the other side, manufacturers also expect much more of representatives. They want representatives to have a highly-trained tech sales and support staff. McLaughlin sees the role now of adding value to the customer’s experience. “You have to offer expertise and complimentary solutions. There are a lot of young people [in the end user industries] who may not have much experience, and there are not as many older, experienced people around in their companies to advise them. So, that becomes the rep’s job.”
Another important service is to provide training to customers and to work in partnership with the manufacturers. “Reps use data and analytics to measure their training, sales, time to quote/order, etc. All of this data is important to the principals. Reps must also have access to subject matter experts so that we are also a resource for customers.”
Doing More with Less
In an audience participation presentation, Mark Lesser of ZBA Associates brought to attendees’ attention the importance of listening. He pointed out the important differentiation between listening to listen and listening to problem-solve. “The thing people want most is to be heard,” he said. “But it’s tough to get people out of the mode of forming their point while the other person is talking.”
Lesser noted that so often in organizations, assumptions muddy the waters. Communication has broken down despite the constant connectivity. “So much time in business world is cleaning up assumptions,” he said. “More focus, awareness, presence and trust is needed to communicate.”
One of the tools he offered to help increase presence and focus is the very simple practice of meditation. “Short meditation helps grown brain manner,” he noted. “Being in the zone,” being focused on what you’re doing allows you to do more with less effort because you are more present.”
Lesser feels that meditation should be as routine in life as brushing your teeth. “The more you can build it into your life, the better. Studies have shown 20 minutes creates actual physical changes in the brain. Work up to a daily practice.”