The month of September marks the end of 2021’s third quarter, with the PVF industry experiencing shortages of critical materials, escalating prices and shipping delays as the world recovers from the COVID-19-induced recession.
Exacerbating the issue is the Biden administration’s continued push against the fossil-fuel industry through increased regulation, taxation and curtailment of leasing for exploration on federally owned land.
The win announced last month regarding the ruling by Federal Judge Terry A. Doughty of the U.S. District Court in Monroe, La., that the administration does not have the legal right to stop leasing federal territory for oil and gas production without congressional approval is being challenged.
In a win for the industry, the U.S. Supreme Court — in a narrow 5-to-4 ruling — voted that the state of New Jersey cannot block construction of the PennEast pipeline on state lands based on a state sovereignty claim.
Natural gas pipelines are part of the critical infrastructure transporting gas through the United States to commercial, industrial and residential consumers. Interstate gas pipelines crossing multiple state lines are approved and regulated by the Federal Energy Regulatory Commission (FERC).
The construction of new and expanded gas pipelines has been subjected to increased scrutiny by this administration’s address to climate change by expanding the use of renewable energy sources and reducing the use of fossil fuels.
Going forward, expect sustained efforts through environmental and legislative challenges contesting expanded and new gas pipeline construction. It’s expected that additional challenges in the courts and increased pressure on the FERC to broaden rules for pipeline certification approval will continue. This will result in further capital cost increases and lengthen the overall timeline for pipeline approval and construction.
The Midstream sector of the energy pipeline industry seems to be the primary sector for sustained activity for the remainder of the year and well into 2022. Overall pipeline construction is down from a projected $47 billion to $17 billion.
FERC approves Enable Midstream’s $540 million Gulf Run Pipeline. The project is designed to transport natural gas from some of the most prolific natural gas-producing regions in the United States. This includes the Haynesville, Marcellus, Utica and Barnett shale regions and the Mid-Continent region to the U.S. Gulf Coast. The bidding process is underway, with anticipated in-service slated for late 2022.
A second FERC certificate authorization order involved WBI Energy Transmission’s North Bakker Expansion Project, which is designed to provide up to 250,000 Dth/d from its existing Tioga Compressor Station to a new interconnection with Northern Border Pipeline Co. The project will provide additional takeaway capacity for increasing levels of natural gas production associated with oil production, thereby reducing the need for flaring.
FERC Commissioner Chatterjee will stay with the commission until the end of the congressional session, meaning that Republicans will retain the majority until December. With that said, it is just a matter of time before the White House nominates and the Senate confirms a Democrat replacement.
When that happens, one thing is certain; an environmental assessment or environmental impact statement will assess the significance of project greenhouse gas emissions and their effect on climate change.
Natural Gas Demand
The demand for natural gas continues to grow with the closure of coal and nuclear-powered plants. There are enough industrial projects under construction to increase natural gas demand by another 250 million cubic feet/day by the end of this year, according to Industrial Info Resources.
Williams Cos. capital expenditures for 2021 will be between $1 billion and $1.2 billion. Capex is expected to be near the same in 2022 as Williams continues to develop key offshore and onshore pipeline projects.
Williams reached an agreement with Shell Offshore and Chevron USA to provide offshore natural gas gathering and crude oil transportation services for the offshore Whale development in the Gulf of Mexico.
The firm plans to expand its existing Gulf of Mexico offshore infrastructure with a 25-mile gas lateral pipeline from the Whale platform to the existing Perdido gas pipeline and a new 125-mile oil pipeline to the existing Williams GA-A244 junction platform. Natural gas will be transported to the William Markham gas processing facility in Matagorda, Texas.
The petrochemical industry also is experiencing significant increases in demand and added an anticipated $16 billion spend for the remainder of the year. In addition, plant turnarounds are expected to be up 37 percent.
Supply-Chain Delays, Materials Price Increases
Per an article published in the Harvard Business Review, “Constraints on supplies of their raw materials — polyethylene, polypropylene and monoethylene — are leading to factory shutdowns and production delays across a large range of industries.”
A survey conducted by the Institute for Supply Chain Management reports “worsening supply-demand imbalances in a variety of areas as the U.S. economy continues to open up.” This includes the PVF sector. Disruption could last a year — or longer.
Remember, plastics have multiple uses: medical equipment, construction supplies, paint, automotive parts and many more. Be prepared to pay more for not only gasoline but for other oil-related products as the country continues to rebound.
ENR’s 2021 Annual Building Cost Index year-to-year rose 14.9 percent. Its 2021 Annual Construction Cost Index year-to-year rose 8.8 percent. ENR’s Monthly Construction Cost Index rose 1.8 percent through August 2021; the Monthly Building Cost Index rose 2.8 percent through the same period.
Pipe and billets required for the production of carbon-steel butt-welding fittings and forged steel flanges continue to experience extended production schedules and escalating prices. This environment is expected to last through the remainder of the year and well into 2022.
Effective Sept. 1, 2021, Nucor Steel announces a $60/ton price increase on all special bar quality (SBQ) sizes, shapes and thermally treated bars. This will be in addition to raw material surcharges and any other applicable charges.
Gerdau Long Steel North America announces that effective Sept. 1, 2021, a $60/ton price increase on all hot-rolled carbon and alloy SBQ bar products, including rounds, squares, flats and special sections. Gerdau Special Steel North America announces base price increases effective the same date on as-cast and hot-rolled products and a $70/ton increase on cold finished products.
Republic Steel announced a $60/ton price increase on all carbon, alloy, and leaded grades on all sizes of hot rolled bar and coil, effective Sept. 1, 2021. Monthly materials cost surcharges, alloy and fuel surcharges will remain in effect and are in addition to the announced increase.
Alton Steel also announced that effective Sept. 1, 2021, a $60/ton price increase on carbon and alloy SBQ products with all surcharge mechanisms remaining in effect.
ArcelorMittal Long Products Canada announces a price increase effective Sept. 1, 2021, on the base price of SBQ rounds and flats produced at AM Longueuil and AM Contrecoeur-West: $60/UDDNT and $75/CDNNT in the Canadian market.
Exacerbating the disruption of the supply chain for PVF materials are the escalating transportation costs and delays that are due to a shortage of qualified drivers, truck chassis and rising fuel prices.
Additional price increases are expected as escalation in steel, seamless pipe, shipping materials, lubricants, energy, labor and transportation costs continue to be persistent. It’s highly recommended that you continue to communicate regularly with your manufacturers/suppliers to avoid stock-outs, unexpected delays in shipping and unexpected price increases.
PVF Roundtable News
The next 2021 Networking Meeting will be held Oct. 12, beginning at 4:15 p.m. (CDT) at Houston’s The Bell Tower on 34th, (713) 868-2355
The golf tournament and Trout Blast are the two major fund-raising events held by the PVF Roundtable Charitable Foundation, with the funds raised dedicated to the PVF Roundtable Scholarship Programs.
As a member of the board of directors, and I speak for all members, we thank you for your participation in these events.
The Networking Meetings are a unique venue for you and your associates to network with your peers in the PVF industry. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop new and long-lasting friendships and pursue new opportunities in the industry.