NEW YORK Looming
overcapacity, the timing of a possible trade complaint against
South Korea and a comparatively low rig count are on the minds
of oil country tubular goods (OCTG) market participants in the
run-up to AMMs sixth annual Steel Tube and Pipe
Conference in Houston.
Sources estimate that between 2
million and 3 million tons of annual welded and seamless OCTG
capacity is set to be added to the market in the coming years,
with a host of companiesincluding Turkish producer
Borusan Mannesmann (
amm.com, Jan. 4), Germanys Benteler
Steel/Tube GmbH (
amm.com, Nov. 7) and investment firm USA
Investment Group LLC (
amm.com, Jan. 22)recently announcing new
Even with robust demand expected
from the development of U.S. shale plays, sources wonder
whether the domestic market will be able to soak up the extra
"Unless we completely drop
imports I dont think domestic (demand) can handle that,"
a source at a Mid-Atlantic distributor said.
"Im shaking my head. My
customers shake their heads," one trader said of the planned
The expected growth here and
slack demand elsewhere is driving the investments, sources
"The U.S. has more than half the
rigs worldwide. Its clearly the single-largest market," a
second trader said.
However, exploration has shifted
recently from natural gas to oil due to plummeting gas prices,
leading to a lull in drill rig counts.
"The rig count is coming down
right now. I still maintain thats temporary," the second
trader said, adding that eventually oil exploration will make
up for the cutback in natural gas. "At (current price levels
for oil), everybody can make a lot of money."
The most recent figures from
Houston-based oilfield services firm Baker Hughes Inc. show a
slight rise in operating drill rigs, although theyre
still well below levels seen at the same time last year (
amm.com, Jan. 28).
Imports would certainly need to
be cut back for the added capacity to find a home, sources say,
and there has been talk that a trade case against Korean
producers of welded OCTG, the biggest foreign suppliers of the
product to the U.S. market, is imminent (
amm.com, Jan. 16).
OCTG imports totaled about 3.65
million tons last year, according to data from the Commerce
Departments Import Administration, with Korea the biggest
"The dumping case will give
relief," the first trader said.
But a third trader warned that
talk of a trade case has been ongoing. "I think its part
of domestic mills game to build some uncertainties into
the marketplace," he said.