China's VAT decision puts damper on US import pipe market

Wednesday, 09 May 2007 13:21:05 (GMT+3)   |  
       

Import pipe prices for the US have fallen by $20 /nt ($22 /mt or $1.00 cwt.) in the past two weeks due to the immediate impact of the Chinese government's VAT rebate decision.

China's decision to reduce the rebate for less finished products and keeping the rebate for finished products unaltered discourages export of hot rolled coil, while encouraging exports of pipe and tube. The increased profitability of exporting pipe in combination with the high number of Chinese pipe manufacturers, has caused Chinese pipe offers to become more competitive. However, the pricing trend for import pipe is still slightly up due to China's strengthening domestic flat rolled market.

Chinese offers for A53 ERW standard pipe now range from $600 /nt to $640 /nt ($661 /mt to $705 /mt or $30.00 cwt. to $32.00 cwt.) FOB loaded-truck, Houston, Texas. Chinese offering prices for large diameter ERW standard pipe now range from $670 /nt to $710 /nt ($739 /mt to $783 /mt or $33.50 cwt. to $35.50 cwt.) FOB loaded-truck, Houston. This price range is also valid for most West Coast ports.

Chinese line pipe (API 5L X42) offers now range from approximately $680 /nt to $730 /nt ($750 /mt to $805 /mt or $34.00 cwt. to $36.50 cwt.) FOB loaded-truck in Houston.

As for domestic prices, most domestic offers for A53 ERW standard pipe continue to range from $47.50 cwt. to $48.50 cwt. ($1,047 /mt to $1,069 /mt or $950 /nt to $970 /nt) ex-mill.

Despite strong consumption by the US energy industry, the OCTG and seamless pipe markets have been hit hardest by the low-priced Chinese imports, and many are worried about the overhang of inventories.

Statistics from the US Import Administration show that in April 2007, line pipe imports to the US shot up to 266,400 mt, compared 180,300 mt imported in the previous month and 133,900 mt imported in April 2006. Year-to-date import line pipe tonnage for 2007 (through April) totaled 773,000 mt, compared to 451,000 mt imported during the same period of the previous year.

Sources say that standard pipe consumption is also strong, more from the energy side than from the construction side, but the domestic pricing trend is now neutral due to the surge of lower-priced imports. Also, the domestic flat rolled market is no longer providing much upward momentum in prices, especially not now that scrap market is weak. However, demand is strong enough to prevent price slippage.

The Baker Hughes North American Rotary Rig Count shows 1,836 rigs as of May 4, compared to 1,828 rigs a week earlier, and 1,792 rigs one year ago.


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