An updated industry report by IBISWorld highlights the strong interdependence between the valve manufacturing industry and the health of industrial manufacturing markets during the recent US recession. During the five years to 2011, industry revenue is estimated to have declined at an average annualized rate of 1.9 percent. Conditions rebounded in 2011, with expected revenue growth of 2.3 percent to $26.7 billion.
“Valve manufacturers rely on several key industries to buy their products, including chemical, petrochemical and petroleum-related industries; water and waste systems; power generation and utilities; and construction,” said IBISWorld industry analyst Nima Samadi in a prepared statement. “Chemical and petrochemical manufacturers faced declining demand due to increased import competition and lower demand from downstream industries; however, conditions improved in 2010 and 2011.”
For petroleum production and pipeline transmission industries, record oil prices between 2006 and 2008 stimulated the growth of drilling and transmission operations globally as these industries expanded their capacity. Still, the subsequent decline in the price of oil dramatically reduced segment revenue, resulting in a fall in demand for petroleum production and transmission-related valves, according to IBISWorld. With oil prices surging again in 2011, demand from petroleum customers spiked again. Some segments have performed well throughout the recession, though, with stimulus funds and demand from the maintenance and repair of existing piping allowing the water and wastewater systems segment to grow.
Many industrial and fluid power valves have become standardized, causing pricing to become the primary basis of competition, according to IBISWorld. This development favors foreign manufacturers; as a result, imported goods satisfy an increasing amount of the domestic market. Industry imports are expected to have grown at a marginal annual rate of 0.2 percent in the five years to 2011 due to recession-related declines. As globalization increases, IBISWorld says foreign imports will threaten the viability of domestic manufacturing.
By specializing in petroleum production and transmission specialty valve manufacturing, the United States has more than doubled its exports to oil-producing nations, such as Saudi Arabia and the United Arab Emirates, during the period. As downstream industries recover from the recession, demand is set to increase, according to IBISWorld.
IBISWorld notes the valve manufacturing industry is bolstered by a large number of small firms. “The top four firms account for less than 30 percent of total revenue,” Samadi said. “Overall concentration has been increasing. Over the past five years, many small- and medium-size firms have exited the industry, while some larger players have engaged in major merger and acquisition activity. Larger firms also continue to grow by increasing their presence in global markets, mitigating losses or downturns in revenue generated by the deterioration of the domestic markets.”
Industry major players are Emerson Electric and Tyco International. Just below the 5 percent threshold IBISWorld uses as its major player cut off is Cameron International; smaller companies include McWane Inc and Meggitt PLC.
For more on IBISWorld’s “Valve Manufacturing In the US: Market Research Report,” click here.
