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Steel tube, pipe production seen improving next year

Keywords: Tags  steel tube, steel pipe, OCTG, Jeff Hanley, Welded Tube of Canada Ltd., hollow structural sections, HSS, John Simon EXL Tube Inc.

The steel tube and pipe market isn’t as strong as producers and distributors would like, but it isn’t that bad either, they said. Most also believe that next year will be better than this year, especially if they can flush some of the excess inventory out of the supply chain.

“Everyone is sitting on the bench waiting to see how things play out,” especially for oil country tubular goods (OCTG), said Jeff Hanley, vice president of energy products at Welded Tube of Canada Ltd., Concord, Ontario. “(The market) won’t blow any doors off, but I think 2014 will be better than 2013.”

The same is true of mechanical tubing, according to Shawn Seanor, vice president of oil and gas engineered solutions at Canton, Ohio-based Timken Co. “While I would like to see a stronger market, I’m very encouraged about the future,” he said. “This is a good time to do the things we need to do to position ourselves for when the market turns around.”

While hollow structural sections (HSS) have been faring better than many other structural products, demand has been flat, according to John Simon, vice president of sales at EXL Tube Inc., North Kansas City, Mo., and chairman of the Steel Tube Institute of North America’s HSS Committee, due to a combination of continued weakness in the nonresidential construction sector and some higher-than-desired inventories, especially at the producer level.

Inventories have been a concern across the tubular spectrum. Gregg Eisenberg, president and chief executive officer of Boomerang Tube LLC, Chesterfield, Mo., said that OCTG inventories jumped when domestic mill capacity utilization tumbled to the 70-percent range from around 90 percent in 2012.

“Distributors are paying very careful attention to our inventory levels” and have been looking to shed some of the excess inventory that built up early last year before many end markets started to soften, Butler, Pa.-based Marmon/Keystone LLC president Tim Spatafore said. “We don’t believe that demand will drop further, but we don’t think there will be a big increase either,” he said, adding that the market is more leery about buying imported product. “There isn’t enough disparity in pricing for us to put our necks out, given the price risk.”

Inventories have since come down quite a bit. U.S. steel pipe and tube distributor inventories had fallen to about 2.9 months’ supply at the end of August from 4.1 months’ supply at the end of December, according to the latest Metals Service Center Institute data.

Hanley said the inventory adjustments are masking some of the strength in the market.

At least for OCTG, the trade complaint filed by domestic producers in early July against producers in nine nations could help to flush out some excess inventory by eliminating some unfairly imported product, according to a spokesman for JMC Steel Group Inc., Chicago. While the trade case, if successful, could result in a temporary void in the marketplace, “I think the domestic manufacturers will soon be able to fill it,” he said.

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