US pipe market - More price increases on the way for both domestics and import

Monday, 21 January 2008 13:20:30 (GMT+3)   |  
       

With US flat rolled prices shooting up dramatically so far in the first quarter, pipe prices are expected to rise in turn.

Though no official announcement has been made yet, domestic mills are expected to raise their standard pipe prices by at least another $50 /nt ($55 /mt or $2.50 cwt.) in the first quarter (in addition to the $50 /nt increase seen in January), with more price hikes expected to come in the second quarter.

For now, most offers continue to range from $44.50 cwt. to $46.50 cwt. ($980 /mt to $1,025 mt or $890 /nt to $930 /nt) FOB mill.

The domestic standard and structural pipe markets have certainly been affected by the fallout of the residential construction market, but the commercial construction market has kept demand buoyant, with plenty of projects planned for 2008. Also, distributor inventories have decreased due to China's absence from the market, and no cheap import alternatives have yet appeared on the scene.

Mills will need to pass along their raw material cost increases, and with very limited competitive import alternatives to buy instead, customers will have no choice but to pay the higher domestic numbers. The domestic mills are already quite busy, and buyers are concerned that they may not be able to secure enough material domestically. Therefore, the pricing trend for domestic pipe is strongly up.

In the first week of January, the US DOC released the preliminary results of the antidumping investigation of standard and structural pipe from China, finding dumping margins of 25.67 percent (Separate-Rate Respondents) to 51.34 percent (China-wide Rate) for all mills under investigation, with the exception of Jiangsu Yulong Steel Pipe Co. Ltd., which received a 0.00 dumping margin.

As was expected, these duties, in addition to the preliminary countervailing duties against China for the same products, averaging 17 percent, will result in a significant penalty for Chinese mills who continue exporting welded standard and structural pipe to the US. Combined with the high ocean freight rates, China's increasing raw material prices, and the recent 10 percent increase (from 5 to 15 percent) in China's export tax for welded pipe, Chinese ERW standard pipe imports will be absent from the US market for quite some time.

Some import sources, including South Korea, Taiwan, India (on the galvanized side), and Turkey, have been shipping some standard pipe tonnage to the US in recent months, though not at the volumes or the aggressive prices that China used to offer at. In recent weeks, due to the large price increases for flat rolled, both in Asia and the US, South Korea and Taiwan have withdrawn their offers from the West Coast. When these mills come back to the market, it is expected that the new offers will be at least $50 /nt to $75 /nt ($55 /mt to $83 /mt or $2.50 cwt. to $3.75 cwt.) higher than the previous offering level of $850 /nt ($937 /mt or $42.50 cwt.) FOB, loaded truck on the West Coast, mirroring the price increase expected for the domestic market.

There are some Turkish offers of ERW A53 available, though traders say that many of these offers have been withdrawn as well. New offers for ERW A53 from Turkish mills range from approximately $43.50 cwt. to $44.50 cwt. ($959 /mt to $981 /mt or $870 /nt to $890 /nt) FOB, loaded truck, in US Gulf ports, representing an increase of $2.00 cwt. ($44 /mt or $4.00 cwt.) since our last report issued December 24. These offering prices are also expected to rise imminently.
 
Although China can no longer ship welded standard pipe and structural pipe to the US, their line pipe offers still continue. Buyers say that current welded line pipe offers from China for the US range from $44.00 cwt. to $45.00 cwt. ($970 /mt to $992 /mt or $880 /nt to $900 /nt) FOB, loaded truck, US Gulf ports. The US line pipe market is still faring well due to the active energy sector, so Chinese line pipe imports (granted that they are used in line pipe rather than standard pipe applications) are not a major issue for the domestic market.

Statistics from the US Import Administration show that imports of welded carbon standard pipe (HTS Code 730630) have decreased significantly in the past several months, mostly due to China's waning participation in the market. In December 2007, standard pipe imports totaled 71,756 mt, a large portion of which was inter-NAFTA trade with Canada and Mexico. This compares to 109,281 mt imported in October 2007, 46,698 mt of which came from China. The top import sources in December were: Canada, at 23,365 mt; Thailand, at 13,817 mt; South Korea, at 7,297 mt; Mexico, at 9,023 mt; and Taiwan, at 5,203 mt. China only accounted for 2,410 mt of the standard pipe imports in December.

Line pipe imports continued at a steady pace in December 2007, totaling 217,473 mt. The top import sources for line pipe in December were: Canada, at 39,846 mt; India, at 37,683 mt; Italy, at 24,051 mt; Greece, at 22,836 mt; and South Korea, at 21,182 mt. Line pipe imports from China slowed down slightly in December, to 14,008 mt, though in November, Chinese line pipe imports totaled 49,143 mt, and in January 2008 through January 15, they have already totaled 37,412 mt.


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