Strong Growth in Oil & Gas Spending Brightens Outlook for Metals & Minerals Companies, a "Navigating the Currents of Change" Webcast on Industrialinfo.com

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Strong project spending growth by U.S. oil & gas companies is increasing demand for products and services from some segments of the Metals & Minerals Industry, according to Industrial Info research leaders. This symbiotic relationship should become even stronger when the U.S. economic recovery gathers speed.

Jesus Davis, IIR vice president of global research for oil & gas, said "Overall the health of the oil & gas industry is really good. We're seeing tremendous amounts of spending in 2010 and going into 2011. The outlook is very optimistic. A lot of spending is being driven by gas in shale formations, high prices for natural gas liquids (NGLs) and fairly sustained crude oil prices," though oil prices did drop by $10 per barrel in August.

The strong oil & gas market also is having a positive impact on Metals & Minerals companies, as they are experiencing greater demand for products and services used by oil & gas companies, such as steel pipe and ceramic proppants, added Joseph Govreau, IIR's vice president for global research for Metals & Minerals. "In the eastern U.S., we are seeing several new steel pipe-making mills moving forward to meet increased demand from the Oil & Gas industry."

Trends in the Oil & Gas and Metals & Minerals industries will be discussed at IIR's upcoming Twenty-Ten Industrial Market Outlook, which will be held Sept. 22 in King of Prussia, Pennsylvania, just outside Philadelphia. Register now for this complimentary event.

"We are seeing a lot of spending by Oil & Gas companies in infrastructure, specifically in non-traditional oil- and gas-producing areas like the Marcellus Shale, which need to build more transmission infrastructure to bring the gas to market," Davis said in a "Navigating the Currents of Change" interview. "This is translating into new business for services and equipment suppliers, such as pipe suppliers, pipeline construction companies, and other suppliers to that industry."

The Marcellus Shale lies under parts of New York, Pennsylvania, West Virginia and Ohio. In Pennsylvania, oil & gas companies are scheduled to begin work on about $1.6 billion of capital and maintenance projects this year, a sharp increase over the $398 million that the industry spent on those projects in 2009. Industrial Info is tracking a total of $813 million of project spending for Pennsylvania's oil & gas industry that is slated to kick off in 2011.

For more on recent trends in oil & gas project spending, see August 11, 2010, article - North American Oil & Gas Sector Spending Continues Growth.

"Overall, project spending in the U.S. Metals & Minerals Industry has been improving, after bottoming out in November 2009," Govreau said. Earlier this year, project spending in this industry experienced some positive growth, but more recently that growth has leveled off, as the prospects for a strong U.S. economic recovery have faded. "Right now, the industry is fluctuating--it doesn't seem to know whether it wants to go up or down. Strong demand for raw materials from overseas has improved the fortunes of some segments of that industry. If the U.S. economy improves, that will positively impact the Metals & Minerals industry. But we are seeing quite a bit of activity now in Pennsylvania."

Pennsylvania is home to about $5.7 billion in project spending for Metals & Minerals companies, commented Govreau, noting several large active steel-making projects under way by AK Steel (NYSE:AKS), Allegheny Ludlum, and U.S. Steel (NYSE:X), as well as several large coal mines.

Construction is scheduled to begin on about $587 million of Metals & Minerals projects in Pennsylvania this year, but projects totaling $1.4 billion are scheduled to begin turning dirt next year, according to projects being tracked by Industrial Info. By contrast, Metals & Minerals companies were scheduled to begin work on $2.9 billion of capital and maintenance projects in Pennsylvania last year, according to Industrial Info's data.

Some sectors of the Metals & Minerals Industry, such as Portland cement makers, have been particularly hit hard by the economic downturn, and additional environmental regulation likely will further dim their future prospects. Govreau said: "Cement has been really hard-hit by the lack of residential and commercial construction activity. Production is down by about 30% since 2005. We have seen about 14 cement plants close last year, and the 110 or so plants that remain will have to comply with increased environmental mandates."

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR'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.