The US domestic pipe market is still trending slightly up, with the market generally accepting the $30 /nt ($33 /mt or $1.50 cwt.) price increase for ERW standard pipe offers. Most domestic offers for A53 ERW standard pipe now range from $47.50 cwt. to $48.50 cwt. ($1,047 /mt to $1,069 /mt or $950 /nt to $970 /nt) ex-mill.
However, traders say that the mills' increase did encounter some resistance, as demand is steady, but not stellar, and much lower-priced Chinese offers still abound. Still, the domestic pipe market has been kept afloat by the March and April flat rolled price increases as well as the firm demand coming from commercial construction and the energy sectors. For these reasons, the pricing trend for domestic ERW standard pipe is still slightly up.
Domestic flat rolled mills have announced more flat rolled price increases for May, and if they go through, pipe pricing should eventually rise again as a result. However, since flat rolled demand is also only lukewarm and scrap prices don't seem to be climbing any more, many people are skeptical that the market will accept the price hikes on flat rolled. Therefore, the flat rolled market may not continue to bolster pipe prices for much longer, and pipe demand will be the determining factor of where prices go. Most likely, demand for standard pipe will strengthen somewhat along with the non-residential/commercial construction markets as the weather warms up.
Sources say that demand for OCTG is steady and demand for line pipe is slightly better. Rig counts and crude oil prices (currently at $65 to $66 per barrel) indicate that the oil sector is still going strong, which in turn, benefits the market for energy pipes. The Baker Hughes' North American Rotary Rig Count shows that as of March 30, the North American rig count was 1,898, compared to 1,991 rigs the week before, and 2001 rigs on the same day of the previous year. The total for the US was 1,749, up slightly from 1,745 the week before, and up from 1,576 a year ago.
As for the import market, prices for standard-sized pipe have remained stable since our last report issued March 16, with Chinese offers for A53 standard pipe remaining at a range of $620 /nt to $660 /nt ($683 /mt to $728 /mt or $31.00 cwt. to $33.00 cwt.) FOB loaded-truck, Houston, Texas. Chinese line pipe (API 5L X42) offers still 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.
However, Chinese A53 standard pipe offers for sizes over 8" have come down by about $10 /nt ($11 /mt or $0.50 cwt.) since our last report, now ranging from range from $700 /nt to $740 /nt ($772 /mt to $816 /mt or $35.00 cwt. to $37.00 cwt.) FOB loaded-truck, Houston. (This price range is also valid for most West Coast ports.)
The reason why Chinese import pipe pricing has not increased much, despite rising raw material costs, is the growing competition among Chinese pipe mills. Chinese pipe mills absorbed much of the recent flat rolled price increases rather than passing them along to standard pipe offers for the US because of the growing number of Chinese pipe mills coming online (hence the increased competition) and the only lackluster demand from the US. One example of this over saturation is the current situation of the Chinese seamless pipe market: Sources say that due to the high number of seamless pipe mills in China, Chinese seamless pipe prices are now in some cases cheaper than the ERW pipe prices. Therefore, there seamless pipe bookings from China have been strong recently.
On the whole, the import pricing trend for pipe is still slightly up, as Chinese flat rolled and pipe prices are still far below offers from other import sources and have plenty of room to rise. Also, there are now rumors that the Chinese government's expected VAT rebate reduction on steel products may affect pipe and tubing exports, though it was long-believed that the rebate reduction would only affect more basic products such as wire rods and rebars. Now that the Chinese government is rumored to reduce the VAT rebate for pipe and tubing from 13 percent to possibly down to 5 percent, Chinese pipe prices could rise $20 /nt to $30 /nt ($22 /mt to $33 /mt or $1.00 cwt. to $1.50 cwt.). Some Chinese pipe mills have already increased prices for traders, and the increase will most likely eventually be passed on to customers as well. Still, no official decision has been announced on the VAT issue yet. April 15 is now the rumored date that the decision will be announced.
Data from the US import administration show that standard pipe imports to the US during the first three months of 2007 totaled 291,200 mt, compared to 362,600 mt for the same period of the previous year. China continues to be the largest import supplier of standard pipe to the US, with YTD 2007 imports (January through March) 136,300 mt. Chinese standard pipe imports to the US for the same period of the previous year totaled 107,100 mt.