This year's National Association of Steel Pipe Distributors (NADPD) Fall Conference, as usual, provided a valuable forum for pipe distributors, traders, and producers alike to make key networking contacts and to discuss the state of the North American pipe market. This year, the event took place from October 11 through 13 amid the lush, tropical setting of Cancun, Mexico at the award-winning Ritz-Carlton Cancun.
The general sentiment at the conference was one of optimism, not just because of the relaxing surroundings, but because of the relief that the current antidumping and countervailing duty investigation against Chinese standard and structural pipes is expected to grant the US domestic pipe market. And while US pricing and demand for most steel products has slipped in the past year, commercial construction and the robust energy market has kept pipe demand strong, and this trend is expected to continue well into next year.
Appropriately, the main themes discussed at the General Session of the conference were the Mexican industry outlook and trade relations between Mexico and the US. Speakers included Alejandro Dieck, PhD, Former Sub-Secretary of Economy for Mexico; Rafael Rubio, PhD, of HYLSA; and Octavio Rangel, Director of CANACERO.
Dr. Alejandro Dieck gave a presentation entitled: "Oil & Gas Outlook and Should We Revisit DOHA/GATT Negotiations."
Dr. Dieck pointed out to the conference-goers that Mexico is one of the few countries that does not allow private sector participation, which has resulted in significant budget limitations since the federal budget allocated for the energy sector has been diminishing.
The changes necessary to aid Mexico's ailing energy market, as Dr. Dieck outlined, are: minor structural reforms, such as private sector participation in exploration and production of non-associated gas, which will allow private sector participation without creating controversy; programs to help energy efficiency; renewable energy sources; and most importantly, but least likely to occur, Dr. Dieck said, are major structural reforms that would require constitutional changes to allow private participation in the energy market. Still, Dr. Dieck concluded his presentation with an optimistic forecast of Mexico's energy industry, predicting minor structural reforms and a positive price environment for the future.
Dr. Rafael Rubio presented: "A Pipe Forecast for NAFTA Countries." The major theme of this presentation was the need for the three North American steel industries to integrate to form one regional market.
The two main avenues Dr. Rubio outlined that North America can use to move towards this integration are the Market Way and the Institutional Way. The Market Way, Dr. Rubio said, consists of trade, investments, and consolidation to reach the goal of increased market integration, while the Institutional Way requires government-created instruments to move towards this goal.
An example of the Market Way is the formation of NAFTA, which Dr. Rubio named as the first major step in Mexico's globalization. Though Mexico still hasn't seen the full benefits of this partnership because of the economic changes that still need to be made within the country, steel trade between Mexico and the US is steadily growing as a result of NAFTA.
Examples of the Institutional Way are the formation of organizations such as the North American Steel Council (NASC), a forum created to discuss public policy issues relating to NAFTA. NASC produced Section 201, which excluded Mexico and Canada from being included in steel antidumping cases filed by the US. Other examples of the Institutional Way include the Security and Prosperity Partnership of North America, the North American Competitiveness Council -- both groups whose goal is NAFTA market integration.
Looking forward, Dr. Rubio said, the areas of work that the NAFTA countries need to focus on are: external trade, internal trade, competitiveness and productivity. These countries have their work cut out for them -- North America is losing market share in world steel trade, Dr. Rubio said, and Mexico has lost market share in the US market. Mexico is losing share in the US to Brazil, Russia, India, and especially to China, which will soon surpass Canada to become the largest US trade partner.
The third and last presenter at the General Session was Mr. Octavio Rangel, who presented: "Dumping Issues: Mexico vs. US as well as Mexico vs. China."
In recent years, the global steel industry resumed its growth after decades of stagnation and low profitability, Mr. Rangel noted. The two main drivers behind this growth have been China and industry consolidation. While HRC prices in the US were the lowest in the world as of September 2007, Mr. Rangel said, we are still in the demand-driven, "price-based" era as opposed to the supply-driven, "cost-based" era that took place from 1989 to 2001.
Currently, regional steel concentration is growing, but global steel concentration is lagging behind other metals and raw materials (such as iron ore), suppliers and key customers (like automotive).
Still, Mr. Rangel is optimistic about the future, expecting industry consolidation in North America to continue, resulting in better balanced inventories; optimization of cost, production and logistics; optimal plant location; and optimal use of resources.