For this month’s Steve & Tom on PVF column, the industry veterans discuss the big economic news for the U.S. economy in 2018: the recent tax reform package promoted by the Trump administration and passed by the House of Representatives and the Senate.
Tom M. Brown: With the reduction of corporate tax rates from 35 percent to 21 percent, reduction in taxes paid by “C Corps” and “Pass Throughs,” and lower taxes for most individuals, the climate for business should exceed the growth of 2017. What are your comments?
Steve Letko: Yes, indeed Tom, tax reform will be a blessing as it pertains to our industry. U.S. refiners, in particular, will benefit most from the Tax Rewrite. Unlike crude producers and equipment makers who have been negatively impacted by the sustained low oil prices that have struggled to generate positive cash flows, refiners have been a small group of the industry that have showed strength following the collapse of oil prices beginning in June of 2014.
The downstream players are negatively related to oil prices, refiners have enjoyed wider refining margins enabling them to generate positive income prior to taxes and therefore are in much better shape to take advantage of the lower tax burden.
The immediate expensing of capital costs will make less financially attractive projects more viable and free up capital to invest.
There are more than $10 billion in projects scheduled to start in the refining sector in 2018. The S&P Oil and Gas Refining Marketing Index is up 28 percent as of the end of December 2017, and is hitting record optimism over the bill passage as we move forward into 2018.
PVF distributors and manufacturers are in line for what could be a record year for the demand for related PVF products including pipe, welding fittings, forged steel flanges and valves along with ancillary products.
TMB: Growth in the economy, and specifically in our industry, reaps huge benefits, but also creates the problem of finding qualified workers to fuel and support increased volume. During the summer of 2017, there existed an estimated shortfall of 80,000 welders in the Houston market alone. Our PVF industry offers great career opportunities for college and high school graduates. How do we expose more young people to these lifetime advantages?
SL: Labor constraints, especially in the Gulf Coast region, are presenting serious problems related to the projects slated for startup in 2018-2019. As you mentioned, the Houston market has been hit hard regarding the supply of welders and other skilled labor related to the PVF industry. The problem has been exacerbated when coupled with the high demand for skilled labor needed for the recovery efforts related to the 2017 hurricanes. Please note, however, the Gulf Coast region is not alone in feeling the effects of skilled labor shortages. The Rocky Mountain region, consisting of Arizona, Colorado, Idaho, Montana, New Mexico, Nevada, Utah and Wyoming, is the leading U.S. region in terms of project values totaling $5.7 billion.
In addition, the Southwest market region consisting of Arkansas, Louisiana, Oklahoma and Texas have scheduled projects set for startup valued at $1.5 billion in 2018.
This is really a nationwide problem that demands immediate attention. If not addressed now, this could get to critical mass in less than 10 years.
The PVF Roundtable is dedicated to providing scholarships to both academic and industrial skill training programs through trade schools. This is a 501(c)(3) non-profit corporation driven solely by dedicated, talented, professional volunteers from all disciplines in the industry.
Our industry needs to start at the high school level to promote the great career opportunities that our industry provides and desperately needs. Not all people are college oriented, yet some have great potential for rewarding careers in the skilled labor sectors of the PVF industry.
TMB: The February 2018 PVF Roundtable is scheduled to be at a new location. Please comment on the date, agenda, and new location.
SL: Due to scheduling conflicts with the Marriott Westchase Hotel, the Board of Directors had to look for a new location that could accommodate the enhanced number of associates registering to attend the networking meetings and sit down dinners.
The board selected an extremely attractive venue well suited for the meetings. The new location is at The Bell Tower on 34th, 901 W. 34th Street, Houston, Texas. There is ample parking with 600-plus spaces and free valet. There will be a number of valet attendants to handle the demand.
The dates of the events going forward are May 8 and Aug. 14.
There will be a special announcement regarding the location and schedule for the sit down dinner scheduled for October. This will be an outstanding event highlighted by a nationally recognized celebrity.
Please mark your calendar for Oct. 16!
TMB: Steve, in closing I want to recognize a friend, an antagonist, a competitor and a protagonist for the BNP titles, Supply House Times, Plumbing and Mechanical and PM Engineer. Bob Miodonski has retired from his post as of the end of 2017. Miodonski’s tenure in our industry goes all the way back to the Horton Publishing days and in his career he headed the three titles mentioned above as well as Contractor magazine. Miodonski was a highly visible professional, and respected editor and journalist in our industry. He leaves large shoes and will be missed.
SL: Bob Miodonski’s decision to retire was a surprise as he did not mention that he was considering retiring at the last PVF Roundtable meeting. I have worked with him over the years while serving on ASA committees going back to the Horton days and throughout his career at Supply House Times magazine.
In addition, he has had an active role in attending all the major events in our industry including the ASA Conventions, MCAA Conventions, PVF Roundtable meetings, and other major shows, reporting in depth the highlights of the events.
His presence at all our major events will be missed as I always looked forward to seeing and meeting with him. He always made it a point to look for me.
We will miss your presence Bob and wish you, and your family, a healthy and rewarding retirement. Just do not get too lazy!