US ERW pipe market eagerly anticipates better times ahead

Wednesday, 05 September 2007 15:04:26 (GMT+3)   |  
       

The domestic pipe market is still experiencing some soft market conditions. However, looking forward to the fourth quarter and first quarter of next year, most market players expect prices to tighten up again.

With the price decay seen in the hot rolled market over the past several months, combined with the glut of import inventories, domestic prices haven't been able to rise despite the absence of new standard and structural pipe offers from China (resulting from the antidumping/CVD investigations which are underway).

However, after dropping some over the past few months, domestic prices have remained more or less stable though in recent weeks, as ERW pipes are still seeing decent demand from the commercial construction sector. Overall, standard and structural pipe demand is fairly good, especially when compared to the other longs markets.

Sources say that domestic A53 standard pipe is slightly stronger than A500 grades, with most domestic A53 offers staying steady at a range of $42.00 cwt. to $44.00 cwt. ($926 /mt to $970 /mt or $840 /nt to $880 /nt) ex-mill.

While domestic prices won't be shooting up dramatically anytime soon, with US hot rolled coil prices finally trending back up, and the last of the Chinese standard pipe imports trickling out, the pricing expectations are up for domestic standard pipe prices in the fourth quarter and first quarter of next year.

On the API and OCTG side of the market, business is still off this year because of the high inventories, and domestic producers are still worried that the petition against Chinese standard pipes will encourage them to export more energy pipes. However, no price slide is expected just yet. Rather than falling as the domestic mills had feared, Chinese line pipe and OCTG prices have remained stable due to China's strengthening hot rolled market and the ocean freight rates for cargoes coming out of East Asia. Also, US demand for API and OCTG pipes is expected to remain relatively strong due to the high oil prices.

Baker Hughes data show that the US Rotary Rig Count as of August 31, 2007 was 1,829, up 13 from the previous week, and up 97 from the September 1, 2006.

Chinese X42 line pipe continues to arrive, though, as we mentioned last week, there are some concerns about quality, and therefore, some hesitance on the part of traders to buy significant amounts of this material. Offering prices for Chinese X42 line pipe have remained stable in the last two weeks, with most offers for pipes 2" to 8" in diameter still in the range of $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) FOB loaded-truck in Houston. Larger sizes (over 16 inches in diameter) still range from $36.00 cwt. to $38.00 cwt. ($794 /mt to $838 /mt or $720 /nt to $760 /nt) FOB loaded-truck in Houston.

The pricing trend for standard pipe imports is still strongly up. For now, hardly anything is arriving, and people are still consuming their inventories of Chinese material. But when these inventories eventually run out, buyers will have to start purchasing imports again and will have to pay the high prices of the non-Chinese import competitors.

License data from the US Import Administration show that in August 2007 (through August 28), line pipe imports in the US totaled 190,358 mt, compared to 277,624 mt the previous month and 170,074 in August 2006. The main import sources in August were: India (48,805 mt), China (28,139 mt), Germany (17,794 mt), the United Kingdom (17,445 mt), and Canada (14,563 mt).

OCTG imports in August totaled 116,347 mt, compared to 150,760 mt in July and 170,677 mt in August 2006. The main import sources in August were China (56,266 mt), Austria (10,384 mt), Canada (9,147 mt), Germany (7,484 mt), and Brazil (6,287 mt).


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