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Pipe, tube demand tepid: Hyundai Hysco

Keywords: Tags  pipe, tube, steel, flat-rolled prices, drill rig count, oil country tubular goods, OCTG, Sam Choi Hyundai Hysco

HOUSTON — Hyundai Hysco Ltd. has seen a tepid start to 2013 after steadily improving demand each year following the recession, a top executive told AMM on the sidelines of the Offshore Technology Conference (OTC) in Houston.

Part of the problem has been the declining rig count, according to Sam Choi, deputy general manager of the South Korean steelmaker’s pipe and tube export team, noting that "2012 was really great. So last year, especially around December, we expected much more progress this year. But after the first quarter ... we realized that last year was better than this year."

Choi noted that the rig count has fallen some 10 to 15 percent from last year, or about 200 rigs. "(Supply for) 200 rigs for 12 months of oil country tubular goods (OCTG) material means about 800,000 tonnes. For a domestic supplier or overseas supplier, that’s a big tonnage (now out of the market)," he said.

At the same, supply is "abundant," and Hyundai Hysco is concerned about further growing domestic capacity, with a number of new mills announced recently.

"Domestic production is about 1.5 million tonnes, and maybe two or three years later 2 million tonnes is (being added) to supply in the USA. That means there is maybe no excess tonnage left for import material," Choi said, adding that Hyundai Hysco was starting to grapple with the implications this has for its market position.

One possibility would be a move into semi-premium connections to differentiate the company from competitors, he said, cautioning against the harsh stance vs. importers by domestic producers.

"Foreign suppliers are not the enemy. We compete with each other but we are not enemies. We exist for customers," Choi said.

Pipe prices, while continuing to decline, might not yet have hit bottom this year, he said.

However, "flat-rolled prices have reached the bottom, so maybe two to three months later the pipe and tube prices will come back again," Choi said, adding that he sees demand picking up late in the third quarter or early in the fourth quarter.

Choi strongly urged approval of TransCanada Corp.’s Keystone XL pipeline as a catalytic event to boost market demand.

"Some ... event is needed to improve this market situation," he added.

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