Industrial Info Resources (IIR) is tracking $783 billion worth of U.S. projects planned to kick off construction this year and have requirements for pipe, valves and fittings (PVF) — see Figure 1.

To be sure, not all will start as planned. More than 2,000 of those projects, worth $203 billion, are assessed with a low probability (69 percent or less) of moving forward as scheduled.

Still, the numbers are big.

Industrial Manufacturing: EVs, AI and Data Centers 

Among the 12 industries IIR is tracking, industrial manufacturing easily leads the pack in total investment value ($263 billion). Industrial manufacturing covers a wide swath of sectors, including auto manufacturing, transportation systems, data centers, distribution and warehousing, and semiconductors and computers, among many others.

As supply-chain challenges ease post-COVID, and the incentives roll in from the Inflation Reduction Act, healthy spending is going on in the traditional automotive regions (Great Lakes, Southeast and Mid-Atlantic) as consumer demand for internal combustion engine vehicles remains strong. 

While the move toward vehicle electrification has made some strides, there is still a long way to go as consumers face sticker shock, range anxiety and a lack of charging infrastructure. Automakers are working to strike a balance between maximizing revenue from internal combustion vehicles while simultaneously investing in green mobility.

The data center sector has grown steadily over the past few years and has seen healthy increases. Loudoun County in northern Virginia continues to lead the worldwide data center market, even as community concerns grow and new guidelines are put into place. With the advent of artificial intelligence (AI), there is more activity not only with the usual suspects such as Meta, Amazon and Google but also with other lesser-known players. 

There is greater demand for more computer/processing horsepower to meet higher-density data center requirements for AI development. As AI requirements grow, data center operators such as Meta must adapt their infrastructure to accommodate high-power density server clusters. Back in 2022-2023, Meta paused several construction projects to “rescope” as it went back to the drawing board to revamp its data center design to optimize for AI.

Precipitated by the challenges faced during the COVID-19 pandemic and the resulting chip crisis, spending in the semiconductor sector has grown dramatically; that momentum will carry over to 2024. The CHIPS Act, signed into law in 2022, has facilitated the reshoring of chip manufacturing to the United States. 

The automotive sector, with electric vehicles (EVs) and more technologically advanced cars, is a big driver for the increased activity. However, the biggest catalysts are AI and data centers, which use many central processing units. 

Semiconductor memory and logic chips are some of the most important components of that. The uptick in EV, AI and data center spending directly correlates to the massive investments made in the semiconductor sector. The Great Lakes, Rocky Mountains and Southwest regions are seeing the most spending.

Oil and Gas Still in Demand

Next comes oil and gas production, with $144 billion in potential project spending for 2024. Demand for oil and gas continues to rise globally and domestically, despite talks of weaning off fossil fuels. Demand for electric vehicles has stagnated and is not growing as rapidly as was anticipated. Therefore, the trajectory for gasoline demand growth is not changing as expected. 

Domestic refineries are running at average rates, and new refineries are coming online in the Middle East, Africa, Mexico and Asia. Consequently, global oil demand is continuing to rise and is forecast to continue to do so going into 2024. 

Ongoing conflict around the world is driving uncertainty for both supply and demand. Russian exports have been significantly reduced but not halted completely. The Israel-Hamas conflict in the Middle East has everyone on high alert for additional supply disruptions in the region if the conflict spreads. These factors are all positives for the U.S. oil and gas producers and drivers for continued capital spending.

Liquefied natural gas (LNG) demand remains strong around the world, as the need for natural gas is robust in Europe and Asia and is expected to grow over the next decade. In 2023, three domestic LNG projects received final investment decisions worth more than $30 billion. Much focus in 2024 will be on projects coming online and their commissioning progress, as several U.S. developers have been working to bring their plants into service as quickly as possible. 

The pace of signed supply purchase agreements between developers of liquefaction projects globally — specifically, those in North America with Asian and European customers — continues to increase. 

Meanwhile, upstream capital expenditures appear to be flat as producers hope inflation cools off, allowing them to maintain production rates without significant changes to spending levels. Additionally, higher interest rates will impact borrowing costs significantly in the near term for those unable to self-fund projects from free cash flow, which keeps a lid on capital spending levels. 

It appears that production growth for some of the majors will come from acquisitions rather than organic growth. Environmental, social and governance (ESG) constraints thought to be impediments in 2023 did not manifest as dramatically as some had expected; ESG concerns are not expected to be a headwind in 2024 either.

Natural gas processing and natural gas liquids (NGL) fractionation have seen surprisingly strong spending levels in 2023; this is expected to continue into 2024. Activity has almost been exclusively focused on the Permian Basin, with the proposal and development of new gas processing and NGL-recovery plants. 

At the other end of the line, NGL fractionation capacity near the Gulf Coast, specifically in Mont Belvieu, Texas, has seen a resurgence of project development as operators propose new trains and restarting capacity that had been idled during the pandemic.

Renewable Solar Power Continues to Rise

Third in line is the power industry, with potential kickoffs worth $101 billion.

The United States continues down the path of a transition toward lower-carbon electricity resources. The current presidential administration has set goals to reach zero carbon emissions from the power industry by 2035. The continuation of production tax credits, investment tax credits and state-level renewable portfolio standards have been the key drivers to reach these goals. 

However, electric utilities face increased pressure from investors, customers and other stakeholders to move to lower carbon choices. The renewable power sector has seen some decrease in costs associated with construction and operation, while others are facing escalating costs, creating a challenge. Other challenges include ongoing supply-chain issues, backlogged interconnect queues and concerns over the reliability of the power supply.

In the renewable power sector, development of new solar power is outpacing all other energy forms in terms of grassroot construction and expansion programs. This has been brought about by lower construction costs and ongoing investment tax credits. IIR expects the development of new solar power to continue at a rapid pace. 

However, there are still growing pains and hurdles along the way. The major issue is the backlog of applications for interconnect agreements to tie these new plants into the grid. In the United States, there can be an 18- to 24-month wait for a decision on interconnect approval from independent system operators, regional transmission organizations and other entities. 

As the power industry transition marches on, there will be a continued closure of coal-fired power. The retirement of another 75 gigawatts or so of coal-fired capacity is foreseen from now through 2033. 

The outlook for the natural gas-fired sector is promising and will continue to be for some time. This is primarily due to the anticipated growing demand for electricity and the need to develop and build reliable, dispatchable electricity sources. Natural gas as a primary fuel ticks these boxes at an affordable price in the United States. 

In Texas, voters recently passed a resolution that allows $10 billion to be set aside to help with the construction of new gas-fired power plants or to modernize existing facilities. In New York and California, the states are directing continued use of natural gas-fired peaking plants beyond their scheduled retirement dates to alleviate concerns over power supplies. 

Brian Ford is editor in chief at Industrial Info Resources and has been with IIR since 2014. With global headquarters in Sugar Land, Texas, and 18 offices worldwide, IIR is a provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. To contact IIR, visit www.industrialinfo.com or call 713-783-5147.