Although standard pipe inventories in the US have grown slimmer since China's exit from the market, and domestic mills are hiking their prices, there is still very little import buying taking place these days.
No low-priced leader has yet emerged to take China's place, and import buyers are not too excited about paying the higher prices offered from other sources. But with the dollar still weak and freight rates still lingering at record highs, it doesn't look like import prices will come down any time soon. Still, with the verdict on the antidumping case against Chinese standard pipe still out (though the domestic mills are expected to be at least somewhat victorious), many distributors are taking a "wait and see" approach, and are not replenishing their inventories until they have to.
One trader told SteelOrbis, "People say demand for pipe is strong, but they are still not in the mood to buy. Most are saying they will be ready to buy for second quarter arrivals. People will eventually end up buying standard pipe offshore and just paying the higher prices."
For the time being, however, import buying for standard pipes is very quiet. Meanwhile, imports of line pipe and OCTG continue to arrive, with offers seen from both China and South Korea. With China's increasing flat rolled prices and rumored elimination of export incentives for line pipe and other products expected to take place in January, coupled with the high freight rates from Asia, these import line pipe prices are expected to keep rallying upward. And since line pipe demand in the US for energy-related projects is expected to remain strong well into 2008, the domestic line pipe market should stay robust next year as well.
Since last month, Chinese offers to the US went up significantly for X42 line pipe of 2" to 8" diameter, now ranging approximately from $38.00 cwt. to $40.00 cwt. ($838 /mt to $882 /mt or $760 /nt to $800 /nt) FOB loaded-truck in Houston, representing a $2.00 cwt ($44 /mt or $40 /nt) increase from last month. South Korean offers are currently trending towards the higher end of that pricing spectrum, though with Chinese numbers expected to go up with the elimination of the VAT rebate for exports, South Korean offers may end up cheaper than the Chinese offers. The import pricing trend remains up as Chinese flat rolled products are still strengthening, and costs are rising. Also, many mills in China prefer to wait until after the first day of the New Year to make sure that the VAT rebate rumors come true. China currently holds a 13 percent VAT rebate for line pipe and OCTG, and it is expected to be eliminated, making Chinese exports more expensive by roughly that amount.
Import statistics from the US Import Administration show that despite the trickling off of Chinese ERW pipe imports in the second half of the year following the AD case filing, overall standard and line pipe import totals this year are at or close to record highs. YTD September, standard pipe imports (which also include seamless pipe, which is not covered by the AD and CVD cases) totaled 1,041,600 mt, compared to 1,126,276 mt for the same period of last year. Meanwhile, line pipe imports (also including seamless) totaled 1,942,680 mt, well above last year's annual total through September of 1,230,580 mt.
Looking to next year, more import sources for standard pipe are expected to emerge, though it remains to be seen whether or not they will be competitive compared to domestic offers. Turkish mills can replace some of the Gulf imports -- Their current offer levels are from $40.00 cwt. to 41.00 cwt. ($882 /mt to $904 /mt or $800 /nt to $820 /nt) for base prices, with some hefty extras for galvanized products.
While distributors' inventories are still in many cases sufficient for the time being, domestic mills are raising prices across the board to make up for their increasing costs. With flat rolled prices on the rise and very few standard pipe import arrivals expected for the first quarter, several US pipe mills have announced a price hike of $50 /nt for standard pipes to go into effect as of January 1. While demand for standard pipes isn't as strong as that for line pipes (which will go up by $75 /nt in January), the general expectation in the market is that most or all of the mills' price increase is certain to go through, since with import prices expected to keep trending upwards, buyers may not have any other affordable option other than to buy domestic.
For now, most domestic A53 offers continue to range from approximately $42.00 cwt. to $44.00 cwt. ($926 /mt to $970 /mt or $840 /nt to $880 /nt) ex-mill.