Editor’s Log: Market Trends For 2010

Over the past few months, I have been asked the same question countless times. With hope in their eyes, industry personnel all are asking for my take on 2010 market prospects. While it is impossible to predict in these uncertain times, here’s an early evaluation.

Despite what many may think, the energy pipeline market had one of its best years on record. While pipeline construction will continue a slowing trend in 2010, we see don’t see it coming to a virtual halt like in years past. Already, several major projects have been green-lighted for 2010. All projections emphasize a solid long-term future for pipeline construction.

Natural gas distribution is in a bit of a holding pattern. The economic downturn hit gas distribution hard as consumption slowed. The gas distribution market needs a healthy housing market, but more importantly, it needs active factories consuming fuel which in turn increases demand on power generation plants. The market will be okay in 2010 but 2011 and beyond have strong potential.

With all the talk of alternative fuels, it seems absurd that we’re still waiting for Congress to focus on what’s at the forefront – natural gas. We don’t want a V8 juice moment, several years in the future, when members of Congress are still trying to figure out a long-term energy strategy, finally slapping themselves on their collective foreheads and saying: “Wow, we should have used natural gas.”

The good news about telecom is that, even during the recession, demand for entertainment and broadband have barely slowed. Further, almost every month a new use or technology variation continues to make bundled broadband services even more relevant in our daily lives. In 2010, stimulus money for rural areas will help some contractors and telecom companies have solid years. Others, who depend upon the giants for much of business, should see a decent but unexciting year.

As the significance of fiber becomes more important to the average person on a daily basis, cities (especially small to mid-sized) are deciding fiber is a key component in keeping communities competitive and relevant, not just locally, but on an international stage. It’s also a quality of life issue for many towns: we may be small in residents but we can offer you to provide you the world via high speed broadband. More and more cities have decided they don’t want to wait for the big boys to finally bring fiber into their towns. Or, in some instances, cities want better, more reliable service that is reflective of community needs, thereby opting to build and operate their own systems.

Having a national smart grid continues to be a priority for many, including Congress. However, for a smart grid to be possible, the basic power grid infrastructure requires lots of upgrading. How fast this initiative can be funded remains to be seen, but there is so much national attention on the concept that I tend to think it will be sooner than later.

Going underground continues to gain traction with progressive thinking utilities – and regulatory agencies as well. All of which will slowly help the electric market, though probably not enough to significantly increase construction in 2010.

Sewer, water and storm sewers are also impacted by the state of the economy, though to a lesser degree. With a struggling tax base and falling property values, cities are reluctant to take on debt to rebuild infrastructure – even when they acknowledge it is desperately needed. The tired adage still rings true: out of sight, out of mind. In tight money times, city leaders still tend to ignore sewer and water systems in favor of more visible public works. The good news is that residents are not quite as ignorant of the situation as they once were, and the EPA and state agencies are under mandates to get even more aggressive with enforcement.

Sewer and water rehabilitation is a bright spot. Stimulus money is just now really beginning to hit home and the first half of 2010 will probably see a flurry of rehab activity. Since most rehabilitation work is funded by user fees, rehab has ridden out the tough economic times better than most market niches. Also, in increasing numbers, cities are realizing that their user fees tend to be inadequate and often kept artificially low. Rate increases are becoming frequent.

While 2010 will not be a banner year, it will be a better year. It will be a transition year to a solid 2011.

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