Since our last US pipe market analysis, the Chinese government officially announced the VAT rebate reduction for certain pipes, which will have the effect of boosting import offering prices to the US for these products, effective July 1.
The VAT rebate for the following products will be reduced from 13 to zero percent: ERW square and rectangular tubing; ERW standard pipe; ERW round structural pipe; and galvanized pipe. The rebate for seamless standard pipe will be reduced from 13 to five percent, while the rebate for the following products will remain unchanged at 13 percent: ERW API 5L line pipe; ERW OCTG (tubing and casing); seamless API 5L line pipe; and seamless OCTG.
As a result of the Chinese government's move to encourage exports of more value-added products while discouraging exports of lower-grade products, the pricing trend for import ERW standard pipe is now strongly up, while the import prices for higher grade pipes like line pipe and OCTG may start to come down. Import inventories of these higher-grade energy pipes are already too large as it is, so domestic producers of these products may not be able to maintain their prices either.
Meanwhile, import standard pipe prices have already risen in the last week due not only to the elimination of the rebate but also because of the antidumping/countervailing duties petition filed against standard pipe. To avoid penalties, Chinese mills are very hesitant to offer standard pipe right now. The deadline for importing these materials without AD/CVD duties could be as soon as June 7, 2007, the date of filing, with retroactive duties imposed at a later time, or else could be as late as November 5, 2007, depending on if there are "critical" or "normal" circumstances, and if there is a "normal" or "extended" schedule. v
Chinese offers for A53 ERW standard pipe now range from $630 /nt to $670 /nt ($31.50 cwt. to $33.50 cwt. or $694 /mt to $739 /mt) FOB loaded-truck, Houston, Texas. Large diameter ERW standard pipe offers range from $700 /nt to $740 /nt ($35.00 cwt. to $37.00 cwt. or $772 /mt to $816 /mt) 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 $690 /nt to $730 /nt ($34.50 cwt. to $36.50 cwt. or $761 /mt to $805 /mt) FOB loaded-truck in Houston.
The US domestic pipe market is still experiencing decent demand from the commercial construction and energy markets; however, it has also been damaged by the high import volumes. Costs have also come down due to the falling domestic flat rolled prices. Most domestic offers for A53 ERW standard pipe continue to range from $47.50 cwt. to $48.50 cwt. ($1,047 /mt to $1,069 /mt or $950 /nt to $970 /nt) ex-mill, though the pricing trend is slightly down since inventories are still high, and the effects of the VAT cutback and AD/CVD petition will not be felt immediately.