TORONTO The pipe and tube
market appeared to be in a holding pattern Tuesday as the
impact of increases on non-energy-related tubulars remained in
At the same time, concerns were
mounting in the long-robust energy tubulars sector about a
declining drill rig count and natural gas prices, which
fell below $2 per million British thermal units (mmBTUs)
Tuesday, a level that 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 regarding prices in general. But, as previously,
energy-sector players generally remained more optimistic than
those more heavily reliant on construction activity.
For domestic hollow structural
sections (HSS), a tubing product used in the construction
industry, prices were said to be at about $980 per ton ($49 per
hundredweight) for April, down $10 from $990 per ton ($49.50
per cwt) in March.
The modest decrease came despite
tube mills announcing price increases of $30 per ton ($1.50 per
cwt) in recent days (AMM, April 17).
It wasnt immediately clear
whether those increases might serve to lift prices or merely
keep them from falling further. Most market sources contacted
by AMM suggested the latter might be the case, with
some continuing to question whether the market could credibly
support the full increases, given softness in demand and
abundant supply of both coilthe substrate used to make
welded tubulars such as HSSand HSS itself.
ASTM A53 tubulars also appeared
to be displaying roughly the same trend, with prices for
popular sizes of grade B material slipping to $1,010 per ton
($50.50 per cwt) from $1,025 per ton ($51.25 per cwt) last
month. The dip comes at the same time that pipe mills have also
announced price increases.
One mill source predicted that
prices would stay neutral or perhaps move downward given
"sluggish" demand in the residential and commercial
construction markets. Meanwhile, lower scrap prices and
overcapacity in sheet production should "keep a lid on any
significant price increases in the next three to six months,"
But a second mill source, whose
company makes energy tubulars, had a very different take on the
market, saying his company was seeing "very strong" lead times
and firming demand both at the mill and distribution levels
thanks to a host of new line pipe projects moving forward. He
predicted the trend could lead to higher prices for
higher-strength line pipe.
Natural gas prices could be
"depressed," the second mill source said, but the energy
industry is "making the switch" to oil drilling thanks to oil
prices that appear set to remain at $100 per barrel or higher.
High oil prices should keep demand for both oil country tubular
goods (OCTG) and line pipe strong at least through the summer
months, he said.
But not everyone in the energy
sector was so sanguine. One distributor contended that South
Korean mills were "destroying" the domestic OCTG market with
what he characterized as "dumping."
South Korea was licensed to ship
61,264 tonnes of OCTG to the United States in March, according
to license data compiled by the U.S. Commerce Departments
Import Administration division, representing 20.1 percent of
the 305,073 tonnes licensed for the month. While the total for
South Korea, the largest overseas suppliers of OCTG to the
United States by volume, marked a 6.3-percent decline from the
65,381 tonnes imported in February, it was up nearly 19 percent
from the 51,497 tonnes imported in March 2011, according to
Census Bureau data.
Still, not everyone thinks that
imports from South Korea are hurting the entire domestic OCTG
market. Competition between some domestic mills and imports
might be fierce in less value-added sectors, where some
domestic mills "get down and dirty and compete with imports,"
one trader said. But domestic OCTG mills generally are doing
well, especially when it comes to higher-grade material, he
"Everybody I talk to says their
business is OK. Nothing is really booming. The oil country guys
are doing a little better (than non-energy customers). But
theyre complaining about margins not being what they had
been," he said.
The trader said he was somewhat
concerned about a "lull" in the rig count, given
"catastrophically low" natural gas prices.
There were 1,950 rotary rigs
operating in the United States for the week ended April 13, a
decline of 29 rigs compared with the previous week, according
to data from Baker Hughes Inc. The oil rig count shed seven
rigs while the gas rig count dropped 23 rigs, the Houston-based
oilfield services provider said. All major energy-producing
states recorded either declines or an unchanged rig count
during the period.
The trader cautioned against
reading too much into data from any particular week, noting
that the rig count could gain 15 rigs this week. But even if it
did, "right now, the trend is clearly down, and thats a
little disconcerting," he added.