US ERW pipe market is still afloat . . . for now

Pipe remains one of the strongest steel products during this period of slowdown in the US domestic steel industry. While domestic tubing prices have come down, standard pipe is still holding steady, with most offers still ranging from $49.00 cwt. to $50.00 cwt. ($1,080 /mt to $1,102 /mt or $980 /nt to $1,000 /nt) ex-mill. Despite the sluggishness of the housing sector, the strong non-residential construction sector is keeping standard pipe prices stable, as A53 pipes are needed for low-pressure water and gas transmission. The line pipe and OCTG market has remained steady as well. The main reason the API pipe market has been able to maintain its strength is that the energy sector is still robust, despite the drop in oil and gas prices. Drilling activity has not waned, and OCTG and line pipes are still very much in demand. The North American rig count this week is at 2087, down slightly from last week's count of 2194, due to a drop in Canadian drilling, but up from the previous year's 2065. In general, the rig count has been moving in an upward direction since last year. However, it may be difficult for the ERW pipe market to stay stable for much longer because of the state of the flat rolled market. Flat rolled prices have come down significantly from their peak levels in July, which will most likely force pressure pipe producers to lower their prices. With both scrap and flat rolled prices expected to fall before year-end, pipe prices will most likely have to register at least a slight decrease as well, depending on how strong pipe demand remains. It is possible that pipe demand will stay at a reasonable enough level so that pipe makers will be able to maintain prices. For now, the pricing trend for domestic pipe is still flat. Flat rolled prices are down worldwide, with the exception of China. After the $20 /mt to $30 /mt increases in Chinese hot rolled announced in October, Chinese pipe mills want to increase their pipe prices to the US. However, the US market is not likely to accept increases while steel prices in the US are staying flat or going down. Also, fierce competition between numerous Chinese pipe mills will also keep prices from rising despite the increasing raw materials cost. In fact, competition between Chinese mills has driven some low grades of API pipe prices down. This is because so many mills in China applied for their API certificates in the last two years, and now there are a plethora of Chinese API mills all coming online at the same time. This competition has driven Chinese API prices down by approximately $10 /nt in the last few weeks. Chinese line pipe (API 5L X42) offers now range from approximately $700 /nt to $750 /nt ($772 /mt to $827 /mt or $35.00 cwt. to $37.50 cwt.) FOB loaded-truck in Houston, with extras for larger than 8” pipe. Chinese offers for A53 standard pipe still 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. While larger than 8” pipe is generally made from hot rolled coils made from slabs, smaller diameter pipes are made from HRC made from billets. New export tax regulations in China should have a softening effect on Chinese pipe prices, as billets and slabs in the Chinese home market will be more plentiful and cheaper, therefore decreasing the cost of pipe production. The export tax does not apply to Chinese pipe products.