Although the US ITC decided to proceed with the antidumping investigation for Chinese standard pipe (US ITC: Preliminary determinations in AD investigations of Chinese nails and pipe ), the US' domestic pipe market is still in a slump.
New Chinese offers for standard pipe have all but disappeared because of the ongoing investigation; however, there is still a lot of import material on the ground. In addition to high inventories, demand is relatively slow due to the soft housing market. Domestic A53 producers have also had some room to discount because of the cheaper flat rolled costs. The drastic cutback in cheap Chinese imports and the eventual emergence of higher-priced import competition should help domestic prices to rise in the long run, but for now, the pricing trend for domestic ERW standard pipe is still down.
Sources say that domestic pipe prices should continue to decrease slightly in the third quarter, though no major drop is anticipated, at least not for standard pipe. US Steel CEO John P. Surma echoed this sentiment in a press release regarding the company's second quarter earnings, saying, "Third quarter average realized prices for tubular steel are expected to decrease from second quarter levels."
West Coast flat rolled and pipe maker California Steel Industries (CSI) said in a release about their second quarter earnings, which fell sharply from Q2 '06 earnings, that ERW sales remain strong "both in tonnage and average prices"; however, West Coast sources say that demand is indeed weak on the West Coast due to high inventories and the weak residential construction market. However, the pipe market is still much stronger than the flat rolled market, and West Coast producers like CSI are struggling to prevent price decay so that they can still make a profit.
Domestic ERW A53 prices have not registered any significant changes in the past two weeks, continuing to range from $44.00 cwt. to $45.00 cwt. ($970 /mt to $992 /mt or $880 /nt to $900 /nt) ex-mill.
Data from the US Import Administration show that in July 2007, a significant amount of Chinese standard pipe tonnage continued to arrive, with China exporting a total of 86,214 mt, remaining by far the biggest standard pipe import source for the US, with Canada a distant second at 21,313 mt.
The domestic line pipe and OCTG markets are not in great shape either due to high import inventories, which are expected to increase further because of the petition against Chinese standard pipe. In recent weeks, a great deal of new Chinese offers for X42 line pipe have appeared on the market, though they are priced closer to standard pipe prices, and some sources suspect that the quality of these line pipes may more closely resemble that of A53B standard pipe. On the bright side, Chinese semi finished product and hot rolled prices are increasing, which will drive up their pipe making costs.
Current Chinese offers of X42 line pipe for the US (2 to 8 inches in diameter), range from approximately $33.00 cwt. to $35.00 cwt. ($728 /mt to $772 /mt or $660 /nt to $700 /nt) FOB loaded-truck in Houston. Larger sizes (over 16 inches in diameter) range from $36.00 cwt. to $38.00 cwt. ($794 /mt to $838 /mt or $720 /nt to $760 /nt) FOB loaded-truck in Houston.
Data from the US Import Administration show that in July line pipe imports totaled 271,998 mt, compared to 205,025 mt in June 2007 and 177,200 mt in July of 2006. Top exporters of line pipe to the US in July 2007 were: Canada, China, Korea, Italy, and India.
In general, the energy market is still strong, with oil prices sky-high and with the US maintaining high levels of drilling. Also quite a few ethanol plants are currently under construction, which is helping industrial pipe sales as well. However, the Baker Hughes North American Rotary Rig Count shows that Canadian drilling has come down considerably from last year's levels, which may result in further over-inventory problems for OCTG pipes, both in Canada, and as a spillover effect in the US. For the week ended July 27, rigs in Canada totaled 371, compared to 547 for the same week of the previous year.
OCTG imports to the US totaled 147,818 mt in July, remaining relatively steady from the previous month's OCTG import total of 140,313, and down from July 2006's all-time monthly high OCTG import total of 195,800 mt.