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The Manufacturer/Supplier Governing Board convened in Leesburg, Va., in early June at the Landsdowne Resort and Spa facility.
The takeaway from the meeting indicated that the outlook for mechanical contractors was very positive for the next 18 months. All are reporting healthy backlogs and active project bidding. The outlook for strong economic longevity beyond 18 months leans heavily on the outcome of the 2020 election, the direction of the Federal Reserve policy and continuation of deregulation policies.
Modular construction is becoming more popular and is expanding in larger, more complex, full room models.
During the meeting, the members were set up in individual tables of 6 to 8 with an elected spokesman. The topic discussed was the effects of the tariffs regarding current projects and the bidding process. Unanimously, all reported that tariffs did not have a significant impact on their projects. Regarding the bidding process, escalation clauses and time limits on bid acceptance address the issue adequately.
The subject of the bifurcation of the industry came up as an area of concern as the larger contractors are getting larger and the smaller are remaining small and those in the middle are getting squeezed out.
Construction starts for the first half of 2019 show a regional trend versus 2018:
Southwest Central: +3 percent
Northwest Central: +5 percent
South Atlantic: +1 percent
Pacific: -7 percent
New England: +9 percent
Mountain States: +18 percent
Mid-Atlantic: -19 percent
Southeast Central: +29 percent
Northeast Central: -4 percent
Midwest Construction Starts
The Midwest market is scheduled to see the power industry investing more than $5.6 billion in third quarter startups from July through September. This region includes Iowa, Kansas, Minnesota, Missouri, Nebraska, North and South Dakota.
A new gas-fired power plant is scheduled to begin in South Dakota in the third quarter as Otter Tail Corp. begins construction on a 267-MW NGF peaking station in Astoria. Sargent & Lundy is engineering the project with a total investment value (TIV) of $205 million.
In Missouri, the St. Louis metro area is scheduled to see an approximate 60 percent increase in construction starts in the second half of 2019, beginning in the third quarter, estimated to be worth more than $6.6 billion. Nonresidential construction is the primary catalyst expected to see an increase of more than 128 percent. Residential construction will see a modest increase of less than 1 percent. Office construction, retail and healthcare will be the sectors to see the most robust activity.
The power industry, again, is the main contributor in the Great Lakes market for construction project startups in the third quarter with a TIV of $6 billion. This includes the states of Illinois, Indiana, Kentucky, Michigan, Ohio and Wisconsin. Ohio leads the way with more than $2.46 billion in TIV in play.
The closing of the region’s coal-fired power plants is being replaced with new natural gas-fired projects that account for more than $3.6 billion in TIV spending.
EmberClear Corp.’s will begin construction on its 1050 MW combined cycle plant in Cadiz, Ohio. This facility will take approximately three years to complete.
In Oregon, Ohio, near Lake Erie, CME Energy will be initiating construction of a combined cycle plant at the Oregon Clean Energy Center. This facility will have a generating capacity of 955 MW with a TIV of $860 million.
Data centers also are big business in the region. Alphabet Inc. will be constructing a 280,000-square-foot data center in New Albany, Ohio. Amazon will begin construction on the Phase IV expansion of its data center in Hilliard, Ohio. The more than 152,000-square-foot expansion will provide expanded cloud services in the region. The TIV is $80 million.
FedEx is expanding its Ohio operations with the construction of a grassroots distribution center in Plain City, located on the outskirts of Columbus. This project has an estimated TIV of $100 million and is scheduled for completion in the first quarter of 2020.
In addition, there are more than 20 power industry maintenance projects scheduled to start up during the third quarter, according to Industrial Info. Among these projects is Duke Energy’s planned maintenance to units 7 and 8 at the Vermillion Generating Station in Cayuga, Ind.
More than $5.3 billion in planned third-quarter projects starts are in the manufacturing industry in the Great Lakes market. The largest project set to begin construction is Fiat Chrysler Automobile’s conversion of an idled plant in Detroit. This project is being built to produce the next generation of the Grand Cherokee, three-row sport utility vehicles and plug-in hybrid models. The TIV is estimated to be $1.6 billion.
Gas flaring and venting in the U.S. is currently concentrated in two basins: the Permian Basin and the Bakken Levels in the Bakken Basin in North Dakota. While oil production in the Permian has dipped during the first half of the year, gas production remains healthy and steadily increasing. Lack of takeaway capacity and the steady increase in gas production is the driving source behind venting and flaring.
Texas and Oklahoma are usually the home of some of the largest activity in the oil and gas pipeline industry. One of the highest-value projects set to begin construction in the third quarter is Boardwalk Pipeline Partners’ $600 million P2K Pipeline Texas. The pipeline will carry 2 billion cubic feet per day of natural gas about 385 miles from the Waha Hub in the Permian basin to Katy.
Ohio also is one of the hotspots for pipeline activity fueled by the rapid growth in the Uticia and Marcellus plays. Columbia Gas Transmission, a TransCanada Corp. subsidiary, is planning to overhaul its Buckeye XPress System, a vital natural gas supply line for the state. Total investment value estimated at $335 million.
This is just an overview of the many projects planned for kickoff during the third quarter of this year. The pace of construction activity in the manufacturing industry sector, the pipeline industry sector, petrochemical industry sector and the LNG platform sector bode well for those of us in the PVF industry.
Predicated on the pace of construction activity in the planning stages in the second half of the year, the construction market should present many opportunities for the PVF sector for the rest of the year and into 2020.
Pricing for carbon steel butt-welding fittings and forged-steel flanges will remain firm through the third quarter, barring any unforeseen global events. Based on current events, both global and domestic, the supply chain for these products could experience possible disruptions. It is recommended that you communicate with your suppliers regularly to prevent being caught unaware.
As a board member of the PVF Roundtable, I urge you and your associates to attend the next Networking Meeting in Houston. Keeping up-to-date with developing opportunities and increasing your network of contacts by attending these meetings is an invaluable investment.
The next meeting of the PVF Roundtable is scheduled for Aug. 13, 2019, starting at 4:30 p.m. at The Bell Tower on 34th in Houston.
Please register early by using the PVF Roundtable website (www.pvf.org).
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