Rise in Valve Shipments Signals Growth in Economy

Like all manufacturing industries, valves saw a decline at one point during the recent world economic woes. “For our industry, which tends to lag behind the general economy and its own end-user industries, that drop was about 5% in 2009, just as we had predicted. However, shipments have been rising steadily since then,” William Sandler, CAE, VMA’s president added.

According to VMA, one factor that will contribute in 2012 is a rise in domestic shipments, which had remained about the same during the last few years. While that may seem counter-intuitive based on the less than robust domestic economic recovery, Broxterman noted, “Keep in mind the MRO market (maintenance) stayed fairly strong—management recognizes that if a plant is to continue to run effectively that there will be a need for money to be spent. Valves are an integral part of proper plant operation so replacements also impacted revenue growth.”

According to VMA’s forecast, exports of valves will again grow—in 2009, exports were at about $710 million; by 2011, they had grown to $760 million, and they are forecast at more than $790 million for 2012.

With respect to the rise in domestic shipments, Valve Magazine wondered if some of that growth might be due to technological advances in unconventional resource extraction, specifically, shale gas.

Sandler felt that those advances might offset some of the other areas but not drive the overall domestic market up, while Broxterman had this comment. “The shale gas Industry is still relatively new to all of us so we are all watching and learning. There is no doubt that the difficult applications found in this arena will drive valve makers to innovate. Several valve companies already have a presence in this market and, clearly, they should see a spike in demand for products that are used in the fracing process.”

Water mains are breaking and wastewater plants are working at maximum capacity in many cities, so Valve Magazine wondered if these would be areas that would contribute to the growth potential for the valve industry. Broxterman agreed that it should be a possibility, “However, municipalities that are struggling with a shrinking tax base cannot seem to find the money to rebuild their aging infrastructures. My own feeling is that this will reach a breaking point at some point in time, and then we will see a spike in demand in this market.”

There is hope, however, that the funds will be made available soon as, in his State of the Union address, President Obama said, “Take the money we’re no longer spending at war, use half of it to pay down our debt, and use the rest to do some nation-building right here at home.”

Broxterman agreed. “The recession hit the chemical industry hard and this was an area where we saw plants shut down or ratcheted way back. There was huge cost-cutting done in this industry because the recession had such a huge impact on chemical demand, which is heavily reliant on demand from the consumer goods markets. However, as the global economy recovers, demand for chemical products is on the rise. Both domestic and export growth have been good over the last several months and that trends is likely to continue through 2012. Cost-saving actions implemented by the industry during the down years, along with production improvements, have resulted in improved profit margins and higher levels of cash available for investment.”

So all of this news is good for the valve industry, but how does that translate to benefitting the economy generally?

Sandler was quick to point out, “The positive effect has been that many domestic manufacturers have started to hire personnel, therefore strengthening the economy. This seems to be a trend in the overall manufacturing industry.”

Broxterman elaborated. “I think manufacturing and the jobs that it brings to the table are a very important part of our having a healthy economy. The Valve Industry epitomizes what manufacturing is all about – solid companies, cutting metal and producing competitive products that are sold throughout the world.”

While the domestic economy certainly has its ups and downs, Sandler reminded us that it is important to remember that domestic manufacturers are global in their business. “You can’t assume that a domestic slow growth economy affects a global industry.”

Additional Valve Market Data:

Along with its annual market forecast for valve shipments, the Valve Manufacturers Association released historical data on past valve shipments by product category and total shipments, as well as its annual breakdown of valve shipments by end-user markets. A few highlights include:

• Shipments by Valve Categories (2002-2011) – In 2011, automated valves accounted for the biggest share among valve types ($1.2 billion), followed by ball valves ($718 million), and gate, globe and check valves ($577 million).
• Total Individual Valve Shipments Over the Past 10 Years – Valve shipments in 2011 at $3.915 billion were the strongest they’ve been over the past decade except during their peak in 2008 at $4.0 billion in sales. In 2001, valve shipments were about $3.1 billion.
• Distribution Forecast of End Users in the 2011 Valve Market – Of the 15 markets tracked by VMA in 2011, Water & Wastewater had the largest share at about 18%, followed by Chemical (17%), Petroleum Production and Petroleum Refining (each at about 12%), and Power Generation (11%).

Kate Kunkel is senior editor for Valve Magazine. Reach her at kkunkel@vma.org.