NEW YORK The steel
industrys worries about significant overcapacity in the
oil country tubular goods (OCTG) market might be overdone, as
announced expansions and new projects will displace older
capacity, according to top industry executives.
"Its efficient capacity.
It displaces old, inefficient mills that should be dead and
gone. Its capacity that services our customer base in the
way they need to be servicedwith quicker deliveries, with
better products, with heavier products, with lighter gauges,"
Barry Zekelman, executive chairman of Chicago-based JMC Steel
Group Inc., said during a panel discussion at
AMMs sixth annual Steel Tube and Pipe Conference
in Houston, adding that the capacity additions will displace
"Ive operated in an
industry that has been in overcapacity for the last 30 years,
and it seems to have worked for me. If somebody else is adding
capacity and theyre not doing it right, were going
to kill them, and thats what happens," Zekelman said.
Millions of tons of new energy
tubulars capacity could be added to the U.S. marketplace in
coming years as a host of companies have announced expansion
plans or new projects (
amm.com, Feb. 1).
Executives also pointed out that
most projects are unlikely to operate at nameplate capacity
from the start, and would be ramped up with market conditions
"We have no intention, in this
market, as we commission the mill in the late summer of this
year, to come out of the gate producing at (full capacity),"
said Robert Mandel, president and chief executive officer of
Concord, Ontario-based Welded Tube of Canada Ltd., which is
installing a $50-million mill in Lackawanna, N.Y. "People need
to understand you produce in accordance with what the market
However, one panelist did see
the added capacity possibly squeezing margins. "At the end of
the day, the better mills will survive, and itll be
tougher for the mills that dont have the heat-treating or
the end-finishing for producing pipe," said Don Baysal,
president of Houston-based Seba Pipe Ltd.
Mandel said most expansions are
being planned by reputable companies, likely with solid
feasibility studies, although he recently came across one
example of a planned expansion that seemed less
"I was troubled to meet with
someone a few months back (who) indicates that its his
intention to bring not one but a number of mills from the
Middle East and install them somewhere in North America," he
said, adding that the potential new entrant seemed to have done
little research on the domestic market. "If that kind of
attitude prevails and if others jump on that kind of bandwagon,
were in for a tougher time than would otherwise be the