Although it is still one of the stronger segments of the US steel market, the US pipe market has been negatively affected by the softening scrap and flat rolled prices as well as by the general uncertainty governing the markets right now.
Pipe buyers in the US are reportedly nervous and not very willing to commit to large orders in this softening price environment. On the welded standard pipe (ERW) side, after rising tremendously in early summer, domestic prices have come off by approximately $100 /nt ($110 /mt or $5.00 cwt.) in the last month, with offers for A53 BPE now ranging from about $1,700 /nt to $1,750 /nt ($1,874 /mt to $1,929 /mt or $85.00 cwt. to $87.50 cwt.) ex-mill. As raw materials prices continue to slip, the pricing trend for domestic pipe is still pointing downward, though it is thought that the downtrend may be relatively short-lived with the market possibly rebounding as soon as early fourth quarter. With China gone from the market, there still are not too many imports coming into the country, keeping inventories on the slim side.
There are some import offers, though, and they are generally trending downwards due to the weakening flat rolled markets in many parts of the world as well as the lowered price expectations from US buyers. Traders say that the more competitive offers for ERW A53 BPE are from East Asian countries like South Korea and Taiwan, offering at about $1,330 /nt to $1,350 /nt ($1,466 /mt to $1,488 /mt or $66.50 cwt. to $67.50 cwt.) FOB loaded truck in US Gulf and West Coast ports, and offering X42 line pipe at about $1,450 /nt ($1,598 /mt or $72.50 cwt.).
Import pipe offers from India, on the other hand, are more expensive than those of the other Asian sources, and are not trending down yet as the Indian hot rolled price is still high. Indian offers for ERW A53 BPE still range from approximately $69.00 cwt. to $71.00 cwt. ($1,521 /mt to $1,565 /mt or $1,380 /nt to $1,420 /nt) FOB loaded truck in US Gulf ports, while GPE offers range from $72.00 cwt. to $74.00 cwt. ($1,587 /mt to $1,631 /mt or $1,440 /nt to $1,480 /nt). Traders say, though, that Indian mills aren't getting many orders at this price level and will have to lower it in order to get some US business (Indian mills are more competitive on galvanized pipes, however, than on black plain end pipes).
Turkish offers are also on the high side, with most offers for ERW A53 BPE at about $1,430 /nt to $1,450 /nt ($1,576 /mt to $1,598 /mt or $71.50 cwt. to $72.50 cwt.) FOB loaded truck in the Gulf. However, these offers are also trending down as the Turkish flat rolled market is particularly soft. Other import sources include Middle Eastern countries like Oman and the United Arab Emirates.
It is not only standard pipe that is showing signs of a downturn, even the formerly red-hot energy pipe market has cooled somewhat. The OCTG market has leveled off; no major price depreciation has been observed, but prices seem to have peaked. However, end-use demand for OCTG and line pipe remains steady due to the busy drilling activity for gas and oil in the United States.
Baker Hughes Rig Counts show that as of August 15 rigs in the US totaled 1,990, up 9.8 percent year-over-year. Data show that since the beginning of 2008 rig counts in the US, particularly for land drilling, have been trending steadily upward. Chinese OCTG imports reached an all-time high in July of 286,608 mt (US Import Administration). But even with the record imports, inventories are reportedly quite low, and domestic mills' lead times are long, testifying to the strength of the demand. Since drilling activity is not showing any signs of tapering off, it is likely that the energy pipe market should recover nicely from the current slump in due time.