NEW YORK Luxembourg-based pipe and tube maker Tenaris SA is working with U.S. steelmakers to determine the best way to cope with a wave of imports that has dragged down prices, the companys top North American executive said during the companys first-quarter earnings conference call.
"From a trade perspective, we have indicated that we are working with the rest of the industry. We are naturally looking at (South) Koreabut not only Korea, other imports as well. We believe we might come to a final conclusion in the coming months," North American area manager Germán Curá said in response to an analysts question about the potential for an anti-dumping suit being filed against Korean producers of oil country tubular goods (OCTG).
Imports have crimped domestic prices, particularly for lower-end energy tubulars. "We continue to see some pricing pressure on the low-end part of our market," Curá said. "This is particularly emphasized given the level of imports that we continue to see, particularly coming from South Korea, the majority of which we all know is carbon low-end stuff."
The import glut is the result of global overcapacity for lower-end products, chairman and chief executive officer Paolo Rocca said. In contrast, the market for premium products is expected to grow 8 percent annually and could see some tightness once drilling activity in the domestic market picks up again.
"Demand and supply in premium will be tight over the medium term," he said. However, 2013 "is not really the year where we will feel the pressure on these products, because (U.S.) gas drilling is not going at a very high rate."
Eventually, however, shale exploration is expected to increase due to greater consumption, improvements in infrastructure and consequently drillers margins, and the return of U.S. manufacturing.
"We perceive that the gas price in North America and the energy independence towards which the U.S. could reach in a relatively short period of time is a strong driver for increasing consumption of gas, and this is setting conditions for a relevant increase (of pipe demand) in the coming years," Rocca said. He pointed to direct-reduced iron (DRI) facilities announced by Charlotte, N.C.-based Nucor Corp. (amm.com, April 19) and Linz, Austria-based Voestalpine Group (amm.com, March 13) as drivers of consumption.
As a result, Tenaris believes that its $1.5-billion investment in a new 600,000-tonne-per-year seamless OCTG facility in Bay City, Texas, is "fully justified," Rocca said in response to an analysts question (amm.com, Feb. 15).
In the short term, however, the pipe and tube maker sees uncertainty in the North American market as the company tries to determine how higher natural gas prices will affect drilling activity. "Its not easy to make a forecast as to how fast rig counts and wells drilled will recover," Rocca said. "It will happen in 2014, but it is not easy to forecast when it will start."