Valve Magazine - Fall 2011

U.S. Industrial Production (3MMA YOY Change)

ular-
rna-
rawn
sys-
to
pti-
xist
est a
med
est-
; in
s
bles
ile
th
ng

-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%

1969

1979

1983

1971

1973

1975

1977

1981

1985

2003

1987

1989

1991

1993

1995

1997

1999

2001

2005

2007

2009

Source: Federal Reserve

chemical market overall are healthy and have been since late last year. In the U.S., plant capacity utilization rose in

2010, but remained well below peak levels at about 76% for the year. The overall trend in the chemical industry continues to be that chemical production is moving away from North America and Western Europe to the emerging markets and the Middle East.

In power, Halloran said demand in the U.S. and some other developed regions remains sluggish, but quoting activity appears to be picking up in places (especially emerging nations) because of the need for infrastructure investments.

The water/wastewater market is growing at a rate of 6% to 8%, driven by population growth, rising living standards, industrialization and the need for maintenance. Halloran said that in general, the market is weak for capex spending, though the stimulus monies have helped. The operating expenditure side, however, is seeing some growth right now.

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The index rose above that point in
August of 2009 and has remained above
it since then. It did very well in the
beginning of 2011 but was hovering
around 50 at the time of the workshop
“so things are still growing, but more
moderately.”
As far as end-user industries:
Oil & gas demand was strong at the
time of the workshop, showing no signs
of deceleration. Globally, rigs were up
over 50% from where they hit bottom in
2009, and in North America, rigs were
up more the 100%. Halloran said “high
oil prices are contributing to the sus-
tained drilling trend, as oil companies
look to take advantage.”
Horizontal rig applications “have
been the driver” in recent years in the
upstream market, which is good for
equipment suppliers because this type of
drilling “leads into a lot of burn and
replacement,” Halloran said.

An important overall global trend in upstream oil & gas markets is that “capital spending should grow at rates of 5% to 7% (or more) because infrastructure investment in emerging regions has yet to catch the pace of demand,” Halloran said.

On the downstream side of the business, he noted that Global Insights said global capex spending increased 7% year over year in 2010, which indicates the potential for favorable “growth rates long term on the refinery side.” Most of that growth, however, is in emerging markets. In North America, most new additions are for Canadian refinery projects, though some modest growth in all areas will occur in maintenance spending going forward.

Halloran said that trends in the

FORECAST: Global Insights believes global oil & gas downstream capital expenditures should increase 10% in 2011, 6% in 2012 and 7% in 2013. Further, Global Insights believes global capital expenditures for chemicals should grow 13% in 2011 and 9% in 2012, but that growth will be driven by China and Latin/Central America. Estimates are for world energy consumption to grow 49% by 2035 (over 2007) driven primarily by developing regions. Renewable energy use will grow 3% per year to take a 23% share of the energy market by 2035.