NEW YORK Northwest Pipe
Co. is mulling production cuts in its tubular segment due to
compressed margins, even as the company continues to boost
"We took some short-term
production reductions in the third and fourth quarters (of
2012) to help control inventories and will consider additional
reductions as we react to further changes in the market,"
president and chief executive officer Scott Montross said
during a conference call.
The possible cuts are the result
of tough market conditions in the tubular segment. "In tubular
products, we expect to see compressed margins for the
foreseeable future as imports have had a negative impact on
both volume and margins," Montross said.
Even as the Vancouver,
Wash.-based company considers cuts, it has invested in capacity
expansions that are expected to boost output in the segment to
about 500,000 tons by "sometime late January, early February
2014" from 425,000 tons currently.
Questioned about possible
overcapacity, Montross said the expansions also will grow the
companys end markets. For example, an investment at its
Atchison, Kan., facility is expected to double the potential
end markets for the plants products.
Northwest Pipe saw capacity
utilization in its tubular segment "somewhere in the 40-percent
range" in 2012, Montross said, although the company has since
managed to boost that figure. "As weve moved into (2013),
one of the things that weve tried to (do) is to establish
some longer-term relationships and agreements with the customer
base, so as were in the first quarter of (2013),
were at a little over 50-percent capacity utilization on
those (tubular) facilities," he said.
The company is looking to move
into higher-value markets in the oil and gas field sector.
"The larger percentage of that
product market (oil country tubular goods) is moving toward
heat-treated products, especially with all the fracking and the
pressures on connections and the joints themselves, so when
were moving up the value chain were getting more
into those heat-treated products as opposed to the more generic
carbon products," Montross said.
The second half of the year
might bring some relief for the OCTG market as drill rig counts
are expected to rise. "Maybe its just positive thinking,
but I havent seen anybody this year thats not
projecting that the rig count starts to go up sometime by the
middle of this year," Montross said.
He made no mention of a
potential trade case against foreign producers of OCTG and line
pipe, which the company reportedly was working on last year (
amm.com, Aug. 8).
"Imports are kind of a fact of
life. We have to deal with imports no matter what," Montross
said during the call.