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As we enter into a new decade, and with so many factors in play, we were curious as to what the PVF activity is in regions across the United States. Sources and experts point to growth in the economy and U.S. pipe, valves and fittings (PVF) spending across 12 industries is expected to increase to $13.6 billion in 2020, up by nearly $400 million from 2019, notes Industrial Info Resource’s most recent PVF Market Assessment.
The Wholesaler reached out to wholesale distributors from coast to coast to tell us what was happening in their areas and what to expect down the road. Here is what each had to report:
Lehman Pipe and Supply Co.
Miami-based Lehman Pipe and Supply Co.serves the southeastern United States, as well as the Caribbean, Central America and South America. The company is run by Josh Aberman, executive vice president, who provided an insight into the area’s activities.
“The South Florida economy and construction has truly flourished over the last five years,” Aberman says. “We are very fortunate that South Florida has had both a tremendous amount of private as well as publicly funded projects. Hospitals are expanding, water treatment plants are being built, and infrastructure improvements are being made to accommodate a growing population.”
As the market has gained strength, we were curious as if the company had come back to its previous level and, if so, had any changes been made to Lehman Pipe’s structure.
“We have been very fortunate with our growth and have had record-breaking years for three consecutive years,” he states. “In October 2017, we built a 100,000-square-foot facility on 10 acres and transferred the business there. In April 2019, we added another truck to our fleet to accommodate Naples and Ft. Meyers, Fla., deliveries. In 2020, we are adding three new locations: Santo Domingo, Dominican Republic; Medellin, Colombia; and a new facility in Broward County, Fla.”
Lehman Pipe’s primary focus is the commercial market, and it sees hospitals and hospitality leading company growth in 2020, Aberman says.
“[However,] the industrial market went through some tough times in the last decade after several years of phenomenal growth,” he explains. Fortunately, it did not affect Lehman Pipe negatively as the area is concentrated on tourism.
One thing was made quite clear when I inquired about the biggest opportunity in PVF distribution for this year. “In one word, growth!” Aberman says.
Infrastructure is a crucial concern for all U.S. communities, and we were curious as to how much the company relies on government infrastructure for its business vs. private or publicly held infrastructure projects.
“Cities, municipalities, school boards, and public hospitals represent approximately 12 to 15 percent of our domestic sales,” Aberman says. When asked if infrastructure is getting the appropriate attention for what needs to be done, he explains: “In my opinion, infrastructure changes are inherently reactive. We tend to wait for overpopulation and overcrowding before we make the necessary changes. There is always a lag to be expected when waiting on ‘government-approved funds.’”
The lack of skilled labor in the construction industry continues to be a problem as employment rosters are not strong enough to handle the increasing number of commercial projects across the country — especially in the local area served by Lehman Pipe. “We will see it continue to get worse,” Aberman says. “Our industry doesn’t get the recognition it deserves, which hinders the growth in the skilled trades to service our industry.”
When reflecting on some of the most important things he’s learned from working in the PVF industry, Aberman notes: “This is not unique to this industry, but you must treat people right. If you are good to your people, they will be good to you.”
Ruth Mitchell: Regarding the tariff agreement, do you foresee any impact on your business, pricing or supply agreements?
Josh Aberman: It has not had a negative impact on our business. The cost of materials has gone up; therefore, the value of our inventory as well as the sale price of goods have also increased.
Puget Sound Pipe and Supply
Established in 1917, Puget Sound Pipe & Supply is a Seattle-based, family-owned and -operated wholesale distributor. The company has its distribution center and headquarters in Kent, Wash., and serves North American regional locations from Alaska to Oregon and Washington state.
The company is involved in many markets, including pipe, valves and fittings. It provides PVF materials to many different industries, such as mechanical construction, oil and gas pipeline, petrochemical, marine, industrial, and pulp and paper.
At the helm are family members Matt Stratiner, CEO, and brother Koltin Stratiner, president, both learning from their father, Gary Stratiner, who heads he family operation as chairman. Collectively, they answered our call for what was happening in their area of the country.
“Historically, any depression in the economy tends to hit the Pacific Northwest a tad later than the rest of the country,” Koltin Stratiner notes, “It appears that this will be the case this time around as well. While things are good at the moment with a decent backlog, there is a slowdown on the horizon that will probably hit in a few years.”
He went on to describe how the metropolitan centers have been the growth leaders in the region for the past five to seven years: “As population spreads out from those areas, it appears that the secondary population centers will be the next to experience the expansion in the region in terms of construction and infrastructure spending.”
The company sees the energy sector in Alaska strengthening in 2020. “Large projects that have been tabled for a couple of years will start this year and give it a boost,” Koltin Stratiner explains “In addition, the commercial construction market in the lower 48 states will also be at a high in 2020 with some large projects breaking ground that have been in the planning phase for multiple years. Overall, there should not be much decline in any sectors in 2020; however, with a general election in November, anything is possible.”
He adds: “The biggest opportunity in PVF distribution continues to be providing a high level of value-added services to the customer, no matter which market segment they are in. While industrials and government-funded projects continue to increase in our area, if we are not able to provide a high level of service, they will begin to procure materials from nontraditional distribution sources.”
RM: The industrial market went through some tough times in the last decade after several years of phenomenal growth. How much did that change the structure or operations of your business?
KS: Our company is lucky that we have always stayed diversified enough to be able to ride out any short-term declines in a single sector. The energy sector in the Pacific Northwest and Alaska was extremely depressed for the last half of the decade. As a company, we took on more “commercial” product lines, such as copper, and leveraged previous relationships to increase the scope of products we were selling. This led to an investment in inventory, more warehouse space and a salesforce in the commercial markets. It has been very successful for us, but we remain committed to the industrial business that has traditionally been our strength.
With the market having gained strength over the past couple of years, we were curious if Puget Sound Pipe & Supply was back up to its previous level and, if so, what changes were made to its structure. “The market has recovered for most of the segments we work with,” Koltin Stratiner explains. “We have changed our distribution model and upgraded or IT infrastructure to adapt to the new growth.,”
When it comes to forecasting, each distribution firm has its own calculation methods and information sources. For Puget Sound Pipe & Supply, the behavior of its customers is the best way to discern future trends.
“Customer engagement is and will likely be the best way to forecast future business for the foreseeable future,” Matt Stratiner explains. “We are lucky enough that in the Pacific Northwest, we tend to lag on national trends. So, we see what is going on around the country and often have time to prepare ourselves. However, micro-economies have become so varied across the country in recent years that talking to our customers about their backlogs, and how they feel about the upcoming months and years, is likely a much better gauge.”.
Forecasting is making sure to fulfill customer need, and master distribution is a vital part of the equation.
“We rely a great deal on master distribution and our relationships with those masters to earn business and fulfill our customer’s needs,” he says. “We have yet to find a customer who can detail out a job well enough in advance and with enough accuracy to reliably bring in all the material for a job direct from a manufacturer. In addition, there are always going to be certain products that we do not want to stock for one reason or another. Master distributors are who we rely on to have this material in their stores so we can get those items in a timely manner for our customers.”
The lack of skilled labor in the area is driven by a different type of distributor — that of Amazon.
“In the greater Seattle area, the ‘Amazon effect’ is very real,” Matt Stratiner notes. “Wages have gone up, employment is extremely low, and many of the younger generation who have entered, or will be joining the workforce, do not want to go into an unglamorous job like PVF. They see their friends and acquaintances working at some tech firm or start-up in the area and all the ‘fun, perks that come along with it. The grass always seems to be greener with younger generations, which is evident when you look at how often most millennials change places of employment. Finding good people who want to stay with a company and grow with it long-term is becoming increasingly hard.”
He adds that the most difficult positions to fill over the next year will be truck drivers, warehouse employees and other mid-level positions. “However, as the economy goes, so does the ability to find people who are looking for work in these areas, and that has always been cyclical,” he notes. “The long-term effect of finding good people and having time to train them so they can replace the aging workforce is something that is going to be much more difficult for the industry as a whole, in my opinion.”
The impact of the new tariff agreement on the company was essentially positive. “The initial impact of the tariffs was a profitable one for most of the PVF business, that being immediate inflation of material in stock,” Matt Stratiner says. “Overnight it seemed, our product became worth 25 to 30 percent more in value. The problem with this is that it created a bubble in pricing, and as we saw the rig count in Texas decrease, we saw an increase in stock on the ground in the United States. This has led to the pricing on many items to fall back closer to where they were before the tariffs went into effect.”
Finally, we asked what the most important thing he has learned from working in the PVF industry. “This is first and foremost a relationship business,” Matt Stratiner states, “People will always find a way to buy from whom they want. To be successful in this business, we need to understand who the key decision-makers are and develop personal connections with them —from the owner and CEO all the way down to the fitter on the jobsite.”
The Collins Cos.
The Collins Cos., based in East Windsor, Conn., is one of the largest industrial distributors of engineered specialties and PVF serving the Northeast. Market segments include large industrial, power plants, institutions, and large OEM’s. Globally, The Collins Cos. also serve the power and process project market. Under the direction of President and CEO Brian Tuohey, the company has more than 100,000 square feet of warehouse space in its six branch locations.
According to Tuohey, these markets will be down in the first quarter of 2020 when compared with the first quarter of 2019.
“To begin the year, we anticipate the market to be down 3 to 5 percent vs. 2019, then we are expecting it to improve each quarter to recover to 2019 levels by years end,” he explains. “In Philadelphia, the oil and gas markets are lagging, but in New England, the OEM, pulp and paper, and power plants (with gas conversion at oil and coal plants) are all improving. Our upstate locations in western New York are also improving in the OEM sector.”
The highpoints in each sector run the gamut, Tuohey notes: “Pulp and paper is improving substantially in Maine due to two new Chinese owners who are investing in upgrading and expanding three large mills. OEM is expanding due to manufacturers pushing to automate whatever they can on their factory floors.”
The distribution firm relies on the organizations it is active in to help with forecasting. “We rely on the American Supply Association and its Quarterly Pulse Report, which provides a snapshot of performance for the PHCP and PVF industry and how it relates to the broader economy,” he explains. Also, as an active member of AD, the company is updated on industry trends through business sessions at its meetings.
With the industrial market having gone through tough times in the last decade after several years of phenomenal growth, we wondered how that changed the structure or operations of The Collins Cos. business. “It was a positive for our company as it provided several new acquisition opportunities, and it forced us to review our entire staff for their effectiveness and make changes where necessary,” he says.
With the market gaining strength, the company has come back to previous levels and made changes along the way. “Our business has recovered to our previous highs, and we have recently ventured (through an acquisition) into the technical engineered ‘service’ business as a new venture in a related field,” says Tuohey.
While the company does not do any business in the government infrastructure market, Tuohey is passionate about infrastructure getting the attention it needs. “Our inability to repair or improve our infrastructure is a critical failure of our representatives in Washington, D.C.,” he says. “It will continue to be a failure until term limits are enacted and we get representatives in congress who are more interested in serving the people and less interested in serving themselves.”
RM: Is the skilled labor force strong enough to handle an increase in projects across the country?
BT: I do not believe so, and this problem will only get worse each year as the baby boomers age out of the workforce. This is a huge issue for our country that is NOT getting sufficient attention. At Collins, we foresaw this problem four years ago and hired a “talent acquisition” manager who works every day on ensuring that we are properly staffed with the best possible people. This initiative has worked out quite well for us.
Tuohey went on to say what makes the PVF industry-unique: “This industry might not be as ‘sexy’ as some others, but it is made up of smart, hardworking, real people who genuinely care about each other, and who will help and share their knowledge with you generously and freely and expect absolutely nothing in return.”