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OCTG trade case seen benefiting sheet mart

Keywords: Tags  steel sheet, OCTG, trade complaint, Severstal, Nucor, Michelle Applebaum, Chuck Bradford, Catherine Ngai


NEW YORK — U.S. sheet steel producers are expected to see a bump in business as a result of the trade case filed by domestic mills earlier this week against imports of oil country tubular goods (OCTG) from nine countries.

Flat-rolled producers are positioned to benefit from the filing, market participants and analysts said, because the tubing mills they sell substrate to stand to gain business at the expense of foreign mills.

"Anything that arrives in the next couple of months has a big risk attached to it, which means the foreign (OCTG) mills will likely stop shipping or ship much less product," a trader said. "I have to assume this will tighten up the hot-rolled market significantly."

Earlier this week, nine petitioners—including Boomerang Tube LLC, Maverick Tube Corp., TMK Ipsco and U.S. Steel Corp.—filed a trade complaint alleging that imports from India, the Philippines, Saudi Arabia, South Korea, Taiwan, Thailand, Turkey, Ukraine and Vietnam have injured domestic producers ( amm.com, June 2).

The energy patch has been one of the strongest end markets for steel in the United States in recent years, a fact underscored by the large number of companies planning to expand capacity or build greenfield facilities here.

But while flat-rolled sheet producers are seen as poised to experience an uptick in demand, not all mills will benefit equally, according to Charles Bradford, an analyst at Bradford Research Inc.

"Hot-rolled sheet from the integrateds (integrated mills) is a little different than that from the minis (mini-mills). The mini-mills make the perfect grade of hot-rolled for pipe makers," he told AMM. "Because they melt mostly scrap, hot-rolled produced by the minis in some cases has a higher nitrogen content. As a result, the steel is not as well-suited for certain types of bending so you don’t typically see it being made into the outer body of a car. But it is perfectly suitable for pipe."

If the trade petition is successful, scrap-based steelmakers, including Nucor Corp. and Severstal North America Inc.’s Columbus, Miss., facility, are likely to be major benefactors, Bradford said.

Earlier this year, Severstal NA was named one of United Metallurgical Co.’s domestic suppliers of hot-rolled coil to source its Houston facility ( amm.com, March 4), while Nucor said in an earnings conference call that the growing number of planned OCTG mills would be an "opportunity" for its flat-rolled segment ( amm.com, April 19).

"It is definitely a positive development for us," a Severstal NA spokeswoman told AMM. "The pipe and tube market, and especially OCTG, is an important segment for Severstal in the South and a fast-growing one. Any increase in domestic production will benefit Severstal Columbus."

The flat-rolled market has experienced a few weeks of upward momentum after three successive rounds of sheet price hikes have taken hold, bolstered by inventory replenishment requirements and supply constraints ( amm.com, June 26) .

Mill and buyer sources said that even if the massive OCTG trade filing does not prove successful, merely taking the action may prolong the upward pricing momentum in the market.

"I think the pipe dumping case will ... strengthen everything that’s already going on, and maybe hold it for a little more long-term than it might seem. It will definitely keep the flat rolled market tight," a flat-rolled mill source said.

Others cautioned, however, that a sustained climb could open the door for competitively priced foreign steel to add market share.

"The trade case will have immediate benefits, whether it’s won or not, because the trading partners will withdraw due to the uncertainty that’s created," Michelle Applebaum, managing partner at Steel Market Intelligence, told AMM. "The domestic steel (sheet) market will definitely see a bump, but whether that bump goes to domestic or imported steel will be a function of what the price premium looks like in the U.S. vs. foreign scenario."


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