Southwest Region of the U.S. Suffers Fewer Project Cancellations than in 2007

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Researched by Industrial Info Resources (Sugar Land, Texas)--The level of spending in the United States' Southwest market region is often used as a barometer for the health of industrial spending elsewhere in North America. The region consists of Texas, Arkansas, Oklahoma and Louisiana and is home to the country's most concentrated number of oil, gas, refining and chemical industries, employing more than 84,000 people. Based on capital and maintenance project spending identified in Industrial Info's North American Project Database, the region is on track to realize investments totaling an estimated $48 billion this year. This is after accounting for a nearly 24% project fallout, consisting of projects that have been canceled or indefinitely put on hold. At the same time last year, the region was experiencing a project fallout level of nearly 31%.

Click on the image at right to see a 2008 project spending analysis for the Southwest market region.

Despite incredibly volatile energy markets during the course of this year, project spending in some of the key industries of the region such as Chemical, Terminals and Transmission have remained very strong. The region's Chemical Processing Industry has experienced less than 10% in project cancellations this year, with similar or smaller levels seen in the other industrial sectors. The power industry has contributed the most to project cancellations this year, representing slightly more than $9 billion of stalled projects. Although this appears high, this number is not unusual, as many times multiple developers are competing for the same power contract, and ultimately someone is left looking for another place to situate their planned capacity. Despite such a large number of cancellations, the power industry is still planning to begin construction of an estimated $15.5 billion in project activity this year in the Southwest market region.

The Pharmaceutical & Biotech Industry continues to gain strength and momentum in the region with expectations of over $2 billion in total spending this year and fewer than $200 million in project cancellations identified so far. The cities of Houston, Austin and San Antonio have been the pharmaceutical companies' locations of choice within the region after analyzing the cost of living and availability of the highly educated people required in this industry.

It is still early enough in the year that additional projects will be identified as canceled or delayed and the level of project fallout is certain to increase. The question is, by how much? Avoiding the landfall of any major tropical storms or hurricanes in the region would help maintain the industrial momentum. Recently, the cost of crude oil has retreated slightly, and a further drop will have mixed reactions among refiners, although the major refinery expansions already underway will probably continue regardless of the short-term fluctuations in the cost of crude oil.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.