According to the "Economic and Steel Market Outlook 2010-2011" report released by the European Confederation of Iron and Steel Industries (EUROFER) on February 4, the steel tube sector in the EU has been hit extremely hard by the economic downturn. The latest output data and final quarter production estimates signal that total activity fell by 32 percent in 2009, far outpacing the drop in activity registered in other steel-using industries.
The key reasons for this collapse in production have been the sharp reduction in output in all client sectors of the steel tube industry and the massive inventory corrections in the steel tube distribution chain and at end-users which already started in the final quarter of 2008 and intensified during 2009.
The outlook for 2010 is for the tube sector to reach the turning point in the first quarter. Stocks have been largely depleted; output and demand are now closely balanced.
From the second quarter onwards, the mild improvement in activity in key steel tube using sectors such as the automotive industry, the metal goods sector and the mechanical engineering industry should have a positive impact on demand for small welded and certain seamless tubes. Increasing business activity will also require distributors and end-users to replenish their sharply reduced inventories.
The outlook for the OCTG market is rather bright too, at the start of the year. Firming demand during the second half of last year, the colder weather and the weak dollar have helped push the Brent crude oil price close to the $80/bbl mark, the highest level since October 2008. This has continued to put pressure on stock piles. This will have a positive impact on global drilling and exploration activity and consequently on OCTG demand.
The outlook for large welded tube projects remains uncertain, mainly because of financing problems. Several large new projects are on the drawing board, awaiting the green light to commence construction.
All in all, total tube output may rise by 2.6 percent in 2010. Acceleration to more than six percent growth could be seen in 2011 once the economic rebound strengthens in 2011.