Speaking at the NASPD Fall Conference in Chicago on September 20, Commercial Metals Company (CMC) CEO Joseph Alvarado pointed out that certain trends within the US were giving his company optimism. Unemployment decreased from 9 percent to 7.5 percent in the past couple of years, he said, and banks are once again starting to lend money to fund projects. In addition, he noted that the architectural building index has been in expansion mode for 11 of the past 12 months.
There’s also positive signs for OCTG consumption, Alvarado said, especially the abundance of gas reserves. There is a renaissance within the energy markets in North America, he said, and unconventional drilling technologies are making reserves reachable. The more we drill, the more pipe gets consumed and all of this is really good for business. When business gets good, people decide to add capacity, and there are 3.5 million tons of announced new capacity that are scheduled to come online by 2016.
Bradford Research Inc. President Charles A. Bradford, however, saw those numbers from a different perspective.
“Within the US, there is a lot of misunderstanding about infrastructure. There is no such thing as a shovel-ready project other than laying asphalt on the road,” he said. “To do a major project you probably have six months just for design work, then there’s permitting, and then you have to put out bids. It’s at least a year before you can even break ground, and a lot of the funding is only for two years. In the end you need 5 or 6 years in order to get the major steel-consuming projects going.”
He also questioned whether the 3.5 million tons of capacity will truly come online.
“You have to wonder where this is coming from,” he said, citing a belief that a lot of these projects won’t get done because US mills will likely not sell hot rolled coil to a foreign-owned US pipe mill because it will create a domestic competitor. “I don’t think a lot of these projects getting done, and some of this forecasted capacity probably isn’t real.”
Samantha Santa Maria, Managing Editor--North American Gas Group, Platts, offered another perspective on the future of natural gas: “The biggest potential demand source for gas going forward is in power generation,” she said. “The more power plants they build the more pipeline laterals they will need to connect supply to them. Coal is no longer the king, and of the 123,600 MW of new power generation capacity under construction or proposed through 2017, about 39.5 percent is gas-fired.”