NEW YORK South Korean pipe mills efficient logistics and mill design, easy access to hot-rolled coil and cheap financing are driving their ability to compete with U.S. producers despite the freight penalty, panelists told attendees at AMMs seventh annual Steel Tube and Pipe Conference in Houston.
These factors make it unlikely that Korean oil country tubular goods (OCTG) producers will face anti-dumping duties, they said.
"I know exactly how the Koreans do what they do. The mill is built in Pohang, 300 yards from (flat-rolled) Posco Ltd. (The coils) are still warm on the trucks when they go to the plant. Once the pipe is made, its probably a mile from the port and they can load the vessels from there," international steel and pipe consultant Mike Evans said in describing the operations of producer Nexteel Co. Ltd.
Efficient mill design and cheap financing available from Korean trading houses also contribute to producers competitiveness, he said. "These mills were built for export. Theyve got the logistics set up (to) where they can be competitive no matter what."
Panelists expressed concern about OCTG pricing following the Commerce Departments decision not to assess preliminary dumping margins on Korean OCTG producers (amm.com, Feb. 18).
"I think its going to go to hell. The Koreans and some of the other mills with zero margins now have carte blanche," said Peter Brebach, managing partner of Colorado Springs, Colo.-based Iron Angels of Colorado Inc.
Some panelists suggested that a politically negotiated agreement might be needed to bring parity to the market, although the viability and legal basis for such an agreement was disputed.
"If there were political will, Id like to see some kind of negotiated settlement between the U.S. government and the Koreans that will allow the Koreans to participate in this market, but not (to the extent) that theyre doing," Evans said.
However, Brebach said that "as long as the margins for Korea and some of the others stay at zero, they have no standing to negotiate such an agreement."
The OCTG trade case could have unintended consequences for U.S. producers as it will lead to more foreign mills opening domestic outposts, according to Don Baysal, president and chief executive officer of Houston-based Seba Pipe Inc.
"If you ask me what this will all bring to the OCTG industry, Id say: a lot of competition," he said. "In the end, U.S. mills running with old technology or inefficient logistics to the well sites or finishing facilities may have to shut down or move on to other products. Ironically, some of the petitionerswho did not invest to modernize or didnt have the funds to modernizewill have a very tough time to compete."