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The PVF market continues reeling from a depressed industrial market fostered by low-priced oil. As of this writing, WTI is at $43.47 and Brent at $46.16/bbl. Downward pressure continues to be exacerbated by the OPEC’s reluctance to stabilize production and the entrance of increased production from Iran and Libya. Global supply will still outpace global demand during the fourth quarter of 2016.
As reported in “The Oil & Gas Journal”, the general consensus of oil and gas services firms is that the global oil market will likely balance by the second quarter of 2017. Alternatively, other potential supply disruptions could come from nations such as Nigeria and Venezuela, adversely impacting the supply/demand dynamic. Low crude-oil prices have stressed their economies and triggered protests. In Nigeria, for example, armed revolts against the central government have thrown the country into chaos. Social unrest in a few countries could turn the market around dramatically.
In the U.S., the shadow of the coming national election casts considerable concern as to the direction the country will take predicated on which philosophy prevails. Capex spending is either being extended into 2017 or cancelled due to reluctance to commit amid uncertainty or regulatory issues that could be resolved by a different administration.
The third quarter experienced volatility in the pricing of carbon forged steel flanges, reflecting the lack of demand in the PVF sector along with the influx of underpriced offshore material. Additionally, sluggish demand has kept the cost of the basic raw materials required for the production of carbon steel butt-welding fittings stable and supply steady. Pricing for these commodities is expected to remain stable for the remainder of the fourth quarter. As always, check with your suppliers and monitor the market frequently to avoid surprises.
Chevron’s Executive Vice President Mark Lashier reflects a more positive outlook resulting from strong global demand and competitive U.S. energy resources for the petrochemical sector. Chevron Phillips is focused on a mid-2017 startup of a $6 billion U.S. Gulf Coast Petrochemical project that includes a 1.5 million metric-ton-per-year ethylene cracker and two world-scale polyethylene units that will produce 500,000 metric tons of resin per year.
“Demand for the chemicals and plastics business is strong,” according to Lashier, “compelling us to continue to search the globe for the next major investment.”
Food and beverage
The U.S. food and beverage industry capital-spending forecast remains strong with $17.5 billion in project plans. Spending plans are being fueled by the demand for more products to supply the food service sector, less volatility in commodity pricing, the shift to more healthier food choices and a sense that the economic outlook will be positive.
Projects in the pipeline are a $155 million meat processing plant in Nebraska; $81 million dog food plant expansion in Arkansas; $60 million poultry plant expansion in North Carolina; $35 million flour mill expansion in Indiana; $30 million meat processing expansion in Michigan; $25 million bakery expansion in New Jersey; $20 million grassroots cold storage facility in Illinois and $20 million craft brewery expansion in Virginia to name a few.
South Carolina is scaling up ports for bigger vessels and greater traffic. The South Carolina Port Authority is investing in many expansion projects to meet the needs of cargo carriers and cruise ships with marine terminal infrastructure projects totaling $5.6 billion. Other related projects are a $500 million Charleston Naval Yard Container Terminal addition; $435 million Charleston Union Pier Cruise Terminal redevelopment; $60 million Mount Pleasant Wanda Welch Wharf repair and improvement along with a $500 million Charleston Post 45 Harbor deepening project.
Ohio is gearing up for $3.8 billion in fourth quarter projects starts. A $700 million retooling project for the North Liberty Automotive Assembly Complex in Toledo is the largest for the fourth quarter. This is followed by the largest pipeline project by Enterprises Transfer Partners valued at $4.2 billion. The 710-mile gas pipeline with gather gas from West Virginia, eastern Ohio and western Pennsylvania for delivery to the Midwest hub in Defiance, Ohio, with 409 miles of the 42-inch line to be laid in Ohio.
The Permian Basin is experiencing a land grab despite slumping crude oil prices. Oil prices are still mired in an oversupply-driven slump. However, you would not know that in West Texas. A land grab has energized an otherwise lackluster market and has sent some explorers’ shares soaring.
The Blackstone Group, L.P. has agreed to invest $1.5 billion in a pair of drilling ventures in the Permian Basin. The firm also committed $500 million to another group who had purchased 16,000 acres in the northeast section of the basin. Wall Street’s rush to the Permian Basin is a sign that the long-awaited recovery in oil and gas may be in the early stages. In some cases, Permian drilling properties are selling at prices exceeding those paid when oil prices were at $100-plus per barrel two years ago.
The two largest projects are in the oil and gas industry and part of Chevron Corp.’s $45-$65 billion Alaska LNG project, which will produce liquefied natural gas and ship it to offshore markets. The project includes a $15 billion LNG liquefaction production and export terminal on the Kenai Peninsula and a $7.5 billion LNG gas treatment plant in Prudhoe Bay. In addition, a $5.5 billion natural gas pipeline from Alaska’s North Slope to the Kenai Peninsula is included as a major component of the Project for the needed supply of natural gas.
New England region
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont are scheduled for $7.6 billion in investments in the pharmaceutical-biotech industry. Massachusetts is leading in attracting industry spending with over 67 active projects with investment valued at $5 billion. Even tiny Rhode Island is in the game with Alexion Pharmaceutical investing $200 million in expanding its Smithfield plant.
West Coast region
California, Washington and Oregon hold the lead in solar projects starts with 26 active projects in play. Oregon ranks highest in project value with two projects totaling a combined valued of $277 million. As long as the Investment Tax Credit for solar installations remains in place with a 30 percent tax credit for solar installation, construction continues its interest in investment. There is an estimated $11.7 billion in nationwide projects to be initiated in 2017.
The shadow of uncertainty caused by the 2016 election, the direction of the Federal Reserve and EPA regulations continue to exert negative influences that are causing decision-makers to take a wait-and-see posture before committing to an investment strategy. As far as the remainder of the year, the demand for carbon steel butt welding fittings and forged steel flanges will continue at a sluggish pace all though pockets of activity will be experienced thus producing mixed results.