Energy market lull casts doubts on steel pipe and tube

May 29, 2012 | 04:42 PM | Michael Cowden

Tags  steel pipe and tube market, OCTG, South Korea, drill rig count, energy market, natural gas prices, Baker Hughes, Insteel H.O. Woltz III

You don’t have to drill deep to hit a pocket of doubt in the North American steel tube and pipe sector. Growing concerns over the rig count, natural gas prices, foreign competition and a still-stagnant construction market have made many players in the market less optimistic than they were at the beginning of the year. 

“Everybody I talk to says their business is OK. Nothing is really booming. The oil country (tubular goods) guys are doing a little better (than non-energy customers),” one distributor source said. “But they’re complaining about margins not being what they had been.”

One trader said he was somewhat concerned about a “lull” in the rig count, given “catastrophically low” natural gas prices.

The pipe and tube market appeared to be in a holding pattern in April and early May as the impact of price increases on non-energy-related tubulars remained in doubt. At the same time, concerns have mounted in the long-robust energy tubulars sector over the drill rig count and declining natural gas prices, which fell below $2 per million British thermal units (mmBtus) in mid-April, a level industry observers said could make many shale gas plays unprofitable.

There appeared to be little consensus on the overall health of the pipe and tube markets, or even prices in general. But energy-sector players generally remained more optimistic than those more heavily reliant on construction activity.

It wasn’t immediately clear whether price increases on non-energy tubulars would be successful or merely keep them from falling further. Most market sources suggested the latter might be the case, with some continuing to question whether the market could credibly support more price increases, given softness in demand and an abundant supply of coil—the substrate used to make welded tubulars—as well as hollow structural sections, which are consumed largely by the construction industry.....

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