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New capacity justified, or have OCTG producers run amok?

Keywords: Tags  OCTG, U.S. Steel Corp., Tenaris SA, Petroleos Mexicanos, Tianjin Pipe Corp., Boomerang Tube LLC, Northwest Pipe Co., Lakeside Steel Inc. Michael Cowden

Build it and the buyers will come. At least, that’s what more than a few pipe mills appear to be banking on with new or soon-to-be built oil country tubular goods (OCTG) projects in the United States.

U.S. Steel Corp., Pittsburgh, remains the top player in terms of U.S. OCTG production capacity, which AMM estimates at about 1.7 million tons per year.

But Luxembourg-based Tenaris SA is hot on its heels, with 1.3 million tons in annual production capacity. While Petróleos Mexicanos will gobble up much of the output from Tenaris’ new 450,000-ton-per-year small-diameter seamless pipe mill in Veracruz, Mexico, commissioned in May after rolling its first pipe in November 2010, Tenaris has said that 70 percent of that production might be exported.

And plans by France’s Vallourec SA to expand in the United States set up a three-way battle for king of the hill in the premium U.S. OCTG market. Vallourec already had an annual capacity of 550,000 tons in the United States and plans to add another 550,000 tons with its new small-diameter seamless rolling mill in Youngstown, Ohio, scheduled to roll its first pipe late this year. Assuming Tenaris and Vallourec ramp up to full production in 2012, next year could see 1 million tons added to the North American market from those two companies alone.

On the seamless front, China’s Tianjin Pipe (Group) Corp. plans to break ground on a $1-billion, 550,000-ton-per-year seamless pipe mill near Corpus Christi, Texas. In the welded market, Boomerang Tube LLC, Chesterfield, Mo., is already churning out OCTG and line pipe from its new 360,000-ton-per-year pipe mill in Liberty, Texas, and Northwest Pipe Co. continues to ramp up production at its retooled welded OCTG mill at Bossier City, La., with a capacity of 125,000 tons.

Those three projects represent another 1 million tons of OCTG capacity, with more to come from the welded OCTG mill being built in Thomasville, Ala., by Welland, Ontario-based Lakeside Steel Inc., and expansions by rival Welded Tube of Canada Ltd. in Concord, Ontario.

U.S. mills shipped 2,163,128 tons of OCTG in 2010, according to data from the American Iron and Steel Institute, Washington. The U.S. also imported 2,384,004 tons of OCTG, according to SteelFacts, McKees Rocks, Pa.. With exports put at 402,954 tons, apparent consumption was around 4.14 million tons.

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