Many steelmakers are bullish on the prospects of spiral-weld line pipe, and even if the market turns most believe they have strategies to cope.
The market should peak in 2008 and return to previous levels by 2009, said David Delie, president and chief executive officer of Berg Steel Pipe Corp., Panama City, Fla. That's not bad news, he added, especially considering that 2007 was a good year.
Berg Steel Pipe already has an annual capacity of more than 400,000 tons of longitudinally submerged arc-welded (LSAW) pipe and plans to add about 180,000 tons of spiral-welded capacity, Delie said.
Transmission pipelines should continue to be built as more natural gas production shifts from traditional fields in the Gulf of Mexico to newer reserves in the Rocky Mountains. And while it might not happen until 2015, gas eventually will be piped in from Alaska to the lower 48 states, he said. "There's too much to leave sitting up there. It's just a matter of when."
Others have questioned the economic feasibility of any new Alaskan pipeline project.
Delie acknowledged that helically submerged arc-welded (HSAW) pipe overcapacity is a concern. "Everybody is adding capacity in this good time, and it's going to cycle around again," he said. "There's going to be some fallout, and it's going to be tough."
On the HSAW side, capacity is in line to more than quadruple within a little more than a year if all projects are completed as planned. North American HSAW capacity currently stands at 425,000 tons annually, but that could surge by 1.7 million tons by early 2009. By comparison, LSAW is expected to maintain its current capacity of around 1.4 million tons per year.
Berg Steel Pipe should be able to handle any future downturn, Delie said, in part because its mills have the ability to quickly change sizes and handle small orders and lots.
The market for spiral-welded pipe is expanding along with a profusion of new energy pipeline projects, said Stephen E. Oyler, vice president of sales and marketing at PSL-North America LLC (PSL-NA). The Lenexa, Kan.-based company plans to invest $103 million to build a 300,000-short-ton-a-year spiral-weld mill in Mississippi (AMM, Nov. 12). U.S. engineers historically have preferred LSAW pipe because it has been perceived to be a better product, but that's changing, he said. "The U.S. market is the last in the world to have this debate. Everywhere else in the world, HSAW is acceptable."
And if pipe demand eventually slackens, low-cost producers like PSL-NA will survive, he said, comparing his company to Nucor Corp., Charlotte, N.C. "When Nucor came in, everyone said, 'You're crazy, there's too much capacity.' They went ahead anyway because their business plan and new technology allowed them to participate and take market share."
Oyler also touted PSL-NA's two-step welding process, which he said is recognized as state-of-the-art and will allow the company to succeed in the large-diameter pipe market.
The current steel and pipe markets are the best in nearly four decades, according to Larry Lawrence, vice president of sales at Evraz Oregon Steel Mills Inc., Portland, Ore. "But I've also learned in that timeframe that nothing is forever and it will pass," he said. "There will be economic consequences down the line."
Evraz Oregon Steel Mills will continue to thrive because it has high-quality product, strong customer relationships and experience in the marketplace, Lawrence said. It also boasts excellent raw materials sourcing, its own rolling mills to convert slab to coil and plate and both internal and external coating facilities.
The company uses a one-step welding process to make spiral-weld pipe. Some argue that two-step is a better technology than one-step, but Lawrence said the one-step vs. two-step debate is a distraction. "If it meets API (American Petroleum Institute) and customer specifications, it doesn't matter if it's 12 steps."