Forecasting the AWE Stainless Steel Market is Made Difficult by Politics

The McIlvaine Company has been making predictions about the air, water, energy (AWE) stainless steel market for decades. The political winds have been of minor importance; the big variables have been in economics. The new reality is that political forces will shape the AWE market in the coming years in an unprecedented way. If the winds are favorable, there will be two billion more people in 2050 and global GDP will be double what it is today. The AWE stainless steel product revenues could be $250 billion. The requisite value would also be $250 billion. In other words, competition will trigger the purchase of lowest cost of ownership (LTCO) products.

By Robert McIlvaine, President & Founder – The McIlvaine Company

The Group of Twenty (G20) is a consortium of the world’s major economies. The G20 represents all inhabited continents, 80% of global GDP, 75% of global trade, and 60% of the world’s population. China and Russia are G20 members. Even though they are dealing with unfavorable political winds, as member countries, they can share the credit for the current prosperity.

If the world becomes less stable without the guidance of the G20, the 2050 AWE stainless steel product revenues could be no greater than they are now (USD $125 billion). Reduced spending on LTCO products could prompt revenues to fall to USD  $100 billion.

Ninety-nine percent of the world’s population has seen nothing but prosperity. But in 1944 (during WWII), European and Asian production was a small fraction of the 1938 (pre-WWII) levels.

Here is what the political winds may blow in.

European Union Investment in the Defense Industry

The European Union (EU) spent a record €240 billion on defense spending in 2023, but it now realizes that the U.S. may be an unpredictable supplier. Therefore, the EU needs to boost its own defense. The EU is debating a new €100 billion special fund to buy urgently needed equipment from European suppliers for Ukraine. The fund would focus on identifying Ukrainian needs—ammunition, tanks, armored vehicles, artillery, small drones, demining equipment, air defense, or munitions. Europe would also be in possession of whatever type of equipment Ukraine needs to fight Russia. This would stimulate the EU’s ASAP initiative and address its current limitation—lack of funding—thereby enabling the EU to submit their orders, dramatically increase production, and expand their products to other areas of need for Ukraine.

Political winds in the Middle East are blowing in many directions. Saudi Arabia is the only country with significant stainless-steel production; the UAE and others have the interest and the funds; and Israel is the base of considerable AWE technology. Israeli-based Habonim was recently purchased by ITT.

Italy is a leading exporter of valves and certain other stainless equipment to the Middle East. The only significant hard facing operation in the Middle East resides in Saudi Arabia, so most service valves are imported.

Growing GDP is a favorable wind blowing in the Middle East; however, disputes between Israel and its neighbors threaten to bring Iran into the fray, resulting in a wider conflict between Iran and the U.S. and the EU.

A tornado could be avoided with a two-state solution, which could result in prosperity for the region.

AWE vendors will be leveraging automation and AI to efficiently supply and help operate plants around the world. Ore will be mined, processed, and transported without the need of operating personnel.

With wind, solar, hydrogen, and bioenergy with carbon capture and storage (BECCS), greenhouse gas concentration will peak while pharmaceutical miracles end cancer and many other sicknesses by employing cell and gene therapy techniques. Thanks in part to AWE technologies, much of the food will be grown in enclosed greenhouses or ponds.

The AWE industry is very international. One advantage is the ease of relocation. If the U.S. became extremely isolationist, Emerson, Flowserve, Crane, and other U.S.-based companies could simply move their corporate offices to another country. Valmet, Neway, and many other international companies could simply pare their staff in the U.S.

The U.S. could possibly impose a 10% tariff on AWE products from all countries, while the 18% tariff on China would remain in place. This blanket tax would be renegotiated for certain countries and compel the federal government to modify free enterprise.

The high-efficiency AWE industry has generated success by outsourcing components to countries specializing in a product, such as castings. There are no iron foundries left in the U.S., and it is unlikely the U.S. could compete with India, China, and Vietnam even if the U.S. auto-mated processes.

The political winds have been relatively calm for 78 years. Storms are now brewing and need to be closely analyzed by valve makers.