On Wednesday May 12, SteelOrbis caught up with Rick Preckel and Paul Vivian of Preston Publishing, to learn more about upcoming trends and forecasts for energy tubular products.
"We recently said OCTG imports were ramping up," said Vivian. "But based on the second week of import licenses that became available yesterday, we feel they are no longer ramping up, but they're exploding. We are on our way to monthly imports of 300,000 metric tons. Right now we're at a 1,492 rig count- and we see a pace of consumption of about 350,000 metric tons a month."
Although China is dealing with a number of AD and CVD cases, he added, emerging players such as Taiwan, Vietnam, Mexico, Korea, Germany and Austria have been more than happy to up import levels.
Demand, however, is expected to tick downward, and the influx in imports will have a negative impact to the domestic market. "So if 300,000 metric tons of our monthly consumption is imports, also considering all the domestic production- we will count a month where inventory grows significantly, which will not be a positive trend."
Both Preckel and Vivian forecast that the annual rig count will decline from the current level, and will fall to a final count of 1,375.
"We're going to see the rig count begin to slip in the next couple of weeks," said Preckel, who further stated he believes that natural gas rigs will tighten, while oil rigs will slightly increase. Natural gas, he said, isn't exhibiting an attractive enough profitability margin to sustain current rig counts within that sector. Because of this, natural gas rigs will likely shrink by approximately 300 before the end of the year.
On the consumption side, due to the anticipated shrinkage of natural gas rigs, OTCG may take a bit of a hit.
"What we're reading and seeing are that completions are behind drilling," continued Vivian. "That a number of companies have said things like ‘we're going to drill 100 wells and complete 40', but given current [low level of] gas pricing, some percentage of the wells are being drilled are inventory, so they can be completed when demand is greater and prices are higher."
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