US ERW pipe market – Chinese pipe makers benefit from steady demand in the US

The domestic ERW pipe market is still buoyant while hot rolled coil prices are deteriorating worldwide. The exception to the downward flat rolled trend is China, where hot rolled prices are increasing and are bound to push up pipe prices as well. In the past two weeks, Chinese standard and line pipe offering prices have increased by $10 /nt ($11 /mt or $0.50 cwt.). Although the Chinese mills are asking to increase prices by $20 to $30 /mt, heavy competition among the Chinese tube makers has only allowed about $10 /mt of the increase so far. Chinese offers for A53 standard pipe now range from $590 /nt to $630 /nt ($650 /mt to $694 /mt or $29.50 cwt. to $31.50 cwt.) FOB loaded-truck, Houston, Texas. Offers for sizes larger than 8” diameter from China range from $690 /nt to $730 /nt ($761 /mt to $805 /mt or $34.50 cwt. to $36.50 cwt.) FOB loaded-truck at West and Gulf Coast discharge ports. Larger than 8” pipe is generally made from hot rolled coils made from slabs. Chinese line pipe (API 5L X42) offers now range from approximately $710 /nt to $760 /nt ($783 /mt to $838 /mt or $35.50 cwt. to $38.00 cwt.) with larger than 8” pipe having similar extras. While flat rolled prices are falling quickly in the rest of the world, particularly in the North America and Black Sea region, hot rolled prices in China are going up. Increases of $20 /nt to $30 /nt for hot rolled coils have been announced, which will eventually transfer into more price increases for pipe prices. The VAT rebate reduction does not apply to finished pipes and tubes, which provides an additional incentive to export those products rather than exporting hot rolled and cold rolled coils. Final census data from the US Import Steel Monitor shows that in the first eight months of 2006, the countries from which the US received the most standard pipe imports were: China, at 371,091 mt; Canada, at 247,390 mt; Mexico, at 50,534 mt; Thailand, at 45,207 mt; and India, at 38,797 mt. The most line pipe imports during the same time period came from: Canada, at 179,373 mt; China, at 171,776 mt; Japan, at 149,521 mt; Korea, at 140,845 mt; and Brazil, at 86,699 mt. The domestic ERW pipe market in the US is still holding steady, in contrast to the markets for other steel products in the US. The domestic market is still benefiting from the non-residential construction market as well as energy-related applications. The only concern is oil and gas prices, which have been slumping since July. However, market experts don't predict that these lower prices will cause an abrupt stop in drilling projects, as rig counts have remained steady over the past several months, despite the $20 per barrel price drop since July's peak levels. The Baker Hughes rig count shows that for the week ended September 13, 2006, the North American rig count was at a healthy 2,205, up from 2,173 rigs counted from the previous week, and the count of 2,016 rigs from the same week of the previous year. Since last month, prices for domestic A53 ERW standard pipe have held steady at a range of $49.00 cwt. to $50.00 cwt. ($1,080 /mt to $1,102 /mt or $980 /nt to $1,000 /nt) ex-mill. The pricing trend is neutral.