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No consensus on tubular trade petition option

Keywords: Tags  Evraz Inc. North America, Tigran Atayan, Hatch, Lynn Lupori-Gray, Pipe Exchange, Dolty Cheramie, imports, trade petition new capacity

HOUSTON — New domestic energy tubular capacity may squeeze U.S. producers’ margins, but there’s no consensus as to whether a trade petition is the answer to overcapacity in the sector.

Tigran Atayan, president of the tubular products group at Chicago-based Evraz Inc. North America, is in favor of trade action against imports. "It should happen," he said following a panel discussion at AMM’s 6th annual Steel Tube and Pipe Conference in Houston. "When will it happen? I hope soon."

But others suggested that new domestic capacity might be the biggest issue facing the pipe and tube sector.

Dolty Cheramie, president of Houston-based line pipe distributor Pipe Exchange Inc., illustrated his thoughts on the matter by showing a slide of a train wreck. "I don’t know what else you can think," he said.

Millions of tons of new energy tubulars capacity may be added to the U.S. marketplace in coming years as a host of mills have announced expansion plans or new projects (, Feb. 1).

Atayan conceded that pipe and tube producers could see margins squeezed even for premium products. "Will it happen in two years? Most probably not," he said. "Will it happen in five years? Most probably yes."

That long-term probability underlies the steel industry’s responsibility to continue to innovate to bolster prices, he added.

Atayan also questioned how many of the announced new projects would actually be built and come to market on time. "It is one thing to announce capital investments; it is another to deliver that facility on time," he said, adding that he expects to see competition become more regional.

As new producers come online, they will jockey for market share and drive down prices, according to Lynn Lupori-Gray, managing consultant at Mississauga, Ontario-based consulting firm Hatch Ltd. But new companies likely will look to displace imports before fighting among themselves for market share, she said.

Lupori-Gray also questioned what relief a trade case might provide. "As we’ve seen in other products, material will find its way into the United States through other channels," she said. "You close one door and another one opens. Imports are a key part of this market, and they are not going to go away."

Cheramie agreed. "People don’t buy import because they can’t get (material) domestically; they buy (imports) because a lot of times it’s the same product and they can get it cheaper," he said.

Trade petitions also have a bleak track record, Cheramie pointed out. "Every time we stop someone, someone else comes and fills the void. So it makes no difference who you stop. There is going to be a void that is going to be filled by another importer."

OCTG imports totaled about 3.65 million tons last year, according to data from the Commerce Department’s Import Administration. South Korea’s share reached more than 840,000 tonnes in the first 11 months of 2012, a 31-percent increase from the same period a year earlier, feeding long-standing speculation that a trade petition may be filed against Korea and perhaps other nations as well.

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