The mechanical tubing market continues to be fairly good, flattening out at a relatively high plateau, but isnt nearly as tight as it was a year ago, when many mills had their customers on allocation or controlled order entry.
With additional headwinds expected to move in during the second half, most mills are leery about making predictions for 2013.
This year has been an OK year on average, with some pockets (of end-use activity) being very good and others that are not good at all, said Edward Vore, vice president of marketing and sales at ArcelorMittal Tubular Products North America.
Given that mechanical tubing demand tends to be reflective of overall industrial production and gross domestic product growth, a lot rides on what happens with the United States and global economies, he said.
The demand is still there, although a number of end-use markets are softening to a certain degree and a lot of inventories are being worked down, said Shawn Seanor, vice president of oil and gas engineered steel solutions at Timken Co., Canton, Ohio. He pointed to the Institute for Supply Managements purchasing managers index slipping below 50 percent in June, July and August as an early warning sign, especially with distributors months of supply on hand increasing, albeit slightly, over the summer.
There also has been an increase in import offerings, especially along the coasts, as a number of world markets struggle more than in the recent past and amid a strengthening of the dollar against the euro, Tim Spatafore, president of Marmon/Keystone LLC, Butler, Pa., said. But while some distributors are starting to sniff around, we wont take a chance on them. There has to be a more significant difference between the import and domestic prices before we do.
There likely will be a few months of correction ahead, Seanor said, but he is optimistic that the industry will end the year on a positive note.
Nevertheless, the significant governmental issues that have yet to be resolved make it difficult to predict what 2013 will look like for the mechanical tubing market, Vore said. A large tax increase impact or spending reduction from the full implementation of sequestration spending cuts could make 2013 a very difficult business environment, at least for the first half of the year.