The Competitive Pipe Industry

INTRODUCTION

Piping and tubing (abbreviated as P/T in this report), and the U.S. industries that fabricate and install these materials, seemingly are rather prosaic businesses, i.e., something that most people take more or less for granted as part of civilized life. After all, pipes and tubes transport water to our houses and businesses and carry away our liquid wastes. They also transport virtually all liquid and gaseous products over short distances (such as a milk transfer line in a dairy) or long ones (such as a transcontinental petroleum products pipeline). Most individuals would not consider a water transmission or sewer line as particularly high-tech.

However, the piping industry is quite sophisticated. Not only are new materials and technologies coming into use to compete with older ones, but P/T is used in a number of industries where fluid transport is not involved. These include electrical and electronics industry use for conduits. Mechanical tubing is used for furniture and light poles. There is piping and tubing that merely moves the same fluid through a closed loop, e.g., in refrigeration and air conditioning systems (HVACR systems) and in hydronic (hot water) heating systems (that also are, of course, HVACR since they relate to the "H" for "heating").

However, the building and construction (B/C) industries are major pipe users. If HVACR systems are included (and they should be since most homes and buildings contain not only HVACR equipment such as refrigerators, but generally also are hydronically heated and, increasingly, air conditioned) then B/C also uses the lion's share of tubing as well.

This study, an update and revision of a 1997 BCC study with the same title, contains revised BCC estimates and forecasts for the current (in base year 2002) and future P/T markets. The major users, building and construction, have been slow-growth industries in recent years as the United States has worked-off overbuilding, especially in the commercial buildings, of the 1980s.

Many major cities still are suffering from commercial vacancy rates of 20% or more, and new construction often must wait until this backlog of space is occupied, modified for another use, or razed/abandoned. There was a commercial building boom in the 1990s that accompanied the IT and dot-com explosion. Much of this went by the boards with the subsequent collapse of so many high-tech companies.

Consolidation, restructuring and retrenchment in manufacturing and other industries also have adversely affected the P/T industries in recent years. To be sure, manufacturing plant modernization and modification requires piping and tubing, but it is not equal to the amount required to build an entirely new plant that replaces an older facility.

For several years, major industrial users like chemicals and petroleum have suffered from lower demands and resulting overcapacity as well as low margins. Until the economy picks up at a faster pace, BCC believes the P/T industry will continue to stay in a somewhat depressed state, at least when compared to previous growth rates.

Thus, this rather slow and lackluster business situation has led to resulting similar slow growth in the P/T industries. This fight for markets, coupled with ongoing technical improvements in newer piping materials, has, if anything, increased an already very competitive situation. Newer competing materials primarily are plastics, many of which are cheaper, lighter, and better able to withstand environmental attacks such as corrosion. In addition, these materials are easier to install and maintain.

It is the goal of this report to give readers a comprehensive update on the state of the U.S. P/T industry, and where BCC believes it is headed at the start of the next century (with predictions and forecasts to 2007). These objectives include:

• descriptions of the pipe and tubing industry, its importance to the functioning and quality of life, and its future prospects
• descriptions of many P/T products and their major end-use markets in the United States, including description and discussion of major types of piping and tubing by material and key applications, and the driving forces behind demand
• an analysis of U.S. industry production and shipments in base year 2002 and growth forecasts to 2007 for several major American P/T materials and applications markets
• descriptions of manufacturing methods used to make important types of commercial piping and tubing
• identification of major American pipe and tubing suppliers
• identification and discussion of major industry dynamics including, supplier strategies, industry changes (consolidation and mergers/acquisitions), and some effects on the U.S. industry resulting from activities of foreign firms
• descriptions of recent trends and new developments in P/T technology
• discussions of environmental and governmental regulatory issues and factors that affect the P/T industry, with emphasis on important public perceptions and related factors.

This study primarily focuses on the United States. It is concerned with estimates for the U.S. pipe and tubing market that are based on products produced by domestic pipe and tubing fabricators. However, as noted above in the report's objectives, the business has some international implications, given the current global nature of business and trade when no nation or region can operate without considering the rest of the world.

A good example of international impact is the increase of cheap imports from the third world that affect markets for U.S. producers. China seems to have become the world's manufacturing center, and is a major exporter of products to the U.S., as are other Asian producers. The greatest effect of P/T imports has been on U.S. steel pipe manufacturers, compounding problems in the domestic raw steel industry. Imports are much less of a problem in other P/T markets, given the weight of most piping materials and products and the local nature of a majority of building and construction projects that comprise the major P/T markets. In fact, there even are some decent export markets for American pipe and tubing.

REASONS FOR DOING THE STUDY

BCC performed this study to provide a comprehensive and updated reference for those interested and/or involved with the pipe and tubing industries and that both serve and benefit from these industries. This is a wide and varied group of personnel in the materials, chemicals, polymer, mechanical equipment and parts companies, both for original P/T manufacture (OEM) and maintenance/replacement parts. BCC sorted through, organized and condensed information from a large amount of literature and other reference materials to compile this report.

Some quite significant, but more evolutionary and revolutionary changes have taken place in the past decade or so. These continue to take place today and probably will for the foreseeable future, as new materials compete for positioning in a mature market. Major competitive market factors involve materials. Intermaterial competition is a way of life in a technologically advanced society, but few industries have so many different competing materials. They range from old standbys like clay and concrete to new high-tech plastics and alloys.

Complicating the situation are the technical and political factors of local building codes. They either can advance or hinder growth of a particular type of pipe in any one of several different types of service. P/T developers and producers must be aware of these factors as well as the activities of their competitors, both in their own materials and in materials and processes. A good recurring example comes from the building trades unions, especially plumbers, who, in several jurisdictions, successfully have slowed or even prevented the use of cheaper and often better plastic piping in residential and commercial structures.

CONTRIBUTION OF THE STUDY AND FOR WHOM

One can argue that piping systems have been one of the primary contributions to the development of civilization as we know it. From ancient civilizations to the present day, piping has been used to move liquids, primarily for water service and waste drainage. As a result, piping is so ingrained in our lives that we seldom think about it unless a new project cuts through our neighborhood, a water main breaks and floods local streets, or some other event reminds us of the huge piping infrastructure that exists around (and beneath) us.

It is this huge infrastructure that should make this report of interest to a wide group of organizations and individuals, i.e., people who are involved in the development, design, manufacture, sale and use of P/T materials, as well as politicians on all levels and the general public. BCC feels this report will be of value to technical and business personnel in the following areas, among others:

• marketing and management personnel in companies that produce, market and sell all types of piping and tubing, as well as forming and installing equipment and parts, components, maintenance materials, and chemicals for cleaning and other uses
• companies that supply, or want to supply, equipment and services to piping and tubing supply companies
• financial institutions that supply money for such facilities and systems, including banks, merchant bankers, venture capitalists and others
• personnel in end-user companies, communities and industries that purchase and use P/T equipment
• government personnel because piping is used at all levels, from the smallest town to the Interstate highway system and the nation's capitol building; all local, state and federal officials are involved in writing and enforcing piping standards to ensure and protect public health and safety and the environment.

SCOPE AND FORMAT

This study provides in depth coverage of many of the most important economic, technological, political, regulatory and environmental considerations involving domestic markets for U.S. production and use of materials and equipment in the pipe and tubing industries. Pipes and tubes are made from materials ranging from inorganic clays and concrete to iron and steel, and to commodity and specialty polymers. Basically, this study is a review and analysis of materials and equipment.

This report includes key technologies (and new technologies), the markets, and some key player companies that make up the U.S. pipe and tubing industry in all its ramifications. This primarily is a study of U.S. Activities and markets, but because of the global nature of most industries, it touches on some noteworthy international activities. These primarily are those that could have an impact on domestic business and markets, e.g., activities of foreign-based companies in U.S. markets and the effects of imports. Export markets are quantified, since these include products made by U.S. pipe and tubing manufacturers.

Demands are estimated for the base year of 2002, and forecast for five years to 2007. All market volume figures usually are rounded to the nearest million pounds. All five-year growth rates are compounded (signified as average annual growth rates or AAGRs). Because of this rounding, some growth rates may not agree exactly with figures in the market tables, especially for differences in small volumes.

This report in segmented into ten sections, with this being the first.

The summary encapsulates findings and conclusions, and includes summary major market tables. It is where a busy executive can find the study's key findings in a condensed format.

This is followed by an overview of the piping and tubing industry. It begins with a historical perspective, then defines and describes the major materials used in pipe and tubing, discusses factors such as regional distribution and the importance of P/T to the U.S. economy, and introduces the major markets, primarily in building and other construction.

Next is the first of the market analysis sections, this one devoted to analysis by construction material of the pipe or tubing. Coverage includes aluminum, clay, concrete, copper, iron, steel, and several types of plastic pipe and tubing.

In the next section, the market analysis is turned on its side, so to speak. It examines P/T markets according to applications and end uses in a number of areas including building/construction (covering uses ranging from water transmission to sewers and storm drain pipe); petroleum service pipe (both "upstream" and "downstream"); machinery, process, and other equipment; electronics and telecommunications; air conditioning and refrigeration, mechanical and structural, and specialty and other uses.

The next section discusses technology, with portions devoted to the manufacture and technology for each major piping material. Several important and more recent technological developments are noted, especially for trenchless technology and the use of pipe linings for repair instead of replacement of leaking or otherwise worn-out piping.

The study then looks at the structure, competitive factors and trends in the U.S. pipe industry, including a broad sweep of the global business and markets. Major emphasis is given to competition between piping materials, a major factor is this industry.

In the next section, there is a discussion of environmental and regulatory factors that affect the P/T industry. The main thrust of this portion is centered on the impact of regulatory and environmental issues on pipe markets.

The final narrative section is devoted to information about U.S. suppliers to this large industry, with profiles of some of the leading companies. Suppliers are segmented according to the materials they provide.

Finally, there is an appendix with a glossary of important terms, abbreviations, acronyms, etc. used in the pipe industry and related technologies such as materials, metals, chemicals and polymers.

Some topics and materials covered in the text of this report are not included in the market forecast tables. These topics and materials are included for completeness. However, they either are outside the scope of this study (such as a discussion of most international activities) or may be too new to have yet developed into a measurable commercial market.

This report is primarily devoted to markets for pipe and tubing as mainly used for fluid handling and other mechanical and structural applications. The emphasis in both the title and scope of this report is on pipe. Not included are some other important industrial applications for tubes and tubing that range from fiber tube cores for towels to clear cellulosic plastic tube containers, and to toothpaste tubes; these are entirely different industries, of interest to others than those who will find this report of value.

METHODOLOGY AND INFORMATION SOURCES

Extensive searches were made of the literature and the Internet, including many of the leading trade publications, as well as technical compendia, government publications, and information from trade and other associations. Much product and market information was obtained from the principals involved in the industry. The information for company profiles was primarily obtained from the companies themselves, especially the larger publicly owned firms. Other sources included directories and articles.