E&C Activity Continues to Increase with Spending Momentum in the Chemical Processing Industry

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Researched by Industrial Info Resources (Sugar Land, Texas)--Increased momentum in capital spending for the Chemical Processing Industry (CPI) can be measured by using many different factors, including the number of active or proposed projects, while also comparing these against projects that have been cancelled, delayed or put on hold. Another measure of the industry's health or momentum is the level of engineering and construction (E&C) activity that has been chosen or contracted for by CPI plant owners. The total investment value (TIV) of projects in which CPI plant owners have secured third-party E&C services for capital projects planned to begin construction during 2012 is an estimated $5.8 billion from more than 160 projects. This is a significant increase from 2011, when Industrial Info identified 146 projects for which E&C services had been selected, valued at only $3.7 billion. This makes the third year of consecutive increases in E&C activity.

This increase in the use of E&C services is presumably taking place as a result of several market drivers that are catapulting spending by CPI plant owners, including cheap natural gas feedstock, making domestic products more competitive on a global stage, an increase in the average TIV of planned CPI projects, plus lower borrowing costs that support mega projects. The confidence that plant owners have in the market also plays a tremendous role in the progress of larger projects where E&C services are more likely to be required. Industrial Info's Confidence Factor for the North American CPI has risen to more than 67% by the beginning of 2012, up from a very low 30% during the recessionary years, only a short time ago. The Confidence Factor measures the number of active and completed projects against cancelled project activity to determine the level of confidence in future projects' maturing and moving forward.

Like so many industrial sectors, the CPI went through a period of drastic reductions in recent years that cut annual spending, sharpened the pencil for future budgets, and reduced operating staff levels significantly. The recent increase in momentum and optimism, paired with some tangible improvements in demand, has plant owners seeking third party contractors and E&C firms to fill their needs for feasibility studies, design and engineering needs. This is evident in the increased number of projects for which E&C firms have been identified for projects planned in 2012 over previous years. Looking ahead at CPI projects planned to kick off in 2013 where an E&C has been selected or secured, projects already total more than $3.5 billion, reinforcing the industry's strong outlook for growth over the next several years.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.