NEW YORK Severstal North America Inc. is looking to move up the value chain in the products it supplies from its Columbus, Miss., mill to pipe makers, particularly as end-users in oil and gas ratchet increase their requirements.
"Weve run X65 ... and were trialing X70 as we speak," Tom Marchak, vice president of commercial for the Dearborn, Mich.-based steelmaker, told AMM.
The move by pipe makers toward higher-strength flat-rolled steel is expected to continue, with some already looking at X100-grade product.
"(Our customers) are buying equipment now to make that strength of pipe," said Mark Pole, Severstal Columbus ladle metallurgy furnace and caster manager, as pipe makers, particularly in the oil and gas space, raise their quality standards. "Theyre pushing us because theyre being pushed by their customers," he said.
In addition to higher-strength grades, Severstal Columbus can supply the wider coils required to make 24-inch line pipe, for which there is burgeoning demand. "We have two large customers ... in the Gulf Coast region that are both in line pipe, and 24-inch is a big product for them," Marchak said.
While pipe and tube has always been an important market for flat-rolled producers, growing demand due to the development of domestic shale plays has provided a further boost. "We knew it was a growing market, but Id like to say that we were a little bit lucky," Marchak said.
About 52 percent of Severstal Columbus shipments for pipe and tube in 2012 were for the line pipe and oil country tubular goods sectors, according to Sabyasachi Bandyopadhyay, quality manager at the mill.
In addition to the oil and gas market, Severstal NA supplies most sectors of the pipe and tube industry, from structural and mechanical to irrigation pipe.
"When we first started, the philosophy was to diversify, so when you take a look, were probably doing business with somewhere between 15 or 16 different pipe and tube customers," Marchak said. "Its nicewell do anywhere between 2,000 and 3,000 tons with one customer, and some we do 15,000 to 20,000 tons per month."
In terms of market dynamics, Severstal NA, a subsidiary of Moscow-based OAO Severstal, has seen a marked divergence between volume and price this year.
"Volumes this year are not disappointing, and Im not just talking about the energy business or pipe and tube," he said. On the pricing front, however, "were literally $80 or $100 (per ton) off last years numbers. It makes no sense."
Growing imports could be part of the reason for the crimped numbers. "The margins are so tight right now with the foreign pipe coming in," Pole said.