US pipe market bounces back with September increases

After many had assumed that domestic pipe prices weren't going to climb any further this year, several domestic pipe producers have announced plans to increase transaction prices for ERW standard pipe by $40 /nt in September. With the energy sector still booming, along with steady demand from the non-residential construction sector, most pipe professionals believe the ERW pipe market is strong enough to accept the new increase. As a domestic pipe trader told SteelOrbis this week, “The customer demand is there. Those who need steel will continue to buy. I don't see prices continuing to rise after September, though.” While the pipe market has enough momentum to register one more major increase before year-end, tubing prices are not likely to increase, since they are not used for water or oil and gas transmission. Construction activity in the US is still decent, but the main reason for the increase in pipe prices is the strength of the energy sector. Also, pipe inventories, though they are healthy, are not as large as structural and mechanical tube inventories, as there are more import sources for tubing than there are for pipe. For now, domestic offers for A53 standard pipe (used primarily for water and low-pressure gas pipes) in the market remain at a range of $47.00 cwt. to $48.00 cwt. ($1,036 /mt to $1,058 /mt or $940 /nt to $960 /nt). As September price hikes are expected, the pricing trend is now slightly up. Current rig count statistics show that for the week ended August 18, 2006, the rig count in North America was 2,233; compared to a count of 2,208 last week; and a count of 1,968 for the same week last year. The import pricing trend is still slightly down, as major import source China is seeing its home prices weaken. However, we have not seen any significant weakening in import prices from China in the past two weeks. Chinese offers for A53 standard pipe still range from $580 /nt to $620 /nt ($29.00 cwt. to $30.00 cwt. or $639 /mt to $661 /mt) FOB loaded-truck, Houston, Texas. Offers for sizes larger than 8” diameter from China range from $680 /nt to $720 /nt ($34.00 cwt. to $36.00 cwt. or $750 /mt to $794 /mt) FOB loaded-truck at West and Gulf Coast discharge ports. Larger than 8” pipe prices are higher due to higher transportation rates, but more importantly, narrow band in China is cheaper and more plentiful. Most of the narrow band is produced from billets, making the raw materials quality of pipe more questionable. Competitive Chinese line pipe offers (API 5L X42) range from approximately $700 /nt to $750 /nt ($35.00 cwt. to $37.50 cwt. or $772 /mt to $827 /mt) with larger than 8” pipe having similar extras. Final census data from the US Import Administration shows that the top exporters of standard pipe to the US from January 2006 through June 2006 were: China, at 226,914 mt; Canada, at 189,214 mt; Thailand, at 45,207 mt; Mexico, at 38,114 mt; and India, at 35,316 mt. The major exporters of line pipe to the US during this period were: Japan, at 118,001 mt; China, at 107,703 mt; Canada, at 104,750 mt; Korea, at 95,193 mt; and Brazil, at 49,821 mt.