US domestic spot prices for oil country tubular goods (OCTG) have been on an upward climb since early 2011, but may begin to retreat in June.
Overall demand for energy pipe has continued to be steady over the past few weeks as rig counts have registered week-on-week increases. Rig counts jumped 48 rigs since mid-April, rising 18 last week, and 28 the week before. Nevertheless, current electric resistance welded (ERW) OCTG casing spot prices in the range of $66.00-$68.00 cwt. ($1,455-$1,499/mt or $1,320-$1,360/nt) ex-mill-unchanged from our last report two weeks ago-are too high to sustain going into the summer months.
North American rigs, primarily those drilling for oil, are not anticipated to decline-at least not significantly in the near future-and so any softening in US OCTG prices is not expected to be dramatic. Spot prices for API X42 ERW line pipe however, may experience a more drastic decline in summer, as demand for line pipe has continuously been below that of OCTG casing.
Lower US line pipe demand is already having an impact on import line pipe offers to the US. Sales prices of Taiwanese and Korean API X42 ERW line pipe into the US have fallen approximately $0.50 cwt. ($11/mt or $10/nt) since our last report two weeks ago, to $53.50-$54.50 cwt. ($1,179-$1,202/mt or $1,070-$1,090) duty-paid FOB loaded truck in US Gulf ports.
On the other hand, J55 ERW OCTG casing sales prices from Taiwan and Korea remain in the range of $57.00-$58.00 cwt. ($1,257-$1,179/mt or $1,140-$1,160/nt) duty-paid FOB loaded truck in US Gulf ports. While bookings of OCTG casing from Taiwan have gained strength in the past few months, bookings of Korean pipe are still radically higher. According to the Steel Import Monitoring and Analysis System (SIMA) 64,668 mt (license data) of OCTG came into the US in April from Korea compared to 8,629 mt (license data) of OCTG from Taiwan. That difference may narrow come early summer however, as traders are currently reporting more negotiability in the Taiwanese offer prices.