From interest rate hikes to the disappointing adoption of renewable energy, the energy and industrials (E&I) sector has faced major challenges over the past few years. With economic volatility still lingering into 2024, industry leaders are directing their attention to the key trends and developments they need to know for the coming quarters.
AlphaSense’s Expert Insights boasts an extensive range of firsthand perspectives from energy and industrial experts covering the latest trends and topics. These expert perspectives can be found in our expert transcript library and enable leaders to identify the trends and implications for the E&I sector at a deeper level.
Below we explore key trends within the E&I sector for 2024 by using valuable expert insights on bifurcated performance in construction, disappointing renewables adoption, and agricultural equipment.
Residential and Commercial Construction
The Federal Reserve’s 11 interest rate hikes over the last two years have reduced home affordability and slowed residential construction markets. Given potential interest rate cuts in 2024, industry watchers ponder the extent of a potential recovery.
AlphaSense experts foresee a patchy recovery in residential construction, with some segments benefiting more than others. Experts expect a divergence in residential market performance in 2024. While they forecast strength at the entry level and the luxury segment, they expect continued weakness in the mid-market.
A former divisional director at PulteGroup explains this divergence and also weighs in on the growing trend among buyers for unique customizations in the construction process, with package-heavy builders expected to not fare as well in this regard:
“For me, I think that we’re really going to see two markets succeed. It’s going to be the value-engineered, low-end pricing and then the luxury. Everything in the middle is probably going to move at a much slower pace. That’s going to be our everyday working professional, head of household, that market is going to slow down.
What I’m seeing is people are looking for more options, less packages. They’re going for the grays or the blue cabinets, white cabinets, etc. They’re looking for a little more luxurious finish, but they also don’t want every single home to look the same. When you go to packages, that does make it definitely very hard to make each home look unique.”
– Former Divisional Director, PulteGroup | Expert Transcript
In commercial construction, AlphaSense experts project performance coatings to outperform the segment. A former Vice President at Sherwin Williams believes that performance coatings will buoy the building materials market in 2024 and that the resinous flooring segment will likely be one of the strongest within commercial construction segments.
The expert also believes the acrylic roof coating segment will likely experience above sector growth. The expert also sees downtrending activity within the new multi-family build segment after years of strong growth:
“When they choose to spend their investment dollars to rehab a roof, they’re going with really good systems that are going to last 30-50 years. Northeast, Midwest has just an abundance of huge old manufactured buildings that constantly need that.
I suspect the fourth quarter will be negative when it comes to new multifamily build, and I think because of the comps 2024 faces, it’s probably going to be negative. Now, the new build side only represents 4%-5% of the total multifamily market, but that’s enough of a drag to keep multifamily flat or maybe negative for the year.”
– Former Vice President, Sherwin Williams | Expert Transcript
Renewable Energy Adoption
In renewables, experts identify investor pressure at large oil companies playing a role in the material adoption of hydrogen and carbon capture technologies. However, they also argue that renewable diesel could be a segment of success due to declining transport costs.
A former director at Phillips 66 shared expert insights on capital discipline, the cost and complexity of carbon capture technology, and the financial durability of renewable diesel:
“Oil companies are under enormous pressure for capital discipline right now. There are a lot of shareholder activists that are basically wanting seats on the board to control what they see is undisciplined CapEx. I think you’ll find in oil companies that they’ll make announcements. They’ll maybe pilot projects. Do I think that they’re going to scale that type of stuff? No.
The ability to capture that [carbon], whether you’re recycling or capturing just volumes of air or you put on scrubbers to capture emissions coming off the emission stacks on these plants, the technology, I think, is not as advanced as we would like. It’s really not scalable. The second thing is the cost of doing this. I’ve heard quotes of over $1,000 a ton to remove carbon. There’ll be a lot of propaganda and greenwashing going on, but I don’t see it happening in a commercial sense. Unless two things happen: 1) The credit values are enhanced and 2) that the technology improves. It’s just not there yet.
Renewable diesel, you can see it already when you look at the cost of the LCFS credits in renewable diesel. Renewable diesel is superior to fossil diesel. The renewable diesel is seen as a drop-in fuel. In other words, there are no modifications to storage, to infrastructure, to fuel systems, to injectors, or to the engine.”
– Former Director, Phillips 66 | Expert Transcript
Agricultural Equipment
Industry watchers are also following the aftermath of lower-than-expected earnings in the agricultural equipment space, a potential shift towards autonomous farming, and wavering replacement demand.
Uncertainty surrounds the depth and duration of the agricultural equipment slowdown. One expert believes that low farmer delinquencies, stable farmer income, and replacement demand could shorten the agricultural equipment downcycle:
“Delinquencies across the COVID time period to now, delinquencies of 2.5%, 3% are now under 1%. Farm balance sheets are in pretty good shape. I have a reason to believe 2024 farm income will be equal to 2023. I think there’s too many pessimists.”
– Former Director, AGCO Corporation | Expert Transcript
Track Key Trends in Energy and Industrials with Expert Insights
The E&I sector is full of dynamic trends for 2024 in the construction, renewables, and agricultural equipment segments, and Expert Insights can reduce the time it takes to find critical market insights so you can allocate more time to strategic decision-making.
Discover more expert insights and predictions for E&I in our report, Key Predictions for Energy and Industrials in 2024.
Evolve your primary market research across the E&I sector when you start your free trial with AlphaSense today.
Xavier serves as the Director of Research, Energy and Industrials at AlphaSense. Before joining AlphaSense, Xavier worked as an equity portfolio manager at various firms including Goldman Sachs, and Gugenheim. Xavier has equity market experience in London as well as New York. Xavier received an MBA from the Wharton School and a BA from Tulane University.
Read all posts written by Xavier Smith
