This is a part of the 2017 Distribution Trends Special Issue. The annual feature was researched and written by MDM based on interviews with dozens of distributors, industry experts and manufacturers. MDM also conducted a survey of its readers to uncover the trends outlined in this issue.
2017 Distribution Trends Special Issue
Oil & gas prices are stabilizing, but recovery is still a work in progress for distributors that serve those markets. Companies with high exposure to this end market reported steep declines in revenue in 2016, some losing nearly a third of their annual revenue. Rig counts are on the rise, though, so new opportunities may open up in 2017 and 2018.
As a result of challenging oil and gas markets, cost control remains a strategic focus for many distributors in this sector. While all of the major industrial PVF distributors have released long-term plans for what they expect to be a reinvigorated market, they have also noted a keen awareness of the need to manage costs tightly in the near-term. MRC Global and Distribution NOW have both laid off employees to "right size the business to the market" and are working toward "optimizing operations."
Aging infrastructure offers significant opportunity for growth in 2017. As of October 2015, two-thirds of the onshore pipelines used to transport natural gas in the U.S. were installed before 1980, according to a report from Pipeline Safety Trust. With the current administration's announced focus on infrastructure upgrade investments, replacement of the aging pipeline system may open new opportunities for growth.
Sensors and other technologies are driving research and development for the industrial PVF sector. With high-profile events drawing more attention to pipeline maintenance and installation, some companies in the sector are investing in ways to better monitor the health of pipelines going forward. While the use is still in infancy, the internet of things and sensors may drive a shift in product demand and consultative services in this sector.
Long-term, the largest distributors (including MRC Global and Distribution NOW) are still looking to acquisitions to expand their reach and grow revenues. Distributors have been more strategic about the geographic markets they've targeted in recent years, but going forward they see opportunity to expand even further as the drilling markets rebuild. But many are keeping in mind the lessons learned in the volatility of the last few years and being more strategic about evaluating the opportunities.
Merger & acquisition highlights in 2016:
FloWorks International LLC, Houston, TX, sold its plate and sheet operations in Garland, TX, to CL Alloys-Dallas LLC. The sale completed FloWorks exit from the distribution of flat products and metal services.
Winsupply Inc., Dayton, OH, acquired industrial pipe, valves and fittings distributor K&J Supply, Pensacola, FL.