The US domestic pipe market is still trending slightly up, with most domestic offers for A53 ERW standard pipe ranging from $47.50 cwt. to $48.50 cwt. ($1,047 /mt to $1,069 /mt or $950 /nt to $970 /nt) ex-mill.
On the raw materials side of the market, while the domestic flat rolled market remains only lukewarm and scrap prices have come down in April, flat rolled prices are trending slightly up both domestically and worldwide. Also, flat rolled prices should rise somewhat in May (though not necessarily by the full $60 /nt amount Nucor has announced), as mills have still not recouped all of the scrap cost increases which took place earlier in the year. Therefore, raw materials continue to provide a slight boost that could push domestic pipe prices to rise further.
As for pipe demand, market sources say that consumption of pipe for construction and energy-related applications is on the rise. Non-residential and commercial construction has bounced back strongly this spring, as the weather starts to warm up across the country. Demand from the oil and gas sector remains especially strong, as new oil exploration projects abound, with a number of new drilling projects, particularly in the Gulf of Mexico, planned for 2007. Oil prices slipped to below $62 /barrel on Thursday for near-term contracts due to worries of inventory buildups and the restart of a major pipeline carrying Canadian oil to the US Midwest. However, analysts say that with concerns over Iran's nuclear program and low US gasoline stocks as we approach the summer driving season, the oil market in general is still very tight.
The Baker Hughes North American Rotary Rig Count shows that as of April 13, there were 1,855 rigs in service, compared to 1,852 a week earlier and 1,806 a year earlier. The United States' total rigs rose to 1,758, compared to 1,726 a week earlier and 1,610 a year ago, while Canadian rigs dropped to 97, compared to 126 a week earlier and 196 a year earlier.
Distributors' pipe inventories are reportedly healthy but not bloated, as demand is strong enough to prevent stock buildup. The Metals Service Center Institute (MSCI) reported that US steel service center inventories fell by approximately 1 million net tons from February to the end of March 2007. However, while limited imports are helping to trim down flat rolled inventories, pipe distributors say that the high number of Chinese pipe imports will prevent a situation of limited supplies.
Statistics from the US Import Administration show that during the first three months of 2007, standard pipe imports to the US totaled 291,800 mt, with China as the largest import source, supplying approximately 135,200 mt to the US. The second largest import source was Canada at 80,100 mt, while the third was Thailand at 14,500 mt. The total standard pipe imports during this period were significantly lower than the amount for the same time of the previous year, which totaled 362,600 mt. However, the number of Chinese standard pipe imports have risen year-on-year, with Chinese imports from January through March 2006, totaling only 107,100 mt.
The pricing trend for import pipe is slightly up, as Chinese flat rolled prices are still trending slowly up. Still, there is no robust price movement, either in the Chinese flat rolled or the Chinese pipe sector. It was rumored that the Chinese government's VAT rebate cutback on long products which took place April 15 would affect pipe and tube pricing, reducing the current 13 percent rebate to five percent; however, this did not take place and so, to the disappointment of US pipe producers, the ruling will not lessen the amount or up the price of Chinese pipe imports.
Chinese offers for A53 ERW standard pipe have not moved noticeably in the past two weeks, and remain 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.
Chinese offering prices for large diameter ERW standard pipe - sizes larger than eight inches - have come down by approximately $10 /nt in the past two weeks, due to the increasing number of Chinese large diameter mills coming online. These prices now range from $690 /nt to $730 /nt ($34.50 cwt. to $36.50 cwt. or $761 /mt to $805 /mt) FOB loaded-truck, Houston. This price range is also valid for most West Coast ports.