US pipe market – Strengthening demand and raw material costs bolster prices

Chinese standard pipe imports to the US have continued their slow ascent, rising $10 /nt ($11 /mt or $0.50 cwt.) since the last month. Chinese A53 standard pipe offers now range from $620 /nt to $660 /nt ($683 /mt to $728 /mt or $31.00 cwt. to $33.00 cwt.) FOB loaded-truck, Houston, Texas. Sizes over 8” still range from $710 /nt to $750 /nt ($723 /mt to $827 /mt or $35.50 cwt. to $37.50 cwt.) FOB loaded-truck, Houston. This price range is also valid for most West Coast ports. 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, with similar extras for pipe larger than 8”. To the contrary of rallying steel prices, Chinese pipe mills are only slowly raising their standard pipe prices. Hot rolled prices in China continue to trend up, but these prices still aren't very high when compared to other world markets. In fact, in some cases, Chinese hot rolled numbers are lower than Chinese slab and billet prices. This situation is a result of overcapacity in the Chinese domestic flat rolled market. Chinese pipe mills are now having a difficult time passing the hot rolled increases along to pipe prices, also because of an overcapacity problem, due to the vast number of pipe mills in China. However, economists predict that the US' pressure to revalue the Chinese currency, yuan, will eventually bringing prices for exports to the US higher. For now, China remains virtually the only competitive import pipe source for the US for the basic commercial products. For all these reasons, the pricing trend for import pipe is slightly up. As for the domestic pipe market, prices will be affected by increases in scrap and flat rolled products. US flat rolled mills like Nucor, Mittal, and AK Steel have announced March and April price increases as high as $100 /nt ($110 /mt or $5.00 cwt.) above than January prices in order to make up for rising raw material costs. However, these increases are only very slowly gaining acceptance as flat rolled demand is still not robust. Flat rolled prices are definitely moving in an upward direction though, and the standard pipe market is now anticipating a $30 ($33 /mt or $1.50 cwt.) increase for 2nd quarter deliveries. The increase will most likely go through, though it might occur gradually, as with the hot rolled increases. On the demand side, standard pipe distributors say that consumption was rather low in January and February due to high inventories along with the extraordinarily cold winter conditions, which put a damper on construction. However, distributors say that they are starting to see demand pick up in March and that the prices should now move in an upward as consumption improves and inventories are reduced. For now, domestic pipe offers for A53 ERW standard pipe still range from $46.00 cwt. to $47.00 cwt. ($1,013 /mt to $1,036 /mt or $920 /nt to $940 /nt) ex-mill. However, in view of the expected $30 /nt increase and the improvement in demand, the pricing trend is now slightly up. Consumption of standard and energy pipes remains steady, though not strong enough to bring down built-up inventories drastically. The US rig count continues to remain fairly steady from week to week, at 2,310 for the week ended 3/9/07, down slightly from 2,353 the previous week and up from 2,222 for the same week of the previous year. Meanwhile, demand for structural circular pipe (A500 or A252) is robust, with domestic prices going up $60 /nt to $70 /nt ($66 /mt to $77 /mt or $3.00 cwt. to $3.50 cwt.) in the first quarter. Demand for structural pipe from the construction, bridge piling, waterwell casing, and agricultural sectors remains very strong, thus dwindling supplies and spurring prices to rise. A structural pipe producer told SteelOrbis this week that domestic prices are close to $900 /nt ($992 /mt or $45.00 cwt.) and are expected to rise even higher in the second quarter.