While US pipe producers are not budging on prices, domestic pipe prices on the distributor level continue to deteriorate as competition amongst distributors heats up.
US pipe distributors have been forced to become extremely aggressive to book any business because demand remains so weak and most buyers are trying to keep inventories to a minimum through the end of the year. "Instead of three people competing for the same order, now 20 are," one pipe distributor told SteelOrbis.
But despite the falling prices at the distributor level, most US pipe distributors aren't able to catch much of a price break from the domestic mills as producers are still trying to reflect some of their raw material cost hikes in recent months, and there is little import competition to stop them. Therefore, US pipe distributor margins are narrowing, on the whole, creating a tough environment for them to do business.
Despite the weak demand, domestic mill asking prices for some pipe products are actually still increasing. Distributors inform SteelOrbis that just last week, most mills increased prices on electric resistance welded (ERW) ASTM A53 black plain end (BPE) Grade B pipe by an additional $4.00 cwt. ($88/ mt or $80 /nt). This price increase reflects flat rolled cost increases of recent months which were passed in most other pipe markets several weeks ago. Still, in most product markets producers would not be able to pass on such a large increase with such weak demand. Nevertheless, the A53 Grade B pipe market is controlled by only a handful of producers and distributors say that if they need product, they have to pay the higher prices. But distributor orders from domestic mills are slowing down too, and as the holiday season approaches, domestic mills may be forced to loosen the reins on pricing a little.
On the import side, most activity has gone quiet. Prices are much more competitive than domestic level, but with demand remaining weak and the end of the year approaching, buyers do not want to risk buying imports right now. On the whole, pipe imports by the US are significantly down this year, and with China being restricted from the US market on just about all steel pipe products and US producers demonstrating their commitment to keeping imports out of the market (most recently with the antidumping and countervailing duty case filings against seamless carbon and alloy steel standard, line, and pressure pipe from China last month), now, pipe import volumes will likely stay sparse.
Import offers for ERW ASTM A53 galvanized plain end (GPE) standard pipe had been somewhat active over the summer; however, interest from traders has waned significantly over the past several weeks, especially as the fence pipe segment has fallen off. Nevertheless, in an attempt to stay as active as possible, Indian and Malaysian mills have lowered their GPE standard pipe offers to the US by approximately $1.00 cwt ($22 /mt or $20 /nt) since our last report two weeks ago, and most offers can now be found in the range of around $41.00 cwt. to $42.00 cwt. ($904 /mt to $926 mt or $820 /nt to $840 /nt) duty-paid, FOB loaded truck in US Gulf ports.
Meanwhile, Korean ERW BPE Grade A standard pipe offers have been making some noise amongst traders for a few weeks now, with most offers decreasing by an additional $2.00 cwt. ($44 /mt or $40 /nt) since our last report two weeks ago, making for a total of $4.00 cwt. ($88 /mt or $80 /nt) in decreases over the past month. Most offers now range from approximately $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) duty-paid, FOB loaded truck in US Gulf ports. With Korean mills demonstrating their willingness to stay aggressive, traders have started to open their eyes to potential bookings for the end of Q1 shipments.
The latest year-to-date US pipe import data shows that standard carbon steel pipe imports this year as of July totaled 380,635 net tons. This figure would annualize at 652,517 nt, which is about half the amount imported in each of the previous four years - from 2004 through 2008, full-year standard pipe import totals have remained above 1.15 million nt.
Annualized 2009 import totals based on YTD July data compared to 2008 total data for OCTG and line pipe are as follows: Line pipe - 1.53 million nt in 2009 / 2.30 million nt in 2008. OCTG - 1.72 million nt in 2009 / 3.01 million nt in 2008.