Spending among U.S. and Canadian companies on projects with requirements for pipes, valves, and fittings (PVF) is forecast to increase slightly in 2020, before gradually declining over the next three years. Specifically, it will increase from $430.1 billion this year to $433.5 billion in 2020, before dipping to $414.7 billion, $409.1 billion, and $408 billion in the next three years, respectively.

Although overall spending on projects with PVF requirements is expected to decline by 7% in 2023 from this year’s level, the actual decline in spending on PVF itself is expected to be more modest at 3.9%.

U.S. power projects with PVF needs reflect coal vs. gas trend

In the U.S., the power-generation industry exceeds all other industries in projected spending on projects with PVF requirements up to 2023, when the industrial manufacturing industry is expected to pull slightly ahead. The power-generation industry is going through a period of significant change, as once-dominant coal continues to lose market share to natural gas—and, to a lesser extent, renewables—as an energy source.

Projects related to environmental mandates and compliance account for nearly 75% of the spending at U.S. coal-fired power plants through 2023, with maintenance-related projects making up most of the remainder. With no new coal-fired plants planned in the U.S., existing facilities are under even greater pressure to ensure their steam turbines, boilers, and other major equipment remain at peak productivity and do not incur any unnecessary delays.

Natural gas-fired power producers, on the other hand, are expected to see nearly $43.4 billion in new-build and unit-addition projects across the U.S. through 2023. Engineering, procurement, and construction companies, such as Kiewit and Black & Veatch, are preparing to begin construction on plants from owners such as Invenergy LLC, Clean Energy Future LLC, and Florida Power & Light, all of which are benefiting from historically low prices for natural gas. The bulk of these projects are combined-cycle facilities.

Natural gas-fired power also helps the U.S. reduce its reliance on foreign energy sources, as more than 90% of the natural gas consumed in the U.S. in 2018 was produced domestically, according to the U.S. Energy Information Administration (EIA). Just as weak market conditions are pushing active coal-fired plants to be as efficient as possible, strong market conditions are pushing gas-fired plants to do the same as they multiply across the country, often replacing closed coal plants. More than $2.5 billion worth of maintenance-related projects are planned at U.S. gas-fired plants through 2023.

The growing need for PVF components in the industrial manufacturing industry can be attributed in large part to big-ticket public transportation projects, particularly in congested urban areas where commuters find it more efficient to keep their cars in their garages. More than 40% of the projected spending on transportation projects with PVF needs that are set to begin construction through 2023 can be found in and around Dallas, Chicago,  and Las Vegas.

U.S. chemical industry to see highest spending on PVF components

While the power-generation and industrial manufacturing industries lead the U.S. in overall spending through 2023 on projects with PVF needs, the highest spending on the PVF components themselves is attributed to the chemical industry. This one industry is forecast to account for as much as 23% of total spending on PVF components by the end of 2022, with a slight decrease in the following year.

Related projects that are set to begin construction within the coming year include a slew of high-value projects along the U.S. Gulf Coast, such as Formosa Plastics Group’s petrochemical complex in St. James, Louisiana; Lake Charles Methanol LLC’s coke-to-methanol plant in Westlake, Louisiana; and ExxonMobil’s petrochemicals complex in Portland, Texas. The Gulf Coast areas of Texas and Louisiana account for more than half of the full spending on projects with PVF needs through 2023.

Specifically, the chemical industry far outpaces other U.S. industries on spending for valves and fittings. (The U.S. industry that accounts for the most spending on pipes is, well, the pipeline industry.)

“Chemical plants operate with some of the most complex chemistry in the industrial market,” said Trey Hamblet, Industrial Info’s vice president of research for the global chemical industry. Many process units require many of miles of process piping and hundreds, or even thousands, of fittings and connections to operate efficiently.

“Investments for new capacity in the chemical industry reached an all-time historical peak in recent years, thanks in large part to cheap natural gas liquids (NGL) feedstock and the shale gas boom. The outlook for inexpensive and abundant feedstock is promoting optimism that the chemical industry’s investments in new capacity will continue for the next several years.”

Oil and gas, oil sands drive Canada’s PVF projects

In Canada, the oil and gas production industry exceed all other industries in projected spending on projects with PVF requirements up to 2022, when the metals and mining industry begins to account for a plurality. This will not surprise anyone familiar with the dominance of oil and natural gas production in Canada’s western provinces. Although low natural gas prices and regulatory pressures have bedeviled Canadian producers over the past three years (and have made many investors wary of new ventures), the industry has seen some positive signs this year, especially Prime Minister Justin Trudeau’s approval of Kinder Morgan’s Trans Mountain Pipeline and the government’s $275 million commitment to Shell’s $40 billion LNG Canada project.

“The past few years have been tough on the oil companies, as well as their suppliers and vendors, due to the pricing environment,” said Jesus Davis, Industrial Info’s vice president of research for Oil & Gas. “Those who sell pipes, valves, and fittings are looking forward to the time when the conditions improve. This will be a big boon to those vendors, as new plants and expansions worth hundreds of millions of dollars begin to move through the pipeline.”

The Montney Shale, which straddles the border between central Alberta and British Columbia, is fueling the bulk of Canada’s upcoming natural gas-production activity. Much of the exploration comes from companies that are using the gas as feedstock for their production of NGL and other goods. Construction began earlier this year on several projects in the area from Advantage Oil & Gas Ltd. and NuVista Energy Ltd., which total hundreds of millions of dollars in investment.

The metals and mining industry also plays a major role in Canada’s western provinces. Teck Resources Ltd. and Suncor Energy Inc. account for more than one-third of the projected spending on projects with PVF requirements that are set to begin construction in 2022. Both companies are planning mining projects in Canada’s oil sands region, although these projects are in their early planning phases, where plenty of factors could alter, delay, or cancel projected investment.

Maintenance projects buck overall trend

While spending on U.S. and Canadian capital projects with PVF needs is expected to steadily decline in the coming years, spending on maintenance projects with PVF needs is expected to gradually increase starting next year. Spending on the PVF components themselves also is expected to see gains, led by a sharp increase in pipe investments in 2021.

As with the capital spending trends, maintenance spending is strongest in areas with the most energy-related growth. In the U.S., this includes the Permian Basin, where pipeline constructors have been racing to meet urgent demand from oil and gas producers to transport their product out of the area. Companies such as DCP Midstream, Kinder Morgan, Energy Transfer and Targa Resources have been building pipelines to the Texas Gulf Coast, where the oil and gas is processed and exported. Most of these companies are planning maintenance on projects with PVF needs.

In Canada, Enbridge is planning a pair of major maintenance projects on a pair of lines in Manitoba, while Alliance Pipeline is preparing for turnarounds at compressor stations in the three westernmost provinces. Enbridge’s projects involve “pigging,” in which devices known as “pigs” are sent through a pipeline system for cleaning, coating and inspection. In addition to PVF components, the pigging projects will require launchers, receivers, welds, equalizing lines, coatings, and other equipment.