Looking at the number of water line projects Northwest Pipe
Co. has landed so far this year indicates a booming market, but
appearances can be deceiving.
The Vancouver, Wash.-based company won two orders amounting
to $18.5 million in February, three orders totaling $32 million
in June and another $6.2-million order in July. But Brian
Dunham, Northwest Pipe's chief executive officer, said he
wouldn't necessarily use gushing terms to describe the market,
despite the seemingly large size of its orders.
"It's been strong for several years now, with new record
highs in terms of market activity for the last three years.
It's not significant increases, but small increases," he said,
noting that the number of jobs booked by Northwest Pipe fell at
the end of 2008 to end the year at a level that was slightly
less than what the company booked in 2007. "I think it's going
to be up again this year," Dunham added.
Likewise, Texas Pipe Works Inc., Longview, Texas, which
manufactures connections for downhole tubulars used in water
wells, is seeing work, but not at previous levels. "If I'm
remembering correctly, (2007) was a really good year," said
Craig Medley, Texas Pipe Works' vice president of sales. "All
that was residential work. Then it all started tapering off in
Most of the well drilling on the East Coast is residential,
so the housing market downturn has impacted that market, Medley
said. "There's the same scenario in the Midwest, but they also
have the agriculture part of the business. Plus, there's been
some drought conditions in several states. We've seen a pickup
in water well business in the last 60 days."
Medley said he's heard very little about how economic
stimulus funding under the American Recovery and Reinvestment
Act (ARRA) has impacted water projects. "If there is some
stimulus money available for water well projects, that would be
the first I'd heard of it," he said. "I've heard that all the
red tape involved and paperwork involved was astronomical."
Dunham said Northwest Pipe so far has had only one project
funded by the stimulus package. "Everything else is in front of
us as well," he said. "But there's a requirement that these
projects take place within a year, and I'm not sure what 'take
place' means." That's a very short time frame for water
projects, which typically have five- to 10-year gestation
periods as a result of all the right-of-way and environmental
issues that can surround them, Dunham added.
However, the water line business is a good one for Northwest
Pipe, he said. "As the U.S. population continues to grow, water
is a requirement to support that growth," he said, adding that
most of Northwest Pipe's work has been for new water lines.
"They talk about the aging infrastructure underground that
is falling apart that has to be replaced," Dunham said, "but so
far that's not been a significant impact on our market. That's
still ahead of us, too."
Several sources mentioned Berg Steel Pipe Corp., Panama
City, Fla., and JSW Steel (USA) Inc. in Baytown, Texas, as
players in the water transmission market, but spokesmen at both
companies said that while they have done some water projects in
the past and still occasionally receive requests to make water
lines, they prefer to focus on the energy market.
"We really haven't (done anything in the water transmission
market) recently," a JSW Steel spokesman said. "We've
concentrated on the gas and oil market."
Several market sources also mentioned Skyline Steel LLC,
Parsippany, N.J., as another player in the industry, but the
company didn't return calls seeking comment.
One drawback of playing in the water tubulars market is
contending with the high cost of transporting tubulars on a
tractor-trailer across the country. Because transportation of
tubulars more than 100 inches in diameter is so expensive,
Northwest Pipe has decided to take the pipe mill to the water
line project area. "We just completed building two mills that
are designed to be transportable," Dunham said. "Pipe mills
have been moved around in the past, but it's a fairly intensive
process cutting them apart and putting them back together
again. These were designed in a way to make them more
containerable and easier to ship."
The mill will make pipe from flat rolled and then coat
and/or line the pipe, possibly allowing for fabrication of
bends, elbows and other add-on stages downstream.
However, a project has to be large enough to make the move
economic, Dunham said. "We're not going to move a mill for a
small project, but there are projects in the world large enough
that the transportation costs of going from a fixed
manufacturing site to a customer site are really large."
While one of the transportable mills is being installed at
Northwest Pipe's southern California plant, the other will be
used as designed. "One mill will have multiple homes. We'll put
it in a location, work through a large project and then move to
a new location," he said, declining to say how much the company
has spent on the mills or where the second one will be erected
first. "It's ready to go. This year. Somewhere."
A tubular manufacturing source said orders from customers
are down. "Last fall, it started to slow down," he said. "I
think availability of funding came into play. It seems to be
projects that are out there are still coming, but there are not
as many new ones as there used to be." He attributes the orders
that are coming in, in part, to ARRA. "We don't get a lot of
information on the projects we're supplying, but that's our
guess," he said.
The manufacturing source said he's not sure the water
tubular market will ever again see the demand levels reached
during the hey-day of the real estate boom, when contractors
were throwing up houses and burying water lines beneath them.
"This is one of those areas where we should have a growing
industry for a long time, with population growth," he said.
"But it's not something we can quantify. I'm an optimist, but I
don't know if I'd go out that far to say it will boom