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OCTG price hike could be a defensive move

Keywords: Tags  oil country tubular goods, OCTG, Vallourec & Mannesmann USA, V&M, Thorsten Schier

NEW YORK — A domestic steel mill’s announcement that it would boost prices on oil country tubular goods (OCTG) could be a defensive move in a sluggish economic environment, market sources told AMM.

"They increased their prices not necessarily because of demand, but because they don’t want to see any further deterioration in pricing," one southern distributor source speculated.

The long lead-up to Houston-based Vallourec & Mannesmann USA Corp.’s $100-per-ton hike on carbon and alloy tubing, which doesn’t come into effect until the beginning of April (, Feb. 19), also points to an effort to shore up order books as buyers will look to purchase ahead of the increase, sources said.

"This should stimulate purchasing, shore up pricing," a second southern distributor source said, noting that the increase comes in a tough pricing environment. "I’ve never encountered so much downside on pricing as you had in the last couple of weeks," he said. "We’re not getting the business because we’re being undercut probably by $30 to $40 (or) even $50 per ton."

Most OCTG product prices tracked by AMM held steady in January vs. December or declined only slightly. But on the whole, they are significantly lower than they were at the same time last year.

Imported J55 casing can now be had for as low as $870 per ton, down 5.9 percent from $925 in December and down 24.3 percent from January 2012.

In addition to soft prices, demand for OCTG at the distributor level is said to be tepid. "It’s just quiet. We’re way, way down from last year," a West Coast distributor source said.

U.S. drill rig activity increased by three to 1,759 as of Feb. 15, according to Houston-based oilfield services firm Baker Hughes Inc. However, that’s still 232 below levels seen at the same time last year.

Other mills are expected to follow Vallourec & Mannesmann USA’s lead.

"I haven’t heard of any others (boosting prices), but they probably will," the first southern distributor source said.

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