Water line manufacturing might be a crazy market but in times like these, when everything goes topsy-turvy, sometimes you need to be, well, a little crazy.
While there are a fair number of steel tubular manufacturers, very few are in the business of making water lines. That business decision has allowed plastics to dominate the market. And while the wisdom of this choice can be argued on both sides of the equation, the bottom line is still the bottom line and the decision to exit any market can add up to a lot of lost revenue.
"Generally, water work is not terrible and it's not fantastic," said Paul Vivian, principal at Preston Publishing Co., a tubulars research firm in Ballwin, Mo., noting that the margins for water line manufacturing are much thinner than those for energy tubulars.
Because transportation of large and long steel and iron pipes is so expensive and these types of projects are dependant on cutting through a lot of red tape—rights-of-way across land, public hearings and often court rulings—"anyone who wants to be in that business is crazy," Vivian said.
And the business is getting crazier, with competition from plastic and a lack of funding to underwrite such infrastructure projects.
Michael Deane, executive director of the National Association of Water Companies in Washington, said the federal Environmental Protection Agency (EPA) has multiple lists of projects that depict what the nation needs in terms of water and wastewater infrastructure for the next 20 years. "It's worth several hundred million dollars over several years," he said.
But actually getting those projects done is a tricky proposition, despite the pressing need. "We've always been concerned in the water industry that we're not investing enough, particularly in the hidden underground infrastructure," Deane said. "It's easier to build treatment plants that are necessary for permit compliance and a more difficult proposition to shut down streets for months to lay lines."
While Deane doesn't believe that economic stimulus funding from the American Recovery and Reinvestment Act will necessarily add to the amount of water projects getting done nationwide, "I think it will help projects that would fall in this economy. I think it will keep up a level of activity and save jobs rather than add more jobs. It's keeping activity going at this point in time."
Vivian agreed. "The EPA has made several comments about the stimulus package and how dismayed (they are) at their ability to get projects started," he said.
The water line market is down because of the economy, according to Jey K. Jeyapalan, an engineer in the pipeline field and owner of Dr. Jeyapalan & Associates LLC, a consulting service in New Milford, Conn. The federal stimulus money isn't helping much, he said. "It is not up; despite all the talk, there is little change in the available money for water pipes."
Jeyapalan said that last year the $3.3-billion water pipe market spent more on plastic material than metal, with ductile iron pipe accounting for 35 percent of the market; welded steel pipe, 10 percent; polyvinyl chloride, 38 percent; fiber-reinforced plastic, 5 percent; high-density polyethylene, 10 percent; and prestressed concrete, 2 percent.
Plastics have been growing significantly for the past 20 years, replacing steel as the material of choice, he said. "Unless the steel pipe people change the way they do business, their market will continue to lose," Jeyapalan added.
Plastic lines offer many advantages they are cheaper, easier to handle and install and create no corrosion problems, he said. "The plastics industry has much deeper pockets and is staffed by forward-thinking people. The steel industry, on the other hand, does not want to change. There are no new ideas that they would consider implementing. It's low margin, and the leadership does not have much in the form of a vision compared to plastics, etc."