Demand for steel pipe and tube is fairly flat, held back by lackluster economic growth in the United States and in the world.
However, there is at least cautious optimism that 2014 will be marginally better as last years inventory build has been largely worked off and anticipation that even the laggard nonresidential construction sector will be seeing more noticeable growth. There also is expected to be a pickup in pipeline activity, at least for some smaller projects.
This year there will be slow to no growth, but it will start to slowly catch up, said Paul Vivian, principal of St. Louis-based steel tube and pipe research firm Preston Publishing Co., blaming much of the industrys malaise on the painfully slow economic recovery, marked by gross domestic product growth of just 2 to 2.5 percent. It has caused demand to flatten out somewhere between somewhat and significantly for everything from the drill rig count to weakness in heavy equipment.
There are also some bright spots, including demand for such products as mechanical tubing for autos. North American light vehicle production is on track to total more than 16 million vehicles this year compared with 15.4 million cars and light trucks last year and a low of 8.6 million at the depth of the recession in 2009, said Christopher Plummer, managing director at Metal Strategies Inc., West Chester, Pa.
Demand for oil country tubular goods (OCTG) is actually holding up pretty well--better than the U.S. drill rig count would indicate, according to Kurt Minnich, a partner at Spears & Associates Inc., Tulsa, Okla., and manager of affiliated Pipe Logix Inc.
With as much as 75 percent of drilling being done horizontally or directionally because of the amount of drilling in the nations shale formations, the number of wells drilled in the United States is expected to increase to 50,000 this year from 48,000 in 2012, even though data from Houston-based Baker Hughes Inc. showed a 5.2-percent year-on-year decline in operating drill rigs as of mid-September.
And Kimberly Leppold, senior steel analyst at Metal Bulletin Research, noted that with horizontal wells being deeper than vertical wells, OCTG consumption per well has increased.
But the big issue when it comes to OCTG is primarily uncertainty about what will happen to the supply side: there was a flurry of announcements of new seamless and welded OCTG pipe capacity additions, including a large number of new mills, and major domestic producers have filed a trade case against shipments from nine countries that accounted for more than half of all U.S. OCTG imports last year.
It will be an interesting time in the next year or so as companies sort through this supply movement, Minnich said.