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October marks the beginning of the fourth quarter of 2021 with the PVF industry continuing to deal with many uncertainties. Dysfunctions in the supply chain, price escalation, shortages of critical materials, shipping delays, skilled/unskilled labor shortage still remain significant obstacles as our industry struggles
Price increases of $60/ton on steel were posted, effective Sept. 1, 2021, by several mills and a 20 percent increase on tubular products by a major pipe manufacturer.
A price increase of approximately 10 percent on most carbon steel butt-welding fittings was posted, effective Sep. 9, 2021, by a major domestic manufacturer, citing that raw material and related freight charges continue to experience considerable price increases. Additional increases are expected during this quarter and into 2022.
I recently visited several large and mid-sized mechanical contractors to discuss the issues facing the manufacturers of welding fittings and forged steel flanges, including escalating raw material costs, availability of raw materials, shipping constraints due to shortage of qualified drivers and chassis shortages and delays of offshore material.
As the surging delta variant keeps shipping at bay, supply chain problems look set to last well into next year and further fuel inflation. The cost of moving a container from Asia to Los Angeles or Long Beach, Calif., is six times higher than one year ago, while sending a container to Europe costs 10 times more.
Meanwhile, U.S. manufacturers face a backlog that has been growing all year, with core capital goods orders climbing to a record high of $231 billion.
Every company visited indicated that they were experiencing price increase notifications on a daily basis. In addition, each company indicated concern regarding the effects on the construction market as we progress into 2022. With their backlogs remaining strong through mid-2022, concern is mounting regarding commitments for new projects.
Project Delays, Starts
With the prospects of continued costs escalation, material shortages and labor constraints, contractors voiced their concerns relating to the final investment decisions (FID) of their clients for capital expenditures on new projects.
Contractors are struggling to find skilled craftsmen as they continue to be impacted by COVID-19-induced project delays per a workforce survey from the Associated General Contractors of America and Autodesk, as reported by ENR.
“Nearly nine out of 10 firms are experiencing project delays among all respondents,” per Ken Simonson, chief economist for the AGC. “Seventy-five percent cite delays due to longer lead times or shortages of materials while 57 percent cite delivery delays. Sixty-one percent of the firms said that their projects are being delayed because of shortages among those of their subcontractors. Delays due to the lack of approvals or inspectors or an owners’ directive to halt or redesign a project were cited by 30 percent of contractors.”
Exacerbating the problems confronting our industry is the impact of Hurricane Ida. Ida’s economic cost could hit $70 billion to $80 billion, per AccuWeather, with much of the losses stemming from the oil industry and supply chain delays. Power outages in some areas may persist for up to six weeks. Full recovery of processing capacity will depend on how quickly power is restored, with some plants taking four weeks from the return of power to recover.
On the brighter side, WEC Energy Group is at work on the $45 million Omo Road Natural Gas Compressor Station near Mount Clemons, Mich., that will be connected to subsidiary Bluewater Gas Storage’s mainline pipeline in Macomb County, Mich. It is performing a $20 million upgrade of Turbine 2 at its Fox Energy Center in Kaukauna, Wis.
WEC is also in the engineering stage of an upcoming $185 million peak shaver near Bluff Creek, Wis., which will process, cool and store liquid natural gas (LNG) to serve the state’s southern-most areas. WEC is proposing an $185 million peak shaver near Ionia, Wis., that is designed to serve the greater Milwaukee area for 10 days during the winter and colder days in the month of April. Air Products has begun construction of a $500 million brownfield stream methane reformer and air separation unit in Texas City, Texas, for the Gulf Coast Ammonia Production Complex.
In Massachusetts, Ashfield Ag Resources and Clean Energy Technologies are planning to construct a biomass-fired power plant in the Ashfield area and another similar plant in an undisclosed site near Ashfield. Each project will have the capacity to process 10,000 tons/year of woody feedstock and generate 16,500 MWh of electric power each year, produce 1,400 metric tons of bio char as a byproduct and generate 26,000 MMBTU of heat/year.
GAO Keystone Report
The U.S. Government Accountability Office (GAO) reported that the two big spills in 2017 and 2019 on the Keystone pipeline from Alberta, Canada, to Illinois discharged nearly 13,000 barrels of oil in the Dakotas. The GAO stated construction, installation or fabrication issues caused the two South Dakota spills, while the North Dakota rupture was tied to defects in the original pipe manufacture.
Several reasons cited were the girth weld joining the two pipe segments of differing wall thicknesses failed, pipe was manufactured with an atypical seam weld geometry enough to cause a fatigue crack due to vibration from pumping stations.
This further emphasizes the need to secure high-quality pipe, butt-welding fittings and forged-steel flanges from reliable domestic sources to ensure the integrity of the piping system and limit exposure to liability.
There is a proposed addendum D-16-02 before ASME to alter the ASME B31.3 to impose additional material requirements for ASTM A105 flanges. This would cause irreparable harm to the flange industry and flange distributors.
Changing the material specifications outside of ASTM will have an immediate negative impact on manufacturers and the distribution industry that have vast inventories in finished product on hand that would be rendered useless.
The proposed addendum has been met with strong opposition from end-users, distribution, code members and manufacturers resulting in the tabling of the issue for a two-year period while further information is gathered.
With the issues set forth in this column, it is highly recommended that you maintain close contact with your manufacturer/supplier to avoid stock outages, unexpected delays in shipping as well as anticipated price increases in the ensuing months.
The next 2021 Networking Meeting will be held Oct. 12, 2021, beginning at 4:15 p.m. CDT at The Bell Tower on 34th, 901 W 34th St., Houston.
The golf tournament and the TroutBlast 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.
The PVF TroutBlast is being held in Matagorda, Texas, Oct. 7-8, 2021, and looks to be a record-breaker for the event, thanks to all the volunteers and committee member efforts.
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 to pursue new opportunities in the industry.