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US mills, buyers differ on line pipe capacities

Apr 12, 2017 | 12:32 PM | New York | Dom Yanchunas

Tags  Line pipe, steel pipe, imported pipe, coatings, Commerce Department, Dom Yanchunas

President Trump's push for fully American-made steel line pipe is pitting two of his key constituencies against each other.

Domestic pipe mills argue that they have the capability to supply all of the steel needed for the nation's expanding network of pipelines. Not so fast, says the energy industry, which claims that not every in-demand size is available, and a Buy America requirement would disrupt its supply chain and stymie the oil and gas build-out that the president wants. 

In written comments submitted to the U.S. Commerce Department this month, an attorney for the American Line Pipe Producers Association (ALPPA) said the president's proposed requirement is "especially important" to the domestic mills, which are harmed by "an onslaught" of unfairly traded imports. The lawyer, Timothy Brightbill of Wiley Rein LLP, wrote that U.S. steel mills can fulfill the nation's needs.         

"The domestic line pipe industry has more than sufficient capacity to meet domestic demand and can supply a full range of line pipe products," Brightbill wrote on behalf of the ALPPA.

"Notably, domestic supply has consistently exceeded domestic demand and consumption of large-diameter line pipe since 2009," Brightbill added. "Instead of U.S. producers supplying domestic demand, imports of large-diameter line pipe, often sold at dumped and subsidized prices, have taken market share from the domestic industry, resulting in dangerously low and unsustainable capacity utilization levels."

Brightbill specified that domestic mills "could have easily handled the entire domestic demand" of large-diameter line pipe even in 2015, a year of peak demand. Total consumption was 3 million tons in 2015. Mill capacity is 4.6 million tons. The utilization rate was 37 percent in 2015.

In their own joint comments to Commerce, five oil, gas and pipeline groups said various inputs would not be available in adequate quantities or in some of the necessary specifications if only domestically produced goods are allowed. The five groups are the American Gas Association, American Petroleum Institute, Association of Oil Pipe Lines, GPA Midstream Association and Interstate Natural Gas Association.

"Current domestic capacity to produce certain materials and equipment used to construct, operate and maintain energy pipelines is limited," the petroleum and pipeline groups said in their comments to regulators this month. "For example, one commonly used line pipe material is grade X70 steel, which is not currently produced in any quantities above 0.750-inch thickness at any U.S. steel mills." 

Commerce's eventual policy "should recognize that global sourcing of steel is currently essential for the continued growth of America's energy pipeline infrastructure and the U.S. economy overall," the purchasers groups wrote. The government's approach to expanding domestic pipeline production could have the unintended consequence of slowing the development of new pipeline projects, a result that "would run counter to" Trump's desire to accelerate such projects.

Instead of employing a "demand-side" approach in taking the unusual step of requiring domestic content for private construction, the five energy groups would prefer a "supply-side" strategy focusing on regulatory, tax and trade reforms.

In January, Trump issued an executive memorandum calling for all new and refurbished pipelines to use fully U.S.-produced line pipe from the melting through coating stages. Commerce invited comments with a deadline of April 7, and is scheduled to have a policy document ready by July 23.

Dura-Bond Industries Inc. president Jason Norris said his company "strongly disagrees" that there is not enough domestic capacity. In his comments to Commerce, Norris said surging volumes of imports have stifled the output at domestic mills. Dura-Bond is based in Export, Pa.

"Despite very strong demand for large-diameter pipe in 2015 and 2016 (mainly diameters of 30, 36 and 42 inches), there were still plenty of U.S. line pipe mills that sat idle or were running at very low capacities, while U.S. imports of pipe produced in India, Turkey and other countries increased substantially," Norris wrote. "The situation is much worse for other diameters, particularly for diameters of 24 inches and below, where demand has not been as robust."  

Europipe Group's Berg Steel Pipe Corp., based in Panama City, Fla., said requiring fully domestic steel would boost its capacity utilization and stimulate further investment. The company, however, must import steel to comply with certain customers' specifications.  

"Currently, the domestic plate producers cannot meet these certain project-specific requirements," Berg wrote in its comments. Some examples are "plate for pipes designed to operate at low temperature, plate for sour service environment (and) certain plate dimensions" or combinations thereof.

"These types of plates are items that we would like to define with the Department of Commerce as outliers that should be exempt from this plan so that the pipeline operators are not left without a material source for their critical infrastructure projects," Berg wrote.  

John Stupp Jr., president and chief executive officer of St. Louis-based Stupp Bros. Inc., said his company strongly supports the president's proposal, which would allow him to expand production at his pipe mill in Baton Rouge, La. He wrote that his Stupp Coatings LLC division already uses U.S.-made inputs.

"All our powder and other consumable supplies for our coating operation are of domestic origin. Domestically sourced flux and wire are also used in one of our pipe manufacturing operations," the company wrote in its comments. "Stupp can source these other materials domestically without difficulty."

American Cast Iron Pipe Co.'s American Steel Pipe division said it idled one mill in May 2016 and is working only one shift at another, partially due to the influx of unfairly traded imports. The Birmingham, Ala.-based company already uses 99.5 percent domestically sourced materials and supports a Buy America policy for pipelines.
"With additional demand, we could quickly expand capacity and production beyond one shift per day," American Steel Pipe division manager Jon Noland wrote to Commerce. "Ideally, we would be running three full shifts per day."


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