Hey HDD Market: How Are You Doing?

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The headline asks the question everyone wants the answers to — how is the HDD market faring these days? We reached out to a few industry leaders to get their take on the HDD market. Taking part in our informal Q&A are:

  • HDD Committee of DCA
  • Renee Martin, HDD Broker
  • Jay Cary, StraightLineHDD
  • Siggi Finnsson, Digital Control Inc.

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Generally speaking, how is the overall health of the HDD market compared with previous years?

HDD Committee: Overall, the HDD market has slowed over the past few years. Currently, we are seeing more pipeline projects being executed, but these projects often have fewer HDD crossings than seen historically. The problem is the apparent misunderstanding of HDD Inadvertent Returns (IRs) and their impacts, which are at times delaying project permitting, or even preventing the use of HDD due to a lack of understanding of the risk. We expect the market will accelerate in the near future as permits are issued for key projects that require significant HDD crossings.

Renee Martin: Activity in the HDD market has increased noticeably over the last year. Fiber, electric, oil and gas installations have all seen growth, not only domestically but in many international markets, as well. A few factors are contributing to the strong market:

More than ever, demand is surging for power, bandwidth availability, and new technology. This has created a sustainable and long-term need for fiber and electric installations. Startup companies are entering the market at a rapid pace, and many existing companies are expanding to meet the need.

Global economic strength. Many countries are focusing on updating or addressing their aging infrastructure, and expanding their fiber networks. The lower US dollar means equipment located in the USA is attractively priced globally and has, subsequently, been driving up equipment exports, especially to India, Africa and Australia.

A number of economic indicators are positive right now so consumers are willing to spend money, and companies are investing in growth.

Jay Cary: The HDD market has seen a nice increase in activity over the past 12 months. We are seeing a wider range in drill sales now vs what we’ve seen the past few years. The 20,000 lbs. class is still our best seller, but interest and sales in the larger 50,000 lbs. and larger machines are on the rise.

Siggi Finnsson: The market continues to be strong and 2018 appears to be on par with or better than last year. We have seen a steady growth in work over the last few years and the international markets are increasingly adopting HDD as a solution. India, for example, is investing heavily in communications and this is driving activity there. Less developed markets are starting to invest as well in order to catch up. Here in the US demand is spread across the utility sectors.

What are the key drivers to today’s HDD market?

HDD Committee: The outlook for the market is positive as more pipelines and underground utility projects progress requiring HDD. Leading indicators to the market uptick we are seeing today include: Infrastructure bottlenecks for oil out of the Permian basin to the Gulf Coast; LNG bottlenecks requiring gas to key plants; Bandwidth increase requirements driving more fiber installation; Aging water infrastructure replacement and population-driven expansion (especially in the Southeast); and Underground electric installation increase due to space, “visual pollution” and storm contingency.

Martin: The labor shortage is an acute issue in the HDD industry. Employers are competing for a workforce from among other busy trades, like construction and oilfield. We often hear contractors say that they have plenty of work and equipment, but insufficient crews to get the job done. Recently, we have seen more used equipment on the market simply because some companies don’t have the manpower to put the rigs to work and can’t afford to let them sit. Major manufacturers, dealers, associations and industry publications have identified the labor shortage and several programs and promotions have been launched in the last couple of years. Some of our customers are aware of the HDD training schools being offered by Vermeer, Ditch Witch and others, though many still aren’t. Local dealers also provide support, but on-the-job experience still seems to be where most new operators acquire their HDD knowledge. Ultimately, we, as an entire industry, need to drive the message about the importance of attracting qualified workers to all tiers of the HDD sector.

Finnsson: Infrastructure investments and replacements are resulting in work being let and most contractors appear to be busy. Telecommunications and technology advancements such as 5G are expected to result in continued work and HDD demand. The aging infrastructure continues to be a problem and we expect that to drive work. Gas work continues to be a strong driver as gas distribution has taken priority. At the macroeconomic level, housing and construction in general are helping to drive utility installations.

Everyone talks about the need for qualified workers. How is this impacting the HDD sector?

HDD Committee: The need for qualified workers is a significant issue for HDD, like the rest of the industry. Our workforce continues to age and retire without sufficient replacement by new workers, leading to a shortfall in qualified workers. Recruiting, training and developing the future workforce will require action from multiple parties. Individual companies are working to develop training and mentoring programs for their new hires to ensure they develop the necessary experience. The industry as a whole must work together to bring attention to the opportunities that HDD provides: hands-on, impactful work, competitive pay and benefits, and great career potential. We must work with trade schools and other entities to help our potential workforce understand that meaningful careers are possible without a college degree and the associated student loans and delay to starting work. We need to push for the government to provide financial assistance for technical training (trade schools) the same as they do for universities.

Martin: The labor shortage is an acute issue in the HDD industry. Employers are competing for a workforce from among other busy trades, like construction and oilfield. We often hear contractors say that they have plenty of work and equipment, but insufficient crews to get the job done. Recently, we have seen more used equipment on the market simply because some companies don’t have the manpower to put the rigs to work, and can’t afford to let them sit. Major manufacturers, dealers, associations and industry publications have identified the labor shortage and several programs and promotions have been launched in the last couple of years. Some of our customers are aware of the HDD training schools being offered by Vermeer, Ditch Witch and others, though many still aren’t. Local dealers also provide support, but on-the-job experience still seems to be where most new operators acquire their HDD knowledge. Ultimately, we, as an entire industry, need to drive the message about the importance of attracting qualified workers to all tiers of the HDD sector.

Cary: This is definitely a serious problem. Many of our customers would like to purchase additional drills to keep up with the work that they are being rewarded, but the lack of operators keeps them from expanding.
Finnsson: In our frequent interactions with contractor this seems to be their biggest issue, that is, it is hard to find and often harder to keep qualified worker. The competition for skilled labor is very fierce and people move frequently making it difficult for contractor to maintain or expand. Younger workers coming into the industry are increasingly tech savvy but with less hands-on experience. We as manufacturers have been responding by providing more training, for example to technical schools and unions. The equipment design is evolving to align with the new workforce and their technical acumen. Key focus from DCI is ease of use to enable new HDD workers to become productive more quickly.

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What challenges do you see the HDD market facing in the years ahead?

HDD Committee: The greatest challenge the HDD market is facing is reputation. Some Agencies, Owners, GCs and the general public do not understand HDD and how it differs from downhole drilling, and this leads to confusion about the benefits and risks of HDD. Uninformed stakeholders can view HDD as adding environmental risk to a project when its use is generally to mitigate the risk associated with disturbing sensitive areas with trenching. Our industry must educate stakeholders and help them understand that HDD is not the same as downhole drilling and fracking, and the benefits associated with trenchless installation. The DCA and the DCA HDD Committee are investing time and resources to assist in educating and spreading the word about the proper HDD process along with all the components of the HDD process. This includes planning and engineering design, fluids/additives used along with IR mitigation, the work plan and process that the work is completed in a safe, proficient and environmentally friendly manner. We also need to protect our reputation by implementing “good drilling practices” that are followed across the industry. We need to set these into place and educate GC’s, Owners, and Agencies as to what they are and how to monitor them. These groups need to understand what to look for in a bid and on a jobsite to help ensure that when they award projects to contractors, the costs to utilize these practices are included, and they are followed on the jobsite. Having an HDD contractor “frack out” or have IRs in an environmentally sensitive area can further tarnish the reputation of the industry.

Martin: Labor constraints will continue to be a challenge until a larger workforce shift has occurred. Local regulations, fluid management, and safety requirements are becoming more stringent, though they are somewhat inconsistent across states and municipalities right now. As they become more universally enforced, contractors will need more resources to help them stay compliant. Detailed, accurate bore planning will also become more prevalent. Awareness about the constantly changing international regulations will be an ongoing challenge for companies who seek to import equipment. Contractors risk buying equipment that is not compliant in their country, or has a configuration that isn’t supported by local dealers or engine manufacturers. When buying equipment, it is imperative to work with people who are knowledgeable about global logistics and regulations.

Cary: As far as equipment goes, I think we will see a shortage in late model, low hour machines. There are a lot of companies that may not want to buy new, but want “like new” equipment at used prices.
Finnsson: The underground is getting increasingly crowded which leads to greater accuracy requirements of the locating systems. Correspondingly interference is increasing and the abundance of WiFi networks only adds to the mix. Locating equipment is therefore expected to deal with those environments and jobs becoming more complex adds further requirements for additional features. As HDD is becoming more accepted jobs are being considered which a few years ago wouldn’t have been dreamt of. The shortage of skilled labor and difficulty in disposing of drilling fluids will continue to be an issue.

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What is the mood of today’s contractors? Are they looking to buy new?

HDD Committee: Contractors continue to buy new equipment as needed, but market activity drives the acquisition of additional or new fleet equipment, and with the current down turn in HDD crossings, new equipment will be harder to pay off with the work load and contractors are making do with the equipment they currently own. Companies are paying attention to the expected uptick in activity, however, and are focused on what modifications or improvements to their fleet are needed to prepare for crossings coming in the next few years.

Martin: The HDD market outlook is very positive right now, and, as a result, contractors are optimistic and confident. An over-abundance of work means that contractors look for ways to become more efficient. The technology in the newer drills can increase the speed and proficiency of installations, so some contractors will buy new to optimize those advantages. Used equipment offers an attractive price point and readily available inventory, so a segment of contractors will elect to buy used so they can minimize their expenses and be more competitive in their market. Internationally, lesser-regulated countries generally cannot use equipment with Tier 4 final engines, so they will continue to absorb used equipment until regulations change, and low-sulfur fuel is more easily accessible. Ultimately, we find that most contractors are looking for reliable equipment, whether that be a new drill, or a used drill with a reputation of good uptime.

Cary: I believe established companies are looking to buy new equipment. I base this on the large volume of trade-in value requests we are receiving form both Vermeer and Ditch Witch dealers.

Finnsson: Contractors are currently optimistic with a fairly healthy backlog of work. They continue to emphasize the lack of qualified work force. Environmental regulations are a concern and in some cases price levels for their work. They seem generally be willing to invest in equipment that addresses either technical or requirement needs such as interference/rebar or documentation with Datalogging. They are continually looking for solutions for existing problems, and when manufacturers offer those, they will purchase what they need.

Sharon M. Bueno is managing editor of Trenchless Technology.

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Sharon M. Bueno

Sharon Bueno is the Managing Editor of Trenchless Technology magazine.

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