Creative suppliers can turn marketplace challenges into business opportunities.
Suppliers of FRP pipes and tanks agree that the past year has been comparatively slow when it comes to new projects. Few of the major industrial manufacturers who so often demand composite-lined tanks or FRP pipes seem to be undertaking new construction, and in some market segments replacements are slow as well. But a number of indicators suggest that now is the time for fabricators to focus attention on educating end users across several industries about the benefits of FRP compared to alternative materials, as business stands poised to pick up.
A 2015 report from Research and Markets forecasts a modest 3.1 percent increase in the global FRP pipe market from 2015 to 2020. Demand in certain industries – including water/wastewater, chemical/industrial and onshore oil and gas – is expected to drive this growth.
For the optimistic, every challenge presents an opportunity. Fabricators facing the five challenges listed below may find themselves well-situated for opportunities in the coming year.
Challenge #1: Chemical M&A activity has slowed major construction.
Opportunity: Need grows for pipe and tank maintenance and replacements.
“In the chemicals industry, everything has a lifespan,” says John Istre, quality control manager for Resin Systems Inc. in Sulpher, La. That holds true for the pipes currently serving chemical manufacturers. As a result, replacement work is an ongoing need.
In a recent presentation for NACE International, John Busel, vice president of ACMA’s Composites Growth Initiative, noted that in 2014, processing industries, including the chemical industry, saw a direct cost of corrosion as high as $67 billion. It’s one reason that many facilities seem to be focusing on repairs.
Tim Morton, production manager for FiberSystems in Dayton, Ohio, sees this emphasis on repairs versus new construction as a sign of the economic times. “We’re doing replacement fittings or pipes, and the same with tanks,” Morton says. “Not a whole lot of tanks fail, but I have a tremendous amount of work refurbishing tanks.”
For Istre, 2016 has been slow largely as a result of high turnover in the chemical industry. “One of the big things that’s been running the market right now has been the changing of the guard – companies buying out plants,” he says. In fact, A.T. Kearney, a global management consulting firm, notes in its 2016 Chemicals Executive M&A report that a number of megadeals have put 2016 on track as a record year for chemical mergers and acquisitions, potentially twice as high as already-high 2015 levels of activity.
The resulting challenge, Istre says, is that few companies are spending money on additions or refurbishments as an air of uncertainty around future acquisitions continues. “But I think it’s going to settle down a little bit, back to almost normal,” he predicts.
With doubt about future ownership, many of these chemical companies have “let a lot of maintenance go,” Istre adds. As activity settles back to normal, new owners assessing their portfolio may be interested in pursuing infrastructure improvements in the year ahead. If this is the case, Morton predicts that there may be plenty of opportunity for smaller fabricators.
“With the [down] economy, the big shops aren’t willing to set up special tooling to meet their customers’ [repair] needs. The customers are really in a jam, and that’s our niche,” Morton says.
Challenge #2: Municipalities are unsure of solutions for failing pipes.
Opportunity: Demand increased for corrosion-resistant piping for water infrastructure improvements.
It’s not every day that the pipe market finds itself in the news, but in the last year failing water systems have made pipe improvements very much a topic of discussion.
Busel notes that the drinking water, sewer treatment and sewer sectors saw direct costs of corrosion exceeding that of processing industries, coming in at $68 billion in 2014. One of the most talked-about failures came when the city of Flint, Mich., switched its water supply in 2014 to the Flint River. High levels of chlorine, which reacted with high levels of bacteria in the river, ultimately corroded the city’s lead pipes. Subsequently, lead seeped into the drinking water supply, causing widespread lead poisoning. By the time the city returned to its original water supplier late in 2015, it was too late to reverse the damage to the pipes.
Flint may be the best known example of failing infrastructure, but it’s not the only one. In early 2016, a concrete water pipeline servicing Silicone Valley failed, leading to $20 million in repairs.
As a result of these failures, the U.S. Senate introduced the Water Resources Development Act of 2016 to authorize $9 billion in water infrastructure improvements, including $220 million specifically for Flint, Mich., and other cities that may have contaminated water supplies. The bill passed the U.S. Senate on September 15 on its way to the House. If signed into law, it promises to drive broad water and sewer infrastructure replacements, presenting opportunities for suppliers of corrosion-resistant FRP pipes.
“We promote FRP composite pipe for all water systems, but adoption of the material has been somewhat slow due to municipal budget restrictions,” Morton says. The availability of funding could help municipalities, although Morton notes that there are built-in savings with FRP piping. “FRP is a higher premium upfront, but the advantages quickly give customers a return on investment. Lighter weight reduces field installation costs, and corrosion resistance means minimal maintenance and a long service life. When you do the math, the savings counties can realize with FRP composites versus replacing pipe again and again are significant.”
Among other examples, officials in Dayton turned to FiberSystems for a composite solution when five packed tower aeration systems installed in the late 1980s began to fail. The aeration systems are used to eliminate volatile organic compounds from ground water. “The spools were experiencing early failure,” Morton explains. “In addition to being able to rebuild the damaged sections, we also significantly extended the lifecycle of the structures.”
Using a high-performance, high-temperature epoxy vinyl ester resin, the 12-inch diameter flanged reducing spools were filament wound and joined through adhesive welding. The spools were also coated with specialty UV-resistant polyurethane to provide the surfaces with corrosion resistance and protection for an improved cosmetic appearance.
There’s another area of water infrastructure that is leading to increased demand for FRP piping and tanks, too. “While not a new application, the increase in seawater and brackish water desalination in the Americas has contributed to the growth of FRP piping and tank use in this market segment,” says Chaun Trenary, vice president of marketing and sales for Denali Inc., a Houston-based manufacturer of FRP tanks, pipes and related equipment.
“We’re currently looking at several projects on the West Coast,” Morton says. “Large diameter, low-pressure FRP piping is best suited for above ground applications, but we’ve also provided continuous filament-wound FRP pipe and fittings for burial underground.”
Challenge #3: Oil and gas industry hits new restrictions with move into more remote locations.
Opportunity: FRP meets the pressure and weight needs of deep-sea applications.
The report from Research and Markets indicates that onshore oil and gas is expected to emerge as the leading FRP pipe market by value and volume consumption, after chemical/industrial applications. The growth of oil and gas exploration activities, coupled with a boom in shale gas production in the onshore oil and gas industry, is expected to spur growth for this segment.
Raymond Burke, product leader – flexible pipe, for Houston-based GE Oil & Gas, explains that given the massive cost of mounting an offshore drilling and construction campaign, oil companies concentrate on operating large, highly productive fields. This scale is pushing more wells into deeper and more remote locations. “One consequence of this trend is that floating production systems dominate new subsea developments, and flexible risers (the pipelines to hook the subsea production system up to floating platforms) become heavier as a consequence of depth,” Burke says.
